The Family Trust Dispute

Model answer

**1. TRUST REVOCABILITY** The trust was silent on revocability. Under F.S. § 736.0602, a Florida trust is REVOCABLE unless its terms expressly make it irrevocable, so Grandmother could have amended or revoked it during her life. This reverses the older COMMON-LAW default (presumed irrevocable) - though note it is not peculiar to Florida; the Uniform Trust Code takes the same position, so the contrast to draw is with the common law and with states that kept it, not with the UTC. CARRY THIS FORWARD - it drives two later sections: while the trust was revocable the remainder interests were subject to Grandmother's power to revoke, and the trustee's duties ran to HER alone (F.S. § 736.0603). The trust became irrevocable on her death in 2024.

**2. ORAL MODIFICATION** Grandmother's statement is NOT an amendment - but get the REASON right, because the obvious one is wrong for Florida. Florida does NOT categorically require a writing to amend a revocable trust. Under F.S. § 736.0602 the settlor amends by substantially complying with whatever method the trust provides; if the trust provides no method, the settlor may use any other method that manifests CLEAR AND CONVINCING EVIDENCE of the intent to amend. So an unwritten amendment is not automatically void here. The claim fails on the facts instead: Grandmother said she WANTED to change the remainder beneficiaries - an expression of future intention, not a present act of amendment - and she never executed anything. A stated wish to amend later is not an amendment.

**3. SPENDTHRIFT PROTECTION** The spendthrift clause protects David's interest from his gambling creditors: under F.S. § 736.0502 a valid spendthrift provision restrains both voluntary and involuntary transfer, so those creditors cannot reach the interest while it is held in trust. What the clause does NOT do is protect the money once it reaches David - once distributed, the funds are no longer protected BY THE TRUST SPENDTHRIFT PROVISION. That is not the same as saying they are collectible: other exemption and collection law may still protect particular assets or funds in his hands. So the creditors must generally wait outside the trust rather than attach the interest inside it. One qualification worth a line: F.S. § 736.0506 can let a creditor reach a MANDATORY distribution the trustee has withheld beyond a reasonable time, spendthrift clause notwithstanding - so 'wait for actual receipt' is not quite absolute.

**4. CHILD SUPPORT EXCEPTION (FL-Specific)** The support claim is different - and keep ELIGIBILITY separate from REMEDY, which is where answers blur. - ELIGIBILITY: under F.S. § 736.0503 a spendthrift provision is unenforceable against certain claims, including one held under a judgment or court order for the support of a beneficiary child. Two things together open the exception: the claimant must fall within the protected statutory category, and there must be the order. The FORMER SPOUSE is within that category, and - assuming, as the facts appear to indicate, that she is entitled to enforce the Florida support order against David - the exception is available. Do not shorten this to any holder of any support order. And note it is that combination, not the shape of the interest of David, that triggers the section. - REMEDY: the shape of the interest determines how easily it is collected. The income interest of David is MANDATORY (income to David for life), so there are distributions the trustee MUST make and an exception creditor can reach them. A discretionary interest would NOT defeat eligibility, but the remedy would be narrower - and keep the two rules apart rather than blending them. F.S. § 736.0503 authorizes ATTACHMENT of present or future distributions - subject to court authorization and to whatever limits the court considers appropriate, so eligibility does not hand the claimant every distribution automatically. F.S. § 736.0504 is a SEPARATE and narrower rule about COMPELLING a discretionary distribution, available only on its own limited conditions - abuse of discretion, or violation of a distribution standard.

**5. TRUSTEE BREACH** First Bank has two distinct problems, and the WEAKER one is the one most answers lead with. - DUTY OF CARE (prudent investor): 80% of the trust in a single stock strongly suggests imprudence absent special circumstances. State the rule honestly - the duty to diversify is NOT absolute; it yields where, under the circumstances, it is prudent NOT to diversify. The trustee would have to justify the concentration with evidence of special circumstances, and nothing in the facts suggests any. - DUTY OF LOYALTY (the stronger ground, and where the analysis should spend its time): the recommending president held a large position in the same stock, disclosed it to no one, and timed the trust purchase around his own personal exit while selling through the public market. Separate BREACH from REMEDY, because they have different answers. BREACH: deliberate coordination plus nondisclosure is divided loyalty on its face. FIRST BANK duty was to act SOLELY in the interests of the beneficiaries, and the president conduct is attributable to the bank on these facts, and that holds whether or not the trust moved the market and whether or not he made a cent. Note what this is NOT: the trust bought no shares from him and no trade of his was matched to it, so this is not the classic trustee-sells-to-the-trust case, and mere co-ownership without the deliberate timing would not by itself establish self-dealing. But do not read that as ending the inquiry - an undisclosed conflict plus a recommendation shaped by personal interests can breach the duty of loyalty with no self-dealing transaction at all. It is the deliberate arrangement that carries it here. REMEDY: different remedies need different proof - causation and loss for compensatory relief, a causally connected personal gain for disgorgement. Market impact may be relevant EVIDENCE but is not an independent requirement of either. And do NOT mistake a portfolio decline for the compensable loss: for loss-based compensatory relief here, the relevant comparison is the trust actual position against the position it would have held under PROPER management, and the facts do not establish what a conflict-free, prudent trustee would have bought, in what amount, or when. Without that counterfactual the compensable loss and its causal connection are unestablished - a gap in EXISTENCE and CAUSATION, not merely in arithmetic. Do not let that soften the breach analysis. - SCOPE: any securities-law questions his trading might raise are outside this trusts question - analyse fiduciary duty only. - TIMING MATTERS: the investment came in 2025, AFTER Grandmother died and the trust had become irrevocable, so the duties ran to David and the remainder beneficiaries. Had it happened while the trust was still revocable, F.S. § 736.0603 would have directed the trustee duties EXCLUSIVELY to the settlor. - KEEP THE DEFENDANTS STRAIGHT. FIRST BANK is the trustee and the direct fiduciary defendant; a corporate trustee acts through its officers, and on these facts the bank made the investment on his recommendation and arrangement, so his trust-investment conduct is attributable to the bank. THE PRESIDENT is not the trustee - he does not automatically take on the bank trustee duties to the beneficiaries merely by being its president, and directing the investment does not by itself make him a fiduciary defendant. The workable theory against him is KNOWING PARTICIPATION or ASSISTANCE in the bank breach, requiring knowledge of the breach plus substantial assistance; a DIRECT claim needs an officer-participation doctrine that independently applies under Florida law, with its elements met - do not assume it. If a theory is established, two exposures follow and answers routinely miss the first: (i) COMPENSATORY liability for trust losses he causally brought about, which requires NO personal gain, and (ii) DISGORGEMENT or a constructive trust for a causally connected gain. On that gain: the subsequent decline supports an inference that he AVOIDED A LOSS by selling when he did, but the facts do not establish whether the trust purchases caused or increased that benefit, or give enough to calculate any causally connected amount. The two recoveries differ in theory and in amount; do not merge them.

**6. TERMINATION** David asks for the ENTIRE corpus outright, with his two living children giving up their remainders and nothing reserved for a later-born child. Test THAT proposal - the analysis changes if he asks for less. The intuitive answer is wrong TWICE. - FLORIDA DID NOT ADOPT THE UTC 411 POST-DEATH ROUTE. What Florida omitted is the UTC 411 beneficiaries-ALONE termination after the settlor dies, so beneficiary consent standing by itself gets David nowhere. - The settlor death ELIMINATED THE SIMPLEST ROUTE. While Grandmother LIVED the answer was simple: the trust was REVOCABLE, so she could have amended or revoked it herself under F.S. § 736.0602. Be precise about what ended - the statute still applies; it was HER revocation and amendment powers that ended at her death. F.S. § 736.0411 is no help either, and be precise about WHY: it was unavailable during her life because the trust was revocable rather than irrevocable, and it cannot be used after her death because it requires SETTLOR CONSENT, which is now impossible. Now the three post-death routes implicated by the stated issues and the express trust provisions - not an exhaustive list of Florida law. (F.S. § 736.04114, the uneconomic-trust route, cannot be evaluated at all on these facts, which give no trust value and no administrative-cost evidence.) Note at the outset that TERMINATION is squarely within all three - F.S. § 736.04113(2) expressly includes terminating a trust in whole or in part, § 736.0412 incorporates those kinds of action, and § 736.04115 permits modification in a manner provided in § 736.04113(2), which carries the same termination power. So David request does NOT fail for being a termination rather than a modification. It fails, if it fails, on consent or on predicates. One threshold point first, briefly: each of these sections has its OWN applicability limits and they are not identical, so check them separately rather than assuming one uniform gate. Because this trust was created in 2020 and expressly invokes all three, no applicability obstacle is apparent on these facts and the analysis can move to substance. - F.S. § 736.0412, NONJUDICIAL: unanimous agreement of the TRUSTEE and all QUALIFIED beneficiaries. Get the roster right. QUALIFIED beneficiary is a defined term - not simply every living beneficiary, but a LIVING beneficiary who satisfies the statutory distribution-position tests. On these facts David and his two living children appear to qualify. Later-born children are NOT qualified beneficiaries and do NOT sign in their own right. But do not stop there, because signing and BINDING are different questions: § 736.0412 expressly picks up the Part III representation rules, so whether an agreement can EXTINGUISH the interests of unborn or unascertained children turns on whether those interests are validly represented - and representation must be CONFLICT-FREE. That analysis (below) applies to this nonjudicial route just as much as to a court proceeding. Note also that material purpose is NOT a statutory requirement of § 736.0412 - it does not import the judicial predicates of § 736.04113. Settlor purpose still matters PRACTICALLY: a trustee deciding whether to consent may well decline because the structure and the spendthrift provision suggest protective purposes. And that is where this route stands - NOT PRESENTLY AVAILABLE, because the required trustee agreement has not been obtained. First Bank has not agreed; note the facts do not say it refused or could never agree, so this is an incomplete proposal rather than a closed door. - F.S. § 736.04113, JUDICIAL: expressly authorizes a court to modify or TERMINATE in whole or in part, and this is where material purpose does statutory work. Give the predicates rather than a shorthand, and confirm them against the controlling version - the purposes have been fulfilled, or have become illegal, impossible, IMPRACTICABLE TO FULFILL, or wasteful; OR because of circumstances not anticipated by the settlor, compliance would DEFEAT OR SUBSTANTIALLY IMPAIR the accomplishment of a material purpose; OR a material purpose NO LONGER EXISTS. Unanticipated circumstances alone are not enough. These facts establish NONE of those predicates. The life-interest/remainder structure and the spendthrift provision are EVIDENCE from which a court might infer protective and successive-enjoyment purposes - but structure is evidence, not a finding, and David present gambling debts do not show Grandmother knew of them or built the trust around them. - F.S. § 736.04115, JUDICIAL: track the statute exactly - the question is whether COMPLIANCE WITH THE EXISTING TRUST TERMS IS NOT IN THE BEST INTERESTS of the beneficiaries. Do not restate it as whether the proposed change is in their best interests; that is a different question. And because this section permits modification in a manner provided in § 736.04113(2), it CAN reach the termination David wants, so do not dismiss it on the label. Treat SETTLOR INTENT as a separate and MANDATORY constraint on the remedy, not a factor: the court must exercise its discretion in a manner that CONFORMS TO THE SETTLOR INTENT - which matters a great deal here, because complete termination would erase the lifetime-income/remainder structure and the spendthrift protection altogether. The route fails on the PREREQUISITE in any event: nothing in these facts clearly establishes that continued compliance with the existing terms is contrary to the beneficiaries best interests, and the spendthrift provision and successive-beneficiary structure cut AGAINST the termination David asks for, and if anything the no-reserve proposal looks economically ADVERSE to the remainder class, which surrenders everything with no consideration or offsetting benefit stated in the facts, while the gambling debts cut against accelerating the fund to David. THE OPEN CLASS - and it matters on ALL routes, not just in court. The remainder runs to the children of David, and David is 55 and living, so more children may be born. It adds no extra SIGNATURE requirement under § 736.0412, but through the Part III representation rules it governs whether an agreement BINDS those later-born interests - so run this analysis for the nonjudicial route as well. In the judicial routes it bites additionally, though state it carefully - unborn persons cannot literally be served, so their interests must be protected through valid representation, joinder where appropriate, or a court-appointed representative or guardian ad litem. Be careful in BOTH directions. Note first who gains - the proposal hands everything to DAVID, and the living children give up their remainders with no consideration or offsetting benefit stated in the facts, just as a later-born child would, so losing a remainder does not by itself create an automatic conflict between them. Nor should you leap the other way and declare a conflict: on THIS proposal every remainder is extinguished without compensation, so the living and later-born children stand in the same economic position, and possible future dilution or differing family motivations do not by themselves establish an actual conflict on the question presented. Florida representation analysis turns on the particular question, so the right answer is that representation must be documented and confirmed - not that it fails. What IS clear is that DAVID cannot represent the unborn class - he takes the corpus. CONCLUSION - keep it honest. Beneficiary consent alone does nothing; Grandmother § 736.0602 revocation and amendment powers ended at her death; § 736.0411 was unavailable in her lifetime and is impossible after it. § 736.0412 CAN reach a termination, but is presently incomplete. The DEFINITE obstacle is that First Bank has not agreed. Separately - because David asks for the ENTIRE corpus - representation of the open class has to be DOCUMENTED AND CONFIRMED before any agreement could bind later-born children; that is a step still to be completed, not a proven failure, since these facts do not establish an actual conflict on this particular question. If a real conflict does surface, a court-appointed representative is the answer. Both judicial routes CAN reach termination but are POSSIBLE PETITIONS only: these facts establish none of the § 736.04113 predicates, and nothing shows that continued compliance with the existing terms is contrary to the beneficiaries best interests under § 736.04115. What you CAN say flatly is that David does not get this trust wound up by counting the consents he has.