Revocable trusts are widely used in Florida for estate planning purposes.  The standard procedure is to title large assets in the name of the revocable trust to avoid having to probate those assets when the settlor dies and also to make it easier for a successor trustee to administer those assets for the benefit of an incapacitated settlor.  On the other hand, because clients can change or “revoke” their revocable trusts at any time and revocable trusts offer zero asset protection from creditors, some may feel that titling assets in the name of the trust is a technical matter with no real-life significance.  Wrong answer . . .  as demonstrated by this case.

Aronson v. Aronson, 930 So.2d 766, 31 Fla. L. Weekly D1317 (Fla. 3d DCA May 10, 2006)

In July of 1996, Mr. Aronson titled his condo located on Key Biscayne in Miami , FL in his revocable trust.  I’m assuming this trust mostly favored his children.  A few months later, in December of 1996 Mr. Aronson deeded this same condo to his second wife.  Perhaps inevitably, Mr. Aronson’s children and second wife ended up in litigation over who owns the condo: the trust or second wife? At trial, the court ruled in favor of second wife.  On appeal, the 3d DCA reversed, ruling that an individual can’t deed a property in his individual capacity if he’s previously deeded it over to his revocable trust, even if he had the authority at any time to revoke his own trust.  The following are a few excerpts from the 3d DCA’s opinion:

Here, the Settlor executed a warranty deed conveying the property to himself, as trustee. Thus, the Settlor, in his capacity as trustee, became the legal title holder of the trust property. See Buerki, 570 So.2d at 1063. Once the Settlor held the property as trustee, for the benefit of the beneficiaries of the trust, he no longer possessed the power to convey the property in his individual capacity.

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However, assuming that the Trust reserved to the Settlor and the Trustee certain powers to dispose of trust assets, there is no question that Mr. Aronson failed to withdraw the property in strict compliance with the Trust instrument as it required the Settlor to deliver a written document to the Trustee in order to withdraw the Trust assets. See Bongaards, 793 N.E.2d at 339. Instead, Mr. Aronson conveyed real property in his individual capacity, which he did not legally own in that capacity. Accordingly, the subsequent transfer was invalid as a matter of law.

We need not and, indeed, cannot attempt to glean Mr. Aronson’s intent in transferring the property to the trust, or subsequently to Ms. Aronson in his individual capacity. Here, there was no ambiguity in either the original transfer of the property to the Trust by warranty deed or the subsequent transfer of the property to Ms. Aronson by quit claim deed. See Dolphins Plus, Inc. v. Hobdy, 650 So.2d 213, 214 (Fla. 3d DCA 1995)(noting that unambiguous language of a written instrument is not subject to judicial construction or interpretation). Having created a valid trust and being familiar with the powers he retained therein, as well as the law in this area, Appellants contend that Mr. Aronson’s intent was to appease his second wife and effectuate a sham transaction he knew to be legally invalid. Conversely, it is argued that Ms. Aronson was the natural object of Mr. Aronson’s bounty and that the subsequent transfer must be held to be valid to give meaning to Mr. Aronson’s actions. These and other explanations may exist in attempting to ascertain the true motive behind Mr. Aronson’s actions. However, the choice of any particular scenario to explain and give meaning to Mr. Aronson’s intent involves guesswork that is not likely to produce enduring legal principles under which to consider future cases.