When a trustee resigns or is removed in Florida, they cannot simply walk away leaving the trust to fend for itself. Florida Statutes § 736.0707 grants departing trustees the right to retain a “reasonable reserve” for payment of debts, expenses, and taxes. But how much is reasonable? The recent decision in Mastriana v. Brown Brothers Harriman Trust Company, N.A., No. 4D2024-0950 (Fla. 4th DCA May 14, 2025), provides essential guidance for trust practitioners navigating this complex issue.
The Statutory Framework: F.S. § 736.0707
Florida’s Trust Code imposes continuing obligations on trustees even after their removal. The statute provides:
§ 736.0707(2), Fla. Stat.: “[A] trustee who has resigned or been removed shall within a reasonable time deliver the trust property within the trustee’s possession to the cotrustee, successor trustee, or other person entitled to the property, subject to the right of the trustee to retain a reasonable reserve for the payment of debts, expenses, and taxes.“
Until trust property is delivered to a successor trustee, the former trustee retains fiduciary duties and “the powers necessary to protect the trust property”. This statutory framework creates a delicate balance: trustees must transfer assets promptly while ensuring adequate funds remain to cover legitimate administrative expenses.
Case Study: The $8.9 Million Reserve
Background
The Mastriana case involved the James M. Salah Trust—a charitable trust valued at approximately $111.6 million. Brown Brothers Harriman Trust Company, N.A., served as trustee until its removal in September 2016. Upon removal, Brown Brothers transferred approximately $111.6 million to the successor trustee but retained $8,910,829.44—roughly 7.98% of the total trust—as a reserve.
The successor trustee sued, alleging that Brown Brothers breached its fiduciary duties by retaining an “excessive and unreasonable reserve” and by imprudently investing the reserved funds.
The Trial Court’s Analysis
After a non-jury trial in March 2023, Judge Kenneth Gillespie of the 17th Judicial Circuit entered judgment in favor of Brown Brothers. The trial court’s analysis offers practitioners a roadmap for justifying reserve amounts:
“The Defendant established that it was the company’s standard practice to hold a reserve of 10% of the total funds. On this point, Defendant provided three reasons which it found prudent to maintain a 10% percent reserve: (1) the fear that it would be sued or brought in as a party to an ongoing Massachusetts malpractice lawsuit, (commonly known as the Sally & Fitch litigation), which it determined that its potential liability exposure could be as high or greater than $20,000,000.00); (2) the need to complete a complex final accounting of the Trust and as personal representative of James Salah’s Estate; and (3) the need to potentially address any objections to its Trust and Estate accountings (in light of the then successor trustee’s unwillingness to sign a consent and waiver).”
Factors Justifying the Reserve
The trial court credited several events that validated Brown Brothers’ concerns:
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The successor trustee filed objections to the final estate accounting
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The Massachusetts malpractice litigation was not settled until October 2018—over two years after removal
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Final waivers relating to trust accountings were not executed until June 2018
Critically, Brown Brothers released approximately $5.5 million of the reserve in April 2019, reducing the holdback to less than 3% of total trust funds.
Trustee Discretion and the Standard of Review
The trial court emphasized trustees’ broad discretionary authority under Florida law:
§ 736.0814(1), Fla. Stat.: A trustee has discretion to “act in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries.” Further, a court “shall not determine that a trustee abused its discretion merely because the court would have exercised the discretion in a different manner or would not have exercised the discretion.“
The court also cited controlling precedent:
Cohen v. Friedland, 450 So. 2d 905, 906 (Fla. 3d DCA 1984): “In the absence of proof that the trustee has failed to perform, or has performed arbitrarily, a court is without authority to remove trust assets from control of the trustee…”
Investment of Reserve Funds
The Mastriana case also addressed how reserve funds should be invested. Brown Brothers held the reserve in fixed-income assets and cash already within the trust portfolio. The trial court approved this approach:
“The Court finds that the Defendant exercised its discretion, purposefully, in holding back specific assets for its reserve that it believed was necessary to preserve capital by using fixed income investments and cash so that such assets would not need to be sold and would be readily available for disbursement, which the Court notes is the intent and purpose of a reserve.”
The Prudent Investor Rule under F.S. § 518.11 requires trustees to consider “the purposes, terms, distribution requirements, and other circumstances of the trust,” with fiduciary decisions judged under a “reasonable business judgment” standard that tests “conduct and not… resulting performance”.
No Right to Jury Trial in Trust Surcharge Actions
A significant procedural ruling in Mastriana affirmed that trust breach of fiduciary duty claims do not carry a right to jury trial. The Fourth DCA held:
“In Chauffeurs, a Seventh Amendment case, the United States Supreme Court recognized that actions ‘by a trust beneficiary against a trustee for breach of fiduciary duty … were within the exclusive jurisdiction of courts of equity[,]’ so no right of jury trial attached.”
The court further cited Rosen v. Rosen, 167 So. 2d 70, 72 (Fla. 3d DCA 1964):
“Courts of equity have original, general, and inherent jurisdiction over trusts and the administration thereof. All trusts, whether express or implied, are within the jurisdiction of the chancellor, even though the relief demanded is for the recovery of money. Proceedings involving trusts are ordinarily within the exclusive jurisdiction of equity.”
Practice Pointers for Trustees
Based on Mastriana and the statutory framework, resigning or removed trustees should consider:
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Document your reasoning: The trial court credited Brown Brothers’ articulated justifications for the reserve amount
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Consider pending litigation: Potential exposure to lawsuits weighs heavily in determining reserve amounts
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Account for accounting complexity: Complex final accountings require adequate funds for professional fees
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Anticipate objections: A successor trustee’s refusal to sign waivers justifies holding additional reserves
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Invest conservatively: Reserve funds should be held in liquid, low-risk assets readily available for disbursement
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Release funds promptly: Brown Brothers’ release of $5.5 million once concerns resolved demonstrated good faith
Frequently Asked Questions
What is a trustee’s “reasonable reserve” under Florida law?
Under F.S. § 736.0707(2), a trustee who has resigned or been removed may retain a reasonable reserve from trust assets for payment of debts, expenses, and taxes before transferring remaining property to a successor trustee. The statute does not specify a formula or percentage for calculating this amount.
Is there a specific percentage that constitutes a reasonable reserve?
No statutory percentage exists. In Mastriana, the court found that Brown Brothers’ standard practice of holding a 10% reserve was acceptable, and the actual 7.98% reserve was deemed “not arbitrary, was reasonable, and well within the Defendant’s discretion”. The reasonableness depends on the specific circumstances of each trust.
What factors justify a larger trustee reserve?
Courts consider: pending or threatened litigation against the trustee, complexity of final accountings, potential objections to accountings, pending tax matters, the successor trustee’s unwillingness to execute waivers, and the time required to wind up administration.
How should reserve funds be invested?
Reserve funds should be invested conservatively in liquid, low-risk assets. In Mastriana, the court approved holding reserves in “fixed-income assets already within the Trust portfolio” that were “sufficiently liquid, and low risk assets suitable for establishing and maintaining a reserve”.
Can a successor trustee demand a jury trial for claims against a former trustee?
No. The Fourth DCA in Mastriana held that trust breach of fiduciary duty claims fall within the exclusive jurisdiction of equity courts, and no right to jury trial attaches—even when the claim involves recovery of money damages.
What standard do courts apply when reviewing a trustee’s reserve decision?
Courts apply an abuse of discretion standard and “shall not determine that a trustee abused its discretion merely because the court would have exercised the discretion in a different manner” under F.S. § 736.0814(1). The trustee’s conduct must be arbitrary or in bad faith to warrant judicial intervention.
How long can a former trustee hold reserve funds?
There is no specific time limit. The former trustee must release funds “within a reasonable time” once the purposes for the reserve have been satisfied. In Mastriana, Brown Brothers released funds gradually as pending matters resolved—including a $5.5 million release approximately 2.5 years after removal.
