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

Celebrities are great for the trusts and estates field. They focus popular attention by bringing to life in dramatic fashion the abstract principles T&E lawyers deal with every day. The latest celebrity to step up to the plate for the T&E world is George Clooney in “The Descendants.”

T&E lawyers can go on ad nauseam about the legal and financial challenges faced by trustees balancing the interests of current and future trust beneficiaries, and we can kill whole forests writing about the legal and financial tools available to trustees [I've done my part, click here, and here], but how do you explain the sometime metaphysical challenges faced by trustees who don't just want to get the job done, they want to "do the right thing." For that, we need good drama. Enter George Clooney in “The Descendants.”

In this blog post Scott Martin of The Trust Advisor Blog provides an excellent write up of Clooney's latest role from a T&E perspective. Here's an excerpt:

Every multi-generational trust is a balancing act between the living and the dead, with the trustee in the precarious position of having to weigh the wishes of vanished grantors against the priorities of their heirs.

The new film “The Descendants,” by the director of “About Schmidt” and “Sideways,” frames that balancing act against the lush landscape of Kauai, where the fictional King family have lived for decades on acreage held in trust.

The land is not only their home but their birthright, so when the heirs decide to sell the property to generate income, the trustee (played brilliantly by George Clooney) has to do plenty of soul searching.

As a beneficiary and heir of the grantors himself, his position is almost impossibly complicated. He is torn between succumbing to the pressure of the cash strapped beneficiaries and the original intent of the family to preserve the land for generations to come.

He gets a lot of things wrong along the way — nobody said playing referee for a fractious family is easy, especially when there are billions of dollars at stake and the heirs are your cousins.

But at the end, he does the best he can, and Payne (who co-wrote the screenplay from a book by Kaui Hart Hemmings) even gives him a little peace after the hard decisions have played out.

Ripped from the headlines

In fact, the situation he has to face reflects the real-life decisions the trustees made a few years ago on behalf of the beneficiaries of Hawaii’s billion-dollar Campbell Estate.

The 107-year-old Campbell Estate was required to dissolve in January of 2007, twenty years after the last death of the direct descendants who had been alive at the time of the trust’s creation.

Some of the heirs took large cash payouts, according to an account in the Honolulu Advertiser — now the Honolulu Star Advertiser — while others chose instead to roll their interests into a new national real estate entity, the San Francisco-based James Campbell Co. LLC.

In its new corporate identity, the former estate had to distribute its estate tax liabilities as well as its assets to the beneficiaries.

But where the acreage in “The Descendants” ends up sold off to outside developers, the Campbell family still controls several thousand acres of their family legacy in Hawaii, as well as an empire of projects on the mainland

Other details are drawn from the story of other family trusts in Hawaii that have faced this same situation in the last few years.

For example, when the film refers to how “Matt King,” played by Clooney, is a descendant of a Hawaiian princess, who was a member of the powerful Kamehameha dynasty, and a mainland banker, the lineage is fictional.

But the story is reminiscent of the foundation of what was formerly known as the Bishop Estate, created by Charles Reed Bishop, a banker who married the Hawaiian princess Bernice Pauahi.

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Grisolia v. Pfeffer, --- So.3d ----, 2011 WL 5864806 (Fla. 3d DCA Nov 23, 2011)

The key to understanding this case is recognizing that one word: "homestead;" is used in three very different ways in Florida's constitution:

• Article X, §4(a) and (b) for creditor protection
• Article X, §4(c) for devise and descent
• Article VII, §6 for taxation

The same home can qualify as "homestead" under one constitutional homestead clause, while at the same time failing to qualify as "homestead" under another constitutional homestead clause. For example, for public policy reasons Florida's homestead tax exemption (Article VII, §6) is "strictly construed." In other words, when in doubt, courts must rule against homeowners claiming this tax benefit. By contrast, Florida's homestead creditor protection (Article X, §4(a) and (b)) is "liberally construed." When in doubt, courts must rule in favor of homeowners claiming this asset-protection benefit.

Courts get into trouble when they rely on a line of homestead case-law authority developed to address one facet of homestead law (e.g., taxes), to decide a case involving another facet of homestead law (e.g., creditor protection). That's what happened in the linked-to case above.

Case Study:

In the linked-to case above the decedent was a foreign national (Venezuelan) who moved to Florida in 2005 after his US-born son was almost kidnapped in Venezuela. In 2006 the decedent purchased an apartment in Florida, which he resided in with his family. In 2007 the decedent was loaned $500,000. In 2009 the decedent died intestate while still residing with his family in his Florida apartment. When the decedent's creditors tried to enforce their debt against his estate, his wife claimed the homestead creditor protection to shield the family's apartment from their claims.

A foreign national does not qualify for the homestead tax exemption unless he's a permanent US resident (i.e., Greencard holder), which the decedent wasn't. The trial court ruled against the family on the homestead creditor protection issue based in large part on the fact that the decedent never claimed, nor did he ever qualify for, the homestead tax exemption. Wrong answer, says the 3d DCA. Just because your "homestead" does not qualify for the tax exemption does not mean it fails to qualify for creditor protection.

In Florida, “courts have consistently held that the protections afforded by the ‘homestead exemption in article X, section 4 must be liberally construed.’“ Taylor v. Maness, 941 So.2d 559, 562 (Fla. 3d DCA 2006) (citation omitted). Furthermore, the homestead exemption jurisprudence of Florida courts “has long been guided by a policy favoring the liberal construction of the exemption: ‘Organic and statutory provisions relating to homestead exemptions should be liberally construed in the interest of the family home.’“ Taylor, 941 So.2d at 562 (citations omitted). Accordingly, the Florida homestead exemption from forced sale “is liberally construed for the benefit of those it was designed to protect.” Taylor, 941 So.2d at 562 (quoting Law v. Law, 738 So.2d 522, 524 (Fla. 4th DCA 1999)).

. . . . . .

Appellees cite to several bankruptcy cases where a debtor, because of his immigration status, could not formulate the requisite intent to make his property his permanent residence. These cases ignore that eligibility for the homestead exemption depends on the intent of the homesteader rather than that of the U.S. Citizenship and Immigration Services. See Cooke, 412 So.2d at 341.

. . . . . .

Other cases cited by Appellees are inapposite as they involve Florida's homestead exemption from taxation that is now set forth in article VII, section 6 of the Florida Constitution (“Tax Exemption”), rather than the homestead exemption from forced sale found in article X, section 4. For example, in Juarrero v. McNayr, 157 So.2d 79 (1963), the Florida Supreme Court held that a citizen and former resident of a foreign country, who is in the United States solely on the authority of a temporary visa, “has no assurance that he can continue to reside in good faith for any fixed period of time in this country ... [and, therefore] does not have the legal ability to determine for himself his future status and does not have the ability legally to convert a temporary residence into a permanent home.” Id. at 81. Likewise, in DeQuervain v. Desguin, 927 So.2d 232 (Fla. 2d DCA 2006), the court found that homeowners who held only temporary visas “could not form the requisite intent to become permanent residents for purposes of the [Tax Exemption].” Id. at 233. However, the Second District also clarified that “because the [Tax Exemption] provides relief from an ad valorem tax, we must construe the statute strictly against [the homeowners].” Id. (citing Capital City Country Club, Inc. v. Tucker, 613 So.2d 448, 452 (1993)). The strict construction applicable to the Tax Exemption stands in contrast to the liberal construction of the homestead exemption from forced sale at issue here. See Taylor, 941 So.2d at 562; Law, 738 So.2d at 524.

Similarly, at the evidentiary hearing the Appellees raised the fact that the Decedent had never claimed a Tax Exemption on the Property. They further argue on appeal that a person in the United States under a temporary visa cannot meet the requirement of permanent residence or home, and therefore, cannot claim the Tax Exemption. Fla. Admin Code R. 12D–7.007 (2002). We note that the portion of the Florida Administrative Code to which they cite applies to the Tax Exemption and not to the homestead exemption from forced sale at issue here. The probate court referenced in the order on appeal that “[i]n fact, the Decedent never claimed a [Tax Exemption] according to the Miami–Dade County Tax Rolls.” As we have previously stated, “[f]ailure to claim the [Tax Exemption] is not evidence that property is not, in fact, homestead.” Taylor, 941 So.2d at 563 (citing Pierrepoint v. Humphreys, 413 So.2d 140, 143 (Fla. 5th DCA 1982)). Clearly, “the homestead exemption from forced sale is different from the [Tax Exemption].” Taylor, 941 So.2d at 563 (citing S. Walls, Inc. v. Stilwell Corp., 810 So.2d 566, 569 (Fla. 5th DCA 2002)).

Under the specific facts of the this case, because the Decedent's American-born Son resided in the Property since its purchase, the Decedent and Widow had a visa which gave them the legal right to reside in Florida, and were actively pursuing permanent residence status prior to the Decedent's death, we find that the Decedent demonstrated the requisite intent to make the Property his family's permanent residence. Based upon the foregoing, we reverse the probate court's order denying the petition for declaration of homestead exemption. 

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Agee v. Brown, --- So.3d ----, 2011 WL 5554833 (Fla. 4th DCA Nov 16, 2011)

At the heart of this case is Florida Bar ethics Rule 4-1.8(c), which prohibits Florida lawyers from soliciting “substantial” gifts from their clients (“lunch on me” is OK) or drafting wills, trusts, deeds, etc. for their clients effectuating any such gift.

The common law rule in Florida is that gifts made to lawyers in violation of Rule 4-1.8(c) aren’t per se void, but they do trigger a rebuttable presumption of undue influence by the lawyer. If the lawyer can’t overcome this evidentiary hurdle, the gift is void. How do I know this? Because a couple of years ago I read what I consider to be one of the most thoughtful and scholarly probate-court orders I’ve ever come across in my career. The order, authored by Pinellas Circuit Judge Lauren Laughlin and later affirmed on a “PCA” basis by the 2d DCA in Carey v. Rocke, 18 So.3d 1266 (Fla. 2d DCA October 23, 2009), does a fantastic job of dissecting the intersection of Florida law and professional ethics in a will contest involving a possible Rule 4-1.8(c) violation. Judge Laughlin's order should be required reading for anyone involved in a case where a will contest involves a possible Rule 4-1.8(c) violation. Click here for a copy of Judge Laughlin's order and click here for my write up of the case.

Case Study:

At issue in the linked-to case above was a will and deed drafted by a lawyer in violation of Rule 4-1.8(c). The trial court ruled the will, and by implication the deed, were per se void as contrary to public policy. Not surprisingly, the 4th DCA reversed. Here’s the crux of their analysis:

Jon and Susan Agee appeal the trial court's order dismissing their petition to revoke probate of the last will of Herbert G. Birck based on a lack of standing. The trial court had found that the prior will upon which the Agees based their standing was void as contrary to public policy because Mr. Agee, in violation of the Rules Regulating The Florida Bar, had drafted that earlier will in which he and his wife were left a substantial bequest. The Florida Probate Code, however, does not provide for such an automatic exclusion. Because we conclude that the Agees have standing under a prior will to petition for the revocation of the decedent's last will, we reverse and remand for further proceedings.

. . .

In support of his position that a bequest to a drafting attorney must be deemed void as contrary to public policy, Brown argues that “[p]ublic policy demands protection of the public and the instilling of confidence in the legal profession.” The best way to protect the public from unethical attorneys in the drafting of wills, however, is entirely within the province of the Florida Legislature. The current statutory framework, contrary to Brown's implication, does contain some protections. See, e.g., § 732.5165, Fla. Stat. (2009) (“A will is void if the execution is procured by fraud, duress, mistake, or undue influence.”); § 733.107(2), Fla. Stat. (2009) (“The presumption of undue influence implements public policy against abuse of fiduciary or confidential relationships and is therefore a presumption shifting the burden of proof....”).

. . .

To the extent that the trial court agreed . . . that the deed drafted by Mr. Agee which transferred the remainder interest in an enhanced life estate to him and his wife was void as against public policy, we note that, just as with devises, the fact that Mr. Agee drafted the deed does not make the deed void per se, but rather raises a rebuttable presumption of undue influence. See Fogel v. Swann, 523 So.2d 1227, 1229 (Fla. 3d DCA 1988).

Lesson learned?

What this case and the 2d DCA's Carey case demonstrate is that there's a right way and a wrong way for clients to make substantial gifts to their lawyers. The wrong way opens the door for litigation and possibly frustrating a client's legitimate testamentary wishes. The right way makes sure the client isn't the victim of undue influence, and just as importantly, makes it much less likely the estate will find itself embroiled in costly litigation. So what's the right way? The Commentary to Rule 4-1.8(c) provides the following road map:

A lawyer may accept a gift from a client, if the transaction meets general standards of fairness and if the lawyer does not prepare the instrument bestowing the gift. For example, a simple gift such as a present given at a holiday or as a token of appreciation is permitted. If a client offers the lawyer a more substantial gift, subdivision (c) does not prohibit the lawyer from accepting it, although such a gift may be voidable by the client under the doctrine of undue influence, which treats client gifts as presumptively fraudulent. If effectuation of a substantial gift requires preparing a legal instrument such as a will or conveyance, however, the client should have the detached advice that another lawyer can provide and the lawyer should advise the client to seek advice of independent counsel. Subdivision (c) recognizes an exception where the client is related by blood or marriage to the donee or the gift is not substantial.

R. Regulating Fla. Bar 4-1.8, Comment
“Gifts to Lawyers.”

In terms of providing guidance for clients who for whatever reason legitimately want to write their lawyers into their wills, California has actually codified (and perhaps beefed up) the litigation-shield contained in the Commentary to our ethics Rule 4-1.8(c) by including it in its probate code. See Cal. Prob.C. §§21350-21356. For a comprehensive list of cases across the country dealing with some version of Rule 4-1.8(c), see ACTEC's Commentary on MRPC 1.8.

Bottom line, client gifts to lawyers are not illegal, but they are freighted with all sorts of baggage and litigation risks. Florida law and our ethics rules provide solid guidance for effectuating these gifts the right way. Sadly, these suggestions were apparently not followed in this case.

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Melican v. Parker, 289 Ga. 420 (May 31, 2011)

There are all sorts of reasons for why probate practice is interesting. Consider, for example, that even the simplest one-page will is governed by a complex body of law, developed over centuries, that appears nowhere within the four corners of the document, yet can have dramatic consequences. In Florida, this body of law, known as “rules of construction” (i.e., rules that apply when the will is silent, but which can be varied by the terms of the will), has been largely codified in Part VI of chapter 732 of Florida's Probate Code. 

The rule of construction at issue in the linked-to case is Florida's "nonademption" statute (F.S.732.606).

Ademption is a common law rule of construction used to determine what happens when a specific item of property gifted under a will is no longer in the testator's estate at the time of his death. In those cases the specific gift is considered "adeemed," and the gift fails. For example, if testator "X" signs a will specifically devising his condominium located in Marco Island to "Y," but later sells the Marco Island condominium and buys a replacement condominium for him and Y to enjoy in the Florida Keys, Y gets nothing: the will said Marco Island condo', not condo' in the Keys.

The ademption rule was simple, but often ended up disinheriting people in a way that seemed unfair and contrary to what testators would have wanted. The more modern view, reflected in section 2‑606 of the Uniform Probate Code, reverses the common law rule in certain cases.

For example, does Y get anything if X signed a sales contract to sell the Marco Island condominium before his death, but the sale didn't close until after he died? That's what happened in the linked-to Georgia Supreme Court case applying Florida law. Under the common law rule, Y gets nothing. Applying the UPC's modern view, Florida's nonademption statute completely changes this outcome: Y may not get the condominium, but when the deal closes, she gets the cash. Here's why:

Pursuant to Fla. Stat. § 732.606(2)(a) (the “nonademption statute”), “[a] specific devisee has the right to the remaining specifically devised property and ... [a]ny balance of the purchase price owing from a purchaser to the testator at death because of sale of the property.” Therefore, where, as here, a balance is owed to a testator from the sale of his or her real property located in Florida, the proceeds from this sale are due to the specific devisee who would have otherwise inherited the real property under the will. Id. See also Ott v. Ott, 418 So.2d 460, 462 (Fla.App.1982) (“The original intent of the [nonademption statute] ... was to prevent ademption in all cases involving sale ... of specifically devised assets when the testator's death occurred before the proceeds of the sale ... had been paid to the testator”) (citation and punctuation omitted; emphasis supplied). Accordingly, Melican, as the specific devisee of the Florida condominium under Strother's Will, was entitled to the proceeds from the sale of the condominium after Strother's death, as these proceeds had not yet been paid to Strother before he died. Fla. Stat. § 732.606(2)(a).

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Steffens v. Evans, --- So.3d ----, 2011 WL 4577938 (Fla. 4th DCA Oct 05, 2011)

In 2002 Mr. Steffens writes his wife into his will. Things get rocky, and in 2007 the couple enters into a post-nuptial agreement that contains a waiver of all inheritance rights. Mr. Steffens dies in 2009 and the issue becomes whether his 2007 post-nup' trumps his 2002 will. The trial court and the 4th DCA both say YES. Here's why:

Tracking the language in section 732.702(1), the Post–Nuptial Agreement refers to the parties waiving “all rights” several times:

Each party freely and voluntarily irrevocably waives all rights in the earnings, property and estate of the other as well as any right to alimony, support or any other monetary relief in the event of a dissolution of marriage or death, except as specifically provided herein.

....

4.1 Except as is otherwise specifically provided in this Agreement, each party waives, relinquishes and releases all right, title and interest in and to any and all of the other party's separate property (See Section 5) to which each party may otherwise be entitled as the spouse of the other party, widow or widower, heir at law, next of kin or distributee, upon or by virtue of a termination of the marriage of the parties by death, divorce, dissolution of marriage, annulment or otherwise....

....

4.2 The waiver contained herein is to be broadly construed pursuant to Section 732.702, Florida Statutes.

(emphasis added.) Accordingly, as Jeffrey's 2002 will was executed before the parties' 2007 Post–Nuptial Agreement, the Post–Nuptial Agreement waived any benefits that would have passed to Andrea under the 2002 will.

The Third District reached a similar result in Hulsh v. Hulsh, 431 So.2d 658 (Fla. 3d DCA 1983). In Hulsh, the court examined whether the language of a post-will antenuptial agreement between the decedent and the widow was effective to waive the widow's right to take under the will. Hulsh, 431 So.2d at 660.

...

Ultimately, relying on section 732.702(1), the court determined that it had “no difficulty in deciding that the language of the antenuptial agreement was sufficient to waive Marcella's rights to take under the provisions of Sheldon Hulsh's will.” Id. at 662 (footnote omitted). Similarly, we find that the language of the Post–Nuptial Agreement waived Andrea's rights to take under the provisions of Jeffrey's will.

The issue I found most interesting was how the court dealt with a "voluntary gifts" clause in the post-nuptial agreement permitting either spouse to make gifts to the other after the post-nup', and stating that those gifts would not be subject to the waivers contained in the post-nup. This is a common clause found in most marital agreements of any sophistication.

["voluntary gifts" clause]

Notwithstanding the terms of this Agreement, either party shall have the right to voluntarily transfer or convey to the other party any property or interest therein, whether Separate Property or other property, which may be lawfully conveyed or transferred during his or her lifetime, or by will or otherwise upon death. Neither party intends by this Agreement to limit or restrict in any way the right and power of the other to receive any such voluntary transfer or conveyance. Such gifts shall not constitute an amendment to or other change in this Agreement, regardless of the extent or frequency of such gifts. Any gifts given by one party to the other hereafter shall constitute the receiving party's separate property.

So if I write you into my will in 2002 but don't die until 2009, when did I make a gift? In 2002 or 2009? For tax and property law purposes, the law is clear: no gift until 2009. That same logic apparently doesn't extend to marital agreements. According to the 4th DCA, the gift was made in 2002 not 2009, thus the 2007 post-nup' clearly voids it.

Thus, [the post-nuptial agreement] unambiguously refers to transfers of property after the 2007 Post–Nuptial Agreement and would not reserve Andrea's beneficiary rights under the 2002 will.

I'm not sure this logic adds up. If I were on the 4th DCA, I would have framed my analysis of the "voluntary gifts" clause in contract-construction terms. Did the post-nup' cover pre-existing wills or not? That how the Florida Supreme Court recently held courts are supposed to deal with beneficiary-designation forms benefiting ex-spouses. See Crawford v. Barker, --- So.3d ----, 2011 WL 2224808 (Fla. Jun 09, 2011), which I wrote about here. Instead, the 4th DCA hung its hat on "Andrea's beneficiary rights under the 2002 will."  What rights? She didn't have any "rights" until 2009?

Lesson Learned?

Until a Florida court says otherwise, the rule seems to be that a general waiver contained in a marital agreement is good enough to void a pre-existing will, even if the marital agreement says nothing specific about the pre-existing will. 

If your legal practice involves drafting marital agreements, you'll want to make sure your "voluntary gifts" clause specifically addressed pre-existing wills, trusts, etc. If the couple intends to void a pre-existing will, you'll want to explicitly say so. If that's not their intent, you'll want to say that too. Either way, specifically addressing the issue will hopefully spare all sides from the expense and stress inherent to the litigation the parties in this case lived through.

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