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

In 2008 the AARP's Public Policy Institute published a provocative report entitled Power of Attorney Abuse: What States Can Do About It.The AARP report highlighted what was wrong with existing POA statutes, how those failings lead to the exploitation of vulnerable adults, and urged state legislators to adopt the Uniform Power of Attorney Act or "UPOAA" as the best means for reform.

Florida heard the call for reform: effective October 1, 2011, we will be the latest state to adopt its version of the UPOAA at Part II of Chapter 709 of the Florida Statutes [click here].

For an excellent plain-English explanation of Florida's version of the UPOAA and how it will affect every new POA drafted in this state, you'll want to read THE FLORIDA POWER OF ATTORNEY ACT – MORE DURABLE THAN EVER by Tami Conetta, of Northern Trust in Sarasota. Ms. Conetta's paper also contains a copy of the Chapter 709 White Paper prepared by the Florida Bar's RPPTL Section. And for those of you who find yourselves litigating the new statute, you'll also want to read the official legislative white paper for the new statute contained in Florida Senate's Bill Analysis and Fiscal Impact Statement.

Here are some highlights from Ms. Conetta's excellent paper explaining our new POA statute (Part II of Chapter 709):

Existing POA's Grandfathered In: F.S. 709.2402

A power of attorney executed prior to the effective date of the Act will remain valid under the Act provided its execution complied with the law of Florida at the time of its execution. If the power of attorney is a durable (or springing) one, it will remain durable (or springing) under the new Act.

"Springing" POA's no longer valid (but existing POA's grandfathered in): F.S. 709.2108

Contingent, or “springing”, powers of attorney will not be authorized after the effective date of the Act. Those in existence prior to the effective date will continue to be recognized. 

New Co-agent and Successor Agent Provisions [F.S. 709.2111]; Automatic Revocation upon Divorce [F.S. 709.2109(2)(b)]:

Subject to the qualification requirements (natural persons who are 18 years of age or older and financial institutions with trust powers), the principal may designate a single agent or, if desired, the principal may designate two or more persons to act as co-agents. Unless the power of attorney provides otherwise, each co-agent may exercise its authority independently. This is a significant change from current law.

Even where the power of attorney requires two or more agents to act jointly, there is a special exception for banking transactions to allow any one of the agents to sign checks and otherwise handle banking matters with a single signature.

If an agent becomes unable to act as a result of the agent’s death, incapacity, resignation, declination, or failure to qualify, the appointed successor agent (if any) may commence serving as agent. The filing of a petition for dissolution of marriage terminates the authority of an agent who is married to the principal unless the power of attorney provides otherwise.

New Drafting Requirements for POA's containing "Superpowers": F.S. 709.2202

The Act clearly allows a principal to grant authority to the agent to take significant actions that can impact the principal’s estate plan or gifting program, but one must be careful in the drafting and implementation of these powers as there are additional execution formalities and restrictions on the authorization. Special note should be made of the application of these rules to powers of attorney executed on or after October 1, 2011. These rules do NOT affect existing powers of attorney prior to that date. [See F.S. 709.2202(5): "This section does not apply to a power of attorney executed before October 1, 2011."]

Minimum Requirements. The following mandatory minimum requirements must be met:

• The authority must be specific. For example, “My agent may create and fund a revocable trust on my behalf."
• [ ** NEW DRAFTING REQUIREMENT ** ]: The principal must sign or initial next to each specific enumeration of the authority.
• The agent may only exercise the authority consistent with the duty to preserve the principal’s estate plan.
• The exercise must not be prohibited by any governing document affected. For example, “My agent may amend or revoke my revocable trust.” But the trust agreement says the right of amendment or revocation is personal to the grantor and may not be exercised by anyone else. 

The Superpowers. The powers that may be granted to the agent under this provision include:

• Create an inter vivos trust.
• With respect to a trust created by or on behalf of the principal, amend, modify, revoke or terminate the trust, but only if the trust instrument explicitly provides for amendment, modification, revocation or termination by the settlor’s agent.
• Make a gift (subject to restrictions).
• Create or change rights of survivorship.
• Create or change a beneficiary designation.
• Waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan.
• Disclaim property and powers of appointment.

Modifiable Restrictions. If the agent is not related to the principal, the agent may not use these powers to benefit himself or anyone to whom the agent has a support obligation.

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Effective October 1, 2011, a surviving spouse's intestate share of an estate will go up from 50% to 100% of the estate if the decedent's descendants are also descendants of the surviving spouse. If you're a probate lawyer this is a BIG deal; you'll need to know this new statute cold.

Because the legislation just passed, the new statutes have yet to be published online. For now, if you want to see the text of the new statutes you’ll have to read Bill CS/HB 325.

Here's how the new intestacy regime for surviving spouses is explained in Florida House of Representative's Staff Analysis of CS/HB 325:

Intestate Estate

When an individual dies (the decedent) without a will, a person's will is declared invalid, or assets are not distributed by a valid will, then the individual is considered "intestate." Since there is no will to direct the distribution of assets, Florida law provides the distribution of assets that remain after paying debts and the expense of conducting the probate proceedings.

Florida law on intestate succession provides that various family members receive a share of the decedent's estate: 

• If there are no surviving descendants of the decedent, then the spouse receives the entire intestate estate.

• If there are surviving descendants of the decedent, who are all also lineal descendants of the surviving spouse, then the surviving spouse receives the first $60,000 in property of the estate, plus one-half of the remaining balance of the estate subject to distribution. [HERE IS WHERE THE LAW IS CHANGING. EFFECTIVE OCTOBER 1, 2011, THIS SURVIVING SPOUSE NOW GETS 100% OF THE ESTATE.]

• If there are surviving descendants of the decedent, one or more of whom are not lineal descendants of the surviving spouse, then the surviving spouse receives one half of the estate and the lineal descendants receive the other half.

• There are additional provisions for distribution in situations beyond these, which distribute assets to other family members, but those are not relevant to the changes made in this bill. See ss. 732.103 and 732.104, F.S.

Effect of the Bill- Intestate Share of Spouse (Section 2)

The bill amends s. 732.102(2), F.S., to provide that the intestate share of a surviving spouse, where all of the decedent's descendants are also descendants of the surviving spouse, is the entire estate. For example, if a husband passes away and was survived by his wife and two children and the wife was the mother of both children and neither had any other children, the wife would now inherit the entire estate rather than the first $60,000 and half of the remaining estate.

The bill also creates s. 732.102(4), F.S., to provide that if the surviving spouse has descendants that are also descendants of the decedent, but the surviving spouse also has a descendant not related to the decedent, then the surviving spouse's intestate share is half of the estate. The lineal descendants of the decedent would inherit the remaining half of the estate under s. 732.103, F.S.

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Attorneys representing trustees, personal representatives, guardians and other fiduciaries operating in Florida have long had to deal with the "fiduciary exception" to the attorney-client privilege. The basic rule is that if the attorney-client communication had to do with normal administration issues the beneficiaries of the trust or estate were entitled to the information, and the trustee, PR, guardian, etc., couldn't claim the privilege. If the communication had to do with the fiduciary's own self interests, for example, if he or she is being sued for malfeasance, then the communications were privileged. I wrote here about the application of this rule in the context of a contested guardianship proceeding.

This ambiguous rule created uncertainty for fiduciaries and their attorneys, inhibiting the free flow of information between client and attorney, which is bad news for all concerned. To get a sense of the kind of trouble this ambiguity can lead to you'll want to read the US Supreme Court's recent discussion of the rule in U.S. v. Jicarilla Apache Nation, --- S.Ct. ----, 2011 WL 2297786 (U.S. Jun 13, 2011).

[1] New Attorney-Client Privilege Protection: F.S. 90.5021:

The Florida Bar's Probate & Trust Litigation Committee has been working on getting rid of the rule by statute since 2005. Well, those efforts have borne fruit [click here for legislative details]: under new F.S. 90.5021 the "fiduciary exception" to the attorney-client privilege is now history in Florida.

[2] New PR/Trustee Reporting Requirements: F.S. 733.212(2)(b) & F.S. 736.0813:

In order to make sure trust and estate beneficiaries don't get caught by surprise by this turn of events, the new legislation also creates new reporting requirements for ALL trustees and personal representatives. The new legislation amends F.S. 733.212(2)(b), to provide that a notice be included on the notice of administration regarding the fiduciary lawyer-client relationship, and F.S. 736.0813, to require the trustee of a trust to include a notice regarding the fiduciary lawyer-client relationship in various statutory mandated notices to the beneficiaries of the trust.

Because the legislation just passed, the new statutes have yet to be published online. For now, if you want to see the text of the new statutes you’ll have to read Bill CS/HB 325.

Here's how the new attorney-client privilege legislation is explained in Florida House of Representative's Staff Analysis of CS/HB 325:

Lawyer-Client Privilege

Section 90.502(1)(c), F.S., provides that a communication between lawyer and client is confidential if it is not intended to be disclosed to a third person. Section 90.502(2), F.S., provides that a client has a privilege to refuse or prevent another party from disclosing those communications.

There has been some issue as to whether the attorney-client privilege applies to a trustee or guardian who employs an attorney in connection with his or her duties as trustee or guardian. The Florida Second District Court of Appeal has addressed both situations.

In Jacob v. Barton, the trustee was being sued by the beneficiary. The issue before the court was whether the attorney client privilege applied to the trustee or the beneficiary. The court ruled that the privilege applied if the work being done was on behalf and for the benefit of the trustee, but if the ultimate benefit was for the beneficiary, the privilege would not apply since the beneficiary was the "real client." The court in Tripp v. Salkovitz, furthered this reasoning to a guardian. The guardian employed an attorney to assist in the duties of administrating the guardianship. The guardian was later sued for mismanagement by a beneficiary after the ward's death. The court ruled that the privilege applies only if the attorney was representing the interests of the guardian and not the ward. In both cases, the court mandated that the lower court conduct an in camera review of the records in question and determine which, if any, fell under the attorney-client privilege.

Effect of the Bill (Section 1, Section 8, Section 11)

The bill creates s. 90.5021, F.S., which provides that, for purposes of this section, a client acts a fiduciary when serving as a personal representative, a trustee, an administrator ad litem, a curator, a guardian or guardian ad litem, a conservator, or an attorney-in-fact. The bill also provides that a communication between a client, acting as a fiduciary, and the client's lawyer is privileged and protected pursuant to s. 90.502, F.S., and that nothing in this section affects the crime-fraud exception to the lawyer-client privilege set forth in s. 90.502(4)(a), F.S.

The bill also amends s. 733.212(2)(b), F.S., to provide that a notice be included on the notice of administration regarding the fiduciary lawyer-client relationship.

The bill amends s. 736.0813, F.S., to require the trustee of a trust to include a notice regarding the fiduciary lawyer-client relationship in various statutory mandated notices to the beneficiaries of the trust.

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Crawford v. Barker, --- So.3d ----, 2011 WL 2224808 (Fla. Jun 09, 2011)

In 1951 Florida enacted a statute automatically cutting divorced spouses out of each other's wills (currently at F.S. 732.507(2)). In 1989 Florida enacted a similar statute for revocable trusts (currently at F.S. 736.1105). The same inequities that lead to post-divorce automatic revocation statutes for wills and revocable trusts are now playing themselves out in cases involving beneficiary-designated non-probate assets benefiting ex-spouses.

Florida courts have traditionally applied classic contract interpretation rules to beneficiary-designated assets benefiting ex-spouses. In most cases this means the ex-spouse gets the assets. In Smith v. Smith, 919 So.2d 525 (Fla. 5th DCA 2005), which I wrote about here, the court articulated the majority approach in Florida as follows:

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, . . . "did just what he needed to ensure that the proceeds would go to [Ms. Smith]-he did nothing." [Cooper v. Muccitelli (Cooper II), 682 So.2d 77, 79 (Fla.1996)]. 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.

The 3d DCA broke with the majority rule in Barker v. Crawford, 16 So.3d 901 (Fla. 3d DCA 2009), crafting a form of post-divorce automatic revocation rule based on the facts of the case. The Florida Supreme Court then stepped in, reversed the 3d DCA, and in the linked-to opinion above reiterated that the rule in Florida for these cases is the majority approach articulated in Smith v. Smith.

Case Study:

In the linked-to case above the decedent opened a deferred compensation fund while married and named his spouse as the beneficiary of that fund in the event of his death. He subsequently divorced and he and his spouse entered into a marital settlement agreement that provided in relevant part as follows:

“Husband shall retain retirement money with the Town of Surfside and the Deferred Compensation Fund f/ka/ [sic] Pepsco.”

The agreement also provided that the husband “shall retain annuity with Pacific Life.” The agreement did not contain a general waiver provision or any other provision referencing the pension, annuity, or the deferred compensation fund at issue in this case.

About a year after the divorce the decedent passed away, never having removed his ex spouse as the beneficiary of his deferred comp' plan. The 3d DCA ruled that the post-divorce ownership of his deferred comp' plan = ex wife didn't get the money unless husband re-affirmed his intent to benefit her post-divorce (which he hadn't, he'd done nothing). The Florida Supreme Court reversed the 3d DCA and instead reaffirmed the approach taken by the 5th DCA in Smith v. Smith.

Absent the marital settlement agreement providing who is or is not to receive the death benefits or specifying the beneficiary, courts should look no further than the named beneficiary on the policy, plan, or account. General language such as language stating who is to receive ownership is not specific enough to override the plain language of the beneficiary designation. Magic words are not required; however, if the parties wish to specify in a marital settlement agreement that a spouse will not receive the death benefits or wish to specify a particular beneficiary, this should be done clearly and unambiguously. Otherwise, the unifying principle of Cooper II, Smith, and Luszcz applies—that the spouse who receives the policy, plan, or account as part of the marital settlement agreement is free to designate whomever he or she chooses as the beneficiary.

...........

We now apply the rule of law to this case. Here, the settlement agreement provided: “Husband shall retain retirement money with” the deferred compensation fund. The agreement did not state who would receive the death benefits or who should be the beneficiary of the deferred compensation fund. However, the contract with Nationwide Retirement Solutions clearly designated Linda Crawford as the beneficiary. Accordingly, looking to the plain language of these documents, the beneficiary designation controls.

...........

In sum, we conclude, after reviewing the language of the marital settlement agreement, that the agreement gave Manuel Crawford ownership of the deferred compensation fund. As the owner, he had the right to designate the beneficiary of his choosing under the terms of the agreement—he was not obligated by the agreement to either maintain or change the beneficiary, and the agreement did not specify who was or was not to receive the death benefits. Thus, because the beneficiary designated on the deferred compensation fund is Linda Crawford, she is entitled to the death benefits.

Florida Needs to Adopt UPC 2-804:

It is inconsistent and illogical to have an automatic post-divorce revocation statute for wills (F.S. 732.507(2)), and revocable trusts (F.S. 736.1105), but not for beneficiary-designated non-probate assets benefiting ex-spouses. Clearly it is not the judiciary's role to create revocation law where none exists (which is what the 3d DCA tried to do). This problem needs a legislative fix.

The way to fix this problem in Florida is by adopting section 2-804 of the Uniform Probate Code, which is the UPC's version of an automatic post-divorce revocation statute applicable to beneficiary-designated non-probate assets. For an excellent discussion of why this is a good idea you'll want to read an article written by Tampa attorney Suzanne Glickman entitled A Fair Presumption: Why Florida Needs a Divorce Revocation Statute for Beneficiary-Designated Nonprobate Assets. Here's an excerpt from the introduction:

Life insurance and other nonprobate assets such as annuities, pay-on-death accounts, and retirement planning accounts have become increasingly popular as estate planning tools. In 2004, Americans purchased $3.1 trillion in new life insurance coverage, a ten percent increase from just ten years before. Purchases made by Floridians accounted for nearly $154 million of this national total. At the end of 2004, there was $17.5 trillion in life insurance policy coverage in the United States. However, it is likely that some of those policies will not provide security for the individuals for whom they were intended, especially if the policyholder resides in Florida. An unfortunate but familiar scenario occurs when a divorced individual fails to change the designated beneficiary on his or her life insurance policy or other contract-based estate planning tool, and the ex-spouse receives the insurance proceeds upon that individual’s death. Whether due to over-sight, mistake, or poor comprehension of the way contracts such as life insurance policies operate, the outcome is especially regrettable when the decedent policyholder leaves behind minor children or a financially struggling family.

While some jurisdictions have enacted legislation to avoid [this result], Florida has not. This Article will propose a Florida divorce revocation statute for nonprobate assets such as life insurance policies, annuities, IRAs and retirement-planning accounts, pay-on-death accounts, and any other type of contract-based asset designating an ex-spouse as beneficiary. By automatically revoking nonprobate asset beneficiary designations upon divorce, such a statute will more accurately enforce the deceased policyholder’s intent and avoid seemingly inequitable results . . . 

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