Florida Guardianship Court Orders Trust Accounting Where Commingling

Jeffrey Skatoff

Written by Jordan Hammer • November 25th, 2014

At first glance, Florida statutes appear to clearly distinguish the law of trusts from that of guardianships, devoting one chapter (Ch. 736) exclusively to trusts and another chapter (Ch. 744) exclusively to guardianships. While the two seem conceptually, administratively, and legally distinct on paper, this is often not the case in practice—particularly where one individual is simultaneously serving as guardian and trustee.  Florida courts routinely address the interplay between these two fields, notably in the landmark case Covenant Trust Co. v. Ihrman, 45 So. 3d 499 (Fla. 4th DCA 2010).

In Covenant Trust, Florida’s Fourth District Court of Appeal reiterated the longstanding principle that a guardianship court does not have the inherent authority to compel a trustee to act.  Instead, Covenant Trust explains that in the absence of a statutory or trust directive, a guardianship court may only compel a trustee to act where the trustee has acted arbitrarily or committed some act of malfeasance that affects the guardianship.  Id. at 505-06.  Recently, attorney Jordan Hammer of Clark Skatoff prevailed in a hearing before Judge John L. Phillips where the issue at bar was whether the guardian’s conduct met the requisite arbitrariness-malfeasance threshold to warrant an order compelling the trustee to act.

In our case, the Ward’s plenary guardian was simultaneously serving as sole trustee of a revocable trust of which the Ward was a lifetime beneficiary.  The Ward held a checking account and certificates of deposit in her individual name at one institution and second checking account in the name of her Trust at another institution.  When the CDs matured, the guardian deposited the CD proceeds into the Ward’s Trust checking account; that is, the guardian commingled guardian and trust assets.  When the time came for the Guardian to account as required by law (Fla. Stat. §§744.367; 744.3678), he was fundamentally unable to reconcile his disbursements because his accounting disclosed the expenditure of funds from the Ward’s Trust account which had been enriched with guardianship assets.  The accounting further disclosed disbursements the Court found to be misleading or altogether improper.

Ultimately, the Court ruled that the Guardian’s commingling of funds coupled with the indicia of misappropriation sufficed under Florida law to warrant an order compelling the guardian—in his capacity as Trustee—to prepare an accounting of all Trust assets administered during the term of the guardianship.

In many guardianship cases where the ward is the settlor of a trust, the line of demarcation between guardianship and trust is often drawn by the titling of property.  The accounts and annuities which likely fund a ward’s care are either held in the ward’s individual name or in the name of the ward’s trust.  Covenant Trust holds that the guardianship court presides only over the former unless the trustee has committed such breach or has acted arbitrarily.  This separation facilitates administration of a trust without interference from a pending guardianship.  However, as demonstrated time and again in practice, this distinction is often more theoretical than empirical.  Clark Skatoff’s recent victory before Judge Phillips of the Palm Beach County Circuit Court further crystallizes the holding of Covenant Trust in defining those circumstances under which a guardianship will invade administration of a trust.

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Florida Guardianship Court Orders Trust Accounting Where Commingling