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 Wartels. Which 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 …

Rizk v. Rizk, — So.3d —-, 2018 WL 6321228 (Fla. 3d DCA December 4, 2018)

In civil-law jurisdictions (such as Haiti) wills are prepared under the supervision of a notary acting in a quasi-judicial capacity that has no counterpart in common-law jurisdictions (such as Florida). We refer to these creatures of civil law as “notarial wills.”

Florida’s Probate Code refers to notarial wills, but doesn’t define them. For a good working definition you’ll want to turn to Comparative Succession Law, Testamentary Formalities (at pg. 449), which describes the four stages commonly involved in their creation as follows:

First, the testator makes an oral declaration of the will to the notary and two witnesses. Second, the notary (or an assistant) reduces the will to written form. Third, after being read aloud by the notary, the will is signed by testator, notary, and witnesses, with the notary adding information about the execution, including, usually, its date and place and the names of witnesses. Finally, the will is retained by the notary and, in some countries, registered in a central register.

Is a notarial will that’s valid in Haiti also valid in Florida? YES

As described by the 3d DCA in the linked-to case above, the Haitian will at issue in this case fits squarely within the classic definition of a notarial will.

[In 2013] the decedent prepared a will in accordance with Haitian law, which authorizes a testator to dictate the will to a Haitian notary who must reduce it to writing and read it back to the testator. The will is then executed by the testator, the notary and four witnesses. The notary then registers the will with the Haitian Tax Office and maintains the original in his or her office.

The testator at the center of this case is described by the 3d DCA as being a “native of Haiti.” I’m guessing that means he was domiciled in Haiti at the time of his death, although the 3d DCA doesn’t tell us explicitly. If the testator was domiciled in Haiti, one would assume any challenge to the validity of his will should have been prosecuted in Haiti. That didn’t happen, and based on that uncontested fact, the will was accepted as valid in Florida. So saith the 3d DCA:

In support of his motion for summary judgment, Appellee, inter alia, provided affidavits by the notary and a Haitian attorney attesting to the 2013 will’s validity under Haitian law. In the Haitian attorney’s affidavit, she states that, to her knowledge, no court action has been filed in Haiti to contest the 2013 will’s validity, and therefore, it remains valid under Haitian law. It appears from the record that not only did Appellant not challenge the 2013 will’s validity in Haiti, but that she already is receiving the benefits of the 2013 will as one of its beneficiaries.

Section 732.502(2) provides, in pertinent part: “Any will, other than a holographic or nuncupative will, executed by a nonresident of Florida … is valid as a will in this state if valid under the laws of the state or country where the will was executed.” § 732.502(2), Fla. Stat. (2013). Appellee provided sufficient and undisputed evidence at summary judgment that the 2013 will is valid in Haiti.

Can you probate notarial wills in Florida? YES

A key characteristic of notarial wills is that the originally signed copy is supposed to stay with the notary who supervised its creation. Since Florida law usually requires the production of original wills for probate, the two systems of law are in conflict. The original notarial will can’t remain in the foreign notary’s custody (as required by local civil law), and also  delivered for probate (as required by Florida law). Fortunately, this conflict’s been resolved by statue.

As explained by the 3d DCA in Malleiro v. Mori (which I wrote about here), section 733.205 of Florida’s Probate Code provides a mechanism of probating notarial wills by allowing a copy to be admitted to probate in this state if the original is required to be retained in the foreign country and “if the original could have been admitted to probate in this state.” Problem solved.

Sampson Farm Limited Partnership v. Parmenter, 238 So.3d 387 (Fla. 3d DCA January 17, 2018)

Non-resident parties can’t be pulled into Florida litigation if they don’t have the kind of “minimum contacts” with this state necessary to satisfy our long-arm statute requirements under F.S. 48.193, and the constitutional due process requirements articulated by our supreme court in Venetian Salami Co. v. Parthenais, 554 So.2d 499 (Fla. 1989). This is basic stuff.

So what’s the problem?

Unfortunately, the less than artfully drafted language of Probate Code section 731.301(2) muddies the water on what should be an obvious point. According to this statue, in “a probate proceeding, formal notice is sufficient to acquire jurisdiction over the person receiving formal notice to the extent of the person’s interest in the estate.”

Does this mean the rules for personal jurisdiction are different in “a probate proceeding”? NO! And it’s not just me that says so; according to this legislative White Paper, the Real Property, Probate and Trust Law Section of The Florida Bar agrees. Here’s an excerpt:

By statute, probate proceedings are in rem, meaning that the court has jurisdiction over the will, if any, the tangible and intangible assets of the decedent’s estate (wherever located), and real estate located in Florida, all without the necessity of any original process. F.S. 731.105; Also see In re: Estate of Williamson, 95 So.2d 244 (Fla. 1957). Service by formal notice is one method of complying with due process requirements necessary to invoke the court’s in rem jurisdiction over those receiving the notice to the extent of their interest in the estate. Even without addition of the phrase, “in a probate proceeding,” the statute is easily read to be addressing only a means of notice to persons subject to the court’s in rem jurisdiction that is calculated to effect due process over those receiving the notice.

Formal notice is not judicial process, and is not the equivalent of a summons. …

Personal jurisdiction is neither contemplated nor required in a majority of adversary proceedings in probate. Of those specific adversary proceedings listed in Probate Rule 5.025(a) that require service of formal notice, only surcharge of a personal representative or guardian requires in personam jurisdiction, and those fiduciaries have submitted to the court’s personal jurisdiction by instituting or participating in the court proceedings. See Payette v. Clark, 559 So.2d 630 (2d DCA 1990) (filing of a petition for administration subjects the personal representative to in personam jurisdiction “for all purposes related to the administration”).

Thus the formal notice procedure was never intended to be a method of obtaining personal jurisdiction over persons having an interest in the probate estate. In Re Estate of Black, 528 So.2d 1316 (Fla. 2d DCA 1988); In Re Estate of Vernon, 608 So.2d 510 (Fla. 4th DCA 1992). Formal notice is a method of service of notice to a person subject to the court’s in rem jurisdiction. It is not a summons or judicial process that confers in personam jurisdiction over the recipient.

To avoid future confusion a statutory clarification was introduced earlier this year in SB 1154 as part of a wide-ranging bundle of Probate Code revisions. Under this bill, the following sentence would have been added to the end of F.S. 731.301(2):

Formal notice is not sufficient to invoke the court’s personal jurisdiction over the person receiving formal notice.

SB 1154 died in committee. Until we have a legislative fix we’ll need to rely on common sense and appellate court guidance to get us to the right answer. Fortunately, that’s exactly what the 3d DCA serves up in this case.

Is probate different? NO

In the linked-to case above a Florida personal representative filed an adversary probate petition requesting a declaratory ruling as to the estate’s ownership interest in a Massachusetts limited partnership (LP). The LP owns and operates a working farm in Massachusetts. The LP has no contacts with Florida.

The LP filed a motion to dismiss for lack of personal jurisdiction, challenging the lack of factual allegations providing a basis for personal jurisdiction under either F.S. 48.193 or our constitutional due process requirements. The personal representative persuaded the probate judge none of that mattered “because of the special nature of probate.” (What?!)

Wrong answer says the 3d DCA. Here’s why:

[In Wolf Sanitary Wiping Cloth, Inc. v. Wolf, 526 So.2d 702 (Fla. 3d DCA 1988), receded from on other grounds by C.A.T. LLC. v. Island Developers, Ltd., 827 So.2d 373, 374 (Fla. 3d DCA 2002) (en banc)], this Court found that section 731.301(1) was not “a shorthand method of subjecting all potential litigants to the jurisdiction of the probate court.” Id. While recognizing that personal representatives have a duty to marshal estate assets with dispatch, this Court concluded that duty “does not empower a personal representative to enforce contract rights against a foreign corporation where jurisdiction has not been obtained.” Id. at 706.

Moreover, it is well established—both generally, and specifically with regard to adversary actions arising out of probate—that a pleading must make the requisite allegations of personal jurisdiction. … Thus, even if [the LP] fell within the scope of section 731.301(1)’s notice provision, [the personal representative] failed to provide any evidence of [the LP’s] minimal contacts with Florida sufficient to meet the constitutional due process requirements necessary to exercise personal jurisdiction over it.

And because the facts matter, the 3d DCA went out of its way to explain that even if the personal representative had followed the established rules for pleading personal jurisdiction, the result would have been the same based on the LP’s lack of minimum contacts with Florida.

 Because [the personal representative] failed to establish a basis for the exercise of long-arm jurisdiction under section 48.193, we need not address the issue of minimum contacts and constitutional due process. It is clear, however, that with respect to this second prong, the record contains no evidence that [the LP] has engaged in any business in Florida, bought or sold property in Florida, or engaged in any other contact with Florida such that [the LP] could reasonably expect to be haled into court here. Indeed, the record shows that the petition was served on [the LP’s] registered agent in Massachusetts. Based on the record here, exercise of personal jurisdiction would “offend ‘traditional notions of fair play and substantial justice.'” Int’l Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)).

In 2017, the Florida Senate voted unanimously to authorize electronic wills (see here). 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 (see here).

So are 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 (HB 409). And this time the bill got signed into law.

Is this a big change in Florida law? YES

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 because it’s the first time Florida law’s retreated even slightly from strict compliance with will-execution rules developed in 19th century England.

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.”

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

Unless the testator is a vulnerable adult [as such term is defined in F.S. 415.102], the witnessing of a will execution can be done remotely if:

  • The individuals are supervised by a notary public;
  • The individuals are authenticated and signing as part of an online notarization session in accordance with s. 117.265, F.S.;
  • The witness hears the signer make a statement acknowledging that the signer has signed the electronic record; and
  • 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?o
    • 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.

Will there be a rush to electronic wills? NO

The new legislation goes into effect on January 1, 2020. But I don’t expect electronic wills are going to become the norm anytime soon. Why? Because the type of electronic-wills legislation we’ve adopted in Florida requires a level of capital investment and specialized data-storage infrastructure few law firms are able to muster. If electronic wills gain widespread acceptance, it will likely be because of law companies like Willing.com, UnitedLex, Axiom, and Elevate.

Our legislation mandates that all electronic wills must be stored by a “qualified custodian,” subject to strict rules and regulations (as well as liability if anything goes wrong). Here’s how this aspect of the new law is 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.

And this isn’t the only obstacle to wide-spread acceptance of electronic wills. 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.” 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.”

As trusts and estates attorneys, we spend our professional lives planning for and adjudicating property issues. In fact, our probate code explicitly tells us at F.S. 731.105 that probate proceedings “are in rem proceedings.”

But before any of this property finds its way into one of our probate courts, someone has to die. And each one of those deaths is its own unique story. How should we think about those stories? Or discuss them with our clients? Or, as is sometimes necessary, address them in court?

It’s not something we’re taught in law school.

Which brings me to a beautifully written and thoughtful guide to writing—and reading—about death that trusts and estates attorneys should find especially interesting. It’s a collection of essays by Miami’s own Edwidge Danticat, entitled The Art of Death: Writing the Final Story. Part philosophy, part literary criticism, part prayer, Danticat explores death both in real life and in art.

Divided into short chapters with titles such as “Ars Moriendi,” “Wanting to Die,” “Close Calls,” and “Feetfirst,” Danticat’s The Art of Death is a quick read, but it’s packed with clear-eyed wisdom and grace that sticks with you long after you’ve put it down.

As an added bonus Danticat peppers her essays with a treasure trove of “on topic” quotes by dozens of writers, including Tolstoy, Camus, Chekhov, Gabriel García Márquez, Toni Morrison, Audre Lorde and Ta-Nehisi Coates. One of my favorites is this quote from The English Patient by Michael Ondaatje, which Danticat used as an epigraph to her book.

We die containing a richness of lovers and tribes, tastes we have swallowed, bodies we have plunged into and swum up as if rivers of wisdom, characters we have climbed into as if trees, fears we have hidden in as if caves. I wish for all this to be marked on my body when I am dead. I believe in such cartography—to be marked by nature, not just to label ourselves on a map like the names of rich men and women on buildings. We are communal histories, communal books.

Good stuff; highly recommended.

Elizabeth Hurley and her son, Damian

Fame and fortune often come together, and sometimes that combustible brew spills over into the world of trusts and estates. Case in point: an inter-vivos trust created decades ago by multi-billionaire Peter Bing was recently at the center of a Los Angeles court battle involving claims by Damian Hurley, son of actress Elizabeth Hurley, and film producer Steve Bing. As reported in Elizabeth Hurley’s Son Prevails in Inheritance Fight, Steve “accused his father of ‘coordinating’ with his sister Mary to ‘orchestrate a massive money-grab,’ which would hurt his children, but enrich her own.”

The legal battle kicked off when the trustee filed a petition seeking to narrowly define the trust’s use of the word “grandchildren” to exclude grandchildren born out of wedlock — which (surprise!) results in Steve Bing’s children getting cut out (Mary’s children fare just fine under this interpretation). But for the large sums at stake and the celebrity references, this is run-of-the-mill stuff for most trusts and estates litigators. What’s interesting about this case — at least from a Florida-law point of view — is what’s NOT contested.

Ambiguity vs. Reformation:

Based on the contents of the trial court order, the litigation seems to have been framed exclusively around a single question: was the trust’s use of the word “grandchildren” ambiguous? According to the trustee, it was. According to the trial court judge, not even close. No ambiguity = no change = Steve Bing’s kids don’t get cut out. Here’s an excerpt from the order:

[T[he Trusts’ use of the word “grandchild” offers no ambiguity otherwise unless one accepts Trustee’s foisted definition that restricts, among others, grandchildren born out of wedlock to one of Settlor’s children unless they lived with one of Settlor’s children while a minor or as a regular member of the household. These restrictive, limiting, further definitions unreasonably distort the term’s clear and plain use in the Trusts.

These cases are usually litigated after the trust’s settlor is dead, which means we all get to speculate about what was actually going through his head when he signed his trust agreement. Not so in this case. Here, Peter Bing, the settlor, submitted an affidavit saying that the narrow definition the trial judge says is now being “foisted” on the court is exactly what he had in mind when he signed his trust agreement back in 1980 (long before any of his grandchildren were born). Sounds like Peter’s telling us his trust agreement doesn’t say what he intended it to say when he signed it. That fact’s important.

If this case were being litigated in Florida, you wouldn’t limit yourself to an “ambiguity” strategy; you’d also seek “reformation” of the document to accurately reflect what the settlor (Peter Bing) is telling us he actually intended to say when he signed his trust agreement. In Florida, the statutory vehicle for this argument is F.S. 736.0415, which is based on Sect. 415 of the Uniform Trust Code (UTC). California hasn’t adopted the UTC.

Here’s how the UTC explains the difference between an “ambiguity” argument and a “reformation” argument:

Reformation is different from resolving an ambiguity. Resolving an ambiguity involves the interpretation of language already in the instrument. Reformation, on the other hand, may involve the addition of language not originally in the instrument, or the deletion of language originally included by mistake, if necessary to conform the instrument to the settlor’s intent. Because reformation may involve the addition of language to the instrument, or the deletion of language that may appear clear on its face, reliance on extrinsic evidence is essential. …

Reformation of inter vivos instruments to correct a mistake of law or fact is a long-established remedy. … This section applies whether the mistake is one of expression or one of inducement. A mistake of expression occurs when the terms of the trust misstate the settlor’s intention, fail to include a term that was intended to be included, or include a term that was not intended to be included. A mistake in the inducement occurs when the terms of the trust accurately reflect what the settlor intended to be included or excluded but this intention was based on a mistake of fact or law. … Mistakes of expression are frequently caused by scriveners’ errors while mistakes of inducement often trace to errors of the settlor.

By the way, there may be a good reason for why a reformation argument wasn’t made. On the other hand, maybe it was made and it was just ignored in the trial court’s order. If this case gets appealed, we may learn more then.

Finally, trust-reformation actions aren’t silver bullets. Even if your trust settlor is still around, and he’s ready and willing to testify, as I’ve previously reported here, the types of “mistakes” courts are authorized to fix in reformation actions are mistakes based on facts existing at the time the document was signed … not years later when events have taken a turn the settlor didn’t expect (like wanting to favor one line of descendants over another).

Biology vs. Settlor Intent:

The trial court order refers to “biological” grandchildren in one form or another on six separate occasions. The implication clearly being that if there’s a genetic link between a settlor and his children’s children, they’re his grandchildren. End of story. Well, it ain’t necessarily so. When construing trust terms the goal is figuring out settlor intent … even if it’s contrary to the “biological” facts.

For example, as explained in Doe v. Doe, a fascinating 2d DCA opinion I wrote about here, for trust-construction purposes someone can be a settlor’s “blood relative,” even if DNA testing proves conclusively that the settlor’s not biologically related to that person. Does this make sense? Yes, if your primary goal is figuring out the settlor’s intent at the time he signed his trust agreement. When construing trusts it’s what’s going on in the settlor’s head at the time he signed his document that matters most, not the empirically-verifiable facts in existence years later at the time the trust is being litigated.

Which brings us back to Peter Bing’s use of the word “grandchildren” in his trust. Back in 1980 he might very well have intended to include all of his biological grandchildren as future beneficiaries, on the other hand, maybe he really did intend to exclude grandchildren born out of wedlock. Even if you think this case is all a subterfuge for Peter’s after-the-fact attempt to cut certain disfavored descendants out of the family fortune, it’s a fair question, and one that’s completely ignored in the trial court order.

This beautiful park in Macon, Georgia, no longer exists because the guy who donated it in the 1910s didn’t predict that the world would become less openly racist over time.

If you’re into podcasts (who isn’t?), and you happen to make your living as a trusts and estates attorney, you’re going to love a recent episode of the Future Perfect podcast entitled Dead people leave billions in their wills. How long do we have to listen to them? Here’s an excerpt from the show notes:

We don’t let dead people vote.

We don’t let dead people run for political office.

But we do let dead people donate money that shapes the world, using charitable trusts.

And as we learn on this episode of the Future Perfect podcast, letting zombie donors pull the strings often doesn’t turn out all that well….

Ray Madoff, a professor at Boston College Law School, wrote a whole book about people donating from beyond the grave, called Immortality and the Law: The Rising Power of America’s Dead.

She says the all-powerful zombie donor is a relatively new American phenomenon.

For the first century or so after the American Revolution, the idea that the dead would have much control over the resources of the world seemed very undemocratic. But then came the Gilded Age, and the rise of a class of unprecedentedly rich people. Some of these robber barons were willing to spread their wealth around — in exchange for immortality. And that immortality came in the form of charitable trusts that lasted forever.

In the decades since, perpetual charitable trusts have become the norm.

The problem? Forever is a long time. And when donors write specific instructions in their trusts, they can’t predict the ways the world will change.

Click here for the podcast audio link. Great stuff, highly recommended.

Alexander v. Harris, — So.3d —, 2019 WL 2147281 (Fla. 2d DCA May 17, 2019)

The creditor protected trust at the center of this case is a special needs trust. This kind of trust is created for a disabled or elderly person that’s intended to supplement, but not supplant, government assistance programs (such as Supplemental Security Income (SSI) and SSI-related Medicaid) by creating a fund to pay for care and services not otherwise provided by public programs.

While these trusts are designed to comply with the strict federal regulations governing eligibility for government disability benefits, they’re also subject to all of the state laws any other trust is subject to in Florida. That intersection of state and federal law is at the heart of this case.

Case Study:

Special needs trusts are subject to the Social Security Administration’s “sole benefit” rule under POMS SI 01120.201(F). The sole benefit rule has caused concern in cases involving claims for unpaid child support because of fears that a special needs trust beneficiary could lose his government benefits if his trust funds are used to pay his child support obligations (i.e., benefit a third party); that’s what the defendant argued in the Alexander v. Harris case.

This case involved a beneficiary of a special needs trust that hadn’t paid his child support in years. His trust was established pursuant to 42 U.S.C. § 1396p with funds from the settlement of a product liability action brought on the beneficiary’s behalf after he was catastrophically injured in a car accident as a minor.

The trust beneficiary owed $91,780 in unpaid child support, and his trust contained approximately $141,997 (plus monthly annuity payments of $3,035 for the rest of the beneficiary’s life). Special needs trusts are usually spendthrift/discretionary trusts for state law purposes, which means they’re shielded from most creditor attacks. But there are exceptions.

Spendthrift clause + discretionary distribution standard = creditor protected trust:

The reason most special needs trusts are impervious to most creditor attacks is a combination of two factors: these trusts usually contain a spendthrift clause that complies with F.S. 736.0502, and/or the trust qualifies as a “discretionary trust” under F.S. 736.0504. Most well-drafted trusts have both provisions — but they don’t have to. A creditor-protected spendthrift trust doesn’t have to be a discretionary trust, and vice versa. See Restatement (Second) of Trusts § 155, comment b.

But there are certain “exceptional” creditors who can pierce these protections. Over three decades ago, in Bacardi v. White, 463 So.2d 218 (Fla. 1985), the Florida Supreme Court held on public policy grounds that under certain circumstances a Florida spendthrift/discretionary trust isn’t shielded from child-support claims or an ex-spouse’s alimony claims. This rule was codified in sections 736.0503 and 736.0504 of the Florida Trust Code, as explained in Berlinger v. Casselberry, a controversial 2d DCA case I wrote about here.

Child support claim + creditor protected trust = win for child support claimant:

Now back to the Alexander case. Here, the 2d DCA held that the special needs trust was subject to garnishment for the same reasons the trust in the Berlinger case had been subject to garnishment: the unpaid debt fell within the state-law exception favoring certain creditors (such as unpaid child support claimants). The trust beneficiary in this case argued his trust funds should nonetheless remain protected because forcing his trust to satisfy his child support obligations would result in him losing his government disability benefits.

Did this argument work? Yes at trial, no on appeal. Why the loss on appeal? Because the argument failed on its own terms. According to the 2d DCA, there’s no “legal basis” for concluding you’re going to lose your disability benefits if your special needs trust pays your child support obligations.

The father argues that using the trust’s funds to satisfy his support obligations would jeopardize his eligibility for public assistance under federal law; however, he cannot identify any legal basis for this conclusion. We can find no federal law or regulation expressly addressing the garnishment of a special needs trust to satisfy a support obligation.

Once that boogeyman was disposed of, the end result was inevitable: child support claimant wins. Anyway, here’s how the 2d DCA made it’s federal disability-law point, which should be of special interest to those of you who spend much time drafting or administering special needs trusts.

To the extent that 42 U.S.C. § 1396p discusses support payments and eligibility, subsection (c)(2)(B)(iii) states that “[a]n individual shall not be ineligible for medical assistance by reason of paragraph (1) to the extent that … the assets … were transferred to … the individual’s child.” Furthermore, federal law gives great deference to state courts in family law proceedings, and the Supreme Court has explained that “[s]tate family and family-property law must do ‘major damage’ to ‘clear and substantial’ federal interests before the Supremacy Clause will demand that state law be overridden.” Hisquierdo v. Hisquierdo, 439 U.S. 572, 581, 99 S.Ct. 802, 59 L.Ed.2d 1 (1979) (quoting United States v. Yazell, 382 U.S. 341, 352, 86 S.Ct. 500, 15 L.Ed.2d 404 (1966)). In Rose v. Rose, 481 U.S. 619, 630, 107 S.Ct. 2029, 95 L.Ed.2d 599 (1987), the Supreme Court recognized that payment of child support is in the parent’s best interest, explaining that federal “benefits are not provided to support [the beneficiary] alone.” There is no indication in the federal statutes that Congress has expressed any intention to preempt state statutes, like section 736.0503, that permit garnishment of spendthrift trusts to satisfy the child support obligations of the beneficiary. Id. at 628, 107 S.Ct. 2029 (“Given the traditional authority of state courts over the issue of child support, their unparalleled familiarity with local economic factors affecting divorced parents and children, and their experience in applying state statutes … that do contain detailed support guidelines and established procedures for allocating resources following divorce, we conclude that Congress would surely have been more explicit had it intended the Administrator’s apportionment power to displace a state court’s power to enforce an order of child support.”).

Can you shop around for stronger creditor protection laws? YES

If you’re a planner with a client looking for better asset-protection than Florida law provides, you may want to consider moving your trust to one of the states vying for this kind of business, such as Nevada or South Dakota. That kind of planning was discussed at length in Bacardi on the Rocks, a Florida Bar Journal article reacting to the Berlinger case. And just recently, in a case written about in California Child Support Order Not Enforced Against South Dakota Trust In Cleopatra, the South Dakota Supreme Court refused to enforce a California child support judgment against a South Dakota Trust.

Putting planning issues aside, what does this case tell us about litigating these kinds of claims?

If you’re prosecuting a claim for unpaid child support, your focus should be on Florida state law and the special treatment afforded to these kinds of claims vis-à-vis otherwise creditor protected trusts. As for the state-law issues, this case and the Berlinger case tell you everything you need to know.

If you’re defending one of these cases, you need to play defense on two fronts: state trust law and federal disability law. As for the federal disability law issues, you have the 2d DCA’s analysis in this case in support of a no-forfeiture result. For another analytical approach that reaches the same conclusion you’ll want to read Thoughts on Supporting Healthy Dependents Using Funds From a Disabled Parent’s or Spouse’s Special Needs Trust, by Florida special needs trust guru David Lillesand. In David’s opinion the Social Security Administration is unlikely to contest this kind of trust distribution both as a matter of law and public policy. Here’s an excerpt:

There is no federal regulation or even an SSI POMS provision that addresses the use of d4A Special Needs Trust funds to pay items of support of the disabled person’s spouse or children. The published “rules” neither allow, nor disallow, such payments. Public policy and state non-support criminal statutes, however, would indicate that withholding support for spouses or children would violate the law. The Social Security Administration has indicated that payment of taxes, administration costs of the trust, and attorney’s fees do not violate the sole benefit rule. Because d4A Special Needs Trusts are self-settled trusts not safe from the claims of legitimate creditors, it would seem not only right, but proper, that trust funds be used to support the disabled person’s legal dependents.

Schanck v. Gayhart, — So.3d —- 2018 WL 1999841 (Fla. 1st DCA April 30, 2018)

In contested probate proceedings, if someone’s asserting a jurisdictional defense it’s probably coming up in one of two contexts. Either your judge lacked personal jurisdiction over one of the litigants (see here, here, here for past examples), or your judge lacked in rem jurisdiction over certain property (see here for past examples). And because nothing’s ever easy in probate, sometimes both concepts play themselves out in a single case. That’s what happened here.

Case Study:

This case involved a breach-of-contract action by the estate against the decedent’s ex-husband, who wasn’t paying up on his side of a marital settlement agreement. The estate ultimately obtained a judgment against ex-husband, then set about trying to collect.

As part of its collection efforts the estate filed a motion asking the probate judge to order ex-husband to turn over the stock and membership certificates of two Florida entities owned solely by ex-husband. Ex-husband claimed his new wife had taken the certificates to her place in Canada, which meant the Florida probate court lacked in rem jurisdiction over the certificates. According to ex-husband, if the estate wanted to get its hands on the certificates it had to go to Canada to get them.

Relying on the broad language of F.S. 678.1121, which authorizes a court to aid creditors trying to collect against certificated security interests, the estate countered by arguing that if the Florida probate judge didn’t have in rem jurisdiction over the certificates in Canada, it certainly had personal jurisdiction over ex-husband, and could use that authority to order him (as the sole owner) to simply cancel the certificates and re-issue new ones to the estate in Florida.

Did this end-run around the in rem jurisdiction barrier work? Yup. But it wasn’t easy. The debtor had three primary defenses. And struck out on all three. Here’s why.

Can a Florida probate judge order you to turn over property located in Canada? YES

The first line of defense was purely jurisdictional. According to debtor, a Florida court can’t use its authority over a Florida litigant to force that litigant to return assets located in Canada. This argument isn’t crazy, and it has worked in at least one other case cited by the defendant. So did it work this time? Nope. Strike one. Here’s why:

This Court has recognized that it is permissible for a trial court to direct a defendant over whom it has personal jurisdiction to act on property located outside its jurisdiction, if the title to the property is not directly affected while the property remains in the foreign jurisdiction. See, e.g., Ciungu v. Bulea, 162 So.3d 290, 294 (Fla. 1st DCA 2015). In Ciungu, this Court held that a probate court had authority to direct a party to effect distribution of property located in Romania by virtue of its personal jurisdiction over the party:

‘It has long been established … that a court which has obtained in personam jurisdiction over a defendant may order that defendant to act on property that is outside of the court’s jurisdiction, provided that the court does not directly affect the title to the property while it remains in the foreign jurisdiction.’

Id. (quoting Gen. Elec. Capital Corp. v. Advance Petroleum, Inc., 660 So.2d 1139, 1142 (Fla. 3d DCA 1995) ) (emphasis in original).

… Accordingly, while the only issue before us is whether the court properly ordered the alternative relief of reissuance, we observe that the court had jurisdiction to either order Appellant to return or reissue the certificates, as neither remedy would directly affect title to the certificates while they remained in Canada. See id.

Does section 678.1121 authorize a court to compel you to re-issue stock certificates? YES

OK, so a judge can order you to turn over out-of-state property generally, but the specific statute at play in this probate/debt-collection case was F.S. 678.1121, and the specific order at play in this case compelled the defendant to re-issue the certificates, not turn them over. Defendant argued section 678.1121 requires actual seizure of the certificates, it doesn’t authorize a court to order cancellation and re-issuance. Wrong answer. Strike two. So saith the 1st DCA:

[The] … Fifth District … [has] conclud[ed] that where one debtor refused to respond to discovery and the other indicated she did not know where the stock was, the trial court could order the corporation to reissue the stock certificate. House v. Williams, 573 So.2d 1012, 1012 (Fla. 5th DCA 1991) …

As in House, the securities here could not “readily be reached by ordinary legal process,” — that is, by seizure of the certificates. We hold that section 678.1121(5) authorizes a court to aid the creditor “in reaching the security or in satisfying the claim by means allowed by law or in equity,” including by ordering their reissuance, regardless of whether securities cannot be seized because their location is unknown or because the debtor has attempted to move them outside the court’s reach.

If the sole shareholder’s a party to your case, do you also need to implead the corporation/LLC? NO

If all else fails, call a time out because an indispensable party hasn’t been joined to the case. Here, defendant argued that because stock and membership certificates are issued by a corporation or LLC, not by shareholders or members (see sections 607.0603(1) and 605.0502(4)), the court was required to direct its order to the entities rather than to him, which means these entities needed to be made parties to the case. And since they’re not parties to the case, he gets a walk.

Did this last ditch defense work? Nope. Why not? Because if, as in this case, the defendant’s the sole owner, he’s in control. Which means he’s the one guy who can force the corporation/LLC to re-issue certificates whenever he wants. Strike three — plaintiff wins — so saith the 1st DCA:

The issuer of a certificated security must reissue a certificate upon request from the owner of the certificate. See § 678.4051, Fla. Stat. (providing procedure for reissuance of a lost, destroyed, or wrongfully taken security certificate). [Defendant] undisputedly owns and controls 100% of both Stellar and DataSignals. Notably, when [the estate] sought to add Stellar as a party during the dissolution proceedings, [defendant] represented that he would—and thus could—provide discovery on Stellar’s behalf “as if Stellar were a party” to the action. As such, we reject [defendant’s] contention he lacks the ability to comply with the court’s order, both on statutory and equitable grounds.