Dingle v. Dellinger, 134 So.3d 484 (Fla. 5th DCA February 7, 2014)

There’s nothing like the threat of a malpractice suit to focus the mind. And in the trusts-and-estates context this risk is exponentially greater for all sorts of reasons, including the fact that you can get sued by lots of people who were never even your clients.

The general trend in Florida is that a third-party beneficiary of your legal services can sue you for malpractice — and it doesn’t matter that the third party was never your client and had zero privity of contract with you. Examples of this trend include cases in which the beneficiaries of a deceased ward’s estate had standing to sue the guardian’s lawyers for malpractice (see here), estate beneficiaries had standing to sue a decedent’s estate planning attorneys for malpractice (see here), a successor personal representative had standing to sue his predecessor’s attorney for malpractice (see here), and an elderly man who had been improperly subjected to a guardianship proceeding had standing to sue the attorney for his former court-appointed guardian for malpractice (see here). This case is yet another example of that trend.

Case Study:

In this case a man hired a lawyer to draft a quitclaim deed that would gift certain real estate titled in the name of a corporation that he was the sole owner of. The client died a few months after the deed was recorded. The client’s surviving spouse then challenged the validity of the deed her husband had executed, ultimately winning that case (and thus presumably getting to keep the contested property for herself). For more on that backstory, see Dingle v. Prikhdina, 59 So.3d 326 (Fla. 5th DCA 2011).

The intended third-party beneficiaries of the now invalidated deed sued the drafting attorney for malpractice. The attorney filed a motion to dismiss, arguing that because the plaintiffs were never her clients they couldn’t sue her. The trial judge agreed and dismissed the case.

Not so fast said the 5th DCA. The rule in Florida is that the third-party beneficiaries of your legal services can sue you for malpractice, even if they were never your clients and had zero privity of contract with you.

If the parties are not in privity, to bring a legal malpractice action, the plaintiff must be an intended third-party beneficiary of the lawyer’s services. See Espinosa, 612 So.2d at 1380. To assert a third-party beneficiary claim, the complaint must allege: (1) a contract; (2) an intent that the contract primarily and directly benefit the third party; (3) breach of the contract; and (4) resulting damages to the third party.[FN1] See, e.g., Caretta Trucking, Inc. v. Cheoy Lee Shipyards, Ltd., 647 So.2d 1028, 1031 (Fla. 4th DCA 1994). A party is an intended beneficiary only if the parties to the contract clearly express, or the contract itself expresses, an intent to primarily and directly benefit the third party or a class of persons to which that party claims to belong. See id.; see also Jenne v. Church & Tower, Inc., 814 So.2d 522, 524 (Fla. 4th DCA 2002) (explaining that courts look to nature or terms of contract to find parties’ clear or manifest intent that it is for third party’s benefit). Thus, it is not necessary that the third-party beneficiary is named in the contract. See Fla. Power & Light Co. v. Mid–Valley, Inc., 763 F.2d 1316, 1321 (11th Cir.1985). Rather, the parties’ pre- or post-contract actions may establish their intent. Id.

[FN1] Although an intended third-party beneficiary may maintain a legal malpractice action in theories of either tort (negligence) or contract (third-party beneficiary), the contractual theory is conceptually superfluous because the crux of the action must lie in tort as there can be no recovery without negligence. McAbee v. Edwards, 340 So.2d 1167, 1169 (Fla. 4th DCA 1976).

What if it’s a two-sided deal?

The lawyer-defendant argued the deed she drafted was a two-sided real estate transaction, which meant she couldn’t ethically represent both sides of the same deal, which meant she couldn’t be sued by the other side either. Here’s how that argument was made:

[Lawyer] insists that she did not have a duty of care to the [plaintiffs] because the requirement of privity in attorney malpractice actions has only been relaxed where there is only one “side” to a transaction (e.g., wills, trusts, estate planning and adoptions), and this case involved a two-sided real estate transaction. Thus, [lawyer] contends that because she was employed by [the party executing the deed], she could not ethically represent the [plaintiffs’] interests or be held responsible to them.

. . . Courts usually reject the contention that the attorney for a seller, buyer, lender, or mortgagor owed a duty to another party. Thus, as a general rule, when a transaction involves two interests to be protected, an attorney employed by one of the parties to the transaction cannot be held responsible to other parties unless it is alleged and proved that the attorney committed some nonnegligent tort such as fraud or theft. See, e.g., Adams v. Chenowith, 349 So.2d 230, 231 (Fla. 4th DCA 1977).

This defense works . . . unless the entire purpose of the deal was to benefit the non-clients. In those cases lawyers can still be sued, even if the deal is usually considered a two-sided transaction. So saith the 5th DCA:

This case involved a real estate transaction, typically a two-sided transaction. However, here, based on the allegations contained in the complaint, there was no adversarial relationship or differing interests to be protected, as the [plaintiffs’] interests were not in conflict with [the client’s interests], thus suggesting a one-sided transaction. See generally Freedom Mortg. Corp. v. Burnham Mortg., Inc., 720 F.Supp.2d 978 (N.D.Ill.2010) (holding that mortgage lender sufficiently pled that primary purpose and intent of attorney’s representation of mortgage broker and title insurer were to influence lender, giving rise to duty of care running from attorney to lender, as third-party beneficiary of attorney-client relationship; although broker and title insurer hired attorney as closing agent presumably to act in their best interests, attorney’s work was nonadversarial as to lender in sense that attorney’s services as closing agent were typically relied upon by all parties to real estate transaction); Kirby v. Chester, 174 Ga.App. 881, 331 S.E.2d 915 (1985) (concluding that closing attorney owed duty to nonclient lender that relied on attorney’s title certification to loan money); Flaherty v. Weinberg, 303 Md. 116, 492 A.2d 618, 629–30 (1985) (determining that unrepresented mortgagor-buyer’s complaint, which alleged that mortgagee-lender retained attorney to intentionally benefit both parties, who had identical interests in the property, alleged sufficient facts to survive dismissal); 4 Legal Malpractice § 34:4 (2013 ed.) (“The rule of privity of contract prevails where a nonclient sues the attorney for errors in handling a transfer of property interests, in creating a security interest, searching title or representing a client in the transaction, who is sued by another party to the transaction.”) (collecting cases); see also Jimerson v. First Am. Title Ins. Co., 989 P.2d 258, 261 (Colo.App.1999) (explaining that professional supplier of information may be liable for its negligence to person with whom it has no contractual relationship, providing that supplier of information knows that recipient of information will provide it to that person or knows that information is to be used to influence transaction); Stuart v. Freiberg, 142 Conn.App. 684, 69 A.3d 320 (2013) (holding that genuine issue of material fact existed as to whether estate beneficiaries were intended beneficiaries of accountant’s work for estate executor, and therefore, whether accountant owed them duty of care, precluded summary judgment in professional malpractice claim against accountant).

Note to readers:

The linked-to opinion was published in 2014. I try to report on cases as they’re published. I don’t always succeed. This blog post is part of an ongoing project to report on older cases I wasn’t able to get to previously.

Cohen v. Shushan, et al., — So.3d —-, 2017 WL 1018422 (Fla. 2d DCA March 15, 2017)

A person’s “status” as a surviving spouse triggers all sorts of valuable inheritance rights under Florida law, including entitlement to inheritance by intestacy (see here); elective share, family allowance, homestead and exempt property rights; inheritance as a pretermitted spouse; and preference in appointment as personal representative. Not surprisingly, whether or not a decedent was validly married is often the central question in a contested estate.

If the couple was allegedly married in Florida, figuring out their marital status is easy. We legislatively abolished common-law marriage in this state half a century ago (see F.S. 741.211), so whether you’re married or not isn’t a facts and circumstances kind of question. If you don’t have a marriage license, you’re not married, end of story (see here).

But what if the couple was allegedly married in some other part of the globe that recognizes various forms of civil unions? In those cases whether or not they were married will turn on the law of the foreign jurisdiction. Here’s how the 2d DCA summarized this point.

“Florida has traditionally approved of the sanctity of marriage, and the act of marriage, regardless of where it is contracted.” Johnson v. Lincoln Square Props., Inc., 571 So.2d 541, 542 (Fla. 2d DCA 1990). Thus, “[u]nder principles of comity a marriage by citizens of a foreign country, if valid under foreign law, may be treated as valid in Florida ….” Montano v. Montano, 520 So.2d 52, 52–53 (Fla. 3d DCA 1988). Conversely, if a purported marital relationship in a foreign jurisdiction would be deemed invalid in that jurisdiction, it must be deemed invalid here. See, e.g., Betemariam v. Said, 48 So.3d 121, 125 (Fla. 4th DCA 2010) (holding that because the Commonwealth of Virginia mandated a marriage license as a condition of marriage, and the litigants had never obtained such a license, “[t]he trial court had no choice but to determine that no legal marriage had occurred”); Farah v. Farah, 16 Va.App. 329, 429 S.E.2d 626, 629 (1993) (“A marriage that is void where it was celebrated is void everywhere.” (citing Spradlin v. State Comp. Comm’r, 145 W.Va. 202, 113 S.E.2d 832, 834 (1960))). We must look, then, to the evidence presented below as to whether reputed spouses are considered married under Israeli law.

What about the in-between cases?

In Florida, whether or not you’re married is a yes or no question; either you are or you’re not. We don’t do in-between. In much of the world a person’s marital status isn’t anywhere near as cut and dry. For example, in some parts of the world living together in a committed relationship can trigger property rights that are the functional equivalent of a common-law marriage, while never bestowing the status of being “married” on the couple. Does that distinction matter? That’s the question at the heart of this case.

“Reputed” spouses under Israeli law:

Marriages in Israel are performed only through religious institutions. Jewish couples must marry through the Chief Rabbinate, whereas Catholics, Druze and Muslims all marry through their own state-sanctioned and publicly funded religious legal systems. Bottom line, any couple whose marriage is not in keeping with the religious law of their respective religions, or who belong to a religious tradition that does not have its own state hierarchy, simply falls outside the boundaries of marriages recognized by the Israeli state.

For these reasons many Israeli couples have opted to cohabitate and establish families without going through the process of obtaining religious marriages. These couples are referred to as yedu’im be-tzibur (ידועים בציבור), translated literally as a couple “known in the public,” but also referred to as “reputed spouses” (that’s the term used by the 2d DCA), and they’re entitled to all of the property rights we in the U.S. would normally associate with a common-law marriage, but they don’t have the legal status of being married. Here’s how the 2d DCA summarized this point:

While Israel has . . . established the reputed spouse relationship as something of an alternative to marriage, and indeed, has conferred a broad array of rights to reputed spouse couples that . . . are “equal” to marriage, Israeli law has purposely kept the status of these two relationships separate. Reputed spouses are not married spouses under Israeli law.

OK, so we get the distinction: reputed spouses aren’t married under Israeli law. But here’s the kicker: under Israeli law they are entitled to inheritance rights, just like married couples, a key point made by the dissent in this case:

[T]he rights of reputed spouses are nearly identical to the rights of formally married people in Israel. One of those rights of reputed spouses is entitlement to an inheritance, as evidenced by the Israeli inheritance order contained in the record.

If a “reputed” spouse is entitled to inheritance rights under Israeli law, what does she get in Florida?

So if foreign law says a couple isn’t married, but the survivor’s still entitled to inheritance rights equivalent to those of a surviving spouse, what does he or she get in Florida? Nothing. Why? Because a person’s “status” as a spouse really matters. In Florida, we don’t do in-between; either you’re married or you’re not. And if you’re not married you don’t get spousal inheritance rights, so saith the 2d DCA:

[M]arriage, under the law, is not simply a bundle of rights and privileges; it is also a status. While we sense from the case before us that the line, as it were, between the statuses of reputed spouses and married couples in Israel has drawn closer over time, perhaps to a point of near proximity, even near equivalency, nevertheless, as both of the experts who testified before the probate court concluded, that line remains firmly entrenched. For better or for worse, under Israeli law marriage is a different legal relationship than a reputed spouse relationship. To borrow from another ceremonious phrase, the two have not become one. Were we to hold otherwise and approximate a reputed spouse relationship as “close enough” for purposes of marriage, our court would simultaneously diminish, if only imperceptibly, the uniqueness of the marital status in the affairs of society and do offense to a sovereign nation’s authority to define, for itself, the precise boundaries of marriage within its own jurisdiction. Cf. Johnson, 571 So.2d at 542; Montano, 520 So.2d at 52–53; Betemariam, 48 So.3d at 125; Farah, 429 S.E.2d at 629. We cannot affirm such a construction of the law.

The dissent charges that this view of Israeli law amounts to a “myopic focus on the technical status of marriage.” True enough.[FN8] Comity requires us to look, closely and carefully, at a foreign nation’s law in this case, not blur its distinctions. Our decision upholds a fine—but very clear—distinction that has been set within Israel’s marital law, one we must maintain out of respect to Israel’s law-making authority. Because Ms. Shushan and the late Mr. Cohen’s legal union was not entered into through any recognized religious authority, they were not married under Israeli law. Ms. Shushan, therefore, could not be a surviving spouse of Mr. Cohen under section 732.102. Accordingly, we reverse the probate court’s order and remand this case for further proceedings consistent with this opinion.

[FN8] Although we might quibble with the implication in our colleague’s choice of adjective that one lawful marriage might merely be “technical,” as opposed to another that would, presumably, hold more genuine legal significance. Under the law, one is either married, or one is not.

scott-rick-signingI previously reported here on the “Florida Electronic Wills Act”. The legislature passed this bill back in May over strong opposition from the Real Property, Probate and Trust Law Section of The Florida Bar. For the public policy arguments for and against the bill, see here and here.

Proving once again that in politics, as in baseball, “it ain’t over till it’s over,” Gov. Rick Scott just vetoed the Electronic Wills Act, even though it was enacted by the Florida senate on a 34-0 vote.

What’s interesting about this process is that the governor doesn’t just issue a veto and leave it at that; he publishes a letter explaining the reasons for his veto. If you’re a trusts and estates lawyer, no matter what your views may have been on the wisdom of this legislation, you’ll find the governor’s veto letter interesting reading. Here’s an excerpt:

The bill creates the “Florida Electronic Wills Act” which authorizes the creation of electronic wills, and provides that the execution of electronic wills may be witnessed and notarized through the use of remote technology. The bill also specifies that electronic wills of residents and nonresidents may be probated in Florida.

This bill has generated much debate among stakeholders who seek to find the right balance between providing safeguards to protect the will-making process from exploitation and fraud while also incorporating technological options that make wills financially accessible to a greater number of Florida’s citizens. While the idea of electronic wills is innovative and may transform estate planning for Floridians, I believe this bill fails to strike the proper balance between competing concerns.

As Governor, I oversee the appointment of notaries public in the State of Florida and have a responsibility to ensure that notaries safeguard the most vulnerable Floridians against fraud and exploitation. While the concept of remote notarization is meant to provide increased access to legal services like estate planning, the remote notarization provisions in the bill do not adequately ensure authentication of the identity of the parties to the transaction and are not cohesive with the notary provisions set forth in Chapter 117, Florida Statutes.

Furthermore, providing an additional Florida venue for the probate of nonresident wills based only upon the qualified custodian’s location in this state could burden Florida’s court system with the probate of estates that may have no Florida nexus other than that the wills were created and stored here. Additionally, if the state where the decedent is domiciled does not recognize electronic wills as a valid declaration of intent, the individual could be left intestate.

Furthermore, I have concerns with the delayed implementation of the remote witnessing, remote notarization, and nonresident venue provisions of this bill. The Legislature delayed these provisions to April 1, 2018, in order to address “substantive changes and outstanding questions” during the next legislative session. Rather than sign an imperfect bill into law, I encourage the Legislature to continue to work on answering these outstanding questions and address the issues comprehensively during the next legislative session.

For the reasons stated above, I withhold my approval of . . . House Bill 277 and do hereby veto the same.


If you make your living in and around our probate courts you’ll find the FY 2015-16 Probate Court Statistical Reference Guide interesting reading. The chart below provides the “cases filed” data for three of our largest circuits/counties: Miami-Dade (11th Cir), Broward (17th Cir), and Palm Beach (15th Cir). For prior years see (2014-15), (2013-14), (2012-13), (2011-12).

And as a rough measure of the crushing case load your average big-city probate judge is saddled with in Florida, I took the total filing figures for Miami-Dade (11th Cir), Broward (17th Cir), and Palm Beach (15th Cir) and divided them by the number of probate judges serving in each of those counties. (In Palm Beach County there are 6 part time probate judges and 1 full time probate judge; for purposes of my chart I count them as 4 full time probate judges.)

So what’s it all mean?

In Miami-Dade – on average – each probate judge took on 3,070 NEW cases in FY 2015-16, in Broward the figure was slightly lower at 2,866/judge, with Palm Beach scoring the lowest at 2,108/judge (almost 1,000 fewer cases per judge than Miami-Dade!). Keep in mind these figures don’t take into account each judge’s EXISTING case load or other administrative duties. These stat’s may be appropriate for uncontested proceedings, which represent the vast majority of the matters handled by a typical probate judge, but when it comes to that small % of estates that are litigated, these same case-load numbers (confirmed by personal experience) make two points glaringly clear to me:

[1]  We aren’t doing our jobs as planners if we don’t anticipate — and plan accordingly for — the structural limitations inherent to an overworked and underfunded state court system. As I’ve previously written here, one important aspect of that kind of planning should be “privatizing” the dispute resolution process to the maximum extent possible by including mandatory arbitration clauses in all our wills and trusts. Arbitration may not be perfect, but at least you get some say in who’s going to decide your case and what his or her minimum qualifications need to be. And in the arbitration process (which is privately funded) you also have a fighting chance of getting your arbitrator to actually read your briefs and invest the time and mental focus needed to thoughtfully evaluate the complex tax, state law and family dynamics underlying these cases (a luxury that’s all but impossible in a state court system that forces our judges to juggle thousands of cases at a time with little or no support).

[2]  We aren’t doing our jobs as litigators if we don’t anticipate — and plan accordingly for — the “cold judge” factor I wrote about here; which needs to be weighed heavily every time you ask a court system designed to handle un-contested proceedings on a mass-production basis to adjudicate a complex trial or basically rule on any technically demanding issue or pre-trial motion of any significance that can’t be disposed of in the few minutes allotted to the average probate matter.

FY 2015-16 Probate Court Filing Statistics:

Type of Case Miami-Dade (11th Cir) Broward (17th Cir) Palm Beach (15th Cir)
Probate 4,147  3,720  4,873
Baker Act  4,895  3,175  1,813
Substance Abuse 823  874  714
Other Social Cases 1,408  351  257
Guardianship 934  450  522
Trust 73  29  254
Total 12,280  8,599  8,433
# Judges 4 3 4*
Total/Judge 3,070  2,866  2,108

*In Palm Beach County (15th Cir) there are 6 part time probate judges and 1 full time probate judge. For purposes of the chart I count them as 4 full time probate judges.

You’d be surprised how varied a probate judge’s docket is:

But numbers alone don’t tell the whole story. To understand the breadth of issues a typical probate judge contends with in an average year, you’ll want to read the official definition given for each of the categories listed in my chart by the Florida Office of the State Courts Administrator 2015-16 Glossary:


All matters relating to the validity of wills and their execution; distribution, management, sale, transfer and accounting of estate property; and ancillary administration pursuant to Chapters 731, 732, 733, 734, and 735, F.S.

Baker Act (Mental Health Act):

All matters relating to the care and treatment of individuals with mental, emotional, and behavioral disorders pursuant to sections 394.463 and 394.467, F.S.

Substance Abuse Act (Marchman Act):

All matters related to the involuntary assessment/treatment of substance abuse pursuant to Sections 397.6811 and 397.693, F.S.

Other Social Cases (Probate):

All other matters involving involuntary commitment not included under the Baker and Substance Abuse Act categories. All matters involving the following, but not limited to:

  • Adult Protective Services Act cases pursuant to Section 415.104, F.S.
  • Developmental disability cases under Section 393.11, F.S.
  • Incapacity determination cases pursuant to sections 744.3201, 744.3215, and 744.331, F.S.
  • Review of surrogate or proxy’s health care decisions pursuant to Section 765.105, F.S., and rule 5.900, Florida Probate Rules
  • Tuberculosis control cases pursuant to Sections 392.55, 392.56, and 392.57, F.S.

Guardianship (Adult or Minor):

All matters relating to determination of status; contracts and conveyances of incompetents; maintenance custody of wards and their property interests; control and restoration of rights; appointment and removal of guardians pursuant to Chapter 744, F.S.; appointment of guardian advocates for individuals with developmental disabilities pursuant to section 393.12, F.S.; and actions to remove the disabilities of non-age minors pursuant to sections 743.08 and 743.09, F.S.


All matters relating to the right of property, real or personal, held by one party for the benefit of another pursuant to Chapter 736, F.S.

Delbrouck v. Eberling, — So.3d —-, 2015 WL 5948724 (Fla. 4th DCA October 14, 2015)

Real-Estate-LawContested probate proceedings often revolve around conflicting claims to specific property that’s titled in the decedent’s name but claimed by someone else.

If the dispute revolves around the decedent’s homestead property (a common scenario), we’ve developed a good amount of law over the years to guide us in how those cases should be handled. Basically, when it comes to homestead (“the” classic non-probate asset), who gets what is not a probate matter, it needs to be litigated in a separate civil action (see here); and the estate has no business using estate funds to litigate those disputes (see here).

On the other hand, if the property at issue was not the decedent’s homestead property, there’s a lot less guidance on how those claims should be handled by our probate judges, which is why the linked-to case above should be of interest to working probate lawyers.

So who gets to occupy the decedent’s contested real estate?

This case involved the estate of Leon Delbrouck, originally from Belgium, who lived in Ft. Lauderdale since 1966 and owned a successful auto repair business (see here). At the time of Delbrouck’s death one of his sons occupied several parcels of real property that were titled in his father’s name, including a residence and the business. According to son, he and his father had operated the business together since 1977, and he continued to operate it after his father retired. This son claimed a constructive trust in the property, which the estate contested.

Am I entitled to an evidentiary hearing?

Son claimed he was entitled to continue occupying the contested property (and running the business) pending the outcome of his constructive-trust action. In support of his argument son pointed to F.S. 733.607(1), which provides in relevant part as follows:

[A]ny real property or tangible personal property may be left with, or surrendered to, the person presumptively entitled to it unless possession of the property by the personal representative will be necessary for purposes of administration.

The PR countered by arguing that anytime the estate wants to take possession of property titled in the decedent’s name all it has to do is say so, and that’s “conclusive evidence” of its right to possession; end of story, no questions asked. In support of its argument the PR also quoted F.S. 733.607(1), but relied on an alternate sentence, which provides as follows:

The request by a personal representative for delivery of any property possessed by a beneficiary is conclusive evidence that the possession of the property by the personal representative is necessary for the purposes of administration, in any action against the beneficiary for possession of it.

If the PR’s argument holds, then who needs courts? That’s not how we adjudicate property disputes, not even in the alternate universe probate proceedings sometimes occupy. So saith the 4th DCA:

The emphasized language establishes that a PR’s need for the property requested for administration of the estate cannot be contested. We do not construe the statute to mean a personal representative’s right to possession or ownership after a decedent’s death cannot be contested in a probate proceeding. The very fact that the statute speaks of “conclusive evidence” implies that an evidentiary hearing may be required when the right to possession of a decedent’s property is genuinely disputed. If ownership of an asset can be contested during probate, it cannot be the case that a personal representative’s assertion of the right to possession can never be challenged. [FN2]

[FN2] Apart from a claim of ownership, a right of possession can arise under other circumstances; for example, a tenancy under a lease.

. . . We agree with the appellant that section 733.607 does not eliminate the need to take evidence where a colorable factual issue exists over the right to possession of property, even if titled in the name of the decedent.

So what’s a judge to do?

If there’s a dispute over who gets to keep certain property owned by the decedent pending the outcome of related litigation, the 4th DCA concluded probate courts should adopt the following procedure (which makes sense to me):

We conclude that, when property is titled in a decedent, but another claims a colorable right to possess the same property, the question of who should temporarily possess the property, pending final resolution of the claim of entitlement, is a factual question that should be resolved by a prompt preliminary evidentiary hearing.

This kind of common sense ruling interpreting a probate statute in a reasonable way, even if the specific text at issue could conceivable be read otherwise, carries a little more weight if appellate courts in other parts of the state have encountered similar situations and come to similar conclusions. Which is why the 4th DCA’s reliance on an analogous opinion by the 3d DCA is so helpful. If you find yourself in this situation it helps to be able to point to multiple appellate opinions standing for the same proposition. Here’s how the 4th DCA summarized its take (and reliance upon) the 3d DCA’s prior holding:

Swartz v. Russell, 481 So.2d 64 (Fla. 3d DCA 1985), is instructive. In Swartz, a decedent’s children and spouse were disputing ownership and possession of real property used in a restaurant business. Id. at 64–65. Because of the conflict and disputes, the administrator ad litem of the estate appointed by the court sought authorization to take possession of all real property, including the restaurant. Id. at 65. One of the sons objected, because he claimed that he had an oral agreement to purchase the business and property from his brother and mother, and he had an oral lease on the property. Id. The trial court ordered the administrator to take possession after a non-evidentiary hearing in which the court concluded that there were no factual issues as to the administrator’s right of possession. Id. The appellate court reversed, concluding that because there were factual disputes as to whether the oral agreements had been partially performed, and thus were enforceable, the probate court erred in ordering that the administrator take possession without affording an evidentiary hearing on the factual issues which would determine the right of possession. Id. at 66.

Note to readers:

The linked-to opinion was published in 2015. I try to report on cases as they’re published. I don’t always succeed. This blog post is part of an ongoing project to report on older cases I wasn’t able to get to previously.

Metaphors-make-your-pointPowers of appointment are the Swiss Army knife of modern estate planning. They’re deceptively simple yet adaptable to almost any planning contingency. And they’re ubiquitous, often incorporated into even the most basic trust agreements for all sorts of good reasons (see here). These clauses don’t get litigated all that often, but when they do, the stakes can be huge (see here).

Specific-reference requirement:

Because power-of-appointment clauses are so common and they’ve been around for so long, it’s easy to take the traditional drafting conventions for granted. For example, a standard power-of-appointment clause will almost always include some kind of “specific-reference” requirement. Here’s a typical example, which was quoted by the 1st DCA in Cessac v. Stevens, a 2013 power-of-appointment case I wrote about here.

Upon the death of my daughter, SALLY, the Trustees shall transfer and deliver the remaining principal of this share of the trust, together with any accumulated or undistributed income thereon to or for the benefit of such one or more persons, corporations or other organizations, in such amounts and subject to such trusts, terms and conditions as my daughter may, by her will, appoint, making specific reference to the power herein granted . . .

Not only is the specific-reference requirement included in most power-of-appointment clauses, it’s also baked into our probate code at F.S. 732.607, which provides as follows:

A general residuary clause in a will, or a will making general disposition of all the testator’s property, does not exercise a power of appointment held by the testator unless specific reference is made to the power or there is some other indication of intent to include the property subject to the power.

Ever wonder where the specific-reference requirement came from? If you see it everywhere, it’s safe to assume it didn’t just get there by accident. Well look no further. As explained in an excellent RPTE Law Journal article that was just published entitled Using Equity To Aid The Exercise Of A Power Of Appointment that Fails To Specifically Refer To The Power, this requirement was originally meant to address a specific estate tax issue — that ceased to exist over half a century ago!

Federal estate tax law prior to October 21, 1942, provided that the value of property subject to a general power of appointment was included in the donee’s gross estate for federal estate tax purposes only if the general power was exercised. Thus, to prevent inadvertent exercise of the general power and inclusion of the appointive property in the donee’s gross estate, a specific-reference clause was usually added to the provision granting the general power.

Concern over inadvertent exercise of a general power of appointment for estate tax purposes disappeared for general powers of appointment created after October 21, 1942. Section 2041 of the Internal Revenue Code of 1986, as amended (Code), provides that the value of property subject to a general power created after October 21, 1942, is included in the donee’s gross estate irrespective of whether the power is exercised. Thus, “inadvertent exercise of a general power created after October 21, 1942, no longer has adverse estate tax consequences.” See Restatement (Third) of Property § 19.10 cmt. d.

Equitable exception doctrine to the rescue:

A typical will or trust agreement is going to be chock full of archaic sounding clauses that may or may not continue to serve a useful purpose. These clauses are usually harmless, but sometimes they’re not. Making specific reference to a power-of-appointment clause may not sound like much of a burden, but you’d be surprised how often this gets mucked up by sloppy drafting.

Rather than hammer family members (and other favored classes of beneficiaries) for these drafting mistakes, the English courts of chancery developed the “equitable exception” doctrine, which salvages bad drafting as long as the defective will or trust is arguably somewhere close to the mark. The doctrine’s been applied in the U.S. (but not Florida), and is articulated in Restatement (First) of Property § 347 as follows:

Failure of an appointment to satisfy formal requirements imposed by the donor does not cause the appointment to be ineffective in equity if (a) the appointment approximates the manner of appointment prescribed by the donor; and (b) the appointee is a wife, child, adopted child or creditor of the donee, or a charity, or a person who has paid value for the appointment.

If you ever find yourself litigating a power-of-appointment clause — no matter what side of the case you’re on — you’ll want to be aware of this equitable rule and how it might impact your case. And to do that you’re going to want to read Using Equity To Aid The Exercise Of A Power Of Appointment that Fails To Specifically Refer To The Power. For example, here’s what the author had to say about the significance of the 1st DCA’s opinion in Cessac v. Stevens:

In summary, the Cessac decision is important on three fronts. First, the decision revealed the court’s willingness to move from case precedent requiring strict compliance with a specific-reference requirement to use of the equitable rule when facts and circumstances permit. Second, the decision highlighted the fact that to have substantial compliance under the equitable rule, the donee must execute a document containing at least a blanket-exercise clause. Third, the decision determined that a state statute corresponding to Uniform Probate Code section 2-610 [such as F.S. 732.607] does not apply when a power contains a specific-reference requirement.

The willingness of the Florida District Court of Appeals in Cessac to move from case precedent requiring strict compliance with a specific-reference requirement to possible use of the equitable rule appears to have been influenced by three factors. First, the court’s willingness to even consider use of the equitable rule reflects its role as a court of equity as well as a court of law. Second, the court recognized that each decision regarding the effectiveness of an exercise of a power should be limited to the facts and circumstances of each case because the court wanted to apply the equitable rule after recognizing under the facts there that “Ms. Cessac will not receive the assets the decedent [donee] apparently intended for her to receive,” but could not apply the rule because the donee’s will failed to even refer to the powers of appointment there. Third, the court cited with approval In re Passmore, where the Supreme Court of Pennsylvania was also willing to move from prior Pennsylvania case precedent requiring strict compliance with a specific-reference requirement to use of the equitable rule when facts and circumstances permit. . . .

Accordingly, the Cessac and Passmore decisions reveal that the equitable rule can be considered and applied by a state court even though precedent applicable to that court may advocate strict compliance with a specific-reference requirement.

Good stuff, well worth holding on to.

STEP-conference-2017I recently had the pleasure of speaking at the STEP Caribbean Conference. I co-presented with Cayman Islands trust litigator Rachael Reynolds. We had fun going through the practical “what ifs” a Caribbean trustee should consider if faced with the prospect of getting pulled into a Florida courtroom.

The Society of Trust and Estate Practitioners or “STEP” is a global organization of international trust and estate lawyers, bankers, accountants and other professionals that originated in the UK, which explains why STEP isn’t nearly as well known in the US as it should be. If your practice involves international trust and estate matters, you need to be in STEP (I’m a member of STEP’s Miami Branch).

electronic-willsSilicon Valley entrepreneurs and venture capitalists have deployed digital tech to change the way we live, eat, and shop. And they’ve aggressively moved into crucial professional services industries like healthcare and finance. But the  practice of law is one slice of the economy that’s remained stubbornly resistant to disruption. That’s slowly changing.

Case in point: Florida’s new Electronic Wills Act, which promises to make wills affordable and accessible to the more than half of all U.S. adults who don’t currently have wills. (As currently drafted the statute won’t go into effect until April 1, 2018.)

For families who don’t require particularly complex estate planning, electronic wills will likely become the norm in the not too distant future, as recognized by the Uniform Law Commission, which recently formed a drafting committee to work on a uniform electronic wills act.

Not surprisingly, this disruptive change isn’t being driven by lawyers, it’s driven primarily by the young tech savvy entrepreneurs behind an internet startup called Willing, a web-based company that allows users to complete their own estate planning documents online.

Willing’s legal advisory board is made up of two giants of the trusts and estates academic world, Profs. John H. Langbein (Yale Law) and Robert H. Sitkoff (Harvard Law), and a representative of one of Wall Street’s most influential law firms, Daniel L. Mosley, a partner in Cravath’s NYC trusts and estates department. Together they’ve co-authored a white paper laying out the practical and public policy arguments in favor of electronic wills, posted here on Willing’s website. Here’s the abstract:

To make a valid will, all American states require a person to comply with a set of formalities that trace back to a pair of statutes enacted by Parliament centuries before the invention of the light bulb. These formalities generally require a will to be in writing, signed by the testator, and witnessed by at least two people. There are good reasons for requiring formalities to make a will. Nevertheless, the traditional will formalities have not adapted to an evolving technological context in which nearly all transactions—including massive end-of-life transfers under pension plans, brokerage accounts, life insurance policies, and the like—can be made electronically. Accordingly, this paper argues in favor of legislation authorizing electronic wills made in compliance with a set of electronic formalities suited to the modern age. These reforms would improve access to will-making while facilitating the integration of wills with the many other methods of deathtime transfer that operate outside the law of wills.

Florida Bar Calls for Additional Safeguards:

The Real Property, Probate and Trust Law Section of The Florida Bar (“RPPTL Section”) came out publicly against the Florida Electronic Wills Act, arguing in this white paper that as originally drafted the act didn’t contain sufficient safeguards to protect testators from exploitation. The RPPTL Section was especially concerned about the act’s authorization of witnessing via remote video webcam technology, in lieu of requiring physical presence. Here’s how the section summed up its concerns:

If the Florida Legislature were to decide that witnesses no longer need to sign a will in the testator’s physical presence, the Proposed Act will still need to include specific changes to prevent fraud and exploitation during the will execution process, including safeguards to protect testators against fraud, undue influence and duress. Those safeguards should include, at a minimum, requirements that the testator be asked a list of fundamental questions confirming that their act in signing the will is voluntary and free of undue influence, to identify all other persons present with the testator, and provide a 360-degree view of the room as part of the execution ceremony. The Proposed Act must also include safeguards aimed at confirming that testators possess sufficient testamentary capacity at the time of executing an electronic will.

The drafters of the Florida Electronic Wills Act apparently took the Bar’s concerns seriously, and have incorporated extensive safeguards into the final version of the statute. For example, under subsection 732.525(1)(8) of the act a testator is required to provide verbal answers to all of the following questions while being videotaped:

  • Are you over the age of 18?
  • Are you under the influence of any drugs or alcohol that impairs your ability to make decisions?
  • Are you of sound mind?
  • Did anyone assist you in accessing this video conference? If so, who?
  • Has anyone forced or influenced you to include anything in this document which you do not wish to include?
  • Are you signing this document voluntarily?

And the video of the electronic execution ceremony must be recorded and stored for future reference, which goes way beyond the current traditional safeguards for executing wills. Here’s an excerpt from that portion of the new act (732.525(1)(9)):

A time-stamped recording of the entire video conference must be identifiable with the document being signed and stored in the electronic record containing the document by a qualified custodian in the manner required pursuant to s. 732.527(1)(c) for the storage of electronic records containing electronic wills.

What’s next?

I’m guessing the act’s 2018 effective date is no accident. This gives everyone another year to iron out any remaining statutory kinks before it all goes live. For more commentary on Florida’s electronic wills statute and electronic wills generally, see here, here, here. I expect we’ll be hearing a lot more about electronic wills over the next year. Stay tuned for more . . .

Full Disclosure:

I’m not an unbiased observer when it comes to electronic wills. I believe they’re inevitable, they’re good public policy, and they shouldn’t be viewed as a business threat by trusts and estates lawyers (for more on this last point, see From Data to Wisdom). Based on those beliefs I’ve agreed to serve as an advisor to Willing and my firm owns a tiny stake in the company.

Most of us would agree that most divorced spouses don’t want their ex’s to hit the jackpot after one of them’s died because someone forgot to update his or her estate planning documents. You’d be surprised how often this happens.

So in 1951, when wills were the dominant estate planning tool, Florida enacted a statute automatically cutting divorced spouses out of each other’s wills (currently at F.S. 732.507(2)). Then revocable trusts grew in popularity, leading in 1989 to the revocable-trust version of that statute (currently at F.S. 736.1105).

In today’s world the dominant estate planning tool for most of us isn’t a will or trust, it’s life insurance or some other pay-on-death financial product (like annuities, pay-on-death brokerage or savings accounts, and retirement planning accounts). Which means a whole lot of Floridians found themselves litigating “who got what” when an ex-spouse forgot to change his or her beneficiary designation forms (see here, here, here). In 2012 we finally closed that legislative loophole with F.S. 732.703 (see here for my write up of that legislation).

There’s been zero case law in Florida testing the new statute’s constitutionality, but given the huge sums of money at stake, it’s probably only a matter of time. This line of attack’s been tried in lots of other states, with mixed results. After a few early wins, the tide has very much turned against the constitutional-challenge argument. And how do I know that? Because I read an excellent Florida Bar Journal article by Donna L. Eng and Scott Konopka entitled Is F.S. §732.703 Susceptible to a Constitutional Challenge by a Former Spouse Whose Claim for Benefits is Denied? Their conclusion? Don’t bet on winning a constitutional challenge in Florida. Here’s an excerpt summarizing their findings:

Although no Florida courts have addressed the constitutionality of F.S. §732.703, it would appear that . . . if a former spouse were to challenge [the statute] by arguing that [its] retroactive application . . . violates his or her rights as a designated beneficiary, or that the [statute] violates his or her rights to freedom of contract, as was argued in [Parsonese v. Midland Nat’l Ins. Co., 706 A.2d 814 (Pa. 1998)] and [Whirlpool Corp. v. Ritter, 929 F.2d 1318 (8th Cir. 1991)], such contentions should fail. As noted above, courts in other states and outside the 11th Circuit have noted the flaws in the Parsonese and Whirlpool analysis: 1) Beneficiaries to a life insurance policy have only an expectancy interest, and no vested rights in the policy; 2) decedents should expect that their policy designations would be regulated by the legislature; 3) public policy favors revocation on divorce statutes, as such statutes recognize the intent of a divorced spouse to revoke the designation of a former spouse as a beneficiary under the policy; 4) a revocation on divorce statute would not violate a beneficiaries’ freedom of contract because beneficiaries are not parties to the contract, and have no standing to raise such a claim; and, 5) revocation on divorce statutes do not violate the decedent’s freedom of contract because the statute only affects the donative transfer aspect of the life insurance policy.

Edwards v. Maxwell, — So.3d —-, 2017 WL 1201873 (Fla. 1st DCA March 31, 2017)

adoption-family-treeTo understand this case you need to keep two basic points in mind.

First, adoptions are sometimes used to “add” individuals to the class of eligible beneficiaries of  what are otherwise closed, irrevocable trusts (see here, here). According to a rule of construction found in our probate code (F.S. 732.608), adoptees are presumed to be descendants of their adoptive parents for inheritance purposes. When this rule’s applied to a trust benefiting someone’s descendants as a class (i.e., without specifically naming them), that class of beneficiaries is presumed to include adoptees.

Second, the “contingent” nature of the trusts at issue in this case determined the outcome. At the center of this case are three multi-generational trusts designed to be discretionary in nature, as in the trust beneficiaries don’t have any fixed or vested property rights. If, when and how a discretionary beneficiary gets access to any of his trust’s assets (if ever) is 100% contingent on the trustee’s independent judgment. In Florida the statutory test for whether or not you have a discretionary trust is found in F.S. 736.0504. Multi-generational discretionary trusts (often referred to as “dynasty” trusts) are the darlings of the estate planning world (see here); over the long term they deliver unbeatable tax savings and creditor protection benefits for most families (see here; here).

Case Study:

This case involves three irrevocable discretionary trusts created by the great-grandparents of John Edwards, who in 2004 adopted a son named Brindley Kuiper, which had the legal effect of adding Kuiper to the class of eligible beneficiaries for these trusts. Edwards’ biological son, Ryan Maxwell, a pre-existing member of the class of eligible beneficiaries for these same trusts, filed suit in 2014 claiming the adoption was a sham that diluted his stake in the family trusts. Maxwell argued he should have received notice of the adoption in 2004, which would have given him an opportunity to fight it in court. The trial court agreed and vacated Kuiper’s adoption order.

Not so fast said the 1st DCA. Because discretionary trust beneficiaries don’t have any fixed or vested property rights in their trusts, Maxwell can’t say for sure he would have been any better off if Kuiper’s adoption had never happened. And because he can’t be certain Kuiper’s adoption actually had an economic impact on him, Maxwell didn’t have legal standing to challenge it in court. No standing = reversal, so saith the 1st DCA:

In this case, Mr. Maxwell lacks standing to set aside the 2004 adoption because he wasn’t entitled to notice in the first place. He had no direct, immediate, and financial interest in the adoption. The interests Mr. Maxwell possesses as an eligible beneficiary to three family trusts are all contingent. See Stefanos, 673 So.2d at 13; Dennis v. Kline, 120 So.3d 11, 22-23 (Fla. 4th DCA 2013). The trusts are solely administered at the discretion of trustees. And Mr. Maxwell has no direct or immediate right to funds in the trust or control over trust-disbursement decisions. The trustees possess unilateral discretion to determine, for instance, if disbursements are made, when disbursements are made, and to whom (among the eligible beneficiaries) disbursements are made. See Blechman v. Estate of Blechman, 160 So.3d 152, 159 (Fla. 4th DCA 2015) (defining a contingent interest partly on the basis of whether it involves an event in the future, which may never happen and which lies entirely outside the control of the beneficiary to bring about with certainty). Because Mr. Maxwell does not possess direct, financial, and immediate interests in the trusts, he had no concomitant right to receive notice about the adoption that added Mr. Kuiper as an eligible beneficiary. And he cannot now have the adoption order vacated.

What’s the takeaway?

Being the beneficiary of a discretionary trust is usually nothing but upside. But you can’t have it both ways. If you can’t be taxed and your creditors can’t get at your trust assets because, as a discretionary beneficiary, you don’t have any fixed or vested property rights, then you can’t turn around and sue someone for diluting your non-existent property rights.