A few years ago Jonathan Galler published an excellent article in the Florida Bar Journal explaining the nuts and bolts of how creditor claims are litigated in probate proceedings. The article’s entitled This Party’s Dead! But Will the Lawsuit Survive? Here’s an excerpt:

The creditors’ claims process can be broken down into four phases: 1) service or publication of the notice to creditors; 2) the filing of a statement of claim; 3) the filing of an objection to the claim; and 4) the filing of an independent action to litigate the substance of the claim. The process is designed to promote “the public policy of providing for the speedy settlement of estates” and “the payment of claims and the distribution to the beneficiaries” in a timely fashion.

What makes this claims process challenging is that it plays out across two co-equal branches of the same circuit court: the Probate Division (where the estate’s administered) and the Civil Division (where independent actions are adjudicated).

When a creditor files a claim in the Probate Division, the estate can test its facial sufficiency in two ways. First, did it follow the “form and manner” requirements of Fla. Prob. R. 5.490? And second, was it filed within the strict filing deadlines contained in F.S. 733.702? If the answer to either question is “no,” the estate can file a motion to strike the claim in the Probate Division.

If the creditor filed a facially sufficient claim, the estate can test its merits by filing an “objection,” which then obligates the creditor to file an “independent action” in the Civil Division. The merits of creditor claims are adjudicated in the Civil Division.

If an estate simultaneously pursues both defenses, i.e., a motion to strike and an objection, the case is now before two co-equal judges: one in the Probate Division, the other in the Civil Division. The question then becomes, which judge decides this initial round of challenges? That procedural question’s answered by the Abbott case discussed below.

Northern Trust Company v. Abbott, — So.3d —-, 2021 WL 45668 (Fla. 2d DCA January 06, 2021):

This case involved a contested creditor claim. The estate challenged both the claim’s facial sufficiency by filing a “motion to strike” in the Probate Division, and the claim’s merits by filing an “objection,” which then obligated the creditor to file an independent action in the Civil Division.

When the estate asked the probate judge to rule on it’s motion to strike, the claimant cried foul, arguing the probate judge’s jurisdiction to adjudicate any aspect of the claim ended once the independent action was filed in the Civil Division. Here’s how the 2d DCA framed the issue:

[W]e write to address the parties’ arguments related to the scope of the probate court’s jurisdiction when faced with both an objection, which results in the filing of an independent action in circuit court, and a motion to strike a statement of claim. [Claimant] takes the position that when she filed her independent action under section 733.705(5), the probate court’s jurisdiction ended. Neither the probate rules nor chapter 733 address the filing of a motion to strike, but the cases allow an interested party to file both an objection and a motion to strike a statement of claim, as [the estate] did here. See Simpson v. Estate of Simpson, 922 So. 2d 1027, 1029 (Fla. 5th DCA 2006); Bell, 366 So. 2d at 767.

A claim’s facial sufficiency is a pure probate-law issue, which means it makes sense to allow probate judges to adjudicate motions to strike in the Probate Division before wasting time on the merits of an independent action pending in the Civil Division. That bit of common sense prevailed both at the trial court level and on appeal in this case. Bottom line, if you file both an objection and a motion to strike a statement of claim, your claim gets decided in the Probate Division. So saith the 2d DCA:

A motion to strike tests the facial sufficiency of the statement of claim, whereas the objection—which requires the claimant to file an independent action—relates to the validity or merits of a facially sufficient claim. See Simpson, 922 So. 2d at 1029 (noting the probate court should have ended its inquiry after determining whether the claimant was a reasonably ascertainable creditor and erred in proceeding to determine the validity of the claimant’s claim, stating “the merits of [the claimant’s] claim should have been determined in an independent action”); Bell, 366 So. 2d at 767 (“The personal representative’s objection to the sufficiency of the [s]tatement of [c]laim can be raised only in the probate court. The personal representative may not collaterally attack the sufficiency of the claimant’s [s]tatement of [c]laim in the trial court which will hear the independent action.” (citations omitted)). When a challenge to the legal sufficiency of a claim is made, the probate court must first determine the facial sufficiency of the claim before the parties litigate the subject matter of the claim in circuit court. See id. Similarly, a challenge to the timeliness of the claim is also a matter within the jurisdiction of the probate court. See Picchione, 354 So. 2d at 955 (holding the probate court properly entered summary judgment on an untimely claim filed against the estate). If the statement of claim is not facially sufficient or is time barred, then there is no reason to require the parties to participate in an independent action to determine the merits of the claim.

Enrique Zamora. Past Chair of the Elder Law Section of the Florida Bar, Florida Bar Board Certified in Elder Law, Florida Supreme Court Certified Civil Mediator

I recently reported on the Erlandsson v. Erlandsson decision and how the 4th DCA’s opinion highlighted the sometimes gut wrenching ethical challenges attorneys face when representing an adult client who’s cognitively impaired in a way that is clearly affecting his or her decision making. Enrique Zamora, one of South Florida’s premier elder law attorneys, graciously agreed to share his thoughts on the case.

[1] Can you give us some background on your experience as court-appointed counsel in contested guardianship proceedings, both as a practitioner and as an educator?

I have been practicing Elder Law for 35 years, even though the Elder Law Section of the Florida Bar was established in 1991. My areas of practice are mostly concentrated in Probate and Guardianship both administration and litigation.

I have been adjunct professor teaching Elder Law at St Thomas Law School since 2004 and Guardianship Law since 2015. I taught 2 semesters (2017 -2018) of Elder Law at the University of Florida Levin College of Law. The weekly commute to Gainesville finally got to me and I decided to quit.

I have been representing AIP’s [“Alleged Incapacitated Persons”] as court appointed attorney for over 25 years. I could write a book on some of my more interesting cases.

I have been the instructor for examining committee members through FSGA [“Florida State Guardianship Association”] sponsored conferences for over 10 years. I’m currently the designated instructor for all examining committee members in Miami-Dade County.

I have also been a speaker on guardianship topics for the Elder Law Section of the Florida Bar for many years.

[2] In the Erlandsson case the court-appointed counsel clearly believed a plenary guardianship was in the AIP’s best interest. If you were court-appointed counsel in this case and you too agreed a plenary guardianship was in the AIP’s best interest, as a practical matter what two or three actions would you have taken before the hearing to possibly broker a compromise of some sort?

I’m a firm believer that mediation is a very useful, but underutilized tool in resolving incapacity/guardianship issues. I also keep in mind that I’m an advocate for my  AIP client and NOT a Guardian ad Litem. Therefore, [my personal opinion of what is in] the best interest of my client is not controlling. My client’s instructions and objectives are my primary source of guidance during the incapacity proceedings. Having said that, there is a clear limit as to how far I can try to follow my client’s objectives, as Chapter 744  clearly states my representation is limited by the ‘extent that it is consistent with the rules regulating the Florida Bar’(744.102(1)).

If mediation doesn’t work, try it again!!. I have  participated in mediation up to 3 times in more than one case.

Even though it is difficult to tell from the opinion in the Erlandsson case, it appears that the AIP was reluctant to take her psychotropic  medication as well as not controlling her diabetes, but it also appears that there was some level of capacity on the part of the AIP. I have successfully convinced several of my  clients to accept the medication being recommended in many Baker Act cases. Therefore, trying to communicate the need to take her medication would have been a possible solution. Of course in this type of cases that solution tends to be short-lived, as usually another crisis arises sooner rather than later.

[3] What advice do you have for court-appointed counsel representing an AIP who is able to communicate just fine, but the AIP is acting irrationally?

My advice if your client is acting irrationally is to look up the meaning of irrational in a  dictionary. Don’t try to apply your standards of what is rational and try to put yourself in your client’s shoes, especially if they are elderly and not in good health. A person’s view of life changes as you see the end coming!!!. But if after doing all that ,you still think your client is acting irrationally, limit your representation as to be consistent with the rules regulating The Florida Bar. Wasting money in discovery with little chance of success is not a recommended strategy.

[4] In your opinion, is a change in our guardianship statutes or ethics rules (or both) needed to ensure disabled adult AIP’s are properly represented in contested guardianship proceedings, or is it simply a matter of better education? And why?

It is always a difficult task to represent a client with diminished capacity, but it can be done. However, in my opinion attorneys need more guidance as to how to handle representation of clients  with diminished capacity. We need to revisit Rule 4-1.14 of the Florida Bar and see how it can be modified to address specifically [the] representation of a client in [an] incapacity proceeding in particular and with diminished capacity in general.

The RPPTL and the Elder Law Sections  are working on both the statutes and the rule. A new Chapter 745 is coming to replace 744 and a revised 4-1.14 is also in the works. Whether these changes address all concerns remains to be seen.

[5] From your perspective as a practitioner, do you have any parting words of wisdom for judges in these cases?

My advice to judges is be patient. Incapacity proceedings can be very stressful on everyone, including the judges. In addition, don’t be paternalistic. Elderly people want to be independent and value their freedom. I will never forget one of my clients during an incapacity hearing, who told the judge in a very convincing and forceful way ‘Judge I need a guardian like I need a hole in my head’. Who can argue with that???

If ownership of a business asset is contested in an estate, the answer to “who gets it?” might be found in the controlling contract, not the decedent’s will or trust. This key point is often overlooked.

For example, in the Blechman case there was a dispute over ownership of the decedent’s 1/2 interest in an LLC. In that case the LLC operating agreement contained the following clause:

… in the event of a death of a Member during the duration of this Agreement, the Membership Interest of the deceased Member shall pass to and immediately vest in the deceased Member’s then living children and issue of any deceased child per stirpes.

Based on this text the court ruled the contested LLC interests were never part of the decedent’s probate estate, but instead transferred immediately to his children, bypassing his trust (which favored the decedent’s girlfriend). Bottom line, the LLC operating agreement controlled, not the decedent’s trust.

Procedurally, the Blechman case was litigated within the probate proceeding as part of a contested estate accounting action. That’s not the only way these cases play out.

Breach of Contract vs. Non-Probate Transfer:

Sometimes the controlling contract doesn’t result in a non-probate transfer, but instead sets up a breach of contract claim against the estate as a form of “agreement concerning succession” governed by F.S. 732.701.

While the end result is the same (contract controls, not the decedent’s will or trust), your litigation path is different. These cases are litigated as contested creditor claims that get adjudicated not by your probate judge, but as “independent actions” before a different judge sitting in the civil division. That’s what happened in the Finlaw case below.

Finlaw v. Finlaw, — So.3d —-, 2021 WL 1431125 (Fla. 2d DCA April 16, 2021):

In this case the decedent signed a partnership agreement governed by Ohio law that contained the following clause:

Each partner, who shall ultimately become a surviving spouse, further agrees to have prepared and execute a last will and testament so as to vest his or her interest in this Partnership in his or her children (lineal descendants).

The decedent subsequently executed a will that left her partnership interest not to her child, but to a grandson. After decedent died, her son filed a creditor claim against the estate asserting an interest in the partnership due to the decedent’s failure to execute her will in conformity with the above-quoted provision of the partnership agreement. Grandson objected, triggering son’s obligation to file an independent action. This is all classic probate creditor-claim procedure.

As his independent action son filed this complaint for declaratory judgment pursuant to F.S. 86.011 and F.S. 86.041 asking the court to construe the partnership agreement and determine that he, rather than the grandson, is the sole beneficiary of the decedent’s interest in the partnership. In a thoughtful and very instructive 11-page final judgment the trial court ruled in son’s favor.

At trial and on appeal grandson argued that no matter what the partnership agreement said, what the decedent really wanted, as reflected in her will, was for him to get this asset. That may be true, but it doesn’t matter. Contracts trump wills — under both Ohio and Florida law — so saith the 2d DCA:

Under both Ohio and Florida law, where contracting parties expressly agree on the disposition of property upon death, that agreement generally controls over a testamentary disposition of the property. See Barnecut v. Barnecut, 3 Ohio App.2d 132, 209 N.E.2d 609, 612-13 (1964) (holding that where a partnership agreement called for the settlement of a partnership interest, the interest did not become a part of the decedent’s estate); Blechman v. Est. of Blechman, 160 So. 3d 152, 159 (Fla. 4th DCA 2015) (observing “the general principle that express language in a contractual agreement ‘specifically addressing the disposition of [property] upon death’ will defeat a testamentary disposition of said property”) (alteration in original) (quoting Murray Van & Storage, Inc. v. Murray, 364 So. 2d 68, 68 (Fla. 4th DCA 1978))); see also Swanda v. Paramount Com. Real Est. Invs., No. C-030425, 2004 WL 1124587, at *2 (Ohio Ct. App. May 21, 2004) (holding partner’s attempt to transfer partnership share by will ineffective where transfer was contrary to partnership agreement).

Thus, having agreed in the partnership agreement to devise the partnership interest only to her children who are lineal descendants, the decedent’s subsequent devise to her grandson instead was contrary to the terms of the agreement. The trial court did not err in so concluding.

“International banking in South Florida has become so significant that Brickell Avenue was dubbed ‘Wall Street South’ by Forbes in 2015,” says David Schwartz, president and CEO of the Florida International Bankers Association. Florida Trend, 11/7/2019

Increasing numbers of people have connections with one country, but live and work in another, frequently owning property or investments in several countries. At the center of this global trend sits Florida, a magnet for foreign investors and a hub of international banking, finance and professional services.

Not surprisingly, Florida probate attorneys often find themselves drawn into international estate cases, be it because the decedent was hiding assets in this state, or some other information critical to a foreign estate proceeding is located in Florida, or because the location of the decedent’s domicile at death is contested and there are dueling probate proceedings running simultaneously here and abroad.

A fundamental challenge for parties and their counsel in all of these cases is how to uncover the evidence they suspect exists, but have yet to obtain. If the decedent owned property in Florida or was domiciled in Florida, the answer is simple. Commence a probate proceeding in Florida, then take advantage of all of the discovery tools generally available to litigants in any Florida civil case, which Probate Rule 5.080 tells us are also available to litigants in any Florida probate proceeding.

Section 1782:

If there’s no jurisdictional “hook” for a Florida probate proceeding, but critically important evidence is located in this state nonetheless, all is not lost. One of the lesser-known strategies to obtain U.S.-style discovery in aid of a foreign probate proceeding is 28 U.S.C. § 1782, known colloquially as “Section 1782″. This federal statute permits a party contemplating or involved in a foreign proceeding to seek documents and even depositions from its opponent or third parties located in the U.S.

Section 1782 can be used by parties involved in overseas inheritance litigation. For example, in Application of Esses, the court granted a section 1782 petition that sought discovery for use in a Hong Kong probate proceeding, in In re Application for Discovery Pursuant to 28 U.S.C. §1782, the court granted a section 1782 petition that sought discovery for use in an Italian probate proceeding, and in In re Pimenta, the court granted a section 1782 petition that sought discovery for use in a Brazilian probate proceeding.

Timing matters:

Section 1782 petitions are technically demanding federal proceedings, best left to specialists. But it’s the kind of tool all probate attorneys should at least be aware of. Why? Because timing matters. This tool is best used early in the process. If you wait until after you’ve been beaten up overseas to try your luck in a Florida courtroom, you’ve probably waited too long, as the petitioner in In re Abud Valech recently learned.

In re Abud Valech, 2020 WL 8919124 (S.D. Fla. December 31, 2020):

This case involved claims by the widow of a man reported to be “one of Ecuador’s richest and most powerful men” whose fortune included businesses, real estate holdings, and investments in Ecuador, Florida, Panama, and other jurisdictions. Despite living a “wealthy lifestyle during their marriage,” when husband died his surviving spouse found he basically had nothing titled in his name, which meant her spousal inheritance rights, referred to as “conjugal share rights” in Ecuador, were worthless.

Following her husband’s death, the widow initiated eight pre-suit discovery petitions in Ecuador. And in every single one of those cases widow’s discovery efforts went nowhere; they were all denied. In addition to her discovery petitions, the widow also commenced three separate proceedings “in Ecuador asserting her conjugal share rights.” According to widow’s Ecuador-law expert, in Ecuador “a lawsuit must be accompanied by all the evidence intended to be used.” Having gotten nowhere in her pre-suit discovery efforts, presumably her spousal-inheritance petitions lacked much, if any, evidentiary support, which again meant she lost every time. Against this backdrop widow decided to try her luck in Florida.

Not surprisingly, the fact that she’d been stymied at every turn in Ecuador was used to devastating effect against the widow once she filed her Section 1782 petition in Florida. The Florida court and defense counsel contesting the Section 1782 petition repeatedly made reference to widow’s prior setbacks in Ecuador.

Applicant has already filed eight unsuccessful evidentiary petitions in Ecuador and cannot use this Application as an “end run” to circumvent the decisions made by Ecuadorian judges to obtain the information. …

In addition to the Noboa Declaration, the Motion also relies on the declarations of Jorge G. Alvear Macias and Daniel Kuri Garcia. ECF Nos. [11-2], [11-3]. Alvear detailed the eight evidentiary requests and three complaints before Ecuadorian courts. ECF No. [11-2] at 65–80. In his conclusion, Alvear notes that despite Applicant’s dissatisfaction with the eleven court requests, she did not challenge any of the decisions with an appeal, a challenge which was available to her. ECF No. [11-2] at 79. Therefore, Alvear presumed that she “acquiesced in those judicial decisions that were adverse to her.” Id. …

The Movants argue that the discovery sought cannot be for use in a proceeding because there is no pending proceeding in Ecuador, and none is “reasonably contemplated.” ECF No. [11] at 14–15. Indeed, they state that “Applicant has unsuccessfully pursued eleven such proceedings in Ecuador”—including eight pre-trial petitions for evidence and three complaints—“all of which have been rejected or unsuccessful.” ECF No. [11] at 15. …

Here, despite eight pre-trial evidentiary petitions, Applicant has been unable to obtain information regarding the property, assets, and income owned and/or controlled by Mr. Anton. The information sought in the eight pre-trial evidentiary petitions is very similar to the information sought in this Application. … This Application is requesting similar information that was previously denied in Ecuador for both substantive and procedural reasons, and, therefore, this factor weighs against granting the Application.

There were other factors also weighing against the widow, as explained by the Florida court in its application of the  “Intel factors” to this case. Bottom line, widow’s Section 1782 petition was denied.

Lesson learned?

Again, timing matters. Would this story have ended differently if widow had contacted a Florida probate attorney shortly after her husband died, who then recommended that she start by filing a Section 1782 petition in Florida prior to jumping into court in Ecuador, and widow had successfully obtained evidence in Florida helpful to her case in Ecuador? And then widow used the evidence uncovered in Florida to support her subsequent inheritance claims in Ecuador? Would this alternate sequence of events have changed the ultimate outcome? We’ll never know. This I do know: getting hammered overseas before you show up in Florida to file your Section 1782 petition is a pretty good way to guarantee you’re going to lose in Florida too.

F.S. 732.5165 tells us that a will (or any party of it) procured by undue influence is void. And F.S. 733.107(1) tells us the person challenging a will on undue influence grounds (or any other basis) bears the initial burden of proof.

But what if direct evidence of the undue influence is impossible to find? That, in fact, is the norm. So is undue influence the perfect crime? Nope. Florida law permits contestants to satisfy their initial burden of proof in these cases with circumstantial evidence sufficient to raise a rebuttable “presumption” of undue influence. Once the presumption’s triggered, F.S. 733.107(2) tells us the burden of proof shifts from the person alleging undue influence to the person defending against the undue-influence charge.

What needs to happen to trigger the undue-influence presumption and how it is — or is not — rebutted at trial, is the central question in almost all inheritance litigation, and the topic of at least two excellent Florida Bar Journal articles (see here, here), as well as national commentary.

Confused? Don’t be. As demonstrated in the 3d DCA’s opinion in the Hannibal case below, all this burden shifting analysis can play out pretty simply in real life.

Hannibal v. Navarro, — So.3d —- 2021 WL 357951 (Fla. 3d DCA February 03, 2021):

This case revolved around a 2003 Will that favored one adult child over all other family members. The will was challenged on undue influence grounds. The undue-influence presumption wasn’t contested, as explained by the 3d DCA.

Eventually, the parties all stipulated to a presumption of undue influence, pursuant to section 733.107(2), Florida Statutes (2019), and agreed that the burden to prove that the 2003 Will was not the product of undue influence was on Navarro, under a standard of preponderance of the evidence.

Good news for the challenger? Of course! Does this mean the case is over? Far from it. And that’s the most important take away from this case. At trial the child favored by the decedent put on evidence rebutting the undue-influence presumption … and won.

As practitioners we have so few published examples of how real world judges weigh the evidence in these cases. Which means any time the facts of one of these cases makes it into a published opinion, it’s well worth holding onto. This one included.

Want a real-life example of how to rebut a presumption of undue influence? Read on:

The testimony at trial revealed that in 1989, Ms. Matthews had taken a mortgage on her home with high interest so that she could loan Marvalene money to open a bar/restaurant in Key West. However, the business ultimately closed, and Marvalene left town, never repaying her mother, a fact which witnesses testified placed a financial burden on Ms. Matthews and led to resentment. Conversely, the testimony at trial also established that Navarro had a very close relationship with her mother, and cared for her both personally and financially over the years.

Following the trial, the trial court concluded that Navarro had proven by a preponderance of the evidence that the 2003 Will was not the product of undue influence, and accordingly entered final judgment in Navarro’s favor, admitted the 2003 Will to probate, and appointed Thurston as the personal representative.

And were these facts sufficient to withstand an appellate challenge? Yup. So saith the 3d DCA:

The arguments advanced here by appellants are little more than a request for this court to reweigh the evidence presented to the trial court below, and this we cannot do. See Madrigal, 22 So. 3d at 829 (noting: “It is axiomatic that the trial court’s resolution of conflicting evidence will not be disturbed by a reviewing court in the absence of a clear showing of error, or that the conclusions reached are erroneous”) (internal quotation omitted). Upon our review of the record below, we conclude there is competent substantial evidence to support the trial court’s determination that the 2003 Will was not procured by undue influence, and therefore affirm. See Diaz v. Ashworth, 963 So. 2d 731 (Fla. 3d DCA 2007).

Antwerp | Illustrated travel posters of Places We Have Been To

Florida is a magnet for people and foreign capital. Last year alone international home buyers poured $15.6 billion into our state’s economy. Florida’s also the first choice for relocating retirees within the U.S., and the single largest recipient of all international migration to the U.S.

In Malleiro v. Mori, the 3d DCA observed that the “people of Florida benefit from the way many citizens of distant states and countries visit, invest, and often stay to live out their golden years in Florida. Some are drawn by the comfort of Florida’s sunshine and coastlines. Others come for the security provided by our low tax economy in which the personal income tax is barred by our traditions and expressly by our Florida Constitution. We owe it to them to ensure that their testamentary intentions are strictly honored regarding the disposition of their Florida property.”

Unfortunately, the statutory “clarifications” suggested by the 3d DCA in Malleiro v. Mori have yet to be realized (although they were the subject of an excellent RPPTL section white paper). Retirees from Colorado might still be surprised to learn their wills don’t always work in Florida, same goes for all those retirees from Illinois with revocable trusts that pass muster back home, but fail once they’ve moved to Florida. And just because your will’s valid in Argentina, doesn’t make it so in Florida.

Why hasn’t Florida adopted the Uniform Probate Code’s expansive test for foreign wills?

It’s not by accident all these non-Florida wills and trusts — which were perfectly valid when created back home — fail once they’re tested in a Florida probate proceeding. These unfortunate outcomes are a direct result of a policy choice we’ve made in this state: unless a foreign will’s executed in strict conformity with Florida law, it’s not going to be accepted in a Florida courtroom. In today’s interconnected world, this exceedingly narrow approach is outdated and a trap for the unwary.

It doesn’t have to be this way. For example, at the other end of the spectrum is the expansive approach reflected in section 2–506 fo the Uniform Probate Code (UPC). Here’s what the UPC approach would look like if adopted in Florida:

A written will is valid if executed in compliance with [F.S. 732.501(1)] or its execution complies with the law at the time of execution of the place where the will is executed, or of the law of the place where at the time of execution or at the time of death the testator is domiciled, has a place of abode, or is a national.

UPC Comment

This section permits probate of wills in this state under certain conditions even if they are not executed in accordance with the formalities of [F.S. 732.501(1)]. Such wills must be in writing but otherwise are valid if they meet the requirements for execution of the law of the place where the will is executed (when it is executed in another state or country) or the law of testator’s domicile, abode or nationality at either the time of execution or at the time of death. Thus, if testator is domiciled in state 1 and executes a typed will merely by signing it without witnesses in state 2 while on vacation there, the court of this state would recognize the will as valid if the law of either state 1 or state 2 permits execution by signature alone. Or if a national of Mexico executes a written will in this state which does not meet the requirements of [F.S. 732.501(1)] but meets the requirements of Mexican law, the will would be recognized as validly executed under this section. The purpose of this section is to provide a wide opportunity for validation of expectations of testators.

This UPC approach would have validated all of the non-Florida wills and trusts noted above, as well as the Belgian will rejected in the following case.

Sacha Zaidman and Patricia Zaidman v. Natchaya Zaidman, — So.3d —-, 2020 WL 1696316 (Fla. 3d DCA April 08, 2020):

This case deals with two competing wills: a Florida will executed in 2012 in conformity with Florida law, and a Belgian will executed in 2015 in conformity with Belgian law. Unfortunately for the proponents of the Belgian will, it wasn’t witnessed by two witnesses, only one. One witness is enough in Belgium, not in Florida. Here’s how the 3d DCA described the Belgian will:

The second will was filed on behalf of the appellants, Mr. Zaidman’s son Sacha and daughter Patricia (the “Children”). The document was handwritten, dated May 17, 2015, and deposited with a Rabbi in Antwerp, Belgium (the “2015 Will”). The 2015 Will purports to revoke all previous wills, states that it is only to be revealed to the Children after Mr. Zaidman’s death, and provides that any dispute regarding it is to be resolved in the Orthodox Rabbinical Tribunal in Antwerp rather than in a secular court.

Under Florida’s current “gotcha” approach to non-Florida wills, the Belgian will, which had only one attesting witness, was doomed from the start — even if we assume it was perfectly valid at the time of execution in the place where it was executed. So saith the 3d DCA:

Here, the 2015 Will was handwritten by the testator in the presence of (at best) one witness. This alone makes the will invalid as a matter of law. See § 732.502(1), Fla. Stat. (2015). Contrary to the Children’s assertion, there is no need for an evidentiary hearing to determine whether there was more than one witness. The affidavit of Mr. Matthias Moortgat, a Belgium notary, states that the testator executed the 2015 Will only “in the presence of Rabbi Yossef T. Hacohen.” An evidentiary hearing would be futile. As correctly stated by the Wife in her answer brief: “Even assuming that the 2015 Will is valid in Belgium, it is still invalid in Florida for failing to comply with the statutory formalities provided in Section 732.502(1).”

KATARZYNABIALASIEWICZ/GETTY IMAGES/ISTOCKPHOTO

Attorneys faced with elderly clients sliding into incapacity grapple with daunting ethical challenges. For family members helplessly watching from the sidelines as an elderly parent’s financially exploited, the emotional toll is way worse. And these are not isolated incidents.

According to AARP, “in 2017 alone, reports of suspicious financial activity involving older folks totaled $1.7 billion. There were 63,500 reports that year, four times as many as in 2013, according to the CFPB, an independent federal agency …”

Case in point: an elderly parent who amends a revocable trust under suspect circumstances. Once the suspected exploitation is discovered, the temptation is to challenge the trust amendment head-on. As demonstrated in the Habal case below, that would be a mistake. But that doesn’t mean you can’t do indirectly what’s impossible to do directly.

What’s the right way and the wrong way to litigate a revocable trust while the settlor’s alive?

Your only viable strategy in these cases requires a two-step process. First, seek a guardianship (this assumes the settlor’s legally incapacitated). Second, once you’re appointed guardian petition the court for authority to contest the suspect trust amendment under F.S. 744.441(k), or to reverse the harm done by re-amending the trust back to its prior provisions under F.S. 744.441(s). By the way, the reverse-trust-amendment option’s not always available. See Gurfinkel v. Josi, 972 So.2d 927 (Fla. 3d DCA 2008) (right to amend can be restricted to settlor by trust instrument itself).

Unfortunately, the guardianship route doesn’t solve the problem of the elderly settlor who isn’t legally incapacitated, but is clearly susceptible to undue influence due to diminished capacity. (For more on this point you’ll want to read an excellent series of articles by Sarasota elder law attorney R. Craig Harrison entitled Protecting the Elderly from Financial Exploitation: The Dilemma and Solution, Parts I and II.) That being said, wasting a whole lot of time, money and effort litigating a revocable trust while the settlor’s alive but not subject to a guardianship doesn’t do anyone any good either, as the litigants in the Habal case learned the hard way.

Habal v. Habal, — So.3d —-, 2020 WL 5372289 (Fla. 4th DCA September 09, 2020):

This case involved an elderly parent who created a revocable trust when his first wife died after forty years of marriage. According to the 4th DCA, at that time, “the son was a beneficiary of the revocable trust. The settlor remarried and later amended the revocable trust.” We’re not told what the change was or what the circumstances of that change were, but whatever happened, it triggered a lawsuit by son challenging the trust amendment.

Not surprising, son’s lawsuit was dismissed pursuant to F.S. 736.0207(2), which bars this kind of frontal attack while the settlor’s alive. According to the 4th DCA:

On appeal, the son argues dismissal was improper because the settlor lacked the capacity to amend the trust, as supported by medical documents. In addition, the son argues exceptional circumstances exist to allow for a tortious interference claim.

Both arguments went nowhere. First, F.S. 736.0207(2) makes this kind of lawsuit impossible while the settlor’s alive — unless it’s prosecuted by the settlor’s guardian.

[A] plain reading of section 736.0207(2) clearly requires a trust to become irrevocable “by its terms or by the settlor’s death” before any action to contest the trust may commence, unless the settlor is incapacitated, in which event only the guardian may commence such an action. ... Both sides in this case acknowledge that the son is not the guardian of the settlor’s property. Thus, the trial court properly dismissed the son’s claims based on its finding that section 736.0207(2) barred the trust contest while the settlor was still alive, regardless of whether the settlor was incapacitated or not when he amended the revocable trust.

Son’s second argument was more creative, but equally doomed. Claiming “tortious interference” isn’t a free pass. So saith the 4th DCA:

The trial court also correctly found that the son’s exceptional circumstances argument for the tortious interference claim was without merit. See Claveloux v. Bacotti, 778 So. 2d 399, 400 (Fla. 2d DCA 2001) (testator’s incompetence did not render daughter’s probate remedies inadequate or ineffective in her tortious interference suit); Whalen v. Prosser, 719 So. 2d 2, 6 (Fla. 2d DCA 1998) (“[A]lthough the law recognizes interference with an expectation as an intentional tort between litigants other than the testator, there is a tendency to prefer that such inheritance disputes be resolved in post-death proceedings and to allow the tort only in circumstances in which no adequate, alternative remedy exists.”).

Lesson learned?

If you get a call from desperate family members wanting to protect dad from obvious financial exploitation, your first question should be: is a guardianship warranted? If the answer’s “yes,” Habal provides a road map for action (by showing us what NOT to do).

If the answer’s “no” because dad isn’t legally incapacitated — but is clearly susceptible to undue influence due to diminished capacity — you’re in one of those really hard “in between” scenarios that our legal system just isn’t equipped to handle — until after the settlor’s death. Those are always the hardest calls. And by the way, don’t beat yourself up if you can’t help; you’re not the problem, it’s systemic. Here again from Part II of the Harrison articles:

Conclusion

There are numerous persons in Florida who are living with diminished capacity. Most of these elderly adults do not want to be classified as “incapacitated.” They want to maintain all of their rights. Because of distance and the change of our society, many of the elderly are socially isolated from their families. These elderly persons may become dependent on neighbors, friends, and others. They are subject to the influences of these individuals, and the numbers of those with diminished capacity are growing each year.

The courts cannot … protect these individuals from the undue influence of others or their poor judgment. The legislature is reluctant to interfere with the rights of those individuals who have legal capacity, and the legal representation of these individuals can prove difficult.

I recently spoke on Florida’s statutory authorization of electronic wills and it got me thinking once again about how consequential — or not — this legislation really is. Spoiler alert: as a practical matter, I think it was much ado about an interesting idea that’s likely to see very little real world application.

Backstory:

In 2017, the Florida Senate voted unanimously to authorize electronic wills. Was that the end of the story? Nope. Former Gov. Rick Scott vetoed the bill, saying it failed to strike the proper balance between convenience and safety.

So were electronic wills dead in Florida? Nope. With only days left in the 2019 legislative session, the Florida Senate again voted unanimously to authorize electronic wills in HB 409. And this time the bill was signed into law and can be found in probate code sections 732.521 through 732.525. This new legislation went into effect on January 1, 2020.

Was this a big change in Florida law?

Florida’s traditional approach to wills is to require “strict compliance” with all of the execution formalities (which date back almost two centuries to the UK Wills Act of 1837). The slightest slip up, no matter how inconsequential, can get your will tossed out of court (see here, here, here).

Electronic wills are a big change as a matter of legal doctrine because it’s the first time Florida law’s retreated even slightly from strict compliance with will-execution rules developed in 19th century England. Is this a big change in terms of the real world? I don’t think so. (I have lots to say on this point at the end of this blog post.)

But what about vulnerable adults, such as the elderly?

Survey data tells us most people believe having a will is important, but less than half have one. Electronic wills are intended to address this problem by making wills affordable and easily accessible to the average consumer using on-line tools that are ubiquitous in 21st century Florida. But did we go too far? Will this become yet another on-line trap for vulnerable adults, such as the elderly?

Not according to Florida’s elder-law attorneys. As reported here, Travis Finchum, representing the Bar’s Elder Law Section, is a supporter.

“We do believe it does address our concerns about vulnerable adults and individual who are susceptible to coercion and undue influence. … The stakeholders have listened to the Elder Law Section, taken our recommendations, and incorporated them into this version of the bill. So we are here to support the bill.”

And as reported here, shortly after the bill was rolled out, the Academy of Elder Law Attorneys’ Shannon Miller assured critics that vulnerable Floridians would be protected.

“We see this as progress,” Miller said. “The important parts of the bill from the elder law perspective are that it does not apply to vulnerable adults. They’re excluded. So the idea that someone would be able to go into a nursing home and take advantage of these vulnerable adults, that is actually not someone who is allowed to engage in remote witnessing.”

The statute’s anti-fraud measures:

A summary of the key protective features built into Florida’s electronic-wills regime is found in the Legislative Staff Analysis. Here’s an excerpt:

Unless the testator is a vulnerable adult, the witnessing of a will execution can be done remotely if:

  1. The individuals are supervised by a notary public;
  2. The individuals are authenticated and signing as part of an online notarization session in accordance with s. 117.265, F.S.;
  3. The witness hears the signer make a statement acknowledging that the signer has signed the electronic record; and
  4. In the case of an electronic will, the testator provides, to the satisfaction of the online notary public, verbal answers to the following questions:
    • Are you 18 years of age or older?
    • Are you of sound mind?
    • Are you signing this will voluntarily?
    • Are you under the influence of any drugs or alcohol that impairs your ability to make decisions?
    • Has anyone forced or influenced you to include anything in this will which you do not wish to include?
    • Did anyone assist you in accessing this video conference? If so, who?o Where are you? Name everyone you know in the room with you.

By the way, you get to the statute’s “vulnerable adult” exclusion in a roundabout way. First, F.S. 732.522 tells us you can’t electronically witness a will unless the process is “supervised by a notary public in accordance with s. 117.285.” F.S. 117.285 then tells us electronic witnessing isn’t valid if the person whose document is being witnessed is a vulnerable adult (as defined in F.S. 415.102).

Will there be a rush to electronic wills? NO

I don’t expect electronic wills are going to become the norm anytime soon. Why?

First, there’s a lack of certainty. Electronic wills are automatically invalid if the testator’s a “vulnerable adult.” Sounds good, except that the statutory definition of vulnerable adult is so broad and open to after-the-fact subjective interpretation, it’s likely any electronic will that’s signed by an elderly person that in any way deviates from the norm isn’t going to get enforced. Here’s how that term’s defined in F.S. 415.102:

“Vulnerable adult” means a person 18 years of age or older whose ability to perform the normal activities of daily living or to provide for his or her own care or protection is impaired due to a mental, emotional, sensory, long-term physical, or developmental disability or dysfunction, or brain damage, or the infirmities of aging.

Second, an electronic will’s not valid unless it’s in the custody of a “qualified custodian,” and few law firms (if any) can muster the level of capital investment and specialized data-storage infrastructure needed to comply with that requirement. Here’s how the requirements to be a qualified custodian are described in the Legislative Staff Analysis:

A qualified custodian of an electronic will is a person who meets all of the following requirements:

  • Is domiciled in and a resident of Florida or is incorporated or organized in Florida;
  • Consistently employs a system for maintaining custody of electronic records and stores electronic records containing electronic wills under the system; and
  • Furnishes for any court hearing involving an electronic will that is currently or was previously stored by the qualified custodian any information requested by the court pertaining to the qualified custodian’s policies and procedures.

A qualified custodian must maintain an audio-video recording of an electronic will online notarization. A qualified custodian is liable for the negligent loss or destruction of an electronic record and may not limit liability for doing so. The bill also prohibits a qualified custodian from suspending or terminating a testator’s access to electronic records. The bill requires a qualified custodian to keep a testator’s information confidential.

If electronic wills ever gain widespread acceptance in Florida it will likely be because of the scale and resources that only law companies or other large corporate actors can bring to bear. Entities like that will have the resources to be “qualified custodians,” not law firms.

And we can already see some movement in that direction. Shortly after our electronic-wills legislation was adopted the internet start-up primarily responsible for its passage, Bequest, INC (d/b/a Willing), was sold to corporate giant MetLife. Here’s an excerpt from the press release announcing that deal that hints at MetLife’s business strategy for electronic wills:

“Willing serves a digitally native audience unlikely to go see an attorney for estate planning services,” said Todd Katz, executive vice president, Group Benefits at MetLife. “Willing complements Hyatt Legal, our existing legal services offering, and positions us to lead the industry by offering customers more choices in how they address their estate planning needs.”

Finally, the “law industry” is famously adverse to change. And electronic wills are exactly the kind of “change” that makes most estate planners break out in hives. In What Is an “Electronic Will”?, published in the April 2018 edition of the Harvard Law Review, the authors identified “six potential barriers to increased uptake of electronic wills,” including “a general resistance to change.” Here’s an excerpt:

… Some scholars have identified potential reasons to doubt an increase in the creation of electronic wills. In 2007, [in an article entitled Digital Wills: Has the Time Come for Wills to Join the Digital Revolution?,] Professors Gerry Beyer and Claire Hargrove identified six potential barriers to increased uptake of electronic wills, including: (1) technical barriers such as the lack of software that would provide adequate authentication, (2) social barriers such as attorneys’ reluctance to help create electronic wills, (3) economic barriers such as the expense of implementing new technology, (4) motivational barriers such as a lack of recognition of the potential benefits of electronic wills, (5) obsolescence barriers stemming from changes in technology, and (6) a general resistance to change. Even as they identified these important roadblocks, however, they recognized that change was on the horizon, noting that “we must be ready to make the transition when the time is right.”

Ever wonder why we don’t spend much time thinking about the income tax consequences of an inheritance? Well, there’s a simple reason for that. According to IRC § 102(a), “the value of property acquired by gift, bequest, devise, or inheritance” is excluded from gross income, which means it’s not subject to income tax.

On the other hand, IRC § 102(b) tells us the income I receive on inherited property (as opposed to the underlying property itself) is subject to income tax. For example, income distributions from a trust are taxable income, but the value of the trust’s underlying principal isn’t.

These income tax rules are simple enough, and in most cases no one gives them much thought. Where things get muddy is in the litigation context, especially when cases settle (and they almost always settle). The reason for that “muddiness” is that while everyone sitting around the negotiating table is focused on the future and “who’s” getting “what” and “when,” the tax treatment of these payments turns on a backward-looking question no one’s interested in when cases settle: the nature of the underlying claims way back when the lawsuit was initially filed.

What’s the “origin of the claim” doctrine?

At today’s top marginal rate of 37%, income taxes can be significant. And it’s a tax that applies no matter how large or small the sums involved might be, as opposed to the estate tax, which is limited exclusively to large inheritances; impacting an infinitesimally small share of the population (think less than 0.1%).

In the estate litigation context, whether a settlement payment is subject to income tax — or not — depends on one critical question: what’s the settlement payment being paid “in lieu of”? In other words, if the settlement payment’s in lieu of a claim for inheritance, no tax. But if it’s in lieu of a claim for some kind of taxable income, it’s taxable.

The legal test determining these outcomes is referred to as the “origin of the claim” doctrine. Here’s how this doctrine’s defined in an excellent user-friendly article entitled Tax Issues When Settling a Trust or Estate Dispute: A Guide for the Litigator, by California attorneys Brian G. Fredkin and Ryan J. Szczepanik:

The “origin of the claim” test was applied by the U.S. Supreme Court in Hort v. Commissioner (1941) 313 U.S. 28, and later articulated in U.S. v. Gilmore (1963) 372 U.S. 39. As stated by the court in Alexander v. IRS (1stCir. 1995) 72 F.3d 938, 942, under the “origin of the claim” doctrine, it is a “well-settled rule that the classification of amounts received in settlement of litigation is to be determined by the nature and basis of the action settled,” and that “amounts received in compromise of a claim must be considered as having the same nature as the rights compromised.”

Why should trusts and estates litigators care?

Framing your lawsuit at its inception as a claim for non-taxable inheritance rights means your settlement is going to be non-taxable. Overlooking this point at the front end of your case makes it impossible to reverse course at the back end when it’s settled and everyone finally wakes up to the looming tax issues.

For an excellent discussion of how this particular tax issue can play out in the estate context, and how the “origin of the claim” doctrine’s used to work through those cases where the tax results are murky, you’ll want to go back to the Fredkin and Szczepanik article. Here’s an excerpt:

The “origin of the claim” doctrine requires that tax consequences be based upon the facts presented. The IRS has explained that the initial pleading is the most persuasive evidence of the tax treatment of an amount subsequently recovered by way of settlement. Therefore, in preparing the initial pleading, the attorney should rely on the strongest theory under state law that supports the client’s claim and achieves favorable tax results.

A trust or estate’s distribution of property is excluded from gross income under section 102(a) of the Code as property acquired by gift, bequest, devise, or inheritance. The same exclusion applies to settlement amounts paid to contesting beneficiaries in compromise of a claim as an heir. Thus, if possible, the claim should be pled for a portion of the estate as an heir, for instance, through a contest to a trust or will.

Example No. 1: Non-Taxable Claim = Non-Taxable Settlement

Again, framing your lawsuit at its inception as a claim for a non-taxable payment means your settlement is going to be non-taxable. Here are two such examples from the Fredkin and Szczepanik article:

In Marcus v. Commissioner, the tax court gave significant weight to the IRS’s admission in its pleadings that an agreement to pay the taxpayer from the net proceeds from the sale of property was a substitute for a bequest of property. The taxpayer received the proceeds in settlement of claims against her stepfather’s estate. The court held this amount to be excluded from gross income as an inheritance. …

A settlement agreement that resolves a party’s claim as an heir should state that the settlement proceeds are “in lieu and instead of” any inheritance. The tax court in Vincent v. Commissioner, held that settlement proceeds in a dispute between the stepmother and her stepson as to the ownership of real property were excluded from gross income under section 102(a) of the Code as property acquired by gift, bequest, devise, or inheritance. The tax court noted that the settlement agreement stated the payment was “in lieu and instead of any inherited interest,” thereby suggesting that language in the settlement agreement will be respected by the courts.

Example No. 2: Taxable Claim = Taxable Settlement

On the other hand, if your claims are framed as seeking payments that are subject to tax, your settlement’s also going to be taxable. Here’s an example of that kind of claim from the Fredkin and Szczepanik article:

If, in contrast, the claim as pled is for compensation for services rendered to a decedent, the tax character likely will be income to the recipient and thus taxable. In Green v. Commissioner, for example, a woman filed suit against her boyfriend’s estate for the value of “wifely” services she rendered to him during his lifetime. The court held that the settlement amount she received was compensation and thus taxable. If the claim as pled is for income from property, the tax character also likely will be income and thus taxable.

Example No. 3: Mixed Claims

And then there are those cases where it’s somewhere in between; it’s a mix of taxable and non-taxable claims. When these cases settle, whether you win or lose the tax argument isn’t going to turn on any one court filing or deposition transcript, it’ll be a “totality of the circumstances” kind of inquiry that’s much more likely to break your way if you’ve been conscious of the tax issues at every step of the case vs. accidentally backing into the right set of facts when it’s all said and done. Here’s an example of a “mixed” claim, again from the Fredkin and Szczepanik article:

Some lawsuits implicate both income and amounts in compromise of a claim as an heir. For example, in Getty v. Commissioner, the court held that a $10 million lump-sum settlement to the eldest son of J. Paul Getty was excluded from gross income under section 102(a) of the Code as property acquired by gift, bequest, devise, or inheritance. The eldest son, J. Ronald Getty, was an income beneficiary under the trust instrument. J. Paul Getty assured his eldest son that he would make him a co-equal income beneficiary with his brothers under the trust, but he never did so. After J. Paul Getty’s death, J. Ronald Getty asserted a claim against the remainder beneficiary, the J. Paul Getty Museum, seeking a constructive trust over an amount equal to the amount J. Ronald Getty would have received from the trust had his father carried out his promise. In holding that the $10 million settlement payment was excludable from gross income, the court reasoned that had J. Paul Getty performed his promise to remedy the inequality, he probably would have done so by a bequest of property. The court explained that when contesting a deficiency determined by the Commissioner of Internal Revenue, the taxpayer must show the merits of his claim by a preponderance of the evidence. The taxpayer need not prove the proceeds are “clearly classifiable” as either property or income from property.

Illustration by Mikel Jaso

If you’re working with the trustee of an irrevocable trust that needs fixing for some reason, your first thought should be to simply re-write the thing by using F.S. 736.04117, Florida’s trust “decanting” statute. Decanting allows you to re-write an irrevocable trust agreement by figuratively pouring the assets from the old trust into a new trust (like decanting a bottle of wine, get it?). And to make a good thing better, our decanting statute was legislatively overhauled in 2018 to make it even easier to modify irrevocable trusts in Florida.

Not surprisingly, decanting is all the rage in estate planning circles; as it should be: it’s a legislatively-sanctioned way to privately re-write an irrevocable trust without going through the costs and delays inherent to a judicial modification proceeding. (Yes, this all gets done out of court.) For a solid general introduction to decanting you’ll want to read Decanting is Not Just for Sommeliers, co-authored by Texas law prof. Gerry W. Beyer. Here’s an excerpt:

Times change, needs change, and laws change thus giving a trustee motivation to decant. Examples of reasons to decant include to:

  • Correct a drafting mistake;
  • Clarify ambiguities in the trust agreement;
  • Correct trust provisions, due to mistake of law or fact, to conform to the grantor’s intent;
  • Update trust provisions to include changes in the law, including new trustee powers;
  • Change situs of trust administration for administrative provisions or tax savings;
  • Combine trusts for efficiency;
  • Allow for appointment or removal of trustee without court approval;
  • Allow for appointment of a special trustee for a limited time or purpose;
  • Change trustee powers, such as investment options;
  • Transfer assets to a special needs trust;
  • Adapt to changed circumstances of beneficiary, such as substance abuse and creditor or marital issues, including modifying distribution provisions to delay distribution of trust assets;
  • Add a spendthrift provision;
  • Divide a “pot trust” into separate share trusts;
  • Partition of trust for marital deduction or generation-skipping (GST) transfer tax planning.

But before you pull the trigger on one of these transactions you’ll also want to do a deep dive into all the potential tax traps that seem to bedevil estate planners at every turn. And to do that you’ll want to read An Analysis of the Tax Effects of Decanting, co-authored by super star tax lawyer Jonathan Blattmachr, as well as the more recent Tax Considerations in Trust Terminations, Modifications, and Decanting Under Connecticut’s New Uniform Trust Code, by Ronald Aucutt, another super star tax lawyer.