Lumbert v. Estate of Carter, 867 So.2d 1175 (Fla. 5th DCA Feb. 27, 2004) (TRIAL COURT REVERSED)
Molly Joy Carter (“Mom”) executed a will on February 23, 1994 that left all of her $1.5 million estate in trust for her only child, Lisa Lumbert (“Daughter”), until Daughter reached certain ages, at which time the trust assets were to be distributed to her outright and free of trust. Mom died and her will was admitted to probate on August 30, 2000. Fourteen months later Daughter died on October 15, 2001 at age 41. At the time of Daughter’s death, most of Mom’s $1.5 million estate was still being administered, so only about $100,000 had been transferred to Mom’s testamentary trust for Daughter. Mom’s brothers and sister argued that Article IV E. of Mom’s trust for Daughter should control what happens with the rest of Mom’s estate, which would result in most of Mom’s estate going to them. Daughter’s surviving husband argued that Articles IV D. of Mom’s trust should control, which would, not surprisingly, result in most (i.e., two-thirds) of Mom’s estate going to him. The disputed trust provisions stated as follows:
Article IV C. When my daughter shall attain the age of 35 years, the Trustee shall distribute one-third of the trust corpus to her in fee and free of trust. Upon her attaining the age of 40 years, the Trustee shall distribute one-half of the then remaining trust corpus to my daughter in fee and free of trust. Upon her attaining the age of 45 years, this trust shall terminate and the Trustee shall distribute the balance of the then remaining trust corpus to my daughter in fee and free of trust. (Emphasis added.)
Article IV D. If my daughter shall have attained any of such respective ages at the time when such trust fund is directed to be set aside for her, the Trustee shall distribute to my daughter such part of or parts or all, as the case may be, of such trust fund (instead of holding same in trust) as are directed to be distributed to her upon attaining such respective ages. (Emphasis added.)
Article IV E. If my daughter shall die, after this trust has been established for her benefit and before the entire principal of her fund has been distributed to her in fee, then in such event the Trustee shall distribute this trust fund (or the remainder thereof then held in trust) in such proportions and in such manner, outright or in trust or otherwise, to or for the benefit of any one or more persons, or corporations as my daughter may appoint by specific reference thereto in her Will admitted to probate; provided however that my daughter shall have no power to appoint the principal of this trust or any part thereof to herself or to her estate, or to her creditors, or to the creditors of her estate…. [If Daughter fails to appoint] then such part of the principal … shall be distributed in fee, equally, unto her lineal descendants, per stirpes, or if none, unto my brothers and sister … (Emphasis added.)
Apparently based on the fact that (i) the trust had been established for Daughter’s benefit at the time of Daughter’s death and (ii) the fact that Daughter died prior to receiving all of the trust principal she was entitled to (albeit because Mom’s estate was still being administered), and (iii) an analysis limited strictly to the exact text of the testamentary trust, Volusia County Circuit Court Judge J. David Walsh sided with Mom’s brothers and sisters. Noting that the trial court’s construction of the testamentary trust “would place too much power in a trustee or personal representative to alter rights of beneficiaries simply by delaying testamentary trust distributions, or funding of testamentary trusts,” the 5th DCA reversed. The 5th DCA then grounded its common sense ruling on two lines of reasoning. First, the court held that the terms of the trust had to be read in context. Clearly, Mom intended for Daughter’s share of Mom’s estate to vest as soon as Daughter reached the requisite benchmark ages, “[t]he actual distribution of these shares was merely a ministerial act.” As such, based on the terms of the trust, the 5th DCA concluded that Daughter’s estate was entitled to two-third’s of Mom’s estate. The second line of reasoning employed by the court looked to 2004->Ch0732->Section%20514#0732.514″>Section 732.514, which the court held mandated that the right to benefits under a testamentary trust vest upon the death of the testator – not when the ministerial acts associated with funding that trust were completed. Recognizing that the computations required on remand “may not be simple,” at FN3 of its opinion the 5th DCA provided the trial court and the parties with the following helpful guidance with respect to apportioning the respective shares of Mom’s estate (based on the 5th DCA’s ruling, Daughter’s estate was entitled to two-thirds of Mom’s $1.5 million estate and the remaining one-third was to go to Mom’s brothers and sister):
It will be necessary to compute and pro-rate growth or loss in the value of the assets, ordinary realized capital gains or losses, reasonable expenses, and unrealized capital gains or losses.