To be clear, under Florida law there’s no such thing as a separate legal entity known as an “estate.” If you want to sue, get paid from, or transfer property to an “estate,” all of that needs to happen via a court-appointed personal representative (“PR”). You’d be surprised how often this basic point gets overlooked (see here, here).

In the De La Riva case linked below, the 4th DCA provided this short summary of the law as applied to cases where you’re trying to sue an estate:

“[I]t is well-settled that ‘an “[e]state” is not an entity that can be a party to litigation. It is the personal representative of the estate, in a representative capacity, that is the proper party.'” Spradley v. Spradley, 213 So. 3d 1042, 1045 (Fla. 2d DCA 2017) (quoting Ganske v. Spence, 129 S.W.3d 701, 704 n.1 (Tex. App. 2004)). “[O]nly when the proper party is in existence may it then be properly served and substituted ….” Stern v. Horwitz, 249 So. 3d 688, 691 (Fla. 2d DCA 2018) (citations omitted) (emphasis added).

De La Riva v. Chavez, — So.3d —-, 2020 WL 5372283 (Fla. 4th DCA September 09, 2020):

In this case the challenge for plaintiff’s counsel was that the defendant’s estate was dragging its feet on getting a PR appointed. After months of waiting and still no PR, plaintiff’s counsel simply amended his complaint to name a fictitious “John Doe” as PR for the estate. This may have seemed like a clever workaround, but as a matter of law it “nullified the subsequent proceedings,” including plaintiff’s proposal for settlement under F.S. 768.79.

After a failed settlement attempt and a great result at trial, plaintiff’s counsel tried to collect fees from the defendant pursuant to F.S. 768.79. Not so fast said the 4th DCA. You can’t sue a “fictitious” PR called “John Doe” and simply go about your business. No PR means “no fees for you,” so saith the 4th DCA:

“If an indispens[a]ble party to an action dies, ‘the action abates until the deceased party’s estate, or other appropriate legal representative, has been substituted pursuant to [R]ule 1.260(a)(1).'” Schaeffler, 38 So. 3d at 799 (quoting Cope v. Waugh, 627 So. 2d 136, 136 (Fla. 1st DCA 1993)). Moreover, the “[f]ailure to substitute the proper representative or guardian nullifies subsequent proceedings.” Id. at 800; see also Ballard v. Wood, 863 So. 2d 1246, 1249 (Fla. 5th DCA 2004) (finding that a failure to substitute pursuant to Rule 1.260(a)(1) nullified the subsequent proceedings). …

Here, Plaintiff initially complied with the procedures of Rule 1.260(a)(1) by contacting opposing counsel and requesting information regarding the opening of the decedent’s estate. See Vera v. Adeland, 881 So. 2d 707, 710 (Fla. 3d DCA 2004). Error occurred, however, when Plaintiff elected to actively continue the litigation, pursuant to his complaint filed against the fictitious “John Doe,” commenced when no estate had been opened and no personal representative appointed. See In re Marriage of Kirby, 280 So. 3d 98, 100 (Fla. 4th DCA 2019); Adeland, 881 So. 2d at 710 (“If no estate has been opened, then another appropriate representative, such as a guardian ad litem, will need to be substituted.”); see also Mattick v. Lisch, ––– So.3d ––––, 43 Fla. L. Weekly D2467 (Fla. 2d DCA Nov. 2, 2018). Proper procedure required the abatement of the proceedings until such time as a personal representative of the estate could be (and actually had been) substituted as party defendant and served with the complaint. See In re Marriage of Kirby, 280 So. 3d at 100.

Image source: Estate & Probate Legal Group

There are all sorts of reasons why you may not want to commence a probate proceeding, but still have concerns about someone else getting the jump on you by secretly probating an invalid Will. In those cases you’ll want to file a “caveat,” an early-warning system used in probate proceedings that’s authorized by F.S. 731.110 and Probate Rule 5.260.

You can file a caveat before or after the death of the person whose estate is to be administered (with the exception of creditors, who can only file after death). By the way, if your local Clerk of Courts goofs and fails to provide the prior notice you’re entitled to as a caveator, you get a “do over”.

But there’s a second, equally important use for caveats. If you’re going to challenge a Will you already know about, you need to file a caveat in those cases too. In other words, simply filing an answer and affirmative defenses isn’t enough, you need to do both (file your answer and also file a separate caveat). Why? Because caveats are the best tool we have for making sure your side gets its day in court before someone else’s contested Will gets admitted to probate, a problem I’ve written about before. Here’s how the 2d DCA summarized the controlling law on this point in the Crescenzo case below:

[W]hen an interested person other than a creditor files a caveat and challenges the decedent’s will, “the probate court [is] obliged to make a determination on [the] challenge to the will prior to appointing a personal representative and admitting the will to probate.” In re Estate of Hartman, 836 So.2d 1038, 1039 (Fla. 2d DCA 2002); see also Rocca v. Boyansky, 80 So.3d 377, 381 (Fla. 3d DCA 2012). The filing of a caveat has “the effect of precluding the admission of the will to probate” until the party filing it has the opportunity to litigate his challenge. Barry v. Walker, 103 Fla. 533, 137 So. 711, 714 (1931); see also Rocca, 80 So.3d at 381 (holding that “will contests and the rights of caveators must be determined” prior to the letters of administration being issued).

But what if you don’t file a caveat and just file an answer, are you out of luck? Maybe not ….

Crescenzo v. Simpson, — So.3d —-, 2018 WL 1219709 (Fla. 2d DCA March 09, 2018):

In this case the contestant didn’t file a caveat, but did file an “Answer and Affirmative Defenses.” In most civil litigation that’s all you need to do. Not so in probate. So what happened? The probate judge ignored the answer and entered an order admitting the contested will to probate sans trial.

Conceding that caveats are mandatory if you want to guarantee a trial before a contested Will’s admitted, on appeal the contestant argued his answer was the “functional equivalent” of a caveat. Did this work? Yes … but just barely, so saith the 2d DCA:

As in Guth’s Estate, here we think any variance in form between Mr. Crescenzo’s answer and a true caveat is immaterial. There is no question that his answer identified his interest in the estate; there is no question that his answer put the court and the parties on notice of a will contest; there is no question that his answer precisely identified the decedent and will to which his challenge pertained; and there is no question that he was looking for a decision on his will contest before the will was admitted to probate. This is a case in which the substance of what Mr. Crescenzo was doing is obvious and any defect in form is inconsequential. See, e.g., Fla. Prob. R. 5.020(a) (“No defect of form impairs substantial rights ….”); In re Estate of Koshuba, 993 So.2d 983, 986 (Fla. 2d DCA 2007) (“We agree … that Mr. Zilewicz’s written statements, made within his Petition for Administration and the Amended Petition for a Guardian ad Litem, were substantially sufficient to place interested persons on notice of his claim. The documents filed in the probate proceeding … are defective as to form, but they sufficiently state the character and extent of his claim.”); Harbour House Props., Inc. v. Estate of Stone, 443 So.2d 136, 137 (Fla. 3d DCA 1983) (“The creditor’s response to the motion to strike its claim became the functional equivalent of a motion to excuse the untimely filing of a claim against the estate.”).

Because Mr. Crescenzo’s “Answer and Affirmative Defenses” was the functional equivalent of a caveat on the facts of this case, we conclude that the probate court erred in entering its order without first addressing Mr. Crescenzo’s will contest. We reverse and remand with instructions for the probate court to vacate the order admitting Ms. Quinones’ will to probate and appointing Ms. Simpson as personal representative and to conduct further proceedings consistent with this opinion.

So what’s the takeaway?

We can all agree no one should have to prosecute an appeal just to preserve your side’s right to a trial before a contested Will’s admitted to probate. In this case the contestant salvaged his trial by convincing the 2d DCA his answer was the “functional equivalent” of a caveat. And you may want to remember that argument if you ever find yourself in the same position (it can happen to the best of us).

But the real takeaway from this case is to not put yourself in this situation to begin with. If you want to guarantee a Will won’t get admitted until after your challenge is tried, simply filing an answer and affirmative defenses isn’t enough, you also need to file a separate caveat.

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Deeding property “into” and “out” of trusts is the kind of bread and butter work trusts and estates lawyers do all the time. But just because deeds-to-trust are commonplace, doesn’t mean you don’t have to sweat the details. Skip the basics of F.S. 689.07, and the property you thought was going into your trust will instead find itself in the middle of someone else’s lawsuit (see here).

On the other hand, ignoring the formalities of your trust agreement can just as easily get you into trouble on the way out. In one case a surviving widow found herself embroiled in almost a decade of litigation that all started because of her husband’s failed attempt to deed a condo unit out of his revocable trust (see here, here, and here).

Deeding property “out” of a revocable trust:

A big selling point for revocable trusts is retained control. As long as my trust is revocable, I retain 100% control over the assets “in” my trust (i.e., assets titled in the name of the trustee), which means this property essentially never stops being “my” property (even if it’s not titled in my name individually). When you couple retained control with the benefits of probate-avoidance, you have a winning combination that’s made revocable trusts central to modern estate planning.

But when it comes to real estate held in revocable trusts, retained control brings with it serious, if subtle risks. The technical formalities required to convey valid title can conflict with the common sense, lived experience of most non-lawyers — especially if the property’s transferred back to the client individually or as a gift to some family member. “If the property’s mine,” the thinking goes, “who cares if I don’t dot every ‘i’ and cross every ‘t’ when I sign a deed transferring my own property out of my own trust?”

Answer: no one cares … until after you’re dead and your heirs (or some unsuspecting third-party purchaser) start suing each other, which is exactly what happened in the following case.

Schlossberg v. Estate of Kaporovsky, — So.3d —-, 2020 WL 4496139 (Fla. 4th DCA August 05, 2020)

This case involved a revocable trust and the settlor’s condominium. The settlor was the mother of two children, a daughter and a son. Mom’s trust was pretty typical. While she was alive she was the sole beneficiary of her trust. Mom also retained the right to revoke her trust at any time in whole or in part “by instrument delivered in writing to the trustee.” Mom and daughter were the co-trustees.

The condo at the core of this case was the subject of three separate deeds.

  1. In 2000, mom executed a deed conveying ownership of her condo to herself and her daughter as joint tenants with right of survivorship.
  2. In 2004, mom executed a second deed, this time conveying her retained interest in the condo to her revocable trust.
  3. In 2005, mom and daughter, as co-trustees of mom’s revocable trust, executed a third deed, this time conveying mom’s retained interest in the condo back to mom individually for life, remainder to daughter upon mom’s death.

The 2005 deed was executed by mom and daughter as follows, which is critical to the outcome of this case.

This Quit-Claim Deed, Executed this … day of … 2005 by [Mom], a single woman and [Daughter], a single woman, individually and as Trustees of the [MOM] INTERVIVOS TRUST AGREEMENT dated … first party, to [Mom], a life estate, with the remainder to [Daughter] …. second party.

Fast forward to 2009. Mom dies and litigation breaks out between her children. As part of that litigation son challenged the validity of the 2005 deed.

Son’s argument focused on a strict reading of mom’s trust (the type of reading that’s perfectly legal, but likely would have seemed absurd to mom). First, because mom was the sole beneficiary of her trust, distribution of the trust’s interest in the condo to sister violated the trust’s terms. Second, because sister was a co-trustee of mom’s trust, distribution of the trust’s interest in the condo to sister was a conflict of interest that violated sister’s fiduciary duties as trustee.

The trial court agreed with son, ruling that the 2005 deed was void. Not so fast said the 4th DCA, which rejected both of son’s strict-construction arguments.

The 2005 deed, executed by the settlor individually, as well as by both trustees of the trust, is valid in accordance with the trust provisions for two reasons. First, the trust allowed the settlor to revoke the trust in whole or in part by a written instrument delivered to the trustees. Second, the trust authorized the trustees to apply any part of the trust assets to the settlor’s use.

The reason this case was litigated in the first place is that both points made by the 4th DCA were implied by the text of the controlling documents, but neither was stated explicitly. If mom had wanted to revoke her trust with regard to her trust’s retained interest in the condo, the deed should have affirmatively said so. It didn’t, which was enough for the trial court to rule against sister. Anyway, in a bit of reverse engineering the 4th DCA found the 2005 deed was a de facto revocation.

[Mom’s] trust provided that the trust could be revoked, in whole or in part, by an instrument in writing delivered to the trustees. It did not describe the form of that instrument. “Ordinarily a power to revoke the trust will be interpreted as including a power to revoke the trust in part by withdrawing a part of the trust property from the trust.” Restatement (Second) of Trusts § 330 (1959). The deed, withdrawing the condo from the trust, was a written instrument executed by both co-trustees and the settlor. It had the effect of removing the condo from the trust. Therefore, the settlor revoked the trust in part as to the condominium.

The second leg of the 4th DCA’s thinking is equally sensible, although here again the court was forced to reverse engineer a set of transactions that are implied by the facts, but never explicitly stated.

If mom had wanted to properly distribute assets out of her revocable trust to her daughter while mom was the only beneficiary, mom could have easily done so by signing two deeds: one from the trustees to mom individually, a second from mom individually to daughter individually. That’s not what happened. Instead, both steps were collapsed into a single deed, which ultimately worked but “cost” the family in terms of litigation that in hindsight was avoidable. Here’s how the 4th DCA explained its rationale on this point:

The parties agree that the trustees could convey the condo to the settlor. The trustees did so through the 2005 deed. This would also have been considered the application of the trust assets for the settlor’s use, which the trustees are specifically authorized to do through conveyance of property. Thus, the co-trustees could have conveyed the property to the settlor, which would have removed the condo from the trust. Then the settlor could have conveyed the property free of trust to herself for life with remainder to Wisotsky. …

Applying the principle of Countrywide Funding to this case, the trustees had the authority to convey the property to the settlor within the terms of the trust, either as a principal distribution for her use or as a partial revocation of the trust. Then the settlor, individually could have conveyed the property to herself for a life estate, remainder to her daughter. Therefore, when the quitclaim deed was executed by both trustees and by the settlor individually, the deed accomplished with a single conveyance the same requirements as two separate conveyances. We see no need to demand two separate conveyances.

[Son] argues that the trustees had no power to gift the remainder interest in the condo unit to [Sister]. However, when the one transaction is considered the combination of two transactions, it is apparent that the trustees did not gift the remainder interest, [Mom] did.

Lesson learned?

As a litigator, you’ll want to consider the 4th DCA’s reasoning no matter what side of the case you’re on. The de facto trust revocation and two-stepped trust distribution found to exist in this case both required a few logic steps that weren’t facially apparent from the text of the controlling documents. Instead, the court was required to stitch together a coherent legal argument based on the facts of the case. Good stuff.

As a planner, the solution is easy (in hindsight, it always is). If your client wants to take real property “out” of her revocable trust and give it away to someone else, make sure you document the gift in a way that irrefutably complies with the terms of the trust agreement. In this case that documentation would have included (1) an explicit written revocation of the trust with regard to mom’s condo, and/or (2) two separate deeds: one from the trustees to mom individually, a second from mom individually to daughter individually.

Image by Megan Tatem, redbook

Under the Florida Uniform Disposition of Community Property Rights at Death Act, married couples moving to Florida from community property jurisdictions bring their testamentary community property rights with them. This includes couples moving to Florida from any of our nine U.S. community property states, and also includes those moving to Florida from anywhere else on the planet that’s a community property jurisdiction (think virtually all of continental Europe and Latin America).

These valuable property rights can dramatically reshape the ultimate disposition of an estate, but are often overlooked by unsuspecting practitioners in common law states like Florida, who by training and experience are generally unaccustomed to spotting community-property issues … until it’s too late.

Community property in Florida? You bet!

Our nine community property states include our two most populous states (California and Texas), and collectively represent over 30% of the entire U.S. population. This slice of the populace is too big to ignore anywhere in the U.S., but especially so in Florida, the first choice for relocating retirees within the U.S., and the single largest recipient of state-to-state migration in the U.S. To the extent any of these domestic migrants are married and come from a community property jurisdiction, they bringing their testamentary community property rights with them.

And then there’s Puerto Rico. It’s not only the largest U.S. territory by population, it’s also a community property jurisdiction. One in three migrants to the U.S. mainland from Puerto Rico settles in Florida. If they’re married, they too bringing their community property rights with them. But it doesn’t end there.

Florida is the single largest recipient of all international migration to the U.S., and the number one destination for South American migrants to the U.S. To the extent any of these international migrants are married and come from a community property jurisdiction, they too bringing their testamentary community property rights with them.

A User’s Guide to Prosecuting Claims under Florida’s Uniform Disposition of Community Property Rights at Death Act:

OK, so there are probably way more Floridians walking around with testamentary community property rights than most of us would have guessed. Should probate attorneys be concerned? YES! These claims are subject to Florida’s ultra-short filing deadlines for probate creditor claims. As I reported here, if these property rights aren’t claimed on a timely basis — they’re forfeited. This is a huge trap for the unwary.

For those of you looking for a practical guide to evaluating these claims, you’ll want to read A User’s Guide to Prosecuting Claims under Florida’s Uniform Disposition of Community Property Rights at Death Act, which is my CLE presentation on the subject. Here’s an excerpt:

There are two distinct property systems in the United States: common law and community property. “Common law is the dominant property system in the United States and has been adopted by 41 states [including Florida]. The theory underlying common law is that each spouse is a separate individual with separate legal and property rights.” “The theory underlying community property is analogous to that of a partnership. Each spouse contributes labor (and in some states, capital) for the benefit of the community, and shares equally in the profits and income earned by the community. Thus, each spouse owns an automatic 50% interest in all community property, regardless of which spouse acquired the community property.”

A couple’s community property rights are a product of their marital domicile. By contrast, the law governing a decedent’s estate is a product of his or her domicile at death.

Black letter Florida law tells us that “[a]dministration of an estate is governed by the law of the decedent’s domicile.” In fact, the Florida Probate Rules ensure practitioners focus on a decedent’s domicile at death by explicitly requiring its disclosure in seven separate rules. But what about marital domicile (i.e., the “domicile that a husband and wife, as a married couple, have established as their home.”)? This distinct species of domicile is never even mentioned in Florida’s probate rules.

In today’s highly mobile society where a couple’s marital domicile often changes multiple times over a lifetime, this statutory blind spot is a trap for unsuspecting practitioners in a common law states like Florida, who by training and experience are generally  unaccustomed to spotting community-property issues. Why? Because even though Florida is not a community property state, if a person dies here but at some point in the past (no matter how many years ago) shared a martial domicile with his or her surviving spouse in a community property jurisdiction, that one fact alone can dramatically reshape the ultimate disposition of the entire estate, no matter what the decedent’s will or trust may say to the contrary.

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In Florida we don’t have jury trials in will contests. But if you’re creative and the facts line up just right, your inheritance case could be decided by a jury if it’s framed as a “tortious interference with an expectancy” claim. The question then becomes, does it matter? Short answer: YES!

If you think of will contests as proxies for all forms of inheritance litigation, there’s plenty of data comparing the results of jury and non-jury trials in these cases. And that data paints a clear picture: the mechanisms we use to decide these disputes are systemically biased in favor of certain outcomes. As reported in Mediation and Jury Trials as Means of Resolving Will Contests, if you’re the plaintiff (i.e., the person contesting the will) your chances of success increase dramatically if your case is decided by a jury:

Research in Davidson County, Tennessee, where jury trials may be used as an alternative to judicial decision making, revealed that ten of twelve [83%] will contests before a judge were resolved in favor of the [defendant], but just seven of twelve [58%] before a jury were resolved in favor of the [defendant]. … In a nationwide study of will contests based on undue influence or lack of testamentary capacity whose appeals where reported from February 3, 1997 to January 27, 1998, it revealed that, when before a judge at the trial level, the [plaintiff] prevailed only five of twenty-two times [23%]; if the contestant went before a jury, the [plaintiff] prevailed six of eight times [75%] …

There are likely as many theories for why judges and juries decide these cases differently as there are lawyers. I don’t think it’s because jurors aren’t as smart, or because they’re more susceptible to bias, judges walk around with the same biases as everybody else.

In my opinion it has more to do with how lawyers and non-lawyers think about the world generally. Lawyers are trained to focus first on what’s the right “legal” answer, then on what’s “fair” for all concerned. For the rest of humanity this calculus is usually reversed. Not surprisingly, these contrasting world views produce different outcomes. Here’s how Prof. Chester, the author of the article and study quoted above, makes this point:

Although judges certainly bring discretion and equitable decision-making to bear when adjudicating will contests, they are still more conscious of preserving the law of the matter than are juries: juries may focus more on fair (natural) distribution of the estate than on preservation of a dead person’s (theoretical) intent. In addition, juries may not impose a stringent notion of what influence might be undue or what degree of mental weakness may rise to the level of incapacity. Instead, they may reason backward. Jurors may collectively feel that if a testator left property in an unnatural manner, he or she must have been crazy, or under undue influence, or both.

This may all sound good in theory, but does it hold up in practice? According to the following two Florida appellate opinions, the answer is clearly YES. In both juries decided the case one way (in favor of the contestant/plaintiff) and judges decided the same case the other way (in favor of the proponent/defendant).

Case Study #1: Mulvey v. Stephens, 250 So.3d 106 (Fla. 4th DCA June 27, 2018)

This case involved inheritance litigation between a decedent’s second wife and a daughter from his first marriage. The litigation took two forms. First a will contest (decided by a judge), then a tortious interference claim (decided by a jury).

Daughter lost her non-jury bench trial on the will contest. Daughter then sued again, this time filing a tortious interference lawsuit (daughter challenged a pre-death transfer of valuable real estate to second wife). By reframing her claim, daughter was now entitled to a jury trial.

The operative facts were the same in both lawsuits: according to the daughter, her father lacked capacity and was the victim of second wife’s undue influence both when he signed his will and when he made the contested property transfer. Does this raise estoppel issues? According to the 4th DCA, the answer is a definite maybe.

Here, we question whether [Florida law] permits the same parties to challenge the same purported tortious conduct in two separate actions, one in the probate court and one in the general civil division. But the Widow does not assert the probate court’s decision has preclusive effect on the subsequent civil action. Thus, for purposes of this appeal, we assume it does not.

So daughter got a second bite at the apple, this time before a jury. Did this make a difference? Of course, jury found in daughter’s favor. Second wife cried foul, seeking a directed verdict in her favor on the grounds that daughter had presented no evidence to support her tortious interference claim. The trial judge let the jury verdict stand. Undeterred, second wife appealed; and her luck was better with the judges at the 4th DCA. Daughter’s jury-trial win was reversed. Here’s why:

We review the court’s denial of a motion for [judgment notwithstanding the verdict (JNOV)] de novo. Alterra Healthcare Corp. v. Campbell, 78 So.3d 595, 601 (Fla. 2d DCA 2011). A JNOV is appropriate only when there is no evidence upon which the jury could rely in finding for the non-moving party. Id. …

Because there was no evidence of tortious conduct by the Widow, the Daughter could not prevail on her claim for tortious interference with expectancy. The trial court erred when it denied the Widow’s motion for judgment notwithstanding the verdict. Accordingly, we reverse the final judgment and remand with instructions to grant the Widow’s motion for judgment notwithstanding the verdict.

Case Study #2: Henry v. Jones, 202 So.3d 129 (Fla. 2d DCA October 14, 2016)

This case involved a brother suing his sister for tortious interference with an expectancy, claiming his sister had improperly diverted substantial sums of money from their mother’s account while acting as her caregiver. The case was put to a jury, which sided with the brother (another win for the challenger/plaintiff).

The trial judge stepped in and voided the jury’s verdict ruling it was “contrary to the manifest weight of the evidence,” and ordered a new trial. Brother appealed. And lost again. Here’s why:

Where a trial court orders a new trial, we review that decision under an abuse of discretion standard. Moore v. Gillett, 96 So.3d 933, 938 (Fla. 2d DCA 2012).

Moreover, “it takes a stronger showing of error in order to reverse an order granting a new trial than an order denying a new trial.” Thus we begin with the presumption that the trial court properly exercised its discretion, and we will not disturb the trial court’s ruling absent a clear abuse of that discretion. However, “such orders must nevertheless be supported by the record or by findings of influence outside the record.”

Id. at 938 (citation omitted) (first quoting Harris v. Grunow, 71 So.3d 186, 188 (Fla. 3d DCA 2011); and then quoting Reynolds v. Towne Mgmt. of Fla., Inc., 426 So.2d 1011, 1013 (Fla. 2d DCA 1983)). …

As noted above, we presume that the trial court’s exercise of discretion was proper absent a demonstration of a clear abuse of discretion, and a ruling “that is unsupported by the record constitutes a clear abuse of discretion.” Moore, 96 So.3d at 938. The record here supports the trial court’s conclusion that the verdict was contrary to the manifest weight of the evidence. We therefore affirm the order granting a new trial on that basis.

Are jury trials a good idea in inheritance cases? YES!

Tortious interference claims and the jury-trial rights they trigger should be pursued whenever possible. Not because jury trials are magic bullets; as demonstrated above, there’s always the risk that a jury’s equitable solution to what is in essence a family dispute can unravel on appeal or get voided by your trial-court judge. The prospect of a jury trial should be pursued because it helps resolve these cases where they should always get resolved: at mediation, by compromise. Here again from Prof. Chester, the author of the article and study quoted above:

I contend that mediated settlement of will contests works best where the right to a jury trial is preserved, giving contestants more leverage at the mediation stage. In mediation, what is a fair distribution of the estate in light of a particular family’s circumstances can be worked out by the parties. Attorneys representing the parties, who otherwise would become deeply involved in the case, can be relegated to a relatively minor role, such as approving a settlement after it is reached.

Wise words indeed.

Image source: I Got a Prenup to Protect My Emotions | Glamour

Prenuptial agreements get litigated all the time in probate proceedings. The challenge in these cases (as in all inheritance litigation) is to not let yourself get caught up in your client’s wishful thinking. Just because a certain outcome seems really unfair doesn’t mean your probate judge will (or should) rule in your favor. This may seem like an obvious point, but you’d be surprised how hard it can be not to fall into this trap in real life. This case is a prime example.

Wilson v. Wilson as Trustee of Paul C. Wilson Living Trust, — So.3d —-, 2019 WL 3808162 (Fla. 4th DCA August 14, 2019)

In this case the decedent and his wife entered into a prenuptial agreement in 2011 that contained all the standard waivers, including a waiver of wife’s elective share rights. In 2014 husband executed a revocable trust that contained the following clause:

There shall be set aside from the property of this trust as much property as is necessary to satisfy the Wife’s elective share pursuant to Section 732.201, et seq., of the Florida Statutes, provided the requirements thereunder are satisfied and a timely election is filed.

If this sentence had ended right before the word “provided,” one could reasonably construe it as a 30% formula clause based on our elective share statutes (under F.S. 732.2065 wife gets 30% of husband’s elective estate). But when you add the text after the word “provided,” it seems pretty clear the clause is pre-conditioned on wife asserting her elective share rights.

Husband died in 2017. When wife did what she was told to do in her husband’s trust (file an elective share claim), husband’s son from a prior marriage objected. Based on wife’s contractual waiver her elective share claim was dead on arrival. Now you might ask yourself (I certainly did), why would husband include a self-canceling clause in his trust? I have no idea, and the 4th DCA doesn’t tell us. And I’m sure wife thought it was all really unfair.

So wife tried to salvage her formula bequest by arguing that husband unilaterally amended their prenup when he signed his trust agreement; thus voiding her elective share waiver. Sounds plausible. Here’s the problem, the moment wife framed her case as a unilateral amendment of the couple’s prenup she was doomed as a matter of law. Here’s why:

We find that the language of the prenuptial agreement unambiguously waived the wife’s elective share. The agreement clearly stipulates that each party has waived their right to the estate of the other, including the right to an elective share. The creation of the trust agreement could not modify the prenuptial agreement since it was not signed by both parties as required by the prenuptial agreement. The controlling Florida Statute also states that modification of a prenuptial agreement is valid only if signed by both parties. See § 61.079(6), Fla. Stat. (2014) (“After marriage, a premarital agreement may be amended, revoked, or abandoned only by a written agreement signed by the parties.”).

Further, any testamentary gifts, by will or codicil, envisioned by the prenuptial agreement would not invalidate any of the provisions of the prenuptial agreement. Therefore, even if the decedent gave the wife a testamentary gift, the waiver of the elective share would still be effective. Thus, if the decedent intended to give the wife a testamentary gift, he could have done so by will or codicil without relying on an elective share and specifically the requirements of the elective share statute.

But what about “reforming” the trust?

There’s an alternative path this case could have gone down. Rather than framing the case in terms of a unilateral amendment of the couple’s prenup, wife could have instead focused on “reforming” the text of husband’s revocable trust. In other words, focus the case on the trust, not the prenup.

A trust reformation action allows a court to re-write a trust — even if the text is clear and unambiguous — if you prove the text as written contains a mistake; it doesn’t reflect husband’s actual intent. This is an equitable remedy that’s been around for a long time and in 2007 was codified in section 736.0415 of our trust code (for more on the backstory to this statute see here).

By the way, a trust-reformation strategy may have been considered and abandoned in this case for good reason (reformation cases are never easy), or used in the case and simply not addressed in the 4th DCA’s opinion. There’s no way to know. But this I do know: reformation is a powerful tool that’s available in trust litigation but foreign to contract-construction litigation (thus easily overlooked). If it’s not already part of your litigation toolbox, it should be.

Illustration: Calum Heath, Bloomberg

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Delightful people”

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

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

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

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

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

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

Guardianship litigation + trust litigation = confusion?

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

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

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

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

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

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

Image: Sam Brinson, The Will to Think

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

So what’s the take away?

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

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

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

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

Semper Fi