This is the second time the 3d DCA has weighed in on this case (I reported on the first appeal here).
In July of 1996 Mr. Aronson deeded his condo (located on Key Biscayne, FL) to his revocable trust. Upon Mr. Aronson’s death, his revocable trust created a life-time irrevocable marital trust for his spouse, remainder to his sons from a prior marriage. A few months later, in December of 1996, Mr. Aronson deeded this same condo directly to his spouse. This was a lawsuit waiting to happen.
Back in 2006, Mr. Aronson’s sons scored a victory when the 3d DCA ruled the deed their dad originally executed transferring his condo to his trust controlled, thus ensuring they would receive the condo upon surviving spouse’s death. Surviving spouse promptly fired back, filing suit to enforce all of her rights to the condo under the terms of the marital trust. This time around surviving spouse came out on top.
In the linked-to opinion above spouse sued for reimbursement of all of the condo-related expenses she had paid with her own funds and also for payment of all of her mandatory principal distribution rights under the marital trust. Because the trust owned only one asset (the condo), there’s only two ways spouse could be made whole:
- sell the condo and pay her from the sales proceeds, or
- transfer a % the condo’s ownership interest to her. The sons wanted to go with option 1 (which would result in wife getting booted out of her home), spouse wanted to go with option 2. The sons won at trial, but lost on appeal.
In an opinion that should be of interest to all estate planners, the 3d DCA ruled homestead property held in a marital trust does NOT lose its creditor protection, even if the creditor you’re protecting against is the spouse:
[T]he trial court reasoned that because any sale would be for the purpose of paying a debt owed to the widow, Article X, Section 4 of the Florida Constitution would not bar the sale. Section 4(b) of Article X specifically states that the exemption from forced sale inures to a decedent’s surviving spouse. There are only three recognized exceptions to this exemption, none of which apply here. See In re Adell, 321 B.R. 562, 571-72 (Bankr.M.D.Fla.2005). Accordingly, since the trial court erred in denying declaratory judgment on the homestead protection, we reverse on this point.
This case is noteworthy because it confirms once again that homestead property held in trust does NOT lose its creditor protection. As I previously explained here, the reason why opinions like this one are especially interesting to estate planners is because they chip away at the precedential value of In re Bosonetto, 271 B.R. 403 (Bankr.M.D.Fla.2001), a much-criticized Middle District Bankruptcy Court opinion ruling that homestead property held in trust lost its creditor protection.