Illustration: Calum Heath, Bloomberg

It’s an election year, which means if you’re a trusts and estates lawyer, you (and your clients) once again get to ruminate on the future of the estate tax.

And elections do matter. President Trump’s 2018 tax bill included a huge estate tax win for the wealthy, doubling the amount that can be passed to heirs tax free to about $22 million for a married couple (indexed for inflation, in 2020 it’s now over $23 million).

My own very subjective sense of the news is that the estate tax hasn’t garnered nearly as much attention this election cycle as it has in the past, but that may just be me. Anyway, the NYT recently published an excellent opinion piece by NYU Law Prof. Lily Batchelder entitled Tax the Rich and Their Heirs that’s packed with the kind of statistics law and economics nerds (like me!) love. Regardless of your politics, it’s well worth reading. Here’s an excerpt:

A massive transfer of wealth is underway and will accelerate in the coming years. Baby boomers and the generation that preceded them currently own $84 trillion, or 81 percent of all U.S. household wealth — wealth that will before long be inherited by their children and other beneficiaries.

This extraordinary transfer of resources will further cement the economic inequality that plagues the United States because this wealth is tightly concentrated in the hands of a few. And it will be passed on as taxes on such transfers are at historic lows.

Among high-income countries, the United States has one of the lowest levels of intergenerational economic mobility, meaning a child’s economic future is heavily influenced by his or her parents’ income. We have the second-highest level of income inequality after taxes and government transfers, and the highest level of wealth inequality. These disparities are sharply skewed by race. Median black household wealth is only 9 percent that of white households, a racial wealth gap that is even larger than in 1968. New research suggests the pandemic will further increase wealth inequality, as the affluent save more and the poor earn less.

Effectively addressing these systemic inequalities will require many things. But increasing the taxation of inheritances is one vital component.

This year, Americans will inherit about $765 billion. People who were already rich will inherit a lot more than people who weren’t wealthy. So will white households; they are twice as likely as black households to receive an inheritance, and receiving an inheritance is associated with an increase in wealth that is 26 times larger for white families than for black families. (This accounting of inheritances includes gifts and bequests, other than those to spouses or to support minor children.)

Roughly 40 percent of all household wealth stems from inheritances. This means that 40 percent of why some Americans are extraordinarily well off has nothing to do with smarts, hard work, frugality, lucky gambles or entrepreneurial ingenuity. It is simply because they were born to rich parents.

Dorothy and Leon Bloom, shown in an undated photo, provided by Dorothy Bloom to the Sarasota Herald-Tribune.

First filed in 2014, this contested guardianship proceeding has dragged on in one form or another for six years (which is a really long time, even by guardianship standards).

By now the three elderly friends at the center of this saga have all died. But a small part of their story lives on in a wonderfully detailed account of the case first published back in 2015 entitled A civil dispute over guardianship. Here’s an excerpt:

Leon Bloom, 96, the founder of an international swimming pool chemical company, is by all accounts a sociable and generous man — the kind who inspires steadfast loyalty among his friends, his family, and the trio of caregivers who now see to his needs around the clock.

He is also the focus of an unusual elder guardianship case that pitted his longtime friend and attorney, former state Sen. Bob Johnson, against his wife of 41 years, Dorothy Bloom.

The Blooms’ friendship with the Johnsons was almost as old as their marriage. The two families celebrated holidays together, and the couples went on cruises to Alaska and the Caribbean.

By the way, the Sarasota Herald-Tribune reporter who wrote this story, Barbara Peters-Smith, was also responsible for a series of groundbreaking exposés on Florida’s elder guardianship system, which were at least partially responsible for important legislative reforms.

“Delightful people”

Former State Sen. Bob Johnson. — Sarasota Herald-Tribune STAFF PHOTO / MIKE LANG

Back in 2015, Bob Johnson (acting as trustee of Leon’s trust), and Dorothy (Leon’s wife), settled their differences over how best to pay for Leon’s care and Dorothy’s related expenses in mediation. As reported in the Herald-Tribune, the two insisted on remaining civil to the very end.

According to Johnson’s attorney, “There were no entrenched interests that were adverse … As far as I can tell, these were delightful people; they had a lovely courtship; he was successful; they had a nice life; she was accomplished; they had a fantastic friendship. I mean, this is Bob’s best friend in the world. This is not about money.”

Unfortunately, the case soon became very much “about money.”

Within months of the mediation conference, Leon and Bob both passed away. So why has this case continued for another five years, including seven separate appellate proceedings … all post mediation? Hard to say. But this we do know, a lot of that litigation had to do with legal wrangling over fees. As in, who’s supposed to get paid from Leon’s trust, and how much are they entitled to?

Fee disputes are unpleasant affairs and almost always bad for business for the attorneys involved. But sometimes they’re unavoidable. Here’s what is avoidable: procedural mistakes that make a bad situation worse for all concerned.

Guardianship litigation + trust litigation = confusion?

Trust disputes and guardianship disputes are governed by separate bodies of law. This distinction’s often lost when trusts get dragged into contested guardianship proceedings — especially if the dispute involves fees. It’s a mistake that can be costly … as the parties in the Bloom case have learned over the years.

For example, if your plan is to get paid from the ward’s guardianship estate, you’re required to serve notice on all “interested persons,” as that term’s used in Ch. 744, Florida’s guardianship law (see here). On the other hand, if your plan is to get paid from the ward’s trust, you’re now operating within the confines of Ch. 736, Florida’s Trust Code, which means you have to serve notice on all “qualified beneficiaries” (possibly including dozens of individuals and charities who previously had no part in the case), as reported here the last time I wrote about the Bloom case.

In re Guardianship of Bloom, — So.3d —-, 2020 WL 2892390 (Fla. 2d DCA June 03, 2020)

This time the issue is more basic: who’s supposed to benefit from legal fees incurred by a ward’s trustee? The trustee or the beneficiaries of the trust? In retrospect the answer is self evident: the trust beneficiaries.

But real life is never that simple. For reasons not fully explained in the 2d DCA’s latest opinion in this case linked-to above, the trial judge concluded it would be unfair to require the trustee to refund all of the fees he’d paid his lawyer with trust funds for services that never should have been performed without prior court approval. That may have been the “fair” result, but it wasn’t the “legal” result, as explained by the 2d DCA:

Despite finding that the payments to [trustee’s attorney] were “ill-advised and inappropriate,” the court declined to order [the trustee] to return them—but not because [the trustee] met his burden that such payments were reasonably necessary and for the benefit of the Trust. Instead, the court concluded that it “would be inappropriate and an undue punishment” to [the trustee] because those funds had gone to his lawyer … rather than to [the trustee] directly. However, as [the opposing party] correctly contends, those funds went to his attorney for the benefit of [the trustee]—not for the benefit of the Trust. Cf. McCormick v. Cox, 118 So. 3d 980, 987 (Fla. 3d DCA 2013) (affirming disallowance of attorney’s fees that trustee paid to law firm in beneficiaries’ action to remove trustee for breaches of fiduciary duties). Given that [the trustee] failed to demonstrate that his payments to [his attorney] were “for the benefit of the trust, and not for his own benefit,” the circuit court abused its discretion in failing to order [the trustee] to return those funds to the Trust. See Barnett, 340 So. 2d at 550. Accordingly, we reverse and remand with instructions that the circuit court enter an order requiring [the trustee] to return all of the funds he paid to his attorney.

Sometimes third parties who had no knowledge of a family’s probate proceeding and wouldn’t have had standing to intervene anyway, are nonetheless adversely impacted by legally improper (and usually self serving) orders entered in these proceedings.

In a lot of ways, when third parties are confronted with probate orders that are facially invalid, challenging the merits of the order is the easy part. The hard part is getting past all of the procedural hurdles protecting these orders from collateral attack once the probate proceeding’s concluded. Those arguments are front and center in this thoughtful and well-researched federal court order … which should make it required reading for anyone making a living as a probate attorney in Florida.

Warner v. Quicken Loans, Inc., 2020 WL 2097981 (M.D. Fla. May 01, 2020 Slip Copy)

Assume a husband and wife own their home as tenants by the entireties (TBE). Under Florida law when a spouse dies her TBE property passes to her surviving spouse automatically by operation of law, which means TBE property isn’t a probate asset (or subject to the probate court’s jurisdiction).

Now what would happen if a family agreed to a homestead order in a wife’s probate proceeding that simply ignored Florida’s TBE law and instead granted a life estate in the couple’s home to her husband, with a vested remainder interest to his daughters? If no one objects and the probate judge doesn’t catch the error, nothing happens; the legally improper homestead order stands. And that’s what happened in this case.

Fast forward a few years; assume husband mortgages the home (the debts payable to Quicken Loans), defaults on the loan, and dies shortly thereafter. If the homestead order entered years earlier in his wife’s probate proceeding controls, Quicken’s mortgage is worthless (when husband died his life estate evaporated).

What’s a “brutum fulmen” and why should I care?

Relying on a delightful Latin phrase that should warm the heart of even the crustiest logophile, Quicken argued the homestead order was a brutum fulmen that didn’t impact its mortgage rights. A brutum fulmen, according to Black’s Law Dictionary, is a “judgment void upon its face which is in legal effect no judgment at all, and by which no rights are divested, and from which none can be obtained, and neither binds nor bars anyone.” For example, in In Re Prudence Co., 79 F.2d 77 (2d Cir. 1935), the court held that a declaration by a state that a certain class of corporations cannot file bankruptcy petitions is brutum fulmen. 79 F.2d at 80.

Here’s how the court framed the competing arguments in this case:

The crux of the dispute concerns the effect of the homestead order. Quicken argues the order is a brutum fulmen as to ownership interests in the property, emphasizing the probate court was without jurisdiction to adjudicate interests in the property because the property had passed to the father outside of probate. The daughters argue the order provided their father a life estate interest in the property and them remainder interests. Their father’s mortgage, they continue, could encumber only his interest—the life estate—and that interest was extinguished upon his death, “removing any title for which [the mortgage] could attach.”

Did the probate judge have the jurisdictional authority to enter a homestead order contrary to Florida TBE law? NO

The court ruled in Quicken’s favor on the key underlying issue: the homestead order was invalid because the probate judge lacked jurisdictional authority over the house, which was TBE property and thus bypassed the probate proceeding as a matter of law.

A probate court has no jurisdiction over property not cognizable in probate, and any judgment is binding only on the rem over which the probate court has jurisdiction. Spitzer v. Branning, 135 Fla. 49, 53 (1938); accord Carlton Fields, P.A. v. Locascio, 81 So. 3d 611, 612 (Fla. 3d DCA 2012). “It, therefore, follows that if the judgment of the probate court purports to bind the rem over which the court is without jurisdiction the judgment is not binding on such rem and is a nullity in that regard.” Spitzer, 135 Fla. at 53. Where a probate court is without jurisdiction to dispose of property, no party’s conduct can confer jurisdiction. Id. Thus, the “mere inclusion of the description of property in pleadings or orders in probate proceedings cannot confer jurisdiction of the rem.” Id.

Can you collaterally attack a homestead order entered by a probate judge lacking jurisdictional authority over the homestead property? YES

Having quickly disposed of the jurisdictional argument, the court turned to the issues that usually trip third parties up in cases like this. It’s this discussion that makes this order worth holding onto for Florida probate attorneys.

The daughters argued Quicken was barred as a matter of law based on “issue preclusion” from challenging the homestead order. This argument went nowhere for two reasons. First, the homestead issue was never litigated in the original probate proceeding. Second, issue preclusion won’t preserve an order that’s entered by a probate judge lacking jurisdiction.

Under Florida law, issue preclusion applies if an identical issue has been fully litigated by the same parties or their privies and a court of competent jurisdiction has rendered a final decision. Id. (citing Essenson v. Polo Club Assocs., 688 So. 2d 981, 983 (Fla. 2d DCA 1997)). Florida courts enforce “with rigor” the requirement that issue preclusion extends only to an issue that was actually adjudicated. Crowley Mar. Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 931 F.3d 1112, 1129 (11th Cir. 2019).

Here, at a minimum, issue preclusion does not apply because whether the homestead order provided the father a life-estate interest in the property and the daughters remainder interests—the issue here—was never litigated during the probate proceedings. Moreover, because the probate court lacked jurisdiction over the property, no judgment purporting to bind the property could be binding.[FN12] See Spitzer, 135 Fla. at 53.

[FN12] Under Florida law, the misapplication of the law to the facts and circumstances that took place is not a proper basis for estoppel. Clifton v. Clifton, 553 So. 2d 192, 194 n.3 (Fla. 5th DCA 1989). Here, as stated, the homestead order did not purport to effectuate a change in ownership interest in the property. Had it, the order would provide no basis for estoppel because the court would have been adjudicating interest in property outside the estate.

Daughters also argued Quicken can’t challenge a homestead order entered in a probate proceeding it had no standing to participate in that had long-since concluded. And oh by the way, Quicken should have known about the homestead order before the home was mortgaged.

Before the homestead order, the county tax collector levied taxes against the property in the father’s and mother’s names. … After the order but before the father died, the county tax collector levied taxes against the property in his name as a “life estate” and the name of one daughter. … After the father died, the county tax collector levied taxes against the property in the name of both daughters.

Once the court decided the original probate judge didn’t have the jurisdictional authority to enter the homestead order, none of these secondary arguments mattered.

While arguing Quicken is bound by the homestead order, the daughters also argue Quicken lacks standing to challenge the validity of the homestead order, contending Quicken was a third party on notice of the order (through the order itself and the tax bills) when it acquired its interest. The argument fails because Quicken is challenging not the validity of the order but the consequence of the order on the mortgage Quicken holds.

In short, the daughters acquired no interest in the property through the homestead order, Quicken’s mortgage interest stands, and their [contrary] quiet-title claim fails as a matter of law.

So what’s the take away?

According to F.S. 731.105, “[p]robate proceedings are in rem proceedings.” And judgments in rem are generally “regarded as an exception to the rule of res judicata limiting the conclusiveness of a judgment to the parties to the proceeding.” Cavanaugh v. Cavanaugh, 542 So. 2d 1345, 1352 (Fla. 1st DCA 1989).

It’s this general rule that usually makes it impossible for third parties to challenge the preclusive effect of facially invalid homestead orders entered by consent in probate proceedings long since concluded. The key to solving this riddle is focusing on the original court’s lack of jurisdiction. In other words, you’re not asking a new judge to re-litigate an issue previously decided by prior judge; you’re asking a new judge to conclude the original judge never had the jurisdictional authority to decide the homestead issue in the first place. That distinction may seem subtle, but it’s outcome determinative.

I don’t usually post this sort of thing. But this year is different.

“The many restrictions due to COVID-19 have stripped the ‘happy’ from our Memorial Day, perhaps reminding us that without neighborhood barbecues and retail bonanzas, the day is really about what the small town of Waterloo began,” Army spouse Frances Tilney Burke of the American Enterprise Institute wrote in a column published in InsideSources.com. “The silver lining of our quarantines, our solitude, and our adherence to stay-at-home orders is that (Memorial day 2020) may be full of thoughtful memories, solemn tributes and quiet commemorations — an acknowledgement of sacrifice rather than a frenzied dash to the local big-box stores. This year, shed of celebration, the shadow of COVID-19 gives us the opportunity to remember (as President Abraham Lincoln did in the Gettysburg Address) ‘those who here gave their lives that (our) nation might live.'”

Semper Fi

Most probate proceedings are uncontested family affairs. In almost all respects that’s a good thing. There’s one downside, however. Because there’s no one contesting anything (and thus keeping everyone on their toes), mistakes happen.

For example, a family might consent to a homestead order that’s actually contrary to the decedent’s will. If everyone impacted by the mistake agrees to undo it (or live with it), no harm no foul. On the other hand, fixing a mistake when there’s conflict can be tricky … as demonstrated in the following case.

Mullins v. Mullins, — So.3d —-, 2019 WL 2396753 (Fla. 5th DCA . June 07, 2019)

In this case a woman died survived by three adult children, two sons and a daughter. The decedent left instructions in her will that basically allowed her two sons to live in her home for as long as they got along, and when both decided they’d had enough, the house was to be sold and the proceeds split as “agreed” by her three children. This was a problem waiting to happen.

On appeal the 5th DCA construed mom’s will as devising a life estate in her homestead property to her two sons and a remainder interest to all three siblings. During the probate process the three siblings consented to entry of a homestead order that devised the property to all three siblings equally, omitting any reference to the life estate. That was a mistake.

Shorty after mom died one of the brothers “made it impossible for anyone else to occupy the property” prompting his two siblings to (very reasonably) seek a partition order from the probate judge forcing a sale (thus allowing everyone to peaceably go their separate ways). The brother who was causing the conflict cried foul, pointing to the life estate he’d inherited in the house under his mom’s will, which barred the kind of sale his siblings were now attempting to force on him. The two siblings that wanted the partition order ultimately prevailed at the trial-court level on the grounds that objecting-brother’s consent to the faulty homestead order was the equivalent of a written agreement under F.S. 733.815 waiving his life estate.

Does a signed “consent” = “written agreement” to altering your share of an estate? NO

It’s perfectly legal and acceptable for estate beneficiaries to enter into agreements among themselves divvying up inheritances any way they want; it’s their property, they can do with it as they please. And F.S. 733.815 provides a statutory vehicle for getting these deals done while the probate proceeding remains ongoing (as long as they’re in writing). So does a signed “consent” to a homestead order that’s at odds with the decedent’s will amount to a binding “written agreement” under F.S. 733.815 waiving property rights? NO, so saith the 5th DCA:

While “[h]eirs and beneficiaries may formally agree to alter their prescribed interests in an estate, … such an agreement must be in writing and comply with section 733.815, Florida Statutes.” Clifton v. Clifton, 553 So. 2d 192, 194 (Fla. 5th DCA 1989) (footnote added). The consents signed by Robert, Kenneth, and Carla state that each beneficiary “hereby consents to the Petition to Determine Homestead Property; consents to the entry of an Order Determining Homestead Property; waives service of Notice of Hearing upon the undersigned and consents to entry of such order ex-parte.” Conspicuously missing is any reference to an agreement to alter the interests, shares, or amounts to which Robert, Kenneth, and Carla are entitled under the will. See § 733.815, Fla. Stat. (2011). And as conceded by counsel, no contract between the three exists that would alter the interests, shares, or amounts to which they are entitled. Id. As such, the consents signed by Robert and Kenneth do not constitute an agreement to reject their life estates. The consents simply establish that the siblings consented to an order confirming their homestead exemption and nothing more.

Image source: How to Keep an Inheritance From Going to a Spouse During Divorce – WSJ.

In 1951 Florida added a provision to its Probate Code automatically cutting divorced spouses out of each others’ wills (F.S. 732.507(2)). In 1989 a similar provision was added to our Trust Code (F.S. 736.1105). And in 2012 the post-divorce automatic revocation rule was extended to non-probate transfers, such as pay-on-death payments from life insurance policies, annuities, employee benefit plans, and IRAs (F.S. 732.703, which I wrote about here when first adopted).

Does the timing of the marriage matter? YES

Either by design or oversight, there’s a key distinction between the older will and trust rules and the more recent non-probate transfer rule. For wills and trusts, the automatic revocation rule applies only if the marriage predates the operative document.

  • F.S. 732.507(2): … “a will executed by a married person …”
  • F.S. 736.1105: … “a revocable trust … executed by a husband or wife …”

For example, if your will or trust benefits your girlfriend, who you then marry and subsequently divorce, your ex’ keeps the inheritance (the marriage did not predate the will/trust). On the other hand, if you named this same girlfriend the beneficiary of your life insurance policy or IRA, she’s out of luck. For purposes of the non-probate transfer rule the sequence of execution and marriage doesn’t matter.

  • F.S. 732.703(2): “A designation made by or on behalf of the decedent providing for the payment or transfer at death of an interest in an asset to or for the benefit of the decedent’s former spouse is void as of the time the decedent’s marriage was judicially dissolved or declared invalid by court order prior to the decedent’s death, if the designation was made prior to the dissolution or court order.”

Gordon v. Fishman, — So.3d —- 2018 WL 4039135 (Fla. 2d DCA August 24, 2018)

In 2005 Ron Priever executed a will devising property to his then fiancé, Silvia Gordon. The couple married two years later, and subsequently divorced in 2013. Priever died two years after the divorce, leaving no children or spouse. He never revoked his 2005 will.

The decedent’s father claimed F.S. 732.507(2) automatically cut Gordon out of the will once she and the decedent divorced. Gordon pointed out the statute didn’t apply to her because she wasn’t married to the decedent at the time he signed his will. The probate judge ruled against Gordon anyway. Wrong answer said the 2d DCA. Here’s why:

The legislature’s use of the adjective “married” to modify “person” is a clear indication that it intended the “person” executing the will to be “married” at the time of execution.[FN2] Thus, section 732.507(2) applies only when the marriage predates the will. The decedent did not marry Ms. Gordon until about fifteen months after he executed his will. Section 732.507(2) does not apply here.

[FN2] Notably, the legislature’s use of the adjective “married” in section 732.507(2) differs from the statutes in other states—where the courts have determined the sequence of the execution of the will and the marriage was irrelevant—as the statutes in those states did not include the adjective “married” or any other language that required the testator to be married prior to the execution of the will. See, e.g., Davis v. Aringe, 292 Ark. 549, 731 S.W.2d 210, 211-12 (1987); In re Estate of Reeves, 233 Cal.App.3d 651, 284 Cal.Rptr. 650, 654 (1991); In re Estate of Forrest, 302 Ill.App.3d 1021, 236 Ill.Dec. 169, 706 N.E.2d 1043, 1045-46 (1999); In re Marriage of Duke, 549 N.E.2d 1096, 1099-1100 (Ind. Ct. App.), on reh’g, 552 N.E.2d 504 (Ind. Ct. App. 1990); Russell v. Johnston, 327 N.W.2d 226, 229 (Iowa 1982); In re Estate of Bloomer, 620 S.W.2d 365, 367 (Mo. 1981) (“The statute does not say ‘all provisions of any will made subsequent to the marriage and in favor of the spouse so divorced are thereby revoked.’ ”); In re Will of Reilly, 201 N.J.Super. 306, 493 A.2d 32, 33, 35 (1985); In re Estate of Knospe, 165 Misc.2d 45, 626 N.Y.S.2d 701, 702-03 (Surr. Ct. 1995).

Former U.S. Attorney General Janet Reno, who died in 2016, stands outside her home in Southwest Miami-Dade. [Bill Cooke | Special to the Tampa Bay Times (2002)]
When Janet Reno executed a trust in 2008, it was just a few years after she’d concluded her run as the second-longest serving Attorney General in U.S. history.

And what was top of mind for her? It wasn’t some grand plan to immortalize herself. Based on the text of her trust agreement, her focus was on what would happen to the family home once she was gone.

The Reno home:

When her mother died in 1992, Reno inherited the family’s built-by-hand, un-airconditioned, rambling Cracker-style house that had served as the launching pad for her career and remained an emotional touchstone for life. Here’s how the house and surrounding 3+ acres were described in a 2002 Miami Herald story:

The image of Reno’s marooned-in-the-tropics upbringing has become South Florida legend over the years, a tale whittled and polished in countless political speeches into one enduring symbol: the house. …

Once located as far west as her mother could build without hitting swamp land, the house now sits — unchanged and unbowed — in the heart of Kendall in suburban Miami, a leafy oasis at the end of an unmarked driveway. Ungainly on the outside, an unruly jumble on the inside, it was sturdy enough to weather Hurricane Andrew with the loss of just one shingle. (The lost shingle is nailed to the wall by the kitchen, enscribed: “Andrew, Aug. 24, ’92.”)

… In eight years as attorney general and 15 as state attorney in Miami, Reno has summoned up “the ranch” as proof of her Old Florida roots until the house has become virtually indistinguishable from the woman herself.

“Mother built it, and Daddy helped with the heavy work when he came home from work at night,” Reno says whenever she’s asked about the house. “That taught me that you can do anything you put your mind to, if you have some time.”

The dangers of “over” drafting:

A well-drafted trust agreement should be elegant, clear, and unambiguous; it should be organized, cohesive and thoughtful. Ironically, your client can be her own worst enemy when it comes to drafting her documents if there’s an issue she really, really cares about, which often leads to “over” drafting.

What I mean by over drafting is the tendency to treat a will or trust agreement like a long family letter vs. the carefully crafted, technical legal instrument it needs to be to avoid future disputes. That’s what I see in the Reno trust.

Reno never married or had children. The focus of her planning was instead on what was supposed to happen with the family home she herself had inherited from her mother. This concern is so important to Reno the word “homestead” gets repeated 18 times in her trust. Unfortunately, this gave rise to internal inconsistencies that ultimately lead to the outcome no one wants: intra-family litigation.

Reno v. Hurchalla, — So.3d —-, 2019 WL 3938297 (Fla. 3d DCA August 21, 2019):

Reno died on November 7, 2016. In Art. V.D. of her trust, the trustee is instructed to sell the Reno home and split the proceeds equally among her nieces and nephews if Reno’s brothers, Mark and Robert, predecease her (which they did).

Upon the death of MARK and ROBERT, in the event the homestead is still owned by the Trust, such property shall be sold and the proceeds of the sale, together with any other corpus and undistributed income still owned by the Trust shall be distributed to Settlor’s nephews and nieces, share and share alike, free of any Trust.

In Art. VI.C. of her trust, the trustee is given contrary instructions. In this section of the document the trustee is instructed to gift the Reno home to the University of Miami (UM) to be preserved “in perpetuity.”

Upon the death of Settler, in the event the homestead is still owned by the Trust, the Trustee shall offer to gift the homestead to the University of Miami upon such terms and conditions as the Trustee deems appropriate and in the best interest of the Trust … The University will preserve and maintain the homestead in perpetuity and may utilize the homestead for such uses as it deems appropriate so long as such use does not destroy the homestead or its unique character …

Following Reno’s death, one of her nieces claimed the trust should be construed as forcing a sale of the family home. The rest of the family sided with preserving the home. The case wasn’t framed as a trust-construction action, but was instead litigated as a cy-près proceeding involving an alternate gift to Miami-Dade College (MDC) following UM’s declination.

Cy-près Doctrine:

“Cy-près” is an old Norman French term meaning “as near as possible” or “as near as may be.” When a settlor’s original “charitable purpose” becomes impossible, impracticable, or illegal to perform, the cy-près doctrine, which has been codified in section 736.0413 of Florida’s Trust Code, allows a court to amend the terms of the trust as closely as possible to the original intention of the settlor to prevent the donation from failing.

When UM declined, MDC and the estate negotiated a Real Estate Transfer and Preservation Agreement and Trustee’s Distributive Deed effectuating the donation and preserving the Reno home. MDC’s south campus is just a half-mile away and the home’s expected to become an extension of the school’s environmental center.

Based on this agreement the trial court and the 3d DCA both ruled the Reno home should go to MDC instead of being sold. Here’s how the 3d DCA explained its rationale:

In the present case, the specified charitable donee had not “ceased to exist” when Ms. Reno passed away, but the statute’s use of the terms “impracticable” or “impossible to achieve” addresses the Successor Trustee’s alternative. The University of Miami’s declination to accept the charitable transfer made the original disposition impossible to achieve. But the Successor Trustee identified an even-closer charitable, educational institution to accept the gift and to comply fully with Ms. Reno’s conditions “in perpetuity,” respecting the “unique character” and “historical importance” of the Reno Homestead.

Article VII of the Trust, “Trustee’s Powers,” specified in section A that in administering the Trust, “the Trustee shall have all powers granted a trustee by the Statutes of the State of Florida and laws of Florida ….” One such statutory power is that conferred by the cy pres statute, section 736.0413, invoked by the Successor Trustee in this case.

After losing at the 3d DCA, the objecting niece asked the Florida Supreme Court to weigh in. Both sides filed briefs (see here, here). The Florida Supreme Court declined to intervene, which means the 3d DCA’s ruling stands.

Bonus: Drafting gift agreements that are enforceable by family members:

As explained in my write up of the Bower Foundation case, in the absence of a written gift agreement preserving standing for a donor’s family, they simply have no legal say in how the gift is administered in future years. For example, if MDC decided 10 years from now that the best way to “preserve” the Reno home was to build a parking garage over it, Reno’s family wouldn’t have standing to challenge that decision in court in the absence of a family-standing clause.

The Reno estate apparently anticipated this problem and incorporated a family-standing clause into both the gift agreement and the gift deed. Here’s an excerpt from the gift agreement:

Any action to remedy an alleged breach of the conditions set forth in this paragraph 3 must be brought in the Circuit Court in and for Miami-Dade County, Florida and shall only be brought by no less than a majority of the named beneficiaries identified in the second paragraph of Article III of the RENO TRUST. For this purpose, a majority in interest of the lineal descendants of a deceased beneficiary identified in the second paragraph of Article Ill of the RENO TRUST may constitute a required beneficiary referred to in the preceding sentence. However, before an action may be brought, COLLEGE must be given written notice detailing the alleged breach and be provided no less than thirty (30) days within which to cure or begin to cure the alleged breach.

If you’re a practicing trusts and estates attorney, sample documents vetted by well-represented parties in real life transactions are gold. You’ll want to add both of these documents to your tool box for future reference.

In Re: Estate of John E. Robinson, — So.3d —-, 2020 WL 697795 (Fla. 3d DCA February 12, 2020)

If a man dies intestate, any children he had while married are automatically considered his heirs, and entitled to a share of his estate as determined by F.S. 732.103. Not so for out-of-wedlock children. If those heirs want to claim a share of their father’s estate, and someone objects, they’re required to prosecute a paternity claim.

So can you prosecute paternity claims in probate proceedings? Yes, but only if the claim’s not time barred. Here’s the problem, F.S. 95.11(3)(b) imposes a 4-year statute of limitations for paternity actions, starting as of the date the putative child turns 18.

By the time paternity’s being litigated in a probate proceeding, the claimant’s almost always a middle aged adult. Which means F.S. 95.11(3)(b) effectively bars 99% of all paternity actions in probate proceedings … even if you have irrefutable DNA evidence.

The legislative fix came in 2009 when F.S. 732.108(2)(b) was amended for the express purpose of ensuring that F.S. 95.11 does NOT bar paternity actions in probate proceedings. As explained in the bill’s Legislative Staff Analysis, the change was intended to

allow a determination of paternity to be made in a probate proceeding solely for the purpose of proving heirship even if it is after four years from the date the child attained majority. Without this change, current case law prohibits a person from proving that someone is her father, even if she has hard scientific data proving it. Her brother, born to the same father but a different mother, could prove his heirship, if, for example, his parents participated in a marriage ceremony, even if the “marriage” is void. The comparative result is fundamentally unfair and depends entirely on the type of proof the two siblings have.

Are Florida’s courtroom doors closed to older Floridians seeking to establish paternity in probate proceedings, but wide open for everyone else? YES

Great, so problem solved right? Nope. The 2009 legislative change wasn’t retroactive. In other words, the new statute helps you only if your paternity claim wasn’t already time barred in 2009. It didn’t revive previously time-barred claims.

So if you happen to have been age 21 or younger in 2009 (i.e., your paternity action wasn’t already time barred), you’re good to go. On the other hand, if you happen to have been age 22 or older in 2009 (18 + 4 = 22), you remain forever time barred from adjudicating paternity in a Florida probate proceeding.

The reason for why the statutory change isn’t retroactive was explained by the 3d DCA in Rose v. Sonson (a similar paternity case I reported on here):

“[o]nce a claim has been extinguished by the applicable statute of limitations, the claim cannot be revived because a constitutionally protected property right to be free from the claim has vested in the defendant.” Id. at 1210; see also Wiley v. Roof, 641 So.2d 66, 68 (Fla. 1994) (“Once the defense of the statute of limitations has accrued, it is protected as a property interest just as the plaintiff’s right to commence an action is a valid and protected property interest…. Florida’s statute of limitations, section 95.011, bars all action unless commenced within designated times…. Once an action is barred, a property right to be free from a claim has accrued.”).

Case Study:

In the linked-to-case above a woman (“Michel”) claiming to be the daughter of a man who died intestate filed a petition seeking a blood sample of the decedent for DNA testing, which she claimed would establish he was her father. The decedent’s sister (“Robinson”) objected. The probate judge granted the request for DNA testing to establish paternity,

reasoning that “if there is a DNA sample that could scientifically establish whether or not John Robinson is the father, it would be … an extreme injustice for this not to occur.” The probate court emphasized that it was a court of equity …

One of the hardest lessons you learn over time as a practicing attorney is that just because an outcome seems unfair, doesn’t make it legally wrong. Justice Holmes is said to have once quipped that “This is a court of law, young man, not a court of justice.” And he was right.

But we’re all human (including judges), and the “unfair” consequences of random events beyond anyone’s control (such as, what age you happen to have been in 2009) can be awfully hard to ignore. So can a probate judge’s “equitable” powers be used to get around the law on the books, especially if that law isn’t particularly equitable to the person standing before the judge? Nope. So saith the 3d DCA:

Michel maintains that the probate court sits in equity and must do what is equitable. She argues that because Robinson raised the issue that she is not the decedent’s daughter, she should be given every opportunity to prove the opposite. While we are sympathetic to Michel’s argument, the probate court erred on rehearing when it invoked equity as a basis to ignore the statute of limitations and this court’s precedents of Rose and Dixon. As the Florida Supreme Court has explained:

[W]e cannot agree that courts of equity have any right or power under the law of Florida to issue such order it considers to be in the best interest of ‘social justice’ at the particular moment without regard to established law. This court has no authority to change the law simply because the law seems to us to be inadequate in some particular case.

Flagler v. Flagler, 94 So. 2d 592, 594 (Fla. 1957) (en banc). Where the legislature has provided “a plain and unambiguous statutory procedure … courts are not free to deviate from that process absent express authority.” Oreal v. Steven Kwartin, P.A., 189 So. 3d 964, 967 (Fla. 4th DCA 2016) (quoting Pineda v. Wells Fargo Bank, N.A., 143 So. 3d 1008, 1011 (Fla. 3d DCA 2014)).

Samad v. Pla, — So.3d —-, 2019 WL 1212338 (Fla. 2d DCA March 15, 2019)

One of the basic building blocks of Florida probate law is the mandatory life estate in homestead property all surviving spouses are entitled to under F.S. 732.401(1). Life estates are supposed to protect surviving spouses by guaranteeing them the “rent free” use of their homes for life.

As explained in a provocative 2007 Florida Bar Journal article entitled The New Homestead Trap: Surviving Spouses Are Trapped by Life Estates They No Longer Want or Can Afford, over time it became apparent that life estates come with all sorts of unintended consequences, sometimes turning what should be financial safety nets into costly burdens for widows and widowers.

The legislative fix came in 2010, when F.S. 732.401 was amended to allow a surviving spouse to opt out of a life estate and instead take a 50% tenancy-in-common interest in the homestead property. As explained in this Legislative White Paper, receiving a tenancy-in-common interest in lieu of a life estate offers significant benefits to surviving spouses.

Can “excusable neglect” get you an extension to file a late homestead election?

This new protective option for surviving spouses was balanced against Florida’s strong public policy favoring the speedy and final determination of probate proceedings by making it subject to a 6-month filing deadline. But how “hard” is this deadline?

Most probate deadlines are subject to some kind of extension if your judge decides there’s a good reason for why you were late. For example, F.S. 732.2135 allows a surviving spouse to file a late elective-share claim if a judge decides there was “good cause shown”. There’s no equivalent statutory “out” for late homestead claims under F.S. 732.401(2). This distinction was no oversight, it was intentional. Here’s an excerpt from the Legislative White Paper:

The time for making the homestead election differs from the provisions of Florida’s elective share statute. Consideration was given to the distinctions between the two elections. The surviving spouse potentially takes nothing under the elective share statutes if the time requirements are not met. The proposed changes to the homestead statute, by contrast, still provide the surviving spouse with a life estate if no election is made so the underlying constitutional policy is preserved whether or not an election is made. (Emphasis added.)

But what about probate rule 5.042? Under this rule if a judge decides you didn’t file something on time because of some kind of “excusable neglect” (such as secretarial oversight), she can usually grant you an extension.

Does rule 5.042(b) apply to F.S. 732.401? Until now we’ve never had an appellate court address that question. Now we do. And I think most probate lawyers will be surprised by the 2d DCA’s answer.

Case Study:

In Samad v. Pla, a widow filed an election under F.S. 732.401(2) to take a 50% tenancy-in-common interest in the homestead property about a month-and-half late. She then petitioned for an extension under probate rule 5.042 claiming excusable neglect. The probate judge agreed, and granted the requested extension. Wrong answer said the 2d DCA. Here’s why:

[R]ule 5.042(b)] provides, in pertinent part, that “[w]hen an act is required or allowed to be done at or within a specified time by these rules, by order of court, or by notice given thereunder,” the court may grant a request for enlargement of time to accomplish the required act if (1) a request for enlargement is made before the expiration of the specified time or (2) after expiration of the time if “the failure to act was the result of excusable neglect.” (Emphasis added.) By its own terms, therefore, rule 5.042(b) does not apply to acts required to be done within a specified time by statute, and there is no probate rule relating to a surviving spouse’s right to elect an undivided one-half interest in the decedent spouse’s homestead as a tenant in common. …

Because [surviving spouse] failed to satisfy the requirements set forth in section 732.401(2), the trial court erred as a matter of law in granting her an extension of time to file her notice of election under that section and in deeming her election timely.

You’ve been warned …

Walters v. Agency for Health Care Administration, — So.3d —-, 2019 WL 6691513 (Fla. 3d DCA December 4, 2019)

Phil Marden for The New York Times

The key to understanding this case is recognizing that one word — homestead — is used in three very distinct and different ways in Florida’s constitution:

  1. The homestead exemption from forced sale (creditor protection) is addressed in Article X, §4(a) and (b) of Florida’s constitution,
  2. The homestead restrictions on descent and devise are addressed in Article X, §4(c) of Florida’s constitution, and
  3. The homestead property tax exemption is addressed in Article VII, §6 of Florida’s constitution.

In other words, there’s no one definition of homestead that’s going to apply in all cases. The same co-op could qualify as “homestead” under one constitutional homestead clause, while at the same time failing to qualify as “homestead” under another constitutional homestead clause.

For example, under F.S. 196.041, a co-op qualifies as homestead property for purposes of Florida’s homestead tax exemption (Article VII, §6). Does this mean this same property also qualifies as “homestead” for other purposes? Not necessarily.

In In re Wartels’ Estate, 357 So. 2d 708 (Fla. 1978), the Florida Supreme Court held that a co-op can’t be homestead property under Article X, §4 of Florida’s constitution because it isn’t “an interest in realty.” Subsequent to Wartels the Florida legislature adopted a new Cooperative Act, Chapter 719, that placed co-ops on equal footing with all other “interests in realty” (as defined by Wartels), which have long qualified as homestead property under Article X, §4 of Florida’s constitution.

So did the post-Wartels legislative changes to Florida law involving co-ops settle the matter? Not for the 3d DCA.

Can a co-op be homestead property under Article X, §4 of Florida’s constitution? (Not in the 3d DCA: Part I)

In Phillips v. Hirshon, 958 So. 2d 425 (Fla. 3d DCA 2007) (a case I wrote about here), the 3d DCA questioned the continued vitality of the Florida Supreme Court’s decision in Wartels, but nevertheless concluded that their “proper institutional role obligate[d] [them] to adhere to Wartels” and that “[t]he better course [was] to affirm [a probate court’s order not extending homestead status to a co-op] and certify.” The 3d DCA also certified that its holding not extending homestead status to co-ops was in conflict with S. Walls, Inc. v. Stilwell Corp., 810 So.2d 566 (Fla. 5th DCA 2002).

After initially accepting jurisdiction, the Florida Supreme Court punted by discharging the case. So was that the end of the story? Nope.

Can a co-op be homestead property under Article X, §4 of Florida’s constitution? (Not in the 3d DCA: Part II)

The linked-to case above involved a co-op in North Miami Beach. The owner passed away survived by an adult daughter. Daughter petitioned to probate the co-op as protected homestead property. The Agency for Health Care Administration filed a statement of claim against the estate in the amount of $81,276.76, and objected to the claimed homestead creditor protection on the basis that a co-op isn’t a fee simple interest in land, and thus under Wartels doesn’t qualify as protected homestead. The probate judge agreed (as she must per the 3d DCA’s Hirshon opinion), and denied homestead protection for the co-op.

On appeal the 3d DCA was asked to reconsider its stance on co-ops as not being homestead under Article X, §4 of Florida’s constitution. Since the last time the 3d DCA had addressed the issue in Hirshon, another DCA had essentially ruled the other way in Geraci v. Sunstar EMS, 93 So. 3d 384 (Fla. 2d DCA 2012) (a case I wrote about here, here).

So did the 3d DCA change its mind this time around? Nope. But they again made clear they would have ruled the other way but for the Florida Supreme Court’s refusal to reconsider its decision in WartelsWhich they again invited the Florida Supreme Court to do. The 3d DCA also certified that its holding not extending homestead status to co-ops was in conflict with Geraci.

We continue to adhere to the Florida Supreme Court’s decision in Wartels, and to our own decision in Hirshon, and affirm the trial court’s denial of [the] petition to declare the cooperative stock to be homestead property. We recognize that, under circumstances similar to the instant case, the Second District, in Geraci v. Sunstar EMS, 93 So. 3d 384 (Fla. 2d DCA 2012), held that the homestead protection at issue was a forced sale rather than a devise and descent, and held that the decedent’s condominium was homestead property for purposes of the exemption from forced sale even though it did not constitute a fee simple interest in land. We therefore certify conflict with our sister court’s decision in Geraci. We also certify, as a question of great public importance, the same question certified by this court in Hirshon:

DOES THE FLORIDA SUPREME COURT’S DECISION IN IN RE ESTATE OF WARTELS V. WARTELS, 357 So.2d 708 (Fla. 1978), HAVE CONTINUING VITALITY IN LIGHT OF THE ADOPTION BY THE FLORIDA LEGISLATURE OF THE COOPERATIVE ACT, CHAPTER 76-222, LAWS OF FLORIDA?

Stay tuned for more …