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

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).

These new statutes aren't available as yet online, but you can see their complete text by scrolling through this bill (which creates 733.1051) and scrolling through this bill (which creates 736.04114). This White Paper also explains 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of the new emergency laws would set a default rule for interpreting wills and trusts while the federal estate tax is repealed, if the document itself doesn't spell one out.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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If you're an estate planner, it's not unusual to get asked if the fees being proposed by trust company "X" are reasonable. We usually have a sense of what the going rate is in our market, but it's mostly a "guesstimate." So I was glad to see an excellent piece of market research published on The Trust Advisor Blog. In a blog post entitled Who's Charging What for Trust Services? trust advisor Jerry Cooper provides a comprehensive chart of the fee estimates he obtained from numerous well-established trust companies and an easy-to-understand explanation of how the various fees stack up. Good stuff to keep handy for the next time you're asked about corporate trustee fees.

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This is a bit off topic, but I recently came across a Goldman Sachs research report entitled Take Stock of America that deserves wider attention than your standard market analysis piece. The report is all about why the smart money's riding on the U.S. Over the next 20 years China will (hopefully) continue to grow and prosper, but that growth won't come at our expense.

Warren Buffett's been beating this drum for years, first in a 2008 NYT's op ed piece, then in his very public 2009 deal to buy a U.S. railroad. “It’s an all-in wager on the economic future of the United States,” said Buffett. “I love these bets.”

What I love about the Goldman Sachs report is its focus on the hard facts underlying Buffett's sunny optimism. This isn't empty-headed jingoism. Consider the following excerpts from Take Stock of America.

[1] Economic Strength
At $14.3 trillion as of December 2009, the US accounts for 24.9% of world GDP. Its economy is 2.8 times larger than the next largest economy, Japan; 3 times larger than the third-largest economy, China; and 4.4 times larger than the fourth-largest economy, Germany. To put these numbers in perspective, the United States has a higher GDP than the next three largest economies combined. The only entity to come close to the US is Euroland, a union of 16 countries with a common currency and monetary policy. A reminder that Euroland includes countries that have their own significant economic challenges will quickly dispel any notion that it will challenge US’s economic preeminence anytime soon.

[2] Military Strength
While the gap between total GDP and GDP per capita of the US and that of other countries is quite significant, the gap in military power is even greater. As Josef Joffe has pointed out, “the United States plays in a league of its own.” Based on 2008 data from the Stockholm International Peace Research Institute, the US spends $616 billion or about 4.2% of its GDP annually on its military, accounting for close to half of the world’s total military spending. Even the sum total of the next 14 countries (including Australia as the 14th) does not add up to the US’s annual outlay.

[3] Prosperity
Let’s now turn to the softer factors that contribute to US’s preeminent status. Since its inception over 200 years ago, the US has had an extremely resilient and dynamic economy and a stable political system. It is an open society and an open economy with immigration as a core principle of its existence. Its technological achievements, in aggregate, outpace those of any other country. The question is how can one measure the factors that account for such resilience, dynamism and stability and use them to make comparisons between the US and other countries. The Legatum Prosperity Index attempts to capture some of these factors. This index is comprised of 79 different variables, which are distilled into nine different sub-indexes; each country’s score is an equal weight of the sub-indexes. The nine sub-indexes are economic fundamentals, entrepreneurship and innovation, democratic institutions, education, health, safety and security, governance, personal freedom, and social capital.

Among major countries, the US ranks number one. Overall, it is ranked ninth out of 104 countries after Finland, Switzerland, Sweden, Denmark, Norway, Australia, Canada and the Netherlands. The only country with a GDP of greater than $1 trillion in the top nine is Canada at $1.3 trillion. Japan, the world’s second largest economy, is ranked 16th. Brazil is ranked 41st, India 45th, Russia 69th and China 75th. 

[4] Taxes
[T]here is scope for a rising tax base. Federal tax revenues stand at the lowest level relative to GDP since 1950. A reversion to more typical postwar levels would equate to several percentage points of deficit reduction. Moreover, the total tax base of the US relative to GDP stands well below the level in any other developed country and the OECD average. Thus, there is capacity for the US to increase taxes without jeopardizing its comparative position in the global economy.

Lastly, it’s worth remembering that both personal and corporate tax rates are low by historical standards. While there is raging debate about the impact of such increases on prospective growth, three points bear mentioning. First, higher tax rates have not historically been an impediment to economic growth, as many of the faster-growing periods in American history occurred with tax rates much higher than today’s levels. Second, levels matter. If the federal marginal tax rate on the highest income bracket were to revert to its pre-Bush level of 39.5%, it would still stand below the 50% threshold that some experts consider highly detrimental to growth. Third, timing matters. The mistake of both the US as it was exiting the Great Depression and Japan early in their “Lost Decade” was raising tax rates during the nascent phases of economic recovery. Given the approaching mid-term elections, any broad tax hikes are unlikely to come until 2011, a point at which the economy should be on strong enough footing to absorb them. In short, while undoubtedly not welcome news for individual tax payers, the near certainty of tax hikes should benefit deficit levels going forward.

By the way, in my opinion these stat's are the byproduct of American exceptionalism, not its root cause. What has set us apart over our relatively short history is the ability to adapt to changing circumstances. This point was captured beautifully in a Alexis de Tocqueville quote the authors of Take Stock of America began their report with:

The greatness of America lies not in being more enlightened than any other nation, but rather in her ability to repair her faults.

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If you're like most trusts-and-estates lawyers, you don't work at a big firm. Which means you can't walk down the hallway and ask one of your partners for a good set of forms when someone wants to hire you to provide a legal opinion on some trust-related issue (as opposed to a tax opinion). Don't underestimate the value of a good set of forms. Good forms don't take the place of your experience and expertise, but they do provide an invaluable "checklist" of issues to think about and a road map for getting the job done "on time and under budget."

The Legal Opinion Standards Committee of the Florida Bar Business Law Section and the Legal Opinions Committee of the Real Property, Probate and Trust Law Section of The Florida Bar just published their Report on Standards for Third-party Legal Opinions of Florida Counsel [click here].  This report is the "gold standard" for Florida legal-opinions. Not only does it explain each and every element of a well-done opinion letter (highlighting pitfalls most of us would never imagine), it provides five sample opinion letters plus a sample "certificate to counsel."

Below is the report's due diligence checklist for trust-related legal opinions. In terms of making sure you don't get sued for malpractice, this is probably the single most important section of the report. You'll want to hold onto this for future reference.

Diligence Checklist - Trusts, including Florida Land Trusts

[1]  If the trustee is a corporation, partnership, or limited liability company, confirm that the trustee that is an entity is properly organized and has active status (or in good standing in the state of its incorporation) and, if it is a foreign entity required to obtain a certificate of authority to transact business in Florida, it has obtained such a certificate of authority from the Department.

[2]  If the deed or other instrument of conveyance is dated prior to July 3, 1992, and the trustee is a corporation, confirm that the corporation has trust powers. As of July 2, 1992, those portions of Section 660.41, Florida Statutes, which mandated that corporate trustees have trust powers were repealed. Thus, if the deed or other instrument of conveyance is dated after July 2, 1992, and the trustee is a corporation, it is unnecessary to confirm the existence of trust powers. See Fund Title Note 31.02.06 (2001). The existence of trust powers for state chartered institutions may be confirmed by obtaining a Certificate from the Department of Banking and Finance, and the existence of such powers for federally chartered institutions may be obtained from the Comptroller of the Currency, at the following respective addresses:

Director, Division of Banking
Department of Banking and Finance
The Capitol Building
Tallahassee, Florida 32399-0350

Comptroller of the Currency
Southeastern District
Peachtree-Cain Tower, Suite 2700
229 Peachtree Street, N.E.
Atlanta, Georgia 30303

[3]  In order to opine that the Client is the trustee of a Florida land trust that is in compliance with the provisions of Section 689.071, Florida Statutes, Opining Counsel should examine the deed or other instrument of conveyance naming the trustee as grantee or transferee for compliance with the requirements set forth in Section 689.071, Florida Statutes.

[4]  If the trust satisfies the requirements set forth in Section 689.071, Florida Statutes, secure a written certificate or affidavit signed by at least the trustee, and preferably also by all of the beneficiaries of the trust, confirming that no separate trust agreement or other agreement governing the trust relationship exists. If the trust satisfies the requirements set forth in Section 689.071, Florida Statutes, but Opining Counsel has knowledge that a trust agreement governing the trust relationship exists, Opining Counsel should secure a copy of the written trust agreement governing the trust and such trust agreement needs to be reviewed by Opining Counsel in order for Opining Counsel to render opinions with respect to the trust and, in particular, in order to determine who is designated as the trustee(s) of the trust.

[5]  If the trust does not satisfy the requirements set forth in Section 689.071, Florida Statutes, Opining Counsel should secure a copy of the written trust agreement governing the trust and such trust agreement needs to be reviewed by Opining Counsel in order for Opining Counsel to render opinions with respect to the trust and, in particular, in order to determine who is designated as the trustee(s) of the trust.

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As reported by Forbes in States Race To Clean Up Congress' Estate Tax Mess, several states - including Florida - aren't waiting around for Congress to get its act together on the estate tax front.

While Congress dilly dallies, the states are racing to come to the aid of families whose estate plans have been thrown into disarray by the Jan. 1 lapse of the federal estate tax. That lapse could, among other things, lead to the unintended disinheritance of spouses, which could in turn lead to expensive legal fights among family members and, ultimately, the impoverishment of some widows or widowers. It could also, ironically, force some families to pay extra state estate taxes.

Legislators in a handful of states, led by Virginia [click here], have already introduced legislation to try to head off such bad results. Virginia's House of Delegates passed its "emergency" bill unanimously Tuesday and the state's Senate is expected to take it up immediately [click here]. Similar bills are pending in Maryland, Nebraska, South Dakota, Tennessee and Washington. Other states, including Florida and New York, have somewhat different legislation pending.

By the way, Forbes has a very cool interactive map showing state-level estate tax laws for 2010 [click here].

Florida's Statutory Fix

At this year's Heckerling conference one of the giants of the Florida trusts and estates bar, Bruce Stone, reported on Florida's statutory fix (CS/HB 361) in an excellent presentation entitled The Clock Struck Midnight: Now What Do We Do?  You can track the status of CS/HB 361 here. Full text of the bill is here.  The following is the proposed trust-code provision as reported by Bruce:

The following is a draft as of noon Monday, January 18, 2010, of a statute to be proposed for adoption in Florida, addressing the uncertainties and potential liabilities of fiduciaries caused by repeal of the estate and generation-skipping transfer taxes. The proposed statute may be submitted to the Florida legislature for its regular session which convenes on March 2, 2010.

Section I - section 736.04114 shall be created as follows:

736.04114 Limited judicial construction of irrevocable trust with federal tax provisions.--

(1) Upon the application of a trustee or any qualified beneficiary of a trust, a court at any time may construe the terms of a trust that is not then revocable to define the respective shares or determine beneficiaries, in accordance with the intention of the settlor, if a transfer occurs during the applicable period and the trust contains a provision that:

(a) includes a formula devise referring to the "unified credit", "estate tax exemption," "applicable exemption amount," "applicable credit amount," "applicable exclusion amount," "generation-skipping transfer tax exemption," "GST exemption," "marital deduction," "maximum marital deduction," or "unlimited marital deduction;"

(b) measures a share of a trust based on the amount that can pass free of federal estate tax or the amount that can pass free of federal generation-skipping transfer tax;

(c) otherwise makes a devise referring to a charitable deduction, marital deduction, or a similar provision of federal estate tax or generation-skipping transfer tax law; or

(d) appears to be intended to reduce or minimize federal estate tax or generation skipping transfer tax.

(2) For the purpose of this section:

(a) "applicable period" means a period beginning January 1, 2010 and ending on the earlier of (i) December 31, 2010, or (ii) the date that an act becomes law that repeals or otherwise modifies or has the effect of repealing or modifying Section 901 of The Economic Growth and Tax Relief Reconciliation Act of2001.

(b) a "transfer occurs" when an interest takes effect in possession or enjoyment.

(3) In construing the trust, the court shall consider the terms and purposes of the trust, the facts and circumstances surrounding the creation of the trust, and the settlor's probable intent. In determining the settlor's probable intent, the court may consider evidence relevant to the settlor's intent even though the evidence contradicts an apparent plain meaning of the trust instrument.

(4) This section does not apply to a transfer that is specifically conditioned upon no federal estate or generation skipping transfer tax being imposed at the time of the transfer.

(5) Unless otherwise ordered by the court, during the applicable period and without court order, the trustee administering a trust containing one or more provisions described in subsection (1) may (a) delay or refrain from making any distribution, (b) incur and pay fees and costs reasonably necessary to determine its duties and obligations (including compliance with provisions of existing and reasonably anticipated future federal tax laws), and (c) establish and maintain reserves for the payment of these fees and costs and federal taxes. The trustee shall not be liable for its actions as provided in this subsection made or taken in good faith.

(6) The provisions of this section are in addition to, and not in derogation of rights under the Florida Trust Code or the common law to construe a trust.

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The Florida Bar Real Property Probate and Trust Law Section is now accepting applications for the 2010 Fellowship class. The RPPTL Section Fellowship program, created in 2007, awards up to 4 fellowships to exceptional Florida attorneys interested in our practice areas. The Fellowship program allows these individuals to be substantially involved in the Section work, receive leadership training and work closely with leading Florida attorneys in their field.

Click here, here for a memo explaining the fellowship program and an application form.

The deadline for applications is April 1, 2010, so please pass this information on to anyone you know who might be interested as soon as possible. If you have any questions, please contact Tae Bronner, co-chair of the RPPTL Fellowship committee, at tae@estatelaw.com or 813-907-6643. The Fellowship memo and application can also be found on the section website at www.rpptl.org.

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The law governing undue influence claims in Florida is a frequent topic of discussion on this blog [click here, here, here, here]. But for those of us in the trenches, we know clever legal arguments rarely carry the day; these cases are won and lost on the strength of your evidence.

So here's the problem: there aren't many tools out there designed to help probate litigators and their clients organize their thinking and zero in on the key facts they'll need to build a winning case. One such tool I recently discovered is the Undue Influence Worksheet developed by forensic psychiatrist Bennett Blum, M.D. In this short article Dr. Blum explains the thinking underlying his worksheet:

The “Worksheet” is based upon the IDEAL protocol, which combines knowledge from the fields of psychiatry, psychology, and sociology regarding the mechanisms of human manipulation, with extensive review of statutes, case law, and legal theory. IDEAL describes those psychological and social factors that commonly co-exist in undue influence situations. These factors are: Isolation; Dependency; Emotional manipulation and/or Exploitation of a vulnerability; Acquiescence; and Loss. 

Case Study:

When I'm teaching I find nothing beats a good case study for explaining new ideas. So I was happy to see Dr. Blum included the following case study in his article applying his Worksheet:

The following is a true case, although extreme in its clarity. The issue of undue influence is obvious, but the case is presented to help show how a fact pattern is considered within the IDEAL protocol:

Mr. Jones is an affluent, 88 year-old retired professor. His beloved wife of 60 years died two years ago, and since then he has been very lonely. Mr. Jones has a good and loving relationship with his three adult children, and though they live in other States he speaks with each every week. Mr. Jones moved to a retirement community four years earlier, and because of his wife’s illness and subsequent death, he has no significant social contacts in his current community. His long-time friends live several hundred miles away. Mr. Jones has multiple medical problems – diabetes, heart disease, high blood pressure, and difficulty walking due to arthritis – but has no apparent cognitive impairment.

Mr. Jones meets Ms. Smith, a 62 year-old divorced woman. She moves into his home six months later. She provides physical care in the form of preparing meals, cleaning the house, taking him to physician appointments, and ensuring he takes his medications properly. During the next six months, Ms. Smith begins asking for “tokens of appreciation” and purchases a new car, wardrobe, and jewelry with Mr. Jones’ money. She also demands that he give her his late wife’s jewelry, which he had intended to give to his grandchildren. At the same time, Mr. Jones stops telephoning his children, and they in turn find it more and more difficult to speak with him. Ms. Smith is now the only person to answer the telephone, and when the children call they often are told their father is unavailable or does not feel well enough to talk. Eventually, they are not allowed to speak to him at all. Two months later, after repeated angry exchanges with Ms. Smith, the eldest child receives a telephone message from Mr. Jones. In the message, Mr. Jones says, “She says I cannot call any of you anymore. If I do she will leave me and she says that at my age no one else will care for me, and that I will be alone. The same thing will happen if I stop giving her money. I know what she is doing, but I was so lonely after your mother died. I couldn’t bear to be that lonely again. I just hope that I can hold back enough money so she will stay until I die.” These were Mr. Jones’ last words to his children. He subsequently changed his estate plan – bequeathing everything to Ms. Smith.

Applying IDEAL to these facts:

Isolation – Mr. Jones’ children and friends live far away, he has no significant social contacts in his current living environment, his mobility is limited due to illness, Ms. Smith intercepts his telephone calls, and he is not allowed to talk to his children.

Dependency – Mr. Jones is emotionally dependent upon Ms. Smith, and she provides for his physical needs (food, cleaning, appointments, medicine). 

Emotional manipulation/Exploiting a weakness – Ms. Smith threatens to abandon Mr. Jones using his fear of loneliness.

Acquiescence – Mr. Jones agrees to Ms. Smith’s demands because he is frightened of being lonely, dependent upon her, and isolated from other social contacts and family. As a result, he gives her money and property, and makes her the sole beneficiary of his estate.

Loss – Mr. Jones suffers financial losses because of Ms. Smith’s threats and coercion. In this case, although criminal charges might have been pursued in some jurisdictions (ex. for elder abuse), the issue of “loss” was used only to support civil litigation.

Caveats and Suggestions:

Although it may seem obvious – do not rely only upon the litigants for information. The “Undue Influence Worksheet” and IDEAL are more effective if there are corroborating statements and observations by 3rd-parties, circumstantial evidence, and/or self-incriminating statements by the litigants. A case may be argued without such corroboration, but the use of IDEAL would be quite limited.

If more sophisticated analysis is needed, an expert should be contacted for advice regarding the development of both general and specific manipulation tactics, their relative impact, and assessment of pertinent cognitive issues (note: impaired cognition is common, but is not essential). These topics require extensive individual attention, and will not be presented in this introductory article.

Also, be cautious when retaining an expert on the issues of manipulation or undue influence. These are specialized fields and very few people are actual experts. Unfortunately, many well-intentioned mental health professionals claim this expertise without knowing how much training and knowledge is necessary.

Some attorneys report successful use of IDEAL without employing associated experts. In these cases, the attorney uses the information obtained through IDEAL and the “Worksheet” to craft a powerful and compelling argument – for either settlement or trial.

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Tax issues loom large in trusts & estates litigation, especially when the estate tax is in play. So on Monday, September 14, 2009, I'll be teaching a 90-Minute National Teleconference entitled Tax Issues in Trust and Probate Litigation.

In this seminar I'll examine how an awareness of the tax issues lurking in the background of almost every contested proceeding can be leveraged to maximum advantage for all concerned.  Click here to sign up.  I hope you can join me.

Bonus Materials:

The written materials for this seminar include a copy of the Mediation Settlement Agreement discussed in Private Letter Ruling 200844010, in which the IRS ruled that if you split a single marital trust into five separate sub-trusts and then terminate just one of those sub-trusts, IRC § 2519 would be triggered only with respect to the terminated sub-trust. The significance of this state of the art sample settlement agreement is that it provides an excellent real-life example of how to elegantly navigate all the issues you need to both anticipate and deal with in any settlement agreement involving a termination of a marital trust that's been QTIP'd. This sample document alone is worth the price of admission.

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The Florida Bankers Association prepared this white paper proposing new legislation to be titled “Prudent Investor Rule Not to Apply,” aimed at relieving trustees of Irrevocable Life Insurance Trusts (ILITs) from a duty to determine whether decisions made by settlors in the selection of life insurance companies, particular types of life insurance policies, and the continuing payment of policy premiums from funds provided by settlors, are appropriate investments and in the best interest of their beneficiaries. I regularly come across articles discussing how to manage the unique fiduciary risks inherent to ILITs (click here for example), so this new legislation seems like a good idea. If anyone has any questions or comments, contact the chair of the Trust Law Committee of the Florida Bar’s Real Property, Probate and Trust Law Section: Barry Spivey.

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I don't know of a better way to quickly get your arms around the hot-button issues driving today's estate-tax planning world [and current reform proposals, click here] than the three white papers listed below, all of which were prepared and published by the Joint Committee on Taxation, a nonpartisan committee of the United States Congress. These papers do a good job of explaining highly technical estate tax issues in clear, easy to understand prose that even a U.S. senator can understand.

Taxation of Wealth Transfers Within a Family: A Discussion of Selected Areas for Possible Reform (JCX-23-08), April 2, 2008.

This paper is divided into two parts. The first part describes a prominent feature of the current Federal estate and gift tax system, the partially unified credit against estate and gift tax, and evaluates two possible reforms to that credit. One possible reform to present law’s partially unified credit would be to make the credit fully unified. A second possible reform to the unified credit, referred to as portability, would allow a surviving spouse to benefit from unused exemption amount of the first spouse to die. The second part of this document sets forth a discussion of liquidity to pay estate tax when estates consist largely of farms or other businesses.

Description and Analysis of Alternative Wealth Transfer Tax Systems (JCX-22-08), March 10, 2008.

This paper addresses broad design issues such as rates, exemption amounts, the treatment of farms and family businesses, and alternatives to the present estate and gift tax system. These alternatives include an inheritance tax, an income inclusion approach (under which gifts and bequests are included in the income of the recipient), and a deemed realization system (under which a gratuitous transfer is treated as a realization event and the transferor is taxed on any gain in the property transferred, generally at rates applicable to capital gains).

History, Present Law, and Analysis of the Federal Wealth Transfer Tax System (JCX-108-07), November 13, 2007.

This paper describes the history of the U.S. Federal estate and gift tax system, summarizes the present estate and gift tax rules, and sets forth data and an economic analysis related to wealth transfer taxation.

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Click here for a PDF copy of the Agenda and related Reports/White Papers for the upcoming meeting of the Florida Bar's Trust Law Committee at the Ritz-Carlton in Key Biscayne this coming Friday, September 19th, at 2 p.m.  These materials are an excellent way to keep up on the latest developments involving Florida's Trust Code that could affect you, your firm or your clients. Any questions/comments regarding the meeting and the linked-to materials should be directed to the committee chair: Barry F. Spivey.

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Click here for a PDF copy of the Agenda and related Reports/White Papers for the upcoming meeting of the Florida Bar's Probate & Trust Litigation Committee at the Ritz Carlton in Key Biscayne on Friday, September 19 from 10 a.m. to 12 noon.  Any questions/comments regarding the meeting and the linked-to materials should be directed to the committee chair: William ("Bill") T. Hennessey.

Bill's email below povides greater detail on the focus of the upcoming meeting:

At the meeting, we will, once again, focus on the spousal rights legislation with the hope that we can pass a final version at the meeting or, at least, move closer in that direction. I have included in the package written comments which I have received from Joel Sharp and Edward Downey. Eric Virgil will also continue his presentation on motions to tax fees and costs in estate and trust proceedings.

We have added a new segment- a case law update- which will be presented at this meeting by Tattiana Brenes-Stahl. I would like a volunteer to present the case law update for our next meeting in Tallahassee. If you are interested, please let me know. Tattiana will be circulating her materials by separate e-mail (or bringing them to the meeting).

For those of you who cannot make it in person, shame on you. The call-in number is 866 - 411 - 5140 Conference ID 69655328. While you are on the telephone, please no eating, typing, yelling at your secretary, or making unnecessary noises in the background. I kindly request that you place your line on mute when you are not speaking. I will try to bring our speakers closer to the phone.

Look forward to seeing you in Key Biscayne. Many thanks.

William T. Hennessey
Gunster, Yoakley & Stewart, P.A.
777 S. Flagler Dr.
Suite 500 E
West Palm Beach, FL 33401
(561) 650-0663 telephone
(561) 655-5677 fax

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I've been a fan of the "directed trusts" idea from the time it was first talked up in the press [click here], through to its recent adoption here in Florida [click here].

Whether you make a living drafting trusts as a lawyer or administering them as a trustee, you should get to know this important new statute, and a great way to do that is to read Directed Trusts: The Statutory Approaches to Authority and Liability, written by two of Miami's very own trusts-and-estates stars, Greenberg Traurig associate Mary Clarke and shareholder Diana S.C. Zeydel.  Their article does a good job of zeroing in on the key issues drafters/trustees need to know about by using a compare-and-contrast approach among the various jurisdictions that have adopted a form of the directed-trusts statute, with a special focus on Florida and Delaware.

Here's what the linked-to article had to say about Florida's directed-trusts statute:

The Florida legislature recently passed an amendment to Florida Statutes §736.0703 intended to relieve the directed trustee of liability for acts done in reliance on the direction of a co-trustee having the authority to direct it in the trust document. Florida's approach differs from the Delaware approach and the approach in the UTC in that it permits a directed trust only if the person giving the direction is also a trustee. The bill revises Florida Statutes §736.0703 by adding a new subparagraph (9) as follows. 

Amendment to Fla. Stat. §736.0703. Cotrustees. 

(9) If the terms of a trust instrument provide for the appointment of more than one trustee but confer upon one or more of the trustees, to the exclusion of the others, the power to direct or prevent certain actions of the trustees, then the excluded trustees shall act in accordance with the exercise of the power. Except in cases of willful misconduct on the part of the directed 3 trustee of which the excluded trustee has actual knowledge, an excluded trustee shall not be liable, individually or as a fiduciary, for any consequence that results from compliance with the exercise of the power, regardless of the information available to the excluded trustees. The excluded trustees shall be relieved from any obligation to review, inquire, investigate or make recommendations or evaluations with respect to the exercise of the power. The trustee or trustees having the power to direct or prevent actions of the trustees shall be liable to the beneficiaries with respect to the exercise of the power as if the excluded trustees were not in office, and shall have the exclusive obligation to account to and to defend any action brought by the beneficiaries with respect to the exercise of the power. 

The significant difference between the approach in the amendment to the Florida statute and the approach of other states is that only a co-trustee may act as a “director,” thus subjecting the co-trustee with the power to direct to full liability as a fiduciary. Presumably, the governing instrument could, however, relieve the trustee with authority to direct from liability for breach of trust except for bad faith and reckless indifference to the purposes of the trust or the interests of the beneficiaries consistent with Florida Statutes §736.1011(1)(a). This should be distinguished from the authority contained in Florida Statutes §736.0808 where the power to direct the trustee does not completely exonerate the directed trustee from liability for following the direction, but the person giving the direction is limited to a fiduciary standard of “good faith,” rather than being subject to liability as a trustee.

The original bill did not include the language, “Except in cases of willful misconduct on the part of the direct[ed] trustee of which the excluded trustee has actual knowledge, ....” Surprisingly, it is not the directed trustee that is held liable for his or her own “willful misconduct” as in Delaware. Instead, the directed trustee must test the malfeasance of the directing trustee. This may present an interesting challenge for the directed trustee because the directed trustee must in effect test the state of mind of the directing trustee to determine if intentional misconduct has taken place. One wonders how the directed trustee will make such a determination. The “actual knowledge” requirement might mean that the directing trustee would have to articulate an intention to commit malfeasance regarding the trust before the directed trustee could be held liable. On the other hand, in its practical application the two tests may yield the same result. If the direction is a blatant violation of the terms of the trust, the directed trustee would likely be deemed to have engaged in willful misconduct upon following the direction, and the directing trustee would likely be deemed to have engaged in willful misconduct by giving such a direction. 

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Click here for a PDF copy of the Agenda and related Reports/White Papers for the upcoming meeting of the Florida Bar's Probate & Trust Litigation Committee on Thursday, July 24, 2008 from 3:00 p.m. to 5 p.m. at the Breakers in Palm Beach County.  These materials are an excellent way to keep up on the latest probate-related developments that could affect you, your firm or your clients.  Any questions/comments regarding the meeting and the linked-to materials should be directed to the committee chair: William ("Bill") T. Hennessey.

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The Florida Bar Real Property Probate and Trust Law Section has developed a new Fellowship program aimed at encouraging junior attorneys (i.e., under age 36) and newly-minted attorneys (i.e., admitted to the bar for fewer than 10 years) to become involved in the Section. Breaking into this niche ain't easy, so anything the Section can do along these lines is a good thing.

Here's a copy of the memo explaining the Fellowship program and a copy of the Fellowship application. The deadline for this year's application is July 21, 2008. If you have any questions contact Tae Bronner, co-chair of the RPPTL Fellowship committee at tae@estatelaw.com or 813-907-6643. The Fellowship memo and application can also be found on the section website; www.rpptl.org.

Good luck!

CORRECTION:

I originally reported that the RPPTL Section's Fellowship program was only open to attorneys under age 36. That was incorrect. As explained in the linked-to Section memo the Fellowship Program is in fact open to all lawyers who (a) are members of the RPPTL Section and (b) have been admitted to the bar for fewer than 10 years or (c) are younger than 36 years of age. I've revised this blog post accordingly.

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Click here for a PDF copy of the Agenda and related Reports/White Papers for the Probate and Trust Litigation Committee Meeting in Bonita Springs on May 22, 2008. I found the following legislative items especially interesting:

• Corporate trustees should be happy with the new legislation being proposed in House Bill 435 [Agenda ITEM 2]. This bill would make the following changes to Florida's Trust Code:

1. F.S. 763.0703(7) would be amended to provide for the type of "directed trusts" banks and trust companies have been lobbying for. Click here for the back story on this issue.
2. F.S. 736.0802(10) would be amended to make it much more difficult to cut off a trustee's access to trust funds to pay attorney's fees when being sued for breach of trust. Click here for an example of the type anti-trustee ruling this legislation is attempting to block.
3. F.S. 736.1008 would be amended to set new outside time limits on when a beneficiary could sue a trustee for breach of trust.

• It looks like the proposed new rule giving heirs standing to challenge a deathbed marriage on the grounds of fraud, duress or undue influence I previously wrote about [click here] is coming up for a vote [Agenda ITEM 4]. This is good public policy, I hope it becomes law soon.
  

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Sarasota attorney Barry F. Spivey, who also chairs the Florida Bar's Trust Law Committee, circulated the following email and link to the Treasury Department's recently published white paper on the U.S. gift tax.  If tax planning is a part of your estate planning practice, this paper is probably a must read.  Here's Barry's email and a link to the referenced white paper:

"For you tax geeks or just plain intellectually curious on the Committee, the Office of Tax Analysis of the Treasury Dept. has published a paper titled "The Federal Gift Tax: History, Law, and Economics." The paper traces the evolution of the gift tax, its structure, and interactions with the income and estate taxes. It concludes with a discussion of the behavioral effects of the gift tax."

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Click here for a PDF copy of the Agenda and related Reports/White Papers for the upcoming meeting of the Florida Bar's Probate & Trust Litigation Committee.  These materials are an excellent way to keep up on the latest probate-related developments that could affect you, your firm or your clients.  I found the following items to be especially interesting:

New Legislation:

Fiduciary Lawyer-Client Privilege: [ITEM 3]

New F.S. 90.5021 is being proposed to address the attorney-client privilege issues I wrote about here.

Payment of trustee's fees from trust assets: [ITEM 4]

A revision to F.S. 736.0802(10) is being proposed to address the conflict-of-interest issues that come up when a trustee uses trust assets to pay for his legal defense in a breach of trust lawsuit.  I recently wrote about this here.

White Papers:

Collateral Attack on the Validity of A Marriage after Death Based Upon Undue Influence:  [ITEM 6]

No jury trial in breach of trust action: [ITEM 8]

Questions/comments regarding the meeting and the linked-to materials should be directed to the committee chair: William ("Bill") T. Hennessey.

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The next meeting of the Probate and Trust Litigation Committee is scheduled for Thursday, August 2 at The Breakers in Palm Beach from 4 p.m. to 6 p.m.  If you have any questions regarding this meeting, you should contact the committee chair directly: William T. Hennessey.

The meeting materials copied here contain white papers addressing the following probate-litigation related issues:

• Fiduciary Lawyer-Client Privilege: Approved by EC [ITEM 3].
• Payment of trustee's fees from trust assets: Approved by EC [ITEM 4]
• Crafting an appellate rule on which Orders are Appealable in a Probate Proceeding? Sean Kelley, Tom Karr, Peter Sachs [ITEM 5]
• Collateral Attack on the Validity of A Marriage after Death Based Upon Undue Influence John Moran, Bill Hennessey, Laura Sundberg, Russ Snyder [ITEM 6]
• Revisions to Rule 1.525 concerning 30 day time limit for filing a motion for attorneys' fees[ITEM 7] Angela Adams, Eric Virgil,Laura Sundberg
• ACTEC Model Arbitration Legislation. [ITEM 8]. Bob Goldman

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The Trust Law Committee met last week.  I apologize for not posting this sooner, but a very hectic trial schedule kept me away from the blog last week. Regardless, my principal reason for posting the committee meeting Agenda and Minutes is to disseminate the following reports/White Papers:

• Holding of legal title of entirities property in trust
• Republication of invalid trust by amendment
• Proposed Trust Code amendment: Directed Trusts
• Proposed Trust Code amendment: Statute of Limitations on Claims Against Trustees

Questions/comments regarding the meeting should be directed to the committee chair: Barry F. Spivey.

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Below is a copy of the email announcing the last Probate and Trust Litigation Committee meeting.  I apologize for not posting this sooner, but a very hectic trial schedule kept me away from the blog last week.  Regardless, my principal reason for posting these announcements is to disseminate the attached reports/White Papers.

The committee meeting Agenda and Minutes contain the following reports/White Papers:

• Fiduciary Lawyer-Client Privilege: Approved by EC [ITEM 3]
• Arbitration clause in a will or trust is enforceable. Passed in Legislature 2007-HB 311 [ITEM 3]
• Exculpatory clause in a will: Passed in Legislature 2007 –HB 311[ITEM 3]
• Payment of trustee’s fees from trust assets: Pending approval of EC [ITEM 4]
• Crafting an appellate rule on which Orders are Appealable in a Probate Proceeding? Sean Kelley, Tom Karr, Peter Sachs [ITEM 5] (Appellate Rule Project - White Paper.pdf)
• Collateral Attack on the Validity of A Marriage after Death Based Upon Undue Influence Bill Hennessey, Laura Sundberg, Russ Snyder [ITEM 6]
• Revisions to Rule 1.525 concerning 30 day time limit for filing a motion for attorneys’ fees [ITEM 7] Angela Adams, Eric Virgil, Laura Sundberg (R. 1.525 - Taxation of fees.pdf, Family Law 12.525.pdf)
• ACTEC Model Arbitration Legislation. [ITEM 8] Bob Goldman

Questions/comments regarding the meeting should be directed to the committee chair: Jack A. Falk

From: Falk, Jack A. [mailto:jfalk@dwl-law.com]
Sent: Monday, May 21, 2007 7:10 PM
To: Falk, Jack A.
Subject: Probate and Trust Litigation Committee meeting on Thursday, May 24, 2007 at 4:00 p.m. in Hollywood, Florida


Dear Committee Members,

The Probate and Trust Litigation Committee will be meeting from 4:00 to 6:00 p.m. on Thursday, May 24, 2007 at the Westin/Diplomat in Hollywood, Florida, in conjunction with the Real Property, Probate and Trust Law Section's Executive Council meeting. Attached please find the Agenda and Minutes with pdf attachments that are part of the Agenda materials for the meeting.

I look forward to seeing you at the meeting! Jack

<<Appellate Rule Project - White Paper.pdf>> <<R. 1.525 - Taxation of fees.pdf>> <<Family Law 12.525.pdf>> <<Agenda and minutes May 2007.pdf>>

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I'm rarely able to physically go to these meetings, but I always find time to read the excellent materials circulated to members prior to each meeting.  I also find these materials to be the best way to keep track of new legislation affecting the trusts and estates practice area.  If you read Jack Falk's e-mail and the attached Agenda and Minutes for this meeting you'll find discussions related to the following topics, all of which should be of interest to any Florida trusts and estates litigator:

• Fiduciary Lawyer-Client Privilege: Approved by EC [ITEM 3]
• Arbitration clause in a will or trust is enforceable: Approved by EC [ITEM 3]
• Exculpatory clause in a will: Approved by EC [ITEM 3]
• Payment of trustee’s fees from trust assets: Pending approval of EC [ITEM 4]
• Which Orders Can Be Appealed in a Probate Proceeding? [ITEM 5] (see White Paper)
• Revisions to Rule 1.525 concerning 30 day time limit for filing a motion for attorneys’ fees [ITEM 6]
• ACTEC Model Arbitration Legislation. [ITEM 7]

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If your practice involves contested probate or trust matters, you would do well to keep abreast of the legislative proposals being considered by the Probate and Trust Litigation Committee.  For example, key legislative items currently under consideration are the following:

• The Committee is considering new legislation that would build on (or perhaps detract from?) existing statutory law addressing when a trustee being sued for breach of trust may pay his or her legal defense fees with trust assets without a prior authorizing court order.  This statute addresses issues raised in a recent case I previously wrote about here.
• The Committee is considering new legislation that would statutorily reverse Florida case law holding that in some circumstances communications between a trustee and his or her attorney are not privileged.  This statute addresses issues raised in a case I previously wrote about here.
• The Committee is considering new legislation that would statutorily recognize the enforceability of arbitration clauses in wills and trusts.

The meeting agenda contains several white papers and proposed statutes being considered by the Committee.  The following is the Committee chair's email circulating the linked-to agenda document.  All inquiries should be directed to Jack Falk at the email address provided below.

 >>> "Falk, Jack A." <jfalk@dwl-law.com> 09/26/06 09:24AM >>>
Dear Committee Members,

The Probate and Trust Litigation Committee will be meeting from 10:00 a.m. to Noon on Friday, September 29, 2006, at Gaylord Palms hotel in Kissimmee, Florida, in conjunction with the Real Property, Probate and Trust Law Section's Executive Council meeting. Attached please find
the Agenda and Minutes for the meeting.

I anticipate that we will spend a substantial part of the meeting working through the proposed legislation on payment of attorneys' fees from trust assets by a trustee accused of breach of
trust.

Attached is the Agenda for the meeting.

I look forward to seeing you in Kissimmee! Jack

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The Probate and Trust Litigation Committee will be meeting from 10:30 a.m. to 12:15 p.m. on Thursday, August 10, 2006, at The Breakers on Palm Beach, Florida, in conjunction with the Real Property, Probate and Trust Law Section's Executive Council meeting.  Committee Chair Jack Falk circulated two emails, which contain detailed memoranda addressing several legislative items that should be especially interesting to probate litigators.  Even if you have no intention of attending, the committee materials alone are worthwhile reading.

The following materials have been circulated for the meeting:

• <<Agenda and Minutes August 2006.doc>>
• <<REPORT OF TESTAMENTARY CAPACITY SUBCOMMITTEEAUGUST 10 2006.doc>>
• <<Memo.7.24.06.pdf>>
• <<Florida Bar Diminished Capacity Memo - Jack Falk.DOC>>
• <<Exhibits.pdf>>

To read Jack's emails simply click the "Continue Reading" button below.

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Miami Attorney Jack A. Falk, Jr., Chair of the Probate and Trust Litigation Committee of the Florida Bar, distributed this agenda as well as this memorandum in connection with the following pending and proposed legislative initiatives discussed at the August 18, 2005 litigation committee meeting:

• Repeal of the Deadperson's Statute.
• Contestability of Revocable Trusts. Status of proposed amendments to sections 737.2065, 744.331 and 744.441, Florida Statutes.
• Fiduciary Lawyer-Client Privilege.
• Enforcing arbitration clauses in wills and trusts.
• Use of trust assets to pay attorneys' fees of the trustee in litigation against a beneficiary and proposed amendments to section 737.403, Florida Statutes.

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