Can a Guardian of Property Replace a Trustee of a Revocable Trust?

Revocable trusts are used for two primary purposes – to avoid probate, and to keep assets out of a guardianship.  At least that is what estate planning clients are led to believe.  But can a guardian of property replace the trustee of the ward’s revocable trust?  Yes.  The Florida Guardianship Code gives tremendous power to guardians, including the amendment of revocable trusts and the replacement of trustees.  

Florida Guardianship Code Section 744.441(19) gives the authority to amend a revocable trust, with court approval:

(19) Create or amend revocable trusts or create irrevocable trusts of property of the ward’s estate which may extend beyond the disability or life of the ward in connection with estate, gift, income, or other tax planning or in connection with estate planning. The court shall retain oversight of the assets transferred to a trust, unless otherwise ordered by the court.

The Florida Guardianship Code is continuously being updated and expanded, to account for how litigious guardianships have become.  Section 744.441(19) is recent.  Prior versions of the Florida Guardianship Code did not provide the explicit authority to amend a trust or replace a trustee.  Yet those prior versions nevertheless allowed a guadian to amend a revocable trust with court authority, including for the purpose of replacing a trustee.

The first case to allow a guardian of property to replace a trustee is Guardianship of Muller, 650 So.2d 698 (4th DCA 1995).  Back then, all the guardianship code provided for was as follows:

744.441 Powers of guardian upon court approval.—After obtaining approval of the court pursuant to a petition for authorization to act, a plenary guardian of the property, or a limited guardian of the property within the powers granted by the order appointing the guardian or an approved annual or amended guardianship report, may:

(2) Execute, exercise, or release any powers as trustee, personal representative, custodian for minors, conservator, or donee of any power of appointment or other power that the ward might have lawfully exercised, consummated, or executed if not incapacitated, if the best interest of the ward requires such execution, exercise, or release.

The petition to amend the trust to replace the trustee alleged as follows:

The petition asserted that appellee had a severe conflict of interest with Muller and that it would be in Muller’s best interest to amend the trust to remove appellee as trustee and name either appellant or an independent third party as trustee. The alleged conflict of interest was premised on litigation between appellant as guardian and appellee, individually and as trustee.

In allowing the guardian to replace a trustee with court approval, the court reasoned as follows:

The legislative history relied upon by appellant is helpful. It suggests that the intent of the 1987 amendment was to broaden the powers of the guardian, not to limit the term “other power” to powers that the ward held as a donee, as was suggested by appellee. Appellant points to several places in titles and summaries of the senate and house bills where it is stated that the effect of the bills is to “broaden” or “increase” a guardian’s powers, including the house staff analysis summary which reads:

Section 744.441(2), F.S., is amended to clearly give a guardian, upon court approval, the power not only to execute powers of the ward, but to exercise or release any powers the ward would have as trustee, personal representative, custodian, conservator or donee.

It is clear that the legislature envisioned that the general provision referring to “other power” held by the ward was distinct from the enumerated fiduciary powers held by the ward. The legislative history strongly suggests that the legislature did not intend that the term “other power” be given a restrictive meaning as suggested by appellee. Moreover, as appellant points out, Black’s Law Dictionary includes the following as the first and primary definition of “power”: “The right, ability, authority, or faculty of doing something. Authority to do any act which the grantor might himself lawfully perform.” Black’s Law Dictionary 1053 (5th ed. 1979). Thus, the trial court erred in ruling that the power to amend the revocable trust to replace the trustee was not authorized by section 744.441(2).

A similar case,  Rene v. Sykes-Kennedy (Fla. 5th DCA 2015), came to the same conclusion in allowing an amendment.  The Ward, White, had established a revocable trust whereby her granddaughter, Rene, became trustee on the incapacity of White.  White was adjudicated incapacitated in 2013 as a result of senile dementia. The Florida guardianship court appointed White’s sister, Sykes-Kennedy, as guardian.  The guardian argued that she needed to become trustee in order to access the assets of the trust to pay for the ward’s care.  The guardianship court also noted the guardian’s education, business experience and relationship with the ward.  The court went out of its way to note that it was not finding any wrongdoing on the part of the prior trustee, the granddaughter. 

The Court reasoned as follows:Section 744.441, Florida Statutes (2013) sets forth the powers that a guardian may exercise with court approval. Among these powers is the authority to exercise any power as trustee that the ward might have lawfully exercised if not incapacitated, if the best interest of the ward requires such action. See § 744.441(2), Fla. Stat. (2013) ; see also In re Guardianship of Muller, 650 So.2d 698 (Fla. 4th DCA 1995) (holding that section 744.441(2) authorized exercise of ward’s power to amend trust to appoint new trustee).

Here, if not incapacitated, White had the power to amend her trust and appoint Sykes–Kennedy as the new trustee. Furthermore, given the evidence regarding Sykes–Kennedy’s education, business experience, and relationship with the ward, we have no difficulty concluding that there was substantial, competent evidence to support the trial court’s determination that it was in the ward’s best interest to have Sykes–Kennedy replace Rene as trustee.

The Court’s opinion makes some reference to making sure that the assets of the trust were available for the care of the ward.  Although the opinion does not so state, I infer that the granddaughter-trustee may not have been completely cooperative in using the trust assets to pay for care of the ward.  A trustee in this position must make every effort to be cooperative; indeed, the trustee should take active measures to work with the guardian to come up with a spending plan and comply with as many requests of the guardian as possible.  

From an estate planning perspective, it appears that the planning documents may not have been completely in sync in this case. Florida law allows for the designation of a pre-need guardian, whereby a person can designate who the person wants to serve as guardian, before a guardian is needed.  Many estate plans will appoint the same person as successor trustee of the revocable trust, pre-need guardian, and financial power of attorney.  This avoids multiple fiduciaries from fighting over control of assets.  

The opinion does not address the destination of assets upon the ward’s death.  I have seen situations where assets are spread out into various “buckets,” each bucket with its own beneficiary at death.  So, once the owner becomes incapacitated, the fiduciaries have a great deal of control over who gets estate assets once the owner dies, by spending money out of some buckets but not others.  Using beneficiary designations and pay on death designations to allocate different assets to different people certainly has the possibility of avoiding probate, but it does create the possibility for fights over which assets to use to pay for the care of the incapacitated person.  The alternative is to have all assets go into a revocable trust, with one set of beneficiaries listed in the trust for all assets on a consolidated basis.  Such planning has a better chance of preserving the true testamentary intent of the client.