Florida Probate & Trust Litigation Blog

McGuireWoods: Recent Cases of Interest to Fiduciaries

Juan Antunez — Sat, 05 May 2012 11:49:46 -0500

The fiduciary litigation group at McGuireWoods LLP in Richmond, Virginia recently published its latest national survey of trust-related cases [click here]. Every one of these cases is a cautionary tale that -- hopefully -- will keep you and/or your client out of court in the first place (which is always the best kind of lawyering). Anyway, good stuff, well worth reading.

French v. Wachovia Bank, N.A., 2011 U.S. Dist. LEXIS 72808 (E.D. Wisconsin 2011). Corporate trustee did not breach its duties by exchanging insurance policies for new policies obtained through its affiliate.
Scanlan v. Eisenberg, et al., 2012 U.S. App. LEXIS 1112 (January 20, 2012). Seventh Circuit reverses district court decision that discretionary beneficiary lacked standing to bring surcharge claim for $200 million in investment losses from investment concentration.
In the Matter of the Accounting by Frieda Tydings, As Trustee of the Ricki Singer Grantor Trust, 2011 NY Slip Op 51177U (Bronx County Surrogate’s Court, June 28, 2011). Surcharge of individual trustee for making interest-free loans to family members and giving trust profits to family-owned business in which trustee held an interest.
In re: Alexander McFadden Testamentary Trust and George McFadden
Testamentary Trust, 2011 Phila. Ct. Com. Pl. LEXIS 320 (November 9, 2011). Trustees found not liable for investment losses during market collapse, but removed for withholding distributions, disclosing private information and failing to appoint required third trustee.
Carlyle Investment Management LLC et al. v. Carlyle Capital Corporation Limited, 2011 U.S. Dist. LEXIS 85710 (Delaware, August 4, 2011). Forum selection clause in an investment management agreement is valid and enforceable.
Wells Fargo Bank, N.A. v. Estate of Ruth Elaine Mansfield, 281 Neb. 693 (2011). Trustee did not abuse its discretion by decision to not pay expenses of beneficiary’s final illness where estate assets sufficient.
Portico Management Group, LLC v. Harrison, 202 Cal. App. 4th 464 (Cal. App. 3d Dist. 2011). Trust assets not subject to arbitration award where award is not against co-trustees.
Estate of Campana v. Comerica Bank & Trust, N.A., 2012 U.S. Dist. LEXIS 1490 (N.D. W. Va. 2012). Arbitration clause in agreement between investment advisor and trustees bars trust beneficiary’s suit against investment advisor.
Smith v. Marez, 2011 N.C. App. LEXIS 2489 (N.C. Ct. App. 2011). Attempt to designate IRA benefits to pass pursuant to terms of will is invalid.
Klingelhoefer v. Monif, et al., 2012 Neb. App. LEXIS 5 (January 17, 2012). Nebraska Supreme Court affirms decision that the terms of the trust holding an LLC interest, and not the LLC agreement, control the disposition of farmland held in the LLC.
Hobbs et al. v. Legg Mason Investment Counsel & Trust Co., 2011 U.S. Dist. LEXIS 999 (N.D. Mississippi, January 5, 2011); Hobbs et al. v. Legg Mason Investment Counsel & Trust Co., 2011 U.S. Dist. LEXIS 7168 (January 25, 2011). Court refuses to dismiss claim that trustee was negligent in failing to inform beneficiaries about GST taxes owed on trust distributions, but dismissed claims that trustee had a duty to modify the trust to avoid the taxes.

5th DCA: No damages = no trustee surcharge action

Juan Antunez — Fri, 27 Apr 2012 19:18:22 -0500

Miller v. Miller, --- So.3d ----, 2012 WL 1365064 (Fla. 5th DCA April 20, 2012)

Trustees are fallible human beings like the rest of us: they can be paranoid, arrogant, uncooperative, mean, petty, abusive, jealous, condescending, hypocritical . . . the list goes on and on. While all this may make your blood boil, none of it amounts to a surcharge suit if you can't also prove you were somehow economically damaged.

The economic damages element of trusts and estates litigation is what anchors these often morally ambiguous cases in the realm of objective reality. Reasonable people can disagree about what's "right" or "wrong" trustee behavior, but we all do math the same way. If the math doesn't add up to a damages claim . . . you don't have a case. Period, end of story. Which may make perfect sense to lawyers and judges (it does to me), but it's pure "crazy talk" to most non-lawyers, who will beg you to please take their case because a trustee is being a total jerk! If you don't have the stone-cold discipline to say "NO" when the math doesn't add up, you're not doing anyone any favors. As I recently wrote here, you can be half way through a jury trial and still get bounced out of court on this issue alone. In the case linked-to above, the judge didn't stop the trial midway, but the end result was the same: no damages = no surcharge.

Appellant . . . as beneficiary of a family trust, filed a surcharge action[FN1] against the co-trustees of the trust. He sought damages alleging that the co-trustees improperly entered into a lease agreement that did not provide fair market value to the trust. . . . Appellant appeals from a final judgment refusing to remove co-trustees . . . The trial court's finding that the trustees acted in the best interest of the trust in entering the lease are supported by competent, substantial evidence. Additionally, the trial court correctly concluded that Appellant failed to prove damages that would support imposing a surcharge against the trustees. See Crusselle v. Mong, 59 So.3d 1178, 1181 (Fla. 5th DCA 2011) (“The elements of a cause of action for breach of fiduciary duty are (1) the existence of a duty, (2) breach of that duty, and (3) damages flowing from the breach.”).

[FN1.] A surcharge action seeks to impose personal liability on a fiduciary for breach of trust through either intentional or negligent conduct. See Black's Law Dictionary 1441 (6th ed. 1990); see also Harding v. Rosoff, 951 So.2d 912, 914 (Fla. 4th DCA 2007) (defining “surcharge” as “charge against a fiduciary to compensate a beneficiary for the breach of fiduciary duty”); Merkle v. Guardianship of Jacoby, 862 So.2d 906, 907 (Fla. 2d DCA 2003) (defining “surcharge” as “the amount that a court may charge a fiduciary that has breached its duty”).

4th DCA: Do traditional standards controlling the issuance of temporary injunctions or "freeze" orders apply in trust litigation?

Juan Antunez — Sat, 21 Apr 2012 14:25:52 -0500

McKeegan v. Ernst, --- So.3d ---- 2012 WL 1192186 (Fla. 4th DCA April 11, 2012)

In contested probate proceedings, the law in Florida is clear: traditional standards controlling the issuance of temporary injunctions or "freeze" orders in other civil actions do NOT constrain a probate judge in the exercise of his inherent jurisdiction over a decedent's estate. See In re: Estate of Barsanti, 773 So.2d 1206 (Fla. 3d DCA 2000). As I previously wrote here, this same permissive standard has been extended to contested guardianship proceedings.

What's interesting about the linked-to opinion above is what the 4th DCA did NOT do. It did NOT extend to trust cases the permissive temporary-injunction standard applied to contested probate proceedings.

Why the permissive probate standard wasn't applied in this trust case isn't addressed by the 4th DCA, but my guess is it has something to do with the fact that under F.S. 731.105 probate cases are by statute in rem proceedings, and that under F.S. 736.0201 trust cases are presumed to be just like any other civil suit, which are usually in personam proceedings. This jurisdictional distinction is a big deal, and plays out in significant ways in how these cases should be litigated, including, apparently, when and if a temporary-injunction should be granted. Here's how the 4th DCA explained its ruling:

“A party seeking a temporary injunction must prove: (1) that it will suffer irreparable harm unless the status quo is maintained; (2) that it has no adequate remedy at law; (3) that it has a substantial likelihood of success on the merits; (4) that a temporary injunction will serve the public interest.” Jouvence Ctr. for Advanced Health, LLC v. Jouvence Rejuvenation Ctrs., LLC, 14 So.3d 1097, 1099 (Fla. 4th DCA 2009) (citation omitted). “The party must also establish that it has a clear legal right to the relief sought. Finally, a trial court must make ‘clear, definite, and unequivocally sufficient factual findings' supporting each of the required elements before entering an injunction.” Id. (citation omitted). “[A] trial court reversibly errs when an order fails to make specific findings for each of the elements.” Wade v. Brown, 928 So.2d 1260, 1262 (Fla. 4th DCA 2006) (citation omitted). Florida Rule of Civil Procedure 1.610(c) provides that “[e]very injunction shall specify the reasons for entry....” The order granting the temporary injunction herein does not make sufficient factual findings which support each of the elements. On remand, the trial court must make specific findings showing that appellees are entitled to relief.

Additionally, appellant argues and we agree that her due process right to notice and an opportunity to be heard were violated because appellees did not meet their heavy burden to establish that notice was not required.

The ex parte temporary injunction failed to meet the requirements of Florida Rule of Civil Procedure 1.610(a). Appellees' attorney did not certify in writing any efforts made to give notice or any reasons why notice should not be required. Fla. R. Civ. P. 1.610(a)(1)(B). Fla. High Sch. Activities Ass'n., Inc. v. Benitez, 748 So.2d 358 (Fla. 5th DCA 1999) (attorney did not certify in writing any efforts made to give notice and notice by facsimile only one hour before injunction was granted was insufficient). Rule 1.610(a)(2) also requires the court to “give the reasons why the order was granted without notice if notice was not given,” which the trial court did not do. See Bookall v. Sunbelt Rentals, Inc., 995 So.2d 1116 (Fla. 4th DCA 2008) (order failing to explicitly state reasons why the order was granted without notice requires reversal even though movant met its burden of establishing the elements for entry of an injunction). For these additional reasons we reverse the order granting the ex parte temporary injunction.

Oddball Trusts and the Lawyers Who Love Them

Juan Antunez — Wed, 18 Apr 2012 10:27:33 -0500

We advise our fiduciary clients they can get sued for failing to diversify their investment portfolios. Why? Because it's inherently risky to put all your eggs in one basket. This is good advice for trusts and estates lawyers too: diversify your practice. One way to do that is to take the trust-law expertise you develop in your traditional estate planning practice, and offer it as a solution for a new set of clients who might not be thinking about as trusts as a planning tool.

Trusts are incredibly flexible arrangements that can be individually tailored to solve all sorts of complex problems. As trusts and estates lawyers, part of our challenge is simply being aware of what the possibilities are. That's why you'll want to read Oddball Trusts and the Lawyers Who Love Them or Trusts for Politicians and other Animals, by Seattle, Washington trusts-and-estates lawyer Wendy S. Goffe. Ms. Goffe does a great job of introducing us to dozens of lesser-known trusts that have evolved over the years in a variety of contexts, many having little to do with traditional estate planning. Good stuff, and well worth your time.

Here's my annotated list of some of the trusts Ms. Goffe covers in her article.

Health and Education Exclusion Trusts
Delaware incomplete gift non-grantor (DING) trusts
Rabbi Trusts
Oral Trusts
Secret Trusts
Alimony and Maintenance Trusts
Business Trusts
Investment Trusts
Environmental Remediation Trusts [example]
Land Trusts
Liquidating Trusts
Voting Trusts
Purpose Trusts
Funeral and Cemetery Trusts
Gun Trusts [blog]
Pet Trusts [blog]
Constructive Trusts
Blind Trusts
Coogan Trusts
Totten Trusts
Interest on Lawyer Trust Account (IOLTA) [FL Bar IOLTA rules]
Interest on Real Estate Trust Account (IRETA)

And here's an excerpt from Ms. Goffe's introduction to Oddball Trusts and the Lawyers Who Love Them or Trusts for Politicians and other Animals:

This article discusses trusts that are, for want of a better expression, off the beaten path of usual trusts encountered in estate planning. Some, such as constructive trusts, are not even trusts at all. This article addresses these trusts for three reasons: First, some of these little-known trusts fill an estate planning need in a way that no other arrangement could. Second, the article explains characteristics of sham trusts and how to avoid these kinds of “trusts.” Finally, because many of our clients (and, truth be told, some of our non-estate planning colleagues) assume that if property is in trust or an entity has trust in its name, it must relate to estate planning. This article dis- cusses some of the more likely trusts that practitioners may encounter. A much broader world of trusts exists beyond the scope of this article, including revocable trusts, various types of irrevocable trusts such as Crummey trusts, dynasty trusts, asset protection trusts, marital trusts, special needs trusts, qualified subchapter S trusts, electing small business trusts, qualified personal residence trusts, charitable lead and charitable remainder trusts, and qualified terminable interest property trusts, to name just a few.

3d DCA/2d DCA: Are evidentiary hearings required when removing a PR or refusing to appoint a PR with statutory priority?

Juan Antunez — Mon, 16 Apr 2012 14:24:36 -0500

Who serves as personal representative (PR) of an estate can have huge real-world consequences. For example, under F.S. 768.20 only the PR has standing to bring a wrongful death suit on behalf of the estate and the survivors [click here]. Also, in contested probate proceedings, the PR is presumed to have direct and confidential access to all of the decedent's privileged papers/ medical records, as well as access to estate funds to pay legal fees. These facts probably explain why PR rulings are often appealed, shining a light on a recurring problem.

For reasons unclear to me, probate judges seem especially challenged by the law governing when/how a judge can remove a serving PR, or when/how a judge can refuse to appoint a PR with statutory preference under F.S. 733.301. These cases get appealed all the time, almost always resulting in reversals [e.g., see here, here, here, here, here].

If there's one word that sums up where these cases go wrong it's: EVIDENCE. Or more precisely, the lack thereof. Probate judges are given a great deal of latitude when asked to decide estate administration issues. But those decisions must be based on evidence, adduced at properly noticed evidentiary hearings; not on the fly based on counsel arguments at a 15-minute hearing. That's the lesson to be drawn . . . again . . . from the latest batch of appellate decisions reversing three probate judges on opposite sides of the state (1 in Tampa, 2 in Miami) who failed to adhere to this simple rule.

Zulon v. Peckins, --- So.3d ----, 2012 WL 933013 (Fla. 3d DCA February 08, 2012):

In this case a Miami PR was removed without notice or evidentiary basis. In another case dealing with another Miami PR just last year, the 3d DCA held in Estate of LoCascio this kind of ruling is reversible error. One year later, nothing's changed: it's still reversible error:

The appellant, Elizabeth Zulon, appeals from an order of the probate court removing her as co-personal representative of her father's estate. Because removal was ordered without notice or an evidentiary hearing, “the ruling did not meet even the most rudimentary requirements of due process.” LoCascio v. Estate of LoCascio, 78 So.3d 573, 574 (Fla. 3d DCA 2011). We reverse and remand with instructions to reinstate the co-personal representatives; FN1 discharge Mr. Peckins as successor personal representative; and conduct a duly noticed evidentiary hearing regarding the removal of Elizabeth Zulon and Ana Zulon as co-personal representatives.

Lezcano v. Estate of Hidalgo, --- So.3d ----, 2012 WL 1414826 (Fla. 3d DCA April 25, 2012):

In yet another Miami case, yet another probate judge got reversed for removing yet another Miami PR without notice or an evidentiary hearing. Go Miami!!

Mercedes Lezcano appeals an order of the probate court, removing her as personal representative of the estate and co-trustee of the trust of her deceased brother pursuant to a generalized order instructing her to show cause why she should not be held in contempt for a purported failure, in her capacity as personal representative, to comply with “[certain] orders [of the court]” and “failing to place all income and assets into [a] restricted depository” and related alleged misdeeds. “Because [the] removal[s were] ordered without notice or an evidentiary hearing, ‘the ruling did not meet even the most rudimentary requirements of due process.’ “Zulon v. Peckins, No. 3D11–1511, 2012 WL 933013, at *1 (Fla. 3d DCA Mar. 21, 2012) (quoting LoCascio v. Estate of LoCasio, 78 So.3d 573, 574 (Fla. 3d DCA 2011)). We reverse and remand with instructions to reinstate Lezcano as personal representative of the estate and co-trustee of the trust, and discharge Mr. Mendez as curator of the estate.

Bowdoin v. Rinnier, --- So.3d ----, 2012 WL 639005 (Fla. 2d DCA February 29, 2012):

In this case the decedent died intestate. Under F.S. 733.301 the decedent's husband has statutory priority for appointment as PR. However, a court isn't bound by F.S. 733.301 if there's evidence proving the statutorily preferred person “lacks the necessary qualities and characteristics” to serve as PR. But again, the key word is evidence. Unproven allegations won't cut it, even if the person making those allegations is the decedent's mother.

A circuit court has discretion to appoint someone other than the preferred person as personal representative of an intestate estate. In re Estate of Snyder, 333 So.2d 519, 520 (Fla. 2d DCA 1976); Garcia v. Morrow, 954 So.2d 656, 658 (Fla. 3d DCA 2007). However, where a statutorily preferred individual is not appointed, the record must show that the preferred person is not fit to serve as personal representative. DeVaughn v. DeVaughn, 840 So.2d 1128, 1133 (Fla. 5th DCA 2003). If the record supports the conclusion that the preferred person “lacks the necessary qualities and characteristics” to act as personal representative, the court has discretion to refuse to make the appointment. Padgett v. Estate of Gilbert, 676 So.2d 440, 443 (Fla. 1st DCA 1996).

Ms. Rinnier produced no witnesses or evidence at the hearing to show that Mr. Bowdoin was disqualified from serving. Although we understand the dilemma faced by the circuit court given the serious nature of the allegations contained in Ms. Rinnier's petition, she was nevertheless required to support those allegations with evidence. In the absence of such an evidentiary basis, the circuit court was not free to appoint someone other than Mr. Bowdoin. We therefore reverse the circuit court's appointment of Ms. Rinnier and remand for an evidentiary hearing to determine whether Mr. Bowdoin, as the person having statutory preference, lacks the necessary qualities to administer his wife's estate. See id.

Everything you ever wanted to know about drafting opinion letters involving Florida trusts (+ great forms!). What else could you ask for?

Juan Antunez — Thu, 12 Apr 2012 15:55:09 -0500

If you're like most trusts-and-estates lawyers, you don't work at a big firm. Which means you can't walk down the hallway and ask one of your partners for a good set of forms when someone wants to hire you to provide a legal opinion on some trust-related issue (as opposed to a tax opinion). Don't underestimate the value of a good set of forms. Good forms don't take the place of your experience and expertise, but they do provide an invaluable "checklist" of issues to think about and a road map for getting the job done "on time and under budget."

The "Report on Third-Party Legal Opinion Customary Practice in Florida, dated December 3, 2011" of the Legal Opinion Standards Committee of the Business Law Section and the Legal Opinions Committee of the Real Property, Probate and Trust Law Section was approved in December 2011 at meetings of the Executive Council of each Section. This report is the "gold standard" for Florida legal-opinions. Not only does it explain each and every element of a well-done opinion letter (highlighting pitfalls most of us would never imagine), it provides sample opinion letters plus an illustrative form of "certificate to counsel" that can be used in connection with rendering third-party legal opinions.

Here's an excerpt introducing the trust section of the report.

Opining Counsel may be asked to render an opinion concerning the status of a Florida trust. Unlike Florida corporations, partnerships or LLCs, a Florida trust is not a separate statutory entity under Florida law. Rather, a Florida trust is a fiduciary relationship with respect to property (whether real property, personal property or both) subjecting the person or persons by whom the title to the property is held (known as the “trustee” or “trustees”) to equitable duties to deal with the property for the benefit of another person or persons (known as the beneficiary or beneficiaries), all of which arises as a result of a manifestation of an intention to create a trust arrangement. Thus, for purposes of rendering an opinion regarding a Florida trust, the Client is really not the trust itself, but rather the person or persons serving as the trustee or trustees of the trust for the benefit of the beneficiaries. As such, the proper status inquiry in the context of a trust should be based on whether the trustee or trustees is or are properly organized and existing and has or have active status.

Thus, if Florida counsel is asked to render an opinion concerning the status of a Florida trust, the Opinion Recipient should want to know whether the Client(s) is or are the trustee(s) of the trust. For this reason, the recommended forms of opinion state that the Client(s) is or are the trustee(s) of the trust and go on to specify the legal basis for such designation.

Fla. SCT: lawyer + financial planner + no written conflict waiver = disbarment

Juan Antunez — Sun, 08 Apr 2012 12:28:27 -0500

The Florida Bar v. Doherty, --- So.3d ----, 2012 WL 1033478 (Fla. March 29, 2012)

Plenty of estate planning lawyers also advertise themselves as financial planners. There's nothing inherently wrong with this (hey, some of my best friends are financial planners!), and I'm sure lots of clients appreciate a "one-stop-shopping" approach to their estate planning (which is inextricably linked to financial planning). In fact, advocates of the multidisciplinary practice approach would argue these lawyers/financial planners are the wave of the future!

Lawyers aren't prohibited from providing financial planning services to their clients; but be warned, if you do so you're walking into an ethical minefield. One wrong turn and ... BANG! There goes your law license. That's what happened in the linked-to case above.

Case Study:

In the linked-to case above the Florida Supreme Court held that a lawyer selling annuities to his client (and earning a commission on that sale) is subject to rule 4-1.8(a), the Florida Bar ethics rule prohibiting a lawyer from engaging in a business transaction with his client unless the lawyer makes the specific written disclosures required by rule 4-1.8(a). No such written disclosure was made in this case, resulting in the lawyer's disbarment. For an example of what that written disclosure might look like, click here for ACTEC's sample disclosure letter waiving the conflict arising when a lawyer writes himself in as a personal representative or trustee of his client's will or trust.

The estate planning lawyer in this case didn't just market annuities to his client (an elderly widow dying of cancer), he also wrote himself in as personal representative of her will and trustee of her three trusts. One of these trusts was also drafted in a way that compelled the trust to buy annuities from two companies lawyer was an agent for. Here's an excerpt:

In addition to her investments, in the last several weeks of the client's life [lawyer] worked to revise her estate planning documents. . . . The client named [lawyer] as her personal representative. She also executed amendments to the Restated Trust to name [lawyer] as successor trustee.
[Lawyer] also authored two new trusts for the client's estate. The first, a real estate trust, was executed on August 10, 2006. The primary asset in the trust was to be the client's condominium unit. The trust instructed that the unit be sold and the proceeds from the sale used to purchase annuities. [Lawyer] was named the successor trustee for the real estate trust and was granted sole discretion to select the annuities that would be purchased. Significantly, the referee found that [lawyer]'s authority to sell financial products was limited to Conseco or Washington National annuities. The second trust at issue, an educational trust, was also executed on August 10, 2006. It was established to pay future educational expenses for the client's grandchildren. [Lawyer] was named the successor trustee for the educational trust.

Not surprisingly, when the Bar examiner took a look at all this, lawyer got hammered. The recommended sanction was disbarment, which the Florida Supreme Court upheld on appeal. Here's an excerpt of the Court's analysis:

[Lawyer] held himself out as a lawyer and a Certified Financial Planner. His professional relationship with the client involved both legal work, including amending her will and executing two trusts on her behalf, and financial services, namely brokering the sale of Conseco and Washington National annuities. It is clear that [Lawyer] stood to earn a commission from the sale of the annuities had those transactions been completed. It is also clear that he did not disclose his financial interest in the transactions to the client in writing as required by rule 4–1.8(a). Accordingly, we approve the referee's recommendation that [Lawyer] be found guilty of violating rule 4–1.8(a).

. . . . .

The evidence demonstrates that [Lawyer]'s conduct created a clear conflict of interest in that there was a substantial risk that his representation of the client would be limited by his own interests. [Lawyer] acted purposefully to make his personal, pecuniary interests at least as important as those of his client and her estate. He advised his client to select various means of estate planning and wealth management that would earn him a personal financial benefit. Additionally, [Lawyer] participated in a business transaction with his client and failed to disclose his substantial interest in the transaction. We believe his actions amount to egregious misconduct.

Sherlock Holmes as trusts & estates teaching tool

Juan Antunez — Sun, 01 Apr 2012 17:12:15 -0500

Prof. Stephen Alton, of the Texas Wesleyan University School of Law, recently published The Game is Afoot!: The Significance of Gratuitous Transfers in the Sherlock Holmes Canon. If you've ever enjoyed any of the Sherlock Holmes stories, and you happen to be a trusts and estates lawyer, you'll want to read this essay. Prof. Alton writes "in character" from the point of view of Dr. Watson, and does a great job of weaving some pretty complex T&E legal issues into a good piece of story telling. Well worth reading. Here's an excerpt:

“You are correct, Watson,” replied Holmes, reading my thoughts. “My knowledge of British law—in particular, that of estates of deceased persons, trusts, and possessory estates in land and future interests—has proven most useful on many occasions in our adventures. Indeed, I pursued a number of courses in the law during my years at the university, and I found the field of gratuitous transfers to be one for plowing.”

I did not pause to ask Holmes how he had read my mind. Instead, I continued my part of the conversation—this time, aloud. "Your most celebrated case in which such knowledge proved more than useful—it proved decisive—was The Hound of the Baskervilles."

"Quite so, Watson. As you will recall, Sir Henry Baskerville was not the last of the Baskerville line. In point of fact, he merely was the penultimate heir to the family title and fortune. Therein lay both the motive for, and the solution to, the mystery.

. . . . .

"My first clue in the chain of inferences that led to the solution of the Baskerville mystery was that Sir Charles, who himself had never married and was indeed childless, had died testate; the baronet's will left almost all of his quite considerable estate to our friend Sir Henry Baskerville, the son of Sir Charles's late younger brother who had borne the same name.

. . . . .

However, the main portion of Sir Charles's estate was the residue, which amounted to almost three quarters of a million pounds and which was left in its entirety to Sir Henry. At the time, I commented that that this vast sum was "a stake for which a man might well play a desperate game."

. . . . .

“Watson, you would hardly call me naïf in matters of human nature. Instantly, I saw the grave temptation to murder. . . . I began my investigation with the working hypothesis that the man who might profit from the death of both Sir Charles and Sir Henry was behind the reappearance of the family's cursed hound . . . "

3d DCA: Beneficiary's "best interests" vs. Settlor's conflicting "intent": who wins?

Juan Antunez — Mon, 26 Mar 2012 10:21:07 -0500

Bellamy v. Langfitt, --- So.3d ----, 2012 WL 385606 (Fla. 3d DCA February 08, 2012)

There is a central tension in the law of trusts between the rights of settlors to specify exactly how they want their trusts administered, and the rights of beneficiaries to have their trusts administered in a fair and equitable manner.

The 3d DCA's opinion in this case crystallizes that tension. After presumably having full access to all of the relevant evidence, the probate judge in this case made a factual determination, concluding it was in the beneficiaries' best interest to modify the trust by eliminating a clause requiring a corporate trustee at all times. Based on a "no-modification" clause in the trust agreement, the 3d DCA reversed, even if, as the 3d DCA admitted, the trial judge's ruling was in the best interests of the trust's beneficiaries.

Does settlor's "intent" always prevail? NO

Effectuating settlor intent is the primary guiding principle of trust law. What's often overlooked is that this principle has always been subject to limitations based on competing public policy concerns. For example, a trust clause disinheriting a beneficiary for marrying someone of a certain faith won't be enforced on public policy grounds, no matter how clearly this outcome violates the settlor's intent (a topic I previously wrote about here). Another more common example is the spendthrift clause found in most well drafted trust agreements. No matter what the settlor's intent may be, for public policy reasons, under F.S. 736.0503 some creditors are permitted to bypass the trust's spendthrift clause, particularly those who supply the beneficiary with "necessaries" (usually food and shelter, but sometimes clothing and transportation, if these are not extravagant). Most jurisdictions, like Florida in F.S. 736.0503, also permit courts to ignore a settlor's spendthrift clause to satisfy a beneficiary's child support and alimony payment obligations.

Beneficiary's "best interests" vs. Settlor's conflicting "intent":

Traditionally, strong public policy principles were the only limits placed on settlor intent. That's changing. Today, a trust beneficiary's "best interests" are also weighed heavily against, and sometime permitted to trump, a settlor's contrary intent. Prof. Gallanis recently published an excellent article examining this trend in trust law entitled, The New Direction of American Trust Law. Here's an excerpt:

In navigating between the extremes of settlor control and beneficiary control, the law of trusts has at times taken a position more favorable to the settlor, and at other times a position more favorable to the beneficiaries. . . . [A]fter decades of favoring the settlor, [American trust law] is moving in a new direction, with a reassertion of the interests and rights of the beneficiaries. I [believe] this new direction is appropriate and welcome.

. . .

[T]he new direction of American trust law is to rebalance the wishes of the settlor with the ownership rights of the beneficiaries. The administration of the trust must, in the end, be for the benefit of the beneficiaries, and their equitable ownership over the trust assets must be respected.

For trust-administration clauses, such as the mandatory corporate trustee clause at issue in the 3d DCA opinion linked-to above, the new trend in trust law is based on the doctrine of "administrative deviation," which permits the modification/deletion of problematic trust clauses if they conflict with the best interests of the beneficiaries. This doctrine was codified in section 412(b) of the Uniform Trust Code. Florida adopted its own version of the rule in F.S. 736.04115.

Why can beneficiary "best interest" trump settlor "intent" in these cases? The answer is found in the comment to UTC section 412(b):

Although the settlor is granted considerable latitude in defining the purposes of the trust, the principle that a trust have a purpose which is for the benefit of its beneficiaries precludes unreasonable restrictions on the use of trust property. An owner’s freedom to be capricious about the use of the owner’s own property ends when the property is impressed with a trust for the benefit of others.

Case Study:

The estate/trust at the center of the linked-to case above has been litigated for years. In order to resolve one facet of that litigation, the parties entered into a settlement agreement permitting the trust's corporate trustee to resign without liability and allowing the trust to proceed into the future without a corporate trustee. The no-corporate-trustee element of the deal required modification of the trust agreement, which contained a mandatory corporate-trustee clause.

After presumably considering the terms and purposes of the trust, the facts and circumstances surrounding the creation of the trust, and extrinsic evidence relevant to the proposed modification, the trial judge approved the settlement agreement -- even if it was contrary to the settlor's intended mandatory corporate-trustee clause -- because the settlement agreement was fair, reasonable and in the best interests of the trust's beneficiaries. The 3d DCA reversed based on a no-modification clause included in the trust agreement . . . even if the modification was in the best interest of the beneficiaries:

In Paragraph 18 of the Trust, as restated in 2002, Mr. Bellamy specifically addressed, and prohibited, the judicial modification of the Trust, specifically providing: “[T]o the extent permitted by law, I prohibit a court from modifying the terms of this Trust Agreement under Florida Statutes s. 737.4031(2) or any statute of similar import.” . . .

In the instant case, the trial court found that the settlement agreement was in the best interest of the beneficiaries and that Paragraph 2 was being modified to allow Merrill Lynch to act as a custodian, as opposed to a trustee, because the “purpose of having a corporate trustee is no longer served because the Trust is substantially administered.” As Paragraph 18 of the Trust prohibits the judicial modification of the Trust, even if it is in the best interest of the beneficiaries, we conclude that the trial court erred by modifying Paragraph 2.

Lesson learned?

Given the general trend in trust law codified in F.S. 736.04115, which weighs heavily the "best interests" of trust beneficiaries vs. strict adherence to settlor intent, settlors and their lawyers can't assume the clear text of a trust agreement will always be followed.

Usually, for the reasons explained by Prof. Gallanis in The New Direction of American Trust Law, the flexibility injected into irrevocable trusts by F.S. 736.04115 is a good thing. But sometimes a client has very good reasons for making sure his trust is administered exactly the way he's planned. In those cases a careful estate planner will want to include the type of no-modification clause at the heart of the linked-to case above, which is explicitly sanctioned in F.S. 736.04115(3) as follows:

(3) This section shall not apply to:
. . .
(b) Any trust created after December 31, 2000, if:
. . .
2. The terms of the trust expressly prohibit judicial modification.

Full Disclosure:

I represented one of the parties in this case years ago. Neither I nor anyone at my firm has been involved in this case for years. However, to be clear, this blog post only reflects my personal views in my individual capacity. It does not necessarily represent the views of my law firm or my past clients, and is not sponsored or endorsed by them. The case-specific information contained in this blog post is based solely on the 3d DCA's opinion, and is provided only for educational purposes and is not intended to provide specific legal advice. No representation is made about the accuracy of the information posted on this blog site. Blog topics may or may not be updated and entries may be out-of-date at the time you view them.

Interview with a Probate Lawyer: Mark R. Manceri

Juan Antunez — Mon, 12 Mar 2012 17:00:03 -0500

Mark R. Manceri of Fort Lauderdale, Florida was on the winning side of Jervis v. Tucker, --- So.3d ----, 2012 WL 385518 (Fla. 4th DCA February 08, 2012), a case I wrote about here.

I invited Mark to share some of the lessons he drew from this case with the rest of us and he kindly accepted.

[Q] What strategic decisions did you make in this case that were particularly outcome determinative at the trial-court level? On appeal?

Focusing on the fact that this was a case of trust construction and not a factual question of testamentary capacity.

[Q] If you had to do it all over again, would you have done anything different in terms of framing the issues for your trial-court judge? On appeal?

I would not change the issues. However, the are several other counts of the complaint that I also feel my clients would have prevailed on if they were to be decided.

[Q] Looking back from your perspective as a litigator, do you think there’s anything that could have been done in terms of better estate planning while the trust settlor was alive to avoid this litigation or at least mitigate its financial impact on the family?

While it may not be clear from the Opinion, the appellant was the very substantial beneficiary of the change under the Second Amendment while he was serving as Guardian and the Trustee. As the Opinion states, the Court was never made aware of the change so there was a clear question of transparency that should have, in my opinion, been addressed.

[Q] Any final words of wisdom for estate planners and probate lawyers of the world based on what you learned in this case?

Remember that the fiduciaries we represent need to act under a higher standard and that should always be kept in mind.

For those of you interested in viewing past interviews done for this blog, click here.

Will Contests--Prediction and Prevention

Juan Antunez — Sun, 04 Mar 2012 11:33:52 -0500

Most trusts and estates litigators don't start out specializing in this niche, they evolve into it. They either start out as pure estate/tax planners (like me) and morph into T&E litigation, or they start out as pure commercial civil litigators and morph into just doing T&E litigation. How you come to the practice obviously influences how you work a case and counsel your clients. What I've noticed is that T&E litigators who come to this niche from a non-litigation estate planning perspective, tend to view each case as an abject lesson in "what not to do" as an estate planner. That's certainly my perspective, which is why litigation-prevention is a recurring them on this blog and a topic I ask about in every interview I've done for this blog [click here].

So it's not surprising I found a recent article by law professor Gerry W. Beyer especially interesting and worth holding onto for future reference. Prof. Beyer's article is entitled Will Contests--Prediction and Prevention, and was published in the Estate Planning & Community Property Law Journal, Vol. 4, p. 1, 2011. It does a good job of identifying likely estate planning landmines and proposing reasonable planning solutions to mitigate the risk and/or costs of related litigation. Here is the abstract of Prof. Beyer's article as posted here on SSRN:

An estate planner must always be on guard when drafting instruments that may supply incentive for someone to contest a will. Anytime an individual would take more through intestacy or under a prior will, the potential for a will contest exists, especially if the estate is large. Although will contests are relatively rare, the prudent attorney must recognize situations that are likely to inspire a will contest and take steps during the drafting stage to reduce the probability of a will contest action and the chances of its success.

This article examines the situations which provide an enhanced likelihood of a will contest and then details the techniques a prudent attorney should consider. An important caveat is in order. Although this article discusses a wide range of strategies that may be helpful in preventing will contests, these techniques vary widely in both cost and predictability of results. There is no uniform approach to use for all clients. Each situation needs to be carefully examined on its own merits before deciding which, if any, of the techniques should be used.

4th DCA: Can a woman who's been adjudicated mentally incapacitated validly amend her revocable trust?

Juan Antunez — Mon, 27 Feb 2012 16:26:09 -0500

Jervis v. Tucker, --- So.3d ----, 2012 WL 385518 (Fla. 4th DCA February 08, 2012)

If you want to really understand what's going on in this case you need to start at the basics and build up from there. The conceptual building blocks of this case are the following:

[1] First, “an adjudication of incompetency shifts the burden of going forward with the evidence on testamentary capacity to the proponent of the [trust].” In re Estate of Ziy, 223 So.2d 42, 43 (Fla.1969); see also Grimes v. Estate of Stewart, 506 So.2d 465, 467 (Fla. 5th DCA 1987)(“Although a declared incompetent may have sufficient lucid moments during which to execute a valid [trust], nevertheless, adjudication of incompetency of a testator creates a prima facia case against the proponent of such a [trust].”).

[2] Second, summary judgment is warranted when the clear text of the trust agreement supports your side of the argument. Why? Because as a matter of law the trial court is prohibited from considering extrinsic facts to explain/construe the clear text of a contested trust agreement. No extrinsic facts = no need for trial. See In re Estate of Barry, 689 So.2d 1186, 1187–88 (Fla. 4th DCA 1997) (“Where the terms of an agreement ... are unambiguous, its meaning and the intent of the maker are discerned solely from the face of the document, as the language used and its plan [sic] meaning controls.”)

Case Study:

OK, now let's apply these general principles to the facts of the case. The trust settlor, Bernice J. Meikle, executed a trust agreement in 1991. She later amended this trust agreement (we're not told exactly when). According to the 4th DCA, this first amendment addressed Ms. Meikle's ability to further amend her trust if she was ever adjudicated incapacitated.

[Key Trust Agreement Text:]

[T]he first amendment to Meikle's trust contains language which provides for the suspension of rights “[i]f, at any time during the continuance of [the] trust, Grantor is adjudicated incapacitated by a court of appropriate jurisdiction.”

The Grantor's powers and those of Grantor/Trustee may be restored either by virtue of [1] an order of an appropriate court having jurisdiction over Grantor, or [2] upon the issuance and receipt by the Trustee of a written opinion from . . . two . . . licensed physicians who have examined the Grantor.

Incapacity Adjudication:

On October 30, 2000, Ms. Meikle was adjudicated incapacitated. A little over a year later, on December 27, 2001, Ms. Meikle executed a second amendment to her trust agreement without [1] obtaining an approving court order, or [2] written opinions from two licensed physicians (oops!).

After Ms. Meikle's death in 2007 the second amendment to her trust agreement was challenged (surprise!). Based on her adjudication of incapacity in 2000, Ms. Meikle was presumed incapacitated when she executed her second amendment in 2001. This evidentiary presumption can, however, be overcome at trial.

Carefully Reading Trust Text = Summary Judgment = No Trial = Happy Clients:

What can't be overcome at trial is the clear text of the trust agreement. Here's where counsel for the contestants nailed it. By focusing on the clear text of the trust agreement, he was able to skip a trial and win on summary judgment. Why? Because by its own terms the trust agreement required one of two preconditions to be satisfied for the second amendment to be valid. These requirements weren't satisfied, thus the second amendment fails . . . regardless of whether or not Ms. Meikle did in fact have testamentary capacity. Thus no need for a trial.

[4th DCA:]

The plain meaning of the document shows that Meikle's capacity must have been restored by the court in order to amend her trust once she was adjudicated incapacitated . . . Without a court order restoring her rights, she must have obtained two opinions by licensed physicians. . . . Dr. Button, a licensed physician who had met with Meikle many times, opined that she possessed capacity to amend the trust; however, Dr. Strang, a nursing home administrator with expert experience and medical schooling—but without a physician's license—submitted the other opinion. This is contrary to what was unambiguously required.

. . . The first amendment to the trust, a valid amendment made before the determination that Meikle was incapacitated, expressly stated that certain things had to occur in order to restore capacity in the event the court declared Meikle incapacitated. Because the proper proof to restore capacity to amend was not presented by Meikle, she did not have the power to amend her trust at the time she did. Accordingly, no genuine issue of material fact exists, as it is clear that Meikle's power to control her property was never restored.

5th DCA: Can estate beneficiaries sue the guardian's lawyers for estate planning malpractice?

Juan Antunez — Mon, 13 Feb 2012 17:11:01 -0500

Hodge v. Cichon, --- So.3d ----, 2012 WL 315846 (Fla. 5th DCA February 03, 2012)

Under Florida law, the three elements of a legal malpractice action are generally described as follows:

the existence of an attorney/client relationship between the plaintiff and the attorney (i.e., "privity of contract");
the attorney's neglect of a reasonable duty; and
that such negligence resulted in and was the proximate cause of loss to the plaintiff.

The "privity of contract" requirement has been relaxed/eliminated where it was the apparent intent of the client to benefit a third party. The most common example of this exception being in the estate planning area, where the plaintiff is a named beneficiary of the decedent's will and the attorney-defendant drafted the will. However, the third party intended beneficiary exception to the rule of privity is NOT limited to will drafting cases. It can extend to any third party who was the intended beneficiary of the lawyer's work. How far the privity exception goes is what this case is all about.

Can estate beneficiaries sue guardians' lawyers for estate planning malpractice? YES!

In this case the plaintiffs were named beneficiaries of the decedent's will. Prior to his death, the decedent was adjudicated partially incompetent and three guardians were appointed for him. The guardians then obtained a court order allowing them to implement an estate-tax savings plan, including the creation of a family limited partnership ("FLP"). The goal of this estate planning was to reduce taxes for the benefit of the estate's beneficiaries, including the plaintiffs. Unfortunately, when the decedent died, about 2 1/2 years later, the FLP plan hadn't been fully implemented, thus forfeiting the anticipated tax savings.

Apparently, during the course of the guardianship proceeding the plaintiffs in this case had been at odds with the guardians and their attorneys. It's undeniable, that the plaintiffs were never represented as counsel by the lawyers for the guardians. And yet, these same plaintiffs sued the guardians' lawyers for malpractice. Why? Because they were the intended third-party beneficiaries of the lawyers' work, NOT because there was ever any kind of attorney/client relationship between them and the lawyers. So says the 5th DCA:

Generally, a party who retains an attorney is in privity with that attorney and may bring a negligence action for legal malpractice. Angel, Cohen & Rogovin v. Oberon Inv., N.V., 512 So.2d 192, 194 (Fla.1987). A limited exception to the privity requirement in the area of will drafting allows an intended beneficiary to file a legal malpractice claim for losses resulting from a lawyer's actions or inactions, where it was the apparent intent of the client to benefit that third party. Id.; See Espinosa v. Sparber, Shevin, Shapo, Rosen & Heilbronner, 612 So.2d 1378, 1380 (Fla.1993); Kinney v. Shinholser, 663 So.2d 643, 646 (Fla. 5th DCA 1995). Standing to pursue a legal malpractice action is conferred upon “those who can show that the testator's intent as expressed in the will is frustrated by the negligence of the testator's attorney.” Espinosa, 612 So.2d at 1380. While the standing exception has been relaxed in will drafting situations, “the third party intended beneficiary exception to the rule of privity is not limited to will drafting cases.” Winston v. Brogan, 844 F.Supp. 753, 756 (S.D.Fla.1994) (citing Greenberg v. Mahoney Adams & Criser, P.A., 614 So.2d 604, 605 (Fla. 1st DCA 1993)).

Appellees take the position that there is “absolutely no evidence of any attorney/client relationship” between Appellants and Appellees. The record demonstrates that the overall intent of Cowart's retaining counsel was to create and establish a FLP for the purpose of preserving and maintaining the estate assets and preventing its dissipation through estate taxes. The petition seeking appointment of a guardian of Cowart's property noted that “[t]he estate plan calls for the creation of a family limited partnership into which the Ward's assets are transferred.” The expectation, according to the petition, was that “[u]nder current tax laws, the implementation of this estate tax planning may save the estate as much as forty percent (40%) in estate taxes.” The purpose of the estate plan was to benefit all named and intended beneficiaries; the larger the net estate, the better for all who might partake.

While there may have been animosity or acrimony among the various heirs and beneficiaries, the actions of retained counsel and the direction of the court in ordering the implementation of the estate plan were intended to benefit all and harm none. As noted in Winston, and as appears herein, while there may be conflict among the parties, there is no indication of a conflict of interest regarding the need to maximize the estate vis-à-vis less taxes and estate preservation. 844 F.Supp. at 756. If the dispute concerns whether or not Appellants were intended beneficiaries, the issue is one of fact for the jury to determine. See id. at 757.

Lesson learned? Guardianship lawyers beware:

It's not unusual for guardianship lawyers to get drawn into complex tax planning for wealthy wards. How might this happen? Assume "mom" is elderly and suffering from dementia. For her own safety, her children have her adjudicated legally incapacitated, and a guardian is appointed for her. Once the family takes stock of mom's assets, they realize she's done little to no estate planning. With a little tax planning, maybe involving a FLP, the family can save hundreds of thousands of dollars in taxes without prejudicing mom in any way. The family asks the guardianship court for approval to proceed, gets it, and tells guardian to make it happen. Guardian turns to lawyer (i.e., you), says make it happen. Ward dies before you make it happen. Presto! Guardianship lawyer is now a defendant in an estate planning malpractice suit. That's what happened in Winston v. Brogan, 844 F.Supp. 753 (S.D.Fla.1994) (cited by the 5th DCA above), and what happened in this case.

Bottom line, if you're a guardianship lawyer, make sure you know what you're doing before you get pulled into some complex, tax-driven estate planning as part of a guardianship proceeding. Complex tax planning is usually not part of the deal for most guardianship lawyers. Don't dabble; make the guardian hire an expert. If you get this wrong, you can get sued, and the plaintiffs won't be your client, the guardian (who may love you!), it'll be people you never met (or may have even been adverse to you in the guardianship proceeding): the estate's beneficiaries.

3d DCA: What happens when homestead property is invalidly devised in trust?

Juan Antunez — Mon, 06 Feb 2012 10:59:50 -0500

Aronson v. Aronson, --- So.3d ----, 2012 WL 280565 (Fla. 3d DCA February 01, 2012)

Estate planners beware. As reported here by the WSJ, "When it comes to blended families, estate planning can be a special kind of hell." A corollary to that observation: blended families are always at risk for probate litigation. Yes, I said always! This case being a prime example: this is now the third appellate decision published by the 3d DCA chronicling 10+ years of litigation between a widow and her deceased husband's sons from a prior marriage. For the prior installments of this long-running dispute, click here and here.

Case Study: Blended Family + Invalid Homestead Devise = Years of Litigation

In July of 1996 Mr. Aronson deeded a condo located on Key Biscayne, FL to his revocable trust. Under the terms of his revocable trust, Doreen (Mr. Aronson's wife) had the condo for life, and at her death it would go to Mr. Aronson's sons from a prior marriage. A few months later, in December of 1996, Mr. Aronson deeded this same condo directly to Doreen. In 2000 the couple sold a home in Massachusetts, which had been titled in Doreen's name alone, and moved into the Key Biscayne condo, which became their homestead residence. Mr. Aronson died in 2001.

1. Who got the condo when Mr. Aronson died?

Because of the two conflicting deeds, this was the first issue litigated. As I reported here, at trial the court ruled in favor of Doreen. On appeal, the 3d DCA reversed, ruling that an individual can't deed a property in his individual capacity if he's previously deeded it over to his revocable trust, even if he had the authority at any time to revoke his own trust.

2. So if the deed-to-trust was valid, where did this leave Doreen?

Not surprisingly, based on the 3d DCA's first opinion, all of the parties assumed they were stuck litigating their competing claims to the Key Biscayne condo within the parameters of Mr. Aronson's revocable trust. In fact, this is the governing assumption underlying the 3d DCA's original opinion for this case, click here.

End of the story? No way! Based on a motion for reconsideration filed by Mr. Aronson's sons, the 3d DCA reversed course, adopting an entirely new theory in the linked-to opinion above, ruling instead that the condo should have never been treated like a trust asset because this was an invalid devise of homestead property. Invalid homestead devise = life estate to Doreen, vested remainder interest for Mr. Aronson's sons, skip the trust entirely. Bottom line, while the deed-to-trust trumped the later deed to Doreen, because it resulted in an invalid homestead devise, this deed should have also been ignored. Confused? The 3d DCA apparently was. Here's how the 3d DCA explained its thinking this time around:

We reverse the judgments under review. First, it is undisputable the Key Biscayne condominium was the decedent's homestead at the time of his death. Second, article X, section 4(c) of the Florida Constitution provides that “[t]he homestead shall not be subject to devise if the owner is survived by spouse or minor child, except the homestead may be devised to the owner's spouse if there be no minor child.” Art. X, § 4(c), Fla. Const. Third, the Florida legislature has made clear its command that this provision shall apply equally to property held by a revocable trust as to testamentary bequests. § 732.4015(2)(a), Fla. Stat. (2001) . . . Finally, section 732.401(1) of the Florida Statutes (2001), provides:

(1) If not devised as authorized by law and the constitution, the homestead shall descend in the same manner as other intestate property; but if the decedent is survived by a spouse and one or more descendants, the surviving spouse shall take a life estate in the homestead, with a vested remainder to the descendants in being at the time of the decedent's death per stirpes.

(emphasis added). Because the Key Biscayne condominium was Hillard's homestead and because his wife, Doreen, survived him, the condominium was not subject to disposition through the trust. . . . At the moment of Hillard's death, his homestead property passed outside of probate, see §§ 733.607, .608, Fla. Stat. (2001) . . . , in a twinkle of an eye, as it were, to his wife for life, and thereafter to his surviving sons, James and Jonathan per stirpes. § 732.401(1), Fla. Stat. From that moment forward, the trustees had no power or authority with respect to the former marital home. The widow became responsible for the expenses of the property, and, of course, remains so for as long as she remains a life tenant. . . .

Lesson learned?

There are a few big takeaways from this case. First, estate planning for blended families is always tricky. This family could have avoided over a decade of acrimony and litigation expenses if Mr. Aronson had consulted with a qualified estate planner up front.

Second, Florida's maddeningly complex homestead laws can befuddle the best of us (ask the 3d DCA). This area of law is counter intuitive and often results in bizarre outcomes even the most deranged law school professor couldn't dream up (this case being a prime example!). If you're cleaning up one of these messes, start at first principles and take nothing for granted (click here for "Kelley's Homestead Paradigm," the ultimate probate lawyer's homestead-law cheat sheet.)

Third, it took these litigants over 10 years (and multiple trials/appeals) to figure out what, "in a twinkle of an eye" (using the 3d DCA's phrase), happened automatically as a matter of law when Mr. Aronson died back in 2001. Starting in 2010, there are added consequences to this kind of delay. In 2010 F.S. 732.401 was amended to allow a surviving spouse 6 months to opt out of a life estate and instead take a 50% tenancy-in-common interest in the homestead property. As I explained here, taking a 50% tenancy-in-common interest in lieu of a life estate can offer significant benefits to surviving spouses. Surviving spouses, and their lawyers, no longer have the luxury of waiting years to untangle the mess caused by an invalid homestead devise. Due to the new 6-month deadline contained in F.S. 732.401, you now have only 6 months to do what the parties in this case needed 10+ years to figure out. 6 months vs. 10 years. Yeah, no pressure . . .

Bonus:

Now that you know what I have to say about this case, you'll want to read this excellent analysis of the case by two of the smartest Florida homestead lawyers practicing today, Jeff Baskies and Charlie Nash, as published in Steve Leimberg's Asset Protection Planning Email Newsletter - Archive Message #198. Here's the executive summary of their piece:

For the third time in less than 5 years, the Florida 3rd District Court of Appeal (covering Miami-Dade County) issued a retraction of a potentially ground-breaking and rule-changing homestead decision.

First, in 2007, the 3rd DCA’s decision in Chames v. Demayo (holding that a waiver of the homestead creditor protection in an attorney’s fee contract was valid) shook the homestead world, until it was overturned, first en banc by the 3rd DCA and then by the Florida Supreme Court. Interestingly, the en banc opinion of the 3rd DCA overturned the original opinion and “got it right” according to the Florida Supreme Court.

Next, in 2011, a three-judge panel of the 3rd DCA issued a ruling in Habeeb v. Linder holding that a husband’s joinder in a warranty deed of homestead property to his wife’s revocable trust constituted a waiver of his post death homestead rights due to his transfer of “all hereditaments” in the “form” warranty deed. That ruling was subsequently withdrawn after significant criticism.

Now, in the latest decision in a very long-running Florida probate litigation, Aronson v. Aronson, (this current line of cases being called “Aronson II” as a prior ruling – “Aronson I” – held that a deed signed by the husband individually was a nullity as it was executed after the husband had already transferred title to his revocable trust) the 3rd DCA on February 1, 2012, withdrew its October 2010 ruling.

Had the original ruling in Aronson II stood, then the post-death consequences of any transfer of a homestead to a revocable trust would again be up for controversy. Fortunately, the 3rd DCA in its substituted decision in Aronson II seems to have reached the correct result regarding the constitutional devise restrictions.

2d DCA: Who has the burden of proving whether or not you're a "reasonably ascertainable" creditor of the estate?

Juan Antunez — Fri, 27 Jan 2012 19:55:04 -0500

Lubee v. Adams, --- So.3d ----, 2012 WL 163911 (Fla. 2d DCA January 20, 2012)

Are you a "reasonably ascertainable" creditor or not? If the answer is YES, then under F.S. 733.710 you have up to 2 years after the decedent dies to file your claim against the estate. If the answer is NO, then under F.S. 733.702 you only have 3 months after the estate's "notice to creditors" is first published to file your claim. 3 months vs. 2 years. That's a big difference.

This case is all about who has the burden of proving whether or not you're a "reasonably ascertainable" creditor.

Case Study:

Personal representatives have a duty under F.S. 733.2121 to search out the decedent's reasonably ascertainable creditors and personally serve them with a "notice to creditors." Once personally served, reasonably ascertainable creditors have 30 days to file their claims.

In this case Mr. Lubee, the creditor, wasn't identified by the personal representative as a reasonably ascertainable creditor of the estate, which means he was never served with a notice to creditors. Mr. Lubee saw things differently, arguing he was a reasonably ascertainable creditor, and as such he should have been personally served with a notice to creditors. Because he wasn't served with a notice to creditors, Mr. Lubee argued the 30-day post service deadline applicable to him (as a reasonably ascertainable creditor) was never triggered, which means he could file his claim any time within 2 years after the decedent's date of death (which he did).

Burden of Proof:

Mr. Lubee's argument works if you assume ALL creditors are reasonably ascertainable, and it's up to the estate to prove they're NOT. His argument fails if you assume NO creditor is reasonably ascertainable, unless proven otherwise. Unfortunately for Mr. Lubee, first the trial court, then the 2d DCA ruled creditors bear the burden of proof, so his claim failed.

According to the 2d DCA, because Mr. Lubee wasn't identified by the estate as a reasonably ascertainable creditor, he had two options: [1] file his claim within the 3-month post publication deadline generally applicable to all creditors; or [2] file for an extension of time under F.S. 733.702(3) within the 2-year window of F.S. 733.710, prove his status as a reasonably ascertainable creditor within the context of that proceeding, then subsequently file his creditor claim. He did neither, so his claim failed as a matter of law. By the way, this two-step process is the exact same formula previously adopted by the 1st DCA in Morgenthau v. Estate of Andzel, --- So.3d ----, 2009 WL 5151741 (Fla. 1st DCA Dec 31, 2009), which I wrote about here.

Bottom line, when in doubt, no one's a reasonably ascertainable creditor until a court says you are. Here's how the 2d DCA explained its ruling:

There is no dispute that Mr. Lubee did not file his claim in the probate proceeding within three months following the publication of notice to creditors and that he did not file a motion for extension of time or otherwise seek an extension. There is also no dispute that Mr. Lubee was not served with a copy of the notice to creditors pursuant to sections 733.702(1) and 733.2121(3)(a). However, Mr. Lubee contends that because he was a readily ascertainable creditor entitled to be served with a copy of the notice to creditors pursuant to those sections, he was only required to file his claim in the probate proceeding within thirty days after service of the notice on him or, at a maximum, within two years of the decedent's death. He argues that because he was never served with the notice to creditors, he timely filed his claim within the two-year window of section 733.710.

Because a notice to creditors was published on November 16, 2007, creditors not entitled to actual notice were required to file their claims on or before February 16, 2008. See § 733.702(1). Creditors who were served with the notice to creditors were required to file their claims within thirty days following service. See id. Because he was not served with a copy of the notice to creditors, Mr. Lubee was required to file his claim in the probate proceeding within the three-month window following publication. Alternatively, Mr. Lubee could seek an extension from the probate court pursuant to section 733.702(3) within the two-year window of section 733.710. See Morgenthau v. Estate of Andzel, 26 So.3d 628, 632 (Fla. 1st DCA 2009) [click here]; cf. Miller v. Estate of Baer, 837 So.2d 448, 449 (Fla. 4th DCA 2002) (affirming order enforcing claim against estate where creditor failed to file claim within three-month window of section 733.702(1) but did file motion for extension of time within two-year window of section 733.710). It is undisputed that he did neither. Mr. Lubee's filing of his claim in the probate proceeding within two years of the decedent's death did not amount to a request for an extension of time and did not otherwise comply with the requirements of section 733.702. Mr. Lubee's claim in the probate proceeding was untimely and therefore barred. As a result, the issue of whether or not Mr. Lubee was a readily ascertainable creditor was immaterial in the civil proceeding, and the trial court correctly granted partial summary judgment in favor of the personal representative.

3d DCA: Revenge of the disappointed heir: tortious interference with an expected inheritance

Juan Antunez — Tue, 17 Jan 2012 07:23:56 -0500

Saewitz v. Saewitz, --- So.3d ----, 2012 WL 10854 (Fla. 3d DCA January 04, 2012)

Tortious interference with an expected inheritance is a relatively new cause of action that's still evolving. So anytime one of these cases makes it into a Florida appellate opinion, it's noteworthy. The last time was back in 2007, coincidentally also before the 3d DCA. See Schilling v. Herrera, --- So.2d ----, 2007 WL 981627 (Fla. 3d DCA 2007). In that case the issue on appeal was when probate proceedings will effectively bar a tortious interference claim [click here]. This time around the issue is damages; or more specifically, how the lack of concrete damages evidence can get your case tossed out of court.

The five elements of this cause of action are generally described as follows:

the existence of some sort of expectancy on the plaintiff's part involving an inheritance;
the defendant's intentional interference with such expectancy;
involvement of tortious conduct, such as fraud, duress, or undue influence, in the defendant's interference;
reasonable certainty that the plaintiff's expectancy would have been realized if not for the defendant's interference; and
damages.

No damages = No case:

In this case the decedent's two daughters sued their stepmother for tortiously interfering with their expected inheritance. Both the trial court and the 3d DCA seem to concede that the first four elements of the plaintiffs' case were proved. However, just because you have evidence of wrongdoing doesn't mean you have a lawsuit. You also need to quantify - and prove - economic damages. I'm often contacted by potential plaintiffs with sad stories of some truly appalling conduct, but when you try to nail them down on how they've been hurt economically, they can't tell you. Just because you've been wronged, doesn't mean you have a lawsuit. You need to be able to quantify concrete economic damages. Here's how the 3d DCA put it:

The daughters' initial brief on this appeal persuasively chronicles the record evidence presented to the jury of manipulative activity taken by their stepmother during their father's dying days and preceding months to contravene their father's wishes with respect to the disposition of his estate. It is apodictic, however, that a plaintiff's initial proof of a prima facie case of both conversion and tortious interference in her case-in-chief requires more than proof of liability. Prima facie proof of damages is required as well.

For trusts and estates litigators, the primary value of this case is the 3d DCA's discussion of what kind of damages evidence you need to put on. First you need to define what expected inheritance the defendant defrauded you out of; then you need to prove with "reasonable certainty" the amount of economic damages you've suffered.

The substance of the evidence the daughters presented to the jury on the element of damages is found in the testimony of three witnesses: Jack Rosenberg, the decedent's accountant; Ron Goldstein, a friend of the decedent; and Lynn Saewitz. Rosenberg provided general testimony that the value of the assets involved in the litigation was “over a million dollars” or “in the millions [of dollars].” Goldstein similarly testified the value of the allegedly misappropriated assets at “seven figures.” Although denying any wrongdoing, Lynn Saewitz similarly indicated the value of the assets in question was in the “millions of dollars.” However, none of the testimony was tied to a legally relevant time period. . . . This omission alone deprives this testimony of any probative value.
Additionally, this testimony is insufficient to satisfy the “reasonable certainty” threshold necessary to be considered legally probative of the amount or extent of damages suffered by the daughters. “Under the reasonable certainty rule, ... recovery is denied where the fact of damages and the extent of damages cannot be established with a reasonable degree of certainty.” . . . The proof adduced must be sufficiently definite for a reviewing court to perform its review obligation. . . . In the case before us, the proof adduced by the daughters in their case-in-chief fails to meet this fundamental requirement. . .

Improvise. Adapt. Overcome.

To say the decedent's daughters must have been crushed by the outcome of this case is probably putting it mildly. Why? Because according to them they weren't able to prove damages with reasonable certainty due to their stepmother's failure to turn over accounting documents she was supposed to produce during pre-trial discovery. In a lesson for all of us, this complaint got them nowhere. According to the 3d DCA counsel for the daughters needed to, as we used to say in the Marine Corps when things didn't go as planned: "improvise, adapt and overcome." In other words, if your opponent doesn't hand you the facts needed to prove your case, you don't just cry foul, you find some other way to get the job done: you improvise, you adapt, you overcome. Here's how the 3d DCA made this same point in the milder vernacular of appellate-court speak:

The daughters argued below, and renew their argument before us, that they were prevented from proving their damages in this case by the failure of counsel for the stepmother to engage in discovery in good faith. The daughters specifically point to the fact, revealed during the testimony of Jack Rosenberg, that defense counsel failed to inquire of him or his accounting firm for documents relating to the value of the decedent's assets in response to a request for production that indisputably included them. As trustee of the Max P. Saewitz Revocable Trust, [stepmother] had the legal obligation to make such an inquiry. . . . The testimony of Jack Rosenberg indicated his firm had responsive documentation. During the course of the argument on the motion for directed verdict, counsel for the daughters placed substantial reliance on this lapse by defense counsel to ask the trial court to either re-open the case to allow more evidence on the element of damages, or, alternatively, grant a new trial as a sanction against [the stepmother] and her counsel for abuse of discovery. The trial court denied relief.

* * * * *

[T]he precise identification of each asset at issue was known to counsel for the daughters well before trial. If a prima facie case of the value of these assets could have been proven through the records or testimony of the decedent's accountants, it follows the assets also could have been valued by experts retained by the daughters. Unless knowingly waived or excused by the daughters themselves, counsel's obligation to the daughters in this case included an independent obligation to be prepared to present a prima facie case on the value of the daughters' damage claim at trial. The actions of defense counsel, even if a violation of a legal or ethical obligation existed, were not the “but for” cause of the daughters' failure to present a prima facie case to the jury.

Lesson learned?

According to the 3d DCA, the "but for" cause of the plaintiffs' loss in this case wasn't their stepmother's stonewalling, "even if a violation of a legal or ethical obligation existed," it was their own failure to retain their own independent expert to prove damages. Bottom line, when all is said and done it's up to you to win your case. If your opponent doesn't make this easy for you, don't expect your judge to come to your rescue. Repeat after me, improvise, adapt and overcome . . . improvise, adapt and overcome . . . improvise, adapt and overcome . . . improvise, adapt and overcome . . .

3d DCA: Florida's new Power of Attorney statutory regime makes its appellate court debut . . . the reviews are good

Juan Antunez — Wed, 04 Jan 2012 21:31:57 -0500

Rosenkrantz v. Feit, --- So.3d ----, 2011 WL 6183525 (Fla. 3d DCA Dec 14, 2011)

As I reported here, on October 1, 2011 Florida overhauled its power of attorney (POA) statutory regime based in large part on the Uniform Power of Attorney Act. The new statute was supposed to clarify some of the ambiguities inherent to the old statute. Based on the 3d DCA's observations in this case, the new statute appears to be delivering on this front.

Less ambiguity = greater certainty for anyone seeking legal advice about POA's and what their rights, duties or obligations as an attorney-in-fact may be. Win, lose or draw, certainty in the law is always a good thing.

Case Study:

In this case an elderly mother executed a POA naming her two children as her co-attorneys-in-fact. As long as everyone does their part, naming two children in your POA as co-attorneys-in-fact is OK and done all the time. Unfortunately, in this case one of the siblings (Sister) believed her brother was improperly blocking her attempts to account for their mother’s assets. What to do? Given the ambiguities inherent to the old statute, the answer was unclear. Bottom line, Sister was compelled to invest valuable time and money into filing a declaratory judgment action just to figure out who was supposed to do what under her mother's POA. On appeal, the legal issue was whether a declaratory judgment action was appropriate in this case. The 3d DCA said yes. The 3d DCA then went out of its way to point out how the ambiguities giving rise to Sister's declaratory judgment action in the first place have now been largely resolved by our new POA statutory regime. Less ambiguity = greater certainty = less time and money wasted on declaratory judgment actions. That's a good thing.

Here's an excerpt from the 3d DCA's opinion:

Gertrude Feit executed a Durable Power of Attorney when she began having memory loss. Gertrude named her daughter, Rosenkrantz, and her son, James Feit, as attorneys-in-fact to oversee her financial affairs. Gertrude and James live in Miami–Dade County, Florida. Rosenkrantz, who lives in New York, alleges that her brother refuses fully to account for their mother's assets, and objects to her efforts to obtain information directly from the financial institutions. Rosenkrantz contends that James' actions impair her ability to carry out her responsibilities as a co-attorney-in-fact, and she is in doubt as to her rights under the power of attorney.

*****

Rosenkrantz thus sought declaratory relief to determine: 1) the extent to which she can, as a co-attorney-in-fact, act without the concurrence of a co-attorney who may be acting in derogation of his fiduciary duty; and 2) whether she, as one co-attorney, is entitled to an accounting from the other co-attorney. If the allegations are proven as pled, it is clear that Rosenkrantz acted properly and prudently in seeking to fulfill her fiduciary role.FN2 . . .

FN2. It should be noted that the Florida Legislature addressed these very issues in its 2011 revisions to Chapter 709. Among the several significant changes, the new statutory scheme provides:

— A principal may designate two or more persons to act as co-agents, and unless the power of attorney otherwise provides, each co-agent may exercise its authority independently. § 709.2111(1), Fla. Stat. (2011).

— If a power of attorney requires that two or more persons act together as co-agents, one or more of the agents may delegate to a co-agent the authority to conduct banking transactions pursuant to the power of attorney. § 709.2111(6).

— An agent may be required by a co-agent to disclose receipts, disbursements, or transactions conducted on behalf of the principal. § 709.2114(6).

— An agent (including a co-agent) may petition a court to construe or enforce a power of attorney, review the agent's conduct, terminate the agent's authority, remove the agent, and grant other appropriate relief. § 709.2116(1).

— An agent's exercise of power may be challenged in a proceeding brought on behalf of the principal on the grounds that the exercise of the power was affected by a conflict of interest. § 709.2116(4).

1st DCA: Great expectations: what property rights does a child have in a parent's future intestate estate?

Juan Antunez — Tue, 03 Jan 2012 18:50:43 -0500

Layne v. Layne, --- So.3d ----, 2011 WL 5560563 (Fla. 1st DCA Nov 16, 2011)

What "rights" do I have in an inheritance from my parents? Under Florida law, generally speaking the answer is none. At most I might expect or hope to one day maybe inherit a share of dad's estate, but an "expectancy" isn't a property right. These basic property-law and inheritance principles are at the heart of this case.

Case Study:

In this case "Son" owned a townhouse 50/50 with his "Dad" and Dad's wife at the time. A few years later, Son deeded his 1/2 share in the townhouse to Dad and Dad's now ex-wife, resulting in Dad and ex-wife each owning a 1/2 interest in the whole property as tenants in common. Dad dies intestate, survived by two heirs: Son and his sister. Son claims 1/2 of dad's intestate estate, including a share of Dad's interest in the townhouse. Ex-wife cries foul, saying Son shouldn't get any part of the townhouse. Why? According to ex-wife when Son deeded his share of the townhouse to Dad, he also deeded away his 1/2 share of Dad's future intestate estate (which included the townhouse). Sound crazy? Well, the trial court actually bought this argument and ruled against Son.

On appeal the 1st DCA reversed the trial court's ruling based in large part on the basic principles outlined above. Sometimes even the savviest judge can get the basics wrong. That's why opinions like this one are helpful, especially for practicing probate lawyers. The following is an excerpt from the 1st DCA’s linked-to opinion:

The court's order states that Appellant's quitclaim deed operated to “convey all of his interest” in the townhouse; thus, he is not entitled to any portion of the property that would otherwise pass to him as a beneficiary of his father's estate. Any right Appellant has to take an interest in the property as a beneficiary did not, however, exist at the time Appellant executed the quitclaim deed. A quitclaim deed conveys only that interest in a property held by the grantor at the time of the conveyance. See, e.g., Blitch v. Sapp, 142 Fla. 166, 194 So. 328, 330 (1940) (holding “a ‘quit-claim’ deed yields only such interest in land as the grantor had at the time of the making of such deed.”). In other words, “[t]he possibility that a person will inherit property from an ancestor is but an expectancy and not an interest in property. While a descendant may expect or hope to inherit, neither a present nor future interest in property actually exists in the absence of a conveyance.” Diaz v. Rood, 851 So.2d 843, 845 (Fla. 2d DCA 2003); see also § 732.101(2), Fla. Stat. (“The decedent's death is the event that vests the heirs' right to the decedent's intestate property.”).

We recognize that the court in Diaz also held that it is possible to convey an expectancy. 851 So.2d at 845. In that case, however, the assignment in question made it clear that the grantor was doing just that; here, the quitclaim deed conveyed only Appellant's interest in the townhouse as it existed at the time of the conveyance. It did not expressly convey any future right to the property Appellant may acquire by virtue of an expectancy, such as a will or via intestacy.

4th DCA: What is the "cy pres" doctrine, and why should Florida charities care?

Juan Antunez — Mon, 19 Dec 2011 12:13:18 -0500

SPCA Wildlife Care Center v. Abraham, --- So.3d ----, 2011 WL 6183491 (Fla 4th DCA Dec 14, 2011)

We all know charities are struggling to stay afloat these days, which means they're asserting themselves in court to a degree unheard of a generation ago (a topic of frequent discussion on this blog, click here). In the linked-to case above several charities, including the SPCA Wildlife Care Center (a Broward County animal shelter affiliated with the Humane Society), found themselves unexpectedly pushed into a corner by a probate court's insistence on adjudicating an issue no one asked it to rule on (lesson learned: always expect the unexpected when setting foot in a courtroom).

The question before the 4th DCA in the linked-to case above was whether a person's vaguely worded testamentary gift to charity can be enforced even if the named charity doesn't exist or the testatrix's charitable intent isn't worded as specifically as usually required for testamentary bequests. The trial court said NO. On appeal, the 4th DCA said YES, siding with the charity and reversing the trial court's decision based on the "cy-près" doctrine.

"Cy-près" Doctrine:

"Cy-près" is an old Norman French term meaning "as near as possible" or "as near as may be." When the original objective of the settlor or the testator becomes impossible, impracticable, or illegal to perform, the cy-près doctrine allows a court to amend the terms of a charitable trust as closely as possible to the original intention of the testator or settlor to prevent the trust from failing. For example, in Jackson v. Phillips, (1867) 96 Mass. 539, the testator bequeathed to trustees money to be used to "create a public sentiment that will put an end to negro slavery in this country." After slavery was abolished by the Thirteenth Amendment to the United States Constitution, the funds were applied cy-près to the "use of necessitous persons of African descent in the city of Boston and its vicinity."

Although unstated in the link-to 4th DCA opinion, the "cy-près" doctrine has been codified in Florida as part of our Trust Code at F.S. 736.0413. This provision is loosely based on section 413 of the Uniform Trust Code.

Case Study:

In the linked-to case above the decedent, Mary Ericson, executed a will that created a trust for the life-time benefit of her close friend, Emma Brown. Upon Ms. Brown's death, the trust's remaining assets were to be distributed to the "International Wildlife Society.” This is all fine, except there's no such thing as the "International Wildlife Society.” So does the charitable bequest fail?

According to Ms. Brown, “it was the intent of the decedent, Mary Ericson, to have the trust assets distributed to a local Broward County, Florida benevolent animal organization which would attempt to aid and care for animals and not consider destruction of animals except as a last resort.” Ms. Brown further attested that the decedent “often spoke of the Humane Society [of] Broward County.”

When the trust was brought before the court for clarification, several charities were notified and given an opportunity to file responses. One of these charities, the SPCA Wildlife Care Center, filed a response asserting that the assets of the testamentary trust should be distributed to it based on the cy-près doctrine. For some unexplained reason the trial court took it upon itself to simply rule the trust's residuary bequest was vague, and thus "failed". In other words, NO charity gets anything. What?! That logic may apply to non-charitable bequests, but not to charities. That's what the cy pres doctrine is all about; fixing vague charitable bequests. Fortunately, the 4th DCA "got it," reversing the trial court's order based on the following analysis.

The cy pres doctrine is the principle that equity will [a] make specific a general charitable intent of a settlor, and will, [b] when an original specific intent becomes impossible or impracticable to fulfill, substitute another plan of administration which is believed to approach the original scheme as closely as possible. Christian Herald Ass'n v. First Nat'l Bank of Tampa, 40 So.2d 563, 568 (Fla .1949). The doctrine is often applied where the named beneficiary is a corporation or institution that has ceased to exist at the time of the testator's death. See, e.g., Lewis v. Gaillard, 61 Fla. 819, 842–43, 56 So. 281, 288 (1911) (applying the cy pres doctrine and holding that the Florida State College for Women was entitled to receive income from the testator's estate, even though the testator's will named the college's predecessor institution, West Florida Seminary, as the beneficiary); Christian Herald, 40 So.2d at 568 (holding where testator devised property to dissolved charitable corporation, the successor in interest of the dissolved corporation became entitled to such property under the cy pres doctrine). Florida courts have held that “the misnomer of a devisee will not cause the devise to fail where the identity of the devisee can be identified with certainty.” Humana, Inc. v. Estate of Scheying, 483 So.2d 113, 114 (Fla. 2d DCA 1986). The cy pres doctrine, however, does not apply when the provisions of the will can be carried out, such as where the will provides an alternative that can be performed. See Jewish Guild for the Blind v. First Nat'l Bank in St. Petersburg, 226 So.2d 414, 416 (Fla. 2d DCA 1969); see also Sheldon v. Powell, 99 Fla. 782, 794, 128 So. 258, 263 (1930).

In the present case, the trial court erred in sua sponte determining that the residue of the testamentary trust would pass by intestacy instead of to a charitable organization for the benefit of animals. The hearing was not scheduled as an evidentiary hearing, and the only extrinsic evidence in the record on the issue of the decedent's testamentary intent consists of the affidavits of the income beneficiary and the attorney who prepared the will. Those would suggest that the court could fashion an alternative plan to effectuate the intent of the testator, where the testator's intent to provide for a charitable bequest to animals, and not to benefit any relatives or other parties, was express. Thus, there was not any evidentiary support for the trial court's conclusion that the residuary clause in Article Six, Paragraph C, of the will should fail.

From the language of the will and the affidavits in the record, it appears that the decedent had a general charitable intent for the residue of her testamentary trust to pass to a charitable organization for the benefit of animals. Even if it cannot be determined which organization the testator had in mind, the interested parties should have the opportunity to present evidence to demonstrate that the cy pres doctrine should apply and permit distribution to a claimant or claimants which can fulfill the original intent of the bequest as closely as possible. Based on the foregoing, we reverse and remand for an evidentiary hearing.

4th DCA: Does an interest in a revocable trust vest when the trust is created or when the testator dies?

Juan Antunez — Mon, 12 Dec 2011 20:15:24 -0500

Darian v. Weymouth, --- So.3d ----, 2011 WL 5554786 (Fla. 4th DCA Nov 16, 2011)

James Hughes and Martha Mayfield were married in 1999. They both had children from prior marriages. Prior to getting married, they entered into a prenuptial agreement. The terms of that prenuptial agreement may or may not have addressed testamentary gifts. The 4th DCA doesn't tell us. Anyway, Mr. Hughes subsequently executed a revocable trust that richly provided for Mrs. Hughes. According to the 4th DCA:

Upon his death, Martha would receive the family home in Florida, the country home in North Carolina, a sum of one million dollars, the contents of the residences, and various other items of personal property.

The couple was tragically murdered on September 3, 2004 by Thomas Kleingartner, Mrs. Hughes's adopted son from a prior marriage. Both died as a result of gunshot wounds to the head. Click here, here and here for more on this terrible crime and the ensuing criminal trial.

Because the coroner was unable to determine which spouse predeceased the other, pursuant to F.S. 732.601(1) the probate court deemed their deaths to be simultaneous and entered an order to that effect in the probate of Mr. Hughes' estate. Accordingly, Mr. Hughes' property was to be disposed of as if he survived Mrs. Hughes.

The order of death wouldn't have mattered in this case if F.S. 736.1106(2) had applied (the antilapse statute applicable to Florida trusts). Under that statute, Mrs. Hughes' heirs would have inherited her share of Mr. Hughes' estate, regardless of who survived who. However, this particular trust fell between the cracks of Florida's current and prior antilapse statute, thus the much harsher common law rule applied.

First, we note that the common law controls this case. Section 736.1106(2), Florida Statutes, Florida's antilapse statute, applies only to trusts which became irrevocable on or after July 1, 2009. Section 737.6035(2)(c), Florida Statutes, Florida's previous antilapse statute, applied only to trusts executed on or after June 12, 2003. The James E. Hughes Living Trust was executed in August of 2000 and became irrevocable in September of 2004. Thus, neither statute controls.

At common law, lapse occurs when the beneficiary or the devisee under the trust predeceases the grantor, invalidating the gift. The gift would instead revert to the residuary estate or be granted under the law of intestate succession. Bottom line, Mrs. Hughes' heirs get nothing under the common law rule.

Mrs. Hughes heirs tried to salvage their claim to Mr. Hughes' estate by claiming that her share of Mr. Hughes' revocable trust had somehow vested at the time Mr. Hughes executed the document. There was a lot of money at stake here, so you can see why Mrs. Hughes' heirs would take a shot at making this argument . . . and at the trial court level it actually worked!? Not surprisingly, the 4th DCA saw things differently and reversed, again leaving Mrs. Hughes' heirs with nothing.

In Florida, the creation of a living trust, standing alone, is not an event which vests the interests provided by a trust agreement. Travis et. Al. v. Ashton et al., 156 Fla. 529, 23 So.2d 725, 727 (Fla.1945) (holding that beneficiary of trust deed who predeceased grantors did not receive a vested interest at time of trust creation. Where element of futurity was annexed to substance of gift rather than enjoyment of it, vesting was suspended and the gift was “contingent .”); Brundage v. Bank of Am., 996 So.2d 877, 882 (Fla. 4th DCA 2008) (stating that the settlor of a revocable trust, of which he is the sole beneficiary until death, may change or revoke the trust at any time); Fla. Nat'l. Bank of Palm Beach Cty. v. Genova, 460 So.2d 895, 897 (Fla.1984) (stating that beneficiaries of revocable living trust do not come into possession of trust property until the death of the settlor, and even then their interest is contingent upon the settlor not exercising the power to revoke). A beneficiary's interest in a trust vests upon the death of the settlor. Sorrels v. McNally, 89 Fla. 457, 105 So. 106, 107 (Fla.1925).

In this case, no sufficient event existed to vest Mrs. Hughes' interest in the Trust prior to her husband's death. In Travis, the Florida Supreme Court held that an intended beneficiary's interest is suspended during the life of the grantor. 23 So.2d at 726. The intended beneficiary's interest lapses should the beneficiary predecease the grantor. Id. Mr. Hughes was the sole trustee and beneficiary under the Trust during his life. Mrs. Hughes was among the contingent residual beneficiaries whose interest came into creation only upon the death of Mr. Hughes and who were entitled to distribution of the then remaining corpus of the trust. Because it was judicially determined that Mrs. Hughes predeceased her husband, her interest in the Trust lapsed upon her death.

Lesson learned?

When a couple dies in a car accident or due to some other tragic event, it can be very difficult, perhaps impossible, to determine who died first, since they both died within moments of each other. It usually doesn't matter. In this case, it mattered big time for Mrs. Hughes' heirs. If they knew then what they know now, Mrs. Hughes' heirs might have pushed the coroner a little harder to make a call on who died first, or maybe hired their own independent expert to make the determination. Coroner and medical examiner offices have been especially hard hit by budget cuts; you don't have to accept their conclusions as gospel [click here]. In hindsight, the 2004 coroner's report in this case, which was probably viewed as a non-event at the time, was outcome determinative. No one said practicing law was easy.