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

Irrevocable life insurance trusts or "ILIT's" are a mainstay of high end estate planning for all sorts of reasons, mostly having to do with saving taxes [click here]. For tax reasons, the client usually can't serve as trustee of his own ILIT. So often family friends (selected for their loyalty to the grantor, knowledge of family dynamics, and willingness to serve without compensation) do the job. What these unsuspecting family-friend trustees never realize is the liability minefield they're waltzing into [click here].

What to do? Well, you could try to draft around the problem, which isn't easy and there are no guarantees whatever fix you come up with will survive a court challenge years later before an overworked and understaffed probate judge. Or you could do things the easy way and get the law changed. That's what Florida did.

Risk Management for ILIT Trustees: Legislative Fix: F.S. 736.0902

As explained in the Legislative Staff Analysis of CS/SB 926, effective July 1, 2010, Florida enacted F.S. 736.0902, statutorily eliminating ILIT trustee liability with respect to (1) insurable interest issues related to the ownership of life insurance and (2) investing in life insurance policies.

The "insurable interest" issues addressed by the ILIT statute are codified in F.S. 627.404. I previously wrote here about how blowing this issue in an ILIT can get you sued. The investment duties waived by the statue for ILIT trustees opting into its protections are found in Florida's Prudent Investor Rule (F.S. 518.11) and Florida's Trust Code (F.S. 736.0804).

How Florida's ILIT Trustee Protection Statute Works:

Under F.S. 736.0902, an ILIT trustee will have NO duty to ensure that there exists an insurable interest in a life insurance policy if:

1. the trust owns insurance on the life a "qualified person" which is a new statutory concept defined as the "insured or a proposed insured, or the spouse of that person, who has provided the trustee with funds used to acquire or pay premiums with respect to a policy of insurance" on the life of any of those individuals;
2. the trust agreement does not opt out of the application of statute;
3. the insurance policy is not purchased from a trustee affiliate nor will the trustee or any trustee affiliate receive commissions related to the policy purchase unless trustee investment duties were delegated to another person;
4. the trustees did not know that the beneficiaries lacked an insurable interest when the policy was purchased; and
5. the trustee did not have knowledge of a STOLI (stranger-owned life insurance) arrangement.

Moreover, under F.S. 736.0902 an ILIT trustee has NO duty to determine whether the life insurance policy is a proper investment, to diversify with respect to any policy, to investigate the financial strength of the issuing company, to decide whether to exercise any policy options nor to examine the financial and physical health of the insured if [a] the first three criteria above apply and [b] either:

1. the trust agreement affirmatively opts in to the application of the statute, or
2. the trustee gives notice to the trust beneficiaries of the trustee's intention to opt in to the statute, and no beneficiary objects within 30 days of receipt of that notice or any written objections are withdrawn.

Practice Pointer: ILIT Trustee Statutory Protections are NOT Automatic: Must "Opt In"

The new ILIT statute isn't self effectuating. In other words, if you want its protections you have to affirmatively opt into its application. You can do this in one of two ways. First, you can include a clause in the trust agreement affirmatively opting into F.S. 736.0902. This is the only way to guarantee the statue will apply to your ILIT. Why? Because the second way to opt into F.S. 736.0902 is by giving all of the ILIT's beneficiaries notice and an opportunity to object. If even one person objects, the statute's investment-duty protections will NOT apply. This is an important point. Here's how the notice/objection regime is laid out in subsection (5)(b) of F.S. 736.0902:

1. The notice of the application of this section shall be given to the qualified beneficiaries and shall contain a copy or restatement of this section.
2. Notice given pursuant to any of the provisions of part III of this chapter to a person who represents the interests of any of the persons set forth in subparagraph 1. shall be treated as notice to the person so represented.
3. Notice shall be given in the manner provided in s. 736.0109.
4. If any person notified pursuant to this paragraph delivers a written objection to the application of this section to the trustee within 30 days after the date on which the objector received such notice, paragraphs (1)(b)-(f) shall not apply until the objection is withdrawn.
5. There shall exist a rebuttable presumption that any notice sent by United States mail is received 3 days after depositing the notice in the United States mail system with proper postage prepaid.

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Common sense, and hard earned experience, tell us that clients can sign perfectly clear and unambiguous wills . . .  that are disasters waiting to happen. Why? Because even the simplest one-page will is governed by a complex body of law that appears nowhere within the four corners of the document, but can have devastating unintended consequences on even the simplest estate plan. 

This body of law, known as [1] “rules of construction” (i.e., rules that apply when the will is silent, but which can be varied by the terms of the will; see Part VI of chapter 732 of Florida's Probate Code for the rules of construction governing Florida wills) and the [2] "rules of law” (i.e., rules that cannot be modified by the terms of the will, such as Florida's strict homestead laws [see here]), is found in Florida's common law, Probate Code, Principal and Income Act and related accounting law, and "read into" every will signed in Florida . . .  even the $5-special you bought at Home Depot.

What can a family do when confronted by one of these time bombs? Until recently, not much. Courts had their hands tied; even if there was clear and convincing evidence that the unambiguous text of the will resulted in an outcome directly contrary to the testator's intent, Florida common law prohibited reformation of the will to fix the mistake.

Legislative Fix:

As explained in Florida House of Representative's Staff Analysis of CS/HB 325, effecitve July 1, 2011, we now have new legislation dramatically expanding the scope of judicial Will reformation actions to fix these mistakes.

The bill creates s. 732.615, F.S., to provide that a court may reform a will even if it is unambiguous. A person challenging the will would have to prove by clear and convincing evidence that both the testator's intent and the terms of the will were affected by a mistake of fact or law. A court may look to extrinsic evidence in these circumstances even if the evidence contradicts the plain meaning of the will.

In the example of [Azcunce v. Estate of Azcunce, 586 So.2d 1216 (Fla. 3d DCA 1991)], the changes provided in the bill may have allowed the court to look at the extrinsic evidence regarding the deceased's intent to not disinherit his daughter even though the will was unambiguous and the extrinsic evidence contradicted the plain meaning of the will.

The bill creates s. 732.616, F.S., to provide that any interested person may petition to modify a testator's will in order to achieve the testator's tax objectives, provided such modification is not contrary to the testator's probable intent. This change would allow a party to seek modification of the will in order to achieve a tax advantage intended by the testator so long as the modification is not contrary to the testator's probable intent.

The bill creates s. 733.1061, F.S., to provide that in the newly created actions under s. 732.615 and s. 732.616, F.S., "the court shall award taxable costs as in chancery actions, including attorneys fees and guardian ad litem fees." A chancery action for attorneys fees and costs is an action in equity that is similar to a prevailing party provision for attorneys fees and costs, but equity does give the court discretion if the circumstances demand. The new section would give the court the ability to charge attorneys fees and costs directly to a party. The bill also gives the court the discretion to tax the fees and costs against a party's interest in the estate or other property of the party that is not part of the estate.

For an excellent discussion of Florida's prior common law governing will-reformation actions and how this new legislation brings us into line with modern national trends, you'll want to read WILL REFORMATION LEGISLATION by Brian Felcoski (prepared with the assistance of Elisa F. Lucchi and Jon Scuderi). Here's an excerpt:

Restatement Third Property: Many states have adopted the approach in the Restatement Third which allows: (1) construction of wills where appropriate, and (2) reformation of wills for unilateral mistake by the testator (or the scrivener as the testator’s agent).

Restatement Third Property § 12.1: Allows for extrinsic evidence so long as there are safeguards to prevent against mistaken evidence through a strict burden of proof.

Rationale of Rest. 3d Prop. §12.1: The rationale is that admitting evidence outside the four corners of a will is inherently suspect but, possibly correct. Rest. 3d Prop. – WDT, §12.1, comment b. However, the law deals with evidence that is inherently suspect but possibly correct on one of two ways, namely: (1) to exclude evidence; or (2) to consider extrinsic evidence with safeguards to prevent against mistaken evidence through a strict burden of proof. Id.

a. The drafters of the Restatement Third believed that the consideration of extrinsic evidence was the only option which would give effect to the testator’s intent. Id. at comment b.

b. The standard of proof must be clear and convincing evidence in order to impose a heightened sense of responsibility on the trier of fact. Id. at comment e.

c. If the grounds are established by clear and convincing evidence, an order of reformation may be supported in addition to other equitable relief such as a constructive trust. Id. at comment f.

d. To support the remedy of reformation, the extrinsic evidence must establish by clear and convincing evidence: (1) that a mistake of fact or law affected the expression, inclusion, or omission of specific terms of the document, and (2) what the donor's actual intention was in a case of mistake in expression or what the donor's actual intention would have been in a case of mistake in the inducement. Id. at comment g.

e. A petition of reformation may be brought before or after the donor’s death. Id.

f. Unless otherwise stated, a judicial order of reformation will relate back to alter the text at the date of execution. Id. at comment f. 

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 LoCascio v. Estate of LoCascio, --- So.3d ----, 2011 WL 2555644 (Fla. 3d DCA June 29, 2011)

Silvia Locascio's brutally beaten corpse was found in her home on October 30, 2001. Eventually her husband and brother-in-law were found guilty of her murder - based in large part on the testimony of the couple's only son. Click here, here for more on the back story to this tragic case.

In this latest -- and hopefully final -- chapter of this very sad case, the 3d DCA reversed a probate order summarily removing the decedent's son as PR of her estate. This court order was just as summarily reversed by the 3d DCA in the following one-paragraph opinion:

Edward J. LoCascio appeals from an order removing him as successor personal representative of his deceased mother's estate. See LoCascio v. Sharpe, 23 So.3d 1209 (Fla. 3d DCA 2009); see also Golden & Cowan, P.A. v. In re Estate of Locascio, 41 So.3d 1113 (Fla. 3d DCA 2010). Because the “hearing” which preceded the ruling did not meet even the most rudimentary requirements of due process, including without limitation the presentation of evidence, it is reversed and the cause remanded with directions to reinstate the appellant as personal representative and for the prompt final resolution of this already over-protracted proceeding.FN1

FN1. We consider that this ruling obviates any reason for a curator or any other extraneous entity to administer the estate.

In order to understand this opinion I think you need to keep two points in mind.

First, the family tragedy at the heart of this case has been the subject of multiple criminal and probate trials plus 9 appeals as far as I can tell. By now -- 10 years after Mrs. Locascio's murder -- the 3d DCA is tired of this case and wants it to go away (note the court's gratuitous reference to "prompt final resolution of this already over-protracted proceeding" and its parting shot in FN1).

Second, the 3d DCA's emphasis on due process underscores the importance Florida law gives to the office of personal representative/PR. Probate judges do not have unfettered discretion to simply remove a PR because someone shows up in court and starts complaining. There needs to be evidence of wrongdoing, and that evidence needs to be presented at an evidentiary hearing affording all concerned with all of the due process protections Florida law affords to such litigants.

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Lituchy v. Estate of Lituchy, --- So.3d ----, 2011 WL 2135597 (Fla. 4th DCA Jun 01, 2011) 

I previously wrote here about whether a person should be required to hire a lawyer if he or she wants to petition a court to probate a will. In Florida the question is governed by Florida Probate Rule 5.030(a), which provides as follows:

(a) Required; Exception. Every guardian and every personal representative, unless the personal representative remains the sole interested person, shall be represented by an attorney admitted to practice in Florida. A guardian or personal representative who is an attorney admitted to practice in Florida may represent himself or herself as guardian or personal representative. A guardian advocate is not required to be represented by an attorney unless otherwise required by law or the court.

In this case the probate court denied the pro se petition for formal administration filed by the estate's sole beneficiary because he wasn't represented by an attorney. Wrong answer says Rule 5.030 (did no one point this simple rule out to the court?), and now the 4th DCA:

The trial court denied the pro se petition for formal administration of the estate of the appellant's wife, because the appellant was not represented by an attorney. We reverse, because the petition states that the appellant is his wife's sole beneficiary. Thus, he is entitled to file the petition without the necessity of an attorney. See Fla. Prob. R. 5.030(a) (“Every guardian and every personal representative, unless the personal representative remains the sole interested person, shall be represented by an attorney admitted to practice in Florida.”) (emphasis added); Benedetto v. Columbia Park Healthcare Sys., 922 So.2d 416 (Fla. 5th DCA 2006).

Reversed and remanded with directions to reinstate the petition for administration. 

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Hill v. Davis, --- So.3d ----, 2011 WL 3847252 (Fla. Sep 01, 2011)

I previously wrote here about the split between the 1st DCA and the 3d DCA regarding whether the 3-month statute of limitations period contained in F.S. 733.212(3) applies to personal-representative disqualification motions. The statute provides as follows:

(3) Any interested person on whom a copy of the notice of administration is served must object to the validity of the will, the qualifications of the personal representative, the venue, or the jurisdiction of the court by filing a petition or other pleading requesting relief in accordance with the Florida Probate Rules on or before the date that is 3 months after the date of service of a copy of the notice of administration on the objecting person, or those objections are forever barred.

3d DCA said NO, statute doesn't apply to PR disqualification motions, 1st DCA said YES it does. The Florida Supreme Court has now weighed in, holding that YES, the  the 3-month statute of limitations period contained in F.S. 733.212(3) DOES apply to personal-representative disqualification motions.

The issue before us is whether an objection to the qualifications of a personal representative of an estate is barred by the three-month filing deadline set forth in section 733.212(3), Florida Statutes (2007), a provision of the Florida Probate Code, when the objection is not filed within that statutory time frame. For the reasons explained below, we hold that section 733.212(3) bars an objection to the qualifications of a personal representative, including an objection that the personal representative was never qualified to serve, if the objection is not timely filed under this statute, except where fraud, misrepresentation, or misconduct with regard to the qualifications is not apparent on the face of the petition or discovered within the statutory time frame. Accordingly, because fraud, misrepresentation, or misconduct was not alleged in relation to the objection to the personal representative in this case, we approve the decision of the First District Court of Appeal in Hill.FN1 To the extent that the decision of the Third District in Angelus involved allegations of fraud and misrepresentation not revealed in the petition for administration, we approve the result in Angelus. However, we disapprove Angelus to the extent that it holds section 733.212(3) does not bar objections that a personal representative was never qualified to serve. We turn first to the facts of this case.

FN1. This case does not involve a proceeding filed under probate code sections 733.504, Florida Statutes (2007), and 733.506, Florida Statutes (2007), which provide for an adversary proceeding to remove a personal representative for reasons set forth in section 733.504. Thus, our decision in this case is limited to objections filed pursuant to section 733.212(3).

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Long v. Willis, --- So.3d ----, 2011 WL 3587411 (Fla. 2d DCA Aug 17, 2011) 

Most people (including most lawyers) assume that a minor's parents, i.e., a minor's "natural guardians" under F.S. 744.301, can make all decisions on behalf of their children, and that this authority extends to voting on behalf of their children under F.S. 733.301 with respect to who gets appointed personal representative (PR) of an estate when applying the "majority in interest of the heirs" test. WRONG answer: under subsection (2) of F.S. 733.301, a minor's parent/natural guardian is NOT authorized to vote on behalf of his or her child with respect to who gets appointed PR; you need a court-appointed guardian of the property to vote on behalf of the minor.

This all makes sense if you remember two points: [1] any time a minor (i.e., someone under 18) inherits $15,000+, a court-appointed guardian of the property is mandatory; and [2] a PR is only required for estates having a value of at least $75,000 (i.e., estates too large to qualify for summary administration). In other words, if the estate is too small to trigger the $15,000-guardian requirement, it's probably too small to need a PR, and vice versa.

Case Study:

In this case the parent/natural guardian of one of the decedent's heirs sought to vote on behalf of her three minor children for the appointment of PR of their father's estate. The decedent, who died intestate, had married and divorced twice prior to his death, so his only heirs were his two adult children from his first marriage and his three minor children from his second marriage. The appellant in this case was the decedent's second ex-wife and the mother of his three minor children.

The 2d DCA does an excellent job of dissecting the interrelated probate statutes and rules at play in this type of situation while also delivering solid practical advice for how the different (and apparently conflicting) timing requirements can all be made to work together in a reasonable manner. This kind of appellate-court-sanctioned statutory road map is gold for practicing probate lawyers.

[1.]  Is a court-appointed guardian of the property necessary to exercise a minor's vote in the appointment of a PR? YES

Ms. Long argues that as the natural guardian of Mr. Long's three minor children, she represents the majority in interest of the heirs and, therefore, has the right to select the personal representative. Significantly, the statute does not entitle a natural guardian to such a right. Rather, section 733.301(2) provides that “[a] guardian of the property of a ward who if competent would be entitled to appointment as, or to select, the personal representative may exercise the right to select the personal representative.” (Emphasis added.)

Ms. Long admits that the court never appointed her as the guardian of the property of her children, but she nevertheless claims that as their parent and natural guardian, under In re Estate of Phillips, 190 So.2d 15, 17 (Fla. 4th DCA 1966), she should have this power. In Phillips, which involved a dispute over the domicile of the decedent at the time of his death, the Fourth District affirmed that the decedent's five-year-old son, acting through his mother and natural guardian, the decedent's former spouse, was entitled to preference in selecting the administrator under section 732.44, Florida Statutes (1965), because he was the decedent's sole heir and next of kin. Id.

After the Phillips decision, the legislature replaced section 732.44, which gave appointment preference to the decedent's “next of kin” but provided no guidance for circumstances in which the next of kin was legally incompetent. The replacement statute, section 733.301, addresses the issue of legally incompetent heirs by clearly and unambiguously limiting the right to select a personal representative to the guardian of the property of such heirs, not to their natural parents. The legislature appears to have the right to create this limitation.

Thus, the probate court correctly ruled that Ms. Long could not vote for her children. 

[2.]  If a parent is served with a 20-day formal notice of someone else's petition for appointment as PR, does this parent have only 20 days to petition for and obtain an order appointing a guardian of the property and for that guardian to vote/object on behalf of the minor? NO

We conclude the probate court erred in ruling that Mr. Long's children were time-barred from challenging the right of their aunt to appointment and that it was without authority to allow these children to seek the appointment of a guardian of the property. First, although Florida Probate Rule 5.040(a)(2) provides that where an interested person on whom formal notice is served does not serve written defenses within twenty days, the probate court may consider the pleading ex parte, Florida courts treat this rule as merely procedural; it is “‘in no sense’ a statute of limitations or a mandatory non-claim provision.” Tanner v. Estate of Tanner, 476 So.2d 793, 794 (Fla. 1st DCA 1985). Applying this reasoning in Tanner, the First District held that where the decedent's beneficiaries filed a joint answer to the petition for administration asserting defenses five days after the time for answers had expired but before the hearing on the petition for administration and the order granting letters, the answer was timely filed. Id. Here, as in Tanner, Ms. Long, on behalf of Mr. Long's minor children, filed the objection to the appointment of Ms. Willis as personal representative just four days after the twenty-day answer period expired and well before the probate court issued the order granting letters. Accordingly, we conclude that the trial court had the authority to consider and should have considered the minor children's objection before the issuance of letters.

Second, we are convinced that the probate court had authority to allow Mr. Long's minor children the opportunity to participate in the vote of the heirs. See § 733.301(1)(b)(2). By requiring a guardian of the property, section 733.301(2) creates significant procedural impediments for minor children who wish to participate in the selection of a personal representative in a contested proceeding. When there is no conflict within a family, such children may well have time to obtain a guardian of the property before the petition for administration is filed. But in a case like this, even if the mother had understood the law, she could not realistically have obtained a guardian of the property for the children and allowed that guardian to vote for the children within the twenty-day response time. We conclude that the probate court had authority and should have allowed Ms. Long a reasonable time to obtain a guardian of the property to vote for the children.

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