When it comes to probate proceedings, there’s a strong public policy favoring finality, even it means valid claims sometimes get sacrificed. For example, F.S. 733.903 tells us that once a probate proceeding is closed, it won’t be reopened because sometime after the fact someone finds a perfectly valid will that would have changed everything.

And if you’re the personal representative, F.S. 733.901(2) tells us that once you’re discharged, you too can rest easy in the knowledge that you can’t be sued for anything you did during the probate proceeding. But alas, this last bit of finality is subject to a few exceptions, which are the focus of 1st DCA’s opinion in the Sims case.

Sims v. Barnard, — So.3d —- 2018 WL 5796936 (Fla. 1st DCA November 06, 2018)

This case involves a probate proceeding that went on for over 10 years, involved multiple personal representatives, and one very active pro se litigant. The final PR was an attorney who filed a final accounting that was objected to. The probate judge overruled the objections, approved the final accounting, and discharged the PR in 2015. Two years later the PR was sued by the same objecting party for “fraud” and “embezzlement”.

The former PR claimed the suit against him was barred by F.S. 733.901(2), and the trial court agreed. On appeal the claimant argued his lawsuit shouldn’t have been dismissed because his claims fall under the “fraud” and “concealment” exceptions. Here’s how the 1st DCA summarized this argument and the controlling Florida law:

Appellant correctly asserts that section 733.901 “does not serve as an absolute bar to the suits filed after the discharge of the personal representative.” Van Dusen v. Southeast First Nat’l Bank of Miami, 478 So.2d 82, 89 (Fla. 3d DCA 1985). The statutory bar codifies “a modified res judicata concept … applicable in probate cases.” Id. at 91. The bar will not be applied to a suit for fraud by concealment, where its application “would permit a fiduciary to benefit from its alleged wrongful acts if it could conceal them for the statutory period.” Karpo v. Deitsch, 196 So.2d 180, 181 (Fla. 3d DCA 1967) (holding that suit was not barred by discharge where suit alleged PR concealed from heirs the true value of estate and concealed from the court the identities of the heirs preventing heirs from asserting objection or claim prior to discharge). Likewise, where the PR conceals its intentional transfer of an estate asset by failing to report the distribution in the petition for distribution or otherwise, the PR “is not entitled to the sanctuary provided by” section 733.901. Van Dusen, 478 So.2d at 91.

The lawsuit at the center of this case seemed to include the magic “fraud by concealment” allegations needed to survive a motion to dismiss. So rather than challenge the pleading on its face, the defendant challenged it on summary judgment, which allowed the trial court (and the appellate court) to look beyond the four corners of the complaint. When that happened, the claims crumbled, both at the trial court level and on appeal.

Appellant filed his lawsuit against Bernard and the law firm on March 13, 2017. While the amended complaint generally alleged fraud and “embezzlement,” the facts asserted by Appellant were that the PR failed to provide him with sufficient accountings to explain all expenditures, leading Appellant to the conclusion that estate funds had been removed without explanation. The missing interim accountings, which Appellant was ultimately provided, simply do not rise to the level of “concealment” by the PR presented in Van Dusen and Karpo.

Wallace v. Watkins, — So.3d —- 2018 WL 3946062 (Fla. 5th DCA August 17, 2018)

But what if an estate gets probated and years later an heir shows up who was excluded from the original proceeding? That’s what happened in this case.

According to the appellate brief, “[a]lthough the decedent died in 1971, no one in the family had the means or know-how to file estate administration papers with the County at that time.” While it’s never stated explicitly, reading between the lines my sense is that the property at issue in this case is an example of “heirs property” passed down informally to surviving family members who lack the resources to judicially perfect their property rights in a probate proceeding. As explained in an excellent Florida Bar article entitled The Disproportionate Impact of Heirs Property in Florida’s Low-Income Communities of Color, these arrangements can lead to all sorts of negative consequences.

Now back to the case. The decedent died in 1971. In terms of formally clearing title to her property, nothing happened until 2001 (29 years later), when her two daughters initiated a summary administration to probate a parcel of real property owned by the decedent at the time of her death. The decedent had adopted three of her grandchildren. These adopted children didn’t get notice of the probate proceeding, nor did they get a share of the property.

Fast forward another 15 years to 2016. The adopted children filed a petition to reopen the Watkins estate under F.S. 735.206(g), which provides as follows:

(g) Any heir or devisee of the decedent who was lawfully entitled to share in the estate but who was not included in the order of summary administration and distribution may enforce all rights in appropriate proceedings against those who procured the order and, if successful, shall be awarded reasonable attorney’s fees as an element of costs.

This statute seems pretty clear cut. If you’re an heir, and you weren’t included in the probate proceeding, you get a do-over. But reading the statute that way runs headlong into Florida’s strong public policy favoring finality in probate proceedings. So not surprisingly, as explained by Judge Schwartz in a thoughtful concurring opinion he wrote in Klem v. Espejo-Norton (a case I wrote about here) the usual rule in Florida is that an estate won’t be reopened even if a rightful heir was excluded. The exception to this rule being the type of “fraud by concealment” scenarios discussed in the Sims case above.

The probate judge reopened the Watkins probate proceeding in a non-evidentiary hearing where apparently no one made a “fraud by concealment” argument. Instead, the argument was made that the petition to re-open was time barred by F.S. 733.710(1), Florida’s non-claim statute for probate creditor claims. Since this isn’t a creditor-claim case (it’s a case about excluded heirs) that argument went nowhere.

Florida’s nonclaim statute applies to claims brought against the estate by creditors. It does not apply to the beneficial interests of heirs. See In re Estate of Robertson, 520 So.2d 99, 102 (Fla. 4th DCA 1988) (rejecting argument that nonclaim statute barred claim of heirship because such claims were “not the type of ‘claim’ contemplated” by nonclaim statute); see also Frank T. Pilotte, Creditors’ Claims and Family Allowance, in Practice Under Florida Probate Code (9th ed. 2017) (“[H]owever, the definition of claims and the nonclaim statute clearly do not apply to the beneficial interests of beneficiaries.”).

So what happened here? While the 5th DCA did say the heirship claims weren’t time barred as creditor claims, it didn’t grant the adoptees any property rights, all it did was affirm a trial court order reopening an estate. Does that mean the general rule barring the reopening of probate proceedings in the absence of fraud doesn’t apply in summary administration cases? Who knows. Here’s what we do know for sure: a family with not-that-much to begin with found itself enmeshed in the kind of probate/property-rights mess that seems to disproportionately burden folks most likely to be the recipients of “heirs property”. And that’s a shame.

Under Florida’s Trust Code there are two classes of beneficiaries, and which class you fall in is a big deal.

As defined in F.S. 736.0103(4), the term “beneficiary” refers to the entire universe of persons who have a beneficial interest in a trust, as well as to any person who has a power of appointment over trust property in a capacity other than as trustee. For purposes of this definition it’s immaterial whether the beneficial interest is present or future, vested or contingent, or whether the person having the interest is ascertainable or even living.

What’s a “qualified beneficiary”?

By contrast, the term “qualified beneficiary,” as defined in F.S. 736.0103(16), encompasses a much smaller — but favored — subset of trust beneficiaries. This class of beneficiaries is limited to current beneficiaries, intermediate beneficiaries, and first line remainder beneficiaries, whether vested or contingent. These beneficiaries are prioritized in two key ways. First, qualified beneficiaries are going to have standing in just about any judicial proceeding involving their trusts. Second, qualified beneficiaries are at the center of all trustee disclosure obligations.

For example, no matter what your trust agreement says, F.S. 736.0105 tells us you can’t waive the duty under F.S. 736.0813 to notify qualified beneficiaries of an irrevocable trust of the existence of the trust, of the identity of the trustee, and of their rights to trust accountings; nor can you waive the duty to provide a complete copy of the trust instrument and to account to qualified beneficiaries; nor can you waive the duty to respond to the request of a qualified beneficiary of an irrevocable trust for relevant information about the assets and liabilities of the trust and the particulars relating to trust administration.

Bottom line, you can’t do your job as trustee if you don’t know who your qualified beneficiaries are.

Miss law school? How about a couple of brain teaser hypotheticals?

And just in case we didn’t get the message that identifying a trust’s “qualified” beneficiaries is critically important (and can be a tricky exercise in real life), the trust code’s 2006 Legislative Staff Analysis (written largely by FSU Law Professor David F. Powell, who was the scrivener for the Ad Hoc Trust Law Committee of the Florida Bar that drafted Florida’s trust code) went so far as to provide hypothetical examples for those of us trying to pin down exactly who falls within this favored class of beneficiaries:

Example 1 — Meaning of Beneficiary. At his death, ninety-year-old D leaves $1,000,000 to T as trustee “to pay the income to D’s spouse S for life, then to distribute trust property to such of D’s descendants as S by will appoints, and in default of appointment in continuing trust to spray income among D’s children from time to time living, and at the death of the last to distribute all trust property per stirpes to D’s then living descendants and if there be none, to D’s alma mater, QB University.” D is survived by S, by two children, C1 and C2, by a grandson Bob (C1’s child) and by a great-granddaughter Fay (Bob’s child). On these facts, the beneficiaries of D’s trust include S, C1, C2, Bob, Fay, QB University, and an indeterminate and unascertainable class of as yet unborn descendants of D. Note that T’s power to spray trust income among D’s children does not make T a beneficiary because T holds that power as a trustee.

Example 2 — Meaning of Qualified Beneficiary. Same facts as Example 1. The qualified beneficiaries of D’s trust, as of his death, include S, C1, C2 and Bob. S is included because she is a permissible distributee. C1 and C2 are included because they would become permissible distributees were S’s interest to terminate at D’s death (i.e., were she to die at that time). Bob is also a qualified beneficiary because he would take the trust property were the trust to terminate at D’s death (because of the death of S, C1 and C2). As of D’s death, neither Fay nor QB University are qualified beneficiaries. Note however, that if Bob were to die after D’s death, Fay would then become a qualified beneficiary because she would be entitled to trust property as a consequence of a hypothetical trust termination at that time. That is, the determination of who is a qualified beneficiary is made as of a specific point in time and can change over time.

Clearly, who’s in and who’s out as a qualified beneficiary isn’t always going to be obvious. You need to apply the statute to a concrete set of facts to make sense of it. And thanks to the 4th DCA we now have two more real life examples. In both cases the 4th DCA makes clear that when in doubt the term “qualified beneficiary” is going to be read expansively, even if the trust agreement was intentionally drafted to reach the opposite result.

Should you assume intermediate beneficiaries die “sequentially” or “simultaneously”?

Hadassah v. Melcer, — So.3d —- 2019 WL 141039 (Fla. 4th DCA January 09, 2019)

In this case the trust agreement left everything to D’s surviving spouse, S, and upon her death to her three daughters, A, B, and C, and when the last daughter dies, to several charities. F.S. 736.0110 extends the rights of a qualified beneficiary to any charitable organization expressly designated to receive distributions from a charitable trust if the organization would otherwise meet the definition of a qualified beneficiary.

D was survived by his three daughters (his wife predeceased him). D’s trustee then filed an action seeking to resign and he named D’s three daughters and the charities as defendants, alleging that they were all qualified beneficiaries of the trust. The daughters argued that the charities weren’t qualified beneficiaries, and thus didn’t have a say in who gets to be successor trustee, because if any one of them died, the surviving sisters would get their share. Thus, the charities weren’t first line remainder beneficiaries. The trial court agreed and entered summary judgment against the charities.

Wrong answer, says the 4th DCA. When you’re defining who falls within the magic circle of qualified beneficiaries you need to assume all intermediate beneficiaries die simultaneously.

The lower court’s order contemplates the sequential termination of the daughters’ individual interests such that A’s interest passes to B and C; then B’s interest passes to C; then C’s interest passes to the charities. This interpretation is contrary to the plain language of the statute.

The statute contemplates the simultaneous termination of the interests of the distributees (“termination of the interests of other distributees or permissible distributees then receiving or eligible to receive distributions”). If the interests of the distributees of the trust were simultaneously terminated, all of the daughters’ interests would terminate and the charities would be the distributees. Therefore, the charities are qualified beneficiaries under the plain language of the statute.

Can you use a “multiple-trust scheme” to draft remainder beneficiaries out of the picture?

Rachins v. Minassian, 251 So.3d 919 (Fla. 4th DCA July 11, 2018)

When it comes to blended families, estate planning can be a special kind of hell, as amply demonstrated by this case, which is now on its second round before the 4th DCA.

In this case D’s trust was for the benefit of his surviving spouse, S, and upon her death for D’s adult children from a prior marriage. D was survived by S and his children. Both D and his estate planning attorney clearly anticipated there was going to be trouble, and tried their best to draft those problems out of existence, as I previously reported here the first time this case made its way to the 4th DCA.

This time around the question was whether a trust agreement that says S’s “Family Trust” terminates when she dies and that at that time new trusts would be created for D’s children, effectively cuts them out as qualified beneficiaries of S’s trust. As explained by the 4th DCA, that was clearly D’s intent.

[I]t appears that the husband settled on the multiple-trust scheme for the very purpose of preventing the children from challenging the manner in which the wife spent the money in the Family Trust during her lifetime.

So did this bit of defensive drafting work? Nope. Here’s why:

[T]he fact that the Family Trust terminates upon the wife’s death does not preclude the children from having a beneficial interest in the Family Trust. Indeed, by definition, a remainder interest in a trust refers to the right to receive trust property upon the termination of the trust. ….

Thus, while the husband may have intended to prevent the children from challenging the manner in which the wife spent the money in the Family Trust during her lifetime, see Minassian, 152 So.3d at 727, the children are qualified beneficiaries under [F.S. 736.0103(16)] and are therefore entitled to the corresponding protections afforded to qualified beneficiaries under the Florida Trust Code.

Johnson v. Townsend, — So.3d —- 2018 WL 5291297 (Fla. 4th DCA October 24, 2018)

Florida remains the largest recipient of state-to-state migration in the US, and the top choice among retirees. A percentage of those transplants are going to be married couples that moved to Florida directly from a community property state or may have lived in a community property state at some time during their marriage. How big a percentage? Bigger than you might think.

There are nine community property states in the US, including our two most populous states: California and Texas. Additionally, Alaska is an elective community property state, and of the five inhabited US territories, Puerto Rico and Guam are community property jurisdictions. That’s a lot of people. But it doesn’t end there.

You also need to keep in mind that married couples moving to Florida from foreign civil law jurisdictions (think all of Latin America) usually bring along with them some kind of community property rights. For an excellent article discussing those issues you’ll want to read Transnational Probate and Estates: Procedural Strategy in Light of Latin American Law and Practices.

Florida Uniform Disposition of Community Property Rights at Death Act (FUDCRPDA)

OK, so even if community property is common, why should we care? Because when one of those community property transplants dies in Florida, the surviving spouse’s testamentary community property rights don’t go away, they’re preserved by the Florida Uniform Disposition of Community Property Rights at Death Act (“FUDCRPDA”) (see F.S. sections 732.216 to 732.228); Florida’s version of the Uniform Disposition of Community Property Rights at Death Act (which has been adopted in 17 states).

For more on FUDCRPDA and how it’s supposed to work, you’ll want to read Playing Both Sides of the Florida Community Property Street?, by Richard Warner, one of the smartest probate practitioners and most provocative commentators in Florida.

But here’s the problem: because Florida isn’t a community property state, community property is an issue most Florida probate attorneys never think about, which means it might be a while before anyone gets around to looking into whether a surviving spouse has any community property rights worth filing a FUDCRPDA claim to preserve. Does this lack of awareness matter? Yes. Why? Because community property claims in Florida probate proceedings are forfeited if they’re not made before the statutory filing deadline. So what’s the filing deadline? According to the 4th DCA, it’s sooner than you might think.

Case Study: Texas + Florida =  FUDCPRDA Claim

The linked-to case above involves a married couple that moved to Florida from Texas (a community property state). When husband died in January 2015, he was survived by his wife and children from a prior marriage. In March 2015 the decedent’s will was admitted to probate and his wife was appointed personal representative. In September 2017 (two years and eight-and-a-half months after the decedent’s death), surviving spouse filed a FUDCPRDA claim, described as follows by the 4th DCA:

The wife’s petition, filed pursuant to sections 732.216–.228, Florida Statutes (2015) (known as the “Florida Uniform Disposition of Community Property Rights at Death Act”) sought to confirm and effectuate her vested 50% community property interest in an investment asset acquired and titled in the decedent’s name while the decedent and the wife were domiciled in Texas, a community property state. See § 732.219, Fla. Stat. (2015) (“Upon the death of a married person, one-half of the property to which ss. 732.216–732.228 apply is the property of the surviving spouse and is not subject to testamentary disposition by the decedent or distribution under the laws of succession of this state.”).

The decedent’s daughters objected, claiming wife’s FUDCPRDA claim was time barred. So what’s the deadline for filing a community property claim? Good question; FUDCPRDA doesn’t tell us, you need to look elsewhere.

If a surviving spouse is going to make an elective share claim, F.S. 732.2135(1) tells us exactly what the deadline is for filing that kind of claim. By contrast, FUDCPRDA doesn’t have any explicit filing deadlines. Wife argued there are none (which makes sense if she was simply perfecting existing property rights to non-estate assets she already owned). Daughters argued wife’s community property claim is a form of creditor claim, so the filing deadlines for probate creditor claims apply (which makes sense if we view a FUDCPRDA claim as creating new property rights to estate assets owned by the decedent).

Is a surviving spouse’s community-property claim subject to the filing deadlines for probate “creditor” claims? YES

Daughters won the definitional argument: community property claims = creditor claims: creditor deadlines apply.

[W]e agree with the daughters’ argument that the wife’s petition to determine her community property interest is a “claim” as that term is defined in section 731.201(4). Section 731.201(4) defines a “claim” as

a liability of the decedent, whether arising in contract, tort, or otherwise, and funeral expense. The term does not include an expense of administration or estate, inheritance, succession, or other death taxes.

(emphasis added). The wife’s community property interest is “a liability of the decedent.” Although the decedent’s possession of the community property in his name may have created a resulting trust, see [Quintana v. Ordono, 195 So.2d 577, 580 (Fla. 3d DCA 1967)] (“A resulting trust is generally found to exist in transactions affecting community property in noncommunity property states where a husband buys property in his own name.”), upon the decedent’s death, his estate became liable to the wife for her community property interest. Thus, upon the decedent’s death, the wife’s community property interest was a claim which the wife had to pursue.

And once the daughters won the definitional argument, the outcome was inevitable: wife’s claim was time barred:

Upon the decedent’s death, the wife had the ability to perfect her community property interest by seeking an order of the probate court pursuant to section 732.223. Because the wife’s community property interest was a “claim” as defined in section 731.201(4), the wife had three months after the time she published the notice to creditors to file her claim according to section 733.702(1), and in any event had two years after the decedent’s death to file her claim according to section 733.710(1). The wife did neither. As a result, the circuit court properly found that the wife’s untimely claim (in the form of her petition) was barred, and that no exception to the statutory deadlines existed. Ruling otherwise would have left no deadline by which the wife had to file a petition to perfect her community property interest, contrary to section 733.710(1).

So what are testamentary community property rights in Florida?

The only way to make sense of how the 4th DCA ruled in this case is to think of a FUDCPRDA claim as a form of testamentary marital right that’s forfeited if not pursued (like an elective share claim), not an adjudication of existing property rights to non-estate assets surviving spouse already owns. The 4th DCA crystallized the competing property rights views animating this case by granting wife’s motion to certify to the Florida Supreme Court the following question of great public importance:

We deny appellant’s motion for rehearing and/or rehearing en banc. However, we grant appellant’s motion to certify to the Florida Supreme Court the following question of great public importance:

Whether a surviving spouse’s vested community property rights are part of the deceased spouse’s probate estate making them subject to the estate’s claims procedures, or are fully owned by the surviving spouse and therefore not subject to the estate’s claims procedures.

This is a fascinating — and fundamentally important — property rights question the Florida Supreme Court will hopefully agree to address.

FUDCPRDA Claim + Probate Creditor Deadlines = Trap for the unwary:

The ultra-short filing deadlines for creditor claims are intentionally designed to cut off potential claimants as soon as possible, which means you need to be thinking about them from day one. The “notice to creditors” mandated by F.S. 733.2121 makes sure everyone is acutely aware of these deadlines. And when it comes to marital rights, like elective share claims, the applicable statutes again give us explicit filing deadlines. FUDCPRDA doesn’t explicitly set a filing deadline, you need to infer it from the limitations periods applicable to “creditor” claims. This is a huge trap for the unwary. You’ve been warned …

If you make your living in and around our probate courts you’ll find the FY 2016-17 Probate Court Statistical Reference Guide interesting reading. The chart below provides the “cases filed” data for three of our largest circuits/counties: Miami-Dade (11th Cir), Broward (17th Cir), and Palm Beach (15th Cir).

And because one year’s snapshot is only so useful, the chart also reports the per-judge average case filing numbers for the prior four years to reflect trends over time.

Type of Case Miami-Dade (11th Cir) Broward (17th Cir) Palm Beach (15th Cir)
Probate 4,354  3,541  4,825
Baker Act  4,714  3,507  2,126
Substance Abuse 937  782  684
Other Social Cases 1,725  383  212
Guardianship 892  448  472
Trust 55  42  212
Total 12,677  8,703  8,531
# Judges 5 3 4.5*
2016-17: Total/Judge  2,535  2,901

 1,896
2015-16: Total/Judge  3,070  2,866 2,109
2014-15: Total/Judge  3,122  3,044  2,020
2013-14: Total/Judge  3,069  3,899  1,950
2012-13: Total/Judge  2,848  3,105  1,871

*In Palm Beach County (15th Cir) there are 9 part time probate judges. For purposes of the chart I count them as 4.5 full time probate judges.

So what’s it all mean?

In Miami-Dade – on average – each probate judge took on 2,535 NEW cases in FY 2016-17, in Broward the figure was slightly higher at 2,901/judge, with Palm Beach scoring the lowest at 1,896/judge. Keep in mind these case-load figures (which have remained relatively constant over the last five years) don’t take into account each judge’s EXISTING case load or other administrative duties.

These stat’s may be appropriate for uncontested proceedings, which represent the vast majority of the matters handled by a typical probate judge, but when it comes to that small % of estates that are litigated, these same case-load numbers (confirmed by personal experience) make two points glaringly clear to me:

[1] We aren’t doing our jobs as planners if we don’t anticipate — and plan accordingly for — the structural limitations inherent to an overworked and underfunded state court system. As I’ve previously written here, one important aspect of that kind of planning should be “privatizing” the dispute resolution process to the maximum extent possible by including mandatory arbitration clauses in all our wills and trusts. Arbitration may not be perfect, but at least you get some say in who’s going to decide your case and what his or her minimum qualifications need to be. And in the arbitration process (which is privately funded) you also have a fighting chance of getting your arbitrator to actually read your briefs and invest the time and mental focus needed to thoughtfully evaluate the complex tax, state law and family dynamics underlying these cases (a luxury that’s all but impossible in a state court system that forces our judges to juggle thousands of cases at a time with little or no support).

[2] We aren’t doing our jobs as litigators if we don’t anticipate — and plan accordingly for — the “cold judge” factor I wrote about here; which needs to be weighed heavily every time you ask a court system designed to handle un-contested proceedings on a mass-production basis to adjudicate a complex trial or basically rule on any technically demanding issue or pre-trial motion of any significance that can’t be disposed of in the few minutes allotted to the average probate hearing.

You’d be surprised how varied a probate judge’s docket is:

But numbers alone don’t tell the whole story. To understand the breadth of issues a typical probate judge contends with in an average year, you’ll want to read the official definition given for each of the categories listed in my chart by the Florida Office of the State Courts Administrator 2016-17 Glossary:

Probate:

All matters relating to the validity of wills and their execution; distribution, management, sale, transfer and accounting of estate property; and ancillary administration pursuant to Chapters 731, 732, 733, 734, and 735, F.S.

Baker Act (Mental Health Act):

All matters relating to the care and treatment of individuals with mental, emotional, and behavioral disorders pursuant to sections 394.463 and 394.467, F.S.

Substance Abuse Act (Marchman Act):

All matters related to the involuntary assessment/treatment of substance abuse pursuant to Sections 397.6811 and 397.693, F.S.

Other Social Cases (Probate):

All other matters involving involuntary commitment not included under the Baker and Substance Abuse Act categories. All matters involving the following, but not limited to:

  • Adult Protective Services Act cases pursuant to Section 415.104, F.S.
  • Developmental disability cases under Section 393.11, F.S.
  • Incapacity determination cases pursuant to sections 744.3201, 744.3215, and 744.331, F.S.
  • Review of surrogate or proxy’s health care decisions pursuant to Section 765.105, F.S., and rule 5.900, Florida Probate Rules
  • Tuberculosis control cases pursuant to Sections 392.55, 392.56, and 392.57, F.S.

Guardianship (Adult or Minor):

All matters relating to determination of status; contracts and conveyances of incompetents; maintenance custody of wards and their property interests; control and restoration of rights; appointment and removal of guardians pursuant to Chapter 744, F.S.; appointment of guardian advocates for individuals with developmental disabilities pursuant to section 393.12, F.S.; and actions to remove the disabilities of non-age minors pursuant to sections 743.08 and 743.09, F.S.

Trusts:

All matters relating to the right of property, real or personal, held by one party for the benefit of another pursuant to Chapter 736, F.S.

Lindenau v. Lundeen, 2018 WL 1152403 (M.D. Florida March 05, 2018)

Florida remains the largest recipient of state-to-state migration in the US, and the top choice among retirees.

Not surprisingly, many of these transplants are slow to abandon the professional relationships they’ve fostered back home — often for decades. When it comes to estate planning that can be a big mistake. Why? Because just because your estate planning documents work back home doesn’t mean they’ll work in Florida. And the person who “pays” for that mistake may be the attorney — not the client (think malpractice claim).

For example, if a trust’s executed somewhere else (like Illinois), F.S. 736.0403(1) tells us it’s generally going to be valid in Florida if it’s valid back home. But that last rule is subject to some big caveats, including Florida’s special execution rules for revocable trusts having “testamentary” provisions. In those cases F.S. 736.0403(2)(b) tells us the non-Florida revocable trust has to comply with Florida’s execution formalities for wills — no matter what the rule might be back home. That can be a huge trap for the unwary.

Florida Retiree + Illinois Attorney = Failed Trust:

At the heart of this case is an Illinois retiree who moved to Florida but kept working with his estate planning attorney back home. The decedent’s Illinois attorney (Lundeen) drafted an amendment to his client’s Illinois revocable trust after the client had moved to Florida and established a new domicile in Florida. The trust amendment was signed by the decedent (Falkenthal) in the presence of two witnesses, but only one of the witnesses signed it. That’s just fine in Illinois, not so much in Florida, as Falkenthal’s new Florida girlfriend (Lindenau) learned when the 2d DCA held in Kelly v. Lindenau (which I wrote about here) that the trust amendment granting her title to the home she shared with Falkenthal failed as a matter of law.

Failed Trust = Malpractice Lawsuit:

So what happened next? Surprise! Lundeen found himself on the receiving end of a malpractice suit in Florida. But it wasn’t all bad news. Fortunately for Lundeen he was represented by excellent defense counsel that got the case removed to federal court, then moved to dismiss it on jurisdictional grounds. Here’s how the federal judge described these two defensive moves:

Following the unfavorable appellate decision, Lindenau filed this lawsuit in the Circuit Court for the Twelfth Judicial Circuit in and for Manatee County, Florida. (See Doc. 2.) Lundeen timely removed it here. (Doc. 1.)

Lindenau alleges that Lundeen committed legal malpractice by “neglecting to draft the Second Amendment according to § 732.503 and § 736.0402, Fla. Stat., failing to advise Falkenthal regarding the execution requirements of Florida law, and by failing to ensure that the Second Amendment was executed by two attesting witnesses.” (Doc. 2 ¶ 22.) Lundeen moved to dismiss the Complaint for lack of personal jurisdiction(Doc. 10), filing a declaration in support. (Doc. 9.) Lindenau responded with her own affidavit and additional evidence. (Docs. 19, 19–1.) Finding no direct conflict in the submitted evidence when construed in Lindenau’s favor, the Court exercised its discretion to hold a non-evidentiary hearing.3 (See Doc. 24.)

Florida’s long-arm statute:

When you’re litigating long-arm jurisdiction it’s a two-step process. First the Court needs to determine if the claims against the non-resident defendant fall within F.S. 48.193, Florida’s long-arm statute. So does drafting a trust amendment in Illinois that fails in Florida fall under Florida’s long-arm statute? Yup:

In [Robinson v. Giamarco & Bill, P.C., 74 F.3d 253, 257 (11th Cir. 1996)] … Michigan attorneys negligently drafted and reviewed a Florida resident’s will, trust, and follow-on testamentary documents. 74 F.3d at 255–56. The client died in Florida, and the will was admitted to probate and the trust administered in Broward County, Florida. Id. at 256. The trust and the estate incurred unexpected tax liability and consequently sued the Michigan attorneys for malpractice. Id. The Eleventh Circuit held the Michigan attorneys “commit[ed] a tortious act within this state” because “[t]heir negligence has allegedly caused damages to an estate in Florida.” Id. at 257.

Robinson controls on the question of the long-arm statute’s applicability. Lundeen negligently drafted a trust amendment, allegedly causing damage to a third-party beneficiary of the Trust in Florida. (Doc. 2 ¶ 23.) Robinson and the “broad construction” the Eleventh Circuit traditionally affords § 48.193(1)(a)(2) subject Lundeen to Florida’s long-arm statute …

Choice-of-Law Clauses Really Matter:

But just because you’re covered by F.S. 48.193 doesn’t mean you’re done. Once that condition’s satisfied, the Court then moves to step two by evaluating whether the defendant has “minimum contacts” with Florida, such that hauling him into a Florida courtroom does not offend “traditional notions of fair play and substantial justice.” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). If step two’s satisfied, the case stays in Florida. If not, it gets dismissed.

In this case the Court said it was a “close call,” but the trust amendment’s Illinois choice-of-law clause tipped the scales in Lundeen’s favor; case dismissed. See you in Illinois. Here’s why:

Lundeen contends this case … aligns with Fleming & Weiss, P.C. v. First American Title Insurance Co., 580 So. 2d 646 (Fla. 3d DCA 1991). There, the out-of-state law firm sent an opinion letter to a Florida bank concerning a subordination agreement that would be used in Florida as part of a mortgage agreement to purchase Florida property, which allegedly caused harm in Florida. Id. at 647. The firm sent the letter “knowing and expecting” it would be used by the Florida bank “in transacting the Florida land loan.” Id. at 648 (Nesbitt, J., dissenting). Nevertheless, the court held the firm’s contacts with Florida insufficient to satisfy due process because the firm “did not solicit business in Florida, maintained no agent or property in Florida,” and “stated … the opinion was based solely on New York law.” Id. at 647–48.

That final point is a critical one. Like the opinion letter in Fleming & Weiss, Lundeen drafted the Trust so that Illinois law would govern. This is an “an indication” that Lundeen never intended to avail himself of Florida’s laws and did not expect to be haled into court here …

Also similarly to Fleming & Weiss, Lundeen does not solicit business in Florida, has no office in Florida, is not licensed in Florida, owns no property in Florida, and has no other clients in Florida. And while the attorneys in Fleming & Weiss … knew and expected their documents would be used in Florida, Lundeen had no such guarantee when he drafted the Trust and the Amendments. (See Doc. 9 ¶¶ 18, 25.) His lack of expectation or intention to subject himself to Florida law distinguishes this case. … By including an Illinois choice-of-law clause and not expecting or intending the Trust to be invoked by Florida courts under Florida law, Lundeen did not purposefully avail himself of this forum, according to Fleming & Weiss.

This case instead comes down to whether Lundeen’s act of drafting the First and Second Amendments “involve some purposeful availment of the privilege of conducting activities within the forum, thereby invoking the benefits and protections of its laws.” … Because the Trust and Amendments were to “be construed and governed by the laws of Illinois” (Doc. 2–1 at 8), and Lundeen did not expect nor intend for the Trust to be administered in Florida under Florida law (Doc. 9 ¶¶ 18, 25), Lundeen cannot be said to have created a “substantial connection” with Florida sufficient to subject him to jurisdiction. See Fleming & Weiss, 580 So. 2d at 647–48.6 Accord Newsome v. Gallacher, 722 F.3d 1257, 1280 (10th Cir. 2013) (collecting cases supporting general agreement among federal courts that “representing a client residing in a distant forum is not necessarily a purposeful availment of that distant forums’ laws and privileges”).

Turkish v. Brody, — So.3d —-, 2016 WL 6992203 (Fla. 3d DCA November 30, 2016)

The family at the center of this case made its money investing in New York and Florida real estate (starting in the 1920s), and they’ve been feuding with each other over that fortune for decades. For that backstory you’ll want to read this 1994 2d Cir opinion.

Fast forward to 2008. One of the surviving heirs was a woman named Ada Turkish who had two children, a son named Arthur and a daughter named Carole. According to the 3d DCA, Mrs. Turkish clearly favored her son.

The record before this Court reflects that, despite Arthur’s lack of significant outside employment for decades, he nonetheless maintained an extravagant lifestyle. His mother, Mrs. Trask, was aware of, participated in, and enjoyed Arthur’s lifestyle, and opted to finance his lifestyle through distributions from Trust Number One and other substantial gifts.

In contrast to her brother, Carole survived on Social Security. The contrast between the siblings was a key theme throughout the litigation, as reported by the DBR in Grandchildren going to court over real estate trust money:

The plaintiff, Carole Brody, 75, lives with her daughter in a two-bedroom apartment in Aventura and buys what she needs on her monthly Social Security stipend. The brother, defendant Arthur S. Turkish, lives in a luxury home in Broken Sound Club, one of the most prestigious country clubs in Boca Raton.

Mrs. Turkish’s gifts to Arthur triggered over $3 million in unpaid gift taxes. Her lawyers negotiated a settlement with the IRS that reduced her gift-tax liability down to $1,022,500. Apparently short on cash, Mrs. Trask chose to fund her tax payment by asking Arthur to funnel cash to her from “Trust Number One,” a trust she’d previously created for the benefit of Arthur and his sister Carole. Arthur was a co-trustee of this trust (his sister Carole wasn’t). Arthur said yes, and exercised his authority as trustee to make a $1,022,500 trust distribution to himself; he then gave these funds to his mom who used the money to pay the IRS and signed a promissory note to pay Arthur back.

When sister Carole got wind of the tax-payment deal between mom and Arthur, she objected, arguing that the $1 million gift tax payment was primarily for Arthur’s benefit (think: self-dealing by Arthur). This factual point was accepted by the trial court, as reflected in the 3d DCA’s opinion:

[FN 1]: It is undisputed that Mrs. Trask made numerous and substantial gifts to Arthur, and therefore, the IRS settlement directly benefitted Arthur because Arthur would have been responsible for a large portion of any gift tax liability as he was the one who received a large portion of the gifts.

Arthur (as trustee) and Carole (as beneficiary) settled this dispute by entering into a Supplemental Release Agreement (“SRA”). Under the terms of the SRA, Arthur agreed to assign his mom’s $1 million promissory note back to their trust, which presumably would make the trust whole. However, unbeknownst to Carole, mom didn’t have the financial wherewithal to pay the loan. The promissory note was virtually worthless.

What’s it take to make sure a trustee/beneficiary settlement agreement’s binding?

The general rule in Florida is that parties deal with each other at arm’s length when settling disputes, so a settlement agreement can’t be invalidated simply because one side misleads the other (see here), or one side makes false representations to the other during a mediation conference (see here).

But what if the settling parties are a trustee and his beneficiary, is it still every man for himself? Not so much. Under F.S. 736.1012, a settlement agreement between a trustee and a beneficiary is voidable if “at the time of the consent, release, or ratification, the beneficiary did not know … of the material facts relating to the breach.” Florida’s statue tracks the text of Uniform Trust Code Section 1009 verbatim. And according to the commentary to UTC Section 1009, if the trustee’s actions constituted self-dealing, full disclosure isn’t enough; under those circumstances a beneficiary’s release is binding “only if the transaction was fair and reasonable.”

In this case the trust was governed by New York law, which has a rule similar to F.S. 736.1012 for enforcing trustee/beneficiary settlement agreements. And because mom’s promissory note wasn’t worth the paper it was written on, and this material fact wasn’t affirmatively made known to Carole, the SRA wasn’t binding, which resulted in Arthur having to pay his sister back half of the tax-money distribution, or $511,250. Here’s how the 3d DCA put it:

In the instant case, although the facts recited in the SRA were accurate, the Co–Trustees failed to make a “full disclosure” to Carole, a beneficiary—that the promissory note Arthur agreed to “contribute” to Trust Number One in exchange for Carole’s release was virtually worthless because Mrs. Trask did not have the ability to repay the promissory note during her lifetime and there would be insufficient estate assets to pay the promissory note upon her death … Therefore, we affirm the trial court’s ruling that the SRA is invalid due to Arthur’s failure to disclose material facts.

So what’s the take away?

If you’re a trustee negotiating a settlement agreement with a beneficiary, the burden is on you to make sure your beneficiary affirmatively represents and warrants that he or she has full knowledge of all material facts related to the deal, that the deal’s “fair and reasonable” (from the beneficiary’s point of view), and that these rep’s and warranties are documented and reflected in the text of your agreement. A “knowing” waiver of rights is a big deal in marital agreements as well. Family law lawyers have had decades to develop contractual rep’s and warranties to address this issue. I think those agreements are excellent models for trustees to use when drafting settlement agreements with their beneficiaries.

Can you rely on trust accountings and 6-month limitation notices to make sure a trustee/beneficiary settlement agreement’s binding?

Arthur argued that even if the SRA was voidable based on his failure as trustee to disclose material facts to Carole, her claim for breach of trust against him was barred because the tax-payment deal had been fully disclosed in a trust accounting she’d been served with, and this accounting contained a six-month limitation notice under F.S. 736.1008(2), which provides as follows:

Unless sooner barred by adjudication, consent, or limitations, a beneficiary is barred from bringing an action against a trustee for breach of trust with respect to a matter that was adequately disclosed in a trust disclosure document unless a proceeding to assert the claim is commenced within 6 months after receipt from the trustee of the trust disclosure document or a limitation notice that applies to that disclosure document, whichever is received later.

So again the issue is: were the material facts “adequately disclosed” to the beneficiary (Carole)? According to F.S. 736.1008(4)(a), a “trust disclosure document adequately discloses a matter if [1] the document provides sufficient information so that a beneficiary knows of a claim or [2] reasonably should have inquired into the existence of a claim with respect to that matter.”

The 3d DCA again ruled against Arthur. Why? Same reason the SRA failed: mom’s promissory note was worthless, and this material fact hadn’t been “adequately disclosed” to Carole (in fact, it wasn’t disclosed to her at all). Here’s how the 3d DCA explained this ruling:

The 2008 accounting … fails to disclose that the promissory note that Arthur contributed to Trust Number One was basically worthless … Further, the 2008 accounting for Trust Number One did not provide Carole with sufficient information that reasonably should have led her to inquire into her claim against the Co–Trustees. Therefore, the six-month statute of limitations set forth in section 736.1008(2) is not applicable because the matter was not “adequately disclosed in a trust disclosure document.” As such, Carole’s claims for breach of fiduciary duty … were not time barred.

I don’t think you can make sense of this case unless you look at it through the prism of trustee self-dealing. If a trustee wants a beneficiary to waive off on that kind of transaction, the burden of proof is always going to be on the trustee.

Which means a trustee shouldn’t assume generally applicable “disclosure” standards are going to shield him from a self-dealing claim. Which in turn means that an accounting-disclosure defense is unlikely to work unless you make it 100% clear that you’ve engaged in self-dealing, and why the transaction isn’t in the best interest of your beneficiaries. If you invite a beneficiary to sue you, and tell her why she could sue, and she still ignores you, then you might just possibly get away with barring future claims by relying on a six-month limitation notice under F.S. 736.1008(2). This kind of explicit disclosure does exist in SEC filings (which are voluminous and way more detailed than a standard trust accounting). I’m sure if you spent some time rummaging around those filings you could find model disclosure text.

For a thoughtful and well-reasoned alternate take on this case, you’ll want to read an excellent Florida Bar Journal article written by Patrick Duffey and Cady Huss entitled Full Disclosure: The Unexpected Ambits and Annals of the Adequate Disclosure Doctrine. Their thesis is that the facts and circumstances of Arthur’s accounting were enough to trigger Carole’s “reasonable inquiry” duty, which means Arthur’s trust-accounting defense should have worked. Here’s an excerpt:

Here, the beneficiary was separately represented by counsel and actively engaged with the trustee as an adversary with respect to the very matter at issue on appeal. She freely entered into the settlement agreement that gave rise to the contested promissory note. The underlying circumstances — that is, the necessity of the funds to pay a settlement with the IRS — would put any reasonable person on notice that, at a minimum, the mother lacked liquid assets to make payment on the note. The trustee made no affirmative representations as to the mother’s solvency. Title to the condominium was nothing more than a red herring: The promissory note was not secured by the property (nor did it purport to be) and had the condominium been owned outright by the mother, it would have been protected homestead not subject to the claims of creditors — including the trust. That holding then leads to an important question: Can a trustee ever rely on the inquiry prong in reporting trust operations to beneficiaries in accountings and other trust disclosure documents?

Bottom line, trustee/beneficiary settlement agreements involving pending claims of self-dealing are minefields that can blow up on you no matter how scrupulously well intentioned the trustee might be or how solid your legal advice is. If you find yourself advising a trustee trying to negotiate a settlement agreement with a beneficiary involving pending claims of self-dealing or any other pending breach of fiduciary duty claims, you’ll want read the Turkish opinion and Patrick and Cady’s excellent article. And you’ll also want to make sure your client appreciates the risks and uncertainties going in. Forewarned is forearmed.

A defining characteristic of inheritance litigation is that the single most important witness — the testator — is dead. And because the testator’s not around anymore to prove to us that he really was acting of his own free will when he disinherited a child, or favored a late-in-life lover, or bequeathed his estate in any other way that’s contrary to generally accepted norms, the second-hand hearsay testimony these cases turn on acts as a sort of Rorschach test. It tells us as much about prevailing social norms and the unconscious biases even the best of us — including judges — operate under, as it does about the testator’s state of mind. And that’s what makes these cases — and estate planning for unconventional clients in general — so confoundingly challenging.

The will of Terry Franklin’s great, great, great, great grandfather John Sutton, marked with an “X” by Sutton, who died in 1846.

Now imagine the year is 1846. You’re an attorney practicing in north Florida, a slaveholding state. A sick old man calls for you; he doesn’t have a family in the formal sense of the word for that time and place, but he lives with a woman of color (his slave) and their mixed-race children. The man tells you he wants to emancipate his slave partner and their children, but he’s too sick to do it on his own, so he wants to make sure they’re freed in his will after he dies. His will’s executed on January 23, 1846, and he’s dead by May of that same year. It’s the perfect storm for a will contest. What do you do?

That’s the story told by Los Angeles trusts and estates litigator Terrence M. Franklin in The 1846 Last Will of John Sutton—What’s Not So New in Will Drafting and Contests. Terry is the great, great, great, great grandson of John Sutton, a white farmer living in Duval County (Jacksonville), Florida, who owned his great, great, great, great grandmother, a black woman named Lucy. John executed a will in 1846 that emancipated Lucy, whom he described as “his mulatto slave, aged about 45,” and her eight children and six grandchildren, all of whom were described by age in the will.

There are two parts to this story that should be particularly interesting to practicing trusts and estates attorneys.

This wax-sealed envelope dated 1846, contained Sutton’s last will and testament.

Drafting in contemplation of litigation:

First, there’s the planning/drafting element of the story. According to Terry, at that time “in the State of Florida if you had emancipated slaves, you had an obligation to pay a thousand dollar bond for each one of them (I don’t know what the bond premium was), lest they become a burden on the people of the State of Florida, and they were required to leave the State within 30 days.”

So John’s will didn’t just emancipate Lucy and their children. His attorney, a man named Gregory Yale, drafted a mechanism into the will meant to actually get them out of Florida and to freedom.

Article Fourth [of the will] said that “I will and bequeath unto my trusty friend and relation, William R. Adams, formerly of Ware County, Georgia and now of Duval County, Florida, all of the above-named property, the said slaves, the future increase of the slaves, all the cattle, all the hogs, et cetera, on the following conditions. Namely, that upon my death or soon thereafter as practicable, the said William R. Adams shall move the said slaves and the increase thereof to a jurisdiction outside of the State of Florida, either Ohio, Indiana or Illinois where they can enjoy their freedom.” …

So the will established that William Adams was to carry out the responsibility of seeing to it that the family was to get there, but it was only on condition that he saw to it that that happened, and failing that, he was required to personally take the property because John trusted that William would see to it that the family made it to Illinois as required.

One of the most important elements of any estate plan is deciding who you’re going to rely on to carry out your wishes after your dead. John Sutton placed a huge amount of trust in his “friend and relation” William Adams. So did William come through? Big time, and in many ways he’s the real hero of this story.

So the document that was found in Southern Illinois specifically described the fact that John Sutton had created this document and that he had named a person named William Adams to be his executor. William Adams had seen to it that the family had made their way from Jacksonville, Florida, to Illinois. And by that time he was able to proclaim them to be free and able to live in perfect freedom. …

Now, bear in mind that … the family packed up all their belongings and made it from Jacksonville, Florida, on to boats I think through Savannah, around the tip of Florida, through New Orleans, up the Mississippi to Illinois where they ended up by December of … 1846. …

And as I said, William Adams who was the named executor of the will who had received the property, that is, my ancestors in trust to make sure that he saw to it that they made their way to Illinois, did in fact comply with his obligations, travelling with the family to Illinois which is where he recorded the copy of the will that I originally heard about, and declared them to be forever free.

Judge William Crabtree’s final decree supporting John Sutton’s will emancipated Terry Franklin’s great, great, great, great grandmother Lucy and her children. The decree ordered that Sutton’s brother who challenged the will to pay a fee to the court.

The Will Contest:

Not surprisingly, the will was contested. This is the second part of the story that should be of particular interest to practicing probate attorneys. John Sutton’s younger brother, a man named Shadrack, challenged the will on grounds that would be familiar to any of us today:

Shadrack alleged that he was informed and believed that “Sutton was at the time of the creation of the document very aged, infirm, bodily and mentally, and that he was then and had been for years wandering in his intellect and subject to the most childish and extravagant superstitions, that he was under the influence of ardent spirits, (he had been plied with alcohol) that his credulity and imbecility made him an easy dupe to the artifices of designing persons who represented to him that the families of children heretofore mentioned were not his offspring—were his offspring and when in fact, they were not his offspring.” …

The petition went on to say, “Your petitioner further showeth unto your Honor that said John Sutton being of sound mind and disposing memory aforesaid was incompetent to make any disposition of the property by will according to the law and that the instrument of writing which he has called his last will is null and void.” Similar to the language that we’d have today in a will contest, the same allegations, undue influence, fraud, lack of capacity.

In her book Fathers of Conscience: Mixed Race Inheritance in the Antebellum South, law professor Bernie Jones studied antebellum will contests in which Southern white men, typically widowed or single, left wills giving property or freedom to women of color and their mixed-race children. Prof. Jones found that the wills were often contested by white relatives claiming that the men were mentally incompetent or were unduly influenced by “jezebels” who used their feminine wiles to take advantage. It was up to the judges ruling on those contests to decide whether it was more important to follow the terms of the wills or to throw them out since they undermined social norms built on the premise that formalized economic and familial relationships between masters and slaves weren’t just distasteful, but illegal.

And for an eerily similar case underscoring the forces arrayed against Lucy and her children in 1840s Florida, you’ll want to read Florida’s Forgotten Execution: The Strange Case of Celia, which tells the story of another Duval County probate case involving another black family emancipated in the 1840s and the horrific ordeals they endured (including re-enslavement). This case was adjudicated by the same probate judge who adjudicated Sutton’s will, Judge William Crabtree, and involved an appearance by the same lawyer who drafted Sutton’s will, Gregory Yale (this time representing family members opposed to emancipation).

Against this backdrop, if you were advising William and Lucy would you tell them to role the dice on a trial in Florida or get out of town and take their chances in a free state like Illinois? (I know what I would have advised.) They apparently opted for the latter course of action; William, Lucy, her children and grandchildren were all long gone by the time the will contest was tried.

And how did that trial turn out? To my surprise, John’s will was upheld.

Well, there was a final decree that was issued on March 10, 1847 by Judge Crabtree. And in his final decree, which you can’t read very well, but Judge Crabtree upheld the will and ordered Shadrach to pay $28.08 in court costs.

But think about this, if the will had been overturned could Shadrack have sued William for some kind of civil theft in connection with helping Lucy and her children to escape? And as fugitive slaves, Lucy and her children would have lived under constant fear of being dragged back to Florida. The stakes for those involved couldn’t have been higher.

Terry Franklin concludes his article by reflecting on the people who’ve helped him uncover his family’s story and his great, great, great, great grandmother’s journey to freedom, including the generous pro bono assistance of Florida trusts and estates lawyers like Mike Simon and his colleagues at Gunster. Terry also reflected on the importance of “the context of history” to the work we do, not just as attorneys, but as citizens with a personal stake in bending the “arc of history towards justice.” I can’t say enough good things about Terry’s article, it’s a must read for any Florida probate attorney.

What has been miraculous to me is that people have opened their arms to me and helped to support in telling this story, including the Gunster firm. After I returned back to the ACTEC meeting after Jeffrey and I went to see the will, one of our colleagues there, Mike Simon, actually said to me, you’ve got to get your hands on those files because now there’s a rule in the State of Florida that says that once files have been digitized, they can be destroyed. So they went to court for me, pro bono, and got me ownership of those original documents, those 46 pages of documents that connect us to our history.

What I’ve learned in this process as I began to dig in further and do my own research and fill out the contours of the novel that I’m trying to write is a little bit about the importance of history. I’ve always thought of history as something that famous people did, or presidents or kings and Queens, or even individuals who did something unusual and extraordinary like Harriet Tubman who now have become part of our history.

But what I realized as I read these documents and connect to my ancestors is that we’re all living in the context of history. That everyday we are taking actions and steps that are part of history. That our descendants will be looking back to us to explain. I know that I stand on the same ark of history with John and Lucy and their children. And with my descendants who are yet to come. And I think the challenge for us, the question for us, is what are we each individually doing to bend that arc of history towards justice.

And I think that’s my message to you today, is that we can talk about the law. We can talk about the facts. We can talk about the books. We can talk about the history. But what is it that we are doing to make life better for those around us, and for our generations yet to come.

Here’s my summary of what happened legislatively in 2018 on the elder law and guardianship front. The legislative focus this year is on preventing and/or responding to instances of elderly and vulnerable adult financial exploitation.

This is part two of my legislative summary for 2018. I previously reported here on the probate and trust related legislation for 2018.

[1] New tools in the fight against financial exploitation of the elderly:

The Legislative Staff Analysis for CS/HB 1059 does a good job of describing the scope of the financial-exploitation threat facing Florida’s large (and growing) elder population. Here’s an excerpt:

Florida is home to more than 5.2 million residents age 60 or older, and has the most residents over the age of 65 in the nation. In 2016, 35.2 percent of individuals nationwide 65 years of age or older were reported to have a disability. Moreover, 19 percent of elders surveyed in a 2016 study conducted by the state’s Department of Elder Affairs (DOEA) indicated that they required assistance with activities of daily living, such as walking, bathing, and dressing.

True incidences of abuse, neglect, or exploitation of the elderly or disabled adults are often difficult to assess. While abuse, neglect, and exploitation of a vulnerable adult can take various forms, the DOEA has described the “financial or material exploitation” of a vulnerable adult to include improper use of an elder’s funds, property, or assets; cashing checks without permission; forging signatures; forcing or deceiving an older person into signing a document; and using an ATM/debit card without permission.

Vulnerable adults residing in nursing homes, assisted living facilities, and adult family care homes are particularly vulnerable to financial exploitation due to the risk of discharge or eviction because of the inability to pay for necessary care and services. Under state and federal law, a nursing home may discharge or transfer a resident with 30 days written notice if the resident has failed to pay a bill for care, after reasonable and appropriate notice for residence at the facility. Assisted living facilities and adult family care homes can relocate or terminate the residency of a vulnerable adult with 45 days notice or 30 days notice, respectively. Consequently, the responsibility of caring for exploited vulnerable adults at risk of discharge or eviction may fall on various state and federal programs.

In 2010, a review of 80 elder financial exploitation cases in Utah found the state’s Medicaid program would potentially pay approximately $900,000 to cover the cost of care for vulnerable adults who had suffered substantial losses due to financial exploitation.

Thanks to CS/HB 1059, effective July 1, 2018 we now have two new statutory tools in the fight against this kind of exploitation. The legislation created new F.S. 825.1035 (which creates a new cause of action authorizing immediate ex parte injunctions freezing contested assets in these cases), and also created new F.S. 825.1036 (which creates a new set of penalties, both civil and criminal, for perpetrators violating these injunctions).

Here’s how the Legislative Staff Analysis describes the new cause of action for immediate injunctive relief found in F.S. 825.1035:

CS/HB 1059 creates a cause of action for an injunction for protection against the exploitation of a vulnerable adult. The bill defines the term “vulnerable adult” to have the same meaning as provided in the “Adult Protective Services Act” (APSA), and defines the term “exploitation” to mean the same as it does under s. 825.103, F.S. The cause of action does not require that a party be represented by an attorney, nor is a party prohibited from filing an action if another cause of action is currently pending between the parties. The bill provides that a petition can be filed by any of the following individuals:

  • A vulnerable adult in imminent danger of being exploited or their guardian;
  • A person or organization acting on behalf of the vulnerable adult with the consent of that person or that person’s guardian; or
  • A person who simultaneously files a petition for determination of incapacity and appointment of an emergency temporary guardian.

A person’s right to petition for an injunction is not affected by the fact that the person has left a residence or household to avoid exploitation of the vulnerable adult. Moreover, the petition may be filed in the circuit court in which the vulnerable adult resides.

In the event a guardianship proceeding is pending at the time of filing, then the petition must be filed in that proceeding. There is no minimum requirement of residency to petition, nor is there a requirement for actual exploitation to have occurred for an injunction to be issued.

And here’s how the Legislative Staff Analysis describes the new enforcement tools found in F.S. 825.1036:

The bill amends s. 741.31, F.S., and s. 901.15, F.S., making a violation of an injunction a first degree misdemeanor (or a third degree felony if the individual has two or more prior convictions for the violation of an injunction) and allows law enforcement to arrest an individual, without a warrant, when there is probable cause to believe the injunction has been violated. A first degree misdemeanor is punishable by up to a year in prison while a third degree felony is punishable by up to 5 years in prison and a $5,000 fine.

The bill authorizes the court to enforce a violation of an injunction through a civil or criminal contempt proceeding, or the state attorney may prosecute it as a criminal violation under s. 741.31, F.S. The court may enforce the respondent’s compliance with the injunction through appropriate civil and criminal remedies, including, a monetary assessment or a fine. The clerk of the court is required to collect and receive such assessment or fine. On a monthly basis, the clerk is directed to transfer the moneys collected to the Department of Revenue for deposit in the Domestic Violence Trust Fund.

If the respondent is arrested by a law enforcement officer under s. 901.15(6), F.S., or for a violation of s. 741.31, F.S., the respondent must be held in custody until brought before the court to enforce the injunction for protection against the exploitation of a vulnerable adult. Pending a hearing, the court may require respondent to post bail in accordance with ch. 903, F.S., and the applicable rules of criminal procedure.

This legislation is a big deal, and for reform advocates like Gainsville elder-law attorney and litigator Shannon Miller, it’s been a long time in coming. Shannon generously shared her personal experiences and perspective as a veteran practitioner litigating these kinds of cases in a 2016 interview for this blog, and now that we have this new legislation she’s published an Exploitation Injunction Handbook July 2018 (including sample forms and commentary) that’s a must read for any practitioner faced with one of these cases.

[2] Guardianship reform and oversight: Clerk of Courts take on greater role as watchdogs

How our courts oversee and administer guardianship proceedings have long been the target of intense criticism and legislative reform efforts (see here, here). All of this has lead to greater oversight by non-judicial actors, including circuit court clerks. Clerks of the circuit courts serve as the custodian of guardianship files. In that capacity they are responsible for reviewing guardianship reports to ensure that guardians are correctly performing their responsibilities and, if appropriate, conduct investigations.

For example, in a story published by the Palm Beach Post entitled Report: Savitt involved with ‘corruption, collusion of judges’, it was reported that the inspector general’s office for the circuit court clerk for Palm Beach County conducted an investigation into allegations of wrongdoing involving guardianship proceedings in that county that resulted in a damning 25-page report. Here’s an excerpt from the Palm Beach Post story:

“Corruption and collusion of judges and lawyers in Delray Beach for financial gain” centered around dubious professional guardian Elizabeth “Betsy” Savitt and her husband, former Circuit Judge Martin Colin, according to a report never before made public by Palm Beach County’s guardianship watchdog.

Once again, a major institution in what is known nationwide as “Corruption County” stands accused of betraying the public trust.

Colin signed orders in Savitt’s cases. The couple’s friend — Circuit Judge David French — oversaw the majority of her cases. And lawyers appointed by Colin steered lucrative guardianships to Savitt while asking Colin to approve tens of thousands of dollars in fees in other cases before him. Other judges approved questionable fees or appointed Savitt under “unusual” circumstances.

These allegations are detailed in a 25-page report by the Inspector General of the Clerk & Comptroller’s Office and obtained by The Palm Beach Post on Friday. The State Attorney’s Office investigated but found no evidence of a crime.

CS/HB 1187 expands on the already existing oversight role played by circuit court clerks when reviewing guardianship reports. Here’s a summary of the legislation provided in the Legislative Staff Analysis:

The Office of Public and Professional Guardians (OPPG) oversees, investigates, and disciplines all public and professional guardians. Complaints against a guardian must be filed with OPPG.

A guardian must file with the circuit court an initial guardianship report, an annual guardianship report, and anannual accounting of the ward’s property. In addition to the duty to serve as the custodian of the guardianship files, the clerk of the court reviews each initial and annual guardianship report to ensure that it contains required information about the ward. If the clerk believes further review is appropriate, the clerk may request and review records and documents that reasonably impact guardianship assets. A guardian or OPPG may disclose confidential information about a ward in limited circumstances.

CS/HB 1187 identifies specific actions that clerks may take when reviewing guardianship reports. The bill permits the clerk to conduct audits and may cause the initial and annual guardianship reports to be audited, when the clerk has reason to believe further review is appropriate. If the clerk identifies an act of wrongdoing on the part of the guardian based on the audit, the bill prohibits the guardian from being paid or reimbursedusing the ward’s assets for any fees incurred in responding to the audit. The bill requires the clerk to advise thecourt of the results of such audits.

The bill allows the clerk to disclose confidential information to the Department of Children and Families or lawenforcement agencies “for other purposes,” as provided by a court order. The bill authorizes a guardian toprovide the confidential information to the clerk or an investigator with OPPG for investigations that arise under a review of records and documents involving assets, the beginning inventory balance, and fees charged to the guardianship.

The bill allows a designee of OPPG to receive records and financial audits to investigate complaints against guardians filed with the OPPG.

2018 was another interesting legislative year for those of us toiling in the vineyards as trusts and estates lawyers. Here’s my summary of what happened on the probate and trust front. I’ll post a separate summary of 2018’s guardianship legislation.

[1] Waiver of homestead rights through deed:

Under Florida law a surviving spouse’s testamentary rights in the couple’s marital homestead residence are spelled out in Art. X, § 4(c) of the Florida Constitution and F.S. 732.4015(1). Spouses are free to contractually waive their homestead rights, and often do for estate planning purposes. The statutory requirements governing those waivers are found in F.S. 732.702. These waivers can be incorporated into any kind of “written contract, agreement, or waiver,” including a deed.

However, deeds often include all sorts of antiquated catchall phrases lawyers have been using for centuries, like “tenements, hereditaments, and appurtenances,” that most of us would never guess include spousal homestead rights. And yet, a pair of appellate decisions concluded that these boilerplate phrases still matter, which means they were enough to constitute homestead waivers under F.S. 732.702. The first decision was published in 2011 by the 3d DCA in Habeeb v. Linder (which I wrote about here), and the second decision was published in 2014 by the 4th DCA in Stone v. Stone (which I wrote about here).

Homestead rights are a big deal. If someone’s going to waive those rights, it shouldn’t happen by accident, like by signing a joint deed that never mentions the word “homestead”. To make sure that doesn’t happen, CS/SB 512 created new F.S. 732.7025, which clarifies when a person knowingly waives homestead rights in a deed. Under the new statute, if you’re going to waive your homestead rights by signing a deed, you need to explicitly say so by including the following or substantially similar language in the deed: “By executing or joining this deed, I intend to waive homestead rights that would otherwise prevent my spouse from devising the homestead property described in this deed to someone other than me.”

For more on the backstory to this statute you’ll want to read the Legislative Staff Analysis.

[2] Beneficiary “best interests” vs. Settlor “intent”: Who wins?

Traditionally, strong public policy principles were the only limits placed on settlor intent (inter-faith marriage clauses are classic example, see here). That’s changing. Today, a trust beneficiary’s “best interests” are also weighed heavily against, and sometime permitted to trump, a settlor’s contrary intent. For an excellent examination of this trend you’ll want to read The New Direction of American Trust Law. Here’s an excerpt:

There is a central tension in the law of trusts between the rights of the donor and the rights of the beneficiaries. On the one hand, the position of the donor seems paramount. The donor—known in trust law as the “settlor”—establishes the terms of the trust and, therefore, has the power to determine the extent of the beneficiaries’ equitable interests and the power to control the actions of the trustee in the trust’s administration. Indeed, the organizing principle of the law of donative transfers, as stated in the Restatement (Third) of Property: Wills and Other Donative Transfers, is that the “donor’s intention is given effect to the maximum extent allowed by law.” On the other hand, the position of the beneficiaries also has a claim to supremacy. Only the beneficiaries hold the ownership interests in the trust, not the settlor. Of course, it sometimes happens that the settlor is also a beneficiary, but here we are speaking of the settlor as such. The beneficiaries, not the settlor, have the equitable ownership of the trust assets, and this would seem to limit the power of the settlor to control the trust. And indeed the Restatement (Third) of Trusts emphasizes that “a private trust, its terms, and its administration must be for the benefit of its beneficiaries.”

In navigating between the extremes of settlor control and beneficiary control, the law of trusts has at times taken a position more favorable to the settlor, and at other times a position more favorable to the beneficiaries.

HB 413 tilts the scales in Florida decidedly in favor of settlor intent, which may or may not be the best public policy, but it certainly clarifies things for our courts and the litigants appearing before them. The bill amends sections of our Trust Code to remove current language that a trust and its terms be administered for the benefit of the beneficiaries. The effect is to establish the settlor’s intent as the guiding principle with respect to the terms, interests, and purposes of a trust. Specifically:

  • The definition of “interests of the beneficiaries” under s. 736.0103(11), F.S. is amended to mean the beneficial interests intended by the settlor as provided under the terms of the trust.
  • The exception to the general rule that the terms of the trust prevail over provisions of the Code contained in s. 736.0105(2)(c), F.S., is amended to remove the mandatory requirement that the terms of the trust be for the benefit of the beneficiaries.
  • Section 736.0404, F.S., is likewise amended to remove the requirement that the trust and its terms be for the benefit of the beneficiaries. As amended, a trust’s purpose only needs to be lawful, not contrary to public policy, and possible to achieve.

For more on the backstory to these changes you’ll want to read the bill’s Legislative Staff Analysis.

“Glitch” warning:

On the other hand, HB 413 leaves untouched the single most powerful tool available to beneficiaries seeking to have trust agreements modified to better address their interests. That provision is found in F.S. 736.04115(1), which allows our courts to modify otherwise irrevocable trusts “if compliance with the terms of a trust is not in the best interests of the beneficiaries.” The public policy underlying this provision is best stated in the following commentary to s. 412 of the Uniform Trust Code:

Although the settlor is granted considerable latitude in defining the purposes of the trust, the principle that a trust have a purpose which is for the benefit of its beneficiaries precludes unreasonable restrictions on the use of trust property. An owner’s freedom to be capricious about the use of the owner’s own property ends when the property is impressed with a trust for the benefit of others. See Restatement (Second) of Trusts Section 124 cmt. g (1959). Thus, attempts to impose unreasonable restrictions on the use of trust property will fail. See Restatement (Third) of Trusts Section 27 Reporter’s Notes to cmt. b (Tentative Draft No. 2, approved 1999).

I’ve been told informally that the folks who worked on the legislation emphasizing settlor intent in HB 413 never intended to invalidate F.S. 736.04115(1), and that the apparent contradictions were unintentional. Hopefully this will all be cleared up in a future “glitch” bill.

But then again, often the easiest way to amend an irrevocable trust to address valid beneficiary concerns is to just “decant” into a new trust with new and improved terms, which avoids having to go to court altogether. And guess what? Florida’s decanting statute is now broader than ever.

[3] Decanting irrevocable trusts just got easier in Florida:

If you’re working with an irrevocable trust that needs fixing for some reason, your first thought should be to simply re-write the trust by using Florida’s “decanting” statute (F.S. 736.04117). Decanting lets trustees re-write irrevocable trust agreements by figuratively pouring the assets from an old trust into a new one. Decanting is all the rage in estate planning circles, as it should be: it’s a legislatively-sanctioned way to privately re-write an irrevocable trust without going through the costs and delays inherent to a judicial modification proceeding. (Yes, this all gets done out of court.) For a solid general introduction to decanting you’ll want to read Decanting is Not Just for Sommeliers.

Our old statute was great, but it had one major limitation: you could only use it if the trustee’s power to invade principal was “absolute”. In other words, you couldn’t decant if the trustee’s power to distribute trust principal was limited by an ascertainable standard, such as the classic health, education, maintenance, and support (“HEMS”) standard. HB 413 gets rid of that limitation, and basically overhauls the rest of the statute to make it work better for all concerned. For those of you hoping to make sense of the new and improved version of our decanting statute, you’ll want to read the bill’s Legislative Staff Analysis, which provides the following summary:

The bill substantially amends s. 736.04117, F.S., related to the trustee’s power to invade principal and expands the ability of the trustee to decant when granted less than absolute power. The bill:

  1. Authorizes a trustee to decant principal to a second trust pursuant to a power to distribute that is not absolute. When such power is not absolute, the trustee’s decanting authority is restricted so that each beneficiary of the first trust must have a substantially similar interest in the second trust. The bill provides a definition for “substantially similar” to mean, in relevant part, that “there is no material change in a beneficiary’s beneficial interest or in the power to make distributions and that the power to make a distribution under a second trust for the benefit of a beneficiary who is an individual is substantially similar to the power under the first trust to make a distribution directly to the beneficiary.”
  2. Authorizes a trustee to decant principal to a supplemental needs trust where a beneficiary is disabled. The trustee may take this action regardless of an absolute discretionary power or discretionary power limited to an ascertainable standard. The bill provides a definition for “supplemental needs trust” to mean a trust that the authorized trustee believes would not be considered a resource for purposes of determining whether the beneficiary who has a disability is eligible for governmental benefits.
  3. Expands the notice requirements under the state’s current decanting statute. Specifically, notice is required to be provided to the settlor of the first trust, if the first trust was not a grantor trust and the second trust will be a grantor trust, all trustees of the first trust, and any person with the power to remove the authorized trustee of the first trust. Moreover, the notice must include copies of both the first and second trust instruments.

In addition to these major changes, the bill:

  • Provides definitions for purposes of interpreting and applying the provisions of s. 736.04117, F.S., including absolute power, authorized trustee, beneficiary with a disability, current beneficiary, government benefits, internal revenue code, power of appointment, presently exercisable general power of appointment, substantially similar, supplemental needs trust, and vested interest.
  • Provides that, with respect to permissible or impermissible modification of certain trust provisions, the second trust may omit, create or modify a power of appointment.
  • Expands the existing prohibition on reducing certain fixed interests to include vested interests.
  • Provides that the second trust may extend the term of the first trust, regardless of whether the authorized trustee has an absolute discretionary power or discretionary power limited to an ascertainable standard.
  • Adds additional tax benefits associated with the first trust that must be maintained in the second trust to include the gift tax annual exclusion, and any and all other tax benefits for income, gift, estate or generation-skipping transfer for tax purposes.
  • Incorporates provisions regarding “grantor” trust status and the trustee’s ability to decant from a grantor trust to a non-grantor trust.
  • Provides that a second trust may be created under the laws of any jurisdiction and institutes certain safeguards to prohibit an authorized trustee from decanting to a second trust which provides the authorized trustee with increased compensation or greater protection under an exculpatory or indemnification provision.
  • Provides that a trustee may decant to a second trust that divides trustee responsibilities among various parties, including one or more trustees and others.

[4] Is there a limit on how far back you can ask for accountings from a trustee who’s never served accountings?

At its core, the job of trustee is as much about keeping beneficiaries adequately informed as anything else.  Most trust litigation can be traced back to a trustee’s inability to adequately explain him or herself to the trust’s beneficiaries, and the Corya v. Sanders case (which I wrote about here) was no different. That 4th DCA case involved several family trusts that had been irrevocable for decades before suit was filed — one dating back to 1953 — for which the trustee had never prepared accountings. When the trustee was finally sued, the plaintiff demanded trust accountings going back decades to each trust’s respective start date.

So what did the 4th DCA decide in Corya? The trustee only had to go back to 2003 for its accountings. And why did it decide that way? Because F.S. 736.08135(3) said it only applied to “trust accountings rendered for any accounting periods beginning on or after January 1, 2003.” That limitation apparently didn’t sit well with trust-accounting purists. So HB 413 amended F.S. 736.08135(3) to add the following new sentence at the end of the statute: “This subsection does not affect the beginning period from which a trustee is required to render a trust accounting.” Does this change mean there’s now no limit on how far back a trustee has to account for? I’m not convinced, but this statutory change definitely opens the door to that argument.

The Corya court also held that a plaintiff’s ignorance of the law (for example, his legal right to annual trust accountings) doesn’t toll the laches clock until he finally gets around to consulting a lawyer — decades after learning the operative facts for an accounting action. Which meant the trustee couldn’t be compelled to account for more than 4 years prior to getting sued. HB 413 attempts to statutorily reverse this ruling as well by amending F.S. 736.1008 to provide that a beneficiary’s actual knowledge that he or she has not received a trust accounting does not cause a claim to accrue against the trustee for a breach of trust. Moreover, the beneficiary’s actual knowledge of that fact does not commence the running of any statute of limitations concerning such claims.

Bottom line, for those of us who read the Corya case as setting January 1, 2003, as the farthest date back a court can compel a trustee to account if he or she’s never served accountings in the past, HB 413 attempts to statutorily undo that result. I’m not sure this is a good thing, and I’m also not sure the bill’s legislative changes accomplish what they set out to do, but you’ll want to know about these changes if one of these cases crosses your desk. For more on the backstory to these changes you’ll want to read the bill’s Legislative Staff Analysis.

[5] Revamp of Florida’s rules for electronically posting/serving trust accountings, trust disclosure documents, and limitation notices:

In today’s world banks do everything possible to communicate with us electronically, and trust companies are no exception, which lead to the inclusion of F.S. 736.0109(3) in our Trust Code. This statute allows a trustee to comply with its notice and reporting requirements by “posting on a secure electronic account or website.” But you only get to use electronic posting if you comply with a long list of requirements, which as a practical matter limits the rules use to corporate trustees.

Well, the electronic posting rules were revamped this year in HB 413.  If you work with corporate trustees and are looking for a quick summary of what’s changed, you’ll want to read the bill’s Legislative Staff Analysis, which summarizes the new electronic posting rules as follows:

The bill provides that the enumerated procedures for electronic posting are solely for the purposes of meeting the notice requirements of s. 736.0109, F.S., and are not intended to restrict or govern courtesy postings in any way. Moreover, the bill provides that the retention requirements only apply if electronic posting is the only method of giving notice.

The bill requires that the initial authorization specifically state whether trust accountings, trust disclosure documents, and limitation notices, each as defined in s. 736.1008(4), F.S., may be posted electronically, but allows a more general description of other types of documents that the sender may provide by posting.

The bill allows a recipient to terminate authorization by following the procedures on the web site instead of giving written notice of such termination.

The bill additionally amends the 4-year document retention requirement:

  • If access is terminated by the sender before the end of the 4-year retention period, then the running of the applicable statute of limitations periods contained in s. 736.1008(1) & (2), F.S., are suspended until 45 days after the sender sends a notice by separate means to the recipient that either access has been restored, or access has been terminated and that the recipient may request copies of the posted documents at no cost.
  • The applicable statute of limitations is also suspended from the time the recipient asks for copies until 20 days after those documents are provided.
  • Documents do not need to be maintained on the website once the recipient’s access has been terminated.
  • No retention is required, and no statute of limitations is suspended, if access is terminated by the action of, or at the request of the recipient. Revocation of authorization to receive documents via posting is not considered to be a request to terminate access to documents already posted.
  • Failure to maintain access does not invalidate the initial notice.

[6] Life insurance agents as trustees, guardians or power of attorney holders for their clients

Trusts and estates lawyers usually focus on the estate-tax planning benefits of life insurance, especially when used to fund an irrevocable life insurance trust or “ILIT”. What we don’t often focus on are the non-tax, state law requirements peculiar to life insurance contracts, such as the insurable interest requirement, which is defined as follows in F.S. 626.798(3)(b):

“Insurable interest” means that the life agent or family member of the life agent has an actual, lawful, and substantial economic interest in the safety and preservation of the life of the insured or a reasonable expectation of benefit or advantage from the continued life of the insured.

This rule is basically designed to make sure people don’t have an economic incentive to buy life insurance on someone they might be tempted to “bump off”. Life insurance agents that run afoul of this rule can find themselves on the wrong side of a lawsuit that’s going to make them really bad (as I wrote about here).

But what about serving as your client’s fiduciary with control over life insurance you’ve sold and are the beneficiary of, is that OK? According to the Legislative Staff Analysis, the old rule was a flat no “unless he or she is a family member of the insured or is a bank or trust company duly authorized to act as a fiduciary.” CS/HB 1073 modifies that rule by amending F.S. 626.798(2) to allow a life insurance agent to serve as a trustee or guardian or accept authority to act under a power of attorney for non-family members if the agent is:

  • Acting as a fiduciary;
  • Licensed as a certified public accountant under s. 473.308, F.S.; and
  • Registered as an investment advisor, or a representative thereof, under federal law or registered as a dealer, investment adviser, or associated person under state law.

As I’ve previously expressed here, serving as trustee of a life insurance trust is a thankless job that carries all sort of uncompensated risks with it. If on top of that you’re the insurance agent who both sold the policy and get a piece of the action when the insured dies, you really need to ask yourself why on earth you’d ever expose yourself to that kind of risk. Under new F.S. 626.798(2) you have that option if you meet the statute’s very strict requirements. Seems to me anyone smart enough to legally qualify as insurance agent and fiduciary under the new rules is probably smart enough to say “no.”

The “collaborative process” is an interesting dispute resolution alternative that’s been used for years — with great success — in the family-law context.

An important tenet of collaborative law is that, should the collaborative process fail, the parties’ lawyers and law firms are disqualified from subsequent litigation. In my opinion, this dynamic changes everything.

I think collaborative law could be the next big thing for resolving trusts and estates cases (which are almost always family disputes of one kind or another), and it’s in that spirit I agreed to be one of the panelists for a webinar that’s taking place on Tuesday of next week, September 18, 2018, from 12:00 PM – 1:00 PM (Eastern). The webinar is entitled Collaborative Process: Are Probate and Trust Disputes on the Horizon?, and it’s sponsored by the ADR Section of The Florida Bar. My co-panelists are Robert J. Merlin (Florida’s elder statesman of all things Collaborative) and A. Michelle Jernigan (lawyer, mediator and arbitrator extraordinaire), presently serving on the Executive Council of the ADR Section.

If you’re a trusts and estates lawyer who’s ever thought to yourself “there’s gotta be a better way,” this webinar’s for you. Click here to sign up.

The webinar is open to all Bar members and may be of particular interest to members of the Real Property Probate and Trust Law, Family Law and the ADR Sections. The purpose of the webinar is to educate members about the Collaborative Process and challenge them to use it as a dispute resolution tool in their practices.