I’m rarely able to physically attend these meetings, but always find time to read the excellent materials circulated to committee members. These materials are the best way to keep track of possible new legislation affecting the trusts and estates practice area. If you read this meeting’s Agenda you’ll find the following reports, all of which should be of interest to any Florida trusts and estates litigator:

  1. Presentation on Fighting Forum Shopping in Probate: An Overview of Comity and Priority in Florida – Lee McElroy (Pages 7-12)
  2. Burden of Proof in Trust Contests – Chuck Wohlust, Lee McElroy, Brandon Pratt, (Pages 19-21)
  3. Recovery of Attorneys’ Fees and Costs in Will and Trust Contests, Rich Caskey, Jack Falk, Norman Fleisher, (Pages 22-26)
  4. Payment of Attorneys’ Fees and Costs in Trust Proceedings – Clarifying Aspects of 736.0802(10), Fletch Belcher, Matthew Triggs and Jonathan Galler, (Pages 27-34)
  5. Referral from Estate & Trust Tax Planning and Trust Law Committees – – Constitutional concerns related to proposed amendment to 736.0902, Larry Miller, (Pages 35-39)
  6. Effect of a Beneficiary’s Qualified Renunciation in a Trust Contest on Beneficiary’s Entitlement to Accountings and Trust Information, Jon Scuderi, Travis Hayes, Chuck Wohlust, (Pages 40-43)
  7. Standing of Contingent Creditor to Contest Will, Cristina Papanikos and Manuel Kushner, (Pages 44-64)

Under F.S. 95.031, the statute of limitations period for most lawsuits starts running as of the date “when the last element constituting the cause of action occurs.” Not so for breach of trust actions. Under F.S. 736.1008, the clock usually starts ticking as of the date the beneficiary knew or should have known of the breach of trust. This distinction is huge, and can be the difference between life or death for your case, as it was in the linked-to case above.

Taplin v. Taplin, — So.3d —-, 2012 WL 1605253 (Fla. 3d DCA May 09, 2012):

Under F.S. 736.1008, the statute of limitations period for a breach of trust action is usually 4 years (although it can range from as short as 6 months to as long as 40 years). F.S. 736.1008 doesn’t explicitly say you have 4 years to sue (that would be too easy), instead it gets you to a 4-year limitations period by cross referencing to “the applicable limitations period provided in chapter 95.” Because a breach of trust is a form of intentional tort, the applicable limitations period is found in F.S. 95.11(3)(o), which is 4 years.

But when does the 4-year clock start ticking? In the linked-to case above the trustees argued the clock starts ticking when the breach occurs. In other words, if the breach occurred more than 4 years prior to when the lawsuit was filed, game over, case dismissed. This argument worked with the trial judge. The 3d DCA didn’t buy it.

As we understand the trustees’ argument, the trustees contend section 95.11(3)(o) limits the reach back of the second amended complaint in this case to four years from the date it was filed. This contention also is flawed.

Why did the trustees’ argument fail on appeal? Because in breach of trust cases you only get to F.S. 95.11(3)(o) after you’ve complied with F.S. 736.1008, which says the clock starts ticking on this kind of case only after the beneficiaries get fair notice of the breach of trust. At the time the trust was created, the then applicable trust limitations statute was F.S. 737.307. As the 3d DCA noted, “for purposes of the issues in this [case], there is no practical difference in the application of [F.S. 737.307 and F.S. 736.1008].” Under F.S. 737.307, you only get to F.S. 95.11(3)(o) after the beneficiary is given fair notice in the form of a trust accounting and opportunity to examine the trust’s records. If that didn’t happen, F.S. 95.11(3)(o) doesn’t apply.

As previously noted, the second sentence of section 737.307 provides for a limited application of Chapter 95 to actions against a trustee, namely those actions where (1) “[the] trustee … has issued a final account or statement [to] the beneficiary,” and (2) “has informed the beneficiary of the location and availability of records for his examination.” See § 737.307, Fla. Stat. (1975). Section 95.02 necessarily had to yield to this incursion by the Legislature into the law of equity. Absent fulfillment by a trustee of the two conditions set forth in the second sentence of section 737.307 of the Florida Statutes, the common law remains in full force and effect with respect to actions brought by a beneficiary against a trustee of a trust.

What happens if F.S. 95.11(3)(o) doesn’t apply?

It might surprise some to learn that under Florida common law breach of trust cases are not subject to any statute of limitations defenses (the best you could do is assert an equitable laches defense). So if F.S. 95.11(3)(o) isn’t triggered in your case, defaulting to common law means the trustee can’t hide behind a statute of limitations defense. That’s what the 3d DCA was alluding to in the last sentence quoted above . .

Absent fulfillment by a trustee of the two conditions set forth in the second sentence of section 737.307 of the Florida Statutes, the common law remains in full force and effect with respect to actions brought by a beneficiary against a trustee of a trust.

. . . and here’s how the 3d DCA summarized the common-law on this point earlier in its opinion.

It has long been recognized at common law that a statute of limitations is inapplicable to shield trustees from their responsibilities to their beneficiaries. Nayee v. Nayee, 705 So.2d 961, 963 (Fla. 5th DCA 1998). As the Florida Supreme Court stated before the turn of the last century:

[I]n cases of continuing trusts that are strictly such, and recognized and enforced in courts of equity only, so long as the relation of trustee and cestui que trust continues to exist, no length of time will bar the cestui que trust of his rights in the subject of the trust as against the trustee [subject to certain exceptions not relevant here].

Anderson v. Northrop, 30 Fla. 612, 12 So. 318, 324 (Fla.1892); see also Sewell v. Sewell Props., 30 So.2d 361, 362–63 (Fla.1947) (“Where the trustee by fraud or deception, or even by keeping quiet when he should speak and account to his cestui, causes the cestui to be ignorant of the rights of the cestui and of the duties of the trustee, laches will not be imputed to the cestui until discovery of the true condition.”). In fact, when the Legislature created chapter 95 in 1872, a statute-denominated “limitations on actions,” the Legislature expressly precluded the applicability of the statute to cases against a trustee of an express trust. See § 95.02, Fla. Stat. (1872) (“This chapter shall not apply to any action … with respect to any moneys or property held or collected by any officer or trustee or his sureties .”).

The fiduciary litigation group at McGuireWoods LLP in Richmond, Virginia recently published its latest national survey of trust-related cases [click here]. Every one of these cases is a cautionary tale that — hopefully — will keep you and/or your client out of court in the first place (which is always the best kind of lawyering). Anyway, good stuff, well worth reading.

  1. French v. Wachovia Bank, N.A., 2011 U.S. Dist. LEXIS 72808 (E.D. Wisconsin 2011). Corporate trustee did not breach its duties by exchanging insurance policies for new policies obtained through its affiliate.
  2. Scanlan v. Eisenberg, et al., 2012 U.S. App. LEXIS 1112 (January 20, 2012). Seventh Circuit reverses district court decision that discretionary beneficiary lacked standing to bring surcharge claim for $200 million in investment losses from investment concentration.
  3. In the Matter of the Accounting by Frieda Tydings, As Trustee of the Ricki Singer Grantor Trust, 2011 NY Slip Op 51177U (Bronx County Surrogate’s Court, June 28, 2011). Surcharge of individual trustee for making interest-free loans to family members and giving trust profits to family-owned business in which trustee held an interest.
  4. In re: Alexander McFadden Testamentary Trust and George McFadden
    Testamentary Trust    , 2011 Phila. Ct. Com. Pl. LEXIS 320 (November 9, 2011). Trustees found not liable for investment losses during market collapse, but removed for withholding distributions, disclosing private information and failing to appoint required third trustee.
  5. Carlyle Investment Management LLC et al. v. Carlyle Capital Corporation Limited, 2011 U.S. Dist. LEXIS 85710 (Delaware, August 4, 2011). Forum selection clause in an investment management agreement is valid and enforceable.
  6. Wells Fargo Bank, N.A. v. Estate of Ruth Elaine Mansfield, 281 Neb. 693 (2011). Trustee did not abuse its discretion by decision to not pay expenses of beneficiary’s final illness where estate assets sufficient.
  7. Portico Management Group, LLC v. Harrison, 202 Cal. App. 4th 464 (Cal. App. 3d Dist. 2011). Trust assets not subject to arbitration award where award is not against co-trustees.
  8. Estate of Campana v. Comerica Bank & Trust, N.A., 2012 U.S. Dist. LEXIS 1490 (N.D. W. Va. 2012). Arbitration clause in agreement between investment advisor and trustees bars trust beneficiary’s suit against investment advisor.
  9. Smith v. Marez, 2011 N.C. App. LEXIS 2489 (N.C. Ct. App. 2011). Attempt to designate IRA benefits to pass pursuant to terms of will is invalid.
  10. Klingelhoefer v. Monif, et al., 2012 Neb. App. LEXIS 5 (January 17, 2012). Nebraska Supreme Court affirms decision that the terms of the trust holding an LLC interest, and not the LLC agreement, control the disposition of farmland held in the LLC.
  11. Hobbs et al. v. Legg Mason Investment Counsel & Trust Co., 2011 U.S. Dist. LEXIS 999 (N.D. Mississippi, January 5, 2011); Hobbs et al. v. Legg Mason Investment Counsel & Trust Co., 2011 U.S. Dist. LEXIS 7168 (January 25, 2011). Court refuses to dismiss claim that trustee was negligent in failing to inform beneficiaries about GST taxes owed on trust distributions, but dismissed claims that trustee had a duty to modify the trust to avoid the taxes.

Miller v. Miller, — So.3d —-, 2012 WL 1365064 (Fla. 5th DCA April 20, 2012)

Trustees are fallible human beings like the rest of us: they can be paranoid, arrogant, uncooperative, mean, petty, abusive, jealous, condescending, hypocritical . . . the list goes on and on. While all this may make your blood boil, none of it amounts to a surcharge suit if you can’t also prove you were somehow economically damaged.

The economic damages element of trusts and estates litigation is what anchors these often morally ambiguous cases in the realm of objective reality. Reasonable people can disagree about what’s “right” or “wrong” trustee behavior, but we all do math the same way. If the math doesn’t add up to a damages claim . . . you don’t have a case. Period, end of story. Which may make perfect sense to lawyers and judges (it does to me), but it’s pure “crazy talk” to most non-lawyers, who will beg you to please take their case because a trustee is being a total jerk! If you don’t have the stone-cold discipline to say “NO” when the math doesn’t add up, you’re not doing anyone any favors. As I recently wrote here, you can be half way through a jury trial and still get bounced out of court on this issue alone. In the case linked-to above, the judge didn’t stop the trial midway, but the end result was the same: no damages = no surcharge.

Appellant . . . as beneficiary of a family trust, filed a surcharge action[FN1] against the co-trustees of the trust. He sought damages alleging that the co-trustees improperly entered into a lease agreement that did not provide fair market value to the trust. . . .  Appellant appeals from a final judgment refusing to remove co-trustees . . . The trial court’s finding that the trustees acted in the best interest of the trust in entering the lease are supported by competent, substantial evidence. Additionally, the trial court correctly concluded that Appellant failed to prove damages that would support imposing a surcharge against the trustees. See Crusselle v. Mong, 59 So.3d 1178, 1181 (Fla. 5th DCA 2011) (“The elements of a cause of action for breach of fiduciary duty are (1) the existence of a duty, (2) breach of that duty, and (3) damages flowing from the breach.”).

[FN1.] A surcharge action seeks to impose personal liability on a fiduciary for breach of trust through either intentional or negligent conduct. See Black’s Law Dictionary 1441 (6th ed. 1990); see also Harding v. Rosoff, 951 So.2d 912, 914 (Fla. 4th DCA 2007) (defining “surcharge” as “charge against a fiduciary to compensate a beneficiary for the breach of fiduciary duty”); Merkle v. Guardianship of Jacoby, 862 So.2d 906, 907 (Fla. 2d DCA 2003) (defining “surcharge” as “the amount that a court may charge a fiduciary that has breached its duty”).

McKeegan v. Ernst, — So.3d —- 2012 WL 1192186 (Fla. 4th DCA April 11, 2012)

In contested probate proceedings, the law in Florida is clear: traditional standards controlling the issuance of temporary injunctions or “freeze” orders in other civil actions do NOT constrain a probate judge in the exercise of his inherent jurisdiction over a decedent’s estate. See In re: Estate of Barsanti, 773 So.2d 1206 (Fla. 3d DCA 2000). As I previously wrote here, this same permissive standard has been extended to contested guardianship proceedings.

What’s interesting about the linked-to opinion above is what the 4th DCA did NOT do. It did NOT extend to trust cases the permissive temporary-injunction standard applied to contested probate proceedings.

Why the permissive probate standard wasn’t applied in this trust case isn’t addressed by the 4th DCA, but my guess is it has something to do with the fact that under F.S. 731.105 probate cases are by statute in rem proceedings, and that under F.S. 736.0201 trust cases are presumed to be just like any other civil suit, which are usually in personam proceedings. This jurisdictional distinction is a big deal, and plays out in significant ways in how these cases should be litigated, including, apparently, when and if a temporary-injunction should be granted. Here’s how the 4th DCA explained its ruling:

“A party seeking a temporary injunction must prove: (1) that it will suffer irreparable harm unless the status quo is maintained; (2) that it has no adequate remedy at law; (3) that it has a substantial likelihood of success on the merits; (4) that a temporary injunction will serve the public interest.” Jouvence Ctr. for Advanced Health, LLC v. Jouvence Rejuvenation Ctrs., LLC, 14 So.3d 1097, 1099 (Fla. 4th DCA 2009) (citation omitted). “The party must also establish that it has a clear legal right to the relief sought. Finally, a trial court must make ‘clear, definite, and unequivocally sufficient factual findings’ supporting each of the required elements before entering an injunction.” Id. (citation omitted). “[A] trial court reversibly errs when an order fails to make specific findings for each of the elements.” Wade v. Brown, 928 So.2d 1260, 1262 (Fla. 4th DCA 2006) (citation omitted). Florida Rule of Civil Procedure 1.610(c) provides that “[e]very injunction shall specify the reasons for entry….” The order granting the temporary injunction herein does not make sufficient factual findings which support each of the elements. On remand, the trial court must make specific findings showing that appellees are entitled to relief.

Additionally, appellant argues and we agree that her due process right to notice and an opportunity to be heard were violated because appellees did not meet their heavy burden to establish that notice was not required.

The ex parte temporary injunction failed to meet the requirements of Florida Rule of Civil Procedure 1.610(a). Appellees’ attorney did not certify in writing any efforts made to give notice or any reasons why notice should not be required. Fla. R. Civ. P. 1.610(a)(1)(B). Fla. High Sch. Activities Ass’n., Inc. v. Benitez, 748 So.2d 358 (Fla. 5th DCA 1999) (attorney did not certify in writing any efforts made to give notice and notice by facsimile only one hour before injunction was granted was insufficient). Rule 1.610(a)(2) also requires the court to “give the reasons why the order was granted without notice if notice was not given,” which the trial court did not do. See Bookall v. Sunbelt Rentals, Inc., 995 So.2d 1116 (Fla. 4th DCA 2008) (order failing to explicitly state reasons why the order was granted without notice requires reversal even though movant met its burden of establishing the elements for entry of an injunction). For these additional reasons we reverse the order granting the ex parte temporary injunction.

 

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We advise our fiduciary clients they can get sued for failing to diversify their investment portfolios. Why? Because it’s inherently risky to put all your eggs in one basket. This is good advice for trusts and estates lawyers too: diversify your practice. One way to do that is to take the trust-law expertise you develop in your traditional estate planning practice, and offer it as a solution for a new set of clients who might not be thinking about as trusts as a planning tool.

Trusts are incredibly flexible arrangements that can be individually tailored to solve all sorts of complex problems. As trusts and estates lawyers, part of our challenge is simply being aware of what the possibilities are. That’s why you’ll want to read Oddball Trusts and the Lawyers Who Love Them or Trusts for Politicians and other Animals, by Seattle, Washington trusts-and-estates lawyer Wendy S. Goffe. Ms. Goffe does a great job of introducing us to dozens of lesser-known trusts that have evolved over the years in a variety of contexts, many having little to do with traditional estate planning. Good stuff, and well worth your time.

Here’s my annotated list of some of the trusts Ms. Goffe covers in her article.

  1. Health and Education Exclusion Trusts
  2. Delaware incomplete gift non-grantor (DING) trusts
  3. Rabbi Trusts
  4. Oral Trusts
  5. Secret Trusts
  6. Alimony and Maintenance Trusts
  7. Business Trusts
  8. Investment Trusts
  9. Environmental Remediation Trusts [example]
  10. Land Trusts
  11. Liquidating Trusts
  12. Voting Trusts
  13. Purpose Trusts
  14. Funeral and Cemetery Trusts
  15. Gun Trusts [blog]
  16. Pet Trusts [blog]
  17. Constructive Trusts
  18. Blind Trusts
  19. Coogan Trusts
  20. Totten Trusts
  21. Interest on Lawyer Trust Account (IOLTA) [FL Bar IOLTA rules]
  22. Interest on Real Estate Trust Account (IRETA)

And here’s an excerpt from Ms. Goffe’s introduction to Oddball Trusts and the Lawyers Who Love Them or Trusts for Politicians and other Animals:

This article discusses trusts that are, for want of a better expression, off the beaten path of usual trusts encountered in estate planning. Some, such as constructive trusts, are not even trusts at all. This article addresses these trusts for three reasons: First, some of these little-known trusts fill an estate planning need in a way that no other arrangement could. Second, the article explains characteristics of sham trusts and how to avoid these kinds of “trusts.” Finally, because many of our clients (and, truth be told, some of our non-estate planning colleagues) assume that if property is in trust or an entity has trust in its name, it must relate to estate planning. This article dis- cusses some of the more likely trusts that practitioners may encounter. A much broader world of trusts exists beyond the scope of this article, including revocable trusts, various types of irrevocable trusts such as Crummey trusts, dynasty trusts, asset protection trusts, marital trusts, special needs trusts, qualified subchapter S trusts, electing small business trusts, qualified personal residence trusts, charitable lead and charitable remainder trusts, and qualified terminable interest property trusts, to name just a few.

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Who serves as personal representative (PR) of an estate can have huge real-world consequences. For example, under F.S. 768.20 only the PR has standing to bring a wrongful death suit on behalf of the estate and the survivors. Also, in contested probate proceedings, the PR is presumed to have direct and confidential access to all of the decedent’s privileged papers/ medical records, as well as access to estate funds to pay legal fees. These facts probably explain why PR rulings are often appealed, shining a light on a recurring problem.

For reasons unclear to me, probate judges seem especially challenged by the law governing when/how a judge can remove a serving PR, or when/how a judge can refuse to appoint a PR with statutory preference under F.S. 733.301. These cases get appealed all the time, almost always resulting in reversals [e.g., see here, here, here, here, here].

If there’s one word that sums up where these cases go wrong it’s: EVIDENCE. Or more precisely, the lack thereof. Probate judges are given a great deal of latitude when asked to decide estate administration issues. But those decisions must be based on evidence, adduced at properly noticed evidentiary hearings; not on the fly based on counsel arguments at a 15-minute hearing. That’s the lesson to be drawn . . . again . . . from the latest batch of appellate decisions reversing three probate judges on opposite sides of the state (1 in Tampa, 2 in Miami) who failed to adhere to this simple rule.

Case Study No. 1

Zulon v. Peckins, — So.3d —-, 2012 WL 933013 (Fla. 3d DCA February 08, 2012):

In this case a Miami PR was removed without notice or evidentiary basis. In another case dealing with another Miami PR just last year, the 3d DCA held in Estate of LoCascio this kind of ruling is reversible error. One year later, nothing’s changed: it’s still reversible error:

The appellant, Elizabeth Zulon, appeals from an order of the probate court removing her as co-personal representative of her father’s estate. Because removal was ordered without notice or an evidentiary hearing, “the ruling did not meet even the most rudimentary requirements of due process.” LoCascio v. Estate of LoCascio, 78 So.3d 573, 574 (Fla. 3d DCA 2011). We reverse and remand with instructions to reinstate the co-personal representatives; FN1 discharge Mr. Peckins as successor personal representative; and conduct a duly noticed evidentiary hearing regarding the removal of Elizabeth Zulon and Ana Zulon as co-personal representatives.

Case Study No. 2

Lezcano v. Estate of Hidalgo, — So.3d —-, 2012 WL 1414826 (Fla. 3d DCA April 25, 2012):

In yet another Miami case, yet another probate judge got reversed for removing yet another Miami PR without notice or an evidentiary hearing. Go Miami!!

Mercedes Lezcano appeals an order of the probate court, removing her as personal representative of the estate and co-trustee of the trust of her deceased brother pursuant to a generalized order instructing her to show cause why she should not be held in contempt for a purported failure, in her capacity as personal representative, to comply with “[certain] orders [of the court]” and “failing to place all income and assets into [a] restricted depository” and related alleged misdeeds. “Because [the] removal[s were] ordered without notice or an evidentiary hearing, ‘the ruling did not meet even the most rudimentary requirements of due process.’ “Zulon v. Peckins, No. 3D11–1511, 2012 WL 933013, at *1 (Fla. 3d DCA Mar. 21, 2012) (quoting LoCascio v. Estate of LoCasio, 78 So.3d 573, 574 (Fla. 3d DCA 2011)). We reverse and remand with instructions to reinstate Lezcano as personal representative of the estate and co-trustee of the trust, and discharge Mr. Mendez as curator of the estate.

Case Study No. 3

Bowdoin v. Rinnier, — So.3d —-, 2012 WL 639005 (Fla. 2d DCA February 29, 2012):

In this case the decedent died intestate. Under F.S. 733.301 the decedent’s husband has statutory priority for appointment as PR. However, a court isn’t bound by F.S. 733.301 if there’s evidence proving the statutorily preferred person “lacks the necessary qualities and characteristics” to serve as PR. But again, the key word is evidence. Unproven allegations won’t cut it, even if the person making those allegations is the decedent’s mother.

A circuit court has discretion to appoint someone other than the preferred person as personal representative of an intestate estate. In re Estate of Snyder, 333 So.2d 519, 520 (Fla. 2d DCA 1976); Garcia v. Morrow, 954 So.2d 656, 658 (Fla. 3d DCA 2007). However, where a statutorily preferred individual is not appointed, the record must show that the preferred person is not fit to serve as personal representative. DeVaughn v. DeVaughn, 840 So.2d 1128, 1133 (Fla. 5th DCA 2003). If the record supports the conclusion that the preferred person “lacks the necessary qualities and characteristics” to act as personal representative, the court has discretion to refuse to make the appointment. Padgett v. Estate of Gilbert, 676 So.2d 440, 443 (Fla. 1st DCA 1996).

Ms. Rinnier produced no witnesses or evidence at the hearing to show that Mr. Bowdoin was disqualified from serving. Although we understand the dilemma faced by the circuit court given the serious nature of the allegations contained in Ms. Rinnier’s petition, she was nevertheless required to support those allegations with evidence. In the absence of such an evidentiary basis, the circuit court was not free to appoint someone other than Mr. Bowdoin. We therefore reverse the circuit court’s appointment of Ms. Rinnier and remand for an evidentiary hearing to determine whether Mr. Bowdoin, as the person having statutory preference, lacks the necessary qualities to administer his wife’s estate. See id.

If you’re like most trusts-and-estates lawyers, you don’t work at a big firm. Which means you can’t walk down the hallway and ask one of your partners for a good set of forms when someone wants to hire you to provide a legal opinion on some trust-related issue (as opposed to a tax opinion). Don’t underestimate the value of a good set of forms. Good forms don’t take the place of your experience and expertise, but they do provide an invaluable “checklist” of issues to think about and a road map for getting the job done “on time and under budget.”

The Report on Third-Party Legal Opinion Customary Practice in Florida, dated December 3, 2011 of the Legal Opinion Standards Committee of the Business Law Section and the Legal Opinions Committee of the Real Property, Probate and Trust Law Section was approved in December 2011 at meetings of the Executive Council of each Section. This report is the “gold standard” for Florida legal-opinions. Not only does it explain each and every element of a well-done opinion letter (highlighting pitfalls most of us would never imagine), it provides sample opinion letters plus an illustrative form of “certificate to counsel” that can be used in connection with rendering third-party legal opinions.

Here’s an excerpt introducing the trust section of the report.

Opining Counsel may be asked to render an opinion concerning the status of a Florida trust. Unlike Florida corporations, partnerships or LLCs, a Florida trust is not a separate statutory entity under Florida law. Rather, a Florida trust is a fiduciary relationship with respect to property (whether real property, personal property or both) subjecting the person or persons by whom the title to the property is held (known as the “trustee” or “trustees”) to equitable duties to deal with the property for the benefit of another person or persons (known as the beneficiary or beneficiaries), all of which arises as a result of a manifestation of an intention to create a trust arrangement. Thus, for purposes of rendering an opinion regarding a Florida trust, the Client is really not the trust itself, but rather the person or persons serving as the trustee or trustees of the trust for the benefit of the beneficiaries. As such, the proper status inquiry in the context of a trust should be based on whether the trustee or trustees is or are properly organized and existing and has or have active status.

Thus, if Florida counsel is asked to render an opinion concerning the status of a Florida trust, the Opinion Recipient should want to know whether the Client(s) is or are the trustee(s) of the trust. For this reason, the recommended forms of opinion state that the Client(s) is or are the trustee(s) of the trust and go on to specify the legal basis for such designation.

For more legal-opinion resources, you’ll want to go to the webpage for the Opinion Standards Committee of the Florida Bar’s Business Law Section.

The Florida Bar v. Doherty, — So.3d —-, 2012 WL 1033478 (Fla. March 29, 2012)

Plenty of estate planning lawyers also advertise themselves as financial planners. There’s nothing inherently wrong with this (hey, some of my best friends are financial planners!), and I’m sure lots of clients appreciate a “one-stop-shopping” approach to their estate planning (which is inextricably linked to financial planning). In fact, advocates of the multidisciplinary practice approach would argue these lawyers/financial planners are the wave of the future!

Lawyers aren’t prohibited from providing financial planning services to their clients; but be warned, if you do so you’re walking into an ethical minefield. One wrong turn and … BANG! There goes your law license. That’s what happened in the linked-to case above.

Case Study:

In the linked-to case above the Florida Supreme Court held that a lawyer selling annuities to his client (and earning a commission on that sale) is subject to rule 4-1.8(a), the Florida Bar ethics rule prohibiting a lawyer from engaging in a business transaction with his client unless the lawyer makes the specific written disclosures required by rule 4-1.8(a). No such written disclosure was made in this case, resulting in the lawyer’s disbarment. For an example of what that written disclosure might look like, click here for ACTEC’s sample disclosure letter waiving the conflict arising when a lawyer writes himself in as a personal representative or trustee of his client’s will or trust.

The estate planning lawyer in this case didn’t just market annuities to his client (an elderly widow dying of cancer), he also wrote himself in as personal representative of her will and trustee of her three trusts. One of these trusts was also drafted in a way that compelled the trust to buy annuities from two companies lawyer was an agent for. Here’s an excerpt:

In addition to her investments, in the last several weeks of the client’s life [lawyer] worked to revise her estate planning documents. . . . The client named [lawyer] as her personal representative. She also executed amendments to the Restated Trust to name [lawyer] as successor trustee.

[Lawyer] also authored two new trusts for the client’s estate. The first, a real estate trust, was executed on August 10, 2006. The primary asset in the trust was to be the client’s condominium unit. The trust instructed that the unit be sold and the proceeds from the sale used to purchase annuities. [Lawyer] was named the successor trustee for the real estate trust and was granted sole discretion to select the annuities that would be purchased. Significantly, the referee found that [lawyer]’s authority to sell financial products was limited to Conseco or Washington National annuities. The second trust at issue, an educational trust, was also executed on August 10, 2006. It was established to pay future educational expenses for the client’s grandchildren. [Lawyer] was named the successor trustee for the educational trust.

Not surprisingly, when the Bar examiner took a look at all this, lawyer got hammered. The recommended sanction was disbarment, which the Florida Supreme Court upheld on appeal. Here’s an excerpt of the Court’s analysis:

[Lawyer] held himself out as a lawyer and a Certified Financial Planner. His professional relationship with the client involved both legal work, including amending her will and executing two trusts on her behalf, and financial services, namely brokering the sale of Conseco and Washington National annuities. It is clear that [Lawyer] stood to earn a commission from the sale of the annuities had those transactions been completed. It is also clear that he did not disclose his financial interest in the transactions to the client in writing as required by rule 4–1.8(a). Accordingly, we approve the referee’s recommendation that [Lawyer] be found guilty of violating rule 4–1.8(a).

. . . . .

The evidence demonstrates that [Lawyer]’s conduct created a clear conflict of interest in that there was a substantial risk that his representation of the client would be limited by his own interests. [Lawyer] acted purposefully to make his personal, pecuniary interests at least as important as those of his client and her estate. He advised his client to select various means of estate planning and wealth management that would earn him a personal financial benefit. Additionally, [Lawyer] participated in a business transaction with his client and failed to disclose his substantial interest in the transaction. We believe his actions amount to egregious misconduct.

Florida ethics cases usually don’t garner much out-of-state attention, but this one did. Why? Because it involves the insurance industry, which plays a huge national role in the estate planning arena. For a solid national take on this case, you’ll want to read this commentary published jointly by California attorney Jay Adkisson of Riser Adkisson LLP, and New York attorney Richard LeVine of Withers Bergman LLP.

Prof. Stephen Alton, of the Texas Wesleyan University School of Law, recently published The Game is Afoot!: The Significance of Gratuitous Transfers in the Sherlock Holmes Canon. If you’ve ever enjoyed any of the Sherlock Holmes stories, and you happen to be a trusts and estates lawyer, you’ll want to read this essay. Prof. Alton writes “in character” from the point of view of Dr. Watson, and does a great job of weaving some pretty complex T&E legal issues into a good piece of story telling. Well worth reading. Here’s an excerpt:

“You are correct, Watson,” replied Holmes, reading my thoughts. “My knowledge of British law—in particular, that of estates of deceased persons, trusts, and possessory estates in land and future interests—has proven most useful on many occasions in our adventures. Indeed, I pursued a number of courses in the law during my years at the university, and I found the field of gratuitous transfers to be one for plowing.”

I did not pause to ask Holmes how he had read my mind. Instead, I continued my part of the conversation—this time, aloud. “Your most celebrated case in which such knowledge proved more than useful—it proved decisive—was The Hound of the Baskervilles.”

“Quite so, Watson. As you will recall, Sir Henry Baskerville was not the last of the Baskerville line. In point of fact, he merely was the penultimate heir to the family title and fortune. Therein lay both the motive for, and the solution to, the mystery.

. . . . .

“My first clue in the chain of inferences that led to the solution of the Baskerville mystery was that Sir Charles, who himself had never married and was indeed childless, had died testate; the baronet’s will left almost all of his quite considerable estate to our friend Sir Henry Baskerville, the son of Sir Charles’s late younger brother who had borne the same name.

. . . . .

However, the main portion of Sir Charles’s estate was the residue, which amounted to almost three quarters of a million pounds and which was left in its entirety to Sir Henry. At the time, I commented that that this vast sum was “a stake for which a man might well play a desperate game.”

. . . . .

“Watson, you would hardly call me naïf in matters of human nature. Instantly, I saw the grave temptation to murder. . . . I began my investigation with the working hypothesis that the man who might profit from the death of both Sir Charles and Sir Henry was behind the reappearance of the family’s cursed hound . . . “