The Method and Purpose of Freezing Trust Assets

Trusts are an increasingly popular way to protect and distribute assets to loved ones after death. Once a trust is established, the person charged with managing the trust property, the trustee, holds a high level of responsibility to treat these assets in a manner that best protects the interests of the beneficiaries. Given the high level of responsibility and trust a trustee holds, the law imposes a number of requirements on the use, accounting, and distribution of trust assets. While most trustees generally make a good faith effort to comply with the terms of the trust and the provisions of Florida trust law, others may ignore or violate these requirements, either intentionally and through neglect. The rights of the beneficiaries, along with fulfilling the intended purpose of a trust, are the primary factors driving court decisions when challenges to the action or inaction of a trustee are filed. Beneficiaries and other interested parties can seek court intervention when they believe the trustee is harming the value or stability of the trust, and want to prevent further damage. Freezing trust assets is one powerful method used to rein in trustees, and a discussion of when and how this restraint is imposed by courts will follow below.

When Courts Will Freeze Assets

When a beneficiary suspects mismanagement of a trust, fraud, breach of fiduciary duties, or questions the validity of the trust itself, information about the value and state of trust assets is often lacking. Without this information, it is impossible to know whether trust assets are being depleted, and irreparable harm being caused to the beneficiaries as a result. In this situation, it is not uncommon for the party challenging the trust to ask the court to freeze trust assets to prevent further loss. This is accomplished by asking for injunctive relief, which orders the other party to take certain actions or stop engaging in specific behavior. Courts have broad discretion to grant these requests, and in the context of trusts, will look for the following before ordering this remedy:

• the trust has been and will continue to be mismanaged, and/or the depletion will harm the beneficiaries;
• the requesting party is likely to be successful on the merits, which is satisfied under a court’s broad authority to decide these matters;
• without freezing assets, there is nothing to prevent continued mismanagement of the trust while the case is pending, e., no other adequate remedy is available; and
• the public’s interest is best served by maintaining the status quo concerning trust assets, which means trying to preserve the maximum amount of trust property.

How to Request this Relief

Asking for this kind of injunctive relief is usually accomplished through an emergency motion, which allows the requesting party to appear before a judge in an expedited manner, instead of the months it can take to have a regular hearing scheduled. Florida statutes specifically authorize courts to remedy breaches of trust by a trustee, and wasting or mismanaging trust assets would certainly fall under this category. Injunctions, being emergency motions, are routinely issued without the presence or participation of the other party, which in practice means the party asking for relief will need to produce strong evidence in support of his/her claim to overcome the due process considerations. Evidence showing the factors described above must be submitted, and usually come in the form of sworn testimony, affidavits, or verified pleadings (certifying the claims made are true). Once an injunction is issued, it will stop the current injury and prevent further harm. In addition, an injunction pauses the development of new facts, so the parties can litigate the matter under static circumstances, which better facilities a final and satisfactory resolution.

Speak with a Florida Estate Planning Attorney

Trusts are often important to the financial security of many individuals within a family, so making sure it is properly executed and followed is extremely important. If you have concerns about the actions of a trustee or terms of a trust created by a family member, talk to William Rambaum. With over thirty years of experience handling estate planning and elder law matters, William Rambaum can help you ensure the trust is handled properly. Contact the Oldsmar law firm for an appointment.

Resources:

lexology.com/library/detail.aspx?g=a734959f-0dba-489d-8073-ac2a0d012a00

leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0700-0799/0736/Sections/0736.1001.html