Estate planners beware. As reported here by the WSJ, “When it comes to blended families, estate planning can be a special kind of hell.” A corollary to that observation: blended families are always at risk for probate litigation. Yes, I said always! This case being a prime example: this is now the third appellate decision published by the 3d DCA chronicling almost 10 years of litigation between a widow and her deceased husband’s sons from a prior marriage (the initial complaint was filed in early 2003). For the prior installments of this long-running dispute, see here and here.
In July of 1996 Mr. Aronson deeded a condo located on Key Biscayne, FL to his revocable trust. Under the terms of his revocable trust, Doreen (Mr. Aronson’s wife) had the condo for life, and at her death it would go to Mr. Aronson’s sons from a prior marriage. A few months later, in December of 1996, Mr. Aronson deeded this same condo directly to Doreen. In 2000 the couple sold a home in Massachusetts, which had been titled in Doreen’s name alone, and moved into the Key Biscayne condo, which became their homestead residence. Mr. Aronson died in 2001.
Who got the condo when Mr. Aronson died?
Because of the two conflicting deeds, this was the first issue litigated. As I reported here, at trial the court ruled in favor of Doreen. 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.
So if the deed-to-trust was valid, where did this leave Doreen? “In a twinkle of an eye,” surviving spouse’s property rights vested.
Not surprisingly, based on the 3d DCA’s first opinion, all of the parties assumed they were stuck litigating their competing claims to the Key Biscayne condo within the parameters of Mr. Aronson’s revocable trust. In fact, this is the governing assumption underlying the 3d DCA’s original opinion for this case, click here.
End of the story? No way! Based on a motion for reconsideration filed by Mr. Aronson’s sons, the 3d DCA reversed course, adopting an entirely new theory in the linked-to opinion above, ruling instead that the condo should have never been treated like a trust asset because this was an invalid devise of homestead property. Invalid homestead devise = life estate to Doreen, vested remainder interest for Mr. Aronson’s sons, skip the trust entirely. Bottom line, while the deed-to-trust trumped the later deed to Doreen, because it resulted in an invalid homestead devise, this deed should have also been ignored. Confused? The 3d DCA apparently was. Here’s how the 3d DCA explained its thinking this time around:
We reverse the judgments under review. First, it is undisputable the Key Biscayne condominium was the decedent’s homestead at the time of his death. Second, article X, section 4(c) of the Florida Constitution provides that “[t]he homestead shall not be subject to devise if the owner is survived by spouse or minor child, except the homestead may be devised to the owner’s spouse if there be no minor child.” Art. X, § 4(c), Fla. Const. Third, the Florida legislature has made clear its command that this provision shall apply equally to property held by a revocable trust as to testamentary bequests. § 732.4015(2)(a), Fla. Stat. (2001) . . . Finally, section 732.401(1) of the Florida Statutes (2001), provides:
(1) If not devised as authorized by law and the constitution, the homestead shall descend in the same manner as other intestate property; but if the decedent is survived by a spouse and one or more descendants, the surviving spouse shall take a life estate in the homestead, with a vested remainder to the descendants in being at the time of the decedent’s death per stirpes.
(emphasis added). Because the Key Biscayne condominium was Hillard’s homestead and because his wife, Doreen, survived him, the condominium was not subject to disposition through the trust. . . . At the moment of Hillard’s death, his homestead property passed outside of probate, see §§ 733.607, .608, Fla. Stat. (2001) . . . , in a twinkle of an eye, as it were, to his wife for life, and thereafter to his surviving sons, James and Jonathan per stirpes. § 732.401(1), Fla. Stat. From that moment forward, the trustees had no power or authority with respect to the former marital home. The widow became responsible for the expenses of the property, and, of course, remains so for as long as she remains a life tenant. . . .
There are a few big takeaways from this case. First, estate planning for blended families is always tricky. This family could have avoided over a decade of acrimony and litigation expenses if Mr. Aronson had consulted with a qualified estate planner up front.
Second, Florida’s maddeningly complex homestead laws can befuddle the best of us (ask the 3d DCA). This area of law is counter intuitive and often results in bizarre outcomes even the most deranged law school professor couldn’t dream up (this case being a prime example!). If you’re cleaning up one of these messes, start at first principles and take nothing for granted (click here for “Kelley’s Homestead Paradigm,” the ultimate probate lawyer’s homestead-law cheat sheet.)
Third, it took these litigants over 10 years (and multiple trials/appeals) to figure out what, “in a twinkle of an eye” (using the 3d DCA’s phrase), happened automatically as a matter of law when Mr. Aronson died back in 2001. Starting in 2010, there are added consequences to this kind of delay. In 2010 F.S. 732.401 was amended to allow a surviving spouse 6 months to opt out of a life estate and instead take a 50% tenancy-in-common interest in the homestead property. As I explained here, taking a 50% tenancy-in-common interest in lieu of a life estate can offer significant benefits to surviving spouses. Surviving spouses, and their lawyers, no longer have the luxury of waiting years to untangle the mess caused by an invalid homestead devise. Due to the new 6-month deadline contained in F.S. 732.401, you now have only 6 months to do what the parties in this case needed 10+ years to figure out. 6 months vs. 10 years. Yeah, no pressure . . .
Now that you know what I have to say about this case, you’ll want to read this excellent analysis of the case by two of the smartest Florida homestead lawyers practicing today, Jeff Baskies and Charlie Nash, as published in Steve Leimberg’s Asset Protection Planning Email Newsletter – Archive Message #198. Here’s the executive summary of their piece:
For the third time in less than 5 years, the Florida 3rd District Court of Appeal (covering Miami-Dade County) issued a retraction of a potentially ground-breaking and rule-changing homestead decision.
First, in 2007, the 3rd DCA’s decision in Chames v. Demayo (holding that a waiver of the homestead creditor protection in an attorney’s fee contract was valid) shook the homestead world, until it was overturned, first en banc by the 3rd DCA and then by the Florida Supreme Court. Interestingly, the en banc opinion of the 3rd DCA overturned the original opinion and “got it right” according to the Florida Supreme Court.
Next, in 2011, a three-judge panel of the 3rd DCA issued a ruling in Habeeb v. Linder holding that a husband’s joinder in a warranty deed of homestead property to his wife’s revocable trust constituted a waiver of his post death homestead rights due to his transfer of “all hereditaments” in the “form” warranty deed. That ruling was subsequently withdrawn after significant criticism.
Now, in the latest decision in a very long-running Florida probate litigation, Aronson v. Aronson, (this current line of cases being called “Aronson II” as a prior ruling – “Aronson I” – held that a deed signed by the husband individually was a nullity as it was executed after the husband had already transferred title to his revocable trust) the 3rd DCA on February 1, 2012, withdrew its October 2010 ruling.
Had the original ruling in Aronson II stood, then the post-death consequences of any transfer of a homestead to a revocable trust would again be up for controversy. Fortunately, the 3rd DCA in its substituted decision in Aronson II seems to have reached the correct result regarding the constitutional devise restrictions.