Florida Probate and Trust Litigation Blog

Surcharge of a Personal Representative for Mismanagement

What is the purpose of a surcharge action?

A "surcharge" is the amount that a court can charge to a fiduciary (like a personal representative or trustee) when that fiduciary has breached their fiduciary duty. In other words, a surcharge action is a way for the judge to hold the fiduciary personally liable for either intentional or negligent conduct.

Who has standing to bring a claim for surcharge?

Consistent with much of probate and trust litigation in Florida, any interested person may bring an action for surcharge against a personal representative, which includes even creditors to the Estate. An interested person is defined in Florida Statutes Section 731.201(23). 

What are the common reasons for surcharging a personal representative?

As a general rule, a personal representative is a fiduciary who owes the same standard of care that applies to trustees. A personal representative owes a duty to settle and distribute the estate of the decedent in accordance with the terms of the decedent's will as expeditiously and efficiently as is consistent with the best interests of the estate. § 733.602, Fla. Stat. 

Typically, surcharge actions relate to the personal representatives failure to properly manage investments in the estate during the pendency of the administration, a personal representative's failure to object to a creditor claim, objections to money paid to agents and employees hired by the personal representative, and mismanagement of a business that is being operated by the Estate.

Unreasonable Fees Paid by the Personal Representative:

When a personal representative hires an agent to perform services, it is the personal representative's duty to make sure the fees paid for those services are reasonable. If a court finds that the payments are substantially unreasonable, the fees could be assessed against the personal representative in their individual capacity. Kozinski v. Stabenow, 152 So. 3d 650, 652 (Fla. 4th DCA 2014).

Poor investments

A personal representative owes a duty to prudently invest the assets of the estate. If a personal representative fails to keep the assets that produce income during the administration, there may be a surcharge action. However, a personal representative may rely on a financial advisor and is not subject to surcharge merely because the investments went down in value. Parker v. Shullman, 983 So.2d 643 (Fla. 4th DCA 2008). A good personal representative should maintain a diversified portfolio of investments.

Evaluating claims against the estate:

It is the personal representative's duty to evaluate creditor claims made in the estate. That means objecting and litigating claims or saving the estate litigation costs by paying claims that are due and owed. A personal representative that fails to object to a claim may be actionable. Similarly, a personal representative's failure to defend a claim may be actionable.

And, if a a personal representative pursues a claim of its own in bad faith unsuccessfully, the personal representative may be surcharged.

Because of all of these potential "land mines," it is good practice for a personal representative to seek court approval with respect to bringing and defending claims relating to the estate.

Continued operation of a business:

One of the most difficult things for a personal representative may be continuing the operation of a business that was owned and managed by the Decedent. While Florida Statute Section 733.612 permits the personal representative to operate the business for up to four months, that time may be extended by provisions in the will or trust. 

Attorney's Fees:

As with most probate litigation matters, a court may award attorney's fees in surcharge actions, as in chancery, to the prevailing party. See Florida Statutes Section 733.609. And, even a losing personal representative may be entitled to collect the attorney's fees paid if the conduct was not in bad faith. See In re Estate of Pearce, 507 So.2d 729 (Fla. 4th DCA 1987).

Contact Us:

PersanteZuroweste handles Estate and Probate litigation matters. If you believe that you may need legal assistance regarding a Florida probate litigation matter, please contact us at (727) 796-7666.

About PersanteZuroweste:

PersanteZuroweste has established a reputation as prominent trial lawyers serving clients throughout Florida. Our office is conveniently located to the Clearwater, St. Petersburg, and Tampa Bay communities.