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A trusts and estates practice is often like playing one of those three-dimensional chess games you used to see on Star Trek: there are usually dozens of viable moves for every client scenario. Half the battle then is simply figuring out what your options are, and nothing beats a trustworthy chart for getting that done. We’ve had this kind of resource for years on the homestead front courtesy of Rohan Kelley, Florida’s homestead guru. We now also have an excellent summary (used to be a chart) that tells you everything you need to know about modifying and terminating irrevocable trusts under Florida law prepared by the power-house father/daughter team of Charles Rubin and Jenna Rubin. Good stuff, highly recommended.

 

Temporary injunctions or “freeze” orders are supposed to simply maintain the status quo, but often who wins or loses this battle can determine the ultimate outcome of a trust case. Why? Because when done “right,” a probate judge’s order either denying or granting a temporary injunction signals very early on in the process how he or she, as judge, is weighing the strengths and weaknesses of your case. This kind of signaling is especially significant in trust litigation because these cases are almost always tried as bench trials. In other words, the same fact finder deciding your injunction motion is going to ultimately decide your case at trial. So yeah, knowing which way your judge is leaning early on is really important. For more on the signaling theory swirling around freeze orders you’ll want to read Signaling, Learning and Screening Prior to Trial: Informational Implications of Preliminary Injunctions.

What’s it take for a court to properly enter a temporary injunction or “freeze” order in trust litigation?

Last year I wrote here about McKeegan v. Ernst, a 4th DCA opinion that’s significant for trusts and estates litigators because it confirms that the traditional standards controlling the issuance of freeze orders apply in trust litigation. In other words, to do it right, your judge is required to enter detailed findings of fact based on evidence (not just legal briefs or argument of counsel) before granting a freeze order.

We now have two more decisions, one from the 2d DCA and a second from the 5th DCA, arriving at the same conclusion. What’s important about these decisions is that they’ll hopefully put the brakes on the almost haphazard manner freeze orders are sometime granted. Dispensing with the need for an order containing detailed findings of fact based on evidence before granting a freeze order may be expedient for the judge, but it actually makes litigating these cases harder and more expensive for everyone else.

Saunders v. Butler, — So.3d —-, 2013 WL 514057 (Fla. 2d DCA February 13, 2013)

In this case the plaintiff filed a “verified” motion for ex parte injunction seeking, among other things, to freeze the assets of a contested trust. The first issue on appeal was whether a verified motion, which is analogous to a sworn affidavit, all by itself is enough to grant a freeze order, or if an evidentiary hearing is necessary as a matter of law. According to the 2d DCA, a verified motion is all you need:

First, Mr. and Mrs. Saunders argue that the trial court did not have the sufficient evidence to allow it to issue an emergency ex parte, temporary injunction. We disagree. Mr. and Mrs. Saunders argue that the trial court had no factual basis to enter the injunction because the complaint was not verified and no evidentiary hearing was held. Contrary to the representations made at oral argument by counsel for Mr. and Mrs. Saunders, the trial court did have sworn testimony to consider in the form of the verified motion for the ex parte injunction. These allegations are sufficient to provide the trial court with a factual basis on which to enter the emergency temporary, ex parte injunction. . . . We therefore conclude that Mr. and Mrs. Saunders are not entitled to relief based on this argument.

The trial court may have gotten away with just relying on a verified motion and foregoing the trouble of actually taking evidence at an evidentiary hearing, but there’s no getting around the “detailed” factual findings a freeze order’s required to contain. It’s this transparency that assures the parties the judge actually considered all of the elements necessary to grant a freeze order (which is supposed to be an extraordinary measure granted only when absolutely needed) — and it’s this same transparency that’s so important to the party’s early understanding of which way their judge is leaning in the case. Skip this step and the order’s fatally flawed as a matter of law; but more importantly, the order loses all value in terms of “signaling” your judge’s initial assessment of the case (which makes settling the case harder/more expensive for all concerned).

Mr. and Mrs. Saunders also argue, however, that the trial court’s order is deficient in that it fails to make factual findings as to each of the four elements the moving party must establish in order to obtain a temporary injunction. With this argument, we must agree. See Randolph v. Antioch Farms Feed & Grain Corp., 903 So.2d 384 (Fla. 2d DCA 2005). As noted in Randolph, the trial court has an “obligation to state sufficient factual findings in support of each element entitling a party to a temporary injunction.” Id. at 385. Like the order in Randolph, the order on review in the instant case “omits any recitation of facts justifying a finding (1) that the plaintiff [ ] will suffer irreparable harm absent the entry of the injunction; (2) that no adequate legal remedy exists; (3) that the plaintiff[ ] enjoy[s] a clear legal right to the relief sought; and (4) that the injunction will serve the public interest.” Id. This omission of factual findings by the trial court requires us to reverse the injunction and remand for further proceedings. On remand, the trial court must either make the factual findings required or dissolve the injunction. See Seashore Club of Atl. City, Inc. v. Tessler, 405 So.2d 767, 768 (Fla. 4th DCA 1981).

After ruling in favor of the appellants, the 2d DCA then goes on to imply the expense and delay of the appeal could have been avoided if they had immediately filed and litigated a motion to dissolve the flawed freeze order.

We note that had the motion to dissolve the temporary injunction been filed and litigated immediately after the entry of the injunction in May 2011, many of the issues raised on appeal already would have been resolved.

I’m not so sure I agree with this advice. For the reasons explained in the 5th DCA’s opinion discussed below, sometimes a motion to dissolve a freeze order in lieu of an immediate appeal can result in a waiver of your defenses.

McKinnon v. Weinstein, — So.3d —-, 2013 WL 3237839 (Fla. 5th DCA June 28, 2013)

Appeals are expensive, so you don’t want to file one unless you really have to. Here’s the problem, sometimes it’s not 100% clear if you need to appeal or if your order is even appealable. What to do? If the stakes are high enough, when in doubt, appeal. If you don’t you may end up waiving a valid defense. That’s what happened in this case.

On appeal the 5th DCA makes clear the underlying freeze order is fatally flawed, but also makes just as clear that failure to appeal the order in the first instance means the objecting party waived its arguments. It’s this risk of waiver that makes the “motion to dissolve” advice at the end of the 2d DCA’s opinion risky. What to do? Make sure your client – not you as his attorney – assume this risk. If the client wants to be absolutely sure objections to an improper freeze order aren’t waived, he’ll pay for the appeal; if the client believes the costs of filing a protective appeal outweigh the risks of waiver, that’s OK too. Bottom line, it’s all good as long as the client is given the opportunity to make an informed decision about the pros and cons of going with the “motion to dissolve” advice at the end of the 2d DCA’s opinion above or filing an immediate appeal to avoid the risk of waiver explained below by the 5th DCA.

Appellant, Mollie McKinnon, is the trustee of the Veronica A. Weinstein Irrevocable Living Trust (“Trust”). Appellees filed suit below seeking to force the trustee to distribute assets, which they claim to be due to them from the Trust. Following a hearing on the matter, the trial court issued an order essentially freezing all Trust assets indefinitely, until it could conduct further proceedings to sort out the parties’ claims. The order, which both parties characterize as a temporary injunction, does not contain any findings that would support an injunction, and does not require the posting of any type of bond. And, although neither party requested the injunction, neither party appealed from the order. Instead, McKinnon later filed a motion with the trial court, arguing that the injunction should be set aside because it was improperly entered. When the trial judge denied that motion, McKinnon appealed from the later denial order in an improper attempt to belatedly challenge the original injunction order. See, e.g., Betancourt v. Estate of Misdraji, 13 So.3d 489 (Fla. 3d DCA 2009) (declining to consider issues raised on appeal from denial of successive petition to re-open estate when same issues had been decided in prior orders from which moving party had not appealed); Ferguson v. Ferguson, 921 So.2d 796 (Fla. 5th DCA 2006) (holding that former husband was not entitled to evidentiary hearing on petition to modify alimony where he failed to demonstrate substantial change in circumstances since entry of a prior order denying modification of alimony from which he did not appeal); M.G. v. State, 711 So.2d 1377 (Fla. 1st DCA 1998) (holding that mother’s failure to appeal prior contempt order precluded her challenge to prior order in appeal from later order entered based upon prior contempt order).

Because McKinnon did not appeal from the injunction order, we will not consider the propriety of that order on appeal.

 

The adult adoption order at the center of the 3d DCA’s recently published opinion in the Goodman v. Goodman case wasn’t voided on substantive grounds, it was set aside for procedural reasons: the adopting party’s intentional lack of notice to other trust beneficiaries having a “direct, financial, and immediate” interest in the adoption proceeding amounted to fraud upon the court.

Just three months later we have another adult-adoption/trust case (is this a trend?). This time it’s before the 4th DCA and the opinion focuses on the much more interesting questions of public policy and settlor intent. As far as I can tell this is the first Florida appellate opinion directly tackling these core inheritance-law issues in the adult-adoption context.

The Changing American Family:

The facts of this case couldn’t be more different from Goodman, where the level of malfeasance was breathtaking. In this case what I see instead is a reflection of a broader trend: families redefining what it means to be a “family” in America. This adds a level of estate-planning complexity for clients and lawyers unimagined a generation ago. Does a family include sperm donors or posthumously conceived in vitro heirs? Maybe, click here, here, here. How about same-sex couples, stay tuned. As for adult adoptions, it’s common practice in some cultures, and far from unheard of in the U.S. Bottom line, what used to be a given (who are my future “lineal” descendants) is far from certain today, and according to census data it’s going to get even less certain over time (a point to keep in mind as multigenerational dynasty trusts become the norm).

Now here’s the good news: with a little forethought and careful drafting, these uncertainties are fixable at the estate-planning stage (see my sample clause below). But it’s the “unknown unknowns” that get you. You can’t fix a problem if you don’t even know there’s a problem that needs fixing. That’s what makes cases like this so important for working trusts and estates lawyers: they raise awareness.

Dennis v. Kline, — So.3d —-, 2013 WL 3014115 (Fla. 4th DCA June 19, 2013):

The settlor in this case had five children. Only one challenged the adult-adoption order. One of the settlor’s five children is a son who could not have children (he’s not the challenger); this son adopted an infant, which, according to the 4th DCA, is what prompted the settlor to amend his estate planning documents to expressly include adoptees.

When the Settlor approached attorney William D. McEachern to draft the Trust instrument in question, his net worth was approximately fifteen to sixteen million dollars. Without elaborating on the purpose for creating Family Trust A, McEachern stated in a deposition that in 1992, the Settlor requested that he draft a restatement of the Trust to incorporate his desire to “include adopted persons” as “issue.” McEachern said that at the time of the Trust’s restatement, he did not contemplate an adult adoption and never broached the idea with the Settlor.

As described by the 4th DCA, both the settlor’s trust agreement and pour-over will contained clauses including adopted persons within the definition of the settlor’s lineal descendants, thus qualifying them as future beneficiaries of his trust.

Crucial to this case is the Trust’s definition of the term “issue.” The Trust, as amended and restated in 1992, contains express definitions of terms relevant to this case. Section XII(E) defines “issue” as “lineal descendants forever,” with the provision that “words of relationship in any degree includ[e] legally adopted persons.” Likewise, Section VIII of the Settlor’s 1992 pour-over will included adoptees among its definition of “children” and identified “issue” as “those becoming so by adoption and those born or adopted after the execution of th[e] will.”

By the way, the default directive contained in F.S. 732.108, which controls intestate succession and adoptees, reaches the same result: they’re included as heirs just like natural-born children. What both the settlor’s trust agreement and Florida law leave unsaid is what happens in the case of adult adoptees. Are they treated the same as minor adoptees? That’s the question at the heart of this case.

Now back to the facts. Another of the settlor’s five children, a daughter named “Dianna,” was also unable to have children due to her battle with Hodgkin’s disease. Rather than form a family by adopting an infant (like her brother did), Dianna’s family evolved over time. Here are the key facts as told by the 4th DCA:

In 2011, thirteen years after the Settlor’s death, Dianna, a New Jersey resident, initiated a court proceeding in Pennsylvania to adopt a twenty-seven-year-old Pennsylvania resident who was living with her biological parents.

. . . As Dianna argues, the nature of Dianna’s relationship with the adoptee is relevant to show that the Settlor would have “fully supported and embraced the adoptee” had he known of the adoption.

Prior to the adoptee’s birth, Dianna was close friends with her biological parents; Dianna attended their wedding and was later chosen as the adoptee’s godmother. From the girl’s birth in 1984 until 1986, the girl’s parents shared a small apartment building as tenants with Dianna, during which period Dianna built a bond with the infant. Over the years, Dianna and the adoptee maintained their relationship; Dianna took the girl on a vacation and later assisted her college aspirations by paying for testing and funding a substantial portion of her college tuition.

When the adoptee was twelve years old, Dianna approached her biological parents regarding her desire to adopt the girl. Recognizing that this was a difficult decision, the girl’s parents decided to let her make her own decision once she reached the age of maturity. However, despite this prolonged relationship with Dianna, the adoptee never met the Settlor, was not otherwise included in Dennis family events, and maintained a healthy relationship with her biological parents.

Against this backdrop the trial court was asked to decide if the adoption of a 27-year-old adult was against Florida public policy and if it’s not, whether summary judgment should have been granted modifying the trust agreement pursuant to F.S. 736.04113 to exclude adult adoptees. In both instances the trial-court judge ruled against the adult adoption (which must have stung for the losing side). On appeal, the 4th DCA reversed both of these orders (which just goes to show that in litigation, as in life, it ain’t over ’til it’s over).

Is adult adoption for inheritance purposes against Florida public policy? NO

Given the trust agreement’s express inclusion of adoptees and the facts of this case, the challenger must have known this wasn’t going to be an easy fight. If you know you may end up arguing against the express text of the trust agreement and perhaps an adverse finding of settlor intent, really all you have left is to play the public policy card.

We all know carrying out settlor intent is the guiding principle of inheritance law. What’s often overlooked is that this general principle has always been subject to exceptions based on competing public policy concerns. For example, the rule against perpetuities was designed to limit the reach of a settlor’s “dead hand” control – regardless of intent – after so many years (a limitation fast becoming obsolete with the ascendancy of dynasty trusts). Another example of public policy trumping testamentary freedom is the invalidity of a will or trust clause disinheriting a beneficiary for marrying someone of a certain faith (a topic I previously wrote about here and here).

So attacking the adult-adoption order on public policy grounds isn’t as far fetched as it might seem at first blush, especially in light of some of the very harsh wording contained in the 3d DCA’s recent Goodman decision. That said, this argument is always a long shot and almost never works. This case is no exception. Here’s how the 4th DCA deconstructed – and rejected – the challenger’s public-policy argument.

We agree with the fifth district that “[t]he public policy of Florida expressly permits the adoption of adults.” In re Adoption of Holland, 965 So.2d 1213, 1214 (Fla. 5th DCA 2007) (citing § 63.042(1), Fla. Stat. (2007)). Such policy is articulated through the wording of the Florida statutes, which provide, with minimal qualification, that any person, whether a minor or an adult, may be adopted. See § 63.042, Fla. Stat. (2011).

In limited circumstances, the Legislature has codified its disapproval of certain adoptive relationships, exemplified by the limitation on adopting one’s spouse. See, e.g., § 63.042(2)(c), Fla. Stat. (2011) (stating that a married person may not adopt his or her spouse). However, unlike other states,[FN8] once a valid adoption has occurred, Florida makes no distinction as to the extent to which an adult adoptee may become a beneficiary in probate proceedings, nor does Florida set a line of demarcation as to whether the “policy” favoring adult adoption extends only to rights specifically identified by statute. In contrast, by way of illustration, Uniform Probate Code § 2–705 expressly limits an adult adoptee’s right to inherit through class gift provisions of wills and other governing instruments . . .

[FN8.] For example, some states specifically prohibit adult adoptions motivated by inheritance objections. See, e.g., Ala.Code § 26–10A–6 cmt. (2011) (“Adult adoptions for inheritance purposes provided for in … the Alabama Code [were] repealed.”). Likewise, “[o]ther states distinguish between adult and minor adoptees under state intestacy and glass gift laws.” Sarah Ratliff, Adult Adoption: Intestate Succession and Class Gifts Under the Uniform Probate Code, 105 NW. U.L.REV. 1777, 1792 & n. 132 (2011) (citing Ind.Code § 29–1–6–1(d) (2011) as an example). Additionally, other states, such as New Jersey, set age restrictions such that adult adoptions “shall not be granted, unless the adopting parent or parents are at least 10 years older than the person to be adopted.” See N.J. Stat. Ann. § 2A:22–2 (West 2011).

Given the existence of UPC § 2–705, the Florida Legislature in 1974 had the opportunity to add such a provision when it “created the Florida Uniform Probate Code Study Commission” for the purpose of “consider[ing] adoption of the Uniform Probate Code.” . . . Following debate, however, the Legislature deemed the Florida Probate Act of 1933, which omitted such a provision, to be satisfactory, electing only to tailor our statutes to be “in the format of the Uniform Probate Code insofar as possible.” Id.

As a result, current Florida probate statutes treat adopted persons, both young and adult, equally with their biological counterparts. See § 736.1102, Fla. Stat. (2011) . . . There is no statutory basis to preclude an adult adoptee from inheriting under a trust. . . . Against the weight of the statutory law, Harriet, nevertheless, requests this court to extend our case law by adopting a public policy which would create an impediment to an adult adoptee’s ability to inherit. . . . We decline Harriet’s request to invoke public policy in this case.

What about settlor intent? 

Having dispensed with the public-policy challenge, the 4th DCA turned its attention to the real heart of the matter: settlor intent. Did the settlor intend to exclude adult adoptees or not? Here’s how the 4th DCA framed the issue:

The fact issue that controls this case is the Settlor’s intent in creating the Trust. . . . Here, the terms of the Trust unambiguously place no limitations on a “legally adopted” person becoming a beneficiary under the Trust.

Absent any provision to the contrary, where a trust is created and executed in Florida, the law presumes that the settlor expected Florida law to apply and Florida law permits adult adoptions. . . . To overcome this presumption, Harriet must establish the existence of a latent ambiguity in the trust which occurs “where the language employed is clear and intelligible and suggests but a single meaning, but some extrinsic fact or extraneous evidence creates a necessity for interpretation or a choice among two or more possible meanings.” Barnwell v. Miami–Dade Cnty. Sch. Bd., 48 So.3d 144, 145–46 (Fla. 1st DCA 2010) (citation omitted).

The 4th DCA then tells us what kind of evidence is going to be needed to decide the case once it’s sent back to the trial judge.

The lawyer who drafted the Trust did not discuss adult adoptions with the Settlor. In the absence of ironclad evidence of the Settlor’s express declaration of opposition to adult adoptions, the Settlor’s intent turns on the credibility of witnesses, the weight to be given to their testimony, and the subtle nuances of the Settlor’s beliefs about the significance of family bloodlines. Whether this adult adoption “substantially impair[s] the accomplishment of a material purpose of the trust” is an issue inappropriate for resolution on summary judgment. § 736.04113(1)(b), Fla. Stat. (2011).

So how can you prove “the subtle nuances of the Settlor’s beliefs about the significance of family bloodlines”? It ain’t easy. In fact, it’s impossible to predict with any certainty what your fact finder (in this case the trial judge who’s already ruled against the adult adoption for public policy reasons and on summary judgment) is going to find convincing when the case is tried. This lack of certainty is underscored by the ambiguous nature of the evidence presented thus far by the parties (see below). All of it’s relevant, none of it’s ironclad. (Can anyone say “settlement”?)

[Evidence: Party arguing for inclusion of adult adoptee:] Addressing the issue of the Settlor’s intent, Dianna described in a deposition that when her father created the Trust, he was initially “anti-adoption” in his desire to maintain his “bloodlines” and “blood rules.” However, following Tom, Jr.’s adoption of an infant daughter, her father started to “come around” to the idea of adoption, resulting in the addition of the “adopteds” provision of the Trust.

[Evidence: Party arguing for exclusion of adult adoptee:] Harriet, on the other hand, described her father as “very conservative” and “old fashioned.” She stated that his intention in creating the Trust was to allow his assets to pass per stirpes, since it was desire “to provide this money for his family to go down the line.” Thus, while her father was initially opposed to Tom, Jr.’s adoption, he eventually agreed to modify the trust to include adopted children since “he had acknowledged [Tom, Jr.’s daughter] and wanted to make [sure] she also got [her] part” as a family member. Harriet did not discuss the concept of an adult adoption with her father.

Lessons learned?

First, based on this case and the 3d DCA’s opinion in the Goodman case we now know how to litigate adult-adoption cases.

  1. Don’t get your adult-adoption order in secret; provide notice and an opportunity to be heard to all other pre-existing trust beneficiaries having a “direct, financial, and immediate” interest in the adoption proceeding (as required by F.S. 63.182(2)(a)).
  2. Don’t count on getting the adult-adoption order set aside on public policy grounds.
  3. In the absence of a trust clause specifically addressing adult adoptions, assume your document suffers from a “latent ambiguity” that can only be resolved at trial.
  4. At trial, the fact issue that controls this kind of case is the settlor’s intent and “beliefs about the significance of family bloodlines.”

Second, this type of case cries out for a drafting solution at the estate planning phase. Including a simple adult-adoption clause in a client’s will or trust should spare all involved the stress and financial strain inherent to any form of inheritance litigation. Below is the clause provided by the Lawgic drafting software, which we use in my firm (it tracks the 18-year-old cut off for adoptees found in Uniform Probate Code § 2–705(f)(1)). I’m sure there are lots of good alternate clauses floating around out there. Just pick one and use it.

Sample Adult Adoption Clause:

Effect of Adoption. A legally adopted child (and any descendants of that child) will be regarded as a descendant of the adopting parent only if the petition for adoption was filed with the court before the child’s eighteenth birthday. If the legal relationship between a parent and child is terminated by a court while the parent is alive, that child and that child’s descendants will not be regarded as descendants of that parent. If a parent dies and the legal relationship with that deceased parent’s child had not been terminated before that parent’s death, the deceased parent’s child and that child’s descendants will continue to be regarded as descendants of the deceased parent even if the child is later adopted by another person.

Zlatkiss v. All America Team Concepts, LLC, — So.3d —-, 2013 WL 2359108 (Fla. 5th DCA May 31, 2013)

If a creditor’s going to successfully pierce a debtor’s corporate veil, it’s usually because the debtor operated his corporation (or LLC) as his “alter ego,” which means the debtor basically ignored the corporation’s separate legal status and treated its assets like his own personal piggy bank. Does this same line of attack apply to Florida spendthrift trusts? Apparently not.

According to the 4th DCA’s 2010 opinion in Miller v. Kresser, which I wrote about here, no matter how much control a beneficiary exercises over the assets of his trust, if the trust agreement’s spendthrift clause is properly drafted, the trust’s assets remain off limits to creditors. Here’s how the 4th DCA summed up the logic of its decision in Miller:

While we agree that the facts in this case are perhaps the most egregious example of a trustee abdicating his responsibilities to manage and distribute trust property, the law requires that the focus must be on the terms of the trust and not the actions of the trustee or beneficiary.

If it’s basically impossible to pierce a spendthrift trust’s protective veil based on “the actions of the trustee or beneficiary” — no matter how much control the trust’s beneficiary asserts over his trust — what’s a creditor to do in this situation? First, learn from the mistake and do a better due-diligence job the next time a trust-fund baby shows up at your office asking for a loan. Second, find a law firm that will take a shot at the spendthrift trust on a contingency-fee basis (why throw good money after bad?)

Case Study: “Are spendthrift trusts constitutional?” YES

In the linked-to case above the plaintiffs, Robert Zlatkiss and Linda Zlatkiss, loaned Louis Steinmetz $350,000, which probably seemed like a good bet after he told them about his $6.9 million trust. But I’m guessing Steinmetz left out this important fact: it’s a spendthrift trust created for his benefit by his parents. In other words, but for the very limited exceptions listed in F.S. 736.0503 (none of which apply in this case), the trust is impenetrable to creditor attack.

When Steinmetz didn’t pay his loan (according to this attack site there are lots of people not getting paid by Steinmetz), his creditors hired Morgan & Morgan, Orlando’s biggest personal injury law firm, to go after Steinmetz’s multimillion dollar spendthrift trust (I assume this PI firm was hired to prosecute a trust case because they agreed to do it on a contingency-fee basis).

In light of the 4th DCA’s Miller opinion, the folks at Morgan & Morgan probably realized they weren’t going to get very far with some kind of alter-ego theory, so they went for the Hail Mary pass: challenge the spendthrift statute itself on constitutional grounds. Nice try, but no cigar. Creditors struck out both at the trial-court level and on appeal. So saith the 5th DCA:

Spendthrift provisions have long been recognized as valid in Florida and sections 736.0501–.0507 additionally provide for the enforcement of spendthrift trusts. Miller, 34 So.3d at 175; Waterbury v. Munn, 159 Fla. 754, 32 So.2d 603 (Fla.1947).

Plaintiffs’ constitutional challenge to sections 736.0501–.0507 is premised on article I, section 21 of the Florida Constitution, which provides in its entirety that: “The courts shall be open to every person for redress of any injury, and justice shall be administered without sale, denial or delay.”

. . .

Plaintiffs contend that sections 736.0501–.0507 abolished a “common law” right “to execute a monetary judgment against any beneficial interest held by a debtor,” without providing a reasonable alternative or demonstrating an overpowering public necessity for the statute.

The glaring flaw in Plaintiffs’ argument is that the creditor-protection provisions of a properly drafted spendthrift trust were recognized as legally valid (and effective to protect trust assets against judgment or other creditors) at common law, long before the adoption of sections 736.0501–.0507. As such, these statutes cannot be considered under [Kluger v. White, 281 So.2d 1 (Fla.1973)] as a legislative act abolishing a common law right, but rather, recognizing one. See, e.g., Munn, 159 So.2d at 605 (citing Croom, 57 So. at 244). Additionally, as noted by the trial judge, Plaintiffs are confusing their right to bring a legal action with their means of collecting a judgment. Article I, section 21 guarantees access to courts, i.e., “the avoidance of significant impediments to the filing of nonfrivolous legal claims[.]” Spencer v. Fla. Dep’t. of Corr., 823 So.2d 752, 756 n. 6 (Fla.2002). It does not guarantee the ability to enforce a judgment. 

AFFIRMED.

Listen to this post

So here’s the typical scenario at the end of a successful mediation conference: it’s been a long day; the clients, the lawyers and the mediator are all tired. No one wants the other side to get cold feet and back out of the deal, so everyone’s willing to stay put for as long as it takes to get the settlement documents typed up and executed before anyone walks out the door.

The lawyers doing the typing, proofing and negotiating of the final text are as tired and bleary-eyed as everyone else (probably more so, they’ve been “on” all day); drafting mistakes happen. Usually those mistakes get caught by one of the many eyeballs reading each draft as it comes off the printer: the mediator, the lawyers, the clients. But sometimes a mistake doesn’t get caught. Scrivener’s errors (what the rest of the world calls “typo’s”) slip by, clauses are inadvertently omitted, no one’s perfect. If it’s a garden variety mistake that doesn’t change the ultimate deal, no one cares. But sometimes a small mistake has big consequences. Again, not a problem if all sides agree to live by the deal they originally struck; you simply circulate a new corrected contract, everyone signs it, all is well.

But what if one side decides he doesn’t want to play nice; he likes the new deal inadvertently created by the drafting mistake. In fact, he’ll take this new deal “thank you very much.” What then? Think: reformation based on mutual mistake.

What’s the reformation/mutual-mistake rule?

In Florida a court can step in and “reform” a settlement agreement to fix drafting mistakes if the difference between what the parties agreed to and what the written document actually says is due to a “scrivener’s error or inadvertence.” Usually this rule is expressed in terms of “mutual” mistake. As in both sides were mistaken when they signed a contract containing a drafting error. So does this rule require both sides to admit there’s a drafting mistake before a court can step in and fix it? No. This is the first key take-away for this case: the mutual-mistake rule does NOT require all sides to mutually agree there’s a drafting mistake. All you need is one vote to win: your judge. Here’s how the Florida Supreme Court stated the rule in Providence Square Ass’n, Inc. v. Biancardi, 507 So.2d 1366 (Fla. 1987), a case involving a settlement agreement resolving a condo dispute:

Biancardi next argues that, as a matter of law, the trial court’s findings of fact did not justify the conclusion of mutual mistake. We disagree and find the trial court’s finding of mutual mistake to be correct. A mistake is mutual when the parties agree to one thing and then, due to either a scrivener’s error or inadvertence, express something different in the written instrument. Blumberg, 51 So.2d at 184. Because the developer, Biancardi, and the other unit purchasers understood that the respective percentage ownership shares in the common elements were to be twenty-five percent each for units one, two, and three, and twelve and one-half percent each for units four and five, the declaration’s provision of equal twenty-percent shares for all five units was clearly a mutual mistake.[FN3.]

[FN3.] Even if, as Biancardi suggests, there was no mutual mistake because she knew the declaration gave units four and five each a twenty-percent share, there would still be grounds under the evidence for a decree of reformation. Reformation is proper when there is a mistake on the part of one side of the transaction, and inequitable conduct on the part of the other side. See, e.g., Hopkins v. Mills, 116 Fla. 550, 156 So. 532 (1934).

Case Study

Sugar v. Guardianship of Stern, — So.3d —-, 2013 WL 440122 (Fla. 3d DCA February 06, 2013)

Now back to the 3d DCA’s opinion linked-to above. In 2010 a probate court declared Idelle Stern incapacitated as a result of her advanced age and stroke-related diminished mental capacity, and appointed Comprehensive Personal Care Services, Inc. (“CPCS”) as plenary guardian over her person and her property. Ms. Stern has four daughters. Litigation broke out among the 4 daughters involving Ms. Stern’s estate. The litigation was eventually settled and documented in a settlement agreement signed by all 4 daughters and approved of by the probate court. Sometime later it was discovered an important clause had been inadvertently omitted from the settlement agreement. At this point 3 daughters agreed there was a mistake, 1 didn’t. A 3-1 vote is tough to beat; not surprisingly the probate judge agreed with the majority and reformed the settlement agreement to fix the “unrefuted” drafting mistake.

When is a mutual mistake “unrefuted”? 

Based on the following evidence, the 3d DCA stated it was “unrefuted . . . that the [settlement agreement] omission was as a result of a mutual mistake due to a scrivener’s error or inadvertence.”

[FN1.] The three daughters and CPCS submitted six sworn affidavits and the sworn testimony of three of the attorneys who attended the settlement conference, who all averred that the omitted provision was an inadvertent scrivener’s error and a mutual mistake. The Sugars offered no evidence to refute these sworn statements.

What’s interesting about the 3d DCA’s “unrefuted” comment is that the court isn’t saying 4th daughter hadn’t made allegations refuting the drafting mistake (she must have or there’d be no case to litigate), instead it’s saying she never offered any evidence refuting her sisters’ version of events. The distinction is important and apparently decided the outcome. This is the second key take-away for this case: anyone can talk a good game, but none of it matters if you can’t prove it. Based on the evidence, the 3d DCA had no trouble affirming the probate judge’s reformation order.

The trial court’s order granting reformation of the settlement agreement is reviewed for an abuse of discretion. Kartzmark v. Kartzmark, 709 So.2d 583, 586 (Fla. 4th DCA 1998). Because it is unrefuted[FN1] that the . . . omission was as a result of a mutual mistake due to a scrivener’s error or inadvertence, we affirm. See Tobin v. Michigan Mut. Ins. Co., 948 So.2d 692, 696 (Fla.2006) (holding that reformation is an equitable remedy employed when a written instrument, due to mutual mistake, does not accurately express the intent or agreement of the parties); Moree v. Moree, 59 So.3d 205, 207 (Fla. 2d DCA 2011) (finding the existence of a mutual mistake where the difference between what the parties agreed to and what the written documents state was due to a scrivener’s error or inadvertence).

If you’re an estate planner, it’s only a matter of time until someone asks you to turn over a deceased client’s estate planning file. Don’t automatically say “yes,” you’d be surprised (horrified!) by the ethical traps lurking in this seemingly simple request (if you want to make sure you don’t get sued for getting this wrong, read Florida Bar Advisory Opinion 10-3, which I’ve previously written about here).

And if you’re a probate lawyer, sooner or later you’re going to find yourself representing a personal representative, trustee or guardian on the receiving end of discovery requests demanding privileged communications (in which case you’ll want to cite F.S. 90.5021, the evidentiary privilege rule specifically designed for fiduciaries, which I’ve previously written about here).

So what’s the link between the ethical duty to keep client information confidential and the evidentiary rule shielding this information from disclosure? Think in camera (Latin for: “in a chamber”) inspection. If there’s a dispute, a court’s going to have to decide which documents get turned over and which don’t. In order to preserve the confidentiality of information claimed to be privileged during the process of determining the propriety of those claims, there’s no other logical alternative than for the court to independently review the material in camera.

Can a court say NO to the in-camera review process? NO

Patrowicz v. Wolff, — So.3d —-, 2013 WL 1352488 (Fla. 2d DCA April 05, 2013)

In this case the same lawyer was apparently estate planner for the decedent and counsel for the personal representative of his estate (which is common). So when the plaintiff subpoenaed his records, it was in his capacity as a non-party estate planner, not probate counsel. Why does this matter? Because it means the law governing if or when these records get turned over are the ethics rules dissected in Florida Bar Advisory Opinion 10-3, not evidentiary rule F.S. 90.5021. This distinction matters.

In any event, when the subpoena was challenged, no matter what law governs the ultimate outcome the path for getting there is the same: court must conduct an in camera review. So can a probate judge simply skip this step? NO, so sayeth the 2d DCA:

Sarah R. Patrowicz, as Personal Representative of the Estate of Joseph H. Winner, petitions this court for a writ of certiorari quashing a discovery order compelling the production of documents allegedly subject to the attorney-client privilege. Because the trial court departed from the essential requirements of the law by ordering the production of allegedly privileged documents without first conducting an in camera inspection to determine whether the privilege applies, we grant the petition and quash the order.

. . .

“A trial court’s order erroneously compelling discovery of information protected from discovery by the attorney-client privilege is reviewable by certiorari.” Bennett v. Berges, 84 So.3d 373, 374–75 (Fla. 4th DCA 2012). A party claiming that documents sought by an opposing party are protected by the attorney-client privilege is entitled to have those documents reviewed in camera by the trial court prior to their disclosure. Id. at 375. This is equally true where the subpoena on its face requests communications between attorney and client. See Nationwide Mut. Fire Ins. Co. v. Hess, 814 So.2d 1240, 1243 (Fla. 5th DCA 2002). The failure to address whether a claimed privilege applies prior to ordering the disclosure of documents is a departure from the essential requirements of the law. See Snyder v. Value Rent–A–Car, 736 So.2d 780, 782 (Fla. 4th DCA 1999).

. . .

[T]he reason we must quash the order is that the trial court ordered production of the documents without first reviewing them and determining whether the attorney-client privilege applied. Not only did Linde specify that his objection was based on the attorney-client privilege, but the subpoena on its face explicitly requested communications between an attorney and his client. Consequently, the trial court was required to conduct an in camera inspection of the documents prior to ordering their disclosure. We therefore quash the order compelling the production of the documents and remand the case for further proceedings.

OK, so if a court can’t say no to the in-camera review process, can you? NO

Bennett v. Berges, — So.3d —-, 2012 WL 832730 (Fla. 4th DCA March 14, 2012)

In probate litigation the same person is your judge and jury; these are all bench trials. So if you’re worried something you told your lawyer is going to prejudice you in the eyes of your judge/fact-finder, having this same judge conduct the in camera review of your files isn’t going to help much, the damage is done. Assuming this scenario, then maybe you’re going to really want to block the in-camera review process. That may be so, but don’t count on an appellate court coming to your rescue. If your judge says turn over the documents, that’s it, you’re done. So sayeth the 4th DCA:

Here, the trial court properly ordered an in camera review of the relevant documents claimed to be privileged. The order does not compel Petitioners to produce the documents to Respondents. After an in camera inspection, the trial court may determine that the documents are privileged and uphold Petitioners’ objection to the discovery request. Accordingly, because the order requires a party to submit allegedly protected materials only for an in camera inspection, and the trial court may never require disclosure of the documents to the opposing party, we hold that the petition is premature. See Cape Canaveral, 917 So.2d at 340 (holding certiorari review was premature because no irreparable harm had been demonstrated where the order under review merely required documents to be produced for an in camera inspection and no discovery had yet been ordered); Gaton v. Health Coal., Inc., 774 So.2d 59 (Fla. 3d DCA 2000) (certiorari review of an order requiring submission of documents allegedly protected by the trade secret privilege to the courts for an in camera inspection was premature because no production had been ordered to the opposing party). But see Cebrian By & Through Cebrian v. Klein, 614 So.2d 1209 (Fla. 4th DCA 1993) (granting a writ of certiorari and quashing an order requiring in camera inspection of certain HRS investigation reports because the shield law found in section 415.52(2), Florida Statutes (1990), created a privilege for such reports; thus, an in camera inspection was not necessary to determine whether the material was or was not protected).

Whether the trial court has misapprehended the scope of the privilege is a question we need not decide because to date, no discovery has been ordered. Accordingly, the petition is denied.

Welch v. Dececco, — So.3d —-, 2012 WL 5969623 (Fla. 5th DCA November 30, 2012)

When and “if” a gift actually occurs can be a tricky, fact-intensive issue to decide. A few years ago I wrote here about a contested gift by former major league ball player Dennis L. Rasmussen to his ex-wife. This time around the case involves an alleged gift of Exxon-Mobil stock by a man to his nephew. After uncle’s death nephew claimed the stock. One problem, the stock certificate remained registered in uncle’s name at the time of his death. As far as the probate judge was concerned, this one fact decided the case: nephew loses. Not so fast says the 5th DCA.

Inter vivos gift of stock does NOT automatically fail if stock remained registered in donor’s name at death:

Gifts are a function of “donative intent,” and just because the stock remained registered in uncle’s name at the time of his death doesn’t automatically mean he didn’t intend to gift it to nephew. Case reversed, here’s why:

In this probate matter, Frank Welch appeals the trial court’s order determining that ExxonMobil stocks had not been transferred to him by his uncle, Frank Kolbl, via inter vivos gift and, thus, belonged to Kolbl’s estate. Because it is unclear from the order whether the court considered all the relevant evidence in arriving at this ruling, we reverse and remand for the trial court to clarify the basis of its ruling.

The elements of an inter vivos gift are present donative intent, delivery, and acceptance. See Mulato v. Mulato, 705 So.2d 57, 61 (Fla. 4th DCA 1997). Here, the trial court concluded that Welch failed to prove present donative intent, and that the evidence showed, at best, a failed testamentary intent. The court cited the fact that the stocks were still registered in Kolbl’s name at his death. Although stock registration is properly considered in analyzing donative intent, it is not necessarily dispositive where, as here, other evidence is presented for and against such intent. See id. at 59–60, 62; Freedman v. Freedman, 345 So.2d 834, 836–37 (Fla. 3d DCA 1977); Sullivan v. American Tel. & Tel. Co., 230 So.2d 18, 18–21 (Fla. 4th DCA 1969); Kuebler v. Kuebler, 131 So.2d 211, 212–16, 218–19 (Fla. 2d DCA 1961); Eulette v. Merrill Lynch, Pierce, Fenner and Beane, 101 So.2d 603, 604–05 (Fla. 3d DCA 1958). It is unclear from the trial court’s order whether the court focused exclusively on the stock registration, or properly considered it as one fact along with all the other evidence relevant to donative intent.

Accordingly, we reverse and remand this matter for the trial court to clarify whether it considered all the relevant evidence, and if not, to reconsider its ruling on the basis of the evidence presented.

When is a gift of stock complete for tax purposes?

It’s impossible to predict with 100% certainty if your particular probate judge is going to consider the particular facts of your specific case and conclude the three elements of a completed gift have been proven: “present donative intent, delivery, and acceptance.” One way to give your judge some guidance (and your client some sense of how weak or strong his case is) is to look to the detailed regulations and common law developed in the tax context for determining when a gift of stock is complete. If under the facts of your case the gift would have been complete for tax purposes, that’s a powerful argument for the same conclusion as a matter of state law, and vice versa. Charities make it their business to put this kind of information on the web for potential donors of stock, so it’s easily accessible if you know what you’re looking for. See here, here, here and here for examples.

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The single most significant paradigm shift shaping the day-to-day reality of estate planners today is not the latest incarnation of our federal transfer-tax system; it’s the non-probate revolution, which refers to the use of non-probate assets to opt out of our state operated system of probate administration. If you ask the average estate-planning professional why he or she thinks it’s a good idea to “avoid probate,” the costs, delays and lack of privacy inherent to our state operated system of probate administration will likely top the list. As real as those concerns may be in uncontested probate proceedings, they take on epic proportions if litigation breaks out.

In fact, I would argue estate litigation poses a much greater risk to family wealth than the focus of much estate planning today, which is taxes. Today, the vast majority of estates owe no estate tax at all. By contrast, the potential wealth-destroying risk posed by estate litigation is exponentially greater and widespread. According to a study cited by the WSJ in a piece entitled When Heirs Collide, it’s a risk that actually impacts close to 70% of all families:

Roughly 70% of families lose a chunk of their inherited wealth, mostly due to estate battles, according to research conducted over two decades by the Williams Group, a San Clemente, Calif., firm that helps families avoid such conflicts.

Until fairly recently most estate-planning professionals (and their clients) assumed there was nothing you could do to improve the process for adjudicating estate disputes once they broke out, all you could do was focus your planning energies on prediction and prevention. However, we all know there are some disputes that simply cannot be prevented, no matter how hard we try or well we plan. We aren’t doing our jobs as counselors if we don’t plan for that risk.

Statutory Authorization of Mandatory Arbitration Clauses in Wills & Trusts

So what’s to be done? Think mandatory arbitration. In Florida there are no jury trials in contested probate or trust proceedings, so these cases lend themselves to privately funded and managed alternate dispute resolution or “ADR” mechanisms, including mandatory arbitration. The trouble with arbitration clauses in wills and trusts is that historically it was unclear if a client could impose mandatory arbitration on the beneficiaries of his or her estate/trust. In Florida this uncertainty was statutorily eliminated in 2007 with the adoption of F.S. 731.401, expressly authorizing mandatory arbitration clauses in wills and trusts, as I previously reported.

Mandatory Arbitration Clauses Respond to what Matters Most to Our Clients

Mandatory arbitration clauses respond directly to the issues our clients most want us to focus on as planners. WealthCounsel’s 7th Annual Industry Trends Survey looked at the business challenges faced by estate-planning professionals in 2013 and provided insight into what motivates clients to engage in planning. According to the survey the top two reasons families engage in estate planning revolve around privatizing the wealth-transfer process (i.e., “avoid probate”: 59%), and the threat of inheritance disputes (i.e., “minimize discord among beneficiaries”: 57%). In my opinion, the single most powerful tool we have as planners responding directly to both of these concerns is the mandatory arbitration clause. These clauses privatize the dispute-resolution process and minimize discord caused by an overworked and underfunded public court system.

Mandatory Arbitration Clauses are Already Integral to the Wealth-Management Landscape

The fine print of your clients’ brokerage or investment account customer agreements will almost always contain a clause that says he or she agrees to resolve any future disputes through mandatory arbitration, largely through the forum operated by the Financial Industry Regulatory Authority, Wall Street’s self-regulatory organization, known as FINRA. (For a typical example check out this Fidelity brokerage agreement.) If arbitration clauses make sense for resolving disputes involving your clients’ investment accounts, why don’t they also make sense when it comes to resolving disputes involving their estates and trusts? (Yes, I’m looking at you corporate trustees!)

Opting out of our overworked and underfunded public court system

By privatizing the dispute-resolution process the parties can, to the extent permitted by F.S. 731.401 (and there are limitations), opt out of the structural limitations inherent to an overworked and underfunded public court system that asks our judges to carry thousands of cases at a time.

The case-load figures we see in our larger counties may be appropriate for uncontested proceedings, but when it comes to that subset of estates that are litigated, these same statistics (confirmed by personal experience) make it glaringly clear to me that we aren’t doing our jobs as estate planners if we don’t anticipate — and plan accordingly for — the structural limitations inherent to an overworked and underfunded public court system. One important aspect of that kind of planning should be “privatizing” the dispute resolution process to the maximum extent possible by including mandatory arbitration clauses in all our wills and trusts.

Arbitration may not be perfect, but at least you get some say in who’s going to decide your case and what his or her minimum qualifications need to be. And in the arbitration process (which is privately funded) you also have a fighting chance of getting your arbitrator to actually read your briefs and invest the time and mental focus needed to thoughtfully evaluate the complex tax, state law and family dynamics underlying these cases (a luxury that’s all but impossible in a state court system that forces our judges to juggle thousands of cases at a time with little or no support). If you have any real-world personal experience litigating large estate cases in our underfunded and overworked state court system, it’s this point that’ll likely tip the scale for you in terms of recommending arbitration clauses. It does for me.

Sample Arbitration Clauses

Sample clauses are often the best way to understand in concrete terms how a general concept gets applied in the real world. Two of the Florida attorneys instrumental in passage of Florida’s statute expressly authorizing arbitration clauses in wills and trusts, Bruce M. Stone and Robert W. Goldman, also co-authored a 2005 ACTEC article providing sample arbitration clauses entitled Resolving Disputes with Ease and Grace.

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In this sharply worded opinion the 3d DCA struck down an order by Miami trial-court Judge Antonio Marin allowing embattled Palm Beach polo tycoon John B. Goodman to adopt his 42-year old girlfriend. The apparent intent behind the adoption was a ploy to qualify the girlfriend for a 1/3 share of a $300 million trust otherwise benefiting Mr. Goodman’s two minor children from a prior marriage. According to the 3d DCA, judge Marin prohibited the minor children’s mother/guardian from intervening in the adoption proceeding “because it would allow for endless intervention by the children to contest the judgment.” What?!

Case Study

Goodman v. Goodman, — So.3d —-, 2013 WL 1222944 (Fla. 3d DCA March 27, 2013)

Thankfully the 3d DCA saw things differently. Not only did the 3d DCA rule mom should have been permitted to intervene, rather than sending the case back to judge Marin, they summarily voided the adoption as a fraud (I’ll explain the fraud ruling in a moment).

Here’s an excerpt from a SunSentinal piece reporting on the 3d DCA’s ruling and the case’s “back-story” entitled Goodman can’t adopt 43-year-old girlfriend, court rules:

Embattled polo mogul John Goodman can’t adopt his 43-year-old girlfriend after all, an appeals court ruled Wednesday.

The adoption would have enabled girlfriend Heather Hutchins to claim a third of a $300 million trust fund established for Goodman’s two children, both younger than 18.

The 49-year-old multimillionaire’s bid to assume parental custody of Hutchins was voided because he didn’t notify his ex-wife Carroll Goodman, the mother of the children, until after the adoption appeals process had passed in January 2012, according to a Third District Court of Appeal ruling. …

It’s the latest episode in the ongoing legal saga surrounding Goodman, who was sentenced to 16 years in connection with the Feb. 12, 2010 death of Scott Patrick Wilson, 23. Goodman’s Bentley ran a stop sign and collided with Wilson’s Hyundai, killing Wilson.

Convicted of DUI/manslaughter in March 2012, Goodman remains on house arrest at his Wellington mansion on a $7 million appellate bond.

Earlier this year, he reached a $46 million settlement in a wrongful death lawsuit brought by Wilson’s parents Lili and William — whose attorneys have said Goodman’s adoption attempt was a brazen bid to shield his assets from the grieving parents.

The Wilsons, divorced since 2007, have been fighting in court over their late son’s ashes. In February, a county court judge denied William Wilson’s request to split up the ashes.

On Wednesday, the appellate court said Goodman’s adoption of Hutchins “constituted a fraud on the court” because he intentionally concealed the adoption from his wife, who was entitled to be made aware of the action because it “directly, immediately, and financially impacted the children.”

“Goodman’s concealment of the adoption proceeding deprived the children of an opportunity to address the trial court and present their objections,” the decision stated.

The adoption of Hutchins was approved in Miami in 2011, but the appeals court decided that because Carroll Goodman wasn’t notified, she had no opportunity to protect her childrens’ financial interests from being encroached upon by Hutchins.

Goodman, who founded the International Polo Club Palm Beach in Wellington, is heir to a multimillion-dollar Texas manufacturing fortune.

So why should trusts and estates lawyers care about adult adoptions?

To make sense of this case you need to keep two basic points in mind. First, many states, including Florida (F.S. 63.042), allow adult adoptions. These laws were primarily intended for situations like a stepparent adopting a stepchild later in life. Second, according to a rule of construction found in our probate code (F.S. 732.608), adoptees are automatically presumed to be descendants of their adoptive parents for inheritance purposes. Bottom line, if a will or trust benefits someone’s “descendants” as a class (i.e., without specifically naming them), that class of beneficiaries is presumed to include adoptees. This rule of construction opens the door to manipulation of multigenerational trusts via adult adoptions.

For example, unable to legally marry in most states, some same-sex couples have used the adult-adoption process to establish inheritance rights for their partners (for example, see Gay Man Adopts His Partner to Avoid Inheritance Tax). I previously wrote here about the last such case to make national headlines; it involved a claim by an adult adoptee to a share of the trust created by Thomas John Watson, Jr., of IBM fame.

Now back to the 3d DCA’s fraud ruling

The adult-adoption order at the center of the 3d DCA’s opinion wasn’t voided on substantive grounds (e.g., it was contrary to the settlor’s intent, or contrary to public policy, or otherwise per se illegal), it was voided for procedural reasons: Mr. Goodman’s intentional lack of notice to interested parties (i.e., the minor children’s mother/guardian). According to the 3d DCA, this intentional deception amounted to fraud upon the court.

Presumably Mr. Goodman knew his ex-wife wasn’t going to stand idly by as he diluted their children’s share of the family trust in favor of his girlfriend. Rather than face this objection head-on and honestly, Mr. Goodman kept the adoption proceeding secret until after the adoption order was entered and no longer subject to appeal. What’s scary about this case (and instructive for litigators) is that this ploy actually worked at the trial-court level?! Even after the trial-court judge was made aware of Mr. Goodman’s deception, he refused to do anything about it. Fortunately the 3d DCA was less willing to put up with this kind of gamesmanship.

[T]he guardian and Carroll were entitled to notice. It is undisputed that neither the guardian nor Carroll received timely notice of the adoption proceeding. Goodman notified them of the adoption proceeding in January 2012, after the period to appeal the Final Judgment of Adult Adoption had expired.[FN1] The adoption converted [Goodman’s girlfriend] into an immediate beneficiary of the trusts and entitled her to one-third of the corpus of the trusts. It hardly could be said that this conversion did not threaten the financial interests of the minor children, whose interests decreased from one-half to one-third. Thus, we hold that . . . the guardian and Carroll were entitled to notice of the adoption proceeding, pursuant to section 63.182(2)(a).

FN1. This lack of notice can only be viewed as none other than an act of concealment, an act which Goodman purposefully instituted to suppress circumstances he knew fully well ought to have been made known to the guardian and Carroll. As we shall discuss further, Goodman committed fraud on the court in doing so. …

The guardian and Carroll correctly pointed out that this lack of notice violated the minor children’s due process rights. We reiterate that Hutchins’ adoption directly, immediately, and financially impacted the children. Goodman’s concealment of the adoption proceeding deprived the children of an opportunity to address the trial court and present their objections. . . .

Furthermore, we determine that the judgment entered in the adoption proceeding is void. This Court previously has stated that “[a] violation of the due process guarantee of notice and an opportunity to be heard renders the judgment void.” . . . This Court also has ruled that the failure to give due process notice and the failure to grant a necessary party’s motion to intervene are defects that can render a judgment void. …

We therefore set aside the Final Judgment of Adult Adoption because Goodman’s deliberate failure to provide notice of the adoption to the guardian and Carroll constituted a fraud on the court. In Florida, a decree of adoption may be set aside based on fraud in the proceedings. . . . Goodman committed extrinsic fraud on the court when he failed to give notice of the adoption to the appellants until after the appeals period had expired. See Richard v. McKesson, 774 So.2d 838, 839 (Fla. 4th DCA 2000) (holding that contingent beneficiary to a trust had standing to challenge the adoption had she known about and was not precluded from collaterally attacking the adoption).

The only other Florida appellate decision involving an adult adoption in the trust context I could find was the 4th DCA opinion cited above by the 3d DCA: Richard v. McKesson, 774 So.2d 838 (Fla. 4th DCA 2000). In that case the adult adoption was also intended to give the adoptee inheritance rights under a pre-existing trust. As in this case, the adult adoption proceeding was kept secret from the pre-existing beneficiary of the trust. As in this case, that adoption order was subject to attack on fraud-upon-the-court grounds.

What about settlor intent?

But what if Mr. Goodman had given his ex-wife notice of the adoption proceeding? Would the result have been the same? Maybe, but not for the same reasons. It seems to me that regardless of whether or not the adoption is valid, the issue of settlor intent remains. At the time of the trust’s creation, was it intended to benefit future adult adoptees? If the answer to that question is NO, then regardless of whether or not the adoption is valid, the adult adoptee gets nothing under the trust. That’s what happened in a DNA case I wrote about here: no matter what the DNA science proved, settlor intent remained the outcome-determinitive question for trust-administration purposes. Same thing for adult adoptions: no matter how legally valid the adoption might be, settlor intent remains the outcome-determinitive question for trust-administration purposes.

Most courts that have addressed the issue in terms of settlor intent have ruled against the adult adoptee. See, e.g., Cross v. Cross, 177 Ill.App.3d 588, 126 Ill.Dec. 801, 532 N.E.2d 486 (1988) (Adoption of adult solely for purpose of making him heir of an ancestor under terms of testamentary instrument known and in existence at time of adoption is act of subterfuge, does great violence to intent and purpose of adoption laws, and should not be permitted.) But sometimes adult adoptees do win these cases. See, e.g., In re Trust Created by Nixon, 277 Neb. 546, 763 N.W.2d 404 (Neb. Apr 10, 2009) (Adult adopted by trust settlor’s daughter was daughter’s child, and thus adoptee became the sole beneficiary of trust upon daughter’s death, under trust document which provided that, upon daughter’s death, the trust was to be divided among her living children, where trust settlor’s will did not specify that the term “children” was to exclude adopted children.)

How would a Florida appellate court rule in this scenario? Who knows. There are no Florida appellate opinions on point.

Lesson learned?

First, the law in Florida is now clear on at least one point in cases involving trusts and adult adoptees: you can’t get these orders in secret, you must provide notice and an opportunity to be heard to all other pre-existing beneficiaries of the trust pursuant to section 63.182(2)(a).

Second, this type of case cries out for a drafting solution at the estate planning phase. Including a simple adoption clause in a client’s will or trust should spare all involved the stress and financial strain inherent to any form of inheritance litigation. Here’s the clause we use in my office, I’m sure there are lots of good alternate clauses floating around out there. Just pick one and use it.

Sample Adoption Clause:

Effect of Adoption. A legally adopted child (and any descendants of that child) will be regarded as a descendant of the adopting parent only if the petition for adoption was filed with the court before the child’s eighteenth birthday. If the legal relationship between a parent and child is terminated by a court while the parent is alive, that child and that child’s descendants will not be regarded as descendants of that parent. If a parent dies and the legal relationship with that deceased parent’s child had not been terminated before that parent’s death, the deceased parent’s child and that child’s descendants will continue to be regarded as descendants of the deceased parent even if the child is later adopted by another person.

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Certainty. It’s the Holy Grail of estate planning and non-existent in any will contest. Here’s how one judge put it over a century ago:

“[P]ost mortem squabblings and contests on mental condition . . . have made a will the least secure of all human dealings, and made it doubtful whether in some regions insanity is not accepted as the normal condition of testators.”

Lloyd v. Wayne Circuit Judge, 23 N.W. 28 (Mich. 1885).

Worst Evidence Rule = NO Certainty:

All litigation is uncertain, but why are will contests especially so? Think “worst evidence rule,” a term coined by famed Yale Law professor John H. Langbein, in Will Contests, 103 Yale L.J. 2039 (1994). In most states (including Florida, see F.S. 732.518) you’re barred as a matter of law from litigating the validity of a will until after the 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 right to the testator’s estate.

So what’s to be done? One possible solution is obtaining a final order validating a will in a guardianship proceeding while the testator is still alive; it worked in a California case I wrote about here. A better idea is adopting legislation expressly authorizing pre-death will contests.

Pre-Death Will Contest = Certainty:

State legislators have experimented with pre-death will contests for generations. According to Prof. Beyer in Will Contests – Prediction and Prevention, the first such statute was passed in 1883 in Michigan, and the National Conference of Commissioners on Uniform State Laws seriously considered the idea in the early 1980’s. As explained by Prof. Beyer, if your goal is greater certainty, a pre-death will contest or “ante-mortem probate” is your best solution.

Ante-mortem probate has the potential of greatly improving the legal system’s effective transmittal of an individual’s wealth by providing the testator with greater certainty that the testator’s desires for the distribution of property will be fulfilled and designation of fiduciaries followed according to the testator’s written declaration. Because the validity of the will would be determined prior to the testator’s death, at a time when all relevant evidence is before the court, will contests would be greatly reduced. In addition, ante-mortem probate would lead to more efficient use of scarce and valuable resources as less court time is expended dealing with spurious will contests and fewer estate funds are dissipated defending those contests.

Admittedly, ante-mortem probate is not a panacea. The ante-mortem process . . . may be extremely disruptive to the testator and the testator’s family. The testator may not wish to disclose the contents of the will or to face the potential embarrassment that may occur if testamentary capacity is litigated. Additionally, the process involves additional costs and may raise due process and conflict of laws problems. The benefits of ante-mortem probate, however, should not be withheld from the public merely because the technique contains flaws or because it may be difficult to determine the proper model to use.

Today there are four states expressly authorizing pre-death will contests by statute: Arkansas, North Dakota, Ohio and Alaska. The pro’s and con’s of these statutes is the subject of a recent article in the ABA’s Probate & Property Magazine entitled Before the Party’s Over: The Arguments For and Against Pre-Death Will Contests. In my opinion, the best part of this article is the very funny cover illustration by Max Licht. On a more serious note, anything we can do to keep up the drumbeat in favor of this much-needed legislation is a good thing, and hopefully this article gets more people thinking about it.

Lesson learned?

If you’re a working lawyer, it’s easy to dismiss talk of pre-death will contests as theoretical mumbo jumbo only academics have the luxury of fooling around with. That would be a mistake. Wrapping our heads around the “worst evidence” problem makes us better practitioners, especially when we have our estate planning hats on. If the risk of a future challenge is present, we can’t naively rely on the fact that there is no doubt the client has capacity and is acting of his own free will, we need to anticipate how the worst-evidence rule can undermine the best laid plans, and proactively stack the deck in the client’s favor through smart defensive planning. For an excellent discussion of the more commonly used defensive-planning techniques you’ll want to read Will Contests – Prediction and Prevention.