Under Florida law, the “terms of a trust” determine how assets placed into a trust are to be managed and distributed at the time of the settlor’s death. Section 736.0103(21) of the Florida Trust Code defines the “terms of a trust” as:
“[T]he manifestation of the settlor’s intent regarding a trust’s provisions as expressed in the trust instrument or as may be established by other evidence that would be admissible in a judicial proceeding.”
In other words, in order to determine the terms of a trust, the Florida courts will first look to the trust’s originating documents themselves. If these documents clearly reflect the settlor’s intent and are legally enforceable under Florida law, then they will be binding. However, if there are any issues with the trust documents – if the settlor’s intent is unclear, if the documents are incomplete, or if they are not legally enforceable – then the courts will look to “other evidence” in order to determine how the trust should be administered.
When dealing with the administration of a loved one’s estate, issues arising out of the incompleteness or unenforceability (or alleged incompleteness or unenforceability) of the estate plan can present difficult challenges. This is particularly true for issues related to the settlor’s intent. Whether the issue arises in the context of deciding what to do as trustee or in the context of a dispute between individuals claiming competing interests in the assets of the trust, trying to determine what the settlor would have wanted can be a trying process and it inherently involves a certain measure of uncertainty.
Proving the Settlor’s Intent When Trust Documentation Is Unclear, Incomplete, or Unenforceable
When the written terms of a trust are insufficient to fully convey the settlor’s intent, the Florida courts will look to “extrinsic evidence” – that is, evidence outside of the written trust documents themselves. In order to be considered, this extrinsic evidence must be “admissible in a judicial proceeding” – meaning that it must satisfy the requirements that apply generally to the use of documentary and testimonial evidence in civil cases. Types of extrinsic evidence that may be used to determine a settlor’s manifestation of intent include:
- The settlor’s age, legal and practical competence, and personal and financial circumstances
- The affected beneficiaries’ ages, legal and practical competence, and personal and financial circumstances
- The relationships between the settlor and the various affected beneficiaries
- The value and character of the trust property at issue
- The purpose (or purposes) for which the settlor created the trust (to the extent that such purpose(s) can be ascertained)
- The relevant business and financial practices
- The circumstances under which the trust must be administered
- The formality (or lack thereof) of the trust’s originating documents
- The skill and care (or lack thereof) with which the trust’s originating documents were prepared
To the extent that each of these forms of extrinsic evidence are admissible (and to the extent that they are available and relevant in any particular case), they can be used individually or collectively in order to establish the settlor’s manifestation of intent. In Florida, two of the primary reasons that extrinsic evidence may be deemed inadmissible to assist in establishing a settlor’s manifestation of intent are:
1. The “Plain Meaning” Rule
In certain circumstances, the Florida courts will look to the “plain meaning” of a trust in order to ascertain the settlor’s intent. Here, the basic concept is that, if the settlor’s subjective intent is not clear, then he or she must have simply meant what most reasonable people would understand the trust documents to say. If this “plain meaning” is clear from the language of the trust documents themselves, then no extrinsic evidence may be necessary in order to prove the settlor’s manifestation of intent.
However, while the “plain meaning” rule may bar the use of extrinsic evidence in some cases, Florida law also recognizes that extrinsic evidence can be used to overcome trust documents’ plain meaning in some cases as well. For example, with regard to reformation of trust documents to correct mistakes, Section 736.0415 of the Florida Trust Code states:
“Upon application of a settlor or any interested person, the court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor’s intent if it is proved by clear and convincing evidence that both the accomplishment of the settlor’s intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement. In determining the settlor’s original intent, the court may consider evidence relevant to the settlor’s intent even though the evidence contradicts an apparent plain meaning of the trust instrument.”
2. The Prohibition on Hearsay
The general rule regarding hearsay is that it is inadmissible as evidence in court. With regard to using hearsay as evidence of intent, the Florida Evidence Code states: “A statement of the declarant’s then-existing state of mind, emotion, or physical sensation, including a statement of intent, plan, motive, design, mental feeling, pain, or bodily health, [is inadmissible] when such evidence is offered to . . . [p]rove the declarant’s state of mind . . . when such state is an issue in the action.”
However, there are a number of exceptions to the prohibition on hearsay, and some of these exceptions may apply in the context of a dispute over the terms of a trust. As a result, when assessing options for proving or challenging a settlor’s intent, it is important to consider whether: (a) any hearsay evidence is available; and (b) if so, if it falls within an exception to the general rule against admissibility.
These are complicated legal issues, and trust disputes can often present challenging questions of interpretation and enforcement. If you have questions and would like to speak with an attorney, we encourage you to contact us for a confidential initial consultation.
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Our attorneys bring more than 35 years of combined experience representing trustees, beneficiaries, and other clients in trust disputes in the Jacksonville area. If you would like to discuss your situation with one of our attorneys in confidence, please call 904-288-4414 or request a consultation online today.