Why this section exists
An irrevocable life insurance trust owns one asset, a policy. Judged as an investment portfolio, that is a spectacularly imprudent arrangement. It is undiversified, it produces no income, and it pays nothing until someone dies.
Florida’s prudent investor law, which the Trust Code imports wholesale through section 736.0901 and reinforces in section 736.0804, would ordinarily require a trustee to diversify, monitor and reconsider. This section removes that problem by removing the duties.
Six of them, and they are listed. With respect to a policy on the life of a qualified person, a trustee has no duty to determine whether the policy complied with the insurable interest statute, to determine whether it is or remains a proper investment, to investigate the insurer’s financial strength, to determine whether to exercise any policy option, to diversify the policy or the trust’s assets in relation to it, or to inquire about the health or financial condition of any insured.
Subsection (3) completes the picture. The trustee is not liable to the beneficiaries or anyone else for loss sustained with respect to a policy this section covers.
The part almost everyone gets wrong
The safe harbour is not one switch. It is two, and only one of them is on by default.
Paragraph (1)(a), the insurable interest question, applies automatically to any policy on a qualified person unless the trust says otherwise.
Paragraphs (1)(b) through (f), which are the five that matter in practice, apply only if one of two things has happened.
(a) The trust instrument, by reference to this section, makes this section applicable to contracts for life insurance held by the trust; or
(b) The trustee gives notice that this section applies to a contract for life insurance held by the trust.
Section 736.0902(5), Florida Statutes.
So a trustee holding a policy under a trust drafted without reference to this section, who has never given notice, still owes all five duties. They must consider whether the policy remains appropriate, check the insurer, weigh the options, and so on. The protection people assume applies to every life insurance trust in Florida applies only where somebody took a step.
If you are a trustee in that position, this is the most useful thing on this page. If you are a beneficiary wondering whether anyone was supposed to be watching, it is the first question to ask.
The notice, and the thirty day veto
The notice route has conditions. The notice goes to the qualified beneficiaries, and it must contain a copy or restatement of the section itself, so the recipients can see what is being switched off. It may be given to a representative under Part III instead, and it must be given in the manner set out in section 736.0109.
Then comes the part that gives a beneficiary real leverage.
If any person notified pursuant to this paragraph delivers a written objection to the application of this section to the trustee within 30 days after the date on which the objector received such notice, paragraphs (1)(b)-(f) shall not apply until the objection is withdrawn.
Section 736.0902(5)(b)4, Florida Statutes.
One objection, from one person, in writing, within thirty days. That is the whole requirement, and the effect lasts until the objection is withdrawn. Not until a court says otherwise, and not until the trustee overrules it. The duties stay on.
There is also a mailing rule. Notice sent by United States mail is presumed received three days after it goes into the mail, and the presumption is rebuttable. That matters, because the thirty days runs from receipt.
The three limits on the trustee’s side
The Legislature built in protections against the obvious abuse, which is a trustee who sells the policy, takes the commission, and then disclaims responsibility for it.
Affiliates and commissions. The section does not apply at all to a policy purchased from an affiliate of the trustee, or one on which the trustee or an affiliate receives any commission, unless the duties were delegated to another person under section 518.112. Affiliate is defined in the subsection as anyone who controls, is controlled by, or is under common control with the trustee.
No compensation. Subsection (8) says a trustee performing services related to a policy covered by subsection (1) may not be compensated for performing that service. You are not paid for a duty you do not owe.
The insurable interest carve out. Paragraph (1)(a) does not protect a trustee who applied for or accepted ownership of a policy knowing that the benefits were not payable to someone with an insurable interest, or knowing the policy was funded by someone without an insurable interest under an arrangement to transfer it onward. That is aimed at stranger originated life insurance, and it is a knowledge based exception rather than a strict one.
Sixteen years, no cases
This section was enacted in 2010. Our review found no decision citing it anywhere, in any Florida court, any Florida federal court, or the Eleventh Circuit, at any precedential status.
For a provision that removes fiduciary duties over what is often a family’s largest single asset, that is a remarkable silence, and it means several practical questions have no answer.
- Is a notice effective if it omits the required copy or restatement of the section?
- What happens if an objection is delivered and never withdrawn? On the face of the statute the duties simply continue indefinitely.
- Does an objection by one qualified beneficiary protect all of them, or only the objector? The text switches off the paragraphs, not the protection as to one person, which suggests the former.
- How does the affiliate and commission disqualifier apply to a trustee who is also a licensed insurance producer?
We publish the nil result as our own review rather than as a certainty.