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Fiduciary Duty: A Foundational Tenet Trending Back Into the Forefront

Real Property, Probate and Trust Law

According to the U.S. Department of Commerce, in the next 15 years, nearly one in every five U.S. residents will be aged 65 or older, laying the groundwork for the largest generational transfer of wealth in U.S. history.1 For context, 58 percent of ultra-high net worth (UHNW) individual wealth (those with a net worth of $30 million or more) is owned by those above 60 years of age, and estimates for the amount these individuals will pass on, just in the next decade, reach $4.1 trillion worldwide, with the United States contributing the largest proportion of total UHNW wealth.2 Viewing this data from a perspective of sheer volume, it is probable that complications will arise in the planning, administration, and distribution of these individuals’ estates in myriad respects. This article explores how a monumental uptick in generational wealth transfers in the next decade will affect 1) estate planning; 2) probate, trust, and fiduciary duty-related litigation; 3) corporate fiduciaries and wealth advisory firms; and 4) fiduciary jurisprudence as a whole.

Estate Planning in a Multinational and Multigenerational Landscape
With two-thirds of the world’s wealthiest consisting of first-generation wealth creators, the coming decade will prove to be these individuals’ first foray into estate and succession planning.3 Consequently, it is imperative that attorneys judiciously draft these clients’ estate-planning documents in a way that effectuates the clients’ intentions, while also providing clear guidance regarding distribution of trust assets, the potential impact of favoring one beneficiary (or class of beneficiaries) over another, the pros and cons of limiting or expanding the trustee’s investment responsibilities, and the ramifications of appointing co-trustees or corporate trustees.4 In so doing, attorneys should also stay abreast of any current changes or developments in the law which, if the next three years bring what President Trump promises, could result in several items to monitor: lower income-tax rates; elimination of gifts of appreciated assets to private charities; elimination of estate and gift taxes and presumably the generation-skipping transfer tax; and income tax at death or carryover basis.5

Technology and globalization have also fundamentally altered the way business is done, which, in turn, have resulted in more UHNW individual estates containing multijurisdictional assets. Similarly, the nuclear family has become less prevalent, causing more fragmented multigenerational families. In essence, UHNW individuals have become more international. This fact requires experienced and qualified lawyers who can navigate the complexities of large estates comprised of varying asset classes in numerous jurisdictions, while also simultaneously settling estate debts and litigating will contests.

In the same vein, maximizing the liquidity of unique, rare, or unusual assets will prove to be a challenge for personal representatives, especially in cases involving transitioning private, family-owned businesses, accessing and monetizing digital or online intellectual property, valuing commercial or residential real estate, and liquidating art and other collectibles.6 In collecting and taking possession of the estate’s assets, the personal representative should find, identify, protect, and store record books, title papers, and any other business documents that would be relevant to valuing the assets within the estate. These documents will aid in the proper administration, investment, and subsequent distribution of the assets of the estate, which should be exercised efficiently, expeditiously, and in a reasonable and prudent manner given the circumstances.7

Managing and appraising these unique assets properly will, in certain cases, require delegating duties to specialists or experts. Such decisions to delegate are subject to a fiduciary standard.8 Nonetheless, when the personal representative does not delegate these duties and performs them himself or herself, he may be entitled to additional or extraordinary compensation depending on several factors.9 The way estate assets are inventoried and carried, the time it takes to marshal the assets within the estate, the method by which the assets are valued, the amount of personal representative and trustee fees, and to whom the assets are distributed, will all become frequent areas of dispute in the coming years.

A Surge in Probate and Trust Litigation
The crux of trust and estate litigation almost always involves fiduciary duty — a standard of care and one of the original tenets of our legal system by which all trustees are bound.10 As fiduciaries, trustees are required to administer an estate or trust in good faith; to control and protect trust property; to be loyal to all beneficiaries; to keep clear, distinct, and accurate records; to show candor to and keep informed the beneficiaries of matters involving the estate and trust; to act impartially with respect to the similar or differing interests of the beneficiaries; to act prudently; to exercise reasonable care, skill, and caution; and to act as prudent investors would considering the circumstances.11 The effectuation of these duties, the scope of the fiduciary relationship (whether expressly by contract or impliedly by relationship), and decisions made during the course of a trust or estate transaction form the basis for claims involving breaches of fiduciary duty.12

Disputes between generational family members or different classes of beneficiaries have always been prevalent in trust and estate litigation. Yet, the factual inquiries involved in deciding these disputes are growing more and more complicated, given the burgeoning number of UHNW individuals who operate internationally, often with pre-nuptial or post-nuptial agreements, constructive trusts, multiple partnership or corporate membership interests, and internationally held property.13 For example, the Second District Court of Appeal recently looked to Israeli law in Cohen v. Shushan, 212 So. 3d 1113 (Fla. 2d DCA 2017), to determine whether spouses were considered married for purposes of an inheritance determination, and to Cayman Islands law in Ebanks v. Ebanks, 198 So. 3d 712 (Fla. 2d DCA 2016), to decide how a certain waterfront property in that jurisdiction would be divided.14

It is anticipated that as the number of UHNW individuals continues to grow steadily at an annual rate of 4.6 percent,15 and as a higher percentage of this population is comprised of self-made fortunes as opposed to inherited fortunes, an increasing number of beneficiaries will clash for control over their family’s business legacy.16 The recent trust contest of Rollins v. Rollins, 298 Ga. 161, 780 S.E.2d 328 (Ga. 2015), is illustrative of this factual scenario.17 The beneficiaries in Rollins disputed the actions of the trustees who, in acting as corporate directors, restructured several of the estate’s business entities, which ultimately affected the liquidity and distribution of trust assets. Although the trustees did not hold a majority interest in any one company, they aggregately had a controlling interest by virtue of their total ownership share of the trusts’ assets, and, thus, their corporate actions on behalf of the businesses were subject to a fiduciary standard.18

An upsurge in wealthy individuals will also open the door for family members or advisors, who are held in esteemed positions of trust within the family, to engage in self-dealing and other opportunistic or nefarious activities.19 A notable example is the litigation quagmire in Seminole County involving Jeno Paulucci, founder of Michelina’s, Inc., one of the most prominent food manufacturers in the country. The beneficiaries of his multigenerational trusts allege that the trustees, who were trusted advisors for Paulucci, put together “sweetheart deals for themselves” and charged “exorbitant” estate management fees that were memorialized in documents that Paulucci signed while mentally incapacitated.20

The effects of innovation and globalization will likewise cause a growing number of estates to be comprised of unique or specialized asset classes requiring a delegation of duty to maximize liquidity and value. This will affect litigation in two ways. First, the trustee or personal representative’s fiduciary duty could be measured against the delegated agent’s performance of his or her unique skill or expertise, taking into account the fiduciary’s duty to exercise reasonable care and diligence in selecting an agent to perform the delegated service.21 Selecting a qualified agent to handle delegated authority becomes more complicated as the delegated tasks become more complex. Second, the trustee or personal representative’s utilization of specialized skills or knowledge in generating maximum value for unique assets, or growing the estate portfolio exponentially, may entitle that individual to increased fees.22 Establishing atypical, delegated fiduciary duties as a basis for enhanced fees will require expert testimony, and likely will hinge on the actual and measurable contributions of the trustee or personal representative in each case.23 A demonstrative example is Robert Rauschenberg Found. v. Grutman, 198 So. 3d 685, 686 (Fla. 2d DCA 2016), in which the Second District Court of Appeal approved the trial court’s award of $24.6 million in trustee fees due to the trustees’ increasing the value of art and other collectibles within the trust from $605,645,595 to $2,179,000,000 over a period of several years.24

Still, personal representatives should be cautious in delegating their financial and accounting duties. Verified inventories of estate assets must include reasonable detail, and for each item listed, its estimated fair market value at the date of the decedent’s death.25 Shortcomings within these records subject a fiduciary to a presumption that any obscurities or doubts be resolved against him or her.26 Concomitantly, the personal representative’s subsequent accountings are required to contain sufficient information to put interested persons on notice as to all significant transactions affecting the administration during the accounting period (with both an asset acquisition value or carrying value, and an estimated current value), including explanations for any entries that involve changes or adjustments in capital asset values.27

If initial inventory values are inflated in comparison to ultimate market sale values, it could prove problematic for the beneficiaries, as it would subject the estate to more personal representative fees than necessary in addition to excessive tax liability. On the other side of the coin, significantly undervaluing assets, such as corporate shares, can also subject third parties and appraisers to suits brought on behalf of the beneficiaries. A lawsuit filed in Multnomah, Oregon, by the son of Ed Lynch, co-founder of Pacific Foods, alleges that Pacific Foods’ value was “grossly understated,” and that the “massively deflated redemption price” adversely affected the estate and the beneficiaries.28 While a personal representative is ordinarily not under a duty to furnish information to a beneficiary, he or she is under a duty to communicate to the beneficiary material facts affecting the interests of the beneficiary that he or she knows the beneficiary does not know and that the beneficiary needs to know for his or her own protection.29

Florida’s probate courts are already experiencing a marked increase in filings and dispositions in the past six years, with the highest filing totals coming from the 11th, Sixth, 20th, 17th, and 15th circuits, respectively.30 Correspondingly, expert witnesses specializing in fiduciary duty and trustee fees are becoming increasingly more sought after. It is probable that this surge in litigation will continue if estate investments lose value and beneficiaries begin to question the investment decisions and strategy of corporate fiduciaries or wealth advisory firms.31

The Effect on Corporate Fiduciaries and Wealth Advisory Firms
The increase in UHNW estates will likely increase the number of accounts that corporate fiduciaries are entrusted to monitor. In some institutions, a single trust administrator already manages upwards of 190 accounts — which are often comprised of varying types of trusts, each with their own specific needs and requirements (e.g., special needs trusts, guardianship trusts, irrevocable trusts, revocable trusts, and investment advisory accounts, among others). The breadth and diversity of these accounts will require, on behalf of the institution, a proactive approach as opposed to a reactive approach by qualified, experienced account managers. Critical to the corporate fiduciary’s success will be the selection of an appropriate client team with extensive experience dealing with the particular needs of each trust and the respective beneficiaries of that trust, and execution of a client plan that anticipates the types of issues that may arise during the course of the relationship.32

Nonetheless, over the years, banking ethos has changed. Institutions once renowned for their trust and fiduciary-related services have succumbed to a sales and revenue dominated culture.33 In some cases, corporate trustees are even refusing to follow clear-cut trust directives to the detriment of the beneficiaries.34 In Kritchman v. Wolk, 152 So. 3d 628 (Fla. 3d DCA 2014), the Third District Court of Appeal found that Wells Fargo breached its fiduciary duty in refusing to abide by the trust’s written directives to pay for the remaining tuition and expenses of a beneficiary’s education.35 Institutions will need to adapt away from the cross-selling culture36 and scrutinize more closely the needs and requirements of the beneficiaries without deviating from their policies and procedures; otherwise exceptions and deviations from these procedures for the sake of retaining a difficult client or increasing revenue will contribute to the already growing amount of litigation. No matter how complicated or problematic a client may be, even one that is court-appointed and supervised, the corporate fiduciary must still diligently fulfill their duties irrespective of any personality conflicts or animus between beneficiaries.37

Further exacerbating nonconformities with the requisite fiduciary duties of the institution is the implementation of automated/digitalized processes and procedures that are reducing the amount of supervision historically utilized by the institution’s trust administrators. This automation is also revolutionizing the way wealth advisory firms and hedge funds execute trades and investment strategies, which may lay the groundwork for increasingly sophisticated clients questioning the prudence of portfolio managers, particularly in situations when institutions utilize closed-circuit products or in-house investment management teams.38 Evidence suggests that with more investment information available in the marketplace, clients have begun researching and requesting specific asset allocations, in effect, removing investment tools from the portfolio manager’s toolbelt. Disputes over investment objectives, portfolio manager discretion, trust performance, and diversification will likely increase commensurate with the growth of UHNW individuals, and may explode if there is a significant market correction in the near future.

Although fiduciary duty is a longstanding concept, its meaning will continue to expand (or contract) in the foreseeable future in correlation with the rising number of trust and estate disputes that Florida is experiencing. The unique factual scenarios arising within UHNW estates will require that a close eye be kept on this evolving area of the law in the years to come.

1 Jennifer M. Ortman, et al., An Aging Nation: The Older Population in the United States, U.S. Department of Commerce, Economics and Statistics Administration, U.S. Census Bureau 2 (May 2014), available at

2 Mykolas D. Rambus, et al., Wealth-X and NFP Family Wealth Transfers Report (2014).

3 Id.

4 See Nancy S. Freeman, Trust Me: Practical Advice for Drafting Florida Trusts, 83 Fla. B. J. 20 (May 2009); see also IIA A. Scott & W. Fratcher, Scott on Trusts §184 (4th ed. 1987) (if there are several trustees, each is under a duty to participate fully in the administration of the trust); Ball v. Mills, 376 So. 2d 1174, 1182 (Fla. 1st DCA 1979), cert. denied, 388 So. 2d 1116 (Fla. 1980) (co-trustees are obligated to “maintain an attitude of vigilant concern” for the proper administration of the trust).

5 Gail E. Cohen, In Like a Lamb, Out Like a Lion, Trust & Estates J. 20 (Jan. 2017).

6 American Bar Association, Guidelines for Individual Executors & Trustees, Estate Planning Info & FAQs (2017),

7 See Fla. Stat. §733.602 (1); Fla. Stat. §733.603.

8 Compare Fla. Stat. §733.609 (“[A] personal representative’s fiduciary duty is the same as the fiduciary duty of a trustee of an express trust.”), with Restat. 2d of Trusts, §171(d) (2012) (“A trustee can properly delegate the performance of acts which it is unreasonable to require him personally to perform. There is not a clear-cut line dividing the acts which a trustee can properly delegate from those which he cannot properly delegate. In considering what acts a trustee can properly delegate the following circumstances, among others, may be of importance: (1) the amount of discretion involved; (2) the value and character of the property involved; (3) whether the property is principal or income; (4) the proximity or remoteness of the subject matter of the trust; (5) the character of the act as one involving professional skill or facilities possessed or not possessed by the trustee himself.”).

9 Fla. Stat. Ann. §733.617(7) (2017). The court may increase or decrease the compensation for ordinary services of the personal representative or award compensation for extraordinary services if the facts and circumstances of the particular administration warrant. In determining reasonable compensation, the court shall consider all of the following factors, giving weight to each as it determines to be appropriate: (a) The promptness, efficiency, and skill with which the administration was handled by the personal representative; (b) the responsibilities assumed by and the potential liabilities of the personal representative; (c) the nature and value of the assets that are affected by the decedent’s death; (d) the benefits or detriments resulting to the estate or interested persons from the personal representative’s services; (e) the complexity or simplicity of the administration and the novelty of the issues presented; (f) the personal representative’s participation in tax planning for the estate and the estate’s beneficiaries and in tax return preparation, review, or approval; (g) the nature of the probate, nonprobate, and exempt assets, the expenses of administration, the liabilities of the decedent, and the compensation paid to other professionals and fiduciaries; (h) any delay in payment of the compensation after the services were furnished; and (i) any other relevant factors.

10 See Brundage v. Bank of America, 996 So. 2d 877, 882 (Fla. 4th DCA 2008) (a trustee owes a fiduciary duty to both the settlor and the beneficiary).

11 Peter B. Tiernan, A Trustee’s Duties and Responsibilities Under Discretionary Invasion Provisions, 79 Fla. B. J. 50 (Oct. 2005).

12 See Devaughn v. Devaughn, 840 So. 2d 1128, 1132 (Fla. 5th DCA 2003); see also Forgione v. Dennis Pirtle Agency, Inc., 701 So. 2d 557, 560 (Fla. 1997); First National Bank and Trust Company of the Treasure Coast v. Pack, 789 So. 2d 411, 414-16 (Fla. 4th DCA 2001).

13 See, e.g., Zoldan v. Zohlman, 11 So. 3d 982, 983 (Fla. 3d DCA 2009) (suit brought by stepdaughter against the stepfather’s estate involved analysis of the validity of the post-nuptial agreement, the trust, the limited partnership agreement, the stepfather’s will, and the fair market value of the securities within the trust); see also Williams v. Stanford, 977 So. 2d 722, 730 (Fla. 1st DCA 2008) (constructive trust is an equitable remedy in cases of breach of fiduciary duty); and Cohen v. Hattaway, 595 So. 2d 105, 107 (Fla. 5th DCA 1992) (officers and directors of a corporation have a fiduciary duty to the corporation and its members/shareholders).

14 See Cohen v. Shushan, 212 So. 3d 1113 (Fla. 2d DCA 2017); see also Ebanks v. Ebanks, 198 So. 3d 712 (Fla. 2d DCA 2016).

15 Mykolas D. Rambus, et al., Wealth-X and NFP Family Wealth Transfers Report (2014).

16 Id. (reflecting a sizable portion of wealth that is due to be transferred is concentrated in the ownership of privately held businesses).

17 Claire O’Conner, Inside an $8 Billion Family Feud: Who Poisoned the Orkin Fortune?, Forbes, Sept. 29, 2014, available at

18 Rollins v. Rollins, 298 Ga. 161, 780 S.E.2d 328 (Ga. 2015).

19 See U.S. v. Chestman, 947 F.2d 551, 567 (2d Cir. 1991) (The heart of fiduciary duty is rooted in the concern that persons who assume trustee-like positions with discretionary power over the interests of others might abuse their position.); see also Black’s Law Dictionary 255 (4th pocket ed. 2006), defining duty of good faith and fair dealing: “[A] duty that is implied in certain contractual relationships requiring the parties to deal with each other fairly.”

20 Rene Stutzman, Jeno Paulucci Heirs Fight Over $150 Million, State Sen. David Simmons Is Right in the Middle, Orlando Sentinel, Jan. 18, 2014, available at

21 Compare Fla. Stat. Ann. §518.112(1) (“A fiduciary may delegate any part or all of the investment functions, with regard to acts constituting investment functions that a prudent investor of comparable skills might delegate under the circumstances, to an investment agent as provided in subsection (3), if the fiduciary exercises reasonable care, judgment, and caution in selecting the investment agent, in establishing the scope and specific terms of any delegation, and in reviewing periodically the agent’s actions in order to monitor overall performance and compliance with the scope and specific terms of the delegation.”), with Restat. 2d of Trusts §171(g) (2012) (“A trustee can properly employ an agent to secure offers for these purposes, or, having himself made contracts for these purposes or fixed terms upon which such contracts may be entered into, he can properly employ an agent to perform ministerial acts to consummate the transactions or to enter into contracts upon such terms. In the case of a trust to conduct a business involving numerous sales or purchases of personal property of relatively small value in each particular case, or numerous transactions of a similar character, the trustee can properly delegate to properly selected agents the power to fix prices and other terms and to carry out such sales, purchases or transactions.”). See also Fla. Stat. §736.0807, which relieves a trustee of liability for the agent’s actions when the trustee properly delegates authority as set forth in the statute.

22 See In re Estate of Newhoff, 435 N.Y.S.2d 632, 638 (Sur. Ct. Nassau County, N.Y. 1980) (“[F]iduciary may not turn over the management of the funds to the co-fiduciary and thereby escape liability.”); see also In re Goldstick, 581 N.Y.S.2d 165, 173 (N.Y. App. Div. 1992) (“A trustee may delegate the exercise of a trust power to a fellow trustee, especially where the latter has an expertise in some particular aspect of the trust management (citation omitted); but that does not give a trustee the right to abdicate his duty to be personally active in the administration of the trust with regard to those functions which call for consistency with usually prudent business practice.”).

23 See West Coast Hospital Ass’n v. Florida National Bank of Jacksonville, 100 So. 2d 807 (Fla. 1958) (quoting Bogert on Trusts & Trustees §976) (Courts consider several factors to determine reasonable trustee compensation, which include “the amount of capital and income received and disbursed by the trustee; the wages or salary customarily granted to agents or servants for performing like work in the community; the success or failure of the administration of the trustee; any unusual skill or experience which the trustee in question may have brought to his work; the fidelity or disloyalty displayed by the trustee; the amount of risk and responsibility assumed; the time consumed in carrying out the trust; the custom in the community as to allowances to trustees by settlors or courts and as to charges exacted by trust companies and banks; the character of the work done in the course of administration, whether routine or involving skill and judgment; any estimate which the trustee has given of the value of his own services; and payments made by the cestuis to the trustee and intended to be applied toward his compensation.”).

24 Robert Rauschenberg Found. v. Grutman, 198 So. 3d 685, 686 (Fla. 2d DCA 2016).

25 Fla. Stat. §733.604, inventories and accountings; public records exemptions.

26 See Brent v. Smathers, 547 So. 2d 683, 685 (Fla. 3d DCA 1989) (a trustee is under a strict duty to keep and render a complete and accurate record and accounting as to its trusteeship to the beneficiary); see also Benbow v. Benbow, 157 So. 512, 519 (1934) (failure to make “clear, distinct, and accurate accounts” as to expenditures from the trust’s funds requires all “obscurities and doubts” to be resolved against the fiduciary).

27 Fla. Prob. R. 5.346(b), Appendix A, Schedule D.

28 Oregon Live, After Co-Founder of Pacific Foods Dies, Fight Erupts over $250 Million, Wealth Advisor (Sept. 1, 2017), available at

29 See Restatement (Second) of Trusts §173 at 379; see also Zottarelli v. Pacific States Savs. & Loan, 94 Cal. App. 2d 480, 211 P.2d 23 (1949).

30 See Florida Office of the State Courts Administrator, Probate Overview, available at

31 Thomas Raymond, Master Limited Partnerships (Revisited), Abbot Downing (2015), available at (reflecting double-digit negative returns for MLPs); Wolf Richter, The Retail Apocalypse Is Demolishing Mall Investors, Business Insider (May 10, 2017), available at (REIT investments have “plunged in unison.”).

32 Christopher Vondracek, U.S. Bank Sued Over Bond Scheme Gone Bad, Courthouse News (Aug. 23, 2017), available at

33 Kartikay Mehrotra, Laura J. Keller & Edvard Pettersson, Wells Fargo Reaches $110 Million Fake Accounts Settlement, Bloomberg, Mar. 28, 2017, available at; U.S. District Court of the Southern District of New York, Securities Complaint Against Goldman, Sachs & Co. (Apr. 16, 2010), available at

34 National Association of Legal Fee Analysis News Blog, Settlement Reached in Fee Dispute in Family Trust Case in Florida (Nov. 20, 2015),

35 See Kritchman v. Wolk, 152 So. 3d 628 (Fla. 3d DCA 2014).

36 Charles W. Ranson, Cross-Selling — Retail and Private Banking Sales Practice (2017),

37 See, e.g., First Union Nat’l Bank v. Turney, 824 So. 2d 172, 189 (Fla. 1st DCA 2001) (defendant bank’s conduct in knowingly failing to disclose material facts in seeking a general release from the beneficiary constituted both a breach of fiduciary duty and a crime-fraud exception applicable to attorney-client communications the bank undertook).

38 See Saijel Kishan, Hedge Funds Are Training Their Computers to Think Like You, Bloomberg, March 27, 2017, available at

David E. Wolff has consulted and participated in trust and fiduciary duty litigation involving hundreds of millions of dollars, and has worked directly with c-level corporate trust officers to determine whether breaches of fiduciary duty occurred in cases involving disputes between income and remainder beneficiaries, substantial trustee/personal representative fee petitions, and violations of the duties of loyalty, good faith, and fair dealing. He also counsels high net-worth individuals regarding sophisticated business and real property transactions, and the economics, viability, and implementation of various trust and transfer tax plans.

This column is submitted on behalf of the Real Property, Probate and Trust Law Section, Andrew M. O’Malley, chair, and Douglas G. Christy and Jeff Goethe, editors.

Real Property, Probate and Trust Law