Family Member, Friend, Bank, or Trust Company: Who Should Hold the Keys to a Florida Irrevocable Trust?

Warren's Problem: A Good Trust With a Hard Family Question

An irrevocable trust is one the person who creates it cannot simply revoke or amend on their own, which is precisely what lets it move assets out of the taxable, countable, or exposed part of an estate for creditor, Medicaid, or tax planning purposes. Once that trust is signed, though, someone has to run it, and that person's judgment matters as much as the document itself.

Consider Warren, 73, who lives in Ponte Vedra Beach and has funded an irrevocable trust with about $3 million in assets. He is a composite drawn from the kind of situation I see often in practice, not an actual client, but his facts are realistic. Warren has two adult children who do not get along, and both are beneficiaries. Warren's first instinct, like many parents, was to name one of his children as trustee. His estate planning attorney asked him to slow down and think through what that choice would actually mean for the next twenty years.

What a Trustee Actually Owes the Beneficiaries

Florida's Trust Code, found in Chapter 736 of the Florida Statutes, sets out real, enforceable obligations for whoever holds the trustee title. A trustee is not simply a family member doing a favor. The role carries fiduciary duties, including:

• Duty of loyalty: the trustee must administer the trust solely in the interest of the beneficiaries, not for personal convenience or advantage.
• Duty of impartiality: when a trust has multiple beneficiaries, the trustee must treat them fairly, balancing the interests of, for example, someone who wants income now against someone who wants the principal preserved for later.
• Duty to account: beneficiaries generally have a right to information about how the trust is being managed and invested.
• Duty of prudent administration: investment and distribution decisions must be reasonable and well documented, not arbitrary.

These duties exist whether the trustee is a bank, a sibling, or a close family friend. The difference is how easily each type of trustee can actually deliver on them when family dynamics get complicated.

The Conflict Problem When a Beneficiary Is the Trustee

Naming one of Warren's children as sole trustee creates an obvious structural problem. Florida law does not allow the same person to serve as sole trustee and sole beneficiary at the same time, because a trustee cannot meaningfully owe duties to himself. Even where that rule is not directly triggered, such as when a child-trustee is one of several beneficiaries, naming a beneficiary as trustee invites a different kind of trouble: every discretionary decision the trustee-child makes about distributions to himself, or about how to treat his sibling, can look self-interested even when it is not.

For Warren, whose children already do not get along, putting one of them in charge of the other's inheritance is close to guaranteeing a dispute. The child who is not trustee may suspect favoritism. The child who is trustee may feel burdened, resented, and exposed to a lawsuit no matter how carefully she acts. This is the single most common mistake I see families make with irrevocable trusts, and it is almost always well-intentioned.

Corporate Trustees, Fees, and Whether They Belong in Florida

A bank or trust company brings professional administration, institutional record-keeping, and, critically for a family like Warren's, no dog in the fight between the children. A corporate trustee has no stake in either sibling's approval and no birthday dinners to attend. That neutrality is often worth the cost.

Florida law does not fix trustee compensation by a rigid formula. The statute simply says a trustee is entitled to compensation that is reasonable under the circumstances. In practice, corporate and professional trustees commonly charge an annual fee expressed as a percentage of trust assets, often somewhere in the low single digits, with the percentage typically declining as the trust grows larger. The exact rate varies by institution and by the complexity of the trust, so any specific figure should be confirmed directly with the trust company being considered rather than assumed from a rule of thumb.

One practical note for Florida families: if a trust is going to be administered in Florida, involve a Florida-licensed attorney in reviewing whether the chosen institution or individual trustee is qualified to serve here and how that choice interacts with the trust's governing law and situs provisions.

Co-Trustees and the Trust Protector as a Middle Path

Some families split the difference by naming a corporate trustee alongside a family member as co-trustees, giving the family a voice while the institution handles administration and provides a check on any single individual's judgment. This can work well, but Florida law is direct about the risk: a lack of cooperation among co-trustees that substantially impairs administration of the trust is itself a ground for court-ordered removal. Co-trusteeship is not a way to avoid conflict if the two people cannot work together at all; it is a way to share power when they can.

A second, increasingly common tool is the trust protector, a person or entity given specific oversight powers under the trust document itself, such as the ability to remove and replace a trustee, approve certain decisions, or modify administrative terms without going to court. A trust protector does not run the day-to-day trust, but acts as a safety valve if the trustee is not working out.

An irrevocable trust is also not necessarily frozen forever in its original form. Depending on what the document allows and what Florida law permits, changes can sometimes be made through a nonjudicial settlement agreement among interested parties, a judicial modification, decanting into a new trust under Florida Statute 736.04117, or with the consent of the settlor and all beneficiaries. None of these tools make an irrevocable trust revocable at will, but they mean today's trustee choice is not necessarily permanent if circumstances change.

Removal and Succession: What Happens If It Doesn't Work

Florida Statute 736.0706 gives beneficiaries, co-trustees, or the settlor a path to ask a court to remove a trustee. A court may remove a trustee for a serious breach of trust, for lack of cooperation between co-trustees that substantially impairs administration, for unfitness or persistent failure to administer the trust effectively, or where circumstances have changed enough that removal serves all the beneficiaries' interests and does not conflict with the trust's purpose. This is a real, usable remedy, not a theoretical one, and it is part of why courts and planners take trustee selection seriously from the start.

Because removal litigation is expensive and slow, the better strategy is almost always to name a clear line of successor trustees in the document itself, spelling out who steps in if the first trustee cannot or should not continue, and under what conditions. A well-drafted succession plan reduces the odds that removal ever becomes necessary.

What Warren Decided

After reviewing his options, Warren chose not to name either child as trustee. Instead, his trust names a corporate trustee to handle administration, investment, and distributions, with a trust protector, a longtime family friend independent of both children, given the authority to remove and replace the corporate trustee if service or judgment ever falls short. Both children remain equal beneficiaries, with the trust's terms defining how and when distributions are made, rather than leaving that discretion to whichever sibling might have held the title.

Warren did not eliminate every possible disagreement between his children. No document can promise that. What he did was remove himself, and them, from having to trust one another's judgment about money for the rest of their lives. The corporate trustee answers to the terms of the trust and to Florida law, not to either sibling personally, and the trust protector gives Warren's family a real check if that relationship ever needs to change.

This article is for general informational purposes only and does not constitute legal advice, nor does reading it create an attorney-client relationship. Florida estate, elder, probate, and real estate law are fact-specific and change over time. Consult a licensed Florida attorney about your individual circumstances. Arthur Simpson, Esq. is licensed to practice law in the State of Florida. Attorney advertising.