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

Vargas v. Acosta, 2006 WL 120182 (Fla. 3d DCA Jan 18, 2006)

In this case the ward's daughter from a prior marriage was his guardian. According to a spirited dissent in this case by Third DCA Justice Ramirez, the animus between these two was "obvious even from the sparse record" before the court. The explicit issue before the Third DCA in this case was whether Miami-Dade County Judge Arthur Rothenberg had complied with the requirements of F.S. § 744.2025 by entering an order sua sponte authorizing the change of the ward's residence from Miami to Cape Coral over his wife's objections and in spite of the fact that counsel for the wife, Candis Trusty, had served a motion to vacate such order.

The Third DCA upheld the trial court's decision. Justice Ramirez dissented by arguing that the ward's spouse had been denied any meaningful level of due process in the proceedings. Here are a few representative excerpt's from Justice Ramirez's dissent:

"The trial court did not hold a hearing. Thus, there is no judicial record to support the change in the ward's residence. The majority finds, without explanation, that the statutory requirements were met by "[considering] the reason [given] for ... relocation." Op. at ----. Does this mean that the court "considered" the reasons in private? Or does the majority mean that the court "considered" the reasons at the after-the-fact hearing on March 7th? When did the trial court "consider" placing the ward in any local facility?

The majority states that there was no dispute that the ward's needs would be best met by living in a facility close to the guardian's home. I find no record support for that statement. I also find no record support for the contrary, but that is the problem. The merits of the move from Miami to Cape Coral were never discussed at the trial level. The only hearing, on March 7, was not to discuss the merits of the move, but to allow the wife an opportunity to vent. Only the process, or lack thereof, was discussed."

"I can appreciate the exigencies of the situation where the medical facility was threatening to remove the ward, but it seems that the wife's counsel filed a hand-written motion before the ward was removed. There was nothing to prevent an emergency hearing taking place at that moment. The right to due process cannot be so casually ignored. Neither appellee's brief nor the majority opinion cite a single case to justify what happened at the trial level. (Emphasis added.)"

One way to rationalize the Third DCA's majority opinion with the points made by the dissent is to assume that under Florida law interested parties other than the ward have very little, if any, constitutionally protected rights. In a case I wrote about here the Second DCA reversed a trial court's decision denying a petition for visitation rights filed by a child-ward's grandmother. The Second DCA held that unlike a natural parent, a child-ward's guardian is simply an agent or "arm" of the court, and thus such guardian does not have the same constitutionally protected "privacy rights" that a natural parent has. The following are a few representative excerpts from that opinion:

"In Florida . . . the power and responsibility of a court exercising guardianship jurisdiction over minors is such that the court itself is considered to be the minor's guardian. See Brown v. Ripley, 119 So.2d 712, 717 (Fla. 1st DCA 1960). Thus "the legal guardian of a minor is regarded as the agent of the court and of the state in the discharge of his duty as such." Id."

"Considering the guardian's status as an arm of the court, the implications of our supreme court's decision in the Watland case, and the weight of authority from other jurisdictions, we conclude that the probate court has the power to direct a guardian to permit a grandparent or other person to visit a minor ward when the best interests of the minor will be promoted by such visitation."

Bottom Line:

Based on the Second DCA's analysis in the grandparent-visitation-rights context (i.e., guardians do not have the same privacy rights that natural parents enjoy) and the Third DCA's willingness above to approve orders entered in the absence of any meaningful due process for the ward's spouse, it appears that in Florida interested third parties should expect to take a back seat to the trial court's discretion in all material matters, and that such interested third parties have few (if any) constitutionally-mandated protections if they disagree with the trial court's decisions. This assumption, if accurate, has profound implications for how Florida attorneys should represent clients involved in contested guardianship proceedings.

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Tallahassee Memorial Regional Medical Center, Inc. v. Petersen, 2006 WL 88489 (Fla. 1st DCA Jan 17, 2006)

In this case the parents of a child apparently brain damaged during delivery filed a pre-suit petition to determine compensability under the Florida Birth-Related Neurological Compensation Act (the "Act," see F.S. §§ 766.301-766.316). At the conclusion of these administrative proceedings, the administrative law judge ("ALJ") awarded the parents lifetime medical expenses for their child, plus $100,000, plus reasonable expenses incurred in connection with the filing of their claim. The parents rejected this award and moved forward with filing their medical malpractice claims against the Tallahassee Memorial Regional Medical Center ("TMRMC").

When counsel for the TMRMC learned of the parents intent to reject the ALJ's award and sue instead, they immediately filed an emergency motion for appointment of a guardian ad litem. The trial judge said no and they petitioned the First DCA for writ of certiorari seeking review of the trial court's non-final order. The First DCA upheld the trial court's decision on two grounds. First, the defendants failed to demonstrate that the child's parents were not acting in the best interests of their child. Second, in the absence of clear evidence indicating a conflict of interest, imposing a guardian ad litem would be a violation of the parents' constitutional privacy rights.

The following are excerpts from the linked-to opinion addressing the two grounds put forward by the First DCA as underlying its decision:

Lack of Conflict of Interest:

"TMRMC fails to demonstrate that the interests of the Petersens are so adverse to that of Jennifer as to require the appointment of a guardian ad litem. The mere decision to proceed in an attempt to gain fuller recovery for the child is not, even in the face of some risk, tantamount to an adverse interest. By filing the complaint for medical malpractice in circuit court, the Petersens sought monetary damages for bodily injury including pain and suffering, and other general damages. These claims are not adverse to Jennifer's interests. Indeed, the facts as presented indicate that the interests of Jennifer coincide fully with the interests of the parents. Cf. Mistretta v. Mistretta, 566 So.2d 836 (Fla. 5th DCA 1990) (holding that child's interests were properly represented by mother where mother sought payment of child support from former husband who held himself out to others as the child's father)." (Emphasis added.)

Constitutional Privacy Rights:

"The Florida Supreme Court has repeatedly held that natural parents have a right to make decisions about their child's welfare without interference by third parties. See generally Von Eiff v. Azicri, 720 So.2d 510 (Fla.1998). In Von Eiff, the Florida Supreme Court held that "[n]either the legislature nor the courts may properly intervene in parental decision-making absent significant harm to the child threatened by or resulting from those decisions." 720 So.2d at 514. As discussed above, TMRMC does not show that any significant harm to the child will result from the Petersens' decision to waive the compensation award under the Act and seek further damages in the circuit court action. TMRMC has merely shown that the Petersens' election of a civil remedy has some risk and does not preserve the guaranteed return of the administrative compensation award. This is an insufficient basis upon which to invade the Petersens' fundamental parental privacy rights." (Emphasis added.)

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Any estate planner worth his or her salt knows by now that the commonly accepted practice of representing both a husband and wife in estate planning is fraught with potential conflict-of-interest issues. In Ethics Opinion 95-4 the Florida Bar provided an excellent summary of the key issues to be aware of when representing couples.

These are not abstract, esoteric ethics questions. If you're not careful, they can come back to bite you in a very big way. In a story reported here, a well established Texas estate-planning attorney and his firm are reported to have been hit with a judgment for $1 million in damages for breach of fiduciary duty to "Husband," plus $2 million in punitive damages. The Texas attorney represented a couple. His firm also represented the wife's mom. After drafting estate planning documents providing that all assets went to the surviving spouse (thus taking full advantage of the unlimited estate tax marital deduction), wife's mom asked lawyer to rewrite will cutting husband out and making mom the beneficiary of wife's estate (presto! no more estate tax marital deduction). Lawyer rewrote wife's will, wife signed new will, no one ever said anything to husband (who was also lawyer's client), wife dies, husband sues: lawyer gets slammed.

Here are a few excerpts from the linked-to story:

"A [Comal County, Texas] jury Tuesday slapped a $3 million judgment on one of New Braunfels' oldest and most prestigious law firms in a lawsuit claiming gross negligence and malpractice.

If the verdict and jury award stands against attorney John Dierksen and his firm, Reagan, Burrus, Dierksen, Lamon and Bluntzer, it will be the largest ever in a Comal County court.

Jurors unanimously ruled the law firm and specifically Dierksen were grossly negligent, that the negligence injured Llano businessman Robert Maxwell -- a New Braunfels native -- and his businesses, Maxwell Marine and Meyer-Maxwell Properties, Ltd., among others, and that the law firm failed to meet its fiduciary duty to Maxwell -- costing him more than $1 million.

Along with the $1 million from failure to meet fiduciary duty, jurors set exemplary or punitive damages of $1.5 million against Dierksen and $500,000 against the law firm for a total of just over $3 million."

Source: Wills, Trusts & Estates Prof Blog

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Siegel v. Novak, 2006 WL 119545 (Fla. 4th DCA Jan 18, 2006)

Probate litigation is often rife with conflict of law issues. For example, it is not uncommon to have a trust governed by the law of one jurisdiction (e.g., Florida law) administered in another jurisdiction (e.g., New York). In this case the parties were litigating whether the decedent's sons had standing to challenge trust disbursements made from their mother's revocable trust prior to her death. Both sides agreed New York law applied to the trust accounting issue. The point of contention arouse around standing. Under New York law the sons had standing to sue, under Florida law they apparently did not.

Question for Florida Court: Does New York law apply to the standing issue or does Florida law apply? In other words, is standing to sue a substantive or procedural matter for choice of law purposes?

Palm Beach County Judge Gary L. Vonhof ruled the decedent's sons lacked standing under Florida law and thus dismissed their claims on summary judgment. The Fourth DCA reversed holding that standing is a substantive matter for choice of law purposes, thus New York law applied because New York bore the most significant relationship to the trust, thus the decedent's sons had standing to sue. The Fourth DCA explained its ruling as follows:

"In a choice of law context, Florida maintains the traditional distinction between substantive and procedural matters." "As the forum state in this case, Florida law determines whether [the issue of standing] is substantive or procedural for choice of law purposes." Generally, when confronted by a choice of law problem, a court will apply foreign law when it deals with the substance of the case and will apply the forum's law to matters of procedure. Substantive law generally relates to the rights and duties of a cause of action, while procedural law involves the "'machinery for carrying on the suit.'".

No Florida case has decided whether standing is a substantive or procedural matter for choice of law purposes. Recently, the eleventh circuit has indicated that "[u]nder Florida's choice of law provisions, Florida law governs all substantive issues, including the question of whether an individual has standing and capacity to sue." In Merkle v. Robinson, 737 So.2d 540, 542 (Fla.1999), the Florida Supreme Court held that "statute of limitation choice of law questions [should be treated] the same as 'substantive' choice of law questions which,**** Florida decides pursuant to the 'significant relationship' test."

In this area, the question of standing to assert a claim is analogous to a statute of limitations defense. Both issues relate to whether a cause of action may proceed; neither involves the "machinery for carrying on the suit" once the right to proceed has been determined. The ability to bring an action at law is a "most valuable attribute" of a legal right, a factor favoring the classification of standing as a substantive matter.

Here, the right of the [decedent's sons] to challenge the distributions from the trust should be decided under New York law. For the challenged distributions, New York bears the most significant relationship to the trust.

(Emphasis added; internal citations omitted.)

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Smith v. Smith, 2005 WL 3555852 (Fla. 5th DCA Dec 30, 2005)

In this case counsel for the ward argued that as a matter of law where, as happened here, there is conflicting expert testimony regarding a person's mental competence, the trial court is precluded from finding that there is "clear and convincing evidence" to support a finding of incapacity, as required by F.S. § 744.331(6). Orange County Judge Lawrence R. Kirkwood didn't buy this argument, and neither did the Fifth DCA, holding as follows:

Although the two experts hired by the defense disagreed with the conclusions drawn by the examining committee, this conflict in the evidence does not preclude a finding that the evidence of incompetency was clear and convincing. Nor would conflicts in the evidence require the court to find a lack of clear and convincing evidence. A similar problem existed in Manassa v. Manassa, 738 So.2d 997, 997 (Fla. 1st DCA 1999). In rejecting the argument that conflicts in the evidence precluded a finding of incompetency, the court explained:

In the case at bar, the record is replete with conflicting medical reports and testimony regarding Manassa's competence. It is the purview of the trial court to determine the credibility and weight of the evidence. See LeWinter v. Guardianship of LeWinter, 606 So.2d 387, 388 (Fla. 3d DCA 1992). This court will not reweigh the testimony and evidence, or substitute its judgment for that of the trier of fact. See In re Adoption of Baby E.A.W., 658 So.2d 961, 966 (Fla.1995). The trial court noted that, with the exception of the examining committee which has seen hundreds of cases to determine incapacity, the medical reports were from physicians who are not professionals in mental health care proceedings. The examining committee opined that Mr. Manassa was incapacitated, and it recommended appointment of a plenary guardian. The trial court weighed the evidence and accepted the recommendation of the examining committee.

Id. at 997-998.

In Shaw v. Shaw, 334 So.2d 13 (Fla.1976), the court said that appellate courts have a right to reject "improbable testimony or evidence." Id. at 16. However, this case does not involve improbable testimony or evidence. It involves multiple experts with competing views, and the court found the evidence of the four experts appointed by the court to be "clear and convincing evidence," which the court properly could do.

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McEnderfer v. Keefe, 2006 WL 129320 (Fla. Jan 19, 2006)

In 2005 I wrote here about the Florida Supreme Court's decision in Warburton construing Florida's homestead laws as applicable to otherwise freely devisable homestead property. This was a companion case to the 2005 decision, and the Court merely restates its earlier position.

This Court recently quashed Warburton and answered the certified question in the negative. We therefore answer the certified question in this case in the negative and hold that where a decedent is not survived by a spouse or minor children, the decedent's homestead property passes to the residuary devisees, not the general devisees, unless there is a specific testamentary disposition ordering the property to be sold and the proceeds made a part of the general estate. See McKean v. Warburton, 30 Fla. L. Weekly S613, --- So.2d ----, 2005 WL 2155180 (Fla. Sept. 8, 2005).

The following briefs were filed with the Court in this case:

• Petitioner's Initial Brief on the Merits
• Respondent's Answer Brief on the Merits
• Petitioner's Reply Brief

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This is my running list of significant Florida trust and probate cases for 2007. Like any compilation, the criteria for inclusion is somewhat subjective, so I'm certainly not guaranteeing that I've identified every case that could conceivably be related to probate matters in Florida. However, if you think I've missed an important probate-related case that deserves wider notice, please let me know. As new cases are published, they'll be added to this list.

2007 Probate Court Filing Statistics [click here]

All of the cases listed below are also cross referenced by topic, so if you ever want to come back to that homestead case you remember seeing, you can simply jump to all of the homestead cases and scroll through those.

1. Disque v. Unger, 2007 WL 101375 (Fla. 4th DCA Jan 17, 2007) (Practice & Procedure)
2. Hernandez v. Hernandez, 2007 WL 120051 (Fla. 5th DCA Jan 19, 2007) (Removal of Personal Representatives and Surcharge)
3. Spoerr v. Manhattan Natl. Life Ins. Co., 2007 WL 128815 (S.D.Fla. Jan 12, 2007) (Practice & Procedure)
4. Keller v. Estate of Keller, 2007 WL 162770 (Fla. 4th DCA Jan 24, 2007) (Will and Trust Contests)
5. Glover v. Miller, 2007 WL 247899 (Fla. 4th DCA Jan 31, 2007) (Practice & Procedure)
6. Simpson v. In re Estate of Norton, 2007 WL 397463 (Fla. 3d DCA Feb 07, 2007) (Practice & Procedure)
7. Hernandez v. Gil, -- So.2d. ---, 2007 WL 466029 (Fla. 3d DCA Feb 14, 2007) (Will & Trust Contests) [Attorney Interview]
8. Harding v. Rosoff, --- So.2d ----, 2007 WL 461381(Fla. 4th DCA Feb 14, 2007) (Will and Trust Contests)
9. Juega v. Davidson, --- So.2d ----, 2007 WL 465523 (Fla. 3d DCA Feb 14, 2007) (Practice & Procedure)
10. EHQF Trust v. S & A Capital Partners, Inc. , --- So.2d ----, 2007 WL 45838 (Fla. 4th DCA Jan 09, 2007) (Appellate Practice in Probate)
11. Arthur v. Milstein, --- So.2d ----, 2007 WL 602630 (Fla. 4th DCA 2007) (Decedent's Remains)
12. Cutler v. Cutler, --- So.2d ----, 2007 WL 601866 (Fla. 3d DCA Feb 28, 2007) (Homestead)
13. In re Gosman, 2007 WL 707365 (Bankr.S.D.Fla. Mar 05, 2007) (Homestead)
14. In re Estate of Coukos, 947 So.2d 1290, 32 Fla. L. Weekly D433 (Fla. 2d DCA Feb 09, 2007) (Dependent Relative Revocation)
15. Trenchard v. Gray, --- So.2d ----, 2007 WL 837294 (Fla. 2d DCA Mar 21, 2007) (Spousal Elective Share Claims)
16. Schilling v. Herrera, --- So.2d ----, 2007 WL 981627 (Fla. 3d DCA Apr 04, 2007) (Tortious Interference with Inheritance)
17. Garcia v. Morrow, --- So.2d ----, 2007 WL 983053 (Fla. 3d DCA Apr 04, 2007) (Personal Representatives)
18. Fach v. Brown Bros. Harriman Trust Co. of Florida, 949 So.2d 260 (Fla. 4th DCA Feb 07, 2007) (Appellate Practice in Probate; Venue)
19. The Florida Bar v. Maurice, --- So.2d ----, 2007 WL 1074948 (Fla. Apr 12, 2007) (Ethics)
20. Morrison v. West, --- So.2d ----, 2007 WL 1135659 (Fla. 4th DCA Apr 18, 2007) (Settlement Agreements)
21. Miller v. Goodell, --- So.2d ----, 2007 WL 1201892 (Fla. 4th DCA Apr 25, 2007) (Contested Guardianship Proceedings)
22. Phillips v. Hirshon, --- So.2d ----, 2007 WL 1263475 (Fla. 3d DCA May 02, 2007) (Homestead)
23. Bryan v. Dethlefs, --- So.2d ----, 2007 WL 1425499 (Fla. 3d DCA May 16, 2007) (Trust Construction)
24. Diaz v. Ashworth, --- So.2d ----, 2007 WL 1484550 (Fla. 3d DCA May 23, 2007) (Will and Trust Contests)
25. Key v. Trattmann, --- So.2d ----, 2007 WL 1517827 (Fla. 1st DCA May 25, 2007) (Resulting Trusts)
26. Marshall v. HQM of Winter Park, LLC, --- So.2d ----, 2007 WL 1647561 (Fla. 5th DCA Jun 08, 2007) (Death Certificates)
27. Weiss v. Berkett, 949 So.2d 1092 (Fla. 3d DCA Feb 07, 2007) (Lack of Prosecution)
28. Forman v. State Dept. of Children & Families, 2007 WL 601628 (Fla. 4th DCA Feb 28, 2007) (Powers of Attorney)
29. City of Key West v. Knowles, 948 So.2d 58 (Fla. 3d DCA Jan 10, 2007) (Dead Bodies)
30. Creasy v. Estate of Mabie, 2007 WL 1773197 (Fla. 1st DCA Jun 21, 2007) (Appellate Practice in Probate)
31. Commercial Capital Resources, LLC v. Giovannetti, 955 So.2d 1151 (Fla. 3d DCA Mar 28, 2007) (Settlement Agreements)
32. Greene v. Borsky, --- So.2d ----, 2007 WL 2119215 (Fla. 4th DCA Jul 25, 2007) (Appellate Practice in Probate)
33. In re Guardianship of Graham, --- So.2d ----, 2007 WL 2189111 (Fla. 4th DCA Aug 01, 2007) (Contested Guardianship Proceedings)
34. In re Estate of Musil, --- So.2d ----, 2007 WL 2317189 (Fla. 2d DCA Aug 15, 2007) (Lost Wills/Virtual Adoption)
35. Gunster, Yoakley & Stewart, P.A. v. McAdam, --- So.2d ----, 2007 WL 2376658 (Fla. 4th DCA Aug 22, 2007) (Attorney Malpractice)
36. Becker v. Davis, 491 F.3d 1292 (11th Cir.(Fla.) Jul 11, 2007) (Trust Accountings)
37. Barber v. Parrish, --- So.2d ----, 2007 WL 2384521 (Fla. 1st DCA Aug 23, 2007) (Slayer Statute)
38. Vaughan v. Boerckel, --- So.2d ----, 2007 WL 2428516 (Fla. 4th DCA Aug 29, 2007) (Funding Revocable Trusts)
39. 39.  Ziino v. Baker, --- F.Supp.3d ----, 2007 WL 2433902 (M.D.Fla. Aug 22, 2007) (Spendthrift Trusts)
40. Kravitz v. Levy, --- So.2d ----, 2007 WL 2480538 (Fla. 4th DCA Sep 05, 2007) (Suing PR/Statue of Limitations)
41. Ramunno v. Terranova, --- So.2d ----, 2007 WL 2480980 (Fla. 4th DCA Sep 05, 2007) (Evidence)
42. Ripoll v. Comprehensive Personal Care Services, Inc., --- So.2d ----, 2007 WL 2043483 (Fla. 3d DCA Jul 18, 2007) (Temporary Injunctions)
43. J.P. Morgan Trust Co., N.A. v. Siegel, --- So.2d ----, 2007 WL 2710957 (Fla. 4th DCA Sep 19, 2007) (Corporate Trustee Compensation Dispute)
44. Berlin v. Pecora, --- So.2d ----, 2007 WL 2710764 (Fla. 4th DCA Sep 19, 2007) (Tenants by the entireties)
45. In re Estate of Magee, --- So.2d ----, 2007 WL 2781131 (Fla. 2d DCA Sep 26, 2007) (Elective Share Statute)
46. In re Guardianship of Stephens, --- So.2d ----, 2007 WL 2811591 (Fla. 2d DCA Sep 28, 2007) (Contested Guardianship Proceedings)
47. Wolfe v. Stevens, --- So.2d ----, 2007 WL 2891413 (Fla. 2d DCA Oct 05, 2007) (Constructive Service of Process)
48. In re Estate of Koshuba, --- So.2d ----, 2007 WL 2934936 (Fla. 2d DCA Oct 10, 2007) (Creditor Claims)
49. Estate of Jelke v. C.I.R., --- F.3d ----, 2007 WL 3378539 (11th Cir. Nov 15, 2007) (Estate Tax Valuation Case)
50. In re Guardianship of Morrison, --- So.2d ----, 2007 WL 4180873 (Fla. 2d DCA Nov 28, 2007) (Contested Guardianship Proceedings)
51. Graham v. Florida Dept. of Children and Families, --- So.2d ----, 2007 WL 4245627 (Fla. 4th DCA Dec 05, 2007) (Contested Guardianship Proceedings)
52. Liberty Life Assur. Co. of Boston v. Miller, Slip Copy, 2007 WL 4233547 (S.D.Fla. Nov 29, 2007) (Power of Attorney; Life Insurance Beneficiary Designations)
53. In re Commitment of Reilly, --- So.2d ----, 2007 WL 4270584 (Fla. 2d DCA Dec 07, 2007) (Contested Guardianship Proceedings)
54. Gurfinkel v. Josi, --- So.2d ----, 2007 WL 4322156 (Fla. 3d DCA Dec 12, 2007) (Power of Attorney; Trust Construction Litigation)
55. Chames v. DeMayo, --- So.2d ----, 2007 WL 4440212 (Fla. Dec 20, 2007) (Homestead Litigation)
56. Griem v. Becker, --- So.2d ----, 2007 WL 4482171(Fla. 3d DCA Dec 26, 2007) (Petition to Determine Heirs)

NON-FLORIDA CASES OF NOTE:

1. Baker Botts, L.L.P. v. Cailloux, --- S.W.3d ----, 2007 WL 460643 (Tex.App.-San Antonio Feb 14, 2007) (Conflicts of Interest)
2. Estate of Hester v. U.S., --- F.Supp.2d ----, 2007 WL 703170 (W.D. Va. Mar 02, 2007) (Estate Tax)
3. Estate of Zlotowski v. C.I.R., T.C. Memo. 2007-203 (Jul 24, 2007) (PR Liability/Tax Penalty)

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Recent newspaper stories reporting on multimillion dollar lawsuits involving two of the wealthiest families in the United States, the Pritzkers (reported here by the New York Times) and the duPonts (reported here by the Daily News), are interesting for many reasons.

The angle I find most interesting is to ask myself what could have been done to avoid litigation in the first place. Both cases seem to revolve around disputes over the administration of family trust funds (versus a zero-sum dispute over a set pot of money by conflicting parties). Without knowing more about these cases, I'd guess the manner in which the subject trust agreements were drafted is in all likelihood at least partly to blame for the current litigation.

Trust documents that may (either initially or over time) govern huge sums of money and span several family generations must be drafted with (1) enough specificity to accomplish the original founder's goals while (2) also allowing for enough flexibility to work through unforseen future contingencies - without having to go to court.

A poorly drafted trust agreement gives the parties only two choices: do nothing or sue. A properly drafted trust agreement provides multiple options for conflict resolution/avoidance between those two extremes.

As I previously wrote here, the amount of wealth flowing into multi-generational trusts or "dynasty trusts" is skyrocketing (current estimates are in the $100 billion range). In the absence of carefully drafted trust agreements, more trust litigation of the type reported above seems inevitable.

• The following are excerpts from the New York Times article on the Pritzker trust litigation:

The Pritzker clan, [Chicago's] first family of fortune and philanthropy, has been riven by accusations of betrayal, self-dealing and conflicts of interests, according to court records unsealed here Tuesday.

The revelations come halfway through a secretive decade-long process in which the Pritzkers must untangle and liquidate huge holdings, including their signature Hyatt hotel chain and the 60 companies in the $6 billion Marmon Group, in order to divide the assets by 2011. The family fought fiercely to keep the records sealed - and the schism secret - but The Chicago Tribune successfully sued to bring them to public light.

The current fight began in July 2000, months after Jay Pritzker's funeral, when six of the cousins - Dan, James, J. B., John, Linda and Tony - wrote the others questioning "whether the structure of our family enterprise needs to be updated." Quoting "Great Grampa Nicholas," the cousins worried that as the growing clan developed divergent interests, members would "feel unfairly treated, and that strains and tensions may develop among people who should be a loving family."

Their letter said information about the family's fortune was too tightly held and asked for more independence in making charitable gifts. "We do not want a divisive process that leaves hurt feelings," it said.

But when the requests were refused, the cousins hired lawyers, and soon conference rooms were filled with documents. They settled about 18 months later, devising a 10-year plan, and went to court only for a limited proceeding to make the agreement binding on future generations.

(Emphasis added.)

• The following are excerpts from the Daily News article on the duPont trust litigation:

He's a direct descendant of one of America's wealthiest families, but Alexis du Pont de Bie Sr. says he's now "literally destitute and homeless" - at least by du Pont standards.

He grew up in a house with 20 bedrooms and 13 bathrooms, set on a 260-acre estate in Delaware, but now he sleeps on the sofas of kindhearted friends.

He once had a trust fund worth $7 million, but now it's worth only $2.7 million - trimming his monthly allowance to $3,000.

De Bie is suing two management companies, Tredegar Trust Co. and Middleburg Financial Corp., both of Virginia, for mismanaging the trust fund, forcing him to live on a working-class salary.

Neither Tredegar nor Middleburg returned calls for comment. The suit seeks $60 million - $10 million based on what the trust would be worth had it been properly invested and $50 million in punitive damages. It also seeks to have a new trustee appointed.

(Emphasis added.)

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Iraqi Heir Loses Half of Estate, Blames Bank

After years of litigation, plus an appeal to Georgia's Supreme Court (see Namik v. Wachovia Bank of Ga., 612 S.E.2d 270 (Ga. S. Ct. 2005), the Court of Appeals in Georgia recently upheld a $1.1 million judgment against Wachovia Bank of Georgia for failing to avoid estate taxes on trust assets held for a non-resident-alien ("NRA") (see Wachovia Bank of Ga. v. Namik, 620 S.E.2d 470 (Ga. Ct. App. August 25, 2005).

Although the latest appeal in this case was published in August of 2005, the trial took place in 2002. Here's an excerpt from this 2003 newspaper story regarding the facts of the case:

The case tests to what extent a bank can be held responsible for investment decisions that expose an estate to higher taxes. The issue is clouded, however, by the bank's unsuccessful efforts to contact the client, who died in an Iraqi prison.

Issam Namik, son of retired Iraqi general Ibrahim Namik Ali, claims Wachovia mismanaged a living trust his father established with the bank in 1989. The bank, he claims, failed to follow Ali's instructions and unnecessarily exposed the $3 million estate to $1.4 million in estate taxes. In December 2002, a Fulton County probate judge ordered the bank to pay $1.1 million to the estate.

According to documents in the trial and appeals courts, Ali came to Atlanta in the spring of 1989 to visit his son. While he was here, he set up a living trust at Wachovia. Ali bought three certificates of deposit, two for $350,000 and one for $2.65 million.

The bank sent Ali to trust officer Thomas Slaughter, who set up the revocable living trust with the understanding that when the largest CD matured, the proceeds would fund the trust. Ali told the bank he wanted the funds invested only in U.S. government backed investments, and Slaughter set down Ali's instructions in a memo, according to court documents.

The largest CD matured in September 1989, with $2,780,380 rolling into Ali's trust. A new trust officer tried repeatedly to contact Ali, using the phone number and addresses Ali had provided earlier that year, but failed. Namik claimed he ordered the bank to stop trying to contact his father because Ali had been arrested on his return to Iraq and was in danger.

Meanwhile, in order to avoid what it thought would be a 30 percent income tax withholding requirement, Wachovia parked the funds from the Ali trust in a tax-free Fidelity money market account while awaiting further instructions from Ali.

Those instructions never came. Ali, arrested immediately and without explanation upon his return to Iraq, died in custody in May 1990. Namik didn't learn of his father's death until 1992 and did not inform the bank until 1994. Wachovia didn't receive a death certificate until 1995, and that's when the legal struggle began. (Emphasis added.)

Lesson Learned:

U.S. situs assets held by non-resident-aliens ("NRAs") are subject to U.S. estate taxes (see IRC § 2101 and IRC § 2106). Avoiding this tax is so simple U.S. corporate trustees run the risk of getting sued when beneficiaries learn that dad's savings account just got chopped in half to pay easily avoidable U.S. estate taxes (which is what happened to Wachovia in this case). In this case Wachovia learned that short-term U.S. treasury bills (under 183 days) are subject to U.S. estate tax, while long-term U.S. treasury bills are not (see IRS Technical Advice Memorandum 9422001). Any corporate trustee that services NRA clients owes it to itself (and its shareholders) to know these tax situs rules cold.

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Estate tax returns are complicated and technically demanding for even the most experienced attorney or CPA. Add to that mix the pressure sometimes applied by family members who are flabbergasted by the amount of tax they have to pay.

This story should be shared with any client tempted to push the envelope or play the audit lottery with the IRS when it comes to estate taxes. As reported here, a Texas lawyer is going to JAIL for intentionally falsifying an estate tax return. Here are a few excerpts from the linked-to story:

U.S. District Judge Robert Junell sentenced Ashley, 44, to two years in federal prison Tuesday on two charges related to tax fraud. Ashley was also ordered to pay $5,200 in fines and will be on supervised release for two years after he is released from prison.

Ashley admitted that during the preparation of the tax return of his father's estate, he directed his secretary to type four backdated gift deeds falsely reflecting that his father, Connell D. Ashley, had deeded a certain portion of a ranch he owned to his sons in 1989, 1990, 1991 and 1992, a news release said. In fact his father had not truly begun to deed portions of the ranch to Stephen Ashley or his brothers until 1993, the release said.

U.S. Attorney Johnny Sutton said in a news release that Stephen Ashley also had his father's former secretary forge a signature on the false deeds and had false notary records created.

Source: You and Yours Blawg

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Smith v. Smith, 2005 WL 3439889, 30 Fla. L. Weekly D2845 (Fla. 5th DCA Dec. 16, 2005)

Both in the divorce context and for estate planning purposes, reviewing beneficiary designation forms for insurance policies, IRAs, and pension plan benefits is one of those "to do" items that often gets left to the end. Well, this case should be the sort of "cautionary tale" you may want to share with those clients who never quite get around to signing their change of beneficiary designation forms.

As part of Mr. and Mrs. Smith (that's their real names) divorce, they signed a marital settlement agreement (prepared by Mrs. Smith) splitting everything up including, at least they thought, their respective insurance policies, IRAs and pension plans. Unfortunately for the beneficiaries of Mr. Smith's estate, he sat on the change of beneficiary designation forms for a year and half before he died - without having executed the forms (oops!). Seminole County Trial Judge Nancy F. Alley sided with Mr. Smith's estate, and ruled that the marital agreement was enough all by itself to entitle the estate to the disputed funds generated by Mr. Smith's life insurance policies and retirement plan benefits.

The Fifth DCA said not so fast, reversing the trial judge based on the following:

In Cooper v. Muccitelli, 661 So.2d 52 (Fla. 2d DCA 1995) ("Cooper I"), the Second District Court of Appeal held that "without specific reference in a property settlement agreement to life insurance proceeds, the beneficiary of the proceeds is determined by looking only to the insurance contract." Id. at 54. The Florida Supreme Court affirmed, saying that a contrary holding would put insurance companies in an "impossible position." Cooper v. Muccitelli, 682 So.2d 77, 79 (Fla.1996) (" Cooper II"). The high court pointed out that despite specific and clearly worded language in an insurance contract, a carrier could never be certain to whom to pay the proceeds. The lesson from Cooper I and Cooper II is that while it may be possible in a marital settlement agreement to waive one's right as a beneficiary of insurance policies, that waiver can only be accomplished if the waiving party specifically gives up his or her rights to the "proceeds" of these policies.FN1 Otherwise, one must look only to the beneficiary designation made by the insured and filed with the insurer.

In the present, case the marital settlement agreement fails to make specific reference to the proceeds of the life insurance policy in question, and the decedent, in the words of the Florida Supreme Court in Cooper II,"did just what he needed to ensure that the proceeds would go to [Ms. Smith]-he did nothing." Cooper II, 682 So.2d at 79. He had a year and a half to execute change of beneficiary forms as required by his policy of insurance, but for whatever reason, he did not do so. Thus, Ms. Smith is entitled to the proceeds of the life insurance policies. (Emphasis added.)

FN1. Obviously some other language such as "death benefits" would likely suffice.

The Fifth DCA came to the same conclusion with respect to the decedent's IRAs and pension plan benefits: no change of beneficiary form means the disputed funds go to the original beneficiary - Mr. Smith's ex-wife.

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If you're like most attorneys whose practice includes probate litigation, you rarely have a chance to attend the Probate & Trust Litigation Committee meetings. Even if you can't go to the meeting, you may want to take a look at the committee-meeting materials (which I've posted here and here). The committee is involved in several initiatives (all of which are discussed in the posted materials) that could have a big impact on your practice, including:

• Contestability of Revocable Trusts.
• Fiduciary Lawyer-Client Privilege.
• Use of trust assets to pay attorneys' fees of the trustee in litigation against a beneficiary.
• Enforcing arbitration clauses in Wills and Trusts.



• Appealing Orders entered in a Probate Proceeding.
• Collateral Attack on the Validity of Marriage after Death Based Upon Undue Influence.
• Enforceability of Exculpatory Clauses in Wills.

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Popp ex rel. Estate of Davis v. Rex, 2005 WL 3299727, 30 Fla. L. Weekly D2760 (Fla. 4th DCA Dec 07, 2005)

I've written before (see here) on how challenging it can be for attorneys drafting estate-planning documents to cover every issue that possibly could come up decades in the future when the document is put to the test in a probate-related dispute. Even minor mistakes/omissions can morph into years of probate litigation. Well, that's exactly what happened in this case.

The case involves the reformation of the Virginia F. Davis 1986 Irrevocable Trust (the "1986 trust"), which provided that when Mrs. Davis died it would be divided in half with one share for each of her two sons and each son's share would be distributed in three installments-one immediately, one five years later, and the last one five years after that. Mrs. Davis died on November 2, 2000, predeceased by her husband (i.e., about 14 years after the 1986 trust was signed). The litigation in question arose in the context of probate-administration proceedings involving one of Mrs. Davis' children, Scott F. Davis, who died without issue on November 19, 2002 (i.e., about 16 years after the 1986 trust was signed) - having received only one of the three installment payments he was originally entitled to under the 1986 trust.

Under Mr. Davis' will, the residuary beneficiaries of his estate were the Pittsburgh State University Foundation, Inc. and the WPBT Communications Foundation, Inc.

According to the Fourth DCA, the 1986 trust contained the following drafting error:

The 1986 trust, as a result of a drafting error, omitted instructions as to what would happen if one of the sons died without children before he had received his installment payments. The trust provisions expressly covered what would happen if a son died with children (providing that the unpaid installments would go to those children) but stopped without going to the next step, directing where the unpaid installments should go if a son had no issue. (Emphasis added.)

Based on the following evidence, Palm Beach County Judge Gary L. Vonhof entered a final judgment reforming the 1986 trust so that the share of a deceased son without issue would go to the other son:

• Testimony of drafting attorney in favor of the requested trust reformation;
• Testimony of a financial advisor who worked with Mrs. Davis in connection with creating the 1986 trust, also in favor of the requested trust reformation; and

• The text of a comparable, but separate, revocable trust established by Mrs. Davis that provided that in the event one of her two sons died without issue, his share was to go to her other son.

The Fourth DCA upheld the trial court's ruling, based on the following:

When this court previously decided [Davis v. Rex, 876 So.2d 609 (Fla. 4th DCA 2004)], we sent the case back to the trial court to determine if the trust should be reformed. We held, citing In re Estate of Robinson, 720 So.2d 540, 543 (Fla. 4th DCA 1998), "that a trust with testamentary aspects may be reformed after the death of the settlor for a unilateral drafting mistake so long as reformation is not contrary to the interest of the settlor." Davis, 876 So.2d at 611. This mistake must be shown by clear and convincing evidence. Robinson, 720 So.2d at 542.

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Any time an attorney writes himself or one of his relatives into a client's will, red flags should shoot up all over the place. If this same attorney is also cutting the testator's family out of the will, the ethical and legal issues become so thick the attorney is almost guaranteeing future litigation over the will. That's exactly what happened in a St. Petersburg, Florida, case, as reported in this newspaper story. Here are a few excerpts from that story:

The millionaire walked into the St. Petersburg law office.

Harry Lieffers Jr., 76, looked over a five-page document and, with a few strokes of a pen, cut his two daughters and stepson out of his will.

On that October day in 2003, Lieffers decided that his roughly $1.5-million estate would be divided equally among two people: His 43-year-old real estate agent and the agent's 22-year-old girlfriend.

"I wish to reward them for the kindness they have shown me," the will said.

The attorney who drafted the will was the girlfriend's uncle.

The document, filed after Lieffers' death last month, is the latest point of contention in a two-year battle over Lieffers' health and estate.

Lieffers' children say he was vulnerable because of dementia and Alzheimer's disease. They say his real estate agent, Gerard Growney, and the attorney, Alan Watson, took advantage of Lieffers.

The family has filed a complaint against Watson with the Florida Bar and plan to contest the will.

* * * *

Lieffers' children know a lengthy court battle may wipe out all of the funds, but they believe Lieffers would have wanted them to push forward.

"If we ever needed Dad, he was there for us," said daughter Reibel. "We will continue to be there for him, to preserve his last wishes now that he is gone." (Emphasis added.)

Did Drafting Attorney Violate Florida Bar Ethics Rule?

Based on the linked-to story, the answer appears to be NO. Rule Reg. Fla. Bar 4-1.8(c) prohibits an attorney from preparing an instrument giving the attorney or a person "related" to the attorney any substantial gift from a client, including a testamentary gift, unless the client is related to the proposed donee. An attorney's niece or nephew is not considered "related" for purposes of this rule. The Florida Bar will have to grapple with this case, but the overriding question for all concerned should be "why get caught up in this mess to begin with?"

Contested Guardianship Proceeding as Precursor to Probate Litigation

One final note, if you read the linked-to story you'll note this family drama started out as a contested guardianship proceeding, emphasizing once again the remarks I've made (see here and here) regarding how these types of proceedings usually end up being precursors to probate litigation. Perhaps if someone had sought discovery of Mr. Lieffers' will as part of the contested guardianship proceedings the parties would have found out about his will's controversial dispositive provisions before his death and worked out these issues while he was still around to comment.

Source: Thanks to Heraldblog@gmail.com for brining this item to my attention!

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