Florida Probate & Trust Litigation Blog

2d DCA: Employing beneficiaries as service providers to boost access to trust funds

Juan Antunez — Mon, 08 Feb 2010 10:56:10 -0500

Burgess v. Prince, --- So.3d ----, 2010 WL 199422 (Fla. 2d DCA Jan. 22, 2010)

Access to trust funds is usually a zero-sum game: If I pay trust funds to one party, there's less money for everyone else. We usually think of this problem in terms of conflicting claims amongst trust beneficiaries: if I pay $$ to beneficiary "A," there's less $$ for beneficiary "B."

So how can I boost payments to beneficiary A without diminishing beneficiary B's share of the trust? One option is to "grow the pie," so there's more to go around for everyone [click here]. Another option is to pay beneficiary A to do some of the trust-administration work being done by third parties. As long as beneficary A can do the job, this transaction is a wash as far as beneficiary B is concerned. So why not "keep the money in the family" by paying a trust beneficiary - rather than an unrelated third party - to do the work? Professionals who take the time to understand this opportunity can become heroes to their trust-beneficiary clients. The linked-to opinion is an example of this second option in action.

Trust beneficiary as Business Manager:

In the linked-to opinion the trust owned Salt Creek Art Works, a large art studio and gallery. One of the trust's beneficiaries was serving as trustee of the trust and business manager for Salt Creek Art Works. The trust agreement provided that a beneficiary may not receive compensation for serving as trustee, but there was nothing stopping her from getting paid for the work she did as business manager. In fact, the trust agreement specifically authorized a trustee/beneficiary to hire herself to do any work the trust required.

When the trustee/beneficiary was removed as trustee she was also stripped of her business-manager fees. On appeal the 2d DCA reversed this ruling by simply applying the clear text of the trust agreement.

Section 6.2 of the Trust provides that a beneficiary may not receive compensation for serving as Trustee:

Any Trustee, whether an individual or corporate trustee, who may serve under the Trust shall be entitled to receive compensation for its services as Trustee in accordance with its schedule of rates in effect at the time the services are rendered, including minimum fees and additional compensation for special investment and interests in a closely-held business. Any Trustee who is also a beneficiary under the Trust shall serve without compensation.

(Emphasis added.) Our record demonstrates, however, that Ms. Burgess did not receive compensation for her service as Trustee. Rather, she received a modest monthly payment from the Trust for operating the ongoing business of Salt Creek Art Works. The payments she received were not contrary to the terms of the Trust. Indeed, the Trust allows compensation to a Trustee serving in other capacities. Section 6.4 empowers the Trustee:

[T]o employ accountants, actuaries, appraisers, attorneys, brokers, building contractors, custodians, investment managers, realtors, and other agents including any Trustee, if such employment be deemed necessary or desirable and to pay reasonable compensation for their services without diminution of any fiduciary's commissions....

(Emphasis added.)

Finally, section 6.5 allows the Trustee to compensate a beneficiary for business management duties:

To determine in his or her discretion the manner and extent of his or her active participation in the business, and to delegate all or any part of his or her power to supervise and operate to such person or persons as he or she may select, including any associate, partner, officer or employee of the business.

To hire and discharge officers and employees, fix their compensation and define their duties; and to employ, compensate and discharge agents, attorneys, consultants, accountants and such other representatives as the Trustee may deem appropriate; including the right to employ any beneficiary or individual fiduciary in any capacity.

(Emphasis added.)

Relying on the plain language of the Trust document, we must conclude that the trial court erred in ruling that Ms. Burgess could not be compensated for managing Salt Creek Art Works.

Florida's Statutory Fix: Race To Clean Up Congress' Estate Tax Mess

Juan Antunez — Thu, 04 Feb 2010 15:52:27 -0500

As reported by Forbes in States Race To Clean Up Congress' Estate Tax Mess, several states - including Florida - aren't waiting around for Congress to get its act together on the estate tax front.

While Congress dilly dallies, the states are racing to come to the aid of families whose estate plans have been thrown into disarray by the Jan. 1 lapse of the federal estate tax. That lapse could, among other things, lead to the unintended disinheritance of spouses, which could in turn lead to expensive legal fights among family members and, ultimately, the impoverishment of some widows or widowers. It could also, ironically, force some families to pay extra state estate taxes.

Legislators in a handful of states, led by Virginia [click here], have already introduced legislation to try to head off such bad results. Virginia's House of Delegates passed its "emergency" bill unanimously Tuesday and the state's Senate is expected to take it up immediately [click here]. Similar bills are pending in Maryland, Nebraska, South Dakota, Tennessee and Washington. Other states, including Florida and New York, have somewhat different legislation pending.

By the way, Forbes has a very cool interactive map showing state-level estate tax laws for 2010 [click here].

Florida's Statutory Fix

At this year's Heckerling conference one of the giants of the Florida trusts and estates bar, Bruce Stone, reported on Florida's statutory fix in an excellent presentation entitled The Clock Struck Midnight: Now What Do We Do? There's a separate statute applicable for wills and trusts. Substantively, they're identical and both are provided in Bruce's materials. The following is the proposed trust-code provision:

The following is a draft as of noon Monday, January 18, 2010, of a statute to be proposed for adoption in Florida, addressing the uncertainties and potential liabilities of fiduciaries caused by repeal of the estate and generation-skipping transfer taxes. The proposed statute may be submitted to the Florida legislature for its regular session which convenes on March 2, 2010.

Section I - section 736.04114 shall be created as follows:

736.04114 Limited judicial construction of irrevocable trust with federal tax provisions.--

(1) Upon the application of a trustee or any qualified beneficiary of a trust, a court at any time may construe the terms of a trust that is not then revocable to define the respective shares or determine beneficiaries, in accordance with the intention of the settlor, if a transfer occurs during the applicable period and the trust contains a provision that:

(a) includes a formula devise referring to the "unified credit", "estate tax exemption," "applicable exemption amount," "applicable credit amount," "applicable exclusion amount," "generation-skipping transfer tax exemption," "GST exemption," "marital deduction," "maximum marital deduction," or "unlimited marital deduction;"

(b) measures a share of a trust based on the amount that can pass free of federal estate tax or the amount that can pass free of federal generation-skipping transfer tax;

(c) otherwise makes a devise referring to a charitable deduction, marital deduction, or a similar provision of federal estate tax or generation-skipping transfer tax law; or

(d) appears to be intended to reduce or minimize federal estate tax or generation skipping transfer tax.

(2) For the purpose of this section:

(a) "applicable period" means a period beginning January 1, 2010 and ending on the earlier of (i) December 31, 2010, or (ii) the date that an act becomes law that repeals or otherwise modifies or has the effect of repealing or modifying Section 901 of The Economic Growth and Tax Relief Reconciliation Act of2001.

(b) a "transfer occurs" when an interest takes effect in possession or enjoyment.

(3) In construing the trust, the court shall consider the terms and purposes of the trust, the facts and circumstances surrounding the creation of the trust, and the settlor's probable intent. In determining the settlor's probable intent, the court may consider evidence relevant to the settlor's intent even though the evidence contradicts an apparent plain meaning of the trust instrument.

(4) This section does not apply to a transfer that is specifically conditioned upon no federal estate or generation skipping transfer tax being imposed at the time of the transfer.

(5) Unless otherwise ordered by the court, during the applicable period and without court order, the trustee administering a trust containing one or more provisions described in subsection (1) may (a) delay or refrain from making any distribution, (b) incur and pay fees and costs reasonably necessary to determine its duties and obligations (including compliance with provisions of existing and reasonably anticipated future federal tax laws), and (c) establish and maintain reserves for the payment of these fees and costs and federal taxes. The trustee shall not be liable for its actions as provided in this subsection made or taken in good faith.

(6) The provisions of this section are in addition to, and not in derogation of rights under the Florida Trust Code or the common law to construe a trust.

5th DCA: Will voluntary financial disclosure - if inaccurate or fraudulent - invalidate a prenuptial agreement dealing solely with inheritance rights?

Juan Antunez — Tue, 02 Feb 2010 20:55:45 -0500

Foster v. Estate of Gomes, --- So.3d ----, 2010 WL 322170 (Fla. 5th DCA Jan. 29, 2010)

Prenuptial agreements limiting themselves solely to spousal inheritance rights are governed by F.S. § 732.702. All other prenuptial agreements are governed by the more burdensome requirements of Florida's Premarital Agreement Act, found at F.S. § 61.079.

Generally speaking, inheritance-rights prenup's are a whole lot simpler to draft, less costly for clients, and easier to enforce. Why? One big reason is that these agreements (if executed prior to the marriage) don't require prospective spouses to go through all of the financial disclosure normally needed to make prenup's governed by Florida's Premarital Agreement Act stick. This distinction is often lost on attorneys used to litigating prenup's in divorce proceedings, and was at the heart of the court's ruling in the linked-to opinion.

Prior to their marriage, Lora Foster and Edward Gomes entered into an antenuptial agreement in which Ms. Foster waived all right to Mr. Gomes's property, including her right to an elective share. Although not required by Florida law, Mr. Gomes disclosed the bulk of his assets when they entered the agreement, omitting one asset valued at approximately $10,000.

* * *

Florida law does not require prior disclosure of assets for an antenuptial agreement. § 732.702(2). Recognizing this, Appellant argues that a disclosure, once made, albeit voluntarily, if inaccurate or fraudulent, invalidates the antenuptial agreement, citing Stregack v. Moldofsky, 474 So.2d 206 (Fla.1985) (Ehrlich, J., dissenting). Unfortunately for Appellant, that dissenting opinion has not garnered a consensus either within the Florida Legislature or Florida courts. We prefer, instead, to rely upon the binding majority opinion which stated, “[n]ondisclosure, whether fraudulent or not, is precisely what the legislature intended to eliminate from consideration on the validity of antenuptial agreements.” Stregack, 474 So.2d at 207. In so holding, the law continues to accommodate the desires of older Florida residents to marry again without risking an unwanted disposition of a lifetime's assets due to a partial disclosure. See id.

3d DCA: Can "buyer's remorse" get a probate litigant out of a settlement agreement?

Juan Antunez — Mon, 01 Feb 2010 19:07:49 -0500

Rachid v. Perez, --- So.3d ----, 2010 WL 173776 (Fla. 3d DCA Jan 20, 2010)

We've all been there: you've been locked in mediation for hours and an unreasonable/ irrational litigant refuses to settle, even if - given the risks and benefits - it's plain to everyone that he ought to accept the settlement offer on the table. The linked-to case addresses this type of situation.

Since most working probate lawyers will find themselves on both sides of this conundrum at one point or another in their career, I thought the best way to think about this case was from both perspectives.

Scenario 1: What if I represent the side that refuses to settle, no matter how reasonable the offer?

No matter how frustrating this situation may be, you have to fight the temptation to subtly "lean" on your client until he accepts a deal you know - without question - is in his best interest. When the dust settles and your unhappy client re-reads the settlement agreement he never really wanted to sign in the first place, you may find yourself on the receiving end of a malpractice lawsuit. Based on the following excerpt from the linked-to opinion, it looks like that's where this case may be headed:

Here, Rachid does not claim that any party misled or induced her to enter into the settlement agreement. Rather, she contends that her attorney misled or induced her.

Blogger and mediator Victoria Pynchon expands here on the likely consequences of those cases where a litigant believes his lawyer "mislead or induced" him to accept a settlement offer.

Here's the bad news. If a litigant is unhappy with the outcome of mediation, he or she is far more likely to bring a complaint (or lawsuit) against his or her own attorney.

In a 2006 article in the Ohio Journal on Dispute Resolution TAKE IT OR LEAVE IT. LUMP IT OR GRIEVE IT: DESIGNING MEDIATOR COMPLAINT SYSTEMS THAT PROTECT MEDIATORS, UNHAPPY PARTIES, ATTORNEYS, COURTS, THE PROCESS, AND THE FIELD Paula M. Young, Assistant Professor at the Appalachian School of Law cites Mel Rubin on "settle and sue" cases which Rubin suggests are on the rise among clients unhappy with the outcome of a mediation. Rubin "also suggests that if a client is unhappy with the outcome of mediation, he or she is more likely to sue his or her attorney for malpractice. Id.

The gist of Victoria's advise - which I agree with - is to make sure your client feels he was treated fairly in mediation, that he wasn't "ganged up on" by the mediator (or you), and that he walks away feeling he was ultimately in control of the final outcome. To that advice I would add: if you think your client is being irrational, the right thing to do may be to tell him to find a new lawyer. As the 3d DCA pointed out not too long ago in a case involving an out-of-control probate litigant, “'just say no' applies to some clients and matters, just as to drugs" [click here].

Scenario 2: What if I represent the side that's trying to enforce a settlement agreement?

If you're counsel for the good guy, the last thing you want is protracted litigation to enforce a settlement agreement. To nip this sort of challenge in the bud, you'll want to point the other side to the linked-to opinion and let him or her know that in the absence of truly outrageous circumstances, Florida law forces litigants to live with the deals they've struck . . . no matter how badly they may be suffering from buyer's remorse.

First, Rachid's burden when seeking rescission of a settlement agreement on this legal theory is a particularly difficult one. See Tilden Groves, 816 So.2d at 660 (“[C]ases settled in mediation are especially unsuited for the liberal application of a rule allowing rescission of a settlement agreement based on unilateral mistake.”); see also Sponga v. Warro, 698 So.2d 621, 625 (Fla. 5th DCA 1997).

Second, Rachid's argument is without merit as the record does not support the legal remedy of rescission on the basis that the settlement agreement was the product of a unilateral mistake. Under Florida law, the party seeking rescission based on unilateral mistake must establish that:

(1) the mistake was induced by the party seeking to benefit from the mistake, (2) there is no negligence or want of due care on the part of the party seeking a return to the status quo, (3) denial of release from the agreement would be inequitable, and (4) the position of the opposing party has not so changed that granting the relief would be unjust.

Lechuga v. Flanigan's Enters., Inc., 533 So.2d 856, 857 (Fla. 3d DCA 1988). Here, Rachid does not claim that any party misled or induced her to enter into the settlement agreement. Rather, she contends that her attorney misled or induced her. Thus, her claim fails as a matter of law. Rachid also cannot demonstrate that there was “no negligence or want of due care” on her part because she had an obligation to read and know the legal parameters regarding the validity and application of the prenuptial agreement prior to mediation. Leff v. Ecker, 972 So.2d 965 (Fla. 3d DCA 2007) (holding that where the plaintiff entered into a mediated settlement agreement with a limited knowledge of the relevant facts, the plaintiff bore the risk of mistake). Additionally, Rachid was represented by counsel at mediation, and she failed to demonstrate that denial of rescission would be inequitable or that granting relief would be unjust. Thus, we conclude that even if Rachid had properly preserved her claim of unilateral mistake, on appellate review her claim would have failed on the merits.

We . . . address the argument that Rachid did raise-that there was no meeting of the minds. As to the trial court's rejection of this argument, we find no abuse of discretion. See Tanner v. Tanner, 975 So.2d 1190 (Fla. 1st DCA 2008) (holding that “ ‘[b]uyer's remorse’ is not a sufficient basis for overturning a marital settlement agreement freely and voluntarily entered into”); see also BMW of N. Am., Inc. v. Krathen, 471 So.2d 585 (Fla. 4th DCA 1985) (rejecting BMW's appeal to set aside a judgment based on BMW's failure to include a condition in its settlement offer). We therefore affirm the order under review.

Billionaire's Will Sparks Family Feud: Spousal Undue Influence?

Juan Antunez — Wed, 27 Jan 2010 16:19:18 -0500

The WSJ's Wealth Report Blog posted here on litigation swirling around the trust/estate of billionaire mall magnate Mel Simon. What I found especially interesting was the implication of possible undue influence by his surviving spouse, Bren Simon. Here's an excerpt:

Months before he died of cancer last September, billionaire mall magnate Mel Simon made some big changes to his will.

The changes boosted the share of his fortune left to his wife, Bren Simon. Originally she was to get a third. After the changes, she was to half.

The changes also cut out Melvin’s three children from his first marriage—Deborah, David Simon and Cynthia Simon-Skjodt—and left charitable giving to Bren’s discretion. The earlier will earmarked one-third of the estate for charity.

Mr. Simon’s estate is valued at somewhere from $1 billion to $2 billion, and it has increased since his death since the stock in the company he founded–Simon Property Group–has rebounded.

The changes to the will sparked an escalating Simon-family feud, as this Chicago Tribune article lays out.. Mr. Simon’s daughter Deborah is suing her stepmom, Bren Simon, alleging she persuaded Mel Simon to change his will to reduce the children’s inheritances. The suit claims her dad was suffering from dementia at the time and needed help signing the document.

Now, Bren Simon’s latest court filing [click here] says Mr. Simon “voluntarily and of his own free will signed a valid will and trust in February.” She acknowledges that Mr. Simon needed help with his signature, but said Parkinson’s symptoms in his right hand were to blame.

Spousal Undue Influence Claims in Florida:

I have no idea what the law is on spousal undue-influence claims in Indiana (where Mr. Simon's estate is being litigated), but in Florida they're very tough to prove. For starters, you can't rely on the "confidential relationship" between spouses to trigger the presumption of undue influence. There's a solid, common sense reason for this rule: in its absence every will benefiting a spouse could potentially be challenged on undue influence grounds. Here's how the 3d DCA explained Florida's approach in Tarsagian v. Watt, 402 So.2d 471 (Fla. 3d DCA 1981):

The holding of Goertner v. Gardiner, 125 Fla. 477, 170 So. 112, reh. den., 126 Fla. 412, 170 So. 844 (1936), that the confidential relationship which exists between a husband and wife is not one which may be considered in the law governing will contests, accord, In re Estate of Knight, 108 So.2d 629 (Fla. 1st DCA 1959), is, in our view, still extant. Since a confidential relationship is one necessary requirement which must be met before a presumption of undue influence arises, under Goertner the presumption cannot arise in the case of a husband and wife. Were the confidential relationship between spouses not exempted from that presumption of undue influence rule, the presumption would arise in nearly every case in which the spouse is a substantial beneficiary, since the required active procurement would almost always be present. One would naturally expect to find a spouse to be present at the execution of the will, present when the testator expresses a desire to make a will, knowledgeable about the contents of the will prior to its execution, involved in its safekeeping, and perhaps even involved in the recommendation of an attorney-preparer and consultation with an attorney-preparer. These, of course, are among the criteria for determining if one is engaged in active procurement. See In re Estate of Carpenter, supra.

On the other hand, I don't think this means a spousal undue influence claim is impossible in Florida; you just can rely on the presumption. Instead, you'll need to prove your case directly. A case that suggests a finding of undue influence against a surviving spouse, although not based on a presumption, is In re Auerbacher's Estate, 41 So.2d 659 (Fla. 1949).

But what if the marriage itself is procured by fraud, undue influence, or duress?

By the way, if someone is intent on preying upon another's wealth, the best way to go about doing it isn’t mucking around with estate planning documents, it’s marrying the guy. The mother of all inter-spousal estate grabs is the marriage itself. Once you’re hitched, you’re automatically entitled to all sorts of goodies as a surviving spouse, no matter what the estate planning documents may say.

This is where we hit a brick wall in Florida: the current state of the law seems to be that marriages procured by fraud, undue influence or duress can’t be challenged after a person’s death. Click here for an excellent white paper prepared by über probate litigator William (“Bill”) T. Hennessey and his team over at Gunster summarizing Florida law on this issue and a proposed legislative fix. Here’s an excerpt:

The mere status of surviving spouse affords a myriad of significant financial benefits under Florida law, including the right to homestead property (at least a life estate in the decedent's homestead residence), an' elective share (30% of the decedent's augmented elective estate), to take as a pretermitted spouse (up to 100% of the estate under the laws of intestacy), family allowance, exempt property, and priority in preference in selecting a personal representative. In addition, Florida courts have held that a presumption of undue influence in a will contest "cannot arise in the case of a husband and wife" because the requirement of active procurement would almost always be present. Jacobs v. Vaillancourt, 634 So. 2d 667, 672 (Fla. 2d DCA 1994); Tarsagian v. Wall, 402 So. 2d 471, 472 (Fla. 3d DCA 1981).

Most of these benefits are well deserved. It has often been said that Florida has a strong public policy in favor of protecting a decedent's surviving spouse. See, e.g., Via v. Putnam, 656 So. 2d 460, 462 (Fla. 1995). However, what happens when a marriage is procured by undue influence, fraud or exploitation? Is Florida's public policy furthered, in such an instance? This report will discuss the current state of Florida law on the ability to challenge the validity of a marriage after the death of one of the parties to the marriage. It will also examine how other states have addressed this issue.
. . . . .

In sum, Florida follows the common law and majority rule which only allows void marriages to be challenged after death. In most instances, Florida courts have held that marriages procured by fraud, duress, and undue influence are merely voidable, affording potential heirs no ability to challenge a marriage after death. Given the extensive rights available to a surviving spouse, a wrongdoer can profit significantly by simply inducing or influencing an elderly person to enter into a marriage. The Subcommittee recommends that the full committee consider and discuss legislation to address this issue.

Just out: International Succession

Juan Antunez — Mon, 25 Jan 2010 11:55:32 -0500

I recently worked with one of my partners, Michele A. Maracini, on drafting the "Florida Chapter" of the newly released International Succession, published by Oxford University Press [click here].

I'm of course biased, but I'm proud of the final product and think it's the kind of international resource more and more U.S. trusts and estates lawyers will need to turn to over the coming years. If your practice has an international flavor, this resource is a good investment. Here's how the publisher described it:

Increasing numbers of people have connections with one country, but live and work in another, frequently owning property or investments in several countries. As such, international aspects arise in an increasing number of estates. Different countries may have separate arrangements for ownership, taxation, and succession. International Succession equips practitioners with the information necessary to navigate problems involving these different systems.

Although lawyers would often advise only on the law of the jurisdictions in which they are based, seeking advice from lawyers in other countries, this book will save the practitioner the time - and expense - of ascertaining the basics concerning the inheritance systems in different countries, offering clear and easy to use information on the laws of inheritance and succession.

Each country's report is based on responses to a comprehensive questionnaire that considers the practical issues arising from the jurisdiction's individual laws, making it easy for users to make specific comparisons between the laws of one country and another. The book covers over fifty countries with entries written by experts from each country, making it an invaluable resource for the busy practitioner.

This title is an improved and expanded version of International Succession , edited by Louis Garb and published by Kluwer Law International, 2004. This edition, published in hardback form, will also be supplemented annually in between editions to update the individual country entries.

Features

Provides a comprehensive survey of succession laws in over fifty countries

Enables easy cross-referencing with a questionnaire format for each country

Considers the practical issues arising out of inheritance across multiple jurisdictions

Supplemented annually in between editions to keep existing country entries fully up-to-date and include a selection of new countries

Entries written by experienced practitioners in the relevant jurisdiction around the world

3d DCA: When will an appellate court reverse a probate judge on a pure fact question?

Juan Antunez — Tue, 19 Jan 2010 15:24:12 -0500

Estate of Madrigal v. Madrigal, --- So.3d ----, 2009 WL 4061747 (Fla. 3d DCA Nov 25, 2009)

I recently wrote here about the "Undue Influence Worksheet," a tool for probate litigators and their clients to organize their thinking and zero in on the key evidence determining the outcome of their undue influence case. Why is this so important? Because when it comes to pure fact questions, such as whether your client did or did not unduly influence the testator, expect you'll only get one shot at winning your case: at trial. As the linked-to case makes clear, it doesn't matter if a panel of appellate judges would have called your case a different way, as long as your trial judge's factual determinations are supported by competent substantial evidence, that's it, game over: the trial judge's order stands.

In the instant case, following an evidentiary hearing, the trial court entered an order making specific findings of facts and concluding that the sole beneficiary procured the testator's last will and testament by undue influence. As the trial court's findings of fact are supported by competent, substantial evidence, and the findings of fact support the trial court's conclusion of undue influence, we affirm the order under review. See Estate of Brock, 692 So.2d 907, 913 (Fla. 1st DCA 1996) (“[O]ur scope of review requires us to accept the factual findings of the trial court so long as there is support for them by competent substantial evidence. It is axiomatic that the trial court's resolution of conflicting evidence will not be disturbed by a reviewing court in the absence of a clear showing of error, or that the conclusions reached are erroneous.”).

What's going on here is pretty basic to how our court system is supposed to work: trial judges decide fact issues, appellate judges decide legal issues. If your case turns on a pure fact issue, don't expect a "do over" on appeal. This division of labor was at the heart of the Florida Supreme Court's thinking when it articulated the competent-substantial-evidence standard in Shaw v. Shaw, 334 So.2d 13, 16 (Fla. 1976):

It is clear that the function of the trial court is to evaluate and weigh the testimony and evidence based upon its observation of the bearing, demeanor and credibility of the witnesses appearing in the cause. It is not the function of the appellate court to substitute its judgment for that of the trial court through re-evaluation of the testimony and evidence from the record on appeal before it. The test ... is whether the judgment of the trial court is supported by competent evidence. Subject to the appellate court's right to reject "inherently incredible and improbable testimony or evidence," it is not the prerogative of an appellate court, upon a de novo consideration of the record, to substitute its judgment for that of the trial court.

OK, you ask, so what's competent substantial evidence?

Here's how the phrase was broken down and defined by the 5th DCA in the context of a probate case in Lonergan v. Estate of Budahazi, 669 So.2d 1062, 1064 (Fla. 5th DCA 1996):

The term "competent substantial evidence" does not relate to the quality, character, convincing power, probative value or weight of the evidence but refers to the existence of some evidence (quantity) as to each essential element and as to the legality and admissibility of that evidence. Competency of evidence refers to its admissibility under legal rules of evidence. "Substantial" requires that there be some (more than a mere iota or scintilla), real, material, pertinent, and relevant evidence (as distinguished from ethereal, metaphysical, speculative or merely theoretical evidence or hypothetical possibilities) having definite probative value (that is, "tending to prove") as to each essential element of the offense charged.

If I'm a reasonably ascertainable creditor and the estate didn't give me notice, do I get a free pass for filing a late claim?

Juan Antunez — Mon, 11 Jan 2010 20:16:29 -0500

Morgenthau v. Estate of Andzel, --- So.3d ----, 2009 WL 5151741 (Fla. 1st DCA Dec 31, 2009)

I recently wrote here about Florida's ultra-short deadlines for filing creditor claims against probate estates and how they can be unforgiving traps for the unwary. These deadlines are scary because they can fly by without a creditor ever being the wiser.

But, some of you may ask, what about an estate's duty under F.S. 733.2121 to give "reasonably ascertainable" creditors actual notice of the filing deadline? If I'm a reasonably ascertainable creditor and the estate didn't give me notice, do I get a free pass? NO says the 1st DCA in the linked-to case above.

In this case the holder of an unpaid promissory note filed a creditor claim against the debtor's probate estate over a year after the estate first published its notice to creditors in a local newspaper. Clearly the creditor had blown past the generally applicable 3-month claims-filing deadline under F.S. 733.702. The creditor argued he shouldn't be bound to this deadline because he was a reasonably ascertainable creditor and the estate hadn't complied with its duty under F.S. 733.2121 to give him actual notice of the filing deadline.

Sorry, says the 1st DCA. Unless a creditor asks for an extension to file his claim (and "insufficient notice of the claims period" is one of the grounds for getting an extension), he's out of luck. Here's why:

Here, appellant filed a statement of claim past the three month filing window. As such, according to section 733.702(1), the claim was untimely as appellant did not receive actual notice of the claim and was, thus, a creditor who fell in the three month filing window following publication. See also Miller v. Estate of Baer, 837 So.2d 448, 449 (Fla. 4th DCA 2002) (holding creditors who do not receive actual notice have until the close of the three month publication window to file a claim regardless of whether creditor asserts it was entitled to actual notice).

Further, appellant did not file a motion for extension of time to file the claim or otherwise seek an extension. All Florida cases since [May v. Illinois Nat. Ins. Co., 771 So.2d 1143 (Fla.2000)] dealing with the forgiveness of a timeliness issue as to a creditor's claim where the creditor asserts he or she was a reasonably ascertainable creditor subject to actual notice reach the issue through review of the creditor's request for an extension, not through creditor's filing of a statement of claim. Faerber v. D.G., 928 So.2d 517, 518 (Fla. 2d DCA 2006) (reversing a trial court's grant of creditor/appellee's motion for extension of time to file a claim where no evidence was considered prior to the grant); Simpson v. Estate of Simpson, 922 So.2d 1027 (Fla. 5th DCA 2006) (reviewing trial court's denial of appellant's motion for extension of time based on the allegation he was a readily ascertainable creditor who should have received actual notice of decedent's death); Longmire v. Estate of Ruffin, 909 So.2d 443 (Fla. 4th DCA 2005) (same); Strulowitz, 839 So.2d 876 (same); Miller, 837 So.2d at 448-50 (same).

While the Statement of Claim listed facts upon which a probate court could grant an extension, the Statement of Claim did not request an extension. Further, at no point in either the initial brief or the reply brief does appellant argue his Statement of Claim should be converted or modified to be read as a motion requesting an extension of time. The proper procedural course for untimely claims is the filing of an extension request prior to the filing of a statement of claim. § 733.702(1)-(3), Fla. Stat. (2007). Under the plain language of the statute, once appellant's claim fell outside the three month claim period, regardless of his arguments for delay, his claim could only be considered after the probate court's grant of an extension. Because appellant chose to file only a Statement of Claim and never requested an extension of time to file that claim, the probate court was bound by the relevant statutes to deny the claim. § 733.702(1)-(3), Fla. Stat. (2007).

Florida Bar Real Property Probate and Trust Law Section is now accepting applications for the 2010 Fellowship class

Juan Antunez — Mon, 11 Jan 2010 13:00:19 -0500

The Florida Bar Real Property Probate and Trust Law Section is now accepting applications for the 2010 Fellowship class. The RPPTL Section Fellowship program, created in 2007, awards up to 4 fellowships to exceptional Florida attorneys interested in our practice areas. The Fellowship program allows these individuals to be substantially involved in the Section work, receive leadership training and work closely with leading Florida attorneys in their field.

Click here, here for a memo explaining the fellowship program and an application form.

The deadline for applications is April 1, 2010, so please pass this information on to anyone you know who might be interested as soon as possible. If you have any questions, please contact Tae Bronner, co-chair of the RPPTL Fellowship committee, at tae@estatelaw.com or 813-907-6643. The Fellowship memo and application can also be found on the section website at www.rpptl.org.

Powerful tool for probate litigators: Undue Influence Worksheet

Juan Antunez — Thu, 07 Jan 2010 12:30:30 -0500

The law governing undue influence claims in Florida is a frequent topic of discussion on this blog [click here, here, here, here]. But for those of us in the trenches, we know clever legal arguments rarely carry the day; these cases are won and lost on the strength of your evidence.

So here's the problem: there aren't many tools out there designed to help probate litigators and their clients organize their thinking and zero in on the key facts they'll need to build a winning case. One such tool I recently discovered is the Undue Influence Worksheet developed by forensic psychiatrist Bennett Blum, M.D. In this short article Dr. Blum explains the thinking underlying his worksheet:

The “Worksheet” is based upon the IDEAL protocol, which combines knowledge from the fields of psychiatry, psychology, and sociology regarding the mechanisms of human manipulation, with extensive review of statutes, case law, and legal theory. IDEAL describes those psychological and social factors that commonly co-exist in undue influence situations. These factors are: Isolation; Dependency; Emotional manipulation and/or Exploitation of a vulnerability; Acquiescence; and Loss.

Case Study:

When I'm teaching I find nothing beats a good case study for explaining new ideas. So I was happy to see Dr. Blum included the following case study in his article applying his Worksheet:

The following is a true case, although extreme in its clarity. The issue of undue influence is obvious, but the case is presented to help show how a fact pattern is considered within the IDEAL protocol:

Mr. Jones is an affluent, 88 year-old retired professor. His beloved wife of 60 years died two years ago, and since then he has been very lonely. Mr. Jones has a good and loving relationship with his three adult children, and though they live in other States he speaks with each every week. Mr. Jones moved to a retirement community four years earlier, and because of his wife’s illness and subsequent death, he has no significant social contacts in his current community. His long-time friends live several hundred miles away. Mr. Jones has multiple medical problems – diabetes, heart disease, high blood pressure, and difficulty walking due to arthritis – but has no apparent cognitive impairment.

Mr. Jones meets Ms. Smith, a 62 year-old divorced woman. She moves into his home six months later. She provides physical care in the form of preparing meals, cleaning the house, taking him to physician appointments, and ensuring he takes his medications properly. During the next six months, Ms. Smith begins asking for “tokens of appreciation” and purchases a new car, wardrobe, and jewelry with Mr. Jones’ money. She also demands that he give her his late wife’s jewelry, which he had intended to give to his grandchildren. At the same time, Mr. Jones stops telephoning his children, and they in turn find it more and more difficult to speak with him. Ms. Smith is now the only person to answer the telephone, and when the children call they often are told their father is unavailable or does not feel well enough to talk. Eventually, they are not allowed to speak to him at all. Two months later, after repeated angry exchanges with Ms. Smith, the eldest child receives a telephone message from Mr. Jones. In the message, Mr. Jones says, “She says I cannot call any of you anymore. If I do she will leave me and she says that at my age no one else will care for me, and that I will be alone. The same thing will happen if I stop giving her money. I know what she is doing, but I was so lonely after your mother died. I couldn’t bear to be that lonely again. I just hope that I can hold back enough money so she will stay until I die.” These were Mr. Jones’ last words to his children. He subsequently changed his estate plan – bequeathing everything to Ms. Smith.

Applying IDEAL to these facts:

Isolation – Mr. Jones’ children and friends live far away, he has no significant social contacts in his current living environment, his mobility is limited due to illness, Ms. Smith intercepts his telephone calls, and he is not allowed to talk to his children.

Dependency – Mr. Jones is emotionally dependent upon Ms. Smith, and she provides for his physical needs (food, cleaning, appointments, medicine).

Emotional manipulation/Exploiting a weakness – Ms. Smith threatens to abandon Mr. Jones using his fear of loneliness.

Acquiescence – Mr. Jones agrees to Ms. Smith’s demands because he is frightened of being lonely, dependent upon her, and isolated from other social contacts and family. As a result, he gives her money and property, and makes her the sole beneficiary of his estate.

Loss – Mr. Jones suffers financial losses because of Ms. Smith’s threats and coercion. In this case, although criminal charges might have been pursued in some jurisdictions (ex. for elder abuse), the issue of “loss” was used only to support civil litigation.

Caveats and Suggestions:

Although it may seem obvious – do not rely only upon the litigants for information. The “Undue Influence Worksheet” and IDEAL are more effective if there are corroborating statements and observations by 3rd-parties, circumstantial evidence, and/or self-incriminating statements by the litigants. A case may be argued without such corroboration, but the use of IDEAL would be quite limited.

If more sophisticated analysis is needed, an expert should be contacted for advice regarding the development of both general and specific manipulation tactics, their relative impact, and assessment of pertinent cognitive issues (note: impaired cognition is common, but is not essential). These topics require extensive individual attention, and will not be presented in this introductory article.

Also, be cautious when retaining an expert on the issues of manipulation or undue influence. These are specialized fields and very few people are actual experts. Unfortunately, many well-intentioned mental health professionals claim this expertise without knowing how much training and knowledge is necessary.

Some attorneys report successful use of IDEAL without employing associated experts. In these cases, the attorney uses the information obtained through IDEAL and the “Worksheet” to craft a powerful and compelling argument – for either settlement or trial.

1st DCA: Trap for the Unwary: Florida's ultra-short limitations periods for probate creditor claims

Juan Antunez — Thu, 31 Dec 2009 20:43:17 -0500

Mack v. Perri, --- So.3d ----, (Fla. 1st DCA Dec 22, 2009)

Plaintiffs suing estates often fail to realize that they're really litigating their claims in two separate courts in front of two separate judges:

The trial court adjudicating their lawsuit (this is where the estate's liability is established); and
The probate court administering the decedent's probate estate (this is where you go to collect if you win in the trial court).

What's scary about this dual-court approach is that it creates a huge trap for the unwary: you can spend years and a fortune in fees litigating claims against an estate in a trial court and never be the wiser to the fact that you've blown past one of the ultra-short limitations periods applicable in a probate court (733.702(1), 733.710(1)); which means no matter how spectacular your win might be at trial, you'll never be able to collect on your judgment in the probate court.

That's the trap the plaintiffs in the linked-to opinion apparently fell into. Here are the key dates/facts as summarized by the 1st DCA:

The decedent, George Watts, a physician, died on November 18, 2004. The first notice to creditors was published on May 14, 2005. On October 31, 2005, the Macks first filed their claims against the Estate based on alleged medical malpractice in connection with surgery Dr. Watts performed on Susan Mack's ankle. The Macks filed a malpractice action against the Estate on January 30, 2006. In February 2009, the Estate filed a petition in the probate court to limit the Macks' claim in the malpractice action to the proceeds of malpractice insurance, see section 733.702(4)(b), Florida Statutes (2005), and the Macks filed petitions seeking to strike the Estate's objections to their claims.

Wrapped up into that one short paragraph are three important takeaways for anyone involved in litigation against a Florida probate estate:

Lesson #1: Never, ever forget F.S. § 733.710(1): Florida's two-year non-claim statute:

In the linked-to case the estate waited until February 2009, almost five years after the decedent died, to spring its trap on the unsuspecting plaintiffs. By then the two-year non-claim period for the estate had clearly run making it impossible for the plaintiffs to get the extension needed to preserve their claim against the probate estate. Here's how the 1st DCA explained this point:

We agree with the trial court that the Macks' claims against the estate are barred by sections 733.702(1)(3), and 733.710(1), Florida Statutes (2005). The Macks' claims were filed more than three months from the date the notice to creditors was first published. See § 733.702(1). Further, the Macks did not file a request for an extension of time under section 733.702(3) until after the running of the two-year non-claim period in section 733.710(1). As the Supreme Court held in May v. Illinois National Insurance Company, 771 So.2d 1143, 1157 (Fla.2000), “section 733 .710 is a jurisdictional statute of nonclaim that automatically bars untimely claims and is not subject to waiver or extension in the probate proceeding.” The May court explained that this statute “represents a decision by the legislature that 2 years from the date of death is the outside time limit to which a decedent's estate in Florida should be exposed by claims on the decedent's assets.” Id. (quoting Comerica Bank & Trust, F.S.B. v. SDI Operating Partners, L.P., 673 So.2d 163, 167 (Fla. 4th DCA 1996)). Here, the Macks' claims were untimely filed under section 733.702(1). Although section 733.702(3) provides for an extension, the claim and motion for an extension must be filed before the operation of the two-year non-claim provision. May, 771 So.2d at 1157.

Lesson #2: Never say never: Florida's two-year non-claim statute doesn't bar ALL claims:

Even if you blow past the two-year mark for perfecting your claim against a probate estate, all may not be lost. In the linked-to case the estate recognized that even though the plaintiffs were barred by F.S. § 733.710(1) from asserting claims against the decedent's probate estate, the decedent's malpractice insurance was still fair game under F.S. § 733.702(4), which provides as follows:

(4) Nothing in this section affects or prevents:

(a) A proceeding to enforce any mortgage, security interest, or other lien on property of the decedent.

(b) To the limits of casualty insurance protection only, any proceeding to establish liability that is protected by the casualty insurance.

(c) The filing of a cross-claim or counterclaim against the estate in an action instituted by the estate; however, no recovery on a cross-claim or counterclaim shall exceed the estate's recovery in that action.

Lesson #3: The clock starts ticking as soon as the first notice to creditors is published:

Under F.S. § 733.702 creditors have three months after the notice of creditors is fist published to file their claims. But F.S. § 733.2121 says publication "shall be once a week for 2 consecutive weeks." So when does the "publication" clock start ticking? After the first or second week? The plaintiffs tried to salvage their claim by arguing for week two. Nice try, but no cigar says the 1st DCA:

We also reject the Macks' assertion that their claim was timely filed when measured from the date of publication of a second notice to creditors by the estate. The time period under section 733.702(1) runs from “the time of the first publication of the notice to creditors.” As the Supreme Court held in Estate of Williamson v. Murphy, 95 So.2d 244, 247 (Fla.1957), a second publication will be deemed “unnecessary surplusage” which has no “affect [on] the validity or effectiveness of the first notice published.”

"The Will: Family Secrets Revealed": Death is only the beginning of new cable series

Juan Antunez — Wed, 30 Dec 2009 13:07:56 -0500

Celebrity probate litigation is never boring, which explains why there's always lots of good stuff out there to write about [click here, here, here], and why a new probate blog out of Michigan, The Probate Lawyer Blog, by author and probate litigator Andrew Mayoras, is all about celebrity probate litigation, all the time [click here].

So it shouldn't come as a surprise that a probate battle involving pseudo celebrity "Leopard Lady" Kitty Tipton-Oakes, widow of jazz musician Billy Tipton, was picked for the pilot program of a new cable series called "The Will: Family Secrets Revealed." I didn't see the episode, but TV critic Linda Stasi gave it rave reviews in the New York Post [click here]. Ms. Stasi's one complaint: "As evidenced by the media feeding frenzy over the estate of Brooke Astor, it's just shocking that it took this long for a network to come up with an idea this juicy."

And for all you probate lawyers out there looking for your 15 minutes of fame, take heart, the show's producers are actively looking for more war stories to share with the rest of us, give them a call [click here].

Probate Litigators Need to Know about the New IRS Regulations under Section 2053 Governing Estate Tax Deductions for Administration Expenses and Claims Against Estates

Juan Antunez — Thu, 24 Dec 2009 10:08:47 -0500

At a top current rate of 45%, the federal estate tax automatically makes the IRS the single largest creditor of most large estates. If the estate tax is looming in the background it's imperative that every decision made by the parties and their lawyers with respect to how they characterize and prosecute their trust/probate claims be considered against this backdrop. I recently presented a national NBI seminar on this very same topic [click here].

At long last probate litigators and their clients have clearer guidance from the IRS on exactly how to make sure they maximize the tax-deduction benefits of estate litigation. The IRS has issued final regulations under IRC § 2053 governing estate tax deductions for administration expenses and claims against estates. Click here for a link to the new reg’s, which became effective on October 20, 2009.

In its background summary for the new reg's [click here] the IRS explained its thinking for why they were needed:

The amount an estate may deduct for claims against the estate has been a highly litigious issue. See the Background in the notice of proposed rulemaking published in the Federal Register on April 23, 2007 (REG-143316-03, 2007-1 C.B. 1292 [72 FR 20080]). Unlike section 2031, section 2053(a) does not contain a specific directive to value a deductible claim at its value at the time of the decedent’s death. Section 2053 specifically contemplates expenses such as funeral and administration expenses, which are only determinable after the decedent’s death.

The lack of consistency in the case law has resulted in different estate tax treatment of estates that are similarly situated, depending only upon the jurisdiction in which the executor resides. The Treasury Department and the IRS believe that similarly-situated estates should be treated consistently by having section 2053(a)(3) construed and applied in the same way in all jurisdictions.

Accordingly, in an effort to further the goal of effective and fair administration of the tax laws, the Treasury Department and the IRS published proposed regulations in the Federal Register on April 23, 2007. In formulating the proposed rule, the Treasury Department and the IRS carefully considered: the statutory framework and legislative history of section 2053 and its predecessors; the existing regulatory provisions under section 2053, particularly those that are generally applicable to all amounts deductible under section 2053; the numerous judicial decisions involving an issue under section 2053(a)(3) and the analysis and conclusion in each; and, the practical consequences of various possible alternatives for determining the amount deductible under section 2053(a)(3).

To help us make sense of it all estate-tax gurus Steve R. Akers and Jonathan G. Blattmachr/Mitchell M. Gans published excellent materials pointing out opportunities and pitfalls built into the new reg's for practitioners and clients alike [click here, here].

3dDCA: Default judgements as discovery sanction in probate litigation

Juan Antunez — Mon, 21 Dec 2009 21:43:27 -0500

Buroz-Henriquez v. De Buroz, --- So.3d ----, 2009 WL 3271354 (Fla. 3d DCA Oct 14, 2009)

It's not unusual in probate litigation for parties to underestimate the importance of complying with discovery deadlines. However, this frustrating fact of life is also an opportunity: I recently won a case simply by obtaining an ex parte order compelling a recalcitrant will-challenger to respond to my pending discovery requests. For reasons that remain unclear to me, this bit of pressure was enough to get this guy out of the case: he voluntarily withdrew his claim with prejudice in lieu of complying with my discovery order. The basis for my order was a local rule applicable in Miami (Admin. Order 06-09), but the underlying authority should be applicable anywhere in Florida.

In the linked-to case the winning side used a discovery-sanctions order to not only default the sitting personal representative out the estate, they also walked away with an order compelling the estate to pay $25,875 in attorneys fees. All that just because the losing side couldn't get its act together when it came to responding to discovery deadlines.

Lesson learned? Use an opponent's recalcitrance to your advantage. Push him to respond to discovery deadlines by relying on the kind of authority cited in Admin. Order 06-09; and once you've got your first order -- follow the example of the winning side in the linked-to case: move for a default judgment and other sanctions if it's ignored.

In the linked-to opinion the 3d DCA explains what kind of findings need to be included in a probate judge's order defaulting an opponent out of a case as a discovery sanction. The order in this case didn't contain the necessary findings, so it got bounced back to the trial judge for a "do over."

It is well established that before a court may dismiss a cause or default a party as a sanction, it must first consider each of the following six factors set forth in Kozel v. Ostendorf, 629 So.2d 817, 818 (Fla.1993):

[1] whether the attorney's disobedience was willful, deliberate, or contumacious, rather than an act of neglect or inexperience; [2] whether the attorney has been previously sanctioned; [3] whether the client was personally involved in the act of disobedience; [4] whether the delay prejudiced the opposing party through undue expense, loss of evidence, or in some other fashion; [5] whether the attorney offered reasonable justification for noncompliance; and [6] whether the delay created significant problems of judicial administration.

Accord Ham v. Dunmire, 891 So.2d 492 (Fla.2004). Moreover, before a trial court enters the extreme sanction of dismissal or default, it must set forth explicit findings of fact in the order imposing the sanction. Alvarado v. Snow White & The Seven Dwarfs, Inc., 8 So.3d 388 (Fla. 3d DCA 2009) (reversing and remanding dismissal for findings on all six Kozel factors); Coconut Grove Playhouse, Inc. v. Knight-Ridder, Inc., 935 So.2d 597 (Fla. 3d DCA 2006) (quashing order tantamount to default and remanding for trial court to make express findings). “Express findings are required to ensure that the trial judge has consciously determined that the failure was more than a mistake, neglect, or inadvertence, and to assist the reviewing court to the extent the record is susceptible to more than one interpretation.” Ham, 891 So.2d at 496 (citing Commonwealth Fed. Savings & Loan Ass'n v. Tubero, 569 So.2d 1271, 1273 (Fla.1990)).

Because the order on appeal contains no findings of fact concerning any of the Kozel factors, we are compelled to reverse the order and remand for consideration of the Kozel factors. In doing so, we do not address the merits of the underlying claims for contempt and sanctions made by the appellee below. If, on remand, the trial court determines that, after considering the Kozel factors, sanctions of dismissal and/or default are appropriate, then the trial court shall include in its order findings of fact with respect to each factor. See Alvarado, 8 So.3d at 389.

4th DCA: What's a "cestui que trust" and can it sue my trustee client?!

Juan Antunez — Mon, 14 Dec 2009 20:07:08 -0500

Wells v. Wells, --- So.3d ----, 2009 WL 2949277 (Fla. 4th DCA Sep 16, 2009)

Florida's declaratory-judgment act (F.S. Chapter 86) is based on the Uniform Declaratory Judgment Act, which was finalized almost a hundred years ago in 1922 [click here]. The early 20th Century vintage of this statute explains why it uses archaic phrases rooted in medieval English jurisprudence, like cestui que trust, when the "Plain English" version of the phrase: "trust beneficiary", would do just as well (for more on the post-1970s "Plain English Movement" click here). For all you trusts-and-estates Geeks out there, click here for more on the etymology of "cestui que trust".

The Uniform Declaratory Judgment Act's use of obscure legalese (adopted without change by Florida) may also explain why the trial court judge in the linked-to case dismissed a claim for declaratory judgment filed by a trust beneficiary (i.e., a cestui que trust), when F.S. § 86.041 specifically authorizes a cestui que trust to file these sorts of claims. Anyway, we now have an appellate opinion confirming what should be an obvious point of statutory construction. Here's how the 4th DCA summed up its ruling:

Section 86.041, Florida Statutes (2007) provides, in part:

Any person interested as or through an executor, administrator, trustee, guardian, or other fiduciary, creditor, devisee, legatee, heir, next of kin, or cestui que trust, in the administration of a trust, a guardianship, or of the estate of a decedent, an infant, a mental incompetent, or insolvent may have a declaration of rights or equitable or legal relations in respect thereto:

(1) To ascertain any class of creditors, devisees, legatees, heirs, next of kin, or others; or

(2) To direct the executor, administrator, or trustee to refrain from doing any particular act in his or her fiduciary capacity; or

(3) To determine any question arising in the administration of the guardianship, estate, or trust, including questions of construction of wills and other writings.

Id. In King v. Pinellas Central Bank & Trust Co., 339 So.2d 712 (Fla. 2d DCA 1976), the court interpreted section 86.041 as follows:

This statute is specific that any person ... may bring a suit for declaratory judgment to have his rights declared under the trust and to direct the trustee to refrain from doing any particular act in his fiduciary capacity. The trustee is presumed to protect the rights of all of the beneficiaries of a trust and, therefore, we hold that all antagonistic and adverse interests were before the court through the trustee.

Id. at 713. Furthermore, “[t]he declaratory judgment act is to be liberally administered and construed.” Dent v. Belin, 483 So.2d 61, 62 (Fla. 1st DCA 1986). Thus, we hold that pursuant to section 86.041, Fla. Stat., Cheryl, as a beneficiary and potentially wrongfully removed co-Trustee, has standing as an interested person to bring a cause of action for declaratory judgment in the present case.

4th DCA: Can a life tenant/trustee be held personally liable for damages?

Juan Antunez — Mon, 07 Dec 2009 15:28:03 -0500

Vaughn v. Boerckel, --- So.3d ----, 2009 WL 3364856 (Fla. 4th DCA Oct 21, 2009)

This is the second time the running trust-and-estate litigation between the decedent's widow (his second wife) and his children and grandchildren from his first marriage has gone to the 4th DCA. The first time around the widow came out on top [click here]. This time around she wasn't so lucky.

In the linked-to opinion above the probate judge was confronted with the following basic question: can the decedent's widow be sued individually and held personally liable for damages she may have caused as trustee of the decedent's trust and/or as the life tenant of several items of real property left to her by the decedent? The probate judge said NO; on appeal the 4th DCA said YES.

Life Tenant's Personal Liability:

I've written before about the potential lopped-sided unfairness resulting from how Florida law treats life estates in homes; and to make matters worse, under Florida law a life tenant can't force a sale of the property through a partition action. Ft. Lauderdale attorney Jeffrey A. Baskies published in excellent article in the June 2007 edition of the Florida Bar Journal that summed up the current state of affairs as follows:

[S]urviving spouses — who are ostensibly “protected” by the Florida Constitution and statutes (given the “right” to live “rent-free in a homestead”) — are required to bear 100 percent of the burden of the state’s two largest fiscal crises: the escalation in property taxes and homeowners’ insurance. In addition, costs of ordinary upkeep, interest payments on mortgages and, in many cases, virtually all of the special assessments are also the burden of the surviving spouse. Further exacerbating the situation, many widows live in communities which have charged (and are still charging) assessments to repair common areas damaged by the hurricanes the state faced these past few years — with the promise of active hurricane seasons for the foreseeable future.

Click here for my prior blog post with a link to the Baskies article.

So what happens if a life tenant decides to simply not pay up, can the remaindermen sue her for damages? YES says the 4th DCA:

Among other duties, life tenants are legally bound to pay property taxes during the continuance of their estate. Chapman v. Chapman, 526 So.2d 131, 135 (Fla. 3d DCA 1988). A life tenant who commits an unreasonable act which results in damage to the corpus of the property or the remaindermen may be liable for damages. Id.

Trustee's Personal Liability:

Florida's common law subjecting trustee's to personal liability was codified in Florida's new trust code at F.S. 736.1002(1), which states that the trustee's liability is the greater of any profit the trustee made from the breach and the amount required to restore the trust to what it would have been but for the breach, including lost income, capital gain, or appreciation that would have resulted from a property administration. In the linked-to opinion above the 4th DCA summarized Florida's pre-code basis for holding trustee's personally liable as follows:

[The widow's potential personal liability as a life tenant] is independent of the law making a trustee personally liable for defalcations in handling the trust. See Flagship Bank of Orlando v. Reinman, Harrell, Silberhorn, Moule Graham, P.A., 503 So.2d 913, 916 (Fla. 5th DCA 1987) (citing Restatement (Second) of Trusts § 205 as to liability of a trustee for breaches of trust causing losses to trust); see also Beaubien v. Cambridge Consol., Ltd., 652 So.2d 936, 938 (Fla. 5th DCA 1995) (holding that it was error to dismiss complaint against individual defendants who had acted as agents of corporate trustee, who could be held “personally liable”).

Maximizing trustee litigation defenses built into Florida's Trust Code

Juan Antunez — Wed, 02 Dec 2009 17:56:48 -0500

Florida’s adoption of the Uniform Trust Code in 2007 [click here] was good news for all sorts of reasons. One primary benefit was the UTC’s beefed up litigation defenses for trustees. Two of those defenses are the subject of an interesting article just published in the ABA’s Probate & Property Magazine by Arizona trusts-and-estates litigator Kevin J. Parker entitled Trustee Defenses: Statute of Limitations, Laches, Self-Executing Accounting Release Provisions, and Exculpatory Clauses.

Exculpatory Clauses:

If you're working with a client at the drafting stage and there's even a hint of future trouble, you need to consider folding an exculpatory clause into the trust agreement. As explained in the linked-to article, these clause weren't always enforced in the past. Under the UTC, they're now expressly authorized:

Many trusts include a provision that purports to immunize the trustee from liability to the beneficiaries absent something beyond "ordinary" negligence or breach of fiduciary duty, such as fraud or intentional misconduct.

In the early days, such clauses were held unenforceable as against public policy. The modern rule (reflected in the Restatement and uniform statutes) provides for enforceability of such clauses, with certain limitations, although some state statutes still invalidate such clauses.

Most states deal with exculpatory clauses in trust instruments in one of three ways. Some states follow the Restatement principles. Some states have adopted the Uniform Trust Code. Some states have, by statute, nullified exculpatory clauses as being against public policy.

The Restatement and Uniform Trust Code provisions are similar. Both provide that exculpatory clauses are generally enforceable. Both provide that such clauses are to be strictly construed. Both establish substantive limitations, providing that the exculpatory clause does not relieve the trustee from bad faith, intentional misconduct, or reckless indifference. Both the Restatement and Uniform Trust Code also provide that an exculpatory clause will be unenforceable if insertion of the clause into the trust instrument was itself a breach of fiduciary duty.

When it comes to exculpatory clauses, Florida law tracks the UTC pretty closely, subject to one significant modification. Like UTC 1008, under F.S. 736.1011 an exculpatory clause may relieve a trustee of liability for breaches resulting from ordinary negligence, but not for breaches committed in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries. Under F.S. 736.0105(2)(u) these restrictions are mandatory; you can't draft around them.

In addition, under F.S. 736.1011 an exculpatory clause is unenforceable if it was inserted as a result of an abuse of a fiduciary or confidential relationship between the trustee and settlor. This latter restriction applies to terms that were drafted or caused to be drafted by the trustee unless the trustee proves that the term is fair and its existence and contents were adequately communicated directly to the settlor. Here's where Florida law and the UTC part ways. Unlike the UTC, Florida law adds the requirement that an exculpatory clause drafted by or at the direction of the trustee must be directly communicated to the settlor in order to be enforceable. This requirement is meant to clearly distance Florida law from a statement in the comments to UTC section 1008 that disclosure to the settlor's attorney would suffice for this purpose.

Ultra-short Limitations Periods for Lawsuits Against Trustees:

One way to protect a trustee from frivolous litigation is to make sure you give a recalcitrant beneficiary the least amount of time possible to sue. Historically limitations periods were unclear in the trust context, and they were usually pro-beneficiary. Under the UTC the tide has turned, with the limitations-period regime now being decidedly pro-trustee. Here’s how the linked-to ABA article put it:

The law on the time limits for a beneficiary to bring an action against a trustee has evolved over time. In early cases, the courts were pro-beneficiary, rejecting time limit defenses on various grounds, including that the cause of action was not time barred unless and until a certain period of time had elapsed after termination of the trust or resignation of the trustee, or that statutes of limitation were tolled until full disclosure had been made by the trustee. Some courts held that statutes of limitation did not apply at all, on the theory that claims against trustees were equitable claims and therefore only equitable timeliness defenses (laches, for example) were available to the trustee. The modern rules are more pro-trustee.

The shortest limitations period provided in Florida’s trust code is a mere 6 months! The protective value of a 6-month limitations period can’t be over stated, and Florida trustees are cheating themselves if they don’t take full advantage of this tool. Here’s how it works: under F.S. 736.1008 the 6-month limitations period applies to actions on matters the trustee has adequately disclosed on a trust accounting or other trust disclosure document when the trustee has provided the beneficiary with a related limitation notice. So getting your limitations notice right is key. Fortunately, the statute provides a sample clause in F.S. 736.1008(3)(c):

A limitation notice may but is not required to be in the following form: "An action for breach of trust based on matters disclosed in a trust accounting or other written report of the trustee may be subject to a 6-month statute of limitations from the receipt of the trust accounting or other written report. If you have questions, please consult your attorney."

Word to the wise: use the statutorily provided sample clause.

For trustees NOT taking advantage of Florida’s ultra-short 6-month limitations period, F.S. 736.1008(1)(a) provides that the claims are barred as provided under Florida’s general limitations period rules, which are found in F.S. Ch. 95. Under these rules assume your trustee will be exposed for at least 4 years to the threat of a lawsuit. 6 months vs. 4 years: that's a huge difference. Which limitations period applies to your trustee may very well be the single most important factor controlling whether or not he gets sued. Yeah, this is a big deal.

2d DCA: Can estate creditors strike sweetheart side deals that cut out the PR?

Juan Antunez — Mon, 23 Nov 2009 17:05:59 -0500

Copeland v. Buswell, --- So.3d ----, 2009 WL 2243701 (Fla. 2d DCA Jul 29, 2009)

Under Florida law the personal representative is the central figure in all things having to do with the probate estate. No matter how inconvenient that fact may be, you can't ignore the PR in the hopes of cutting a better deal for yourself. That's the basic take-away from this case.

In this case the estate's largest creditor (Tampa General Hospital claimed $492,224 in unpaid medical bills) tried to cut a better deal for itself by bypassing the PR and dealing directly with a third party that owed the estate money (a tortfeasor). Under the side deal the hospital got a bigger chunk of its claim paid ($300,000) and the tortfeasor cut its liability exposure to the estate by almost $200,000. Sounds clever. Everybody wins right? Wrong!

Why is the estate the big loser in this deal?

First, by cutting out the PR the estate basically got nothing. Which means the PR had no funds with which to pay her own lawyers, or pay herself a PR's fee, or basically pay any other creditor whose claim had priority over the hospital's under Florida's probate code.
Second, by cutting out the PR the estate was deprived of the full value of its claim. At the wrongful-death trial the judge ruled that the decedent had in fact incurred 100% of the $492,224 in unpaid medical bills being claimed by the hospital. In other words, the estate's damages claim would have been for the full amount, NOT the lower figure agreed to in the side deal.

The 2d DCA said no way to the deal, and unwound the whole thing by focusing on how it basically did an end run around the priority-of-payments scheme built into Florida's probate code:

Under section 733.707, Tampa General's claim for medical expenses would be designated as a class 4 claim to be paid after class 1, 2, or 3 claims. See § 733.707(1)(a)-(d). In this case, by virtue of [the side deal], Tampa General's class 4 claim for medical expenses improperly took precedence over class 1 claims for costs of administration and class 2 claims for funeral expenses, in contravention of the priorities established in section 733.707.

The majority's opinion does a good job of explaining the law, but they don't really comment how this deal was too cute by half. For that you need to read Judge Concurs' concurrence. Here's an excerpt:

[A]s the majority points out, once an estate is opened the decedent's creditors must settle any claims with the personal representative of the estate pursuant to Florida's probate rules and statutes. No creditor of an estate is entitled to enter into a sweetheart deal with any entity owing money to the estate that would circumvent the statutory priority of creditors set forth in section 733.707(1)(a). This prohibition on “side deals” is especially important in cases when apportionment issues among creditors could arise, such as when there are insufficient estate assets to pay all claims. Principles of equity, order, and decorum should rule the apportionment process, not insider knowledge and arbitrary favoritism.

4th DCA: Can a probate judge boot a recalcitrant cotenant out of homestead property?

Juan Antunez — Mon, 16 Nov 2009 18:15:30 -0500

Buettner v. Fass, --- So.3d ----, 2009 WL 3446478 (Fla. 4th DCA Oct 28, 2009)

Why??!!, your clients will ask, do you have to start a new partition action in front of a new judge to adjudicate an existing dispute involving a decedent's homestead property if everything else the decedent owned is already subject to the probate judge's authority?

And your answer will be: "Hey, if it made sense, it wouldn't be homestead." Well, maybe that's what your inside voice would say. Your outside voice would hopefully say something like: "Because that's the law, so don't waste your time and money litigating a dispute involving homestead property in a probate court." At which point you can now point to the linked-to opinion as an example of what NOT to do:

Appellant . . . appeals an order evicting him from the entire premises of the apartment building and directing the personal representative to recover possession of the entire premises. Although no transcript is provided, and the appellant failed to appear at the hearing on the eviction, the order is fundamentally erroneous on its face in that it purports to evict appellant from the homestead premises and place them in the possession of the personal representative. As the court had already determined that the property was homestead, and thus not part of the decedent's estate, the personal representative had no possessory interest in it. See Herrilka v. Yates, 13 So.3d 122 (Fla. 4th DCA 2009); Harrell v. Snyder, 913 So.2d 749 (Fla. 5th DCA 2000).

We reverse the order of eviction with instructions to modify the order to exclude that portion of the property which the court has already designated as homestead. While the personal representative claims that appellant is thwarting the personal representative's ability to maintain the remainder of the property, remedies must be sought other than to dispossess appellant from his own property where the personal representative has no ownership interest in the homestead. See, e.g., Wescott v. Wescott, 487 So.2d 1099 (Fla. 5th DCA 1986) (holding that husband could seek partition of property despite wife's claim of homestead).

3d DCA: Is Florida's slayer statute equivalent to a forfeiture statute, awarding all of a killer's property to the estate of the victim?

Juan Antunez — Sun, 08 Nov 2009 20:55:14 -0500

LoCascio v. Sharpe, --- So.3d ----, 2009 WL 3448111 (Fla.App. 3 Dist. Oct 28, 2009)

Silvia Locascio's brutally beaten corpse was found in her home (pictured below) on October 30, 2001. Eventually her husband and brother-in-law were found guilty of her murder - based in large part on the testimony of the couple's only son. Click here, here for more on the back story to this tragic case.

Eight years after his mother's murder Edward J. LoCascio (Son) argued that under F.S. 732.802 (Florida's "slayer statute") his father had forfeited all property rights in the couple's marital assets effective as of the date of the murder. The end-goal of this strategy was to claw back the hundreds of thousands of dollars in legal fees father spent on his defense prior to his murder conviction [click here].

I recently wrote about a Georgia case where that state's slayer statue was also cited as the basis for clawing back attorney fees paid by a surviving widow who ultimately plead guilty to murdering her husband. The slayer-statute argument didn't work in Georgia [click here], and according to the 3d DCA, it won't work in Florida either.

[1] Does a Murdering Spouse Forfeit His 50% Share in Couple's Home? NO

When a person murders his or her spouse, under Florida law the couple's jointly-titled residence is deemed converted into tenants-in-common property. Result: murderer doesn't inherit the couple's house; instead the house is deemed owned 50/50 by the murderer and the deceased spouse's estate. In the linked-to case Son argued that under Florida's slayer statue his father's 50% share of the couple's residence was forfeited to his mother's estate as of the date of her death. Both the trial-court judge and the 3d DCA rejected this argument:

The Son commenced two appeals to this Court. In case no. 3D08-1711, the Son argues that the marital residence (the decedent's and murderer's homestead) passed in full to him as the mother's sole heir. The Son bases this argument on the phrase in subsection 732.802(1) [of Florida's slayer statute] that “the estate of the decedent passes as if the killer had predeceased the decedent.” Had [his father] predeceased [his mother], the Son argues, then [his mother's estate] would have been vested with sole title to the residence at the time of her death, and that exclusive title would then have passed to the Son under Florida's law of intestate succession.

We have previously rejected this argument. In Capoccia v. Capoccia, 505 So.2d 624 (Fla. 3d DCA 1987), this Court reconciled subsections (1) and (2) of the statute, explaining that “the express language of subsection (2) does not call for the complete termination of the killer's interest in the property but merely the termination of the right of survivorship.” Id. at 624-25. Subsection (2) states that the killing “effects a severance of the interest of the decedent,” codifying a prior equitable doctrine that the property in such a case is “treated as if it had been formerly held as a tenancy in common.” Id. at 624.

[2] Does a Murdering Spouse Forfeit 100% of All Marital Assets? NO

Son also argued that his father had forfeited 100% of his property rights in the couple's marital assets effective as of the date of his mother's death. Again Son lost at the trial-court level and before the 3d DCA. In the quoted-text below the focus on clawing back legal fees becomes clear.

In the second appeal, Case No. 3D09-118, the Son maintains that the then-personal representative, plaintiff in the civil lawsuit, was erroneously denied relief against Edward S. LoCascio's property. Specifically, the personal representative sought a constructive trust over all marital property, including Edward S. LoCascio's rights or interests in that property. Instead, the final judgment of constructive trust was limited to all assets of the decedent, including any such assets “titled or assigned in the name of the defendant Edward S. LoCascio.” The Son maintains that the significance of this alleged error-otherwise appearing moot because of the estate's judgment liens in amounts tens of millions of dollars greater than the murderer's known assets-is that the constructive trust over his father's assets would relate back to the date of his mother's death.FN6

[FN6.] During the years between the date of the murder and the entry of the judgment liens against Edward S. LoCascio for over $75,000,000, he apparently incurred substantial indebtedness to one or more law firms for his defense in the murder trial and representation in the probate and wrongful death cases.

The slayer statute is not, as presently written, a forfeiture statute awarding all of a killer's property to the estate of the victim. Nor does the pre-statutory equitable principle that “no one shall be permitted to profit by his own wrongdoing” include any such forfeiture of the killer's separate property. Capoccia, 505 So.2d at 624. Accordingly, we find no error in the limitation imposed by the trial judge in the final judgment of constructive trust against Edward S. LoCascio.