A short section, and the shortness is the point
A trust director is subject to the same rules as a trustee in a like position and under similar circumstances in the exercise or nonexercise of a power of direction or further power under s. 736.1406(3)(a) ... regarding:
(1) A payback provision in the terms of a trust necessary to comply with the reimbursement requirements of s. 1917 of the Social Security Act, 42 U.S.C. s. 1396p(d)(4)(A), as amended, and regulations issued thereunder, as amended.
(2) A charitable interest in the trust, including notice regarding the interest to the Attorney General.
Section 736.1407, Florida Statutes. The omitted words are a cross-reference gloss repeated throughout the Part.
Two subjects. That is the whole of the statutory limitation on what a trust director may direct.
Everywhere else in Part XIV the constraint on a director is a duty rather than a prohibition. Under section 736.1408 a director is a fiduciary judged as a trustee, and can be sued for breaching that duty. This section is different in kind. It holds the director to the same rules as a trustee on two specific matters, so the director cannot occupy a freer position than a trustee would.
Both limits protect somebody outside the family
This is the observation worth taking away, and it tells you what the drafters thought was at risk.
The Medicaid payback. A first party special needs trust must, to preserve the beneficiary’s eligibility, provide that the State is reimbursed for medical assistance on the beneficiary’s death. That requirement comes from federal law, and the section cites it as section 1917 of the Social Security Act, 42 U.S.C. section 1396p(d)(4)(A). The interest being protected is the State’s.
The charitable interest. Where a trust has a charitable component, the director is held to a trustee’s rules about it, including the notice duty to the Attorney General. The interest being protected is the charitable one, which under section 736.0110(3) the Attorney General asserts.
Neither limit is there for a beneficiary. There is no provision saying a director cannot direct a distribution that guts a beneficiary’s interest, or cannot direct an investment nobody would make. Those are left to the fiduciary duty in section 736.1408 and to the terms of the instrument.
That is a defensible design. A power of direction is granted deliberately by a settlor, and second guessing it by statute would defeat the arrangement. But it means a beneficiary looking for statutory protection against a director will not find it here.
What the same rules as a trustee means
The formula is the uniform act’s and it recurs in section 736.1408. It is the same rules as a trustee in a like position and under similar circumstances.
In a like position does real work. A director holding a narrow power over distributions is compared to a trustee holding that power, not to a trustee with the whole administration. The comparison is calibrated to the role rather than to the office.
The section applies to exercise or nonexercise. A director who declines to act, and whose inaction defeats a payback provision or damages a charitable interest, is within it.
In practice
If you are drafting a directed special needs trust, this section means the payback provision cannot be engineered around through the director. A power of direction is not a route past federal reimbursement requirements, and a director who tried would be measured by what a trustee could have done, which is nothing.
If the trust has a charitable interest, the director inherits the trustee’s obligations on it, including notice to the Attorney General. That is easy to miss when the director is a family member appointed for a narrow purpose and nobody has told them the Attorney General is in the picture.
No court has construed this section
Our review found no citing decision, on a Florida court filter and nationwide, at every precedential status. The Part took effect on July 1, 2021.
One drafting note for anyone reading the practitioner literature. The Florida Bar Journal article on the Act, written by the chair of the drafting committee, carries this section under a heading that prints the section number as 736.1406. Its footnote cites section 736.1407, and the content is this section. We mention it only so that a reader comparing the article against the statute is not confused.