legislature-lobbiest
The rotunda of the Capitol, the natural habitat of advocates and lobbyists, during the closing week of the legislative session in April. (Photo: Democrat files )

This was another busy year on the legislative front. Most of the changes to our Probate and Trust Codes were rolled into House Bill 343, which I report on below. In this subsequent blog post I’ll report on House Bill 5 (which overhauled Florida’s elder guardianship system).

1. What’s it take to get a court order shifting legal fees in contested probate and trust proceedings?

If you’re ever involved in any contested probate or trust proceedings, this is the single most important legislative item you’ll want to focus on for 2015. Why? Because the fee-shifting statute in our Probate Code (F.S. 733.106) and its analog in our Trust Code (F.S. 736.1005) need to be considered in every one of these cases. There aren’t many statutes you can say that about. And this year both were overhauled in significant ways.

Backstory:

Contested probate and trust proceedings almost by definition involve multiple beneficiaries (what’s to fight over if there’s only one beneficiary?) Often, only one of the beneficiaries is driving the litigation, the others are basically innocent bystanders. The default rule is that the cost of this litigation is borne proportionately by all — not just the litigious beneficiary. To say this is unfair to the “innocent bystander” beneficiaries is putting it mildly. Under F.S. 733.106 (in probate cases) and F.S. 736.1005 (in trust cases) our courts have the authority to work some equity here by shifting the cost of the litigation so it’s borne solely (or at least mostly) by the litigating beneficiary’s share of the estate.

Over the years some of our appellate courts have interpreted these statutes as requiring specific findings of bad faith, wrongdoing, or frivolousness before fees could be shifted, which is akin to a F.S. 57.105 standard (as discussed here). That standard may make sense in the context of civil litigation generally, but it really doesn’t work in the “innocent bystander” scenario (i.e., why should non-litigating beneficiaries bear the cost of litigation they never wanted any part of, even if the claims weren’t technically frivolous?) On the other hand, giving probate judges unbridled discretion to shift fees isn’t a good idea either (see here for what can go wrong).

Statutory revamp:

House Bill 343 tries to balance the competing interests, amending both F.S. 733.106 and F.S. 736.1005 in two fundamental (and identical) ways. First, to the extent courts were requiring specific findings of bad faith, wrongdoing, or frivolousness before fees could be shifted, that requirement’s been statutorily eliminated. In other words, the bar for shifting fees has been lowered to something below what’s currently needed to shift fees under 57.105. Second, both statutes now contain detailed lists of “factors” courts “may” (read should) consider when shifting legal fees:

  • The relative impact of an assessment on the estimated value of each person’s part of the estate.
  • The amount of costs and attorney fees to be assessed against a person’s part of the estate.
  • The extent to which a person whose part of the estate is to be assessed, individually or through counsel, actively participated in the proceeding.
  • The potential benefit or detriment to a person’s part of the estate expected from the outcome of the proceeding.
  • The relative strength or weakness of the merits of the claims, defenses, or objections, if any, asserted by a person whose part of the estate is to be assessed.
  • Whether a person whose part of the estate is to be assessed was a prevailing party with respect to one or more claims, defenses, or objections.
  • Whether a person whose part of the estate is to be assessed unjustly caused an increase in the amount of costs and attorney fees incurred by the personal representative or another interested person in connection with the proceeding.
  • Any other relevant fact, circumstance, or equity.

The bill also codifies case law regarding the assessment of fees in estate proceedings by authorizing a court that assesses fees and costs against one person’s part of an estate, to direct payment of such fees and costs from the person’s part of a trust if the person’s part of the estate is insufficient to fully pay the assessment, a “pour-over” will is involved, and the matter was interrelated with the trust from which payment is made. These amendments apply to proceedings filed on or after July 1, 2015.

2.  What exception applies to the 3-month deadline for filing objections to the validity of a will, venue of the probate proceeding, or the court’s jurisdiction?

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. 3d DCA said NO, 1st DCA said YES. As I reported here, in Hill v. Davis, — So.3d —-, 2011 WL 3847252 (Fla. Sep 01, 2011), the Florida Supreme Court weighed in on the issue, holding that YES, the 3-month statute of limitations period DOES apply to personal-representative disqualification motions, but left open what some considered to be a huge loophole “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.” Because objections to the validity of a will, venue of a probate proceeding, or the court’s jurisdiction are also covered by F.S. 733.212(3), the Hill loophole logically applied to those objections as well. House Bill 343 closes that loophole for any basis other than estoppel (and then only in very limited circumstances), as explained in the bill’s Legislative Staff Analysis:

In the case of objections to the validity of a will, venue, or the jurisdiction of a court, the bill partially codifies the holding of the Hill decision and provides that except for estoppel based on the misstatement of a personal representative as to the time that an objection may be filed, the three month time period for objections under s. 733.212, F.S., may not be extended for any reason. Any objection not barred by the three month time period must be filed no later than the earlier of entry of an order of final discharge of the personal representative or one year after service of notice of administration.

These amendments apply to proceedings filed on or after July 1, 2015.

3. But what about statutorily disqualified personal representatives? Does the 3-month SOL still apply?

Under F.S. 733.303 and F.S. 733.304, no matter how well qualified you might be to serve as someone’s personal representative (“PR”) or how badly the decedent wanted you to do the job, you’re statutorily disqualified from serving if:

  • You’ve ever been convicted of a felony.
  • You’re mentally or physically unable to perform the duties.
  • You’re under the age of 18.
  • You’re not a Florida a resident (unless one of the family-member exceptions in 733.304 applies).

One of the primary objections to the Florida Supreme Court’s ruling in Hill was that there should never be a limitation on objecting to a person serving as PR who was statutorily disqualified from doing the job since day one. In other words, this person should have never been appointed PR in the first place, so why give him or her a pass just because no one figured this out until it was too late to object? House Bill 343 addresses that concern by eliminating the limitations period for statutorily disqualified PRs, as explained in the bill’s Legislative Staff Analysis:

The bill amends ss. 733.212(2)(c), 733.212(3), and 733.2123, F.S., to remove the limitation periods for objections to the qualifications of a personal representative after service of notice of administration. All interested persons may object to an unqualified personal representative after the issuance of letters and within 30 days after a personal representative serves a notice of ineligibility under s. 733.3101, F.S. If the personal representative was not qualified to act at the time of appointment, no action will be required on the part of an interested person to remove such personal representative as the bill amends s. 733.504, F.S., to require a personal representative who knows that he or she was not qualified to act at the time of appointment to immediately resign. Courts are also required to remove a personal representative and revoke his or her letters of appointment if he or she was not qualified to act at the time of appointment. A personal representative who was qualified to act at the time of appointment but later becomes ineligible to serve must provide in the notice required under s. 733.3101, F.S., that interested persons have the right to petition for his or her removal. A personal representative who fails to resign if not qualified at the time of appointment or who was qualified at the time of appointment but fails to provide notice of later ineligibility to serve will be personally liable for attorney fees and costs incurred in removal proceedings.

These amendments apply to proceedings filed on or after July 1, 2015.

4. What about changes to the allocation of estate tax liability in probate proceedings?

Our estate-tax apportionment statute is found in F.S. 733.817, and it’s notoriously complex and tricky to apply. This statute hasn’t been substantially revised since 1998, although a number of significant changes have occurred in federal and state tax laws since that time, including the elimination of the federal credit for state death taxes and, by extension, the Florida estate tax. To fill that gap House Bill 343 substantially revises F.S. 733.817 to:

  • update the statute for consistency with changes in federal estate tax laws;
  • codify case law governing estate tax apportionment; and
  • address “gaps” in the current statutory apportionment framework.

If you’re looking for a good place to quickly get your arms around the particularities of these statutory amendments, you’ll want to read the bill’s Legislative Staff Analysis, which is way too long to summarize in this blog post. If you’re willing to wait, you can rest assured legions of tax lawyers will be presenting on these changes over the next year.