A trust is an animal with several different heads. In order to create a non-charitable trust, you need several different parts. Section 736.0402, Florida Statutes, lays out the requirements for creating a trust in Florida. Non-charitable trusts require: (1) a settlor with capacity, (2) intent to create a trust, (3) a definite beneficiary, (4) duties for the trustee, and (5) that there is not a sole trustee and sole beneficiary who are the same person.
So trusts are created with three types of people, although technically you only need two people to properly form a trust. Let me explain. You need a settlor (also known as a grantor or trustor), the person who creates the trust and sets out the elements of the trust. Second, you need a trustee, the person who essentially runs the trust and makes sure that the property is distributed when and how it should be. Lastly, you need a beneficiary, the person who reaps the benefit(s) of the trust.
As the last requirement in the statute makes clear, the same person cannot occupy all three of these positions, or even the last two, the trustee and the beneficiary, without a second person involved. In other words, the settlor cannot be the trustee and the beneficiary or even designate one person as the trustee and the beneficiary, because the point of the trust would be destroyed. The trustee must owe an equitable duty to someone other than himself or herself. It is similar to creating a corporation that includes only one person. It doesn’t work, because it is essentially a fraud. In corporations, you can pierce the corporate veil and the person becomes liable as if the corporation did not exist. In a single person trust, the trust is non-existent and the property is typically, if not always, put back in the hands of the settlor, or the settlor’s heirs, and it can be reached by creditors. Now that doesn’t mean that a settlor cannot be the trustee and beneficiary for his or her lifetime and then at death pass the trust on to someone else, because the person receiving the benefits of the trust after the settlor’s death is the second person needed, they are a second beneficiary.
So if you cannot have one person as the sole trustee and sole beneficiary, can you have multiple trustees or multiple beneficiaries? Well, you can have multiple trustees, or co-trustees, and multiple beneficiaries has already been answered; you can have as many beneficiaries as you want as long as they are definite, i.e., the beneficiaries cannot be everyone who is poor in the United States. Not only can there be multiple beneficiaries, but there can be multiple trustees too. Additionally, if a trustee is not named in the trust documents or the trustee dies and there is no successor trustee named in the trust documents then the court can and will appoint a successor trustee and the trust will not fail. The trustee can be an individual, several people, or a corporation. An individual can be the settlor, a beneficiary, or someone otherwise disconnected with the trust as long as the individual is not both the sole trustee and the sole beneficiary as explained above.
Proper estate planning is an important part of dealing with your financial well being and trusts have many options and many twists and turns that can be problematic, so creating one has to be done with care. The biggest risk is that the trust will be deemed non-existent, which can cause huge problems especially when creditors are involved.