Florida Probate & Trust Litigation Blog : Florida Probate Litigation, Will Contest Lawyer & Attorney : Juan C. Antúnez : Serving Miami, Jacksonville, Tampa Saint Petersburg, Orlando, Fort Lauderdale

As reported here, because Scott Peterson was convicted of killing his pregnant wife, a California judge ruled last Friday that he is not entitled to collect the benefits of her life insurance policy. The judge said the money should go to the executor of Laci Peterson's estate, her mother, Sharon Rocha.

Although the news report does not mention California's "Slayer Statute" as the basis for the judge's ruling, I assume that must have been the basis for the ruling. Florida's Slayer Statutes are found at F.S. § 732.802 (probate estates) and F.S. § 737.625 (trust estates), and would have resulted in the same outcome.

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John H. Langbein, the Sterling Professor of Law and Legal History at Yale Law School, has just published a commentary that is highly critical of the Connecticut probate system entitled Don't Die In Connecticut: A will can't protect you from the state's predatory probate system, considered a national disgrace, Hartford Courant, Oct. 23, 2005.

According to Prof. Langbein's Testimony to Connecticut Legislature Committee on Program Review and Investigations, Hartford, CT. October 7, 2005 [click here], Florida has a "responsible probate system" that compares very favorably to Connecticut's system. In fact, the good professor had the following sage words of advice for the citizens of his fair state:

When citizens of our state ask me about Connecticut probate, I give this simple advice: Try not to die in Connecticut. If you are a person of means, you should--late in life--establish your domicile in some place such as Florida or Maine or Arizona that has a responsible probate system. You can still own a Connecticut home and spend plenty of time here. Indeed, if you place title to your Connecticut home in a Florida trust, your trustee can even transfer the house after your death without going through Connecticut probate.

Source: Wills, Trusts & Estates Prof Blog

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Sandler v. Jaffe, 2005 WL 2655765 (Fla. 4th DCA Oct. 19, 2005)

Elderly parents often title bank accounts jointly with their children. Although extremely common, the problem with this type of arrangement is that the temptation to walk away with some of mom or dad's funds can sometimes be irresistible. This case is a prime example of that risk.

Facts: Concerned about possible incapacity issues arising out of her advanced age, mom titled all her bank accounts jointly with her daughter; daughter then transferred $84,000 from one of these joint accounts to an account titled in the name of her own husband and daughter (the family dynamics of this case are "interesting" to say the least). Mom finds out about transfer, sues daughter for return of funds, then dies while lawsuit is pending. Mom's other child, son, carries on with suit as personal representative of mom's estate.

Key points of the case:

• Daughter argued that F.S. § 655.78(1) absolved her from any liability. The 4th DCA rejected this argument, noting that this statute is intended to protect banks from getting drawn into disputes between title holders of an account. It in no way shields joint title holders from liability for their own actions.
• Daughter argued that since she was a joint title-holder with right of survivorship, she was entitled to all of the funds at mom's death anyway or, in the alternative, mom gifted all of these funds to her when she titled the bank accounts jointly. So no harm done. These arguments failed because mom actually found out about the transfers pre-death and sued for their return.

Lesson learned:

Obviously mom was trying to plan for her incapacity; she certainly never intended to gift all of her estate to her daughter at the expense of her son. Joint bank accounts are a clumsy way of planning for incapacity and often run afoul of the "Trust, but verify" maxim. Revocable trusts are a much better alternative.

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Conflicts between current beneficiaries of a trust that want to maximize current income distributions and remainder beneficiaries of a trust that want to maximize their remainder interest are at the core of almost all disputes involving a trust's administration. In the past the best trustees could do to manage this inevitable conflict was to invest trust assets in income producing securities (e.g., bonds) while also trying to ensure an acceptable level of capital appreciation for the remainder beneficiaries. This type of investing inevitably leads to lower overall growth of the trust's portfolio. Savvy use of Florida's Principal and Income Act can deliver a win-win solution to this age old conundrum. Here's how:

• First, increase the anticipated remainder interest of the trust by investing the trust's portfolio in accordance with the Modern Portfolio Theory. This investment approach is in stark contrast to traditional trust investment approaches that artificially skewed portfolios in favor of high income producing assets (e.g., bonds).
• Second, increase current distributions to the income beneficiaries by relying on the authority granted under F.S. § 738.104 to make adjustments between principal and income or the authority granted under F.S. § 738.1041 to convert the trust into a "unitrust."

This solution works because investing in accordance with the Modern Portfolio Theory increases the size of the trust "pie," thereby creating win-win options for all concerned. Using a case-study approach the authors of The Appropriate Withdrawal Rate: Comparing a Total Return Trust to a Principal and Income Trust, 31 ACTEC J. 118 (2005), do a great job of explaining in plain English how a trustee can both increase current distributions and deliver a higher expected return to the remaindermen using the solution outlined above.

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The NY Times reported here on oral arguments made in Gonzalez v. Oregon, the United States Supreme Court case testing the limits of federal authority over decisions made at the state level regarding medical care. In 2001, United States Attorney General John Ashcroft determined that Oregon's assisted-suicide legislation was not a legitimate medical practice and thus doctors who prescribe the deadly drugs would be in violation of the Controlled Substances Act ("CSA").

In Oregon v. Ashcroft, 368 F.3d 1118 (9th Cir. 2004), the Ninth Circuit ruled against the federal authorities, holding that attempting to criminally prosecute physicians if they help terminally ill patients commit suicide in accordance with Oregon's Death With Dignity Act exceeded federal authority, stating as follows:

"To be perfectly clear, we take no position on the merits or morality of physician assisted suicide. We express no opinion on whether the practice is inconsistent with the public interest or constitutes illegitimate medical care. This case is simply about who gets to decide. All parties agree that the question before us is whether Congress authorized the Attorney General to determine that physician assisted suicide violates the CSA. We hold that the Attorney General lacked Congress' requisite authorization. The Ashcroft Directive violates the "clear statement" rule, contradicts the plain language of the CSA, and contravenes the express intent of Congress." (Emphasis added.)

This case goes to the heart of the "states' rights or New Federalism" debate often separating Republicans and Democrats. What's ironic is that in this instance it's a Republican administration advocating for more federal authority - an argument usually reserved for Democrats - and directly contrary to the "New Federalism" philosophy usually advocated by Republicans. Stay tuned for more.

Source: Wills, Trusts & Estates Prof Blog

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A "dynasty trust" is a trust that is not limited by the rule against perpetuities (the "RAP") and can therefore last for centuries or, in some states, forever. Florida’s statutory rule against perpetuities is found in F.S. § 689.225. This statute was amended in 2000 to allow dynasty trusts in Florida to remain in effect for up to 360 years, which effectively abolishes the RAP.

Estate planning Nirvana:

Dynasty trusts have received a lot of attention in recent years from trusts-and-estates practitioners.  In a NY Times article entitled Shifting Rules Add Luster to Trusts, the planning benefits of these types of trusts was described as follows:

''Dynasty trusts are tremendously attractive, because wealth builds up quickly when it can be passed on without paying estate taxes at each successive generation,'' said Gideon Rothschild, a partner at Moses & Singer, a law firm in New York.

If a dynasty trust of roughly $1 million was established today, Mr. Rothschild figured, it would be worth $867.7 million after four generations, assuming that it grew 7 percent a year and nothing was spent. By contrast, it would be worth $35.6 million if the property was given outright to future generations and was subject each time to an estate tax of up to 55 percent.

Dynasty trusts have also been written about in the WSJ [click here].

Big business for bankers:

Dynasty trusts may be good estate planning, but are they big business for bankers?  You better believe they are!  Prof. Robert H. Sitkoff of Harvard Law School and Prof. Max M. Schanzenbach of the Northwestern University School of Law analyzed federal banking data and concluded that as of the end of 2003 roughly $100 billion in trust funds had shifted to U.S. states - like Florida - that abolished the RAP and are thus amenable to the creation of dynasty trusts.  According to the authors, these new trust funds may translate into as much as $1 billion in yearly trustees' fees.

The Sitkoff-Schanzenbach study was published in a 2005 Yale Law Journal article entitled Jurisdictional Competition for Trust Funds: An Empirical Analysis of Perpetuities and Taxes.  Here's an abstract of the article:

Abstract:
This Article presents the first empirical study of the domestic jurisdictional competition for trust funds. To allow donors to exploit a loophole in the federal estate tax, since 1986 a host of states have abolished the Rule Against Perpetuities as applied to interests in trust. To allow individuals to shield assets from creditors, since 1997 a handful of states have validated self-settled asset protection trusts. Based on reports to federal banking authorities, we find that, on average, through 2003 a state's abolition of the Rule increased its reported trust assets by $6 billion (a 20% increase) and increased its average trust account size by $200,000. By contrast, our assessment of validating self-settled asset protection trusts yielded indeterminate results. Our perpetuities findings imply that roughly $100 billion in trust funds have moved to take advantage of the abolition of the Rule. Interestingly, states that levied an income tax on trust funds attracted from out of state experienced no observable increase in trust business after abolishing the Rule. Because this finding implies that abolishing the Rule does not directly increase a state's tax revenue, it bears on the study of jurisdictional competition. In spite of the lack of direct tax revenue from attracting trust business, the jurisdictional competition for trust funds is patently real and intense. Our findings also speak to unresolved issues of policy concerning state property law and federal tax law.

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Although many parents hesitate when it comes to discussing their estate plans with their children, doing so can be very helpful in terms of avoiding future acrimony. On this point, the California Estate and Business Law Blog recently posted the following:

Deborah L. Jacobs has written an informative article in the October 2005 issue of Bloomberg Wealth Manager (pdf format - slow loading but worth the wait). The article discusses the family dynamics of estate planning with adult children. Key graphs:

Many parents are afraid to inform children about an inheritance for fear it will "demotivate" them - destroy their incentive to work or to be productive members of society. But Thayer Willis, a therapist in Portland, Oregon, and author of Navigating the Dark Side of Wealth, says she's had several clients in their 50s or 60s who didn't know they were getting a huge inheritance and would have made very different life choices if they had - about careers and leisure activities, for instance. They wound of resenting their parents for being so secretive, Willis says.

Lee Hausner, a Los Angeles psychologist specializing in money and families and the author of Children of Paradise: Successful Parenting for Prosperous Families, explains that it's perfectly appropriate for children to discuss their inheritance with their parents. And Las Vegas attorney Steve Oshins recommends children ask that their inheritance be distributed through a trust rather than outright - and the trust should be drafted to provide protection from law suits and claims of divorcing spouses.

Source: California Estate and Business Law Blog

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On September 23, 2005 the Daily Business Review reported that Broward County probate judge Mel Grossman ordered Fort Lauderdale attorney Stephen Rakusin to return $1.6 million in fees and costs that were challenged by Holy Trinity Orthodox Seminary, a Russian Orthodox monastery. The Monastery was represented by Robert Judd, a partner at Gunster Yoakley in Fort Lauderdale, in connection with the fee dispute.

According to the Daily Business Review, judge Grossman ruled that under the "Maxcy rule" (see Maxcy v. Citizens National Bank of Orlando, 240 So.2d 93 (Fla. 2d DCA 1970)), after four years of work on the case attorneys Stephen Rakusin and Craig Donoff (both of whom were engaged by the personal representative of the estate) would have to contend themselves with a $151,500 flat-fee originally negotiated by Donoff. Judge Grossman ruled that Rakusin's billing was a violation of the Maxcy rule because he was contracted to perform the same legal services on an hourly basis that Donoff had agreed to do for a flat fee.

Lesson learned: In probate, winning is only half the battle. Getting paid for your work is often just as difficult and hotly contested as the underlying litigation.

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Herskovitz v. Hershkovich, 2005 WL 2254003, 30 Fla. L. Weekly D2209 (Fla. 5th DCA Sept. 16, 2005) (Trial Court Affirmed)

This case is yet another example of why probate litigation can be especially challenging. Not only must counsel in these cases have the ability to quickly spot the often highly technical probate-law issues in play in the relatively short period of time permitted to challenge a will in probate, he or she must also be sufficiently knowledgeable in civil procedure and trial techniques to successfully venture into the litigation arena.

The decedent's surviving brother in this case challenged the validity of a second codicil to his brother's will (which completely cut him out of the estate) on the grounds that the two attesting witnesses to that codicil were unaware of the testamentary nature of the instrument they were signing. In other words, counsel for surviving brother correctly identified a substantive issue under Florida probate law that favored his client. Counsel made this argument when he successfully opposed a summary judgment motion filed by the surviving spouse. So far, so good. Unfortunately, counsel failed to make this argument again when the probate court conducted an evidentiary hearing on the matter . . . thereby waiving the issue on appeal. The Fifth District Court of Appeal summed up its ruling on this point as follows:

In [his memorandum opposing summary judgement, surviving brother] contended questions of fact existed as to whether the witnesses could authenticate the documents. Subsequently, the trial court denied [surviving spouse's] motion for summary judgment. Once the summary judgment was denied, it was incumbent upon [surviving brother] to present whatever arguments and documents he believed relevant to determining those questions of fact to the trial court at the evidentiary hearing. By failing to do so, he waived this issue for appellate review.

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The Daily News reported here that famed ABC News anchor Peter Jennings left a fortune worth more than $50 million to his wife and two children. According to Jenning's will, which was recently filed in Manhattan Surrogate's Court, Jennings, 67, left the bulk of his estate in trust for his two children, Elizabeth, 25, and Christopher, 23, from his marriage to writer Kati Marton.

Source: Legacy Matters Blog

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