Just because a deed says property’s being transferred to a “trustee” doesn’t make it so. If the deed doesn’t comply with F.S. 689.07′s disclosure requirements, the named trustee is deemed to own the property in fee simple, which means it’s his to do with as he pleases.
Under F.S. 689.07(1) a deed-to-trust that conveys property to a trustee but does not name the trust’s beneficiaries, or identify the nature and purposes of the trust, or identify the subject trust by title or date, fails. The theme here is disclosure. But this disclosure requirement runs head on against one of the primary reasons families use trusts to begin with: privacy.
So how does F.S. 689.07 balance the minimum public disclosure needed to ensure marketable title against the natural desire to keep family trusts private? It lets you keep a trust “secret” until it’s challenged, at which time anyone with a stake in the outcome can cure the lack of disclosure by recording a copy of the trust agreement in accordance with subsection (4) of F.S. 689.07, which provides in relevant part as follows:
Nothing herein contained shall prevent any person from causing any declaration of trust to be recorded . . . after the recordation of the instrument evidencing title or ownership of property in a trustee . . .
How and when this curative provision gets used in the midst of litigation is the subject of the 1st DCA’s opinion in the Heiskell case.
Can you rely on F.S. 689.07(4)’s “cure” clause 30 years after the original deed was recorded and after a lawsuit’s been filed? YES
Heiskell v. Morris, — So.3d —-, 2015 WL 9258277 (Fla. 1st DCA December 18, 2015)
The property at issue in this case is a 1,360-acre estate in northern Florida known as the “Morris Grove Plantation” that’s been owned by the same family for over a hundred years. In 1983 six siblings took title to the property from their parents and simultaneously conveyed the property to a revocable trust they all signed and were all beneficiaries of. Two of the siblings were appointed co-trustees and they took title to the property as “trustees”. The trust contained a “non-recordation” clause that was intended to keep the trust’s provisions out of public view. Apparently these clauses were common back in the day.
Fast forward 30 years. The siblings are deadlocked over how to manage the property. One of the co-trustees filed a partition action asserting that the property was conveyed to him in fee simple — not as trustee — because the 1983 deed didn’t comply with F.S. 689.07′s disclosure requirements. A month after the lawsuit was filed — and 30 years after the original deed was recorded — the other co-trustee recorded the subject trust in an attempt to trigger F.S. 689.07(4)’s “cure” clause. So does this after-the-fact defensive move work? Yes, so saith the 1st DCA:
Though no reported case has mentioned subsection (4) since its addition over five decades ago, its apparent purpose was to temper potentially harsh readings of subsection (1) that could marginalize the interests of trust beneficiaries. . . . [S]ubsection (4) says that nothing in the statute precludes any person from recording a trust agreement before or after the recordation of a deed or other “instrument evidencing title or ownership of property in a trustee[.]” It thereby permits the recordation of a trust agreement after a deed’s recordation, even decades later, which is what happened here. . . . Subsection (4) counterbalances subsection (1) in two important ways. One is that it allows previously unrecorded trusts (“secret” trusts discussed below) to be recorded as a means of protecting the interests of beneficiaries and innocent third parties by providing public notice of a trust’s existence. The other is its recognition that trusts, even if unrecorded, may be enforced by beneficiaries against their trustees. In either instance, a focus of subsection (4) is the protection of beneficiaries.
But what about the trust’s non-recordation clause? Does it void the statute’s after-the-fact cure provisions? NO:
The Trust Agreement stated that it “shall not be placed on record in the county in which the Trust property is situated or elsewhere, but if it is so recorded such recording shall not be considered as notice of the rights of any person under this Agreement derogatory to the title or powers of the Trustees.” This type of clause, which is commonplace in private trusts, see, e.g., Florida Jurisprudence Forms Legal & Business, Recordation of Trust Instrument § 34:594 (2015) (providing standard language for prohibiting recordation of a trust instrument), is designed to advance the settlor’s intent of preventing public disclosure of the terms of a trust and thereby protecting the privacy of beneficiaries. See generally Frances H. Foster, Trust Privacy, 93 Cornell L.Rev. 555 (2008) (discussing the pros/cons of the use of trust privacy provisions). Trust privacy has many benefits, which a non-recordation clause advances. But circumstances exist where a trust agreement must be recorded, as the language in the Trust Agreement envisions (“but if it is so recorded”), such as when a beneficiary is attempting to establish the enforceability of a trust, as was done here. Recordation for such a purpose does not violate the central purpose of the trust’s non-recordation clause.
Does a Personal Representative (PR) have standing to litigate deed-to-trust cases under F.S. 689.07? YES
Giller v. Giller, — So.3d —-, 2016 WL 1658754 (Fla. 3d DCA April 27, 2016)
This case involves the estate of famed Miami architect Norman Giller. Prior to his death he transferred title to various parcels of real estate to himself as trustee of his own revocable trust. The deeds didn’t comply with F.S. 689.07′s disclosure requirements, identifying the transferee only as “Norman Giller, Trustee”. After Giller’s death two of his children filed a declaratory-judgment action in their representative capacities as PRs of his estate asking the court to rule on whether the deeds failed, which means the properties would become assets of the probate estate.
Giller’s third child (Brian) filed a motion to dismiss asserting that the PRs lacked standing to file suit under F.S. 689.07. His theory was that the statute’s designed to protect “subsequent parties” who might innocently buy property that’s subject to some kind of secret trust, not the property owner’s PRs. Was he right? NO, so saith the 3d DCA:
Brian asserted in his Motion to Dismiss that section 689.07(1) has no application to this case, and the Personal Representatives are not “entitled” to relief under section 689.07(1), because they are not parties who relied on the public records in acquiring an interest in the properties. In support of his argument, Brian cites to language in various cases addressing the purpose of section 689.07(1). . . . Notably, none of these cases address the issue of standing or “entitlement” of the personal representatives of a decedent-grantee to seek relief based on the operation of section 689.07(1), and none limit the class of parties entitled to relief under subsection (1) to “subsequent parties.”
Moreover, this Court’s precedent supports our conclusion that a grantee’s personal representative may seek a determination regarding ownership under section 689.07(1). In Turturro v. Schmier, 374 So.2d 71 (Fla. 3d DCA 1979), the personal representative of the decedent’s estate claimed title to the property under section 689.07 by virtue of a deed conveying a remainder to the decedent, “Morris Siegel, as Trustee,” and specifically alleged that the estate was the fee simple title holder to which the property reverted upon the demise of the holder of the life estate. . . .
In reaching its conclusion, this Court noted that the purpose of the statute is “to prevent a fraud from being perpetrated on a subsequent transferee who might rely on the record and be unaware of a secret trust creating ownership in another.” Id. The fact of whether a subsequent transferee did or did not rely on the deed, however, did not contribute to this Court’s analysis—the personal representative was not required to be a “subsequent party” in order to seek relief under section 689.07(1).