In re Estate of Woodward, — So.2d —-, 2008 WL 942044 (Fla. 2d DCA Apr 09, 2008)
A basic rule under Florida’s probate code is that specifically-devised property is inherited subject to any existing mortgages or other encumbrances unless the decedent’s will specifically directs otherwise. Here’s the governing rule:
733.803 Encumbered property; liability for payment.–The specific devisee of any encumbered property shall be entitled to have the encumbrance on devised property paid at the expense of the residue of the estate only when the will shows that intent. A general direction in the will to pay debts does not show that intent.
In the linked-to case the personal representative (PR) was managing several farms that were part of a single probate estate. The estate-administration process stretched out for several years. During that time the PR sold one of the farms and used the sales proceeds to pay off some debt, thererby satisfying a $241,805.81 mortgage on farm property that had been specifically devised to one of the heirs. The decedent’s will did NOT state that the specifically-devised property was to be distributed debt-free. Oops!
One of the residuary beneficiaries cried foul, arguing that under F.S. 733.803 the PR should have set aside the sales proceeds for the residuary beneficiaries of the estate, rather than paying off debt on the specifically devised property. The PR said this rule only applied if the debt was in place at the time of distribution, but didn’t stop her from paying off debt encumbering specifically devised property during the course of the probate proceeding. Wrong answer!
No matter how long the estate-administration process takes, you can’t re-write the testator’s will. Which is effectively what the PR did in this case when she paid off the debt on the specifically devised property at the expense of the residuary estate. Here’s how the 2d DCA explained the rule:
The trial court’s rejection of Brian’s objection to the satisfaction of the encumbrance is inconsistent with the governing provision of the Florida Probate Code. Section 733.803, Florida Statutes (2002), provides that “[t]he specific devisee of any encumbered property shall be entitled to have the encumbrance on devised property paid at the expense of the residue of the estate only when the will shows that intent ” and that “[a] general direction in the will to pay debts does not show that intent.” (Emphasis added.) This statute makes clear that Jay was to inherit his father’s interests in the three encumbered farms free of debt only if the will or codicil specifically expressed the decedent’s intent that Jay would inherit the interests free of debt. Neither the will nor the codicil shows the intent required by the statute. Cf. In re Estate of Sterner, 450 So.2d 1256, 1257 (Fla. 4th DCA 1984) (holding that section 773.803 required residue of estate to pay encumbrances on property where codicil leaving life tenancy in property to specific devisee specifically stated that life tenancy was to be “free of rent and of any encumbrance of any nature whatsoever, such as taxes, liens, pledges, etc., except utilities and telephone”). Although the will states that all the decedent’s legal debts should be paid, the statute plainly provides that such a general direction for the payment of debts does not evidence an intent that encumbrances on devised properties be paid at the expense of the residuary estate.
We reject the personal representative’s argument that section 733 .803 only applies to encumbrances that remain unsatisfied at the time of distribution and that she had unfettered discretion to pay debts of the estate during the period of administration. Such an interpretation is inconsistent with the design of section 733.803 to carry out the testator’s intent with respect to the devise of encumbered property.