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Under F.S. 732.502(2), oral (nuncupative) wills and un-witnessed handwritten (holographic) wills aren’t valid in Florida under any circumstances, no matter how strong the evidence is that they’re otherwise legitimate. This is basic stuff for Florida probate lawyers.

What may come as a surprise to many is that when it comes to will-execution requirements, there’s no one-size-fits-all. Because there’s no federal constitutional right to dispose of property by will, each state is free to choose it’s own set of standards reflecting widely varying public policy choices.

Florida has opted to emphasize fraud avoidance, at the expense of automatically invalidating a % of wills all would agree are legitimate. Other states have opted to emphasize testamentary freedom, at the expense of opening the door for more inheritance litigation over a % of wills all would agree are highly suspect . . .  but very difficult to challenge in court because, by the time your will contest gets litigated, your single most important witness, the testator, is dead. Which means we’re forced to litigate these cases based in large part on the worst evidence available: the self-interested hearsay testimony of those claiming a slice of the estate for themselves.

In some states oral wills are valid in limited circumstances (usually during a person’s “last sickness”) and in many states, including Colorado, holographic (self-written) wills are valid . . . whether or not they’re witnessed. The rule permitting un-witnessed handwritten wills also applies in Canada.

For example, on June 8, 1948 in Saskatchewan, Canada, a farmer named Cecil George Harris who had become trapped under his own tractor carved a will into the tractor’s fender. It read, “In case I die in this mess I leave all to the wife. Cecil Geo. Harris.” Under Florida law this unwitnessed holographic “will” would have been ignored. Not so in Saskatchewan, Canada. Mr. Harris died and his tractor fender, which is currently on display at the University of Saskatchewan College of Law, was probated and stood as his will.

On June 8, 1948, Cecil George Harris scratched his final wishes onto this panel as he was dying, pinned under a piece of farm machinery. His words were recognized as his will, an important moment in Canadian legal history. (Merle Massie)

Case Study

Lee v. Estate of Payne, — So.3d —-, 2013 WL 5225200 (Fla. 2d DCA September 18, 2013):

In the linked-to case above a Colorado man wrote his own will. Even though the will wasn’t witnessed, because it was written in the decedent’s own hand it’s valid under Colorado law and was admitted to probate by a Colorado court. The issue then became whether a Florida court was required to do the same.

Answer: NO. Here’s why: F.S. 734.104(1)(a) says so. Under this statute non-Florida wills accepted to probate by non-Florida courts are valid in Florida, but only if they comply with the witness requirements found in F.S. 732.502(2). The Colorado will wasn’t witnessed, so it’s not valid in Florida … regardless of what Colorado law or a Colorado court might say.

It’s the law, but is it constitutional?

Reasonable people might disagree about who has the better rule: Florida or Colorado. But unless you can find a constitutional argument for why the Florida statute shouldn’t be enforced, you’re stuck with it. Constitutional challenges come up from time to time in inheritance cases . . . and almost never succeed. I’ve previously written here about a constitutional challenge to Florida’s elective-share statutes. It didn’t work then and and it’s not working now. Here’s how the 2d DCA summarized the failed constitutional challenge in the linked-to case above:

[I]n In re Estate of Olson, 181 So.2d 642 (Fla.1966), . . . the supreme court considered the issue now before us:

Whether or not an intelligently written will in the handwriting of the deceased, who was fully competent and cognizant, will be recognized, or voided for the sole reason of the absence of two witnesses, as required in Section 731.07 F.S.; and whether or not such statutory requirement invades and violates constitutional rights.

Id. at 642. Olson affirmed the trial court’s order denying probate of a holographic will. Id. at 644. . . . [T]he supreme court held that, although the governing statute may have thwarted the testator’s intent, the statute was constitutional, subject only to legislative change. Id. at 643. The court noted that the statute’s intent in requiring two witnesses’ attestation was “to assure [the will’s] authenticity and to avoid fraud and imposition.” Id.

. . .

Ms. Lee now asks us to revisit the continued validity of Olson. Recall that Olson observed that requiring two witnesses to a will was “to assure its authenticity and to avoid fraud and imposition.” 181 So.2d at 643. Holographic wills, under Olson, are not as reliable as wills executed in the presence of witnesses. Ms. Lee challenges that assumption and argues that handwritten holographic wills are inherently reliable. “[I]t is exceedingly difficult to forge a successful counterfeit of another’s handwriting throughout an entire document, so that the requirement that the document, or at least its material provisions, be entirely in the testator’s or testatrix’s handwriting, affords protection against a forgery.” Jay M. Zitter, Annotation, Requirement that Holographic Will, or its Material Provisions, Be Entirely in Testator’s Handwriting as Affected by Appearance of Some Printed or Written Matter Not in Testator’s Handwriting, 37 A.L.R. 528, § 2[a] (1985) (footnotes omitted). Ms. Lee notes that twenty-six states allow holographic wills, with statutory provisions to assure reliability. She contends that no rational basis exists to deny probate of all holographic wills without allowing any inquiry into authenticity.

Nice try, but no cigar. The 2d DCA punted on deciding the constitutional challenge, citing In re Estate of Olson, 181 So.2d 642 (Fla.1966) as binding authority. However, we may not have heard the last of this case. Perhaps revealing some sympathy for the challenger’s argument, the 2d DCA asked the Florida Supreme Court to weigh in on the issue by certifying the following question:

DO SECTIONS 732.502(2) AND 734.104(a) VIOLATE ARTICLE I, SECTION 2 OF THE FLORIDA CONSTITUTION BY CATEGORICALLY DEFEATING THE INTENT OF THE TESTATOR OF A HANDWRITTEN HOLOGRAPHIC WILL WITHOUT A RATIONAL RELATION TO THE FRAUD IT SEEKS TO CURE?

Stay tuned for more . . .

Effective October 1, 2013, we now have F.S. 732.806, a new statute effectively codifying existing ethics Rule 4-1.8(c) as part of our probate code, and making a violation of this ethics rule an automatic basis for voiding any part of a will, trust or other written instrument making an improper client gift to the drafting lawyer or a person related to the lawyer. However, like the existing ethics rule, the restrictions on gifts under the new statute do not affect:

[1] Gifts to a lawyer or other person if the lawyer or other person is related to the person making the gift.

[2] A written instrument appointing a lawyer, or other person related to the lawyer, as a fiduciary.

[3] Title to property acquired for value from a person who receives the property in violation of the restrictions on gifts.

This new statute changes existing Florida common law. The common law rule in Florida was that gifts made to lawyers in violation of ethics Rule 4-1.8(c) weren’t void per se, but they did trigger a rebuttable presumption of undue influence by the drafting lawyer. If lawyer couldn’t rebut the presumption, the gift was then voided (see here, here). In other words, under our prior common law improper gifts to lawyers weren’t automatically void, but they were voidable. The new statute reverses this order. Improper client gifts are now automatically void as a matter of law, which should make it less expensive and time consuming for parties contesting such gifts to have them set aside.

But no matter how just your cause may be, the expense and uncertainty of litigation is often daunting. So the new statute also contains a mandatory fee-shifting clause, which is tilted in favor of contesting parties:

In all actions brought under this section, the court must award taxable costs as in chancery actions, including attorney fees. When awarding taxable costs and attorney fees under this section, the court may direct payment from a party’s interest in the estate or trust, or enter a judgment that may be satisfied from other property of the party, or both. Attorney fees and costs may not be awarded against a party who, in good faith, initiates an action under this section to declare a gift void.

Are all client gifts to lawyers per se void? NO

What F.S. 732.806 demonstrates is that there’s a right way and a wrong way for clients to make substantial gifts to their lawyers. The wrong way opens the door for litigation and possibly frustrating a client’s legitimate testamentary wishes. The right way makes sure the client isn’t the victim of undue influence, and just as importantly, makes it much less likely the estate will find itself embroiled in costly litigation. So what’s the right way? The Commentary to Rule 4-1.8(c) provides the following road map:

A lawyer may accept a gift from a client, if the transaction meets general standards of fairness and if the lawyer does not prepare the instrument bestowing the gift. For example, a simple gift such as a present given at a holiday or as a token of appreciation is permitted. If a client offers the lawyer a more substantial gift, subdivision (c) does not prohibit the lawyer from accepting it, although such a gift may be voidable by the client under the doctrine of undue influence, which treats client gifts as presumptively fraudulent. If effectuation of a substantial gift requires preparing a legal instrument such as a will or conveyance, however, the client should have the detached advice that another lawyer can provide and the lawyer should advise the client to seek advice of independent counsel. Subdivision (c) recognizes an exception where the client is related by blood or marriage to the donee or the gift is not substantial.

R. Regulating Fla. Bar 4-1.8, Comment
“Gifts to Lawyers.”

Bottom line, client gifts to lawyers are not illegal, but they are freighted with all sorts of baggage and litigation risks. Florida law and our ethics rules provide concrete guidance for effectuating these gifts the right way. Do it the wrong way, and you’ll now run head on into F.S. 732.806. For more on the conflict-of-interest concerns underlying new F.S. 732.806, you’ll want to read an excellent CLE presentation on the new statute prepared by William T. Hennessey of Gunster, Yoakley & Stewart, P.A. entitled Thanks, But No Thanks!: The Ethics of Client Gifts.

What about writing yourself in as a client’s trustee or personal representative?

Like our existing ethics rule, F.S. 732.806 also contains a carve out for wills and trusts in which the drafting lawyer is named as his client’s PR or trustee. However, the commentary to Rule 4-1.8(c) strongly hints there’s a potential for conflict-of-interest, and the drafting lawyer should obtain the client’s “informed consent” to such appointment.

This rule does not prohibit a lawyer from seeking to have the lawyer or a partner or associate of the lawyer named as personal representative of the client’s estate or to another potentially lucrative fiduciary position. Nevertheless, such appointments will be subject to the general conflict of interest provision in rule 4-1.7 when there is a significant risk that the lawyer’s interest in obtaining the appointment will materially limit the lawyer’s independent professional judgment in advising the client concerning the choice of a personal representative or other fiduciary. In obtaining the client’s informed consent to the conflict, the lawyer should advise the client concerning the nature and extent of the lawyer’s financial interest in the appointment, as well as the availability of alternative candidates for the position.

R. Regulating Fla. Bar 4-1.8, Comment
“Gifts to Lawyers.”

Get it in writing:

You’ll want to treat a client’s “informed consent” in this scenario as a conflict waiver, which according to ethics Rule 4-1.7 means it needs to be “confirmed in writing”. Conflict-waiver letters are high-risk documents that are never easy to draft, so starting from scratch on your own is NOT a good idea. If you don’t have a good form you’ve used in the past, you’ll find ACTEC’s sample waiver letter to be an excellent starting point. See ACTEC’s Form of a Letter Regarding the Appointment of the Lawyer as a Fiduciary.

For more on the conflict-of-interest concerns underlying wills and trusts appointing a drafting lawyer as his client’s PR or trustee, here again you’ll want to read the excellent discussion of this issue contained in the CLE presentation prepared by William T. Hennessey of Gunster, Yoakley & Stewart, P.A. entitled Thanks, But No Thanks!: The Ethics of Client Gifts.

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According to census data, Florida is the largest recipient of state-to-state migration in the U.S. Internationally, Florida remains the top state for international home buyers. So it shouldn’t come as a surprise to anyone that multi-jurisdictional estates are a growing part our practice here in Florida.

The jurisdictional issues these cases raise in probate and trust cases are different. On the probate front, jurisdiction is often a given (there’s no FL probate proceeding if there isn’t a FL probate asset that needs administering), so most of the case law focuses on conflicts-of-law issues (see here, here). On the trust front, if the trustee isn’t a Florida resident, jurisdiction is never a given (see here).

Effective October 1, 2013, we now have new legislation addressing the thorny jurisdictional issues inherent to multi-state and international trust cases in two ways: first, it creates a new, detailed long-arm statute specifically designed for trust cases (new F.S. 736.0202); and second, it repeals F.S. 736.0205, a poorly drafted forum non conveniens statute that had been used to preemptively block litigation in Florida involving non-resident trustees (see here, here).

For better or worse, repeal of F.S. 736.0205 and passage of new F.S. 736.0202 is likely to lead to even more multi-jurisdictional trust cases getting litigated in Florida courts. Here’s how this senate staff analysis described the statutory problems the new legislation is intended to address:

Current Florida law does not contain a comprehensive long-arm statute for litigation relating to a trust. The Florida Supreme Court, following decisions by the United States Supreme Court, has ruled that if there is a statute authorizing jurisdiction and if the defendant has sufficient minimum contacts with Florida such that maintaining the suit does not offend traditional notions of fair play and substantial justice, a Florida court may exercise jurisdiction over the defendant. The minimum contacts test is a factual analysis insuring that a defendant’s constitutional right to due process is not violated. The statute authorizing the jurisdiction is called a long-arm statute.

The Real Property, Probate, and Trust Law Section of The Florida Bar is concerned that the long-arm statute in s. 48.193(1), F.S., is too generic to authorize jurisdiction over all necessary parties in a trust dispute, including nonresidents. Section 736.0202(1), F.S., allows Florida courts to acquire personal jurisdiction over nonresidents if he or she accept a trusteeship of a trust having its principal place of administration in Florida, or he or she moves the principal place of administration of a trust to Florida. However, this leaves a number of scenarios in which Florida courts do not have express authority for jurisdiction over all necessary parties. Examples of necessary parties unaccounted for by s. 736.0202(1), F.S., include a beneficiary who accepts compensation from a trust or a person who performs a service for a trust, if the trust has its principle place of business in Florida.

While on its face, s. 736.0205, F.S., appears to be a statute establishing jurisdiction, courts have interpreted it to be a forum non conveniens statute that requires a court to determine the “most appropriate forum” in which a case should proceed. Courts have suggested that the statute shifts to the plaintiff the burden of proving that the choice of venue is appropriate. However, this conflicts with Florida Rule of Civil Procedure 1.061 which provides that the defendant has the burden of pleading and proving the facts necessary to obtain a change of venue. Thus, the relationship between the statute and the rule of civil procedure creates confusion as to the correct placement of burden of proof for forum non conveniens issues.

Under new F.S. 736.0202(2), a Florida court is deemed to have personal jurisdiction over any non-resident trustee, trust beneficiary or other interested person who personally (or through an agent) does any of the following:

  1. Accepts trusteeship of a trust having its principal place of administration in this state at the time of acceptance.
  2. Moves the principal place of administration of a trust to this state.
  3. Serves as trustee of a trust created by a settlor who was a resident of this state at the time of creation of the trust or serves as trustee of a trust having its principal place of administration in this state.
  4. Accepts or exercises a delegation of powers or duties from the trustee of a trust having its principal place of administration in this state.
  5. Commits a breach of trust in this state, or commits a breach of trust with respect to a trust having its principal place of administration in this state at the time of the breach.
  6. Accepts compensation from a trust having its principal place of administration in this state.
  7. Performs any act or service for a trust having its principal place of administration in this state.
  8. Accepts a distribution from a trust having its principal place of administration in this state with respect to any matter involving the distribution.

For more on the back story to this new statute and how it’s all supposed to work going forward you’ll want to read the FL Bar white paper submitted in support of the new legislation entitled Proposed Statutes on Acquiring Jurisdiction over Trustees and Trust Beneficiaries and Repealing s. 736.0205, and the CLE presentation explaining the new statute prepared by Barry F. Spivey of Spivey & Fallon, PA. entitled Jurisdiction Over Nonresidents in (Mostly) Trust Litigation.

In the trusts and estates world, if it’s not in writing it usually doesn’t count. We all know wills have to be in writing, F.S. 732.502, and the same goes for most trusts, F.S. 736.0403(2). And most of us know waivers of spousal rights also have to be in writing. F.S. 732.702. But what if you’re one step removed from actually making a will? For example, what if “A” promises “B” that at some time in the future he’ll sign a will leaving 50% of his estate to B in exchange for B promising to do the same for A, does that have to be in writing? Yup, that too. F.S. 732.701. And what about agreements among estate beneficiaries to carve up a probate estate in a manner altering what they’re otherwise legally entitled to? Again, it needs to be in writing. F.S. 733.815.

Taking off the blinders:

So here’s the problem. If our training and experience teach us that oral agreements having to do with inheritance rights are NOT enforceable 99% of the time, how likely are we to spot the rare case where the general rule doesn’t apply? Not very, especially if we don’t have examples of what those cases might look like in real life. Fortunately, this year we have two such examples that resulted in published appellate opinions, both of which arose in circumstances that should sound familiar to probate practitioners.

Case study #1: Is an oral agreement to split mom’s inheritance enforceable? YES

Ferguson v. Carnes, — So.3d —-, 2013 WL 1316345 (Fla. 4th DCA April 3, 2013)

This case involved a brother and sister’s common-sense solution to their mom’s frequent threats to disinherit one or the other of them. As alleged by brother (“Ferguson”), rather than roll the dice on who would be in mom’s good graces when she passed away, he and his sister (“Carnes”) agreed to split the inheritance pot 50/50 no matter what mom’s will said. Here’s how the 4th DCA described their deal:

In his complaint, Ferguson alleged that he and Carnes are the only living children of a wealthy mother, who frequently threatened to disinherit both siblings. The complaint further alleged that Ferguson and Carnes entered into an oral agreement in order to afford each other assurance against disinheritance. The oral agreement provided that if one sibling were disinherited, Ferguson and Carnes would divide evenly between them whatever property either received from their mother’s estate.

If true (sister now denies this deal ever existed), brother and sister are to be commended for their good sense . . . but for one problem. No one thought it would be a good idea to put this deal in writing. Oops! Mom died, and sure enough, one of the siblings was disinherited (brother). When brother asked sister to live up to their handshake deal (surprise!) she refused. Brother then sued sister for breach of contract. Sister responded by moving for summary judgment, claiming that the alleged mutual promises failed for lack of consideration. Not so says the 4th DCA. Here’s why:

The oral agreement between Ferguson and Carnes did not lack consideration. Essentially, the terms of the oral agreement as pleaded, which Carnes admitted for purposes of her motion, delineated mutual promises. In other words, Ferguson and Carnes each promised the other to split their respective inheritances with the other, so that each would receive equal shares of whatever amount their mother willed to one or both of them. The consideration lies in the fact that each gave up the possibility of inheriting more than the other in return for insuring that neither would be disinherited in whole or in part. See Ashby, 651 So.2d at 247. The trial court erred by viewing each promise in isolation of the other, rather than viewing them as mutual corresponding promises.

We conclude that Ferguson alleged sufficient facts to establish the creation of an oral agreement and to withstand summary judgment. Accordingly, we reverse and remand for further proceedings.

Unwritten promises are the kind of thing you can expect to get dredged up in contested estates. Usually these promises aren’t worth suing over, but that may not always be true. If faced with this kind of situation and the economics of the claim warrant actually filing suit, the 4th DCA’s summary of the law controlling the enforceability of mutual promises should be helpful.

An oral contract must meet the requirements of a written contract, including offer, acceptance, consideration, and sufficiently specific terms. St. Joe Corp. v. McIver, 875 So.2d 375, 381 (Fla.2004). Promises have long been recognized as valid consideration in forming a contract. Diaz v. Rood, 851 So.2d 843, 846 (Fla. 2d DCA 2003) (“‘[A] promise, no matter how slight, can constitute sufficient consideration so long as a party agrees to do something that they are not bound to do.’ ” (quoting Ashby v. Ashby, 651 So.2d 246, 247 (Fla. 4th DCA 1995))); Wright & Seaton, Inc. v. Prescott, 420 So.2d 623, 626 (Fla. 4th DCA 1982) (“[M]utual promises constitute considerations for each other.”); Jenkins v. City Ice & Fuel Co., 118 Fla. 795, 160 So. 215, 218 (1935) (“[M]utually enforceable promises may constitute a valid consideration for each other.”). A bilateral contract results from “mutual promises to do something in the future, in which the consideration of the one party is the promise on the part of the other, each party being both a promisor and a promisee.” McIntosh v. Harbour Club Villas Condo. Ass’n, 468 So.2d 1075, 1076 (Fla. 3d DCA 1985).

Case study #2: How long are oral agreements good for? Aren’t they limited to one year by the statute of frauds? NO

Browning v. Poirier, — So.3d —-, 2013 WL 842853 (Fla. 5th DCA March 08, 2013)

Inheritance disputes are usually the last battle in a family war that’s been going on for years, sometimes decades. So if anyone’s making claims based on an oral agreement, chances are that unwritten promise was made years ago. But wait, doesn’t our statute of frauds (F.S. 725.01) bar enforcement of oral agreements that aren’t performed within one year? Not exactly. In this case the 5th DCA tells us why enforcement of an oral agreement made 14 years earlier is NOT barred by the statue of frauds.

Here’s how the oral agreement at the heart of this case was described by Judge Sawaya in his dissenting opinion:

This case involves two romantically involved individuals who allegedly agreed to split the proceeds of any lottery tickets they purchased, only to have the eventual winning ticket split their romance. The purchaser of the winning ticket is Lynn Anne Poirier, the Appellee. The claimant of half of the proceeds is Howard Browning, the Appellant. Browning testified at trial that he and Poirier became romantically involved in 1991 and started living together that year. He further testified that in 1993, they entered into an oral agreement to split the proceeds of any lottery tickets they may purchase and that this agreement was to last as long as they remained romantically involved. Some fourteen years after the alleged agreement was made and while the parties were still romantically involved and living together, Poirier purchased the winning ticket, collected one million dollars, and refused Browning’s request for half of the proceeds. The displeased and disgruntled Browning then filed the underlying suit for breach of contract and unjust enrichment seeking half of the proceeds. Poirier denied the existence of any oral agreement to split future lottery proceeds and interposed the defense of the statute of frauds.

Fourteen years is a long time, especially if we’re talking about an oral agreement (I can’t remember what I had for breakfast yesterday). Isn’t this exactly the type of bramble bush the statue of frauds is supposed to keep us out of? Yes, but no rule’s perfect. If it’s possible for the oral agreement to be performed within one year, the statute of frauds doesn’t apply . . . even if your handshake deal ends up spanning 14 years. So saith the 5th DCA:

Although the parties contemplated that the relationship would last more than one year, there was nothing in the agreement, which was terminable at will, to show that it could not be performed within one year, or which required performance for a period of time exceeding one year. Hence, Browning’s suit for breach of contract is not barred by the statute.

By the way, boyfriend also sued girlfriend for unjust enrichment, an equitable claim we see with some frequency in inheritance disputes. At the trial-court level the judge ruled this claim was barred as a matter of law because you can’t simultaneously argue the existence of an oral agreement and also seek redress on the grounds of unjust enrichment, which presupposes there’s no contract. Again, wrong answer.

There’s nothing wrong with hedging your bets in litigation by asserting alternate — or even inconsistent — arguments. In fact, under our rules of civil procedure it’s explicitly authorized. See Fla. R. Civ. P. 1.110(g) (“A party may … state as many separate claims or defenses as that party has, regardless of consistency and whether based on legal or equitable grounds or both.”). So pleading mutually exclusive claims in a single lawsuit, such as breach of contract and unjust enrichment, is OK. Depending on how the facts play out at trial, one of those claims will remain viable, so litigating them both simultaneously in the same lawsuit makes sense. Here’s how the 5th DCA made this point:

We also reverse the dismissal of Browning’s count for unjust enrichment. The trial court dismissed this count on the basis of Tobin & Tobin Ins. Agency, Inc. v. Zeskind, 315 So.2d 518 (Fla. 3d DCA 1975). Logically, a party whose contract is unenforceable due to the statute of frauds cannot recover for unjust enrichment, as the law will not imply a contract where an express contract exists regarding the same subject matter. Kovtan v. Frederiksen, 449 So.2d 1, 1 (Fla. 2d DCA 1984). Thus, once it is shown that an express contract exists, the claim for unjust enrichment necessarily fails. Real Estate Value Co. Inc. v. Carnival Corp., 92 So.3d 255, 262 n. 2 (Fla. 3d DCA 2012). Here, however, Poirier denied the existence of an express contract and the jury has yet to determine whether an express contract exists. Under these circumstances, the two claims can be maintained simultaneously. Id., ThunderWave, Inc. v. Carnival Corp., 954 F.Supp. 1562, 1566 (S.D.Fla.1997) (citing Hazen v. Cobb, 96 Fla. 151, 117 So. 853, 857–58 (1928)).

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There’s nothing wrong with hedging your bets in litigation by asserting alternate — or even inconsistent — arguments. In fact, under our rules of civil procedure it’s explicitly authorized. See Fla. R. Civ. P. 1.110(g) (“A party may … state as many separate claims or defenses as that party has, regardless of consistency and whether based on legal or equitable grounds or both.”). But there are limits. Generally speaking, you can’t have it both ways in inheritance disputes. In other words, you can’t simultaneously benefit from and contest the validity of the same legal instrument, be it a will, trust, deed, contract, etc. There are two doctrines that put this general principle into effect: the “renunciation” rule and the “estoppel-by-acceptance-of-benefits” rule.

The renunciation rule and the estoppel-by-acceptance-of-benefits rule are two sides of the same coin. The renunciation rule requires that a beneficiary renounce or divest himself of benefits under the instrument he’s contesting as a precondition to prosecuting his claims against its validity. This is usually viewed as a pleading rule. As in, if you’re representing a beneficiary of a trust who wants to contest the validity of his trust, your complaint needs to contain a renunciation allegation. The doctrine of equitable estoppel holds “that a person should not be permitted to unfairly assert, assume or maintain inconsistent positions.” Head v. Lane, 495 So.2d 821, 824 (Fla. 4th DCA 1986) (emphasis added). One “form of estoppel occurs where a person attempts to repudiate the obligations and validity of a transaction after accepting the benefits resulting from it.” Id.

Case Study

Fintak v. Fintak, — So.3d —-, 2013 WL 4483103 (Fla. 2d DCA August 23, 2013)

At the heart of the linked-to-case above is an irrevocable self-settled trust a father funded with his own life savings. The trust was to be administered by dad and two of his sons as co-trustees. Dad’s current wife gets nothing under the trust. All of dad’s six children from a prior marriage, including his two co-trustee sons, get it all when dad dies. When dad’s current wife learned of the trust all h_ll broke lose, triggering years of litigation. As the 2d DCA put it:

This is a particularly contentious case involving the dangerous amalgam of family and money.

After the case had been going on for several years and after dad had passed away (surviving spouse continued the litigation as PR of his estate), the two co-trustee sons moved for summary judgment on the grounds that dad had accepted benefits from his trust while simultaneously contesting its legitimacy. In short, dad had run afoul of both the renunciation rule and the estoppel-by-acceptance-of-benefits rule. The trial-court judge agreed with them and granted final summary judgment in their favor.

The problem with the trial-court’s order is that neither rule applies if the “benefit” you’ve accepted under the trust you’re contesting is property you already had a legal claim to. In this case the trust was funded with dad’s own assets (it was a self-settled trust). Any distribution of trust assets dad received was income or principal he would have owned regardless of the trust’s existence. It was his property before the trust was funded, and it would remain his property afterward if the trust were invalidated. This central fact determined the outcome of this appeal.

Here’s how the 2d DCA summed up its analysis of why the renunciation-rule didn’t apply in this case:

[B]ecause Edmund owned all of the assets within the Trust prior to its creation, he would be entitled to the income and principal in any event, and the renunciation rule would not do equity. Under the facts of this case, requiring renunciation would be to elevate form over substance. See Medary v. Dalman, 69 So.2d 888, 890 (Fla.1954). The case of Medary v. Dalman is illustrative of this point. In Medary, the husband was a devisee of a one-fourth interest in certain property bequeathed to him under his deceased wife’s will. Id. at 889. When the will was admitted to probate, the husband filed suit in equity to have a trust declared in his favor as to the entire property because he supplied all the funds to purchase the property and the title was taken in his wife’s name for convenience only. He did not intend for the property to be a gift or advancement to the wife. The husband did not renounce the devise to him under his wife’s will prior to filing suit and the action was dismissed. On appeal, the Florida Supreme Court held that the husband was not required to renounce the devise to him of the one-fourth interest in the same property prior to filing suit because the husband:

. . . either owns the entire property, or title to one-fourth of it has vested in him by virtue of his wife’s will. This is a case where the donee would not receive under the will a benefit to which he would not be entitled except for the will, in which event no election is required. A renunciation in such a case would be more of form than of substance, for even if he lost in his suit to establish a resulting trust on the theory that the property is not part of the wife’s estate and consequently not subject to devise, he would still be entitled to take under the will.

 Id. at 890 (internal quotation marks and citations omitted).

In light of the foregoing, we find that the renunciation rule is inapplicable to the facts of this case and the trial court erred in granting summary judgment for Thomas and John on the ground that Shirley’s claims were barred by the renunciation rule.

For the same reasons the estoppel-by-acceptance-of-benefits rule didn’t apply either. Here’s how the 2d DCA summed up its analysis on this point:

[A]s we held in the context of the renunciation rule, an individual cannot be estopped from challenging an instrument by accepting that which he or she is legally entitled to receive regardless of whether the instrument is sustained or overthrown. . . .  As discussed at length above, Edmund would have been legally entitled to the assets of the Trust if the Trust was never created and in the event the Trust is declared invalid.

Under these circumstances, the trial court erred in granting summary judgment . . . based on the doctrine of estoppel by the receipt and acceptance of benefits.

Lesson learned?

If you don’t know the “why” of a rule, blindly following it often ends up elevating form over substance. That’s what appears to have happened in this case. The renunciation rule is one of those pleading technicalities we read about in CLE materials and hear mentioned from time to time at Bar conferences, but few of us take the time to drill down into the “why” of the rule. The 2d DCA did that for us in this case, hopefully both demystifying it and demonstrating how infrequently it really has any real-world significance.

Staum v. Rubano, — So.3d — , 2013 WL 4081055 (Fla. 4th DCA August 14, 2013)

If you’re domiciled in one state at death (say New York), but own real property in another state (say Florida), your estate may have to be probated  or “administered” in both states, with New York being your domiciliary administration and Florida being your ancillary administration. This all works smoothly as long as the estate isn’t involved in any litigation. Once you have lawsuits pending in multiple jurisdictions you quickly bump into questions about how to reconcile each independent jurisdiction’s unique probate-law regime as applied to a single decedent’s estate.

The conflict-of-law puzzles lurking under the surface of contested multi-jurisdictional probate cases are never easy. For example, assume in our scenario NY law and FL law resulted in different outcomes in estate-related litigation pending in FL. Generally speaking, FL law would trump NY law as applied to any FL real property. See Jones v. Habersham, 107 U.S. 174 (1883). By contrast, NY law would – generally speaking – trump FL law as applied to any FL personal property. See In re Estate of Binkow, 120 So.2d 15 (Fla. 3d DCA 1960). Confused? It gets better. Under certain circumstances the laws of NY and FL could both apply. See Cuevas v. Kelly, 873 So. 2d 367 (Fla. 2d DCA 2004).

What about creditor claims: whose statute of limitations periods apply: NY or FL?

How ancillary probate proceedings are supposed to work in Florida and what law applies has been codified to a large extent in chapter 734 of Florida’s probate code. In F.S. 734.102(7) we’re told an ancillary personal representative can’t sell, lease or mortgage Florida real estate “to pay a debt or claim that is barred by any statute of limitation or of non-claim of this state.” The non-claim statute being referred to is F.S. 733.710, our 2-year non-claim statute for probate-creditor claims. This statute is a recurring theme on this blog and a huge trap for the unwary (see here, here).

Clearly, a NY creditor can’t adjudicate his probate-creditor claim in Florida against a NY decedent’s Florida real estate if its barred by F.S. 733.710. But is that the end of the story? Apparently not. According to the 4th DCA’s linked-to opinion above, once the Florida real property is liquidated, there’s nothing stopping the NY creditor from having those funds transferred to NY, then adjudicating his creditor claim against those same funds in NY . . . even though they would have been time-barred in FL.

Case Study:

This case involves a NY nursing home trying to get paid for care it provided to a man who died domiciled in NY. At the time of his death the decedent owned real property in FL. Here are the key facts of the case as recounted by the 4th DCA:

In 2007, the decedent died while domiciled in New York. At the time of the decedent’s death, the nursing home was owed payment for its care of the decedent in New York. . . . In 2010, the decedent’s personal representative opened the New York domiciliary estate. In 2011, the nursing home filed a claim against the New York domiciliary estate. Later that year, the decedent’s personal representative opened the Broward County ancillary estate to administer the disposition of the decedent’s Broward County home. The nursing home filed a claim against the Broward County ancillary estate.

The nursing home then filed a petition in Broward County to compel an accounting of the ancillary estate and to transfer the ancillary estate’s assets to the New York domiciliary estate. See Fla. Prob. R. 5.150(b) (2011); § 734.102(6), Fla. Stat. (2011) . . . In the petition, the nursing home alleged that . . . if the personal representative transferred the ancillary estate’s assets directly to the domiciliary estate’s beneficiaries instead of to the New York domiciliary estate, then the nursing home likely would not recover on its claim against the domiciliary estate.

The personal representative filed a motion to dismiss the nursing home’s petition. The personal representative argued that because the nursing home filed its claims against both the New York domiciliary estate and the Broward County ancillary estate more than two years after the decedent’s death, the claims were untimely under Section 733.710(1) . . . The nursing home’s response to the motion argued that section 733.710(1) did not apply because its petition was not requesting the court to adjudicate the nursing home’s claim against the ancillary estate. Rather, according to the nursing home, its petition requested the court only to compel an accounting of the Broward County ancillary estate and to transfer the ancillary estate’s assets to the New York domiciliary estate so that the New York court overseeing the domiciliary estate could administer the distribution of those assets.

The NY creditor lost at the trial-court level based on the estate’s timeliness argument. Wrong answer ruled the 4th DCA, which summed up its conflict-of-law analysis in two short sentences:

[T]o the extent the circuit court found that the nursing home’s pending claim against the New York domiciliary estate was untimely, we reverse. We are aware of no authority providing a Florida court with jurisdiction to determine that a creditor’s pending claim against a foreign domiciliary estate is untimely.

Having rejected the trial-court’s application of FL’s non-claim statute to funds intended for distribution in a NY probate proceeding, the 4th DCA sent the case back with instructions to get the money moved to NY:

Based on the foregoing, we reverse the circuit court’s order granting the personal representative’s motion to dismiss the nursing home’s petition to compel an accounting of the ancillary estate and to transfer the ancillary estate’s assets to the domiciliary estate. We remand for reinstatement of the petition and for proceedings consistent with this opinion.

Lesson learned?

This 4th DCA opinion is a must-read for out-of-state probate creditors. If you accept that the primary purpose of an ancillary administration is to collect assets of nonresident decedents found in Florida and remit the proceeds to the domiciliary executor or administrator, this case makes sense. Once the Florida real property was liquidated, what happens to those funds in NY is up to a NY judge to decide. End of story.

Listen to this post

This case was 12 years in the making. Starting with the settlor’s death in 2001, boiling over into a lawsuit in 2006 after the trustee paid himself a $1.2 million fee (which wasn’t disclosed to the trust’s beneficiaries until after the fact), finally getting to trial 6 years later in 2012, and concluding a year after that with the appellate decision linked-to above (not as bad as Jarndyce v Jarndyce, but wow?! 12 years!!). While much of the 3d DCA’s opinion focuses on the beneficiaries’ trust-accounting objections, at its heart this case is all about disputed trustee fees.

Case Study

McCormick v. Cox, — So.3d —-, 2013 WL 4081414 (Fla. 3d DCA August 14, 2013)

What started out as a $1.2 million fee dispute snowballed into an across-the-board indictment of just about everything the trustee ever did, resulting in a whopping $5.3+ million adverse judgment against him. Any time a trustee is at odds with the beneficiaries of his trust, fees are going to be a flashpoint. There are lots of ways to manage that problem, but they all revolve around getting prior consent from a court and/or the trust’s beneficiaries. The trustee at the center of this case did neither, opting instead to pay himself first and ask questions later. Here’s how the 3d DCA described how the payment was handled:

When the [$12 million] sale of the [trust’s] property closed in August 2005, McCormick instructed the closing agent to make separate distributions to the trusts totaling over $1,548,000 . . . McCormick’s testimony and notes established that these funds were diverted from the proceeds without clearance from the beneficiaries, much less any court order, primarily to fund “trustee’s fees” totaling $1,217,528 in four payments from September 2005 through December 2005. When professionals retained by the beneficiaries realized that the net proceeds were substantially less than anticipated, they began a journey of discovery that culminated in learning of the “trustee’s fees” and commencing the circuit court adversary proceeding.

In retrospect, the trustee’s approach was a really bad idea, as the 3d DCA makes clear in this scathing assessment of the trustee’s conduct when his fees were first questioned:

When the beneficiaries learned of the extraordinary and unilateral trustee’s fees paid by McCormick to himself from the sale of the Lynnfield property in 2005, they and their professionals immediately demanded information and the legal basis for the payments. Remarkably, McCormick did not immediately restore the payments (or any part of them) to the trusts pending a resolution of the matter or the submission of the claim for trustee’s fees to the court. Nor did McCormick place the funds (or any part of them) in a separate account or segregate them until the court considered the matter. McCormick simply retained the funds and waited for the beneficiaries to come after him in their lawsuit. The trial court had the power to review the evidence regarding the trustee’s administration of the trusts and to determine an appropriate trustee’s fee, including no fee at all. § 736.1001(2)(h), Fla. Stat. (2013) (authorizing the court to “reduce or deny compensation to the trustee” to remedy a breach of trust); Ortmann v. Bell, 100 So.3d 38, 45 (Fla. 2d DCA 2011).

By the way, this case is far from over. Now comes the collection phase. A $5.3+ million judgment may sound like a lot, but it’s worthless if you can’t collect. Something to keep in mind before embarking on years of expensive litigation, especially if your litigation target isn’t bonded (as in this case).

On the present record, and in the absence of a bond, the beneficiaries must pursue collection remedies (of as-yet unknown efficacy) against the defendants/appellants, with no apparent recourse to a surety.

Lesson learned?

If you’re a trustee, when in doubt, get a court order in advance. This approach applies to any trustee decision, but it’s especially applicable when it comes to your fees. You may not like what the judge tells you, but at least you know in advance what the deal is. At that point you have a choice: take the deal or walk. In other words, accept the court’s ruling as to what a reasonable fee would be under F.S. 736.0708, or bow out of the engagement. What you don’t want to do is roll the dice and hope a court will see it your way years later when every decision you ever made as trustee is picked apart in hindsight.

Listen to this post

So when can you litigate inheritance disputes in federal court? According to the U.S. Supreme Court’s 2006 decision in Marshall v. Marshall the answer is anytime federal diversity jurisdiction would otherwise apply and the jurisdictional “probate exception” does NOT apply, i.e., a federal judge is NOT being asked to: [1] probate a will, [2] administer a decedent’s estate, or [3] interfere with property already in the custody of a probate court. The non-interference directive is a reiteration of the general principle that, when one court is exercising in rem jurisdiction over a res, a second court will not assume in rem jurisdiction over the same res.

Marshall was a game changer

Marshall dramatically narrowed the jurisdictional probate-exception bar, opening the doors to “federalized” trust-and-estates litigation to an extent previously unimagined. It’ll be years before the lower courts work through the specific contours of Marshall’s general conclusions on a case-by-case basis; until then every case is significant, including the two Florida cases discussed below.

Case Study No. 1

Kaplan v. Kaplan, — Fed.Appx. —-, 2013 WL 3884190 (11th Cir. July 29, 2013)

The Kaplan case demonstrates just how narrow the probate exception is in a post-Marshall world. The plaintiff sued his uncle in federal court for allegedly breaching his fiduciary duties as personal representative (PR) of an estate being probated in Florida. Most probate lawyers would laugh if you suggested this tactic to them. Why? Because the only way you become a PR is if a state probate judge appoints you to that position. So you’d think suing a PR for improperly exercising the authority granted to him by a state probate judge is something you can only do in a state probate court . . . and you’d be wrong. Both the trial court and the 11th Cir. concluded suing a PR for breach of fiduciary duty does NOT = administering a decedent’s estate. So the probate exception does NOT apply:

Consistent with the holding in Marshall that a federal court is obliged to exercise its jurisdiction to consider matters that do not annul a will, invalidate the administration of an estate, or interfere with property in the custody of the probate court, id. at 311–12, 126 S.Ct. at 1748, the district court ruled that Alexander’s action was not in the nature of a probate proceeding and that it had jurisdiction to entertain Kaplan’s in personam claims against his uncle.

But just because a federal court isn’t jurisdictionally barred from adjudicating a claim doesn’t mean your case is going to get decided by a federal judge. Under the right circumstances a federal judge can always stay its case in favor of a parallel state-court proceeding. Which is exactly what happened in this case based on the Colorado River doctrine, which was summarized by the 11th Cir. in Moorer v. Demopolis Waterworks and Sewer Bd., 374 F.3d 994, 996 (11th Cir.2004) as follows:

The Colorado River doctrine of “exceptional circumstances” authorizes a federal “district court to dismiss or stay an action when there is an ongoing parallel action in state court.” LaDuke v. Burlington Northern Railroad Co., 879 F.2d 1556, 1558 (7th Cir.1989). The principles of this doctrine “rest on considerations of ‘[w]ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation’.” Colorado River, 424 U.S. at 817, 96 S.Ct. 1236 (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 183, 72 S.Ct. 219, 96 L.Ed. 200 (1952)). Although federal courts have a “virtually unflagging obligation … to exercise the jurisdiction given them” they may defer to a parallel state proceeding under “limited” and “exceptional” circumstances. Id. at 817-818, 96 S.Ct. 1236. Among the factors the district court should consider in determining whether such exceptional circumstances exist are:

(1) the order in which the courts assumed jurisdiction over property; (2) the relative inconvenience of the fora; (3) the order in which jurisdiction was obtained and the relative progress of the two actions; (4) the desire to avoid piecemeal litigation; (5) whether federal law provides the rule of decision; and (6) whether the state court will adequately protect the rights of all parties.

TranSouth Financial, 149 F.3d at 1294-5 (summarizing Moses H. Cone Memorial Hospital v. Mercury Constr. Co., 460 U.S. 1, 16-26, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). The decision whether to dismiss “does not rest on a mechanical checklist, but on a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction.” Moses H. Cone, 460 U.S. at 16, 103 S.Ct. 927. The weight of each factor varies on a case-by-case basis, depending on the particularities of that case. Id. One factor alone can be the sole motivating reason for the abstention. Id. (noting that the desire to avoid piecemeal adjudication was the driving force behind the dismissal in Colorado River).

Probate exception v. Abstention doctrine

Now that the probate exception has been whittled down to near meaninglessness, where you litigate an inheritance dispute that’s pending in parallel federal and state court actions is likely going to turn not on issues of jurisdiction, but instead on whether the federal case should be stayed under the Colorado River doctrine. That’s what happened here. In order to avoid wasteful piecemeal litigation in two courts, the federal judge stayed his case in favor of the ongoing probate proceeding. Here’s why:

Alexander argues that the decision to stay his federal action conflicts with Marshall v. Marshall, 547 U.S. 293, 126 S.Ct. 1735, 164 L.Ed.2d 480 (2006), but we disagree. . . . The district court did not abdicate its obligation to exercise its jurisdiction. See Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246.

The district court did not abuse its discretion by staying the federal action. The nature of the probate proceedings reveals that parallel federal and state litigation would result in deleterious piecemeal litigation. See Moorer, 374 F.3d at 996; Ambrosia Coal and Const. Co. v. Pages Morales, 368 F.3d 1320, 1333 (11th Cir.2004). Alexander has an opportunity to object to the decisions that Leon has made in distributing the estate, see Fla. Prob. R. 5.150, 5.345, 5.400, and the resolution of those objections will dispose of or substantially limit Alexander’s claims that Leon breached his fiduciary duties to the estate, see Fla. Stat. §§ 733.609(1), 733.901(1)-(2). For example, Alexander complains that Leon acted tortuously by settling a wrongful death survivor’s claim for a low amount, but the probate court has approved the settlement and, in so doing, “relieved [Leon] of liability or responsibility for the compromise,” see Fla. Stat. § 733.708. And the record supports the finding of the district court that a parallel federal action would be wasteful. Alexander already has attempted to excuse his violation of the discovery deadline in the federal action as necessary to accommodate the ongoing probate proceedings.

Case Study No. 2

Freeman v. U.S. Bank, N.A., 2013 WL 2147558 (M.D. Fla. May 16, 2013)

But don’t expect all your inheritance disputes to end up back in state court, especially if the case revolves around a trust. Trusts are often at the center of inheritance disputes, which means they’re usually litigated within the context of a probate proceeding. But trusts are NOT probate assets. So by definition litigating a trust case does NOT = administering a decedent’s estate. For example, if your inheritance dispute revolves around the proper interpretation of a trust, that’s not a probate proceeding, so there’s no reason why your declaratory-judgment action can’t be litigated in federal court (assuming you otherwise have diversity jurisdiction). That’s what happened in this case.

So when should a federal court NOT stay an inheritance dispute?

In this case parallel litigation is pending in three courts. There’s a probate proceeding pending in Sarasota County, Florida, a trust declaratory-judgment action pending in a Florida federal court (Tampa), and a competing declaratory-judgment action pending in a Missouri probate court. The Florida PR was the plaintiff in the Florida federal suit. The defendants in that case were in Missouri. Not surprisingly, the Missouri defendants would rather litigate the case on their home turf, so they tried to get the Florida federal case either [a] dismissed on jurisdictional grounds or [b] stayed under the Colorado River doctrine in favor of their Missouri lawsuit . . . and struck out on both arguments.

So does a trust declaratory-judgment action fall under what’s left of the probate exception to federal court jurisdiction? Not even close. Here’s why:

In Rudman v. Rudman, 2009 WL 857541 (N.D.Tex.2009), the federal district court retained jurisdiction of a state court action removed from a probate court. There, the action, much like the action here, sought a declaratory judgment regarding whether an individual was a beneficiary of a trust and an accounting of the trust. The Rudman court relied on Marshall v. Marshall, 547 U.S. 293, 126 S.Ct. 1735, 164 L.Ed.2d 480 (2006), and held that the action did not fall within the probate exception. Consequently, as long as the action does not challenge the validity of the will or trust, or the validity of the probate proceeding, then the probate exception does not apply to curtail the federal court’s jurisdiction to adjudicate a claim between parties. Nothing in the case at bar precludes this Court’s jurisdiction in the nature of the probate exception to federal jurisdiction.

OK, so by now it’s pretty clear a probate-exception argument isn’t going to get you very far in most trust cases. So how about asking for a stay under the Colorado River doctrine? It worked in the Kaplan case. This is actually the more interesting part of the case because the court goes into a good amount of detail in its explanation for why it’s NOT staying the federal suit. This kind of detail is gold for working litigators.

The circumstances of this case fail to satisfy even the first factor of Colorado River, because this Court obtained jurisdiction of the declaratory judgment action first. See Ambrosia Coal & Constr. Co. v. Pages Morales, 368 F.3d 1320, 1331 (11th Cir.2004) (cataloguing six factors to determine Colorado River abstention).

Moreover, as discussed above, this action does not impede the administration of the probate case pending in Sarasota County, Florida. The balancing of the other Colorado River factors in this case “heavily weigh[ ] in favor of the exercise of jurisdiction.” Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16, 103 S.Ct. 927, 937, 74 L.Ed.2d 765 (1983). The Middle District is more convenient for the Plaintiff, who has resided the last thirteen or so years here with his now deceased father, and evidence establishing “familial ties” is likely to be found in Florida. Piecemeal litigation is avoided by following the first-filed rule, and this action was filed first. See, e.g., National Union Fire Ins. Co. of Pittsburgh, Pa. v. Beta Constr., LLC, 2010 WL 3789042 (M.D.Fla.2010).

That Missouri law will be applied does not necessarily favor abstention where there are no complex questions of state law. See Noonan South, Inc. v. County of Volusia, 841 F.2d 380 (11th Cir.1988). Finally, both forums are adequate to protect the parties’ rights and therefore does not tip the balance in favor of abstention.

Lesson learned? Think “first-filed rule”

Assuming your case otherwise qualifies for federal diversity jurisdiction and you don’t fall within the very narrow confines of the post-Marshall probate-exception rule, the odds of your case getting litigate in federal court will turn exclusively on the six factors needed to determine Colorado River abstention. Most of those factors depend on facts you can’t control as counsel. But there is one important factor you absolutely can control: where the first lawsuit is filed. He who strikes first gets priority. If you want your trust action to get litigated in state court, file there first. If you want your trust action to get litigated in federal court, file there first. The “first-filed rule” isn’t outcome determinative, but all else being equal it’s probably going to tip the scales decisively one way or the other.

Estate of Kester v. Rocco, — So.3d —-, 2013 WL 3155849 (Fla. 1st DCA June 24, 2013)

Most parents want to treat their children fairly in their estate planning, but fair doesn’t necessarily mean equal. We all know there are perfectly valid reasons for why a parent might opt to NOT divide the family pie in equal shares, such as compensating a middle-aged daughter (and yes, it’s usually a daughter) who’s given up part of her own life to care for mom or dad. This type of scenario comes up all the time in undue influence cases where one child — the dutiful caregiver — is favored over his or her siblings in mom or dad’s will. If you’re a trusts and estates lawyer in Florida and you haven’t dealt with this kind of case yet, just wait, sooner or later you will.

The new normal: middle-aged children caring for elderly parents:

Ask people where they want to end their lives, and for most the answer is home. For more and more elderly Americans that means moving in with a middle-aged child. According to a 2008 MetLife study nearly 10 million adult children, or about 1 in 4 (mostly Baby Boomers), provide personal care to parents in need. Not surprisingly, as compared to the rest of the U.S. this trend is especially pronounced in Florida which, according to the U.S. Census Bureau, lead the nation in terms of having the greatest share of its population aged 65 and older in 2010 (followed by West Virginia and Maine).

But just because you care for an aging parent, is it fair to get a bigger piece of the inheritance pie? If the answer to that question is in any way related to the economic costs borne by adult caregivers, the answer is clearly yes. Consider these statistics from the MetLife study:

  • The total estimated aggregate lost wages, pension, and Social Security benefits of adult children who become their parents’ caregivers is nearly $3 trillion.
  • The total economic impact of caring for an elderly parent in terms of lost wages and Social Security benefits is on average $324,044 for women, and $283,716 for men, or $303,880 for the average male or female caregiver 50+ who cares for a parent.
  • Adult children 50+ who work and provide care to a parent are more likely to have fair or poor health than those who do not provide care to their parents.

So yeah, from an economic standpoint the case for favoring a care-giver child over an equally-loved — but unavailable — sibling in a parent’s estate plan is compelling. So why do these cases end up getting litigated under some undue-influence theory so often?

Does a dutiful adult child caring for an elderly parent = undue influence? NO

Undue influence is presumed when: (1) a person with a confidential relationship with the testator, (2) was active in procuring or securing the preparation or execution of the devise and (3) is a substantial beneficiary thereof.

Every middle-aged child favored by mom or dad for the sacrifices made to personally care for an ailing parent gets caught up in this three-part test. There’s no escaping it. Consider this typical scenario: did mom “confide” in the daughter whose home she was living in, of course (strike 1); if mom’s too old or frail to drive, then was daughter “active in procuring or securing the preparation or execution of the devise,” of course, who else was going to drive mom to lawyer’s office (strike 2); and finally, if mom had the audacity to actually demonstrate her gratitude for daughter’s sacrifice by favoring her in her will, then presto: daughter’s now a “substantial beneficiary” of mom’s will (strike 3).

Does this mean care-giver daughter should automatically be presumed to have exercised undue influence over mom? Common sense (and a growing body of demographic and economic data) tell us the answer is clearly no. Unfortunately, common sense doesn’t always prevail in a will contest (that’s what we mean by “rolling the dice” at trial). Which means we need an appellate court to remind us of the obvious every once in a while, as the 1st DCA does in the linked-to case above. Taking care of an elderly parent is a “good thing;” no one should be put on the defensive for doing what’s right. That’s not just common sense — it’s the law. So saith the 1st DCA:

Evidence merely that a parent and an adult child had a close relationship and that the younger person often assisted the parent with tasks is not enough to show undue influence. Estate of Brock, 692 So.2d at 911. Where communications and assistance are consistent with a “dutiful” adult child towards an aging parent, there is no presumption of undue influence. Carter v. Carter, 526 So.2d 141, 142–43 (Fla. 3d DCA 1988). Ultimately, “[i]f an adult child … cannot talk to his parent … then we have finally demolished the family ties of love and natural affection.” Id.

 

The Florida Bar v. Swann, — So.3d —-, 2013 WL 3064813 (Fla. June 20, 2013)

Dishonesty. It’s an ugly charge that’s implicit (and sometimes explicit) in practically every case involving fiduciary misconduct by a personal representative (PR) or trustee. For most defendants the “what’s-your-worst-day-in-court” calculus for this kind of case is usually a dollars and cents exercise: on your worst day in court, what’s the largest money judgment you’re looking at? For lawyers serving as PR’s or trustees the stakes are potentially much higher: your worst day in court could be a professional death sentence: disbarment.

Why We Lie

Last year I wrote here about a trusts and estates lawyer that not only lost her license, she was criminally prosecuted for being dishonest. I’ve covered similar stories before, click here, here. Now we have another case involving another trusts and estates lawyer losing his license for being dishonest. If the stakes are so high for lawyers, why do we lie? Probably for the same reasons everyone else does, at least that’s what Prof. Dan Ariely would tell us. He’s a professor of psychology and behavioral economics at Duke University, the author of the new book, The (Honest) Truth About Dishonesty: How We Lie to Everyone—Especially Ourselves, and the subject of Why We Lie, a WSJ interview discussing his book and latest research findings. Here’s an excerpt:

Over the past decade or so, my colleagues and I have taken a close look at why people cheat, using a variety of experiments and looking at a panoply of unique data sets—from insurance claims to employment histories to the treatment records of doctors and dentists. What we have found, in a nutshell: Everybody has the capacity to be dishonest, and almost everybody cheats—just by a little. Except for a few outliers at the top and bottom, the behavior of almost everyone is driven by two opposing motivations. On the one hand, we want to benefit from cheating and get as much money and glory as possible; on the other hand, we want to view ourselves as honest, honorable people. . .

In short, very few people steal to a maximal degree, but many good people cheat just a little here and there. We fib to round up our billable hours, claim higher losses on our insurance claims, recommend unnecessary treatments and so on.

. . .

All of this means that, although it is obviously important to pay attention to flagrant misbehaviors, it is probably even more important to discourage the small and more ubiquitous forms of dishonesty—the misbehavior that affects all of us, as both perpetrators and victims. This is especially true given what we know about the contagious nature of cheating and the way that small transgressions can grease the psychological skids to larger ones.

Case Study:

In the linked-to case above the Florida Supreme Court disbarred an attorney for misconduct involving 26 separate Bar rule violations covering a span of years and tainting the lives of family members and clients alike, including the following matters having a particularly close link to his work as a trusts and estates attorney:

[Misconduct as PR] In count I, addressing Swann’s conduct as the personal representative of his father’s estate, the referee found Swann guilty of violating several Bar Rules, including rules 3–4.3 and 4–8.4(c). . . . [T]he referee found that Swann used estate funds for various real estate transactions and structured the transactions to obscure the true ownership of the money and property involved; that although he refunded his father’s estate $400,000 from the total $463,429 used, there is no evidence that he repaid the estate the remaining $63,429. . . . Most notably, the referee found that Swann’s testimony during his divorce proceedings and his testimony before the referee in this case, both given while under oath, were directly contradictory. During his divorce case, Swann testified in a deposition that he invested estate funds solely for his mother’s benefit. However, before the referee, he testified that the money was a personal loan. It is clear to this Court that Swann varied his sworn testimony to suit his own purposes in each case.

[Conspiring with girlfriend to defraud elderly client in sham marriage] Turning to count II, the referee found that Swann helped his girlfriend, Khadija Rhoualmi, to exploit an elderly client [named William Shelton]. This count may involve the most egregious instances of Swann’s misconduct. The referee found Swann guilty of violating several Bar Rules in count II, including that he engaged in dishonest conduct in violation of rule 3–4.3. . . . On November 18, 2005, Rhoualmi and Shelton were married. Several months later, Shelton was declared incompetent to make financial and legal decisions. He passed away in August 2006. Ultimately, the Fourth Judicial Circuit Court entered a final judgment in In re Estate of Shelton, Case No.2006–CP–1845 (the Shelton case), which annulled the marriage between Shelton and Rhoualmi . . . In relevant part, the circuit court found that Rhoualmi’s “real intention was to obtain Shelton’s money and property” and that “[s]he accomplished this, in part, with the active assistance of Henry T. Swann, III (‘Swann’), an attorney with whom she became romantically involved by mid–2004.” In re Estate of Shelton, Case No. 2006–CP–1845 (Fla. 4th Cir. order entered Nov. 16, 2007) (emphasis added).

[For more on this case see Sad, final days in ‘sham marriage’; and more generally, read here about Florida legislation designed specifically to battle sham marriages].

[Misconduct as PR and trustee] Finally, count V addresses Swann’s actions as the co-personal representative for the Taylor estate and as the trustee for the Taylor Trust. As with counts I through IV, the referee found Swann guilty of violating several Bar Rules, including rule 3–4.3. In support of this recommendation, the referee found that Swann used an asset of the Taylor estate, the Taylor home, to benefit his girlfriend, Khadija Rhoualmi. Swann allowed Rhoualmi, and later a client, to live in the Taylor home for a rent below the market value. He did not fully advise the estate beneficiaries of this arrangement, and the evidence indicates that he did not fully account for the rental income he earned.

What’s the common thread? Dishonesty

We usually think of “dishonesty” in normative terms, reflecting personal (and usually private) beliefs about how things should or ought to be, how to value them, which things are good or bad, and which actions are right or wrong. For lawyers, these normative considerations have added weight; under Bar rules 3-4.3 and 4-8.4(c) the ramifications are potentially career ending. Here’s how the Florida Supreme Court bridges the gap between dishonesty in a lawyer’s private, personal affairs (e.g., as a deponent in his own divorce or PR of his father’s estate) and the very public consequence of disbarment.

[E]very count described in the referee’s report involves some instance of Swann’s dishonest and deceitful conduct. Our prior decisions have made clear that basic fundamental dishonesty is a serious flaw, one which cannot be tolerated by a profession that relies on the truthfulness of its members. Fla. Bar v. Rotstein, 835 So.2d 241, 246 (Fla.2002); Fla. Bar v. Korones, 752 So.2d 586, 591 (Fla.2000). . . .

Finally, the fact that much of the misconduct in this case involves Swann’s personal affairs does not change our conclusion that disbarment is warranted. This Court has long held that ethical violations which occur while a member of The Florida Bar is not acting as an attorney can nonetheless subject the attorney to disciplinary proceedings.

As this Court has stated before, “an attorney is an attorney is an attorney.” Even in personal transactions and when not acting as an attorney, attorneys must avoid tarnishing the professional image or damaging the public…. The practice of law is a privilege which carries with it responsibilities as well as rights. That an attorney might, as it were, wear different hats at different times does not mean that professional ethics can be “checked at the door” or that unethical or unprofessional conduct by a member of the legal profession can be tolerated.

Fla. Bar v. Della–Donna, 583 So.2d 307, 310 (Fla.1989) (citations and internal quotation marks omitted). This Court has previously imposed lengthy suspensions or disbarment when attorneys engage in dishonest conduct in their personal matters.

Lesson learned?

Prof. Ariely’s research reminds us to pay attention to those small transgressions, the little “white” lies that probably won’t get noticed, but open the door for the next lie, this one a little bigger, and then the next, and the next . . . and before you know it you find yourself in a career-ending nightmare you wouldn’t have dreamed possible when you first started practicing law years earlier. The lawyer at the center of the disbarment case linked-to above had been practicing over 30 years (since 1975) with a completely clean record — until now. He didn’t find himself in this predicament overnight; it was years in the making.

What to do? Think small. Professionalism initiatives like the Got Civility? pledge making the news lately (see Got civility?) may seem like much ado about nothing (don’t send nasty e-mails), but they’re important. Why? Because they discourage the small and more ubiquitous forms of dishonesty that “grease the psychological skids” for the big lies that can morph into career-ending catastrophes.