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.

Conclusion
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.