Florida Probate & Trust Litigation Blog

Florida Probate & Trust Litigation Blog

By Juan C. Antúnez of Stokes McMillan Antúnez P.A.

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Lessons from “Clarity on Capacity”: A UK-law perspective on the unique ethical challenges faced by estate planners representing clients with diminished capacity

Posted in Ethics & Malpractice Claims, Trust and Estates Litigation In the News

Clarity on Capacity, an excellent article in the March 2014 STEP Journal, examines how recent court cases have raised questions as to the continued suitability of the “Golden Rule”, which governs the ethical duties UK estate planners have when representing clients with diminished capacity.

Florida ethics Rule 4-1.14 and its ABA model-rules counterpart, Rule 1.14, address the unique ethical challenges faced by attorneys representing clients with diminished capacity. To say this is a “thorny” situation is putting it mildly, especially for estate planners, which means any concrete help we can get navigating these waters is incredibly valuable.

One way to work the problem is to come at it from the clinician’s viewpoint: what are the indicia of incapacity doctors and other therapists look for when diagnosing and treating adults with diminished capacity? For guidance on this front you’ll want to read a handbook published jointly by the the American Bar Association and the American Psychological Association entitled Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers, which I wrote about here.

Another way to work the problem is to come at it from a comparative-law perspective. How do estate planners in other parts of the world deal with this kind of situation? For example, our Rule 4-1.14 and the “Golden Rule” developed by English courts cover the same scenario: an estate planner representing a client with diminished capacity. But what’s interesting about the Golden Rule is its focus on building a record to counter future challenges to capacity in will contest cases. The Golden Rule was established in a 1975 opinion written by judge Templeman in Kenward v. Adams (1975) The Times 29 Nov, and provides as follows:

In the case of an aged testator or a testator who has suffered a serious illness, there is one golden rule which should always be observed, however straightforward matters may appear, and however difficult or tactless it may be to suggest that precautions be taken: the making of a will by such a testator ought to be witnessed or approved by a medical practitioner who satisfies himself of the capacity and understanding of the testator, and records and preserves his examination and finding.

This is excellent practical advice for any estate planner, no matter where on the planet he or she happens to be working.  But how has this rule played out in real life — especially in the litigation context? Has this good advice turned into a trap for the unwary? That’s the focus of Clarity on Capacity, an interesting article published in the March 2014 STEP Journal. It’s eye opening and well worth reading for Florida practitioners. Here’s an excerpt:

[The golden rule] is helpful insofar as it emphasises that solicitors and will writers must do what the circumstances reasonably require to satisfy themselves that the testator has capacity to make the will; that they must do what they reasonably can to prevent the will being challenged on the ground of want of capacity; and that, where the testator is aged or has suffered a serious illness, these duties will commonly require the making of the will to be witnessed or approved by a medical practitioner who satisfies themselves of the capacity and understanding of the testator, and records and preserves their examination and finding. It is especially helpful because recent research has shown how a ‘good social front’ can mislead someone who is not medically trained into thinking that a would-be testator has capacity.

. . .

It is unfortunate, however, that Templeman J expressed himself in sweeping terms, using the words ‘aged’ and ‘has suffered a serious illness’ without qualification. Indeed, he impliedly ruled out exceptions by saying that the precautions should ‘always’ be taken. If the sprightly widow has had a serious illness from which she has fully recovered, it cannot surely be appropriate, still less necessary, for her solicitor to get a doctor to confirm that she has the capacity to give her estate to her children equally.

. . .

A number of recent cases involving testamentary capacity have raised questions on the golden rule . . . In Sharp v Adam [2006] EWCA Civ 449 the rule was observed, but the trial judge held, largely on the basis of the evidence of experts who had not seen the deceased, that the will was invalid, and the Court of Appeal upheld his decision. In Key v Key [2010] 1 WLR 2020 the solicitor who took instructions for the will was strongly criticised for failing to observe the rule. In Wharton v Bancroft [2011] EWHC 3250, although lack of capacity was not pleaded, failure to comply with the rule was raised in support of a plea of undue influence. The judge said that the failure was irrelevant, because the solicitor had been called to make a will for a dying man.

In Hill v Fellowes Solicitors [2011] EWHC 61, a professional negligence claim against solicitors in respect of an inter vivos transaction, the judge said that there was ‘plainly no duty upon solicitors in general to obtain medical evidence on every occasion upon which they are instructed by an elderly client just in case they lack capacity’.

The remarks of the Court of Appeal in Burgess v Hawes have had their effect. They influenced the judge in Greaves v Stolkin [2013] EWHC 1140, although it was significant in that case that the solicitor who took instructions for the will had asked questions of the testator with a view to establishing his capacity. More importantly, they were usefully explained by the judge in Re Ashkettle (deceased) [2013] EWHC 2125. He said, among other things: ‘Any view the solicitor may have formed as to the testator’s capacity must be shown to be based on a proper assessment and accurate information or it is worthless.’

No reported case seems to have considered the research already mentioned, which shows how a ‘good social front’ can mislead someone who is not medically trained into thinking that a would-be testator has capacity. In Greaves v Stolkin, this research was mentioned, but the judge apparently thought it was irrelevant to the facts.

Someday All This Will Be Yours: A History of Inheritance and Old Age

Posted in Musings on the Practice of Law

One of the most famous sentences in literature is the opening of Leo Tolstoy’s novel Anna Karenina: “All happy families are alike; each unhappy family is unhappy in its own way.” While this may be great art, it’s nonsense in real life. Families caught up in inheritance disputes are, almost by definition, “unhappy”. Trusts and estates lawyers know all too well these unhappy families are often very much “alike” in fundamental ways — especially as litigants. That’s what makes professional experience so valuable; after a while you know what to expect and what your next steps should be (both in and out of court). But what of the past? Has the world changed so dramatically there’s not much we can learn from past inheritance disputes?

That’s a question Hendrik Hartog, a Princeton history professor, grapples with in Someday All This Will Be Yours, a fascinating study of over 200 New Jersey appellate opinions involving estate disputes (including trial transcripts for approximately 60 of those cases) decided as the agrarian 19th century turned into the industrial 20th (circa 1840 to 1940), and families began to face longer life expectancies without the safety nets of pensions, nursing homes, Social Security, Medicare and Medicaid we have today. All of these cases rested on the same underlying transaction: a promise by an older property owner to a younger person — usually a child or another younger relative, but sometimes an employee or neighbor. “Someday,” an old man or woman had said, “all this will be yours!” “When I die, I will leave you the land,” or “I will pay you for your time and effort,” or “you will inherit everything,” or “you will be treated as my own child.” “But until then, you must stay with me and work,” or “stay with me; care for me.” Or, “Don’t leave me!” When the older person hadn’t kept his or her promise, disputes arose, and a percentage of those disputes ended up in court.

While the litigants Hartog writes about may have been acting in historically specific ways, the family dynamics animating their disputes remain the same today. In the cases Hartog analyzed older property owners were using what property they had to counter one of the great fears of old age: loneliness. In addition to fears of loneliness, a yearning for care provided with “[l]ove — incorporating feelings of duty, kindness, sympathy, concern, and affection — also played a crucial role in old people’s strategies.” Property rights, fear of loneliness, a desire for lovingly provided care. Today’s estate planners see these same dynamics at play in their practices every day. In fact, we now have empirical evidence to back up the “folk” wisdom we’ve long taken for granted: loneliness kills. Research shows the effect of loneliness and isolation on mortality is equivalent to smoking 15 cigarettes a day, is equivalent to being an alcoholic, is more harmful than not exercising, and is twice as harmful as obesity (Holt-Lunstad, 2010).

But are we more inclined to sue today than we were a century ago? In other words, can Hartog’s case studies (and the extraordinarily detailed accounts of intimate family relationships offered by the trial transcripts) teach us something we can use today about how to either avoid litigation as estate planners, or successfully resolve these disputes as estate litigators? Short answer: Yes! Based on Hartog’s findings, things haven’t changed all that much. Here’s an excerpt:

One should not be surprised that people chose to litigate when such situations occurred. The moment of parental death was one that was widely understood [circa 1840 to 1940] as a distinctly legal moment in the life course. Inheritance, probate, and the transfer of familial assets were paradigmatic moments when everyone knew they had to deal with the law. Situations involving land and other valuable properties and their final disposition were ones in which, perhaps above all others in everyday life, potential litigants had an enormous incentive to sue. . . . [I]n this individualistic and capitalistic legal culture, such legal conflict was normal, although unpleasant, for family members. It remained a predictable event in a family’s history. Family members would find many disincentives to sue because of the disruption to or destruction of familial relationships. However, by the time litigation was initiated, often the family was already in deep conflict. The possibility of a negotiated settlement may have been long past.

If you read Someday All This Will Be Yours, which I highly recommend, don’t go looking for specific legal strategies (which I mistakenly did at first). Instead, approach the book for what it is: a richly textured study of how inheritance disputes played themselves out in a specific historical context. While the litigation tactics driving these cases may have evolved over time (for example, today most inheritance-agreement cases in Florida would be governed by F.S. 732.701, not the quantum meruit or specific performance arguments underlying these disputes circa 1840 to 1940), the “human” factor remains the same.

The unhappy family you represented last year (or a decade ago) is not, as Tolstoy claimed, “unhappy in its own way.” Nor were the unhappy families involved in estate disputes a century ago. As Hartog demonstrates, when you know what to look for, families caught up in these cases are much more “alike” than you’d expect. Identifying these patterns of behavior and learning from them is what informs this thing we call “professional judgment.” And that judgment is what sets us apart as lawyers (anyone can google a statute on the internet). That’s a lesson worth learning (or remembering), no matter how long you’ve been toiling away at this weird profession we call lawyering.

M.D.Fla.: Can you be found guilty of “defalcation” for billing a client in accordance with Florida’s statutory fee schedule?

Posted in Compensation Disputes, Ethics & Malpractice Claims

West v. Chrisman, Slip Copy, 2014 WL 4683182 (M.D.Fla. September 19, 2014)

According to the Supreme Court, a person accused of defalcation satisfies the required state of mind when he or she acts with a conscious disregard of a substantial and unjustifiable risk that his or her conduct will violate a fiduciary duty. A “substantial and unjustifiable risk” is one that, “considering the nature and purpose of the actor’s conduct and the circumstances known to him, its disregard involves a gross deviation from the standard of conduct that a law-abiding person would observe in the actor’s situation.”

If there’s anyone out there that still believes F.S. 733.6171 (the probate code’s attorney’s fee statute) or its trust-code equivalent (F.S. 736.1007) establishes a fee that’s “set” or otherwise blessed by Florida law, this case is going to be a rude awakening. Not only did billing in accordance with the statutory fee schedule not shield a probate attorney from getting his fees cut by 90%!, a bankruptcy court’s ruled he was guilty of defalcation for doing so.

How bad is a finding of “defalcation”? Pretty bad.

In Bullock v. BankChampaign, N.A., 133 S.Ct. 1754 (2013), the Supreme Court recently held that a finding of “defalcation” requires evidence of either “an intentional wrong” or “reckless conduct of the kind set forth in the Model Penal Code.” According to the Supreme Court, a person accused of defalcation satisfies the required state of mind when he or she acts with a conscious disregard of a substantial and unjustifiable risk that his or her conduct will violate a fiduciary duty. A “substantial and unjustifiable risk” is one that, “considering the nature and purpose of the actor’s conduct and the circumstances known to him, its disregard involves a gross deviation from the standard of conduct that a law-abiding person would observe in the actor’s situation.” Id. at 1760.

How could billing in accordance with Florida’s statutory fee schedule result in a court finding that you’ve acted in gross deviation from the standard of conduct a law-abiding person would observe? Read on . . .

Case Study:

This case involves a $23 million estate and a fee dispute between the decedent’s former estate planning/probate attorney (“West”), and the decedent’s daughter (“Aleta”). After her father’s death Aleta signed West’s fee agreement, which proposed that his legal fees be “calculated pursuant to the provisions of Florida Statutes § 733.6171 and § 737.2041,” but included no calculation of the fees. In other words, the fee would be based on a percentage value of the estate, instead of West’s billable hourly rate. When the fee agreement was signed West was also serving as co-trustee of the decedent’s trust, a fact which plays a big part in the bankruptcy court’s ruling. (Anytime an estate planner writes himself into his client’s trust agreement as a trustee, it’s an ethical red flag, see here.)

Applying the fee schedule contained in F.S. 733.6171, West estimated his firm’s fees would be $355,887, based on a percentage value of the estate. Aleta testified that she was “shocked” by that amount, but that West told her that the bill was “set by Florida statute and law,” and that, prior to his passing, her father had known about it. West and his paralegal both deny ever having said any such thing. Anyway, Aleta made two payments (totaling $237,258) before falling out with West, ultimately suing him in state court seeking a return of the fees already paid.

While the state case against him was pending, West filed a voluntary petition for Chapter 7 bankruptcy. Aleta sued West in the bankruptcy proceeding, alleging that he “had abused his fiduciary position as Co–Trustee of the Trust to fraudulently enter into a fee arrangement with the Estate and the Trust.” Aleta sought a determination that West therefore owed a debt equaling the fees already paid him under the arrangement, that would not be dischargeable by his bankruptcy petition.  Under 11 U.S.C. 523(a)(4), debts “for fraud or defalcation while acting in a fiduciary capacity” are not dischargeable under the bankruptcy code (as I’ve previously reported here, here).

To say West got clobbered in his bankruptcy trial is putting it mildly. First, the bankruptcy court concluded that our probate code’s percentage-based approach to compensation does not apply in this case “because clearly that would lead to an unreasonable fee.” Next, using the lodestar method the court determined a reasonable fee of only $24,780, which, when subtracted from the $237,258 in fees actually paid to West, resulted in a total debt of $212,478. Finally, the bankruptcy court concluded that West had falsely represented to Aleta that the fee was set by Florida law and that Aleta had justifiably relied upon that statement in entering into his fee agreement. The bankruptcy court thus concluded that West had made fraudulent representations in violation of his fiduciary duties, and that any fees West owed to Aleta would not be dischargeable pursuant to 11 U.S.C. §§ 523(a)(2)(A) and (a)(4).

For our purposes, the key ruling on appeal affirming the bankruptcy court’s defalcation ruling against West is the following:

Here, West was Co–Trustee before he entered into the Fee Agreement with Aleta. Accordingly, as the Bankruptcy Court held, he had the duty to do more than simply not to act unreasonably. He had the duty to “administer the trust in good faith, in accordance with … the interests of the beneficiaries,” and to “administer the trust solely in the interests of the beneficiaries.” Fla. Stat. §§ 736.0801 and 736.0802 (emphases added). And he had “[the] obligation to make full disclosure to the beneficiary of all material facts.” First Union Nat’l Bank v. Turney, 824 So.2d 172, 188 (Fla. 1 st DCA 2001).

By entering into the Fee Agreement without affirmatively advising Aleta that such a fee was not mandatory or explaining any alternatives to her, West acted in reckless disregard of these duties. West is an experienced attorney who has practiced law for many years. He admits that he knew that the provisions of Florida Statutes §§ 733.6171 and 737.2041 were not mandatory,[FN3] and that he had a duty to minimize attorneys’ fees, see Doc. 1–125 at 103. Despite having this knowledge and experience, however, instead of advising Aleta of her options, West pushed Aleta to sign the fee agreement, even going so far as to tell her that it was “required” by Florida law. At the very least, West acted in reckless disregard of his duties of loyalty and candor, and grossly and egregiously deviated from the standard of conduct that a law-abiding fiduciary would observe. Accordingly, the Court will affirm the Bankruptcy Court’s finding that West committed a defalcation while acting as a fiduciary, in violation of 11 U.S.C. § 523(a)(4).

FN3. Indeed, West makes much of the fact that Paragraph 3 of the Fee Agreement uses the word “propose,” Doc. 15 at 39–42, and Wigglesworth testified that West sometimes charged flat fees, Doc. 1–77 at 192.

Lesson learned?

We can all agree hourly billing is a terrible way to do business. So what’s to be done? Don’t wait for a top-down solution. Legislating a one-size-fits-all fix doesn’t work (as the tortured history of F.S. 733.6171 makes abundantly clear, see below). The only thing we can do is work the problem from the bottom up, one client at a time, adjusting to the particular facts of each case. For example, if your engagement agreement provides for billing in accordance with Florida’s statutory fee schedule found in F.S. 733.6171, you’ll want this same agreement to contain text affirmatively advising the client that such a fee is not mandatory and explaining possible hourly-billing alternatives. According to the bankruptcy judge in this case, this omission lead directly to the defalcation ruling.

For an excellent discussion of how we can use the latest in behavioral finance to inform our billing practices, you’ll want to read a white paper by Chicago estate planner Louis Harrison entitled Billing in a Pareto Optimal World, which he states “is a result of ten years of analysis and research, and reliance on the principles of behavioral finance to explain irrational client behavior.” I think Harrison’s one of the best speakers in our field. Anyway, here’s his “macro takeaway” as applied to hourly billing:

How interesting behavioral finance is to what we do on a day to day basis. We would theorize that focus on this area could be the single greatest untapped value to us as practitioners. But it does require thought and focus, and effort for which no hourly payment is immediately made. Creativity on bonus structures is perhaps our greatest missed opportunity. As the tired metaphor goes, “we can’t catch any fish if our pole is not in the billing lake to begin with.” We sometimes become so focused on short term results associated with hourly billing that we miss the retirement forest for the billing trees.

I couldn’t agree more. Now if only I could use some behavioral finance magic to get myself to follow his good advice!?

How did we get here?

According to the Florida Bar’s pamphlet on attorney’s fees, there “are more than 200 Florida Statutes which allow for an award of attorney’s fees in certain legal actions.” I’m sure each one of those fee statutes has its own back story, and F.S. 733.6171 is no exception. The spark that lead to the current iteration of the statute was the Florida supreme court’s ruling in In re Estate of Platt, 586 So.2d 328 (Fla. 1991), which concluded that probate courts could not — as a matter of law — approve attorney’s fees based solely on a fixed percentage of the value of the estate. Instead, probate courts are required — as a matter of law — to evaluate contested fees by using the lodestar method (which is all about hourly billing, see here).

After Platt the Bar swung into action, coming up with a series of legislative changes responding to the court’s adoption of the lodestar method and also mounting public dissatisfaction with the then existing probate system (as captured in this 1994 Pulitzer Prize winning series of editorial reports). The statute we have today was passed in 1995. Although it says nothing about “billable hours,” when challenged, courts will (because as a matter of law, they must) apply the lodestar method, which means that in the absence of agreement we’re stuck with the tyranny of the billable hour. For an entertaining blow-by-blow history of the legislative process leading up to our current fee statute, you’ll want to read Paying for Personal Representatives and their Attorneys May Cost You an Arm and a Leg, a 1994 article published in the UM Law Review.

Survey: top three reasons families engage in estate planning: (1) avoid probate (59%), (2) minimize discord among beneficiaries (57%), and (3) protect children from mismanaging their inheritances (39%).

Posted in Trust and Estates Litigation In the News

7th Annual Industry Trends Survey reports that the top three reasons families engage in estate planning are to: (1) avoid probate (59%), (2) minimize discord among beneficiaries (57%), and (3) protect children from mismanaging their inheritances (39%).

WealthCounsel’s 7th Annual Industry Trends Survey looked at the business challenges faced by estate-planning professionals in 2013 and provided insight into what motivates clients to engage in planning.

According to the survey, the top two reasons families engage in estate planning revolve around privatizing the wealth-transfer process (i.e., “avoid probate”: 59%), and the threat of inheritance disputes (i.e., “minimize discord among beneficiaries”: 57%). In my opinion, the single most powerful tool we have as planners responding directly to both of these concerns is the mandatory arbitration clause. These clauses both privatize the dispute-resolution process and minimize the family discord caused by an overworked and underfunded public court system. Back in 2007 Florida was the first state in the nation to adopt legislation expressly authorizing these clauses in wills and trusts (for my write up of the statute and sample clauses, see here).

If you look at any bank, trust company or brokerage firm’s account opening agreement, you’ll find a mandatory arbitration clause in there. If arbitration clauses make sense for corporate institutions with the resources and experience needed to best evaluate the pros and cons of our public court system, why don’t they also make sense for our clients? Answer: no good reason. I’ve written before on why privately funded and administered arbitration proceedings are a better dispute-resolution process for estate litigation. Whether you agree with me or not, there’s no denying this fact: arbitrating inheritance disputes responds directly to the top concerns our clients want us to focus on.

2d DCA: Surviving spouse’s Homestead Rights vs. ex-spouse’s contractual rights under Marital Settlement Agreement. Who wins?

Posted in Homestead Litigation, Marital Agreements and Spousal Rights

Friscia v. Friscia, — So.3d —-, 2014 WL 4212689 (Fla. 2d DCA August 27, 2014)

2d DCA: “[T]he homestead status afforded to the Decedent’s interest in the marital home does not negate the terms of the MSA. . . . Because the MSA provides that it is binding on the parties’ “respective heirs, next of kin, executors and administrators,” . . . Second Wife [is] bound by its terms as well. Unfortunately for the Second Wife, the . . . provisions of the MSA result in her having a life tenancy in the Decedent’s interest in name only.”

It’s not unusual for marital settlement agreements (“MSAs”) to pop up as major players in contested probate proceedings (see here, here, here), what is unusual — which makes this case a “must read” for probate lawyers — is how the MSA’s contractual provisions trumped one of the sacred cows of Florida inheritance law: a surviving spouse’s homestead rights.

Case Study:

The decedent (“Husband”) entered into a MSA as part of his 2008 divorce from “Former Wife”. They had two children together. After the divorce Husband and Former Wife owned their “Marital Home” 50/50 as tenants in common. Under their MSA, Husband and Former Wife agreed she could continue living in the Marital Home until their youngest child graduated from high school, at which point Former Wife had the option of either buying out Husband’s 50% share in the property or selling it and splitting the net sales proceeds 50/50 with Husband.

Husband married again (“Second Wife”), then a few years later died in 2011. Second Wife was the personal representative of Husband’s estate. Husband’s youngest child had yet to graduate from high school in 2011, which meant Former Wife’s occupancy rights under the MSA remained in effect. Second Wife tried to circumvent the MSA by taking control of Husband’s 50% share of the Marital Home.

[1] Can a person have two homestead properties? YES

Second Wife argued the Marital Home didn’t qualify as creditor-protected homestead property because Husband wasn’t living in the house when he died, so she was free to take control of it as PR and sell it pay estate obligations. Wrong answer. As I’ve previously written here, under Florida law it’s possible to have more than one homestead property, even if you’re not living in the second house.

In this case, as in [Beltran v. Kalb, 63 So.3d 783 (Fla. 3d DCA 2011)], the final judgment of dissolution did not operate to transfer the Decedent’s interest and the former marital home had not been deeded when the Decedent died. Thus, the Decedent and the Former Wife still owned the former marital home as tenants in common at the time of his death. See Beltran, 63 So.3d at 786–87. And the fact that the Former Wife had been awarded exclusive use and possession of the marital home did not in itself extinguish its homestead protection. See id. at 787. The Decedent’s interest retained its homestead protection because the Decedent’s sons, whom he still supported financially, continued to live on the property. See id.; see also Nationwide Fin. Corp. of Colo. v. Thompson, 400 So.2d 559, 561 (Fla. 1st DCA 1981) (“[T]he Florida Constitution does not require that the owner claiming homestead exemption reside on the property; it is sufficient that the owner’s family reside on the property.”).

[2] Did the MSA’s sales clause waive homestead property’s creditor protection? NO

Having struck out on her first homestead argument, Second Wife then claimed that the homestead property’s creditor protection shield had been waived by the MSA’s sale clause, so here again she was free to take control of it as PR and sell it pay estate obligations. My guess is that most probate lawyers would have bet on Second Wife winning this point. Why? Because not too long ago in Cutler v. Cutler (a case I wrote about here), the 3d DCA held that a Will’s sale’s clause stripped the decedent’s homestead property of its creditor protection, freeing the estate’s PR to take control of the property and sell it to pay estate obligations. Why the different outcome this time around? Because for probate purposes the homestead property’s protected status gets decided when the decedent dies. If the sales clause applies at death (as it did in Cutler), creditor protection falls; if the sales clause does not apply at death (as in this case), creditor protection stands.

Here’s what the 2d DCA had to say in terms of the importance of timing:

As relates to this case, the operative time frame for determining homestead status is the time of the owner’s death because a property’s character as homestead dies with the decedent. Rohan Kelley, Homestead Made Easy, 65 Fla. B. J. 17, 18 (Mar. 1991); see also Wilson v. Fla. Nat’l Bank & Trust Co. at Miami, 64 So.2d 309, 313 (Fla.1953). “Although the property is no longer ‘homestead,’ the exemption from forced sale ‘bonds’ to the title and transfers to the heir or devisee, if the constitutional conditions are met.” Kelley, supra, at 18.

Again, because the MSA’s sales clause had yet to kick in when Husband died, it didn’t waive the homestead property’s creditor protection shield, which meant Second Wife couldn’t take control of it as PR and sell it to pay estate obligations:

[T]he Decedent’s agreement to sell the marital home was not necessarily inconsistent with the homestead right protecting his interest in the home from forced sale. See In re Ballato, 318 B.R. 205, 209 (Bankr.M.D.Fla.2004) (holding that a provision of a final judgment of dissolution providing for the sale of the marital home and the division of the proceeds does not in itself preclude homestead status on one spouse’s half interest); Barnett Bank of Cocoa, N.A. v. Osborne, 349 So.2d 223, 223 (Fla. 4th DCA 1977) (“[W]e determine the trial court correctly ruled that the property was subject to the homestead exemption claimed by the former husband, notwithstanding the former husband and wife having been divorced and the wife entrusted by the decree with custody of the children and possession of the home” until the youngest reaches majority.).

Similarly, the Decedent’s agreement to divide the proceeds was not necessarily inconsistent with his homestead right protecting his share of the proceeds from claims of his creditors. See Kerzner, 77 So.3d at 217 (holding that a husband’s agreement to sell the marital home and pay any “liens or encumbrances” on the home with the proceeds does not constitute a waiver of homestead protection from claims of his creditors because a judgment held by a creditor is not a lien or encumbrance on the homestead property).

Thus, the MSA provision providing for disposition of the marital home did not constitute a waiver of the Decedent’s homestead protections from forced sale or the use of any sale proceeds to pay his creditors.

[3] Will surviving spouse’s homestead rights trump ex-wife’s contractual rights under the MSA? NO

This is the part of the case I find most interesting. A key component of the MSA was Former Wife’s right to keep living in the Marital Home until the kids were out of high school. This contractual right conflicts directly with Second Wife’s right to a life estate in Husband’s 50% share of the Marital Home, which she’s entitled to under F.S. 732.401(1) if it’s homestead property. Not one to wait around, once she lost her homestead disqualification argument, Second Wife showed up at First Wife’s doorstep and demanded to be let in so she could enforce her homestead life-estate rights. As reported by the 2d DCA, this bit of “self help” didn’t end well:

Second Wife went to the former marital home “to exercise her right in the life estate” and Thomas [Husband's older son] refused entry. When the Second Wife persisted with her attempts to gain entry, Thomas called the police and they escorted the Second Wife from the property. [Second Wife] argued that, as a life tenant, [she] has an unrestricted right of access to the property.

Why didn’t Second Wife’s ploy work? Because under the MSA’s successors-in-interest clause, Husband’s executor (i.e., his PR), heirs,  and “next of kin” (including his Second Wife) were bound by the terms of the MSA as they relate to the Marital Home, even if that means his new wife ends up with a life estate “in name only.”

[T]he homestead status afforded to the Decedent’s interest in the marital home does not negate the terms of the MSA. If the Decedent had lived, the Former Wife would have been entitled to exclusive use and possession of the former marital home. . . . Because the MSA provides that it is binding on the parties’ “respective heirs, next of kin, executors and administrators,” . . . Second Wife [is] bound by its terms as well. Unfortunately for the Second Wife, the . . . provisions of the MSA result in her having a life tenancy in the Decedent’s interest in name only.

Lesson learned?

This “homestead” case has attracted a good amount of commentary (e.g., see here, here). My guess is that most probate lawyers will read it and scratch their heads in consternation, while most divorce attorneys will do the same and feel vindicated. Why? Because at its core this case really isn’t about homestead law, what it’s really about is the lengths to which our courts will go to enforce settlement agreements, even when that enforcement action takes place as part of a probate proceeding involving parties who never signed the contract (like a new wife!).

As noted by the 1st DCA in Pierce v. Pierce (a case I wrote about here), the “mediation and settlement of family law disputes is highly favored in Florida law.” My personal experience is that judges will bend over backwards to hold parties to their settlement agreements, especially in family disputes. If you’re involved in an inheritance dispute that revolves around enforcing an MSA, step one is to get the dispute before the right judge (which may be your family-law judge instead of your probate judge, see here). Step two: hammer away at the point that litigating parties make big sacrifices when they settle their disputes short of trial. The benefit of that bargain is meaningless if the deal goes up in smoke when one side dies. The way we make sure that doesn’t happen is by enforcing MSAs in the probate context, even if that means someone’s homestead rights get sacrificed in the process.

Changing trustees can be contentious, but there are ways for beneficiaries to ease the process.

Posted in Trust and Estates Litigation In the News, Trustees In Hot Water

“Choosing a trustee is hard — but getting rid of one is harder. Beneficiaries who choose to switch trustees can find the process costly, drawn out, and unpleasant. But it may be getting a bit easier. Last year, the Superior Court of Pennsylvania ruled that Jane McKinney, the beneficiary of her parents’ trusts, was allowed to switch trustees from PNC Bank — the trustee after a series of bank mergers — to SunTrust Delaware Trust, which was geographically closer to her home.” Source: Dumping a Trustee, by Amy Feldman, Barron’s (September 27, 2014).

As a family trust moves into its second or third generation, it’s almost inevitable that someone’s going to be unhappy with the trustee. The good news is that most well-drafted trust agreements include a mechanism for replacing trustees as and when needed. Now the bad news: in the absence of good drafting trust beneficiaries may have to sue for the removal of their trustee. In the past the only grounds for that kind of suit was a showing of some kind of malfeasance or negligence. This type of litigation is fraught with uncertainty and usually very expensive to pursue. Fortunately for Florida trust beneficiaries, as of 2007 we’ve adopted § 706(b)(4) of the Uniform Trust Code, which is the UTC’s “no fault” trustee removal provision. This UTC provision is incorporated into our trust code at F.S. 736.0706(2)(d), and it empowers a court to remove a trustee without cause if:

[R]emoval is requested by all of the qualified beneficiaries, the court finds that removal of the trustee best serves the interests of all of the beneficiaries and is not inconsistent with a material purpose of the trust, and a suitable cotrustee or successor trustee is available.

Here’s the official commentary to the UTC provision, explaining the rule’s underlying rationale:

It has traditionally been more difficult to remove a trustee named by the settlor than a trustee named by the court, particularly if the settlor at the time of the appointment was aware of the trustee’s failings. . . . Because of the discretion normally granted to a trustee, the settlor’s confidence in the judgment of the particular person whom the settlor selected to act as trustee is entitled to considerable weight. This deference to the settlor’s choice can weaken or dissolve if a substantial change in the trustee’s circumstances occurs. To honor a settlor’s reasonable expectations, subsection (b)(4) lists a substantial change of circumstances as a possible basis for removal of the trustee. Changed circumstances justifying removal of a trustee might include a substantial change in the character of the service or location of the trustee. A corporate reorganization of an institutional trustee is not itself a change of circumstances if it does not affect the service provided the individual trust account. Before removing a trustee on account of changed circumstances, the court must also conclude that removal is not inconsistent with a material purpose of the trust, that it will best serve the interests of the beneficiaries, and that a suitable cotrustee or successor trustee is available.

To date we haven’t had a Florida appellate decision discussing F.S. 736.0706(2)(d). So if you’re involved in a case seeking to apply this statute, for now all you can do is look to rulings from sister states that have also adopted the UTC’s “no fault” approach. Which brings me to In re Jane McKinney Descendants’ Trust, a 26-page scholarly, well written and thoughtful Pennsylvania appellate opinion that’s received a good amount of national attention and is a “must read” for trust lawyers working in UTC jurisdictions (like Florida). Here’s an excerpt from a recent Barron’s piece entitled Dumping a Trustee reporting on the case:

Last year, the Superior Court of Pennsylvania ruled that Jane McKinney, the beneficiary of her parents’ trusts, was allowed to switch trustees from PNC Bank — the trustee after a series of bank mergers — to SunTrust Delaware Trust, which was geographically closer to her home. The case was important because the court didn’t require McKinney to show any cause, such as negligence or bias in its dealings, issues that historically would have been required in forcing a trustee to step aside. Instead, the court ruled that “a string of mergers over several years, resulting in the loss of trusted bank personnel, coupled with the movement of a family from Pennsylvania to Virginia, constitutes a substantial change in circumstances.”

Although the UTC’s no-fault approach is a vast improvement over traditional trust law, it does impose one very significant hurdle: unanimous consent by all of the trust’s beneficiaries. As reported in the Barron’s piece, this may be a lot harder than you’d expect:

It’s especially problematic, if all (or a majority) of a trust’s multiple beneficiaries need to sign off on a change of trustee. A pending Washington, D.C., case revolves around the Tompkins family trust; some of its 94 beneficiaries want to switch trustees. While the Tompkins case may be extreme, getting agreement even among four children after the parents have died may prove difficult enough. “We’ve seen removal delayed because the beneficiaries cannot agree,” says Magill. “It forces shared decision-making that isn’t suited to the circumstances.”

Lesson learned?

Good drafting pays off; include easy-to-execute provisions for removing trustees in all of your trust agreements.

“Roughly 70% of families lose a chunk of their inherited wealth, mostly due to estate battles.” How to manage estate litigation risk? Think “process” . . . then think “mandatory arbitration”

Posted in Trust and Estates Litigation In the News

Source: When Heirs Collide, Wall Street Journal (Sept. 26, 2014).

Accenture estimates that $30 trillion will pass from Boomers to Millennials over the next 30 years. Will this intergenerational wealth transfer actually happen? Who knows? At one time Boomers were expected to benefit from a similar windfall of equally gargantuan proportions — some $41 trillion at the time of this study (2003). Then reality stepped in, the “great recession” hit (likely the worst global recession since World War II), incomes stagnated, people lost their jobs. More recent estimates now put the expected Boomer inheritance at $8.4 trillion.

Managing uncertainty:

Uncertainty is unavoidable, the best we can do is manage it. And good estate planning is all about managing uncertainty. The trick is knowing which uncertainties or “risks” to focus on. Traditionally, the risk factor most estate planners and their clients spent most of their time fretting about was taxes. In reality, estate litigation poses a much greater risk for most people. According to this study fewer than 2 out of every 1,000 Americans who die — 0.14% — owe any estate tax whatsoever because of the high exemption amount (which has more than quadrupled since 2001). By contrast, the potential wealth-destroying risk posed by estate litigation is exponentially greater. In fact, according to a study cited this weekend in a WSJ piece entitled When Heirs Collide, it’s a risk that actually impacts around 70% of all families:

Roughly 70% of families lose a chunk of their inherited wealth, mostly due to estate battles, according to research conducted over two decades by the Williams Group, a San Clemente, Calif., firm that helps families avoid such conflicts.

How to manage estate litigation risk? Think process . . . then think mandatory arbitration:

Until fairly recently most estate planners (and their clients) assumed there was nothing you could do from a planning perspective to improve the process for resolving estate disputes once they broke out, all we could do was focus our planning energies on prediction and prevention. Preventive planning is important, be we can’t stop there. If “[r]oughly 70% of families lose a chunk of their inherited wealth, mostly due to estate battles,” planning for a better dispute-resolution process needs to be a high priority. So how do we do that?

Step one, opt out of all the unpredictability and qualitative limitations inherent to an overworked and underfunded public court system that asks our probate judges to juggle thousands of cases at a time. (In Miami-Dade – on average – each of our probate judges took on 2,848 new cases in FY 2012-13, and in Broward the figure was even higher at 3,105/judge.) Step two, “privatize” the dispute resolution process to the maximum extent possible via mandatory arbitration clauses in all our wills and trusts, which are enforceable by statute in Florida (F.S. 731.401). I’ve written before on why I believe privately funded and administered arbitration proceedings are a better dispute-resolution process for estate litigation. Whether you agree with me or not, there’s no denying this fact: estate litigation is a real threat potentially impacting every one of our clients. One way or another these disputes will get resolved. Planning for that eventuality requires a focus on process, not just prevention.

Interview with a Probate Lawyer: Frank T. Adams

Posted in Interview with a Probate Lawyer, Marital Agreements and Spousal Rights

Frank T. Adams of Dunwody White & Landon, P.A. in Coral Gables, Florida, was on the winning side of Kelley v. Kelley, a case involving a collateral attack on a “quickie” Nevada divorce in connection with a Florida inheritance dispute.

Frank T. Adams of Dunwody White & Landon, P.A. in Coral Gables, Florida, was on the winning side of Kelley v. Kelley, an interesting 4th DCA opinion I wrote about here involving a collateral attack on a “quickie” Nevada divorce in connection with a Florida inheritance dispute.

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

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

[A] Once the decedent’s son abandoned the counts in the complaint challenging the validity of the will based on lack of testamentary capacity or mistake, he was left with his challenge to the exercise of the power of appointment in favor of Joanna by attacking the 1979 Nevada divorce. At both the trial court level and on appeal we relied on the fact that under Nevada law the son could not challenge the parent’s divorce. Nevada law precludes a challenge to the divorce proceedings from anyone other than the parties. If Nevada law would not allow Gordon, III to challenge the divorce, how could a Florida court grant those rights of the son. The court did not even need to get to the issue of the validity of the 1979 divorce. There was a 30+ year old decree from Nevada and no one with the right to challenge it. Obviously the decedent was not challenging it and the divorced wife (Gordon, III’s mother) could not challenge it because (i) she had been the petitioner in the divorce proceedings (is she going to tell the Nevada court that she committed a fraud upon it) and (ii) she IS REMARRIED (obviously she believes the 1979 divorce is valid). Since Gordon, III had no right to challenge the Nevada divorce, that count properly should be dismissed on a Motion to Dismiss.

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

[A] I think the courts got it right by seeing the case as controlled by the full faith and credit clause of the US Constitution. While we had several other arguments (in my mind most notably a lack of standing*) the best way for the courts to resolve the issue was to confirm the inability of our courts to overturn a sister-state’s order (from a case where the court had personal jurisdiction over the parties to that suit). We left the courts with no other choice, short of invalidating a 30 year old decree.

*The provisions in Gordon Jr’s Will exercising the power of appointment provided that if Joanna did not survive Gordon, Jr, then the trust assets (under the Gordon I trust agreement) were distributable to the charities. Since the charities were permissible appointees, even if Joanna was not the surviving spouse the trust assets should pass to the charities and not to Gordon, III, as the taker in default. The only remaining count did not claim that the charities were impermissible appointees.

[Q]  Do you think there’s anything that could have been done in terms of better estate planning to avoid this litigation or at least mitigate its financial impact on the family?

[A] In addition to being the attorney for the personal representative, I was Gordon Jr’s attorney and the draftsman of his Will. I had drafted Mr. Kelley’s prior documents and when he came in and told me that he wanted to cut his son out of his estate plan, obviously my antennae went up. I did what I have always done when such a case arises: (i) I discussed the client’s decision with him at length and, on more than 1 occasion; (ii) advised him that this was his, and only his, decision to make, but he needs to think long and hard about the decision – if you have any doubts, error on the side of including your child in the estate plan; (iii) spoke with Mr. Kelly again, a week after our meeting to confirm his decision to cut out his son; (iv) highlighted the fact that his son was cut out of the estate plan, when I forwarded the initial drafts to him; (v) went over every provision in the documents with Mr. Kelley, in person, before the documents were executed, making sure (a) he understood the documents; (b) he understood the consequences of his decision; (c)the documents accurately reflected his intentions; and (e) the decision was his alone (concluding in my own mind that he had testamentary capacity and was not being unduly influenced by anyone). Throughout the process I took copious notes, understanding that a will contest was likely to occur and that my estate planning file would likely be subject to disclosure through discovery. I feel I did all I could; and that was borne out by the fact that the counts in the original complaint based upon Incapacity, Mistake and Undue Influence, were all dropped by the son. During the estate planning, I really could not see coming a challenge to Mr. Kelley’s prior divorce (more than 25 years prior to the planning), in light of a marriage to Joanna of more than 20 years and the fact that I knew his ex-wife was also remarried.

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

[A] When a client wants to cut out a child you must immediately go into litigation mode. Expect there will be a contest, so make sure you take extra steps to make sure, in your own mind, that the testator has testamentary capacity. DOCUMENT your file, but keep in mind that it will become the subject of discovery.

One thing I do not believe I will do as a routine matter, will be to question the validity of the client’s prior divorce. While I will continue to question where and when the client got divorced and ask for a copy of the divorce decree for my file, I will not go beyond that and investigate the details of that divorce. While the court did not address the issue, what would have been the worst consequence if Gordon, III had been permitted to challenge the Nevada divorce, would have been the impact on both the estate planning and the probate. In the estate planning, it would have required the planner to interrogate his own client about the prior divorce and perhaps even discuss the matter with the divorce attorney who handled the matter. That would have been a nightmare. In the probate, when there is an intestacy or an election to take an elective share and either the decedent or the surviving spouse had been married previously, I require a copy of the divorce decree(s). (I have had a case where the decedent was never divorced from his prior spouse to the “surviving spouse” and was thus denied an elective share.) If the court had sided with Gordon, III, the probate attorney would have to not only obtain a copy of the divorce decree, but would also have to conduct a full investigation into the validity of those proceedings.

4th DCA: If a probate creditor files his “independent action” in the wrong division of the circuit court, should the action be dismissed or transferred?

Posted in Creditors' Claims

West v. West, — So.3d —-, 2013 WL 5989234 (Fla. 4th DCA November 13, 2013)

4th DCA: “[W]hile the circuit court is divided into divisions for efficiency in administration, all judges of the circuit court exercise the court’s jurisdiction, and cases filed in the wrong division should be transferred to the proper division.”

One of the decedent’s two sons claimed his father owed him over $50,000 when he passed away. To collect on this debt son filed a creditor claim against his father’s estate. Other brother objected, which triggered the obligation under F.S. 733.705 to file an “independent action” to adjudicate the claim. The creditor-brother, who also happened to be his father’s personal representative, had apparently gotten comfortable in the probate division, because he filed his independent action as an adversary proceeding in the circuit court’s probate division, rather than filing a new complaint in the circuit court’s civil division. According to local Administrative Order 6.102–9/08, that was a mistake. So how do you fix this mistake? Do you transfer the improperly filed claim or dismiss it? The probate judge dismissed it. Wrong answer says the 4th DCA, the case should have been transferred, here’s why:

The single question we answer is whether the trial court should have transferred the case to the civil division. The answer is yes.

In 2008, the chief judge of the Fifteenth Circuit signed Administrative Order 6.102–9/08, which declared that “independent actions” be filed in the civil division. The personal representative filed the claims in the wrong division, and he could not re-file his petition in the civil division because the statutory thirty-day period expired. See § 733.705(5), Fla. Stat. (2011). His only viable options were to have his claim transferred or to obtain an extension of time. The trial court denied him both.

We have previously acknowledged that, in a situation where a complaint should have been filed in the probate division, the court should not dismiss the case solely because it was filed in the wrong division. Grossman v. Selewacz, 417 So.2d 728, 730 (Fla. 4th DCA 1982) (citing In re Guardianship of Bentley, 342 So.2d 1045 (Fla. 4th DCA 1977)). “[W]hile the circuit court is divided into divisions for efficiency in administration, all judges of the circuit court exercise the court’s jurisdiction, and cases filed in the wrong division should be transferred to the proper division.” Id.

While the personal representative did not file a motion to transfer, he did argue that transfer was the correct remedy.

As the Third District explained:

In the instant case the [trial] court did not consider the question of transfer, and there is nothing in the record to show that it was requested to do so. Nevertheless, we feel that in construing the rule to produce a just result (as we conceive it our duty to do) it is necessary for us to hold that the court should transfer rather than dismiss the cause.

Gross v. Franklin, 387 So.2d 1046, 1048 (Fla. 3d DCA 1980) (emphasis added).

The trial court erred in not transferring the personal representative’s petition to the civil division.

Lesson learned?

In this case the 4th DCA addresses the same basic issue covered by the 3d DCA in its Kates opinion, which I wrote about here. Bottom line, all circuit court judges have the same inherent authority; it doesn’t matter if your judge’s deciding a will contest, adjudicating a murder trial, or enforcing an alimony claim: same authority. If you’re convinced a claim’s being litigated in the wrong division of the right circuit court (in other words, you’re not challenging venue or the circuit court’s subject matter jurisdiction), what you need to do is have the case transferred to the correct division — NOT move for dismissal. At its core this is an administrative-convenience argument, not a jurisdictional or venue challenge.

Note to readers:

The linked-to opinion above was first published in 2013. 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.

4th DCA: What’s it take to collaterally attack a “quickie” Nevada divorce as part of a Florida inheritance dispute?

Posted in Marital Agreements and Spousal Rights, Practice & Procedure

Kelley v. Kelley, — So.3d —-, 2014 WL 4427275 (Fla. 4th DCA September 10, 2014)

4th DCA: “The driving force behind Nevada’s statutory impediment on collaterally attacking divorce decrees has its origins in the state’s decision to establish itself as a premiere divorce destination. A low barrier to attacking a Nevada divorce decree would have been bad for business.”

In this case a disinherited son contested his father’s estate on the grounds that his father wasn’t “legally” married at the time of his death, thus excluding his surviving spouse as a valid beneficiary of a multigenerational family trust. This kind of status-based challenge is a common line of attack in inheritance disputes. For example, inheritance cases can turn on a person’s status as a validly “adopted” heir (click here), or status as a true “descendant by blood” (click here), or status as a “posthumously” conceived child (click here), or status as a “legally” recognized father (click here), or status as a “legally” married spouse (click here). This is what happened in the Kelley case above.

Case Study:

The seeds of this controversy were planted over 50 years ago in 1956 when Gordon P. Kelley (“Gordon I”) created the Gordon P. Kelley Trust Fund, an irrevocable trust benefiting his children for life, including his son “Gordon Jr.” Under the terms of the Kelley trust when Gordon Jr. died he had a limited power of appointment, exercisable in his Will, to transfer the remaining assets of his trust to or in further trust for his surviving “spouse,” any descendants of Gordon I, and certain charities. If Gordon Jr. didn’t exercise this power, the trust fund divested 100% by default to his son, Gordon Kelley III (“Gordon III”).

Gordon Jr. exercised the power of appointment in favor of his current wife, Joanna Kelley (“Joanna”), and three charities. Gordon III got nothing. According to the 4th DCA Gordon III sought to invalidate his father’s power of appointment on several grounds, including Joanna’s status as a legally married spouse:

Gordon III sought a declaration finding Gordon Jr.’s exercise of his power of appointment invalid since Joanna was not his legal spouse, and thus was “not a permissible appointee” under the Kelley Trust. The count alleged that in 1979 Gordon Jr.’s first wife, Holly Burguieres, “appeared in Nevada for a ‘quickie divorce’” and secured a divorce decree after falsely asserting she was a resident of Nevada. Evidence of the ruse was allegedly memorialized by a financial agreement confirmed and incorporated by the trial court in its final dissolution judgment, which reflects that Burguieres actually resided in Mexico City.

Alleging that neither Burguieres nor Gordon Jr. satisfied Nevada’s six-week residency requirement, Gordon III contended the Nevada court lacked subject matter jurisdiction over their case, rendering the divorce decree void. Building upon this revelation, since Gordon Jr. was still legally “married” to Burguieres, his marriage to Joanna would be bigamous—and thus void as against public policy—making Gordon Jr.’s exercise of his power of appointment in Joanna’s favor invalid, since she did not fall within the four classes of beneficiaries permitted by the Kelley Trust. As a result, Gordon III averred “all assets of the [Kelley Trust] are distributable to [himself] as the default taker.”

Collaterally attacking a divorce judgment entered in another state:

Gordon III argued that according to the federal constitution’s “full faith and credit clause,” a Florida probate judge wasn’t required, or even entitled, to give effect to his father’s Nevada divorce judgment. Constitutional arguments come up from time to time in inheritance cases, but they’re always tough to make, and almost never work (see here, here). This case is no exception. Here’s the controlling test for collaterally attacking another state’s divorce decree on constitutional grounds, as articulated by the 4th DCA:

Consistent with full faith and credit, a divorce decree obtained in a foreign state is impeachable in Florida only if the judgment is susceptible to collateral attack under the foreign state’s jurisprudence. See Johnson v. Muelberger, 340 U.S. 581, 589 (1951). This rule “provide[s] a substantial degree of uniformity regarding the vulnerability of divorce decrees to collateral attack,” enhancing the finality of each state’s judgments. In re Marriage of Winegard, 278 N.W.2d 505, 508 (Iowa 1979). Furthermore, collateral attacks wilt against judgments involving parties who have had their day in court; where “there has been participation by the [parties] in the divorce proceedings” and “the [parties] ha[ve] been accorded full opportunity to contest the jurisdictional issues,” any further attack on the judgment is barred by res judicata. Sherrer v. Sherrer, 334 U.S. 343, 351 (1948) (footnote omitted); Coe v. Coe, 334 U.S. 378 (1948).

Did the argument work in this case? No. Why? Because both parties to the Nevada divorce (Gordon Jr. and Burguieres) participated in and accepted the court’s final judgment. In other words, they had their day in court and accepted the final outcome. Under these circumstances, a third party (Gordon III) is barred as a matter of law from re-opening the Nevada divorce by challenging the outcome years later in a Florida courtroom.

In this case, Burguieres initiated the Nevada dissolution proceedings by filing a verified complaint with the trial court, in which she attested to Nevada’s limited jurisdictional requirements. After Gordon Jr. answered the complaint without raising a jurisdictional challenge, Burguieres appeared in court and confirmed her residency allegations. . . . Since both Gordon Jr. and Burguieres participated in the divorce proceedings and are bound by the Nevada decree, Nevada law precludes Gordon III’s collateral attack. The Faith and Credit Clause therefore bars his full assault on the Nevada judgment in Florida.

By the way, it’s no accident that out-of-state challenges to Nevada divorces are so difficult. Having it any other way is bad for business. As noted by the 4th DCA:

The driving force behind Nevada’s statutory impediment on collaterally attacking divorce decrees has its origins in the state’s decision to establish itself as a premiere divorce destination. A low barrier to attacking a Nevada divorce decree would have been bad for business. As one commentator explains:

 To escape states with harsh laws, people with money (or, more frequently, wives of people with money) could get on a train and head for a “divorce mill.” Throughout much of the twentieth century, the divorce mill was Nevada. It needed the business, and moral qualms, for whatever reason, have never played a big role in Nevada jurisprudence. In 1927, Nevada reduced its residence period to three months, and in 1931, in a “frenzied attempt to head off … threatened rivalry” from other states, Nevada reduced the residence period still further, to six weeks. “Going to Reno” became almost a synonym for getting a divorce.

 Lawrence M. Friedman, A Dead Language: Divorce Law and Practice Before No–Fault, 86 Va. L.Rev. 1497, 1504–05 (2000).

What about non-U.S. divorce decrees?

Does it matter that the foreign divorce decree at issue in this case was entered in a sister state (i.e., Nevada), vs. a foreign nation (e.g., Mexico)? Yes. Divorce decrees entered in non-U.S. courts aren’t nearly as bullet proof as those entered in sister states (an important distinction to keep in mind in a state like Florida, which has the 4th largest immigrant population in the nation (one-in-five Floridians are foreign born)):

Gordon III contends the Florida Supreme Court’s decision in In re Estate of Kant, 272 So.2d 153 (Fla.1972), provides the child of a decedent, as a lineal descendant, with unbridled “standing to challenge and impeach the validity of a divorce decree [in Florida] when it will affect the validity of a later marriage to the reputed surviving spouse.” In Kant, the deceased’s children alleged in an answer to a petition for letters of administration that the deceased’s marriage to his current wife was void since the wife’s prior divorce to a different spouse in Mexico had never been “rendered.” In re Estate of Kant, 265 So.2d 524, 525 (Fla. 3d DCA 1972). At trial, the children presented evidence that the divorce decree was actually a forgery. Kant, 272 So.2d at 155. As a result, the trial court denied the petition for letters of administration, finding that the current wife “was in fact not the widow of the deceased because she had not been lawfully divorced from her prior husband.” Id.

Did the U.S. vs. non-U.S. divorce distinction ultimately matter in this case? No. Vegas may be its own form of alternate reality (like Miami!), but it’s still part of the U.S. Bottom line: the Nevada divorce stands; Gordon III’s claims fail.

The crucial difference between Kant and this case is that the Full Faith and Credit Clause was not at issue, since “[s]tates are not required to give full faith and credit to divorces rendered in foreign nations,” such as Mexico. In re Schorr’s Estate, 409 So.2d 487, 489 (Fla. 4th DCA 1981) (emphasis added). Bound by the precepts of full faith and credit, Gordon III was required—unlike the children in Kant—to demonstrate his ability to bring the action under the foreign state’s jurisprudence. Since, as discussed previously, Gordon III failed to meet this hurdle, his action was impotent and properly subject to dismissal.