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

If you're representing a personal representative or trustee in a complicated estate or trust administration case, the "who gets what" question won't be easy to answer. No surprise there. What may be surprising, especially to lawyers, is how large a role Florida's Principal and Income Act (Ch. 738) or "FPIA" often plays in these cases.

Here's why: trusts and estates have two basic classes of owners: income beneficiaries and principal beneficiaries. Sometimes the same people are both income and principal beneficiaries, sometimes they're not. When they're not, there's an inherent conflict: if a receipt is accounted for as income, the income beneficiary benefits to the detriment of the principal beneficiary, and vice versa. It's up to PR's and trustees to resolve this conflict, and the way they do that is governed by the FPIA.

Who gets what?

In a traditional trust where the income beneficiary receives distributions of income at least annually and the principal beneficiary gets the trust principal at the death of the income beneficiary, the FPIA rules governing income/principal determine the benefits to be shared between the beneficiaries.  Same goes for wills: the FPIA governs what the income is and who gets it. However, these are all default rules, and according to F.S. 738.103(1), these rules can all change depending on what the will or trust agreement says. For example, if a trust agreement says that receipts from the sale of a particular asset must be allocated 25% to income and 75% to principal, you do exactly that, and there's no need to decipher the FPIA rules otherwise governing the transaction. Bottom line, to the extent the written instrument provides guidance on accounting for income and principal, this guidance is treated by Florida law as the final authority.

For an excellent explanation of how the FPIA works in real life, you'll want to read Things That May Surprise You About Florida’s Principal and Income Act and Related Accounting Law, Parts I and II, a two-part series published in the Florida Bar Journal by William C. Carroll and John W. Randolph, Jr., which I previously wrote about here and here.

So what changed in 2013?

Since its adoption in 2002, there have been three separate "glitch bills" to fix various problems with the FPIA. During the 2012 legislative session, Florida adopted its fourth FPIA glitch bill [click here]. For an in-depth explanation of the statutory changes, you'll want to read the Legislative Staff Analysis. For a plain-English explanation of the FPIA changes most relevant to those of us in the trenches, you'll want to read Principal & Income Act Updated, published in the Winter 2013 edition of ActionLine by attorney Edward F. Koren and CPA F. Gordon Spoor. Here's an excerpt from the ActionLine article:

Fiduciary Duties; General Principals

While most of Florida’s Principal and Income Act is intended to apply to all fiduciaries, including trustees and personal representatives [F.S. 738.102(4)], certain sections of the Act that were intended to apply to all fiduciaries contained the word “trustee.” Additionally, the word “fiduciary(ies)” was used in certain sections that were only intended to apply to “trustee(s).” The 2012 Revisions clarify some of these inconsistencies by using the word “trustee” rather than “fiduciary” in all sections intended to apply only to trusts. Additionally, the 2012 Revisions added a specific provision that states that, “All provisions of this chapter also apply to any estate that is administered in Florida, unless the provision is limited to a trustee rather than a fiduciary.” [F.S. 738.103(3)].

. . .

Addition of “Carrying Value”

The 2012 Revisions re-introduce the concept of “inventory value” by . . . adopting the phrase “carrying value.” In addition to harmonizing . . . F.S. § 736.08135(2)(b) with Florida Probate Rule 5.346, Appendix B(IV), several statutes within the [FPIA] were revised to reference “carrying value” within the context of income and principal allocations. [F.S. 738.202, 738.401(6), and 738.603].

“Carrying value” is defined in F.S. § 738.102(3) as “the fair market value at the time the assets are received by the fiduciary.” This is different from “cost basis,” which is defined in the Internal Revenue Code. For the estates of decedents, and trusts described in F.S. § 733.707(3) after the grantor’s death (i.e., revocable trusts), the carrying value of assets received upon the grantor’s death is the value as determined for federal estate tax purposes (or date of death if no estate tax return is re- quired). For assets acquired during the administration of the estate or trust, the carrying value is equal to the acquisition cost of the asset.

. . .

Changes to Unitrust Provisions

The ease of administration aspect of a unitrust has caused it to gain wide acceptance. Typically, the annual unitrust amount is based on the valuation of the trust as of a specific date. [F.S. 738.1041(2)(b)2.d.] Recent market fluctuations, however, have impacted the value of trust as- sets, resulting in significant variations in the annual calculation of the unitrust amounts. In an effort to minimize these fluctuations, the 2012 Revisions incorporate a “smoothing rule” to be used when computing the fair market value of the unitrust. The smoothing rule incorporates an “Average Fair Market Value” concept [F.S. 738.1041(1)(a)], which requires that fair market value for purposes of the unitrust computation be computed using the average of the fair market value of the trust’s assets at the beginning of the current year and each of the prior two years.

. . .

Distributions To Residuary And Remainder Beneficiaries

As was the case under the 1974 Act, the 2012 Revisions now require that accounting income be allocated to beneficiaries based upon carrying values, except in cases where dispro- portionate distributions are made. This greatly simplifies trust administration by not requiring valuation of trust assets each time a distribution is made--unless disproportionate distributions are made [F.S. 738.202].

. . .

Distributions From Entities

The 2002 Act provided that cash distributions from entities not in liquidation were allocated to income. In determining if a distribution was in liquidation, absent a representation from the entity, a default rule existed that provided that any distributions made by the entity in excess of 20% of the entity’s gross assets (as shown on the entity’s year end financial statements immediately pre- ceding the initial receipt) was deemed to be made in liquidation.

. . .

The 2012 Revisions attempt to . . . clarify the application of the 20% rule used in determining liquidating distributions. For non-publicly traded entities, cash distributions are treated as income unless they are determined to have been received in liquidation. If the total distributions by the entity exceed 20% of the entity’s gross assets as shown on the entity’s year-end financial state- ments immediately preceding the initial receipt, the distribution will be allocated to income to the extent that total distributions received from the entity – for the number of years or portions thereof while it was subject to the trust – have not equaled a cumulative annual return of 3% of the entity’s carrying value, computed at the beginning of each period included in the measuring period. Distributions in excess of this amount are treated as principal [F.S. 738.401(5)(b)].

For publicly traded entities, cash distributions are treated as income unless they are determined to have been made in liquidation. The 20% default rule is replaced by 10% of the entity’s fair market value as of the beginning of the measuring period. If total distribu- tions exceed this 10% threshold, such distributions will be income to the extent that amounts allocated to income for the number of years (or portion of years) that the trust held an interest in the entity have not equaled a cumulative return of 3% of the entity’s fair market value at the beginning of each measuring period [F.S. 738.401(e)].

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There's a good reason why homestead litigation is a recurring theme on this blog: it’s a non-intuitive thicket of complexity that can trip up even the best and brightest lawyers and judges [click here]. One way to cut through this complexity is to rely on trustworthy charts that graphically summarize the key "do's" and "don’ts" in a single easy-to-read snapshot. The granddaddy of all homestead-law charts is Kelley's Homestead Paradigm, by renowned Florida homestead-law expert Rohan Kelley. We now have another excellent resource to work with in Charles Rubin's homestead chart, poetically entitled Restrictions on Transfers of Florida Homestead Property. Both are reliable, user-friendly tools for the practicing probate lawyer. Good stuff, highly recommended.

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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.

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

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

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

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

. . . . . 

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

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

. . . . .

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

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

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

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

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

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

. . . . .

Summary of Procedures Under Rev. Proc. 2011-48

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

. . . . .

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

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

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

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

. . . . .

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

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

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If, when and how Civ. Pro. Rule 1.525, the rule setting a 30-day post-judgment deadline for filing attorney's fee motions in civil litigation, applies to contested probate, guardianship and trust proceedings, is an important question. The last thing any lawyer wants to do is blow a deadline for claiming fees on behalf of his client. Here’s what the rule says:

Any party seeking a judgment taxing costs, attorneys’ fees, or both shall serve a motion no later than 30 days after filing of the judgment, including a judgment of dismissal, or the service of a notice of voluntary dismissal.

Florida appellate courts have upheld application of Rule 1.525's 30-day deadline to all adversary probate and guardianship proceedings (there's never been any question that Rule 1.525 does NOT apply to NON-adversary probate/ guardianship proceedings), and arguably to all trust proceedings. See Price v. Austin, 43 So.3d 789 (Fla. 1st DCA 2010) (adversary guardianship proceeding, click here); Hays v. Lawrence, 1 So.3d 1176 (Fla. 5th DCA 2009) (adversary probate proceeding, click here); Donkersloot v. Donkersloot, 993 So.2d 126 (Fla. 2d DCA 2008) (trust litigation, click here).

However, a rule designed to apply in the general commercial litigation context didn't really work in the probate, guardianship and trust context, where fee petitions are appropriately filed all the time, not just after a final judgment is entered. To fix this glitch in 2011 legislative and rule changes were adopted completely eliminating Rule 1.525's 30-day deadline in the adversary probate and guardianship context, and limiting Rule 1.525's 30-day deadline to fee petitions filed in trust proceedings by anyone other than the trustee (e.g., a beneficiary suing the trustee for malfeasance).

[1]  Rule 1.525 NOT Applicable to ANY Probate or Guardianship Proceeding:

In In re Amendments to Florida Probate Rules, --- So.3d ----, 2011 WL 4467595 (Fla. Sep 28, 2011), the Florida Supreme Court amended subdivision (d)(2) of Probate Rule 5.025 (the rule governing adversary probate and guardianship proceedings), completely eliminating Rule 1.525's application in the adversary probate and guardianship context as follows:

(2) After service of formal notice, the proceedings, as nearly as practicable, must be conducted similar to suits of a civil nature, including entry of defaults. The Florida Rules of Civil Procedure govern, except for rule 1.525.

[2]  Rule 1.525 Applicable to ONLY Certain Contested Trust Proceedings:

In 2011 the Florida legislature adopted new subsection (6) to Fla. Stat. § 736.0201 specifically limiting Rule 1.525’s application to anyone other than the trustee (e.g., a beneficiary suing the trustee for malfeasance) as follows:

Fla. Stat. § 736.0201(6): 

Rule 1.525, Florida Rules of Civil Procedure, shall apply to judicial proceedings concerning trusts, except that the following do not constitute taxation of costs or attorney’s fees even if the payment is for services rendered or costs incurred in a judicial proceeding:

(a) A trustee’s payment of compensation or reimbursement of costs to persons employed by the trustee from assets of the trust.

(b) A determination by the court directing from what part of the trust fees or costs shall be paid, unless the determination is made under s. 736.1004 in an action for breach of fiduciary duty or challenging the exercise of, or failure to exercise, a trustee’s powers.

For more on the analysis that went into the new trust-code provision limiting Rule 1.525's 30-day deadline to only certain trust proceedings, you'll want to read Florida House of Representative's Staff Analysis of CS/HB 325.

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

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

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

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

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

How Florida's ILIT Trustee Protection Statute Works:

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

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

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

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

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

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

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

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

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

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

Legislative Fix:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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In 2008 the AARP's Public Policy Institute published a provocative report entitled Power of Attorney Abuse: What States Can Do About It.The AARP report highlighted what was wrong with existing POA statutes, how those failings lead to the exploitation of vulnerable adults, and urged state legislators to adopt the Uniform Power of Attorney Act or "UPOAA" as the best means for reform.

Florida heard the call for reform: effective October 1, 2011, we will be the latest state to adopt its version of the UPOAA at Part II of Chapter 709 of the Florida Statutes [click here].

For an excellent plain-English explanation of Florida's version of the UPOAA and how it will affect every new POA drafted in this state, you'll want to read THE FLORIDA POWER OF ATTORNEY ACT – MORE DURABLE THAN EVER by Tami Conetta, of Northern Trust in Sarasota. Ms. Conetta's paper also contains a copy of the Chapter 709 White Paper prepared by the Florida Bar's RPPTL Section. And for those of you who find yourselves litigating the new statute, you'll also want to read the official legislative white paper for the new statute contained in Florida Senate's Bill Analysis and Fiscal Impact Statement.

Here are some highlights from Ms. Conetta's excellent paper explaining our new POA statute (Part II of Chapter 709):

Existing POA's Grandfathered In: F.S. 709.2402

A power of attorney executed prior to the effective date of the Act will remain valid under the Act provided its execution complied with the law of Florida at the time of its execution. If the power of attorney is a durable (or springing) one, it will remain durable (or springing) under the new Act.

"Springing" POA's no longer valid (but existing POA's grandfathered in): F.S. 709.2108

Contingent, or “springing”, powers of attorney will not be authorized after the effective date of the Act. Those in existence prior to the effective date will continue to be recognized. 

New Co-agent and Successor Agent Provisions [F.S. 709.2111]; Automatic Revocation upon Divorce [F.S. 709.2109(2)(b)]:

Subject to the qualification requirements (natural persons who are 18 years of age or older and financial institutions with trust powers), the principal may designate a single agent or, if desired, the principal may designate two or more persons to act as co-agents. Unless the power of attorney provides otherwise, each co-agent may exercise its authority independently. This is a significant change from current law.

Even where the power of attorney requires two or more agents to act jointly, there is a special exception for banking transactions to allow any one of the agents to sign checks and otherwise handle banking matters with a single signature.

If an agent becomes unable to act as a result of the agent’s death, incapacity, resignation, declination, or failure to qualify, the appointed successor agent (if any) may commence serving as agent. The filing of a petition for dissolution of marriage terminates the authority of an agent who is married to the principal unless the power of attorney provides otherwise.

New Drafting Requirements for POA's containing "Superpowers": F.S. 709.2202

The Act clearly allows a principal to grant authority to the agent to take significant actions that can impact the principal’s estate plan or gifting program, but one must be careful in the drafting and implementation of these powers as there are additional execution formalities and restrictions on the authorization. Special note should be made of the application of these rules to powers of attorney executed on or after October 1, 2011. These rules do NOT affect existing powers of attorney prior to that date. [See F.S. 709.2202(5): "This section does not apply to a power of attorney executed before October 1, 2011."]

Minimum Requirements. The following mandatory minimum requirements must be met:

• The authority must be specific. For example, “My agent may create and fund a revocable trust on my behalf."
• [ ** NEW DRAFTING REQUIREMENT ** ]: The principal must sign or initial next to each specific enumeration of the authority.
• The agent may only exercise the authority consistent with the duty to preserve the principal’s estate plan.
• The exercise must not be prohibited by any governing document affected. For example, “My agent may amend or revoke my revocable trust.” But the trust agreement says the right of amendment or revocation is personal to the grantor and may not be exercised by anyone else. 

The Superpowers. The powers that may be granted to the agent under this provision include:

• Create an inter vivos trust.
• With respect to a trust created by or on behalf of the principal, amend, modify, revoke or terminate the trust, but only if the trust instrument explicitly provides for amendment, modification, revocation or termination by the settlor’s agent.
• Make a gift (subject to restrictions).
• Create or change rights of survivorship.
• Create or change a beneficiary designation.
• Waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan.
• Disclaim property and powers of appointment.

Modifiable Restrictions. If the agent is not related to the principal, the agent may not use these powers to benefit himself or anyone to whom the agent has a support obligation.

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Effective October 1, 2011, a surviving spouse's intestate share of an estate will go up from 50% to 100% of the estate if the decedent's descendants are also descendants of the surviving spouse. If you're a probate lawyer this is a BIG deal; you'll need to know this new statute cold. For a reliable, user-friendly chart summarizing the new law, you'll want to rely on Fort Lauderdale estate planning attorney David Shulman's excellent Intestacy Flow Chart.

Here's how the new intestacy regime for surviving spouses is explained in Florida House of Representative's Staff Analysis of CS/HB 325:

Intestate Estate

When an individual dies (the decedent) without a will, a person's will is declared invalid, or assets are not distributed by a valid will, then the individual is considered "intestate." Since there is no will to direct the distribution of assets, Florida law provides the distribution of assets that remain after paying debts and the expense of conducting the probate proceedings.

Florida law on intestate succession provides that various family members receive a share of the decedent's estate: 

• If there are no surviving descendants of the decedent, then the spouse receives the entire intestate estate.

• If there are surviving descendants of the decedent, who are all also lineal descendants of the surviving spouse, then the surviving spouse receives the first $60,000 in property of the estate, plus one-half of the remaining balance of the estate subject to distribution. [HERE IS WHERE THE LAW IS CHANGING. EFFECTIVE OCTOBER 1, 2011, THIS SURVIVING SPOUSE NOW GETS 100% OF THE ESTATE.]

• If there are surviving descendants of the decedent, one or more of whom are not lineal descendants of the surviving spouse, then the surviving spouse receives one half of the estate and the lineal descendants receive the other half.

• There are additional provisions for distribution in situations beyond these, which distribute assets to other family members, but those are not relevant to the changes made in this bill. See ss. 732.103 and 732.104, F.S.

Effect of the Bill- Intestate Share of Spouse (Section 2)

The bill amends s. 732.102(2), F.S., to provide that the intestate share of a surviving spouse, where all of the decedent's descendants are also descendants of the surviving spouse, is the entire estate. For example, if a husband passes away and was survived by his wife and two children and the wife was the mother of both children and neither had any other children, the wife would now inherit the entire estate rather than the first $60,000 and half of the remaining estate.

The bill also creates s. 732.102(4), F.S., to provide that if the surviving spouse has descendants that are also descendants of the decedent, but the surviving spouse also has a descendant not related to the decedent, then the surviving spouse's intestate share is half of the estate. The lineal descendants of the decedent would inherit the remaining half of the estate under s. 732.103, F.S.

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Attorneys representing trustees, personal representatives, guardians and other fiduciaries operating in Florida have long had to deal with the "fiduciary exception" to the attorney-client privilege. The basic rule is that if the attorney-client communication had to do with normal administration issues the beneficiaries of the trust or estate were entitled to the information, and the trustee, PR, guardian, etc., couldn't claim the privilege. If the communication had to do with the fiduciary's own self interests, for example, if he or she is being sued for malfeasance, then the communications were privileged. I wrote here about the application of this rule in the context of a contested guardianship proceeding.

This ambiguous rule created uncertainty for fiduciaries and their attorneys, inhibiting the free flow of information between client and attorney, which is bad news for all concerned. To get a sense of the kind of trouble this ambiguity can lead to you'll want to read the US Supreme Court's recent discussion of the rule in U.S. v. Jicarilla Apache Nation, --- S.Ct. ----, 2011 WL 2297786 (U.S. Jun 13, 2011).

[1] New Attorney-Client Privilege Protection: F.S. 90.5021:

The Florida Bar's Probate & Trust Litigation Committee has been working on getting rid of the rule by statute since 2005. Well, those efforts have borne fruit [click here for legislative details]: under new F.S. 90.5021 the "fiduciary exception" to the attorney-client privilege is now history in Florida.

[2] New PR/Trustee Reporting Requirements: F.S. 733.212(2)(b) & F.S. 736.0813:

In order to make sure trust and estate beneficiaries don't get caught by surprise by this turn of events, the new legislation also creates new reporting requirements for ALL trustees and personal representatives. The new legislation amends F.S. 733.212(2)(b), to provide that a notice be included on the notice of administration regarding the fiduciary lawyer-client relationship, and F.S. 736.0813, to require the trustee of a trust to include a notice regarding the fiduciary lawyer-client relationship in various statutory mandated notices to the beneficiaries of the trust.

Because the legislation just passed, the new statutes have yet to be published online. For now, if you want to see the text of the new statutes you’ll have to read Bill CS/HB 325.

Here's how the new attorney-client privilege legislation is explained in Florida House of Representative's Staff Analysis of CS/HB 325:

Lawyer-Client Privilege

Section 90.502(1)(c), F.S., provides that a communication between lawyer and client is confidential if it is not intended to be disclosed to a third person. Section 90.502(2), F.S., provides that a client has a privilege to refuse or prevent another party from disclosing those communications.

There has been some issue as to whether the attorney-client privilege applies to a trustee or guardian who employs an attorney in connection with his or her duties as trustee or guardian. The Florida Second District Court of Appeal has addressed both situations.

In Jacob v. Barton, the trustee was being sued by the beneficiary. The issue before the court was whether the attorney client privilege applied to the trustee or the beneficiary. The court ruled that the privilege applied if the work being done was on behalf and for the benefit of the trustee, but if the ultimate benefit was for the beneficiary, the privilege would not apply since the beneficiary was the "real client." The court in Tripp v. Salkovitz, furthered this reasoning to a guardian. The guardian employed an attorney to assist in the duties of administrating the guardianship. The guardian was later sued for mismanagement by a beneficiary after the ward's death. The court ruled that the privilege applies only if the attorney was representing the interests of the guardian and not the ward. In both cases, the court mandated that the lower court conduct an in camera review of the records in question and determine which, if any, fell under the attorney-client privilege.

Effect of the Bill (Section 1, Section 8, Section 11)

The bill creates s. 90.5021, F.S., which provides that, for purposes of this section, a client acts a fiduciary when serving as a personal representative, a trustee, an administrator ad litem, a curator, a guardian or guardian ad litem, a conservator, or an attorney-in-fact. The bill also provides that a communication between a client, acting as a fiduciary, and the client's lawyer is privileged and protected pursuant to s. 90.502, F.S., and that nothing in this section affects the crime-fraud exception to the lawyer-client privilege set forth in s. 90.502(4)(a), F.S.

The bill also amends s. 733.212(2)(b), F.S., to provide that a notice be included on the notice of administration regarding the fiduciary lawyer-client relationship.

The bill amends s. 736.0813, F.S., to require the trustee of a trust to include a notice regarding the fiduciary lawyer-client relationship in various statutory mandated notices to the beneficiaries of the trust.

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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.

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Section 731.110 of Florida's Probate Code allows any person who is apprehensive that an estate will be administered or that a will may be admitted to probate without that person’s knowledge to file a caveat with the court. "Caveat" is a Latin term that means "warning or admonition". In the Florida probate context it refers to a mechanism that compels a local court to give you notice of any petition filed to administer a decedent's estate (and as I wrote here, it's reversible error if a probate judge ignores this obligation).

Especially if you're anticipating a possible will-challenge, caveats are critically important defensive tools: they allow you to block an opposing party from getting him or herself appointed personal representative ("PR") under an invalid will in advance of the litigation. The side that gets appoint PR has significant advantages in any probate case, and once a PR's appointed, the court can't just boot him out [see here, here, here].

Legislative fix:

Probate lawyers often try to file pre-death caveats, but some courts refuse to accept the filings. Neither the Florida Probate Rules nor the Florida Probate Code specifically prohibits the filing of a caveat if the person is not yet deceased; however, both the Code and the rules reference the content of a caveat in relation to a “decedent” and his or her “estate.”

Effective this year, F.S. 731.110 was amended to fix this problem and also generally improve the way caveats are administered. Here's how the legislative fix is summarized in this Legislative White Paper:

EFFECT OF PROPOSED CHANGE GENERALLY:

The proposed change would permit the filing of a pre-death caveat by an interested person. So as to limit the burden placed upon the Clerk of Court to monitor pre-death caveats, the proposed change would provide that such caveats shall expire two (2) years after filing. The amendment would also exclude the filing of pre-death caveats by creditors of the decedent as the committee did not feel the appointment of a personal representative or the admittance of a potentially invalid will substantially affected the rights of creditors in an estate. The right of a creditor to file a post death caveat is not affected by this amendment. Finally, the amendment would also eliminate the inconsistencies between F.S. §731.110 and Fla. Prob. R. 5.260, bringing the statute in line with the procedural requirements of the rule.

ANALYSIS:

One of the primary purposes of F. S. §731.110 is to permit an interested personto require notice be served upon them and that they be permitted an opportunity to object to a petition for administration before a personal representative is appointed or the decedent's purported last will and testament is admitted to probate. If the interested person is denied information regarding the death of the decedent, the purpose of the statute is defeated if the interested person is not permitted to file a caveat until after the death of the decedent. The clarification that pre-death caveats are permitted to be filed by interested persons assures that wrongdoers may not isolate individuals from their family and then obtain the appointment as personal representative or have a potentially invalid will admitted to probate without the interested person having any ability to require prior notice. The amendment also resolves the present inconsistency between the circuits in the interpretation of the present statute by the clerks of court regarding the acceptance of pre-death caveats. Finally, the amendment will limit the impact on the clerks of court by providing that the caveat will expire two years after filing. It would be the responsibility of the caveator to docket the pre-death caveat for re-filing or renewal at the termination of the two year period. The amendment also eliminates the inconsistency in procedural aspects between the statute and relevant rule and brings the statute in line with the rule.

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In un-contested probate proceedings, there are all sorts of issues you can resolve via affidavits without incurring the costs and delays inherent to hauling in live witnesses for an evidentiary hearing. By contrast, the minute probate proceedings morph into litigation the rules of evidence apply in full force. Which means you can't get away with using affidavits unless there's some sort of applicable hearsay exception. For example, the 5th DCA recently made the point here that affidavits won't cut it to prove a "lost" will. You need live witnesses for that kind of case.

In a will contest the estate has the initial burden of proving the formal execution and attestation of the will. Once the estate’s done that, the burden of proof then shifts over to the contestant. But what do you do if the will at issue was executed years (perhaps decades) earlier and you simply can’t track down the witnesses? In the past it was an open question as to whether you could use an affidavit to establish prima facie the formal execution and attestation of the will. Here's how this Legislative White Paper explained the problem:

In proceedings contesting the validity of a will, Florida Statutes § 733.107 provides that "the burden shall be upon the proponent of the will to establish prima facie its formal execution and attestation." Occasionally, at the time of testator's death, witnesses to the execution and attestation of a will are dead or otherwise unavailable (i.e. they cannot be located, are incapacitated, or perhaps have no recollection of the signing ceremony). Because the rules of evidence are applicable to probate proceedings, a self proving affidavit or oath of an attesting witness taken outside of the probate proceedings could be excluded as hearsay making it difficult or impossible for the proponent of the will to meet the burden of presenting prima facie proof of due execution and attestation in a will contest, particularly for wills that were executed many years or even decades ago. Should the present unavailability of the attesting witness, who has previously given a sworn statement regarding due execution and attestation, thwart the testator's constitutional right to dispose of his property by will as recognized by the Florida Supreme Court in Shriners Hospital For Crippled Children v. Zrillic, 563 So.2d 64 (Fla. 1990). The proposed legislation amends Florida Statute §733.l07 to permit self-proving affidavits and oaths of attesting witnesses executed in compliance with the Florida Probate Code to be admitted into evidence to establish the prima facie evidence needed to meet the initial burden of proving formal execution and attestation in contested probate proceedings.

Fear no more, the hearsay problem's been fixed statutorily in the following new sentence to Florida Statutes § 733.107:

A self-proving affidavit executed in accordance with s. 732.503 or an oath of an attesting witness executed as required in s. 733.201(2) is admissible and establishes prima facie the formal execution and attestation of the will.

"But wait, there's more!"

Palm Beach County board certified trusts and estates attorney Pete Matwiczyk responded to this blog post with an insightful warning: the new legislation's a good start, but not a complete fix. To understand why you need to read Mr. Matwiczyk’s comments. With his permission, I’ve quoted them below.

This legislation puts a patch on the problem, but not a complete fix. I brought the issue to the attention of Lee McElroy and the probate litigation committee of RPPTL. Lee was the prime mover and (I believe) the draftsperson of the white paper. After the legislative patch, only wills with self proving affidavits, or with living witnesses who are available to give an affidavit can be saved. Be very careful about the wills in your will vault, especially if they were drafted by the long retired and deceased partner who drafted wills before the adoption of the Florida Probate Code, in 1974, which allowed for and popularized the use of self proving affidavits.

Consider a challenge that is otherwise completely without merit, but that succeeds only because the proponent cannot meet the strict evidentiary requirements to establish due execution. The legislation falls short. In that case, even the new 733.107 does not save the document after the burden shifts to the proponent.

Section 733.107 is derived, in part, from the UPC. States other than Florida have developed or adopted solutions so that wills that otherwise qualify as valid wills under the statute of wills, are not rendered invalid just because a challenge is filed and there are no witnesses to overcome the hearsay rule. For example, not all states have adopted an absolute burden shift approach once a contest is filed. The burden shift need not be absolute, but could be the subject of a proffer type proceeding, just like was enacted as part of 736.0802 (10) prohibiting payment of trustee attorney fees.

Another possible Florida specific remedy would be an amendment to the evidence code, for a limited exception (of some type) but reaching beyond the probate code, into the evidence code. According to what I heard, the evidence code was a more ambitious undertaking that would have apparently taken too long with an unpredictable outcome.

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Back in 2007 I wrote here about a provocative Florida Bar Journal article [click here] by renowned trusts and estates attorney Jeffrey A. Baskies sounding the alarm on the unfair economic burden borne by widows and widowers receiving life estates in homestead property and the inability of these surviving spouses to use partition actions to remedy their situations. Here's how Mr. Baskies summed up the problem:

Florida’s homestead laws have created a new trap for surviving spouses — the life estate that was designed to protect them has instead trapped them in homes they no longer want and can no longer afford.

This situation has become acute as a result of the convergence of several developments over the past five years. There has been a tremendous increase in property taxes statewide. While many homesteads have benefitted from the “save our homes” cap on ad valorem property taxes, for those that were purchased in the last few years, the base for property taxes may already be inflated. Homeowners’ insurance costs for everyone have increased as much as several hundred percent. For many surviving spouses, there have been special assessments for condo and homeowners’ associations for hurricane damage. For those in single family homes, many have had to pay for significant repairs not covered by insurance. Floridians benefitting from the “save our homes” cap on their property taxes have a generalized fear of moving, because to do so could result in significantly increased taxes as a result of purchasing a new home (even a less expensive one). Finally, as a result of increased property values, many surviving spouses who want to move fear they cannot find a reasonable alternative place to live.

Combined, these factors have created a difficult situation for many Florida residents. But, when coupled with an inability to alter or sell their life interests, many surviving spouses are trapped in their homesteads. If they no longer desire to live in their homes or they can no longer afford to do so, what can they do and where can they go?

Legislators responded to Mr. Baskies' call to action by amending F.S. 732.401 to allow a surviving spouse to opt out of a life estate and instead take a 50% tenancy-in-common interest in the homestead property. As explained in this Legislative White Paper, taking a 50% tenancy-in-common interest in lieu of a life estate can offer significant benefits to surviving spouses. If the surviving spouse is incapacitated, F.S. 744.444(9) has been amended to empower her guardian to make the election for her.

A key provision of this new legislation is the applicable deadline: the election must be made within 6 months after the decedent’s death and during the surviving spouse’s lifetime. Bottom line, the new statute and the Legislative White Paper explaining how it works should be required reading for all Florida probate lawyers.

But What about Post-death Disclaimers of Homestead Rights?

Another way surviving spouses have always been able to opt out of homestead property rights is via a post-death disclaimer. However, there's been conflicting trial-court rulings on exactly what happens as a matter of law when a surviving spouses disclaims his or her homestead-property rights. Here's how the conflcting authority was summarized in this Legislative White Paper:

In reviewing the effect of a spouse's disclaimer of his or her homestead interest, circuit courts have reached conflicting results. See In Re: Estate of Joseph T Ryerson, Jr., No. 93-307 (Fla. 15th Cir. Ct., June 17, 1993), affd, per curiam, No. 93-2074 (Fla. 4th DCA July 20,1994) and In re: Estate of Frances N Janien, 12 Fla. 1. Weekly Supp. 221 (February 28, 2005), Case No. 502004CP000973 (Fla. 15th Cir. Ct., (December 6, 2004), in which the courts held that where homestead was invalidly devised, a post death disclaimer of the surviving spouse's life estate in homestead did not divest the decedent's descendants of their vested remainder interests. At least one other circuit court has reached an opposite result under similar facts and held that the spouse's disclaimer would divest the decedent's descendants of their interests and give effect to the otherwise invalid devise. See In Re: Estate of Harry Sudakoff, No. 91-87 (Fla. 12th Cir. Ct. March 25, 1994), affd, per curiam, No. 94-02102 (Fla. 2d DCA, March 10, 1995). 

New legislation addresses this conflicting authority by codifying the Ryerson approach in new subsection (4) of F.S. 732.401 and new subsection (3) of F.S. 732.4015.

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Congress shocked everyone by letting the estate tax lapse in 2010. What I've found most interesting about this state of affairs are the unintended consequences:

First, no estate tax in 2010 is great news for the super rich, like George Steinbrenner's heirs, but bad news for the moderately wealthy, people who have assets between $1.3 million and $3.5 million. For these families dying in 2010 likely means higher taxes. This is a federal tax issue only Congress can address.

Second, no estate tax in 2010 could lead to the unintended disinheritance of widows and widowers, which could in turn lead to expensive legal fights among family members. Potential inheritance litigation caused by Congressional inaction is a state-law issue that state legislators can step in and fix. And that's exactly what they've been doing.

Increased probate litigation threat: Florida's statutory fix: 733.1051 & 736.04114

As reported by Forbes in States Race To Clean Up Congress' Estate Tax Mess, state legislators have been busy passing legislation aimed at avoiding the unintended disinheritance of widows and widowers caused by the unforeseen lapse of the federal estate tax in 2010. Florida has now joined the club with passage of two new pieces of legislation: 733.1051 (governing wills), and 736.04114 (governing trusts). This White Paper does a good job of explaining the reasoning behind the new legislation.

Most states enacted simple one-size-fits-all statutes. The upside to this approach is that it's less expensive to implement. Here's how these statutes were described in the Forbes piece:

Most of the new emergency laws would set a default rule for interpreting wills and trusts while the federal estate tax is repealed, if the document itself doesn't spell one out. The rule: Any tax terms or formulas should be read as if the estate tax law of 2009 were still in effect. The proposed emergency laws also typically include a backstop provision allowing any potential beneficiary or executor to go to court, within a year from the date of death, if he or she doesn't think that this default is what the deceased really wanted.

The downside to the one-size-fits-all approach is that saving court costs is given priority over ensuring the testator's intent is followed. Maybe the testator knew exactly what would happen if he died in 2010 and intended that outcome? A one-size-fits all statute could essentially strip this testator of his testamentary freedom.

Florida didn't adopt a one-size-fits-all statute, opting instead for a more nuanced approach aimed at determining the testator's probable intent from all of the facts and circumstances. If your primary goal is effectuating testator intent, Florida's approach makes sense. But it comes at a cost: Florida's legislation makes it impossible to avoid the time and expense of a judicial construction proceeding. Here's how the Forbes piece described Florida's approach:

One renegade state--Florida--is proposing to send folks with ambiguous documents to court from the start to determine the deceased's intent, instead of assuming the deceased wanted to follow the estate tax law of 2009. The court could consider outside evidence, such as the estate attorney's testimony. The proposed law would allow estate assets to be used to pay for this proceeding and says that heirs might have to wait for distributions pending the outcome of the court's decision.

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Payment of trustee attorneys' fees when defending breach-of-duty claims has been a hot topic over the last few years due to appellate decisions out of the 3rd and 4th DCA's that were decidedly non-trustee friendly [click here, here].  The Florida Bankers Association swung into action, proposing new legislation that would make it more difficult to cut off a trustee's access to trust funds when defending against a breach-of-duty claim. The end product is new F.S. 736.0802(10), which became effective July 1, 2008.

Access to trust funds to pay for litigation - vs. the substance of the claim - often determines the outcome of the case. If you're suing a trustee or defending a trustee, you need to be aware of this new legislation. Trustees also need to be aware of the new affirmative notice obligation created by this change in the law.

736.0802 Duty of loyalty.--

(10) Payment of costs or attorney's fees incurred in any proceeding from the assets of the trust may be made by the trustee without the approval of any person and without court authorization, unless the court orders otherwise as provided in paragraph (b).

(a) If a claim or defense based upon a breach of trust is made against a trustee in a proceeding, the trustee shall provide written notice to each qualified beneficiary of the trust whose share of the trust may be affected by the payment of attorney's fees and costs of the intention to pay costs or attorney's fees incurred in the proceeding from the trust prior to making payment. The written notice shall be delivered by sending a copy by any commercial delivery service requiring a signed receipt, by any form of mail requiring a signed receipt, or as provided in the Florida Rules of Civil Procedure for service of process. The written notice shall inform each qualified beneficiary of the trust whose share of the trust may be affected by the payment of attorney's fees and costs of the right to apply to the court for an order prohibiting the trustee from paying attorney's fees or costs from trust assets. If a trustee is served with a motion for an order prohibiting the trustee from paying attorney's fees or costs in the proceeding and the trustee pays attorney's fees or costs before an order is entered on the motion, the trustee and the trustee's attorneys who have been paid attorney's fees or costs from trust assets to defend against the claim or defense are subject to the remedies in paragraphs (b) and (c).

(b) If a claim or defense based upon breach of trust is made against a trustee in a proceeding, a party must obtain a court order to prohibit the trustee from paying costs or attorney's fees from trust assets. To obtain an order prohibiting payment of costs or attorney's fees from trust assets, a party must make a reasonable showing by evidence in the record or by proffering evidence that provides a reasonable basis for a court to conclude that there has been a breach of trust. The trustee may proffer evidence to rebut the evidence submitted by a party. The court in its discretion may defer ruling on the motion, pending discovery to be taken by the parties. If the court finds that there is a reasonable basis to conclude that there has been a breach of trust, unless the court finds good cause, the court shall enter an order prohibiting the payment of further attorney's fees and costs from the assets of the trust and shall order attorney's fees or costs previously paid from assets of the trust to be refunded. An order entered under this paragraph shall not limit a trustee's right to seek an order permitting the payment of some or all of the attorney's fees or costs incurred in the proceeding from trust assets, including any fees required to be refunded, after the claim or defense is finally determined by the court. If a claim or defense based upon a breach of trust is withdrawn, dismissed, or resolved without a determination by the court that the trustee committed a breach of trust after the entry of an order prohibiting payment of attorney's fees and costs pursuant to this paragraph, the trustee may pay costs or attorney's fees incurred in the proceeding from the assets of the trust without further court authorization.

(c) If the court orders a refund under paragraph (b), the court may enter such sanctions as are appropriate if a refund is not made as directed by the court, including, but not limited to, striking defenses or pleadings filed by the trustee. Nothing in this subsection limits other remedies and sanctions the court may employ for the failure to refund timely.

(d) Nothing in this subsection limits the power of the court to review fees and costs or the right of any interested persons to challenge fees and costs after payment, after an accounting, or after conclusion of the litigation.

(e) Notice under paragraph (a) is not required if the action or defense is later withdrawn or dismissed by the party that is alleging a breach of trust or resolved without a determination by the court that the trustee has committed a breach of trust.

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Effective July 1, 2007, Florida adopted legislation expressly authorizing mandatory arbitration clauses in wills and trusts.  The new statute provides as follows:

731.401 Arbitration of disputes.--

(1) A provision in a will or trust requiring the arbitration of disputes, other than disputes of the validity of all or a part of a will or trust, between or among the beneficiaries and a fiduciary under the will or trust, or any combination of such persons or entities, is enforceable.

(2) Unless otherwise specified in the will or trust, a will or trust provision requiring arbitration shall be presumed to require binding arbitration under s. 44.104.

Two of the Florida attorneys instrumental in passage of the new legislation, Bruce M. Stone and Robert W. Goldman, also co-authored a 2005 ACTEC article discussing mandatory arbitration clauses in wills and trusts entitled Resolving Disputes with Ease and Grace.  The ACTEC article does a good job of summarizing the pros and cons of arbitration, concluding that arbitration is likely "ideal" in the following circumstances:

1. Fee disputes, including fiduciary and legalfees
2. Prudent investing disputes
3. Document construction
4. Principal and income disputes, includingadjustment powers
5. Trust terminations or severances
6. Accounting disputes
7. Declaratory relief in general

This list of "ideal" abritration senarios implicitly recognizes that arbitration is NOT the best solution for resolving ALL disputes, a view I share and have written about [click here].

Sample arbitation clauses:

Sample clauses are often the best way to understand in concrete terms how a general concept may be applied in the real world.  Note that all of the sample clauses do two things:

• require arbitration; and
• define the procedural rules that would govern the arbitation proceeding (for example, who appoints the arbitrator, how many arbitrators are required, what are the discovery rules, etc). 

Under the new Florida arbitration statute, if the settlor does not identify  the procdural rules he or she would like to apply the default rules are provided by F.S. 44.104.

The AAA's website [click here] provides specific procedural rules for arbitrating such wills-and-trusts claims and the following sample arbitration clause:

AAA Standard Arbitration Clause:

In order to save the cost of court proceedings and promote the prompt and final resolution of any dispute regarding the interpretation of my will (or my trust) or the administration of my estate or any trust under my will (or my trust), I direct that any such dispute shall be settled by arbitration administered by the American Arbitration Association under its Arbitration Rules for Wills and Trusts then in effect. Nevertheless the following matters shall not be arbitrable questions regarding my competency, attempts to remove a fiduciary, or questions concerning the amount of bond of a fiduciary. In addition, arbitration may be waived by all sui juris parties in interest.

The arbitrator(s) shall be a practicing lawyer licensed to practice law in the state whose laws govern my will (or my trust) and whose practice has been devoted primarily to wills and trusts for at least ten years. The arbitrator(s) shall apply the substantive law (and the law of remedies, if applicable) of the state whose laws govern my will (or my trust). The arbitrator's decision shall not be appealable to any court, but shall be final and binding on any and all persons who have or may have an interest in my estate or any trust under my will (or my trust), including unborn or incapacitated persons, such as minors or incompetents. Judgment on the arbitrator's award may be entered in any court having jurisdiction thereof.

The authors of Resolving Disputes with Ease and Grace also provided four sample arbitration clauses, including the following two:

Generic provision—Short version:

It is my hope and expectation that there will be no dispute in relation to this Trust [my estate]. Nevertheless, if there is any dispute or controversy among any of the Trustee [personal representative] and the beneficiaries involving any aspect of this Trust [my estate] or its administration, the parties to the dispute may agree on the manner of resolution. If there is no such agreement, the disputing parties shall submit the matter to mediation, and, if unresolved by mediation, to binding arbitration. If a party to the dispute fails to participate in good faith in the mediation or arbitration, the arbitrator or the court having jurisdiction over this trust [my estate] is authorized to award costs and attorney’s fees from that party’s beneficial share or from other amounts payable to that party (including amounts payable to that party as compensation for services as a fiduciary).

Generic provision—Long version with forfeiture clause:

[Comment: As with other language in these sample clauses, the forfeiture provision in paragraph (c) below has not been tested in the courts. Assuming that a mandatory arbitration provision in a will or trust is otherwise enforceable in a given jurisdiction, it is believed that a forfeiture provision is likely to be enforceable also, including in jurisdictions that do not recognize the validity of no-contest provisions.]

(a) It is my hope and expectation that there will be no dispute in relation to this Trust [my estate]. Nevertheless, if there is any dispute or controversy among any of the Trustee [personal representative] and the beneficiaries involving any aspect of this Trust [my estate] or its administration, the parties to the dispute may agree on the manner of resolution. If there is no such agreement, the disputing parties shall submit the matter to mediation, and, if unresolved by mediation, to binding arbitration. If the parties are unable to agree on the selection of a mediator or arbitrator, the court having jurisdiction over this Trust [my estate] shall select the mediator or arbitrator. [The mediator or arbitrator shall have the following qualifications: ACTEC fellow; attorney with at least 10 years’ experience in trusts and estates; etc.]

(b) In the case of arbitration, the arbitrator shall establish the procedure for arbitrating the matter or matters and recognizing the goals of privacy, efficiency, less formality than in a judicial tribunal, and less expense than might be incurred in a judicial forum, while reaching a fair result. The decision of the arbitrator shall be final and binding on the Trustee [Executor], all beneficiaries, and their heirs, successors, and assigns. If the arbitrator determines that a guardian ad litem is needed to represent the interests of unborn, unascertained, or incapacitated interested persons, a guardian ad litem shall be appointed by the court having jurisdiction over this Trust [my estate].

(c) If a disputing beneficiary fails to participate in good faith in the agreed-on procedure for resolution, or in the mediation or arbitration if there is no such agreement, the disputing beneficiary’s interest in this Trust [my estate] shall be forfeited and the beneficiary, if an individual, shall be treated as having predeceased the Settlor [me] [with no surviving issue]. If for any reason it is determined by the court having jurisdiction over this Trust [my estate] that the foregoing provision for forfeiture is not effective, the arbitrator or the court having jurisdiction over this trust [my estate] is authorized to award costs and attorney’s fees from the beneficiary’s share or from other amounts payable to the beneficiary.

(d) The provisions of subparagraph (c) above shall not apply to the beneficial interests of:

(1) the Settlor’s [my] spouse, to the extent that his [her] interest would otherwise qualify for an estate or gift tax marital deduction;

(2) any beneficiary, to the extent that the beneficial interest would otherwise qualify for an income, gift, or estate tax deduction for charitable purposes unless and until all such charitable beneficial interests have expired.

If, however, the Settlor’s [my] spouse or any such beneficiary who is a disputing beneficiary to whom the above forfeiture provisions do not apply nevertheless fails to participate in good faith in the agreed-on procedure for resolution or in the mediation or arbitration, the arbitrator or the court having jurisdiction over this trust [my estate] is authorized to award costs and attorney’s fees from his, her, or its beneficial share.

(e) The acceptance of the Trust by any trustee or co-trustee constitutes the trustee’s or co-trustee’s agreement to comply with the above provisions. If a trustee or co-trustee is a party to a dispute and fails to participate in good faith in the agreed-on procedure for resolution or in the mediation or arbitration, it shall be deemed that the trustee or co-trustee has breached its fiduciary duties and has resigned, and the court having jurisdiction over this Trust is authorized to surcharge the trustee or co-trustee for costs, attorney’s fees, and any other sums deemed appropriate. [The personal representative’s consent to act constitutes his, her, or its agreement to comply with the above provisions. If a personal representative is a party to a dispute and fails to participate in good faith in the agreed-on procedure for resolution or in the mediation or arbitration, it shall be deemed that the personal representative has breached his, her, or its fiduciary duties and has resigned, and the court having jurisdiction over my estate is authorized to surcharge the personal representative for costs, attorney’s fees, and any other sums deemed appropriate.]

(f) If the validity of these provisions requiring arbitration is contested, the court having jurisdiction over this Trust [my estate] shall resolve that issue prior to resolution of the balance of the dispute. If the arbitration provisions are determined to be valid, the balance of the disputed issues shall be resolved as provided in this Article __.

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In re Amendments to the Florida Evidence Code, --- So.2d ----, 2007 WL 2002629 (Fla. Jul 12, 2007)

Florida's version of the "Dead Man's Statute" has been a trap for unwary litigants for over a century.  Widely criticized by commentators, practitioners, and even courts, in 2005 the rule was finally abolished when the Florida legislature repealed section 90.602, Florida Statutes.  For those interested in learning more about this evidentiary rule and why reform was needed, the 2005 legislative staff analysis is an excellent starting point.

In lieu of the Dead Man's Statute, the Florida legislature created section 90.804(2)(e), Florida Statutes (2005), which added an exception to the hearsay rule to permit relevant communications of deceased or incompetent persons to be heard by the trier of fact.  Due to a quirk of Florida's constitution, the Florida Supreme Court is required to approve this new evidentiary statute to the extent the new statute is deemed "procedural" in nature.  That's what the linked-to opinion is meant to do.

Understanding this rule of evidence is fundamental in the probate litigation context, which is why I've reproduced it below in its entirety:

90.804 Hearsay exceptions; declarant unavailable

(1) [No Change]

(2) HEARSAY EXCEPTIONS.-The following are not excluded under s. 90.802, provided that the declarant is unavailable as a witness:

(a)-(d) [No Change]

(e) Statement by deceased or ill declarant similar to one previously admitted.-In an action or proceeding brought against the personal representative, heir at law, assignee, legatee, devisee, or survivor of a deceased person, or against a trustee of a trust created by a deceased person, or against the assignee, committee, or guardian of a mentally incompetent person, when a declarant is unavailable as provided in paragraph (1)(d), a written or oral statement made regarding the same subject matter as another statement made by the declarant that has previously been offered by an adverse party and admitted in evidence.

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In In re Amendments To Florida Probate Rules, --- So.2d ----, 2007 WL 1932256 (Fla. Jul 05, 2007), the Florida Supreme Court adopted several amendments to our probate rules, all of which were proposed by the Florida Probate Rules Committee.  The following is the explanatory preamble to the rule changes, all of which will become effective on January 1, 2008:

BACKGROUND

On January 29, 2007, the Florida Probate Rules Committee (Committee) filed a regular-cycle report recommending amendments to several of the Florida Probate Rules, as well as the adoption of two new rules. The Committee proposes amendments to existing rules 5.040 (Notice); 5.041 (Service of Pleadings and Papers); 5.200 (Petition for Administration); 5.210 (Probate of Wills Without Administration); 5.241 (Notice to Creditors); 5.490 (Form and Manner of Presenting Claims); 5.496 (Form and Manner of Objecting to Claim); 5.498 (Personal Representative's Proof of Claim); 5.499 (Form and Manner of Objecting to Personal Representative's Proof of Claim); 5.530 (Summary Administration); 5.650 (Resignation or Disqualification of Guardian; Appointment of Successor); 5.670 (Termination of Guardianship on Change of Domicile of Resident Ward); 5.697 (Magistrate's Review of Guardianship Accountings and Plans); and 5.710 (Reports of Public Guardian). It further proposes the adoption of two new rules: rules 5.095 (General and Special Magistrates) and 5.645 (Management of Property of Nonresident Ward by Foreign Guardian).

DISCUSSION

After the Committee filed its report with the Court, the Court published the proposed amendments in The Florida Bar News. Sean O. Cadigan and Keela Roberts Samis, both members of The Florida Bar, filed a joint comment, the only one filed. Cadigan and Samis, both of whom have served as magistrates in probate cases, suggested the addition of a sentence to the end of subdivision (e) in rule 5.697 to read: “The magistrate shall be required to file a report only if a hearing is held pursuant to subdivision (d) of this rule or if specifically directed to do so by the court.” They believed the additional sentence would make it clear that a magistrate would not need to prepare and file a magistrate's report or adhere to the exception period when the magistrate assists the court in the review of guardianship reports, but does not conduct a hearing to review the report.

In its response to the comment, the Committee agreed that the addition of the sentence proposed by Cadigan and Samis would avoid a possible misinterpretation of the rules and asked the Court to incorporate the sentence proposed by Cadigan and Samis into its proposal.

CONCLUSION

Having taken the proposed amendments, the comment, and the Committee's response into consideration, we hereby adopt the amendments to the Florida Probate Rules as set forth in the appendix to this opinion, including the additional sentence at the end of subdivision (e) in rule 5.697, suggested by Cadigan and Samis. New language is indicated by underscoring; deletions are indicated by struck-through type. The committee notes are offered for explanation only and are not adopted as an official part of the rules. The amendments will become effective on January 1, 2008, at 12:01 a.m.

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Florida's new trust code (FTC) becomes effective on July 1, 2007.

As Florida practitioners (and courts) work their way through this comprehensive statute, there are a few resources all should keep handy until we start getting some appellate opinions construing the new code:

• Legislative Staff Analysis of FTC. Prof. Powell's Scrivener's Summary of the FTC was basically incorporated verbatim into the Legislative Staff Analysis for the FTC. The value of Prof. Powell's explanation of all of the important subsections of the FTC and the underlying policy rationales for material changes to existing Florida trust law cannot be overstated. This is the definitive resource for understanding the FTC.
• Final Committee Draft of FTC.  Contains cross references to all corresponding Uniform Trust Code provisions.  UTC commentary should be helpful in the absence of Florida appellate opinions.
• Prof. Powell's two Florida Bar Journal Articles explaining the new FTC (see here and here).
• UTC Reporter's Summary of FTC.

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In re Amendments to Florida Probate Rules, --- So.2d ----, 2007 WL 268753 (Fla. Feb 01, 2007)

To those of us who live in this world, new probate rules are yet another piece of the puzzle to keep up with.  So here you are.  Below is the Florida Supreme Court's preamble and order making the changes effective immediately.

PER CURIAM.
This matter is before the Court for consideration of proposed amendments to the Florida Probate Rules. We have jurisdiction. See art. V, § 2(a), Fla. Const.

On October 30, 2006, the Florida Probate Rules Committee (Committee) filed a fast track report recommending various amendments to the Florida Probate Rules in response to 2006 legislation. The Committee has proposed amendments to a number of rules, mostly in response to statutory changes made by chapters 2006-77 and 2006-178, Laws of Florida. Chapter 2006-77 became effective June 6, 2006, and chapter 206-178 became effective July 1, 2006. In addition, the Committee has recommended amendments to several rules in order to reflect the recent renumbering of the Florida Rules of Judicial Administration. See In re Amend. to Fla. Rules of Jud. Admin., 939 So.2d 966 (Fla.2006). All proposed amendments were approved by unanimous vote of the Committee and the Executive Committee of The Florida Bar Board of Governors. The Committee published the proposals in the November 1, 2006, edition of The Florida Bar News, with a request that comments be filed directly with the Court. No comments have been filed.

Accordingly, upon consideration of the Committee's report and the relevant legislation, we hereby amend the Florida Probate Rules as reflected in the appendix to this opinion. New language is indicated by underscoring; deletions are indicated by struck-through type. The committee notes are offered for explanation only and are not adopted as an official part of the rules. The amendments shall become effective immediately.

It is so ordered.

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The Florida Probate Rules are amended regularly in two-year cycles. The Florida Supreme Court just published these amendments to the Florida Probate Rules as part of that cycle, effective January 1, 2006.

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Effective July 1, 2005, Florida enacted the Florida Uniform Disclaimer of Property Interests Act. Although the Florida statute is modeled on the Uniform Act, it is reported to contain substantial enhancements as well. The Wills, Trusts & Estate Prof Blog reported here the following comment by one of the statute's lead authors:

The variations are so significant that Adam Hirsch, the William and Catherine VanDercreek Professor of Law at Florida State University, says that "it may fairly be described as an alternative model, potentially worthy of contemplation by other state drafting committees."

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For the benefit of the rest of Florida, here is a copy of the 2005 legislative summary presented by Michael Dribin of Broad and Cassel to the Probate and Guardianship Court Committee of the Dade County Bar Association. Enjoy!

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Florida's Constitutional Homestead Protection

Article X, Section 4, Florida Constitution

Florida's "Probate Code" is contained in Chapters 731 -- 735 of the Florida Statues.

Ch. 731 General Provisions
Ch. 732 Intestate Succession of Wills
Ch. 733 Administration of Estates
Ch. 734 Foreign Personal Representatives; Ancillary Administration
Ch. 735 Small Estates

Other relevant statutes include the following:

Ch. 198 Estate Taxes
Ch. 738 The Florida Uniform Principal and Income Act
Ch. 744 Guardianship
Ch. 747 Conservatorship
Ch. 765 Health Care Advance Directives (e.g., Living Wills)

Probate and Guardianship matters in Florida are administered pursuant to the following rules of procedure:

Probate Rules (2005 Edition)

October 1, 2004 Amendments to Probate Rules

2005 Biennial Report of the Florida Probate Rules Committee

Cover Letter
Report
Appendix A
Appendix B
Appendix C

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