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

Connell v. Connell, --- So.3d ----, 2012 WL 3101842 (Fla. 2d DCA August 01, 2012)

Joint bank accounts and other forms of joint property get litigated all the time in contested probate proceedings, which means they end up as recurring topics on this blog [see here, here, here, here]. This time around the issue was who owned a $58,350 men's Rolex watch and $19,386 men's diamond ring the decedent purchased with funds from a joint checking account shortly before his death.

Back Story:

The decedent at the heart of this case was a 95 year old retired jeweler who enjoyed wearing expensive jewelry. In August 2009 while shopping with his wife (a woman 26 years his junior he married eleven months prior to his death) the decedent purchased a $58,350 men's Rolex watch. In February 2010 he purchased a $19,386 men's diamond ring. On both occasions the decedent used funds from a checking account titled jointly with his wife. According to the 2d DCA:

The decedent wore the watch and ring every day. Before he went to bed he took them off and put them in a pocket of one of his suits. In the two weeks before his death, the decedent was hospitalized twice. Before going to the hospital, he gave the watch and ring to Fana to put away, and she put them in her purse.

Decedent died in March 2010. Decedent's son/personal representative (PR) asked surviving spouse to return the watch and ring. Wife said no; PR sued.

So who gets the watch and ring?

Decedent and surviving spouse had signed an Antenuptial Agreement, which contained the following joint-property clause:

“Upon the death of one party during the continuation of the marriage and prior to any divorce, dissolution or separation of the parties, the survivor shall succeed to the entire interest of the deceased party in all other jointly-owned property.”

However, according to the Antenuptial Agreement, any property the decedent owned individually at death was all his, to dispose of as he pleased.

Bottom line, wife gets the watch and ring if they're joint property; son/PR gets them if they weren't. Seems simple right? It's not. 

2d DCA Speaks:

The first question that needs to get answered is whether the watch and ring were purchased with joint funds. Answer: NO. Here's why:

It is undisputed that the joint checking account was a joint tenancy with a right of survivorship, not a tenancy by the entireties. When a joint account holder withdraws funds from a bank account that is held as a joint tenancy with the right of survivorship, it “terminates the ‘joint tenancy nature of the [funds] and severs the right of survivorship as to the funds withdrawn.’” Wexler v. Rich, 80 So.3d 1097, 1100 (Fla. 4th DCA 2012) (quoting Sitomer v. Orlan ex rel. Sitomer, 660 So.2d 1111, 1114 (Fla. 4th DCA 1995) (alteration in Sitomer)). When a joint tenant conveys an interest to a stranger, it “destroys the unities of possession and title.” Sitomer, 660 So.2d at 1114. We also note that Fana consented to the withdrawal of the funds for the jewelry purchases, so the decedent was not liable to her for her share of the joint account. See Nationsbank, N.A. v. Coastal Utils., Inc., 814 So.2d 1227, 1230 (Fla. 4th DCA 2002) (stating that “the withdrawing joint tenant is liable to the joint owner for that person's share of the withdrawn funds”). Thus, once the funds were withdrawn from the Connells' joint checking account, the funds lost their joint character.

OK, so if the watch and ring weren't purchased with joint funds, were they owned jointly? Because items of personal property, such as watches and rings, don't have documentation of title, you're left litigating whether the facts and circumstances indicate the couple intended joint vs. separate ownership. According to the 2d DCA, the facts weighed in favor of separate ownership. End result: PR gets the watch and ring.

The trial court's determination that the decedent did not make a gift of the watch and ring to Fana is not at issue on appeal. The trial court made a factual determination in the original order to the effect that the decedent's delivery of the watch and ring to Fana prior to his hospitalization was not made with the intention of gifting the property to her, but rather it was a temporary delivery for the purpose of safekeeping while he was in the hospital. The trial court did not change this ruling on rehearing.

*  *  *  *  *

Moreover, the fact that the decedent purchased the watch and ring with funds from the joint checking account (and a small contribution of cash from Fana) while they were shopping together does not make the watch and ring the joint property of the Connells. Rather, it is for whom the watch and ring were purchased rather than how they were purchased that is important. . . . Fana seems to equate the term “acquired jointly” with her being “involved” in the purchases that were made when they were together at the jewelry stores. However, the circumstances reveal that she was merely assisting the decedent buy a watch and ring for himself, not that they intended to jointly own the jewelry.

A joint tenancy has the characteristic of survivorship and to create a joint tenancy four unities must be present: the unities of possession, interest, title, and time. Beal Bank, SSB v. Almand & Assocs., 780 So.2d 45, 53 (Fla.2001). The unity of possession is joint ownership and control. Id. at 52. Here, the unity of possession was not present in either the watch or the ring. The watch and ring were intended for the decedent's exclusive use. The decedent had been in the jewelry business, and he enjoyed expensive jewelry. He had the possession and use of the watch and ring. In fact, the trial court even made the oral finding on rehearing that the items were “personal to the decedent.”

Furthermore, the watch and ring were jewelry items designed for a man. Fana never wore or used the watch and ring. And she referred to the items as “his” jewelry. When the decedent was not wearing the watch and ring, he put them in the pocket of one of his suits. Fana only took possession to store them for safekeeping before the decedent went to the hospital. The trial court found in its original order that if the decedent had returned from the hospital, “he would have again resumed using both the ring and watch.” In the original order the trial court also determined that the circumstances indicated the decedent's “intention, consistent with his actions, to use these items of jewelry for his personal benefit.”

The circumstances here failed to show the unity of possession as to Fana with respect to the watch and ring. Therefore, the watch and ring were the separate property of the decedent. 

Lesson learned?

The law governing joint property cases is tricky and litigating them can be a fact-intensive undertaking (think depositions, subpoenas, production requests, interrogatories, etc.) Translation: these cases are rarely viable from a purely economic perspective (then again, litigants are rarely logical purists, see here). Even if the law and facts are a "slam dunk" in your favor, these cases are inherently uncertain and expensive to litigate. Consider the basic facts of this case: lawsuit was first filed in 2010, trial took place in 2011 (PR lost), appeal decided in 2012 (PR wins). In other words, two years after his father's death (and after having to overcome a trial-court loss by again rolling the dice on an appeal), PR finally gets the watch and ring back. Hope it was worth it.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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). These statutes were all we needed when most people relied on a will or revocable trust to provide for their heirs.

Times have changed. Today, life insurance and other beneficiary-designated non-probate assets such as annuities, pay-on-death accounts, and retirement planning accounts have become the dominant wealth transfer mechanism for most middle class families (wills and trusts remain dominant for the wealthy). As reported by by Tampa attorney Suzanne Glickman in A Fair Presumption: Why Florida Needs a Divorce Revocation Statute for Beneficiary-Designated Nonprobate Assets:

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.

Against this backdrop, it was inconsistent and illogical to have automatic post-divorce revocation statutes for wills and revocable trusts, but not for beneficiary-designated non-probate assets. As I reported here, attempts to fill this gap in the courts failed. The problem needed a legislative fix. Now we have one.

As reported in this Florida Senate Legislative White Paper, effective July 1, 2012 new F.S. 732.703 came into effect, accomplishing the following:

[F.S. 732.703] generally nullifies upon divorce or annulment the designation of a spouse as a beneficiary of nonprobate assets such as life insurance policies, individual retirement accounts, and payable on death accounts. State-administered retirement plans are exempt from [F.S. 732.703]. If the provisions of [F.S. 732.703] apply, an asset will pass as if the former spouse predeceased the decedent.

[F.S. 732.703] also specifies criteria for a payor of a nonprobate asset to use in identifying the appropriate beneficiary. [F.S. 732.703] specifically provides that the payor is not liable in some circumstances for transferring an asset to the beneficiary identified through the bill’s criteria.

*****

[F.S. 732.703] voids the designation of a former spouse as a beneficiary of an interest in an asset that will be transferred or paid upon the death of the decedent if: [1] The decedent’s marriage was judicially dissolved or declared invalid before the decedent’s death; and [2] The designation was made before the dissolution or order invalidating the marriage.

Click here for a link to the Florida Senate's webpage for this new legislation and links to the actual text of the bill. 

F.S. 732.703 is not all encompassing, it only applies to the following beneficiary-designated non-probate assets:

• a life insurance policy, qualified annuity, or other similar tax-deferred contract held within an employee benefit plan;
• an employee benefit plan;
• an individual retirement account;
• a payable-on-death account;
• a security or other account registered in a transfer-on-death form; and
• a life insurance policy, annuity or other similar contract that is not held within an employee benefit plan or tax-qualified retirement account.

F.S. 732.703 does NOT apply:

• to the extent federal law provides otherwise;
• if the governing instrument as defined in the bill expressly provides that the interest will be payable to the designated former spouse after the order of dissolution or order declaring the marriage invalid and the instrument expressly provides that benefits will be payable to the decedent’s former spouse;
• to the extent the disposition of the assets are governed by a will or trust;
• if a court order required the decedent to acquire or maintain the asset for the benefit of the former spouse or children of the marriage;
• if under terms of the order of dissolution or order declaring the marriage invalid, the decedent did not have the ability to unilaterally terminate or change the beneficiary or pay-on-death designation;
• if the designation of the decedent’s former spouse as beneficiary is irrevocable under applicable law;
• if the contract or agreement is governed by the laws of another state;
• to an asset held in two or more names as to which the death of one co-owner vests ownership of the asset in the surviving co-owner or co-owners [i.e., joint accounts]; or
• if the decedent remarries the person whose interest would otherwise have been revoked as a former spouse under the bill and the decedent and that person are married to one another at the time of the decedent’s death.  

Trap for the unwary: Joint Survivor Accounts:

The F.S. 732.703 exception probate lawyers will want to focus on is for joint survivor accounts. Here's what Jeff Baskies, one of Florida's preeminent estate planning gurus, had to say about this issue:

Obviously, the most important and potentially controversial exception relates to joint accounts. A decision was made not to address those accounts in this context. While I believe Florida law currently provides that tenancy by the entireties accounts (which might otherwise be covered by [the joint-account exception] above) are converted to tenancies in common upon a divorce, I do not believe there is a similar rule for joint accounts with rights of survivorship. If this issue creates ongoing problems or a trap for the unwary, perhaps subsequent “clean-up” legislation will address joint accounts. 

[Click here for Jeff's entire commentary on the new statute].

"Catch me if you can . . . " 

The second big point probate lawyers will want to keep in mind is enforcement. F.S. 732.703 is specifically designed to keep banks and insurance companies out of the line of fire if a family dispute erupts over any beneficiary-designated non-probate asset covered by the statute. If an ex-spouse swoops in and improperly cashes a life-insurance check before anyone is the wiser, you won't be able to sue the insurance company, you'll have to chase down the ex-spouse and sue him or her directly to get the money back.

Here's how the statute's "payor" immunity is described in this Florida Senate Legislative White Paper:

[F.S. 732.703] provides that in the case of pay-on-death accounts, securities or other accounts registered in transfer-on-death form, and life insurance policies, annuities or other similar contracts not held within an employee benefit plan or a tax-qualified retirement account, the payor is not liable for making any payment on account of, or transferring any interest in, such assets to any beneficiary.

A payor’s immunity for making a payment in accordance with the criteria in [F.S. 732.703] applies notwithstanding the payor’s knowledge that the person to whom the asset is transferred is different from the person who would own the interest due to the dissolution of the decedent’s marriage or declaration of the marriage’s validity before the decedent’s death. As such, a secondary beneficiary will have a cause of action against the former spouse who receives the payment or transfer of the assets described in [F.S. 732.703] if the beneficiary designations was made void upon divorce or annulment.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Aronson v. Aronson, --- So.3d ----, 2012 WL 280565 (Fla. 3d DCA February 01, 2012)

Estate planners beware. As reported here by the WSJ, "When it comes to blended families, estate planning can be a special kind of hell." A corollary to that observation: blended families are always at risk for probate litigation. Yes, I said always! This case being a prime example: this is now the third appellate decision published by the 3d DCA chronicling 10+ years of litigation between a widow and her deceased husband's sons from a prior marriage. For the prior installments of this long-running dispute, click here and here.

Case Study: Blended Family + Invalid Homestead Devise = Years of Litigation

In July of 1996 Mr. Aronson deeded a condo located on Key Biscayne, FL to his revocable trust. Under the terms of his revocable trust, Doreen (Mr. Aronson's wife) had the condo for life, and at her death it would go to Mr. Aronson's sons from a prior marriage. A few months later, in December of 1996, Mr. Aronson deeded this same condo directly to Doreen. In 2000 the couple sold a home in Massachusetts, which had been titled in Doreen's name alone, and moved into the Key Biscayne condo, which became their homestead residence. Mr. Aronson died in 2001.

1. Who got the condo when Mr. Aronson died?

Because of the two conflicting deeds, this was the first issue litigated. As I reported here, at trial the court ruled in favor of Doreen. On appeal, the 3d DCA reversed, ruling that an individual can't deed a property in his individual capacity if he's previously deeded it over to his revocable trust, even if he had the authority at any time to revoke his own trust.

2. So if the deed-to-trust was valid, where did this leave Doreen?

Not surprisingly, based on the 3d DCA's first opinion, all of the parties assumed they were stuck litigating their competing claims to the Key Biscayne condo within the parameters of Mr. Aronson's revocable trust. In fact, this is the governing assumption underlying the 3d DCA's original opinion for this case, click here.

End of the story? No way! Based on a motion for reconsideration filed by Mr. Aronson's sons, the 3d DCA reversed course, adopting an entirely new theory in the linked-to opinion above, ruling instead that the condo should have never been treated like a trust asset because this was an invalid devise of homestead property. Invalid homestead devise = life estate to Doreen, vested remainder interest for Mr. Aronson's sons, skip the trust entirely. Bottom line, while the deed-to-trust trumped the later deed to Doreen, because it resulted in an invalid homestead devise, this deed should have also been ignored. Confused? The 3d DCA apparently was. Here's how the 3d DCA explained its thinking this time around:

We reverse the judgments under review. First, it is undisputable the Key Biscayne condominium was the decedent's homestead at the time of his death. Second, article X, section 4(c) of the Florida Constitution provides that “[t]he homestead shall not be subject to devise if the owner is survived by spouse or minor child, except the homestead may be devised to the owner's spouse if there be no minor child.” Art. X, § 4(c), Fla. Const. Third, the Florida legislature has made clear its command that this provision shall apply equally to property held by a revocable trust as to testamentary bequests. § 732.4015(2)(a), Fla. Stat. (2001) . . . Finally, section 732.401(1) of the Florida Statutes (2001), provides:

(1) If not devised as authorized by law and the constitution, the homestead shall descend in the same manner as other intestate property; but if the decedent is survived by a spouse and one or more descendants, the surviving spouse shall take a life estate in the homestead, with a vested remainder to the descendants in being at the time of the decedent's death per stirpes.

(emphasis added). Because the Key Biscayne condominium was Hillard's homestead and because his wife, Doreen, survived him, the condominium was not subject to disposition through the trust. . . . At the moment of Hillard's death, his homestead property passed outside of probate, see §§ 733.607, .608, Fla. Stat. (2001) . . . , in a twinkle of an eye, as it were, to his wife for life, and thereafter to his surviving sons, James and Jonathan per stirpes. § 732.401(1), Fla. Stat. From that moment forward, the trustees had no power or authority with respect to the former marital home. The widow became responsible for the expenses of the property, and, of course, remains so for as long as she remains a life tenant. . . .

Lesson learned?

There are a few big takeaways from this case. First, estate planning for blended families is always tricky. This family could have avoided over a decade of acrimony and litigation expenses if Mr. Aronson had consulted with a qualified estate planner up front.

Second, Florida's maddeningly complex homestead laws can befuddle the best of us (ask the 3d DCA). This area of law is counter intuitive and often results in bizarre outcomes even the most deranged law school professor couldn't dream up (this case being a prime example!). If you're cleaning up one of these messes, start at first principles and take nothing for granted (click here for "Kelley's Homestead Paradigm," the ultimate probate lawyer's homestead-law cheat sheet.) 

Third, it took these litigants over 10 years (and multiple trials/appeals) to figure out what, "in a twinkle of an eye" (using the 3d DCA's phrase), happened automatically as a matter of law when Mr. Aronson died back in 2001. Starting in 2010, there are added consequences to this kind of delay. In 2010 F.S. 732.401 was amended to allow a surviving spouse 6 months to opt out of a life estate and instead take a 50% tenancy-in-common interest in the homestead property. As I explained here, taking a 50% tenancy-in-common interest in lieu of a life estate can offer significant benefits to surviving spouses. Surviving spouses, and their lawyers, no longer have the luxury of waiting years to untangle the mess caused by an invalid homestead devise. Due to the new 6-month deadline contained in F.S. 732.401, you now have only 6 months to do what the parties in this case needed 10+ years to figure out. 6 months vs. 10 years. Yeah, no pressure . . . 

Bonus:

Now that you know what I have to say about this case, you'll want to read this excellent analysis of the case by two of the smartest Florida homestead lawyers practicing today, Jeff Baskies and Charlie Nash, as published in Steve Leimberg's Asset Protection Planning Email Newsletter - Archive Message #198. Here's the executive summary of their piece:

For the third time in less than 5 years, the Florida 3rd District Court of Appeal (covering Miami-Dade County) issued a retraction of a potentially ground-breaking and rule-changing homestead decision.

First, in 2007, the 3rd DCA’s decision in Chames v. Demayo (holding that a waiver of the homestead creditor protection in an attorney’s fee contract was valid) shook the homestead world, until it was overturned, first en banc by the 3rd DCA and then by the Florida Supreme Court. Interestingly, the en banc opinion of the 3rd DCA overturned the original opinion and “got it right” according to the Florida Supreme Court.

Next, in 2011, a three-judge panel of the 3rd DCA issued a ruling in Habeeb v. Linder holding that a husband’s joinder in a warranty deed of homestead property to his wife’s revocable trust constituted a waiver of his post death homestead rights due to his transfer of “all hereditaments” in the “form” warranty deed. That ruling was subsequently withdrawn after significant criticism.

Now, in the latest decision in a very long-running Florida probate litigation, Aronson v. Aronson, (this current line of cases being called “Aronson II” as a prior ruling – “Aronson I” – held that a deed signed by the husband individually was a nullity as it was executed after the husband had already transferred title to his revocable trust) the 3rd DCA on February 1, 2012, withdrew its October 2010 ruling.

Had the original ruling in Aronson II stood, then the post-death consequences of any transfer of a homestead to a revocable trust would again be up for controversy. Fortunately, the 3rd DCA in its substituted decision in Aronson II seems to have reached the correct result regarding the constitutional devise restrictions.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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 . . . 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Habeeb v. Linder, --- So.3d ----, 2011 WL 613392 (Fla. 3d DCA Feb 09, 2011)

UPDATE: This case was settled, prompting the 3d DCA to enter this order withdrawing its opinion. Trust and estates lawyer extraordinaire, Jeff Baskies, once again provides excellent commentary on this turn of events and what it all means for Florida homestead law.

Under Florida law a surviving spouse's rights in the couple's marital homestead residence are spelled out in Art. X, § 4(c) of the Florida Constitution, and F.S. 732.401. Spouses are free to contractually waive these rights, and often do for estate planning purposes (especially in second marriages where each spouse has children from a prior marriage). The specific statutory authority governing these types of estate planning marital agreements is found in F.S. 732.702. This statute is often the subject of litigation (and commentary on this blog, click here, here, here), and is at the heart of the linked-to opinion above.

The 3d DCA's opinion in this case has caused quite a stir in estate planning/probate circles. (For an excellent discussion see Jeff Baskies' commentary). Why? Because it's a great example of how NOT to draft a valid marital agreement under F.S. 732.702, and yet the court upheld the contested homestead-waiver. What happened?

The 3d DCA was asked to decide if a store bought form deed signed by a husband and wife could qualify as a valid marital agreement under F.S. 732.702, resulting in a valid waiver of the husband's homestead rights. There were two pivotal issues at play in this case:

[1] Fair Disclosure?

A homestead-waiver agreement executed after a couple has married is not valid unless each spouse provides the other with "fair disclosure" of his or her assets or "estate". F.S. 732.702(2). There was no formal financial disclosure between the spouses in this case. At issue was whether "fair disclosure" could be inferred from the facts and circumstances of their long-term marriage. Both the trial court and the 3d DCA said YES based on the following record:

[1] The 1979 deed was signed by both spouses many years into a long-term marriage and at a time when both occupied the condominium in question. [2] The deed was prepared for them by a Florida attorney. [3] Each spouse signed the instrument before two subscribing witnesses and a notary public. [4] The spouses also later prepared last wills and testaments reflecting the intended disposition of their respective assets based on the assumption that the 1979 deed effectively relinquished Mitchell's property rights, including homestead interests, in the condominium.

[5] A month after Virginia passed away in November 2008, Mitchell executed under oath a petition for administration of Virginia's estate and a petition to determine the continued homestead status of the condominium property. These documents further illustrated Mitchell's understanding that the 1979 deed had validly transferred all of his rights in the property to Virginia at that time, with the result that the devise of the property in her later will was also valid and effective.FN3

[6] FN3: Only when Mitchell passed away in January 2009 was it suggested that the 1979 deed failed to relinquish to Virginia, or waive, Mitchell's homestead rights.

From this record, the trial court properly concluded that the spouses made “fair” disclosure to each other, and there is certainly no evidence to the contrary.

By the way, there's all sorts of good law that says fair disclosure in the marital agreement context can be inferred from the facts and circumstances. See, e.g., Del Vecchio v. Del Vecchio, 143 So.2d 17 (Fla. 1962) (Basic issue as to validity of antenuptial agreement is concealment, not absence of disclosure by husband, and wife may not repudiate it if she is not prejudiced by lack of information.)

If you're drafting a marital agreement you NEVER want to rely on facts and circumstances to uphold the validity of your client's document; but if you're a litigator trying to uphold an improperly drafted agreement in court, the facts and circumstances of the couple's relationship just might win the day for you. It worked in this case.

[2] Legally Sufficient Waiver?

A homestead-waiver agreement is valid if it provides for a waiver of "all rights" or equivalent language. The form deed signed by the couple in this case way back in 1979 was described as follows by the 3d DCA:

The warranty deed, a “Ramco Form 01,” was a pre-printed form widely used by Florida practitioners in the days when “word processors” were human typists rather than compact machines.

Needless to say, the deed didn't contain any explicit homestead waiver language, but it did contain sweeping, boilerplate transfer language you find in old forms (such as a conveyance of all “heriditaments”). At issue was whether this sweeping boilerplate language satisfied the statute's waiver requirement. Again, both the trial court and the 3d DCA said YES. Here's an excerpt of the 3d DCA's analysis:

In this case . . . section 732.702 provides . . . specific guidance regarding the waiver of the particular constitutional rights involved, namely, the constitutional rights of one spouse in a marital homestead. The statute establishes, and the warranty deed satisfied, the requisite elements of a valid waiver as a matter of law.

The statute itself contemplates that a “written contract, agreement, or waiver” may be used to memorialize a relinquishment of a spouse's homestead rights. These alternatives demonstrate that “waive” is not a talismanic word within the statute, so that a contract or agreement may accomplish the same result. Neither the statute nor any interpretation of the statute supports the appellant's argument that Mitchell was required to execute a second “contract, agreement, or waiver” after (1) title had vested exclusively in Virginia's name, (2) she “formed the intention that the property would be her domicile or permanent residence,” and (3) he survived her. To the contrary, the Florida Supreme Court has concluded that a spouse's single agreement under section 732.701(1) “is the legal equivalent of predeceasing the decedent, for purposes of article X, section 4(c).” City National Bank of Florida v. Tescher, 578 So.2d 701, 702 (Fla.1991). In that case, as here, the surviving spouse had waived homestead previously and no minor children survived the decedent.

.  .  .

Article X, section 4(c) of the Florida Constitution expressly authorizes a husband and wife to alienate their homestead property “by mortgage, sale or gift,” and that is what both spouses did in 1979. In this case the term “heriditaments” in the 1979 warranty deed encompasses the homestead rights of each grantor as survivor. The term includes “anything capable of being inherited, whether it is corporeal, incorporeal, real, personal, or mixed.” 42 Fla. Jur.2d Property § 7 (2010).

The best way to make sense of this opinion is to read it from a litigator's point of view, not as an estate planner:

For litigators, this case underscores a truism that's repeated so often it's become a cliche: trials turn on their facts, not abstract legal principles. The winning side in this case put on a compelling, fact-intensive case, that compensated for the obvious legal deficiencies created by the couples' reliance on a store bought form document executed over 20 years ago.

For estate planners, the take-away from this case is that the family could have avoided the rancor, costs and delays inherent to any estate dispute pitting family members against each other with a minor investment in competent estate planning back in 1979, versus pouring huge sums of money into a trial and appellate proceeding in 2011. Whatever this litigation cost the family, I can guarantee you it's several orders of magnitude greater than what husband and wife would have paid a qualified estate planner back in 1979 to properly document their intended homestead waiver.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

As I previously wrote here, irrevocable dynasty trusts are all the rage in estate planning circles, and for good reason. They're good tax planning and offer excellent asset protection benefits. Although a rouge plaintiff's lawyer is the boogeyman most people think about when they hear asset protection, the real threat to family wealth is divorce. The odds of your children or grandchildren getting targeted by some frivolous lawsuit are maybe 1 in a 1,000, the odds of them getting divorced: 50/50.

So how secure are assets held by irrevocable dynasty trusts in the event of a Florida divorce?

Most estate planners would answer that question by focusing on whether the trust can be pierced to pay post-divorce judgments for alimony or child support. In other words, ex-spouses would be viewed as creditors. From this perspective the answer is relatively clear: under F.S. § 736.0503(3) a claim against an irrevocable trust by a beneficiary’s child, spouse, or former spouse is permitted only as a last resort upon a showing that traditional methods of enforcing the claim are insufficient. The “last resort” requirement can be traced directly to Bacardi v. White, 463 So. 2d 218 (Fla. 1985), the 1985 Florida Supreme Court decision that has defined this area of the law in Florida ever since.

But what about equitable distribution?

Could a fully discretionary, spendthrift-protected irrevocable trust funded with non-marital assets by a beneficiary's parent (or grandparent or great-grandparent) that is otherwise valid in all respects be counted as part of the beneficiary's marital estate for equitable distribution purpose? Florida's Trust Code doesn't address this question, and as far as I can tell it's never been dealt with directly by a Florida appellate court.

For lawyers (especially estate planners!), uncertainty is a bad thing. Which is why I found a recent New Hampshire case reported on in the Wills, Trusts & Estates Prof Blog so interesting. In this blog post Prof. Beyer discusses the outcome of the New Hampshire Supreme Court case In re Goodlander, 20 A.3d 199 (N.H. 2011). In that case the court considered whether a beneficiary's interest in a discretionary irrevocable trust created and funded for her benefit by her father should be considered a marital asset subject to division. Both the trial court and the supreme court said NO. Why? Because the beneficiary didn't have a property right in any future trust distributions, all she had was a “mere expectancy.” The New Hampshire Supreme Court based its holding largely on a provision of that state's trust code, RSA 564-B:8-814(b), that statutorily excludes a beneficiary's interest in a discretionary irrevocable trust from the definition of "property":

. . . if a distribution to or for the benefit of a beneficiary is subject to the exercise of the trustee's discretion, whether or not the terms of a trust include a standard to guide the trustee in making distribution decisions, then the beneficiary's interest is neither a property interest nor an enforceable right, but a mere expectancy.

Based on this statute, the New Hampshire Supreme Court ruled as follows in In re Goodlander, 20 A.3d 199 (N.H. 2011):

Because the trustee of the EMT Trust has the sole discretion to distribute funds to the beneficiaries, including Tamposi, any interest Tamposi has in future distributions fits squarely within the definition provided by the UTC for a “mere expectancy.” RSA 564-B:8-814(b). That is, any distribution to or for the benefit of Tamposi “is subject to the exercise of the trustee’s discretion, whether or not the terms of a trust include a standard to guide the trustee in making distribution decisions.” Id. Accordingly, Tamposi’s interest in future distributions of the EMT Trust “is neither a property interest nor an enforceable right, but a mere expectancy.” Id.

POSTSCRIPT: The "aha!! insight" 

"All-property" States (such as NH) vs. "Marital Property" States (such as FL) & Why it Matters in this Case:

This blog post generated a good amount of interest. One careful reader, Leonard J. Adler, a Florida-licensed attorney and Managing Director at Bessemer Trust in Palm Beach, suggested that the key to understanding the NH court's ruling is to NOT focus on the "mere expectancy" clause in that state's trust code, but to instead focus on the fact that NH law makes no distinction between marital and nonmarital assets in divorce proceedings.

“Property,” for purposes of equitable distribution under NH law (RSA 458:16-a), includes all property -- regardless of how titled or when or how acquired (including gifts and inheritances). That is why the determination that the interest in the NH trust was a "mere expectancy" and thus not “property” was crucial in In re Goodlander, 20 A.3d 199 (N.H. 2011). The fact that assets are acquired by gift, devise or descent, is but 1 of 15 factors for a NH divorce court to consider under RSA 458:16-a when determining if a divorcing couple's assets should be divided unequally, but all such assets are still subject to division. A Florida court would not have to make this determination because uner F.S. 61.075(6)(b)2 assets acquired by gift, devise, or descent (and assets acquired in exchange for such assets) are statutorily excluded from the definition of marital property, and thus not subject to division.

Mr. Adler was also kind enough to point me to a 2004 NH Bar Journal article entitled Division of the Pre-Marital Trust or Inheritance, which does a good job of explaining how assets inherited in trust are treated very differently in divorce proceedings litigated in "all-property" states like NH vs. "marital property" states like FL:

An outstanding yet difficult issue to be confronted under New Hampshire divorce law is how to apportion a multi-million dollar inheritance, trust or business that pre-exists a long-term marriage. . . .

In fashioning property settlements in divorce, states are divided into three main categories: [1] "community property" states, [2] "marital property" states [like FL] and [3] "all-property states." New Hampshire is an "all-property" state that gives the court the authority to divide all property of the parties (however or whenever acquired) in an equitable manner. A court is required to view the parties’ property as a whole and then make an equitable distribution. Whether property is individually or jointly owned, it is still considered a marital asset.

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

Deathbed marriages can be the ultimate weapon for those looking to prey on the elderly. In Florida you can marry someone minutes before their death and automatically vest into the right to live in the decedent's homestead residence rent-free for the rest of your life, a 50%-100% share of the decedent's estate under Florida's intestacy statute or pretermitted spouse statute, or at the very least a 30% share of the decedent's estate under Florida's elective share statute.

What may come as a shock to most lawyers is that under Florida common law heirs are stopped cold on a per se basis from challenging deathbed marriages -- no matter how ugly the circumstances may be. This, by the way, is the traditional rule applicable in most U.S. jurisdictions (see How Do I Love Thee, Let Me Count the Days: Deathbed Marriages in America).

Efforts have been under way since 2008 aimed at closing this loophole [click here], culminating in 2010 with the creation of F.S. 732.805. This statute is a dramatic change from existing Florida law. For the first time in state history a decedent's heirs will have legal standing to challenge a deathbed marriage on the grounds of fraud, duress or undue influence.

Florida probate lawyers would do well to familiarize themselves with F.S. 732.805; and for those of you looking for a little help on that front, you'll want to check out this 2008 Bar-committee White Paper and the 2010 Florida Senate Bill Analysis covering the new statute. Here's an excerpt from the Senate Bill Analysis:

The bill creates s. 732.805, F.S., which provides that a surviving spouse found to have procured a marriage to the decedent by fraud, duress, or undue influence is not entitled to certain rights or benefits that inure solely by virtue of the marriage or the person’s status as surviving spouse, unless the marriage is subsequently ratified. Specifically, the surviving spouse is not entitled to the following:

[1]  Any rights or benefits under the Florida Probate Code, including entitlement to elective share or family allowance; preference in appointment as personal representative; inheritance by intestacy, homestead, or exempt property; or inheritance as a pretermitted spouse.

[2]  Any rights or benefits under a bond, life insurance policy, or other contractual arrangement if the decedent is the principal obligee or the person upon whose life the policy is issued, unless the surviving spouse is provided for by name in the bond, life insurance policy, or other contractual arrangement.

[3]  Any rights or benefits under a will, trust, or power of appointment, unless the surviving spouse is provided for by name in the document.

[4]  Any immunity from the presumption of undue influence that a surviving spouse may have under state law.

If the surviving spouse is found to have procured the marriage by fraud, duress, or undue influence, then any of the above rights or benefits that would have passed solely to the surviving spouse by virtue of the marriage shall pass as if the spouse has predeceased the decedent.

Any interested person may bring a challenge to a surviving spouse’s rights as a defense, objection, or cause of action. The contestant has the burden of establishing, by a preponderance of the evidence, that the marriage was procured by fraud, duress, or undue influence. If the surviving spouse raises ratification as a defense, the spouse has the burden of establishing, by a preponderance of the evidence, the subsequent ratification by both parties. A challenge made under this section must be commenced within four years after the decedent’s death, unless the claim is barred sooner by adjudication, estoppels, or a provision of the Florida Probate Code or Florida Probate Rules.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Hall v. Maal, --- So.3d ----, 2010 WL 1212794 (Fla. 1st DCA March 30, 2010)

Just because someone says they were married to the decedent, doesn't make it so. In contested probate proceedings you simply can't take this fact for granted; the economic implications are too big. A surviving spouse has [1] the right to homestead property (at least a life estate in the decedent's homestead residence), [2] a right to an elective share (30% of the decedent's augmented elective estate), [3] a right to take as a pretermitted spouse (up to 100% of the estate under Florida's laws of intestacy), [4] a right to a family allowance, [5] a right to exempt property, and [6] priority in preference in selecting a personal representative. In addition, as I recently wrote here, Florida courts have long held that a presumption of undue influence in a will contest "cannot arise in the case of a husband and wife" because the requirement of active procurement would almost always be present.

So how do you "test" the validity of a marriage?

The 1st DCA made clear in the linked-to case above that determining if a couple "acted" married is NOT the way to test a marriage's legal validity. In this case the couple had a formal wedding ceremony, lived together, had children together, walked around telling anyone who would listen they were man and wife, executed a mortgage as husband and wife, and in all other respects "acted married," but they never got around to getting a marriage license. So were they "legally" married? NO says the 1st DCA. Why? Because 741.211, Florida Statutes (2002) says common-law marriages aren't valid in Florida. So if you don't have a marriage license, you're not married.

Acting Married

If there were ever two people who acted married, it was the couple in this case:

Ms. Hall and Dr. Maal were engaged to be married on March 2, 2002, at Old Christ Church in Pensacola. Leading up to their wedding date, they went through many of the familiar activities of those who intend to marry. They arranged for the church, engaged a minister, sent out invitations, arranged for flowers and a photographer, and attended pre-marital counseling. They attended at least two wedding showers. And, as some couples do, they started to work out a pre-nuptial agreement.

The week before the wedding, the couple was scheduled to go to the office of the county court clerk to get a marriage license. However, on that day, Dr. Maal called Ms. Hall at work and told her that they were not going to be able to get a marriage license because they had not agreed on the pre-nuptial agreement. Ms. Hall was understandably upset by this-all of the arrangements had been made and many of the guests were already in Pensacola for the ceremony. Dr. Maal persuaded her to go ahead with the ceremony, reassuring her that “everything will be alright.” On March 2, 2002, Dr. Maal and Ms. Hall participated in a full wedding ceremony performed by a minister at the church with numerous family members and friends present, complete with attendants, music, and flowers, and followed by a very nice reception. They did this knowing that they had not ever applied for nor received a marriage license.

In the years following the 2002 ceremony, two children were born of the relationship, Dr. Maal referred to Ms. Hall as his “wife,” and she referred to him as her “husband.” The mortgage on the parties' home referred to them as “husband and wife.” Ms. Hall was referred to as “Mrs. Maal” in her workplace, although she had not legally changed her name. The parties continued to file separate tax returns.

A year after the “marriage” ceremony, the parties appeared before the clerk of the court and applied for and received a marriage license. However, the license was neither solemnized nor returned to the clerk of the court to be made part of the official records of the county.

No Marriage License = You're NOT Married

These two may have walked, talked and looked married . . . but they weren't. As explained by the 1st DCA, in the absence of a marriage license validly "solemnized" in accordance with Florida law: you're NOT legally married.

Since 1967, when the Florida legislature abolished common law marriage, there has been only one method of producing a legally cognizable marriage in Florida. See generally §§ 741.01-.212, Fla. Stat. (2002). Persons desiring to be married are required to apply for a marriage license which can be issued by a county court judge or the clerk of the circuit court. See § 741.01, Fla. Stat. (2002). After issuance, a license is valid for 60 days within which time the marriage must be solemnized. See § 741.041, Fla. Stat. (2002). Marriage may be solemnized by ordained clergy, judges, clerks of court, or notaries public. See § 741.07, Fla. Stat. (2002). After solemnization, the officiant shall certify on the license that the marriage has been performed and deliver it, within 10 days, to the clerk or judge that issued it. See § 741.08, Fla. Stat. (2002). The county court judge and the clerk of the circuit court are required to keep a correct record of all licenses issued and of the licenses returned as certified by the officiant. See § 741.09, Fla. Stat. (2002). There are also provisions for proving up a marriage when the certificate is not completed on the marriage license, when the certified license is lost or when death or other cause prevents a certificate from being made. See § 741.10, Fla. Stat. (2002).

*     *     *     *     *

The parties were not in substantial compliance with Chapter 741. Whether substantial compliance exists is a fact-based inquiry. However, in order for there to be substantial compliance, there has to be some compliance. Some compliance would, at a minimum, entail the parties applying for and receiving a license.

*     *     *     *     *

To the extent that the dissent would hold that a marriage ceremony without a license, coupled with living together and “acting married,” results in a valid marriage, it would recreate a species of common-law marriage in violation of section 741.211, Florida Statutes (2002).

Hat tip to Eric Virgil

Coral Gables probate litigator extraordinaire Eric Virgil recently posted a summary of this case on the list service for the RPPTL section of the Dade County Bar Association. That's how I became aware of it. Thanks Eric.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

Foster v. Estate of Gomes, --- So.3d ----, 2010 WL 322170 (Fla. 5th DCA Jan. 29, 2010)

Prenuptial agreements limiting themselves solely to spousal inheritance rights are governed by F.S. § 732.702. All other prenuptial agreements are governed by the more burdensome requirements of Florida's Premarital Agreement Act, found at F.S. § 61.079.

Generally speaking, inheritance-rights prenup's are a whole lot simpler to draft, less costly for clients, and easier to enforce. Why? One big reason is that these agreements (if executed prior to the marriage) don't require prospective spouses to go through all of the financial disclosure normally needed to make prenup's governed by Florida's Premarital Agreement Act stick. This distinction is often lost on attorneys used to litigating prenup's in divorce proceedings, and was at the heart of the court's ruling in the linked-to opinion.

Prior to their marriage, Lora Foster and Edward Gomes entered into an antenuptial agreement in which Ms. Foster waived all right to Mr. Gomes's property, including her right to an elective share. Although not required by Florida law, Mr. Gomes disclosed the bulk of his assets when they entered the agreement, omitting one asset valued at approximately $10,000.

*     *     *

Florida law does not require prior disclosure of assets for an antenuptial agreement. § 732.702(2). Recognizing this, Appellant argues that a disclosure, once made, albeit voluntarily, if inaccurate or fraudulent, invalidates the antenuptial agreement, citing Stregack v. Moldofsky, 474 So.2d 206 (Fla.1985) (Ehrlich, J., dissenting). Unfortunately for Appellant, that dissenting opinion has not garnered a consensus either within the Florida Legislature or Florida courts. We prefer, instead, to rely upon the binding majority opinion which stated, “[n]ondisclosure, whether fraudulent or not, is precisely what the legislature intended to eliminate from consideration on the validity of antenuptial agreements.” Stregack, 474 So.2d at 207. In so holding, the law continues to accommodate the desires of older Florida residents to marry again without risking an unwanted disposition of a lifetime's assets due to a partial disclosure. See id.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Turchin v. Turchin, --- So.3d ----, 2009 WL 2871564 (Fla. 4th DCA Sep 09, 2009)

If I buy an investment property with my own pre-marital funds but jointly title the property with my wife, what was my intent?  Did I intend to gift a 1/2 interest in the property to her, or did I put her name on the deed for convenience purposes only?  Especially when the person who put up all the money is dead, it's next to impossible to establish with certainty what exactly were his intentions when the deed was signed.

We could spend years litigating each of these cases, or we could assume that most people who jointly title property intend to make a gift, and let those who believe otherwise bear the burden of proving no gift was intended.  In Florida we've opted for the latter approach: a gift is presumed whenever property is jointly titled. The side that benefits from this presumption in litigation has a huge advantage, which explains why these cases often turn on the evidentiary-presumption issue [click here, here, here, here].

Can a valid pre-nup' trump the default presumptions governing joint property under Florida law?

One of the primary reasons people sign marital agreements is to reverse or otherwise alter the default presumptions applicable to property acquired before or after marriage. So it would have been a big deal if when put to the test - as in the linked-to opinion - a marital agreement's property distribution scheme failed to work as intended; not because of some drafting error, but because it simply didn't comport with Florida law.

Fortunately the agreement worked. As framed by the 4th DCA the question at issue in the linked-to opinion was simple:

Can a decedent's surviving spouse rely on Florida's "gift presumptions" to ignore the terms of her valid pre-nup' and claim as her own the sales proceeds of jointly-titled property purchased by her deceased husband with his separate premarital assets? 

According to the probate judge the answer was clearly NO. The 4th DCA agreed, here's why:

Sharyn Turchin now appeals, arguing, among other things, that the trial court erred in failing to apply a gift presumption when the properties were jointly titled in the names of husband and wife. Although Sharyn Turchin is correct that a gift is presumed under Florida law when property is purchased by one spouse but placed in both names, this presumption does not apply when the antenuptial agreement specifically designates how the jointly held property is to be distributed. See Bowen v. Bowen, 345 S.C. 243, 547 S.E.2d 877, 881 (2001); cf. Hannon v. Hannon, 740 So.2d 1181, 1187 (Fla. 4th DCA 1999) (“As a general matter, the provisions in chapter 61 on alimony do not exist to displace nuptial agreements; rather the statutes exist to set the principles when there is no agreement.”). “A primary purpose of an [antenuptial] agreement is to modify or shrink the general discretion of [a] judge in doing equity between the parties. The agreement itself is intended to define the mutual equities, and the trial judge is not free to ignore its provisions or to render them ineffective.” Hannon, 740 So.2d at 1187. Because the antenuptial agreement in this case unambiguously provided for the manner of distribution of jointly held property based upon who funded the acquisition, the presumption does not apply. Accordingly, the trial court properly declined to apply the gift presumption. We therefore affirm.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Taylor v. Taylor, --- So.2d ----, 2009 WL 186155 (Fla. 1st DCA Jan 28, 2009) [Attorney Interview]

I wrote here in 2006 about an "ambiguous" premarital agreement that the 3d DCA held was a valid waiver of a widow's marital rights under F.S. § 732.702. Here's the clause at the center of the 3d DCA case:

"It is [husband's] intent that, in the event of his death, all of his separate property be given to his children, STEVEN M. LADD and BETHANY S. LADD, or as otherwise provided for in his Last Will and Testament."

In that case the court relied on evidence outside of the four corners of the agreement as the basis for enforcement. In other words, the 3d DCA held this clause was NOT precise enough on its own to effectuate a waiver of spousal rights under F.S. § 732.702, so the probate court was right to accept parol evidence when enforcing it.

Fast forward to the present and the linked-to opinion out of the 1st DCA. Here's the waiver clause at the center of the new case:

"All property which belongs to each of the above parties shall be, and shall forever remain, their personal estate, including all interest, rents, and profits which may accrue from said property, and said property shall remain forever free of claim by the other."

According to the 1st DCA this clause was just fine, thank you very much. No ambiguity here. In fact the 1st DCA goes out of its way to let the probate court know that it should NOT have taken parol evidence to "decipher" its meaning. Here's how the 1st DCA explains its ruling upholding this clause on the grounds that under F.S. § 732.702 a contract's broadly-stated intention to waive spousal rights in whatever form they may take is sufficient:

Application of section 732.702(1) leads us to conclude that the trial court erred in determining that the prenuptial agreement was ambiguous as to Appellee's rights in the decedent's estate. Section 732.702(1) does not require that the parties specify an intent to relinquish rights given to surviving spouses in order to effectively relinquish those rights. Instead, the statute provides that a general relinquishment of “all rights” or equivalent language is sufficient to accomplish this purpose. Here, Appellee agreed, under paragraph one, that after marriage, the decedent's property would “forever remain [his] personal estate” and that such property would be “forever free of any claim by [Appellee].” Because this language is equivalent to a statement that Appellee waived “all rights” in the decedent's property or estate, section 732.702(1) compels a conclusion that the prenuptial agreement was a valid waiver of those rights.

Lesson learned?

I think it's impossible to reconcile the different approaches taken first by the 3d DCA in 2006 and then by the 1st DCA above when applying F.S. § 732.702 to what all of us can agree are less than artfully drafted prenuptial agreements. So what's a probate litigator to do? Cover all your bases. How? Argue in the alternative: build a record that wins your client's case based both on parol evidence (à la the 3d DCA's approach in 2006) and on the text of the agreement itself (à la the 1st DCA's approach in the linked-to case above). Either way, you're ready, willing and able to win your case.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Slate recently reported here on Bill Murray's brewing divorce. From a practitioner's standpoint I was especially interested to find excerpts of original source documents - including Murray's prenuptial agreement - reproduced in the Slate post. Here's an excerpt:

Days before their 1997 wedding ceremony, comedian Bill Murray and his wife, Jennifer Butler Murray, entered into a 26-page antenuptial agreement (excerpted below and on the following four pages). "Jennifer … is aware that Bill is a person of very substantial means and income," the document said (Page 2). The agreement stipulated that Murray would "continue to retain all right title and interest … to all separate property he may now own or hereafter acquire" (Page 3). As a wedding present, Bill agreed to buy his bride a modest house ("not exceeding one million dollars") of her own ("title … taken in Jennifer's sole name"—Page 5). In the "event of marital discord," Jennifer would relinquish her rights to alimony (Page 4) and instead receive within 60 days of the marriage's dissolution a lump-sum "marital award" of $7 million (Page 5).

I don't do divorce litigation, but I do draft marital agreements as part of my practice. The Murray piece underscored for me how high the stakes can be when you work on a pre-nup. Fortunately, Florida recently adopted the Uniform Premarital Agreement Act (UPAA) at F.S. 61.079 (like that segway from celebrity divorce to Florida statutory reference?).  In a recent Florida Bar Journal article entitled The Uniform Premarital Agreement Act: Taking Casto to a New Level for Prenuptial Agreements, Florida divorce attorney Doreen Inkeles described the likely impact of this new legislation on the enforceability of pre-nuptial agreements as follows:

Ultimately, it would appear that prenuptial agreements will be harder to set aside under the act. If one cannot establish fraud, duress, or overreaching, which are hard enough to prove, the need to prove unconscionability catapults what had previously been an “unfair or unreasonable” standard into the stratosphere where the circumstances must be “shockingly unfair” and “excessively unreasonable.” And the elements of lack of financial disclosure/lack of knowledge must also accompany the unconscionability claim. The act reflects Florida’s policy which does not prohibit persons from making hard bargains or entering into unfair agreements, as long as they do it voluntarily, of their own free will, and with at least an approximate knowledge of what they are giving up.

.  .  .  .  .

Combined with the apparently more stringent standards set forth in the UPAA, parties will have second thoughts about testing the enforceability of their agreements now that the Florida Supreme Court has recognized the enforceability of prevailing party attorneys’ fee provisions contained in prenuptial agreements which would place liability on the impecunious spouse for the already dominant spouse’s attorneys’ fees should the agreement be upheld.

Blogging credit:

Credit goes to Chicago probate attorney Joel A. Schoenmeyer for bringing the Slate piece to my attention in this post on his Death & Taxes Blog.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Perry v. Perry, --- So.2d ----, 2008 WL 588901 (Fla. 4th DCA Mar 05, 2008)

4th DCA Judge Gary M. Farmer penned a thoughtful concurring opinion in this case dissecting the following question:

When a decedent's will violates the terms of his divorce settlement agreement, as incorporated into a final judgment of divorce, what recourse do the rightful beneficiaries of the estate have?

Judge Farmer's analysis of this question provides an excellent road map for probate counsel to follow if ever presented with a similar set of facts.

1st Theory: Breach of Contract Claim:

When a will violates the terms of a valid contract, the primary remedy is an independent action for breach of contract - not a frontal assault on the will itself.  In other words, a will can be perfectly valid and also be in breach of a contract.  The remedy then is a suit for damages resulting from the contract breach, not an order declaring the will invalid and not subject to probate.  Here's how Judge Farmer summarized current Florida law on this point:

“Florida courts have held that ... the proper remedy for an alleged breach of a contractual provision in a will is an independent civil action for breach of contract. See Johnson v. Girtman, 542 So.2d 1033, 1035 (Fla. 3d DCA 1989); In re Estate of Algar, 383 So.2d 676, 677-78 (Fla. 5th DCA 1980); Sharps v. Sharps, 219 So.2d 735, 737 (Fla. 3d DCA 1969).”

Essentially these cases stand for the proposition that a will leaving property to someone to carry out a contractual duty is revocable even though the revocation breaches the contract, and so the remedy is an independent action for breach of contract.

2d Theory: Challenge the Will on the Grounds of Illegality:

What if the will-contract at issue is incorporated into a final judgment, as is common in divorce proceedings?  This is where Judge Farmer's analysis is most interesting.  According to Judge Farmer a will that violates a final judgment is analogous to a will containing a illegal clause, and thus the offending clause may be ignored.  This is a will-construction argument that is very different from the breach-of-contract theory I've always thought was primarily at issue in these cases.  Here's how Judge Farmer explained this point:

[A] bequest in violation of the rule against perpetuities is in opposition to the law of descent and distribution.FN3 Probate courts have a long tradition of refusing to carry out will provisions involving some attendant illegality in the distribution of decedent's property. Another example-much beloved of the jurisprudes FN4 is Riggs v. Palmer, 115 N.Y. 506, 22 N.E. 188 (1889), which held that the laws governing probate of wills and the distributions of estates, even though plainly requiring otherwise, will not be enforced to secure the benefit of a will to a legatee who has killed the testator in order to prevent a revocation of the will.

FN3. The common law rule against perpetuities has been replaced in Florida by statute. See § 689.225(7), Fla. Stat. (2007).

FN4. These legal philosophers cite Riggs as one of the chief examples of the incoherence of law-that is to say that opposing outcomes in legal disputes may both be justified by the legal corpus and that, contrary to the positivists, law is not a prediction of what a judge will do in a given case.

In this case, a substantial issue might be raised as to whether the probate court could properly enforce a will provision made in direct violation of a permanent injunction in a final judgment commanding the decedent to dispose of another person's property in a certain way. If a court of competent jurisdiction has already determined by permanent injunction that decedent may name only his children by an earlier marriage under the power of appointment, by what theory may the Probate Judge enforce a willful violation of that injunction? After all, a violation of a permanent injunction is as much a violation of the law as a bequest extending beyond the period of perpetuities.

• Email This
• Print
• Comments (4)
• Trackbacks
• Share Link

Weisfeld-Ladd v. Estate of Ladd, 2006 WL 231481 (Fla. 3d DCA Feb 01, 2006)

Clearly, the couple at the center of this dispute thought that when they signed their prenuptial agreement they were waiving any spousal rights they had to each other's separate property - including rights of a surviving spouse to an elective share under F.S. § 732.201. Nonetheless when husband died, surviving spouse went ahead and filed a petition seeking an elective share of his estate. The 3d DCA summarized her testimony regarding the couple's clear intent as follows:

"Most importantly, the wife testified as to her understanding of the Prenuptial Agreement. It was her understanding that if she would have passed away, her son would have inherited all of her separate property, and that upon her husband's death, his children would inherit all of his separate property."

"[Wife] even acknowledged that if she would have predeceased her husband, her son would have been entitled to inherit all of her separate property. Based upon the wife's interpretation of the Prenuptial Agreement, it is clear that the husband and wife's intent would have been defeated if the surviving spouse was permitted to receive an elective share. There is no doubt that the wife clearly understood that, by entering into the Prenuptial Agreement, she would not receive any of the husband's separate property upon his death, and that all of his separate property would go to his two children."

The only problem was that the prenuptial agreement didn't actually say what the parties thought they were agreeing to. In fact, the key language of the prenuptial agreement doesn't mention waiving spousal elective share rights at all, what it does say is, to say the least, "ambiguous":

"It is [husband's] intent that, in the event of his death, all of his separate property be given to his children, STEVEN M. LADD and BETHANY S. LADD, or as otherwise provided for in his Last Will and Testament."

Was that one sentence enough under F.S. § 732.702 to effectuate a valid waiver of spousal elective share rights? According to Dade County Probate Judge Maria M. Korvick it was, so she denied surviving spouse's elective-share petition. By the way, here are the portions of F.S. § 732.702 focused on by the 3 DCA:

"rights of a surviving spouse to an elective share *** may be waived, wholly or partly, before *** marriage, by a written contract**** Unless the waiver provides to the contrary, a waiver of 'all rights,' or equivalent language, in the property or estate of a *** prospective spouse *** is a waiver of all rights to elective share**** (emphasis added by 3d DCA)."

What I find most interesting about this case is how the 3 DCA seems to go out of its way to affirm the trial court's ruling denying the surviving spouse's elective share claim. Obviously swayed by a compelling set of facts, the 3 DCA arrived at the "right" conclusion as follows:

First: Assume findings of fact NOT included in the trial court's order:

"The trial court did not make a specific finding as to whether the Prenuptial Agreement was ambiguous or unambiguous. However, as the trial court allowed the wife to testify as to her intent when entering into the valid Prenuptial Agreement, we assume that the trial court found that the Prenuptial Agreement was susceptible of more than one construction and, therefore, ambiguous."

Second: Agree with findings of fact ASSUMED into the record:

"Upon review of the Prenuptial Agreement, we agree with the trial court's determination that the Prenuptial Agreement was ambiguous."

Third: After assuming factual findings into the record that weren't there to begin with, then agreeing with the trial court's assumed findings of fact, hold that "PAROL EVIDENCE," i.e., testimony by the surviving spouse completely undermining her own petition, was validly admitted to construe the "ambiguous" prenuptial agreement:

"As the agreement was ambiguous, the trial court properly admitted parol evidence to shed light on the intent of the parties when entering into the Prenuptial Agreement."

Presto! Good facts save the day!

• Email This
• Print
• Comments
• Share Link

As I previously posted here, "Dynasty Trusts" are estimated to hold up to $100 billion in assets. Dynasty trusts are only one subset of the trust options available to families. And as more and more of those families formalize their estate planning with the use of trusts for their children, more and more of those trusts will be targeted in divorce proceedings. Whether you represent a trust beneficiary considering a prenuptial agreement or a divorcing spouse attempting to shield his or her trust assets from Florida's equitable distribution regime (i.e., F.S. § 61.075), you need to know what the key issues are.

Step one, read the 1985 landmark Florida Supreme Court opinion Bacardi v. White, 463 So.2d 218 (Fla. Jan 31, 1985). Step two, read Colorado trust & estates attorney Marc A. Chorney's recent Real Property, Probate and Trust Journal article entitled "Interests in Trusts as Property in Dissolution of Marriage: Identification and Valuation."

• Email This
• Print
• Comments
• Share Link