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

SPCA Wildlife Care Center v. Abraham, --- So.3d ----, 2011 WL 6183491 (Fla 4th DCA Dec 14, 2011)

We all know charities are struggling to stay afloat these days, which means they're asserting themselves in court to a degree unheard of a generation ago (a topic of frequent discussion on this blog, click here). In the linked-to case above several charities, including the SPCA Wildlife Care Center (a Broward County animal shelter affiliated with the Humane Society), found themselves unexpectedly pushed into a corner by a probate court's insistence on adjudicating an issue no one asked it to rule on (lesson learned: always expect the unexpected when setting foot in a courtroom).

The question before the 4th DCA in the linked-to case above was whether a person's vaguely worded testamentary gift to charity can be enforced even if the named charity doesn't exist or the testatrix's charitable intent isn't worded as specifically as usually required for testamentary bequests. The trial court said NO. On appeal, the 4th DCA said YES, siding with the charity and reversing the trial court's decision based on the "cy-près" doctrine.

"Cy-près" Doctrine:

"Cy-près" is an old Norman French term meaning "as near as possible" or "as near as may be." When the original objective of the settlor or the testator becomes impossible, impracticable, or illegal to perform, the cy-près doctrine allows a court to amend the terms of a charitable trust as closely as possible to the original intention of the testator or settlor to prevent the trust from failing. For example, in Jackson v. Phillips, (1867) 96 Mass. 539, the testator bequeathed to trustees money to be used to "create a public sentiment that will put an end to negro slavery in this country." After slavery was abolished by the Thirteenth Amendment to the United States Constitution, the funds were applied cy-près to the "use of necessitous persons of African descent in the city of Boston and its vicinity."

Although unstated in the link-to 4th DCA opinion, the "cy-près" doctrine has been codified in Florida as part of our Trust Code at F.S. 736.0413. This provision is loosely based on section 413 of the Uniform Trust Code.

Case Study:

In the linked-to case above the decedent, Mary Ericson, executed a will that created a trust for the life-time benefit of her close friend, Emma Brown. Upon Ms. Brown's death, the trust's remaining assets were to be distributed to the "International Wildlife Society.” This is all fine, except there's no such thing as the "International Wildlife Society.” So does the charitable bequest fail?

According to Ms. Brown, “it was the intent of the decedent, Mary Ericson, to have the trust assets distributed to a local Broward County, Florida benevolent animal organization which would attempt to aid and care for animals and not consider destruction of animals except as a last resort.” Ms. Brown further attested that the decedent “often spoke of the Humane Society [of] Broward County.”

When the trust was brought before the court for clarification, several charities were notified and given an opportunity to file responses. One of these charities, the SPCA Wildlife Care Center, filed a response asserting that the assets of the testamentary trust should be distributed to it based on the cy-près doctrine. For some unexplained reason the trial court took it upon itself to simply rule the trust's residuary bequest was vague, and thus "failed". In other words, NO charity gets anything. What?! That logic may apply to non-charitable bequests, but not to charities. That's what the cy pres doctrine is all about; fixing vague charitable bequests. Fortunately, the 4th DCA "got it," reversing the trial court's order based on the following analysis.

The cy pres doctrine is the principle that equity will [a] make specific a general charitable intent of a settlor, and will, [b] when an original specific intent becomes impossible or impracticable to fulfill, substitute another plan of administration which is believed to approach the original scheme as closely as possible. Christian Herald Ass'n v. First Nat'l Bank of Tampa, 40 So.2d 563, 568 (Fla .1949). The doctrine is often applied where the named beneficiary is a corporation or institution that has ceased to exist at the time of the testator's death. See, e.g., Lewis v. Gaillard, 61 Fla. 819, 842–43, 56 So. 281, 288 (1911) (applying the cy pres doctrine and holding that the Florida State College for Women was entitled to receive income from the testator's estate, even though the testator's will named the college's predecessor institution, West Florida Seminary, as the beneficiary); Christian Herald, 40 So.2d at 568 (holding where testator devised property to dissolved charitable corporation, the successor in interest of the dissolved corporation became entitled to such property under the cy pres doctrine). Florida courts have held that “the misnomer of a devisee will not cause the devise to fail where the identity of the devisee can be identified with certainty.” Humana, Inc. v. Estate of Scheying, 483 So.2d 113, 114 (Fla. 2d DCA 1986). The cy pres doctrine, however, does not apply when the provisions of the will can be carried out, such as where the will provides an alternative that can be performed. See Jewish Guild for the Blind v. First Nat'l Bank in St. Petersburg, 226 So.2d 414, 416 (Fla. 2d DCA 1969); see also Sheldon v. Powell, 99 Fla. 782, 794, 128 So. 258, 263 (1930).

In the present case, the trial court erred in sua sponte determining that the residue of the testamentary trust would pass by intestacy instead of to a charitable organization for the benefit of animals. The hearing was not scheduled as an evidentiary hearing, and the only extrinsic evidence in the record on the issue of the decedent's testamentary intent consists of the affidavits of the income beneficiary and the attorney who prepared the will. Those would suggest that the court could fashion an alternative plan to effectuate the intent of the testator, where the testator's intent to provide for a charitable bequest to animals, and not to benefit any relatives or other parties, was express. Thus, there was not any evidentiary support for the trial court's conclusion that the residuary clause in Article Six, Paragraph C, of the will should fail.

From the language of the will and the affidavits in the record, it appears that the decedent had a general charitable intent for the residue of her testamentary trust to pass to a charitable organization for the benefit of animals. Even if it cannot be determined which organization the testator had in mind, the interested parties should have the opportunity to present evidence to demonstrate that the cy pres doctrine should apply and permit distribution to a claimant or claimants which can fulfill the original intent of the bequest as closely as possible. Based on the foregoing, we reverse and remand for an evidentiary hearing.

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Darian v. Weymouth, --- So.3d ----, 2011 WL 5554786 (Fla. 4th DCA Nov 16, 2011)

James Hughes and Martha Mayfield were married in 1999. They both had children from prior marriages. Prior to getting married, they entered into a prenuptial agreement. The terms of that prenuptial agreement may or may not have addressed testamentary gifts. The 4th DCA doesn't tell us. Anyway, Mr. Hughes subsequently executed a revocable trust that richly provided for Mrs. Hughes. According to the 4th DCA:

Upon his death, Martha would receive the family home in Florida, the country home in North Carolina, a sum of one million dollars, the contents of the residences, and various other items of personal property.

The couple was tragically murdered on September 3, 2004 by Thomas Kleingartner, Mrs. Hughes's adopted son from a prior marriage. Both died as a result of gunshot wounds to the head. Click here, here and here for more on this terrible crime and the ensuing criminal trial.

Because the coroner was unable to determine which spouse predeceased the other, pursuant to F.S. 732.601(1) the probate court deemed their deaths to be simultaneous and entered an order to that effect in the probate of Mr. Hughes' estate. Accordingly, Mr. Hughes' property was to be disposed of as if he survived Mrs. Hughes.

The order of death wouldn't have mattered in this case if F.S. 736.1106(2) had applied (the antilapse statute applicable to Florida trusts). Under that statute, Mrs. Hughes' heirs would have inherited her share of Mr. Hughes' estate, regardless of who survived who. However, this particular trust fell between the cracks of Florida's current and prior antilapse statute, thus the much harsher common law rule applied.

First, we note that the common law controls this case. Section 736.1106(2), Florida Statutes, Florida's antilapse statute, applies only to trusts which became irrevocable on or after July 1, 2009. Section 737.6035(2)(c), Florida Statutes, Florida's previous antilapse statute, applied only to trusts executed on or after June 12, 2003. The James E. Hughes Living Trust was executed in August of 2000 and became irrevocable in September of 2004. Thus, neither statute controls.

At common law, lapse occurs when the beneficiary or the devisee under the trust predeceases the grantor, invalidating the gift. The gift would instead revert to the residuary estate or be granted under the law of intestate succession. Bottom line, Mrs. Hughes' heirs get nothing under the common law rule.

Mrs. Hughes heirs tried to salvage their claim to Mr. Hughes' estate by claiming that her share of Mr. Hughes' revocable trust had somehow vested at the time Mr. Hughes executed the document. There was a lot of money at stake here, so you can see why Mrs. Hughes' heirs would take a shot at making this argument . . . and at the trial court level it actually worked!? Not surprisingly, the 4th DCA saw things differently and reversed, again leaving Mrs. Hughes' heirs with nothing.

In Florida, the creation of a living trust, standing alone, is not an event which vests the interests provided by a trust agreement. Travis et. Al. v. Ashton et al., 156 Fla. 529, 23 So.2d 725, 727 (Fla.1945) (holding that beneficiary of trust deed who predeceased grantors did not receive a vested interest at time of trust creation. Where element of futurity was annexed to substance of gift rather than enjoyment of it, vesting was suspended and the gift was “contingent .”); Brundage v. Bank of Am., 996 So.2d 877, 882 (Fla. 4th DCA 2008) (stating that the settlor of a revocable trust, of which he is the sole beneficiary until death, may change or revoke the trust at any time); Fla. Nat'l. Bank of Palm Beach Cty. v. Genova, 460 So.2d 895, 897 (Fla.1984) (stating that beneficiaries of revocable living trust do not come into possession of trust property until the death of the settlor, and even then their interest is contingent upon the settlor not exercising the power to revoke). A beneficiary's interest in a trust vests upon the death of the settlor. Sorrels v. McNally, 89 Fla. 457, 105 So. 106, 107 (Fla.1925).

In this case, no sufficient event existed to vest Mrs. Hughes' interest in the Trust prior to her husband's death. In Travis, the Florida Supreme Court held that an intended beneficiary's interest is suspended during the life of the grantor. 23 So.2d at 726. The intended beneficiary's interest lapses should the beneficiary predecease the grantor. Id. Mr. Hughes was the sole trustee and beneficiary under the Trust during his life. Mrs. Hughes was among the contingent residual beneficiaries whose interest came into creation only upon the death of Mr. Hughes and who were entitled to distribution of the then remaining corpus of the trust. Because it was judicially determined that Mrs. Hughes predeceased her husband, her interest in the Trust lapsed upon her death.

Lesson learned?

When a couple dies in a car accident or due to some other tragic event, it can be very difficult, perhaps impossible, to determine who died first, since they both died within moments of each other. It usually doesn't matter. In this case, it mattered big time for Mrs. Hughes' heirs. If they knew then what they know now, Mrs. Hughes' heirs might have pushed the coroner a little harder to make a call on who died first, or maybe hired their own independent expert to make the determination. Coroner and medical examiner offices have been especially hard hit by budget cuts; you don't have to accept their conclusions as gospel [click here]. In hindsight, the 2004 coroner's report in this case, which was probably viewed as a non-event at the time, was outcome determinative. No one said practicing law was easy.

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In re Amendments to Florida Rules of Appellate Procedure, No. SC11-192 (Fla. Nov. 3, 2011) 

A subcommittee of the Probate and Trust Litigation Committee has been looking at ways to add greater certainty to the question of when a probate/guardianship order is or is not appealable since 2007. That effort has finally borne fruit in the form of the Florida Supreme Court's new Florida Rule of Appellate Procedure 9.170, which goes into effect on January 1, 2012 (see linked-to opinion above).

To understand why this new rule was adopted and the problem it is supposed to address, you'll want to read an extremely thorough 38-page white paper [click here] produced by the Bar committee working on this project. Here's an excerpt:

By way of background, prior to the 1996 amendment to the Florida Rules of Appellate procedure, Rule 5.100 of the Florida Probate Rules governed when an order in a probate or guardianship case was appealable. Rule 5.100 provided in part that “all orders and judgments of the Court determining rights of any party in any particular proceeding in the administration of the estate of a decedent or ward shall be deemed final, and may, as a matter of right, be appealed to the appropriate district court of appeal.” The problem was, and really still is, that it is not clear exactly what qualifies as a final order and the case law does little to refine or define what finality is.

. . . . . 

Thus, the 3d DCA noted in its decision in Delgado v. The Estate of Garriaga, 870 So.2d 912, 914 n.5 (Fla. 3d DCA 2004),

Perhaps there should be further study of this problem with a view toward developing a rule further defining what constitutes a final order in a probate appeal. It appears wasteful to allow piecemeal appeals, one before and the other after the adversary action.

. . . . .

One approach to resolving this problem is to supplement the existing appellate rule with a non-exclusive list of types of probate and guardianship orders that would be included as orders that “determine a right or obligation of an interested person.” These “types” of orders would be identified by what they do rather than what they are called.

In new Appellate Rule 9.170 the Florida Supreme Court adopted the idea of including a non-exclusive list of types of probate and guardianship orders that would be deemed per se final, appealable orders "determining a right or obligation of an interested person.” The list is 24-orders long. Here's the relevant portion of the new rule, as set forth in the linked-to opinion above:

Orders that finally determine a right or obligation include, but are not limited to, orders that:

1. determine a petition or motion to revoke letters of administration or letters of guardianship;
2. determine a petition or motion to revoke probate of a will;
3. determine a petition for probate of a lost or destroyed will;
4. grant or deny a petition for administration pursuant to section 733.2123, Florida Statutes;
5. grant heirship, succession, entitlement, or determine the persons to whom distribution should be made;
6. remove or refuse to remove a fiduciary;
7. refuse to appoint a personal representative or guardian;
8. determine a petition or motion to determine incapacity or to remove rights of an alleged incapacitated person or ward;
9. determine a motion or petition to restore capacity or rights of a ward;
10. determine a petition to approve the settlement of minors’ claims;
11. determine apportionment or contribution of estate taxes;
12. determine an estate’s interest in any property;
13. determine exempt property, family allowance, or the homestead status of real property;
14. authorize or confirm a sale of real or personal property by a personal representative;
15. make distributions to any beneficiary;
16. determine amount and order contribution in satisfaction of elective share;
17. determine a motion or petition for enlargement of time to file a claim against an estate;
18. determine a motion or petition to strike an objection to a claim against an estate;
19. determine a motion or petition to extend the time to file an objection to a claim against an estate;
20. determine a motion or petition to enlarge the time to file an independent action on a claim filed against an estate;
21. settle an account of a personal representative, guardian, or other fiduciary;
22. discharge a fiduciary or the fiduciary’s surety;
23. award attorneys’ fees or costs; or
24. approve a settlement agreement on any of the matters listed above in (1)–(23) or authorizing a compromise pursuant to section 733.708, Florida Statutes.

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Steve Akers of Bessemer Trust is one of the best speakers you'll ever have the pleasure of running into as a trusts and estates lawyer. As a former private practice T&E lawyer himself, he knows what's important for those of us in the trenches. Which is why I was especially interested in his recent write up of Rev. Proc. 2011-48 (the new IRS guidance for preserving § 2053 estate tax deductions that are uncertain and have yet to be paid) poetically entitled Protective Claim for Refund Procedures for Section 2053 Claims.

If an estate is both subject to the estate tax and litigation, a key issue everyone needs to stay focused on from day one is ensuring all applicable tax deductions under IRC § 2053 are preserved. For example, IRC § 2053 tax deductions include attorney's fees and costs (usually a big sticking point in T&E litigation). Maximizing IRC § 2053 tax deductions creates win-win opportunities by mining the tax code for new funds with which to settle disputes.

. . . . .

Summary of Procedures Under Rev. Proc. 2011-48

1. Time Period For Filing Protective Claim. The protective claim for refund may be filed at any time within the period of limitations for filing a claim for refund under §6511(a) (i.e., the later of three years after the return was filed or two years after the payment of tax). Rev. Proc. 2011-48, § 4.01.

. . . . .

5. Identification of the Claim or Expense; Ancillary Expenses. Each claim or expense for which a protective claim for refund is made must be clearly identified with “an explanation of the reasons and contingencies delaying the actual payment to be made in satisfaction of the claim or expense.” Rev. Proc. 2011-48, § 4.05(1). For contested matters, the protective claim must identify the contested matter and potential liability by including the name of the claimant, the basis of the claim, “the extent or amount of the liability claimed,” and a brief statement of the status of the contested matter. (A copy of relevant court pleadings generally will be sufficient to identify the claim.) Rev. Proc. 2011-48, § 4.04(3).

There is no necessity that the protective claim “state a particular dollar amount.” The 2009 § 2053 regulation confirms that even though the “specific dollar amount” issue is not addressed in the Revenue Procedure. Treas. Reg. § 20.2053-1(d)(5). This is a very important consideration in crafting the protective claim because a request for a specific high dollar amount of deduction would likely be a “smoking gun” in the underlying litigation about the contingent claim.

Ancillary expenses (such as attorneys’ fees, court costs, appraisal fees, and accounting fees) “related to resolving, defending, or satisfying the identified claim or expense” are automatically included as part of the claim for refund without the need for separate identification of these ancillary expenses. Rev. Proc. 2011-48, § 4.04(2).

CCA 200848045, provides a general overview of protective claims. While Rev. Proc. 2011-48 does not specifically refer to this Chief Council Advice, it may nevertheless assist in understanding the type of information that the IRS is seeking in identifying claims. CCA 200848045 says that Reg. § 301.6402-2 does not require that a particular dollar amount be asserted but the claim must “identify and describe the contingencies affecting the claim.” This requirement “is interpreted liberally by the Service. So long as the claim is sufficiently clear and definite [to] apprise us of the essential nature of the claim, it will be accepted as having met the requirement.” (This is important because providing too much detail about what makes the claim contingent may give the other side in the litigation insight into the taxpayer’s perceived weaknesses in its case.)

. . . . .

10. Limited Scope of Review. Rev. Proc. 2011-48 confirms that “generally the Service will limit its review of the Form 706 to the deduction under section 2053 that was the subject of the protective claim.” Rev. Proc. 2011-48, § 5.01, referencing Notice 2009-84. However, very importantly, the limited review described in Notice 2009-84 and in § 5.01 does not apply to “[a] taxpayer that chooses not to follow or fails to comply with the procedures set forth in this revenue procedure.” Rev. Proc. 2011-48, § 3.

The explicit reference to Notice 2009-84 is important, because that Notice provides insight into why the IRS inserted the word “generally” in the sentence about limiting the scope of review. The Supreme Court has held that the IRS can examine each item on a return to offset the amount a refund claim, even after the period of limitations on assessment has run. Lewis v. Reynolds, 284 U.S. 281, 283 (1932). However, the IRS in Notice 2009-84 agreed that it would limit the review of protective claims for refund to preserve the ability to claim a deduction under §2053 “to the evidence relating to the deduction under section 2053,” and not exercise its authority to examine each item on the return to offset a refund claim. This limitation does not apply if the IRS is considering a claim for refund not based on a protective claim regarding a deduction under §2053 in the same estate. Also, the Notice says the limitation applies “only if the protective claim for refund ripens after the expiration of the period of limitations on assessment and does not apply if there is evidence of fraud, malfeasance, collusion, concealment, or misrepresentation of a material fact.” The Revenue Procedure is not as explicit but makes a passing reference to this requirement about the refund ripening after the period of limitations has run. It says the limited scope of review applies when determining “whether there is an overpayment of tax based on a timely-filed section 2053 protective claim for refund that becomes ready for consideration after the expiration of the period of limitation on assessment ...” (Accordingly, there may be an advantage in not having resolved the underlying lawsuit regarding the claim against the estate until after the period on additional assessments has run — to the extent that there may be items on other parts of the estate tax return that the IRS might question if it could.)

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