Lanning v. Pilcher, — So.3d —-, 2009 WL 1941210 (Fla. 1st DCA Jul 08, 2009)

The “Save Our Homes” (SOH) amendment to Florida’s constitution sets a 3% maximum limit on annual valuation increases of homestead property for ad valorem tax purposes. Over time, the SOH cap has created huge disparities in property taxes paid by Florida residents vs. non-Florida residents. Consider these 2002 stat’s, as reported in Protecting and Preserving the Save Our Homes Cap:

Statewide in the year 2002 the Save Our Homes (SOH) cap protected about $80 billion in assessed value from taxation. That is up 68.50 percent over the year 2001, when it was about $47.9 billion.

But is it constitutional?

The discriminatory effect of Florida’s property tax scheme on non-residents is obvious, which makes it an easy target for constitutional attack. That’s basically what happened in the linked-to opinion. Unfortunately for the tax-challengers in this case all of their arguments have been tried before . . . and failed. And as explained by the 1st DCA, they didn’t work this time either:

The main appeal consists of a series of federal constitutional challenges to Article VII, Section 4(d), but all of the supporting arguments have been rejected before in comparable cases. For example, the Supreme Court held in Nordlinger v. Hahn, 505 U.S. 1 (1992), that a California constitutional amendment limiting real property tax increases to 2% per year, in the absence of a change of ownership, did not violate the Equal Protection Clause. And this court held in [Reinish v. Clark, 765 So.2d 197 (Fla. 1st DCA 2000)] that the Florida homestead exemption did not violate the Equal Protection Clause, the Privileges and Immunities Clause, or the Commerce Clause. Although Reinish dealt with the application of the $25,000 homestead exemption, while this case involves a challenge to the 3% tax cap on increases in the assessment of homestead property, the analysis is the same. In both cases, the tax benefit is based on the way the property is used, not on the status of the landowner as a resident or nonresident.

The homestead exemption and the 3% tax cap apply only to property that is used as a primary residence and therefore qualifies as a homestead. A Florida resident who owns vacation property or business property in the state will not be entitled to claim any tax benefit under Article VII, Section 4(c) and will be in the same position with respect to that property as a nonresident. The plaintiffs argue that the existence of a benefit for homestead property, when combined with the tax treatment of non-homestead property, gives Florida residents a tax advantage, but this is essentially an argument that the homestead exemption is itself unconstitutional, a point rejected in Reinish.

For these reasons we hold that Article VII, Section 4(c) of the Florida Constitution is valid under the United States Constitution and that it does not violate a nonresident’s rights under the Equal Protection Clause, the Privileges and Immunities Clause, or the Commerce Clause. Likewise, we hold that section 193.155, Florida Statutes, the law implementing Article VII, Section 4(c), is constitutionally valid.

Zoldan v. Zohlman, — So.3d —-, 2009 WL 1310995 (Fla. 3d DCA May 13, 2009)

In this case “husband” sued his second wife’s estate on undue influence grounds trying to get out of a post-nuptial agreement he signed obligating him to leave a share of his $40 million estate to second wife’s daughter. Husband died after filing his lawsuit, and his sons were substituted in as plaintiffs.

So by now the litigation is between two estates: husband’s estate vs. wife’s estate. But those are only legal titles, this fight is really between two sets of heirs: husband’s sons from a prior marriage (representing his estate) vs. wife’s daughter from a prior marriage (representing her estate). As the WSJ recently reported in The Right Steps, blended families are often a volatile mix (see also here), which may explain why the two estates battling it out in this case have by now gone through two full blown trials followed by two trips to the 3d DCA.

Wife’s estate won the first round [click here]. Perhaps emboldened by this win, wife’s estate then tried to make the best of its win by arguing that its share of husband’s estate (25% of a $40 million family limited partnership) shouldn’t be subject to the standard valuation discounts applicable to FLPs, but should instead be measured on a “fair value” basis (i.e., no discounts for lack of marketability or minority status) under F.S. 620.2114(1).  Nice try, but no cigar. This time around husband’s side won:

Originally, the Estate disputed Ms. Zoldan’s right to obtain anything other than what each of the three sons had inherited, i.e. an interest in the limited partnership. Eventually, however, the Estate took the position that if monetary damages were ordered, it was a “fair market valuation” that should be utilized in determining that award. The parties attached a dollar amount to each valuation method, concluding that the “fair market valuation” of the interest was $2,247,573, while the “fair valuation” of the interest was $6,450,937. Thus, by mutual agreement, the only question before the trial court was which valuation method should be applied.

.   .  .  .  .

While the partnership agreement does not permit a limited partner to withdraw and demand distribution from the partnership, Mr. Zohlman’s sons, one of whom is the general partner with “sole and exclusive control of the Limited Partnership,” nevertheless agreed to distribute to Ms. Zoldan the “fair market value” of a one quarter interest of Mr. Zohlman’s 99% limited partner interest in the partnership, i.e., the amount a full limited partner would receive if that partner took the interest and attempted to sell it on the open market. FN4 See Rothschild v. Kisling, 417 So.2d 798, 801 (Fla. 5th DCA 1982) (recognizing that fair market value is generally “what a willing buyer would pay a willing seller” for an interest). Such a distribution would be consistent with paragraph 12 .03 of the partnership agreement which provides that although “[n]o Partner shall be entitled to demand a distribution be made in partnership Property … the General Partner may make or direct property distributions to be made, using the property’s fair market value as of the time of the distribution[ ] as a basis for making the distribution[ ].”

It would also be consistent with that portion of the partnership agreement governing permitted sales of limited partnership interests, which obligates limited partners to establish the market value of their interests by obtaining a bona fide offer from a willing buyer in the marketplace:
. . . . .

Here, the stipulated fair market value of Ms. Zoldan’s interest was put at $2,247,573. Based on the foregoing analysis, we find no error in the methodology used to make this determination.

We also reject the notion that there was no competent, substantial evidence to support the trial court’s determination that Ms. Zoldan’s interests should be valued using the fair market value method. The Estate presented the expert testimony of David Pratt, a seasoned trust and estate lawyer, who testified that fair market value is the valuation standard used when distributing trust assets and the assets of an estate. More specifically, Pratt testified that fair market value is the exclusive valuation method used for the purpose of determining distributions from a limited family partnership that is part of a trust or an estate.

Thus, we find no error in the valuation method used by the trial court. The promise made and broken was that Mr. Zohlman name Ms. Zoldan an heir equal to his three sons. Ms. Zoldan was offered and rejected an interest in the limited partnership which would have put her in the exact same position as the Zohlman brothers. Having rejected that offer, the Estate maintained that the measure of Ms. Zoldan’s damages would be the “fair market value” of the interest she rejected. With no dispute as to the dollar amount attached to the use of a “fair market valuation,” with that method being identified in the partnership agreement itself, and with that valuation method being supported by expert testimony, we conclude that it was properly employed. Accordingly, we find the trial court’s order was correct in its entirety, and affirm the order awarding Ms. Zoldan $2,247,573, plus pre-judgment interest.

Lesson learned?

Valuation issues involving FLPs are a BIG DEAL! to estate planners and probate lawyers alike. Florida trusts and estates lawyers will want to take note of this important valuation case. The 3d DCA’s opinion is fine as far as it goes, but doesn’t go into much detail explaining the losing side’s “fair value” argument, for that you’ll want to read Appellees’ Answer Brief.

By the way, many of the issues raised in this opinion were the subject of an excellent Florida Bar Journal article by Rebecca C. Cavendish and Christopher W. Kammerer, as applied in the context of closely-held corporations: Determining the Fair Value of Minority Ownership Interests in Closely Held Corporations: Are Discounts for Lack of Control and Lack of Marketability Applicable?

Celebrities loom large in the world of probate litigation. They’ve often lead messy lives, which means their estates are magnets for litigation [click here]. And (if their heirs are lucky), they leave  behind huge fortunes that actually get bigger over time. In fact Forbes publishes an annual Top-Earning Dead Celebrities list that tracks this phenomenon.

So far Michael Jackson’s estate is following the celebrity-probate script to a “T”. 

Jackson’s life was messy: three children by different women; complicated family dynamics involving his brothers, sister, mom and dad; drug abuse . . . you get the picture.  And even if Jackson’s will isn’t challenged or some unkown heir doesn’t come forward with some other type of claim, figuring out how to manage his estate will be a monumental task akin to reorganizing a multimillion dollar media conglomerate on the verge of insolvency. Here’s an excerpt from a WSJ piece entitled Jackson Will From 2002 In Spotlight that gives us a glimpse of what’s to come:

Unwinding Mr. Jackson’s estate is likely to be a thorny challenge, given the size and complexity of both the assets and the debts involved. In all, Mr. Jackson died with around $500 million debt, but the value of his assets probably outweigh that, possibly by $200 million or more, according to people familiar with the matter.

Mr. Jackson’s most valuable asset is believed to be his 50% stake in Sony/ATV Music Publishing, a joint venture with Sony Corp. That stake is collateral for a $300 million loan held by Barclays PLC. And Mr. Jackson’s level of control over the venture was reduced in a 2006 refinancing. For instance, he no longer has veto power over key executive appointments, according to people familiar with the situation. Sony also has the right to buy half of Mr. Jackson’s 50% stake when it chooses.

Mr. Jackson’s other assets include Mijac, a publishing catalog that comprises his own musical composition that is collateral for a separate $73 million loan. And control of the master recordings of his albums, currently in the hands of Sony, is set to revert to him in five years, according to people familiar with the matter.

But Mr. Jackson last year defaulted on a $24.5 million loan backed by another major component of his portfolio, Neverland Valley Ranch. He then became a partner in a venture — Sycamore Valley Ranch Co., LLC — that now owns the property. It is not clear what will become of the property once the will is executed.

On the upside, in the midst of this recession Jackson’s estate is the kind of economic stimulus package that’ll “provide a lifetime annuity for scores of trust and estate lawyers,” as predicted in the WSJ’s Wealth Report Blog [click here].

Stay tuned for more . .

Glantz and Glantz, P.A. v. Chinchilla, — So.3d —-, 2009 WL 1531644 (Fla. 4th DCA June 3, 2009)

An appellate court won’t reverse a probate judge’s ruling cutting attorneys fees unless there’s been an “abuse of discretion.” In other words, if reasonable minds could disagree on how the court should have ruled, then the appellate court must affirm the trial court’s ruling . . . even if the appellate judges would have come to a different conclusion. Here’s how the Florida Supreme Court put it in Canakaris v. Canakaris, 382 So. 2d 1197 (Fla. 1980): “the appellate court must fully recognize the superior vantage point of the trial judge . . . . If reasonable men could differ as to the propriety of the action taken by the trial court, then the action is not unreasonable and there can be no finding of an abuse of discretion.”

So it’s a rare case indeed when an appellate court comes across a set of facts that compels it to step in and reverse a fee ruling that is so patently unfair it simply can’t be left alone. This is one of those cases. Here are the facts:

The personal representative of an estate was a member of prepaid legal services program. The program referred her to the law firm of Glantz & Glantz, P.A., where the personal representative retained Mark Mastrarrigo to handle estate matters.

Subsequently, the personal representative wrote a letter to the court expressing her concern about the law firm’s billing, prompting the trial court to conduct an evidentiary hearing. Testimony revealed that the attorney documented 123 billable hours defending a will contest, filing and pursuing a motion to disqualify another attorney based on a conflict of interest, and working with a curator in connection with the sale of the estate’s property.

Pursuant to the prepaid legal services program, the attorney charged $115 per hour, a 51% discounted rate from the normal billing rate of $225 per hour. The total charges amounted to $12,400 plus costs. The law firm submitted an affidavit from an expert attesting to the reasonableness of the fees and costs, specifically that $13,500 was a reasonable fee for the services rendered. Testimony evidenced that this amount was based on the discounted hourly rate and not on the normal billing rate.

The court entered an order awarding the law firm fees in the amount of $6,885, 51% of the $13,500 reasonable fee attested to by the expert. The court denied the law firm’s motion for rehearing, from which the law firm now appeals.

The 4th DCA went on to explain the legal basis for its reversal as follows:

Here, the prepaid legal services contract rate of $115 per hour is presumed to be reasonable. See, e.g., Sotolongo v. Brake, 616 So.2d 413, 413-14 (Fla.1992). The 123 hours expended is also reasonable given that the attorney testified to the services rendered by the law firm in representing the personal representative in a will contest, a motion to disqualify another lawyer, and work done with the curator. The trial court accepted the expert’s affidavit that $13,500 was a reasonable, already discounted fee. The trial court did not find the hours or the discounted rate to be unreasonable. Nevertheless, the trial court inexplicably reduced the reasonable fee by another 51%. In doing so, it abused its discretion.

The exception that proves the rule.

The fact that the probate attorney won this fee dispute shouldn’t embolden anyone; it’s an exceptional case that only proves your fees have to be ridiculously low to begin with to have a prayer of winning on appeal. Not a good strategy for staying in business for very long. The better lesson to be drawn from this case is that fee disputes are no-win situations. And the best way to win that battle is to take the time up front to make sure your client doesn’t object to your fees once you’ve done all the work. Billing is part science, part art. For an excellent article discussing how to get this right in the trusts and estates context, read Understanding the Legal and Emotional Aspects to Billing and Collecting for Legal Services [click here for slide show] by frequent lecturer and Chicago estate planning attorney Louis Harrison.

Undue influence is one of the mainstays of probate litigation and a frequent topic of discussion on this blog [click here, here, here]. Probate lawyers need to know this area of the law cold.

Orlando litigator David P. Hathaway tackled the issue from an interesting perspective in a June 2009 Florida Bar Journal article entitled Make It an Even 10: Courts Rely on More Than the Seven Carpenter Factors to Analyze a Claim for Undue Influence of a Will or Trust.

David’s thesis is that probate litigators need to think beyond the seven Carpenter factors we all know and love.

In addition to the seven Carpenter factors, however, Florida law recognizes at least three other indicators of active procurement: a) isolating the testator and disparaging family members; b) mental inequality between the decedent and the beneficiary; and c) the reasonableness of the will or trust provisions. This article analyzes the case law surrounding these additional factors to assist practitioners in fully developing a case for or against undue influence.

And here’s how David goes on to introduce each of these factors:

Isolating the Testator and Disparaging Family Members
As early as 1919, the Florida Supreme Court found undue influence where a beneficiary purposefully isolated the decedent by denying access to family and friends, with hopes of breaking down whatever ties of affection existed between the decedent and his family and friends.9 In Newman v. Smith, 82 So. 2d 236 (Fla. 1919), a beneficiary of a will had intercepted letters and telegrams sent to the decedent by his daughter, ignored all requests contained within them, and responded only to prevent the decedent’s daughter from visiting the decedent.10 The beneficiary’s isolation of the decedent denied the daughter all access to the decedent, such that “the ties of fatherly affection [were] destroyed.”11 The court stated that based on these facts, it would have invalidated the will on the grounds of undue influence alone without any evidence of lack of testamentary capacity.12

Mental Inequality Between the Decedent and the Beneficiary
Florida courts have considered the inequality of mental acuity between the decedent and beneficiary to determine whether a will was procured by undue influence. Although this factor is similar to the issue of voiding a will for lack of testamentary capacity, it differs in that it assumes the decedent does have testamentary capacity, but is weak-minded and, therefore, easily influenced. Essentially, the factor compares the decedent and the influencer rather than merely evaluating the testamentary capacity of the decedent.

Reasonableness of the Will or Trust Provisions
A sometimes obvious sign of undue influence in the procurement of a will or trust is the instrument itself. The 1919 case of Newman v. Smith, discussed earlier, stated that a suspicion of undue influence was inevitable because the will seemed to contradict, ignore, and disregard the promises and assurances made by the decedent to his needy child, yet provided substantial bequests to an “affluent wife, held in slight regard.”47 In Newman, the decedent had promised and assured his beloved daughter that he would provide for her upon his death and had an original will reflecting such intent.48 However, this “equitable, rational, and just” will was replaced by a subsequent will which disinherited the daughter and devised all of the decedent’s property to his affluent wife.49 The Florida Supreme Court stated that a will should not be revoked “merely because it is unreasonable and unjust.” However, where “it does violence to the natural instincts of the heart, to the dictates of fatherly affection, to natural justice, to solemn promises, to moral duty, such unexplained inequality and unreasonableness is entitled to great influence in considering the question of testamentary capacity and undue influence.”50 The court also stated “[i]n doubtful cases the reasonableness or not of a will, in its various provisions is entitled to great weight.”51

In the commercial litigation context F.S. § 57.105 is a powerful tool for curbing abusive litigation tactics: if you engage in bad faith or frivolous litigation, not only will you eventually lose, you’ll also end up paying the other side’s legal fees. This is a commonly-used device that everyone knows about and has been the subject of multiple Florida Bar Journal articles [click here, here, here, here]. F.S. § 57.105 also occasionally pops up in the probate-litigation context [click here].

What’s often overlooked is that Florida’s probate code provides a similar remedy that’s just as powerful, but doesn’t require you to jump through any of the procedural hoops built into F.S. § 57.105.

In both F.S. § 733.106(4) and F.S. § 733.6175(2), a probate judge is given the express statutory authority to determine from whose share of the estate attorneys fees incurred in frivolous or bad faith litigation will be paid. You might want to go this route in lieu of a personal judgment for fees against a bad actor under F.S. § 57.105 because you don’t have to worry about collecting on your judgement: the probate-code route allows you to simply go after assets already available and subject to the court’s authority as part of the probate estate.

Geary v. Butzel Long, P.C., — So.3d —-, 2009 WL 1606034 (Fla. 4th DCA Jun 10, 2009):

Here’s how the 4th DCA explained the law in the Geary case on when a probate judge can shift the winning side’s attorney’s fees against one of the estate’s beneficiaries for frivolousness:

In In re Estate of Lane, 562 So.2d 352 (Fla. 4th DCA 1990), we examined the propriety of a probate court’s order assessing attorney’s fees from a will contest proportionally against the specific beneficiaries as well as the residuary estate. We noted that section 733.106(4), Florida Statutes, permits the court to direct from what part of an estate a fee assessment shall be paid (just as section 733.6175(2) does). However, we explained:

This section does not give the trial court unbridled discretion to award fees from any part of the estate. Before the trial court may assesses fees against a beneficiary’s share of an estate there must be a finding of bad faith or wrongdoing by the beneficiary or other circumstances which would warrant such an assessment.

Id. at 353. Despite our use of “bad faith and wrongdoing,” we relied on and agreed with Cohen v. Schwartz, 538 So.2d 922 (Fla. 3d DCA 1989), in which the court suggested that in trying to close a prolonged estate, the trial court could assess attorney’s fees against a beneficiary’s portion of the estate for frivolous litigation consistent with section 733.106(4). We agree that if the litigation pursued is frivolous, then the court would have the authority under that section to assess fees against a specific beneficiary’s portion of the estate.

The trial court found that the fees incurred in pursuing the fees on fees litigation constituted essentially frivolous litigation and were unreasonably incurred. Therefore, it acted within its discretion to apportion the fees for that litigation to Geary. However, the court did not make a finding that the personal representative engaged in frivolous litigation in its initial defense to Butzel Long’s motion for fees and seeking disgorgement of fees paid. To the contrary, it noted that that defense may have been justified. It found only that the fees on fees litigation, which pushed the fees and costs awarded to Butzel Long from $19,000 to $49,000 (and subsequently even more), was unreasonable and unnecessary. Therefore, while the court could properly assess the fees on fees litigation against Geary, it should not have imposed the initial $19,000 for the fees litigation on Geary’s share of the estate without a finding of wrongful conduct, bad faith, or frivolousness.

Lesson learned? Think 57.105 motion.

First, if you look over the Florida Bar Journal articles explaining F.S. § 57.105 you’ll see that the standard for determining what constitutes “frivolous” litigation in that context is identical to the frivolity standard applied under F.S. § 733.106(4) and F.S. § 733.6175(2).

Second, a probate judge can’t shift fees for frivolous litigation unless its order contains specific findings of fact establishing “wrongful conduct, bad faith, or frivolousness.” Again, this “specific findings” requirement is identical to that required under F.S. § 57.105.

Bottom line, given that there are very few appellate-court decisions discussing when and how to apply F.S. § 733.106(4) and F.S. § 733.6175(2) to curb wrongful conduct, bad faith, or frivolousness in the probate-litigation context, looking to cases discussing F.S. § 57.105 makes sense; also, “framing” the issue for your probate judge as being analogous to a “57.105 motion” is probably the best short-hand way of making clear to your judge exactly what kind of remedy you’re looking for and why.

Your judge may not be all that familiar with the ins and outs of fee-shifting under F.S. § 733.106(4) and F.S. § 733.6175(2), but he or she will almost certainly know exactly what you’re talking about the moment you say, “judge, this is like a 57.105 motion.”

Herrilka v. Yates, — So.3d —-, 2009 WL 1531772 (Fla. 4th DCA June 03, 2009)

Homestead property is something probate lawyers deal with in almost every estate-administration  proceeding, but it’s NOT a probate asset. This disconnect is a source of never-ending client consternation and attorney heartburn. The linked-to case is a prime example.

In this hotly-contested estate the court appointed a curator and this curator set about doing what curators do. Apparently there wasn’t enough cash in the estate to pay for this work, so the curator asked the judge (who had appointed her) to please put a lien on what may have been the decedent’s single most valuable asset – his homestead property – to pay her fees. The court obliged her . . .  and was reversed on appeal.

The probate court’s order was reversed for two reasons:

  1. the decedent’s alleged spouse occupied the house at all times – so the curator never actually took possession of the property (strike one); and
  2. the curator’s work related to general estate-administration matters – not preserving the homestead property (strike two).

The statute governing this dispute is F.S. 733.608, and the 4th DCA does an excellent job of explaining it:

The trial court’s decision to impose the lien pursuant to section 733.608 was improper because, in accordance with the plain meaning of the statute, Yates failed to meet its requirements. This is because: (1) Yates has not, and cannot, take possession of the property, as it is occupied by an “interested person;” and (2) the fees incurred by Yates for which the lien was imposed were not incurred for the purpose of preserving, maintaining, insuring, or protecting the homestead property.

With respect to section 733.608, subsection (3) allows for imposition of a lien on “property referenced in subsection (2).” § 733.608(3). The property referenced in subsection (2) is “protected homestead” that “is not occupied by a person who appears to have an interest in the property” which the personal representative has “take[n] possession of … for the limited purpose of preserving, insuring, and protecting it for the person having an interest in the property.” Id. § 733.608(2). For purposes of probate litigation, the Florida Legislature has defined an “interested person” as “any person who may reasonably be expected to be affected by the outcome of the particular proceeding involved.” Id. § 731.201(23). In order to impose a lien, section 733.608(3) also requires that the “expenditures and obligations incurred,” which include “fees and costs,” for which the lien is imposed were incurred for the purpose of “preserv[ing], maintain[ing], insur[ing], or protect[ing]” the homestead property.

In this case, the trial court erred in imposing the lien because the homestead property was never taken into possession, either legally or factually, by Yates, as Constance still occupies it. This failure to take possession negates a claim for the imposition of the lien because, to do so, section 733.608 first requires that the personal representative take possession of the property “for the limited purpose of preserving, insuring, and protecting it.” § 733.608(2). Furthermore, Yates cannot legally take possession of the property because it is “occupied by a person who appears to have an interest in the property,” id., i.e., Constance. Constance is an “interested person” because, by potentially being Joseph’s surviving spouse and joint owner of the property, as well as being the property’s current occupant, she is a “person who may reasonably be expected to be affected by the outcome of the particular proceeding involved.” Id. § 731.201(23).

Even if Yates met the threshold possession requirement of section 733.608, the lien was still not properly imposed. This is because the expenses the lien represents were incurred for legal services having to do with the administration of the Estate. The services, as required by section 733.608(3), were not incurred for the specific purpose of preserving, maintaining, insuring, or protecting the homestead property.

Accordingly, the imposition of the lien was improper because it failed to meet the requirements of section 733.608. We, therefore, reverse its imposition.

MacIntyre, ex rel. Wedrall Trust v. Wedell, — So.3d —-, 2009 WL 1393375 (Fla. 4th DCA May 20, 2009)

In Florida National Bank of Palm Beach County v. Genova, 460 So.2d 895 (Fla.1984), the Florida Supreme Court held that – as a matter of law – you can’t challenge a settlor’s removal of funds from her revocable trust on undue influence grounds.  In the Genova case the settlor’s withdrawal of funds was challenged while the settlor was still alive. In this case the settlor was dead, so the question became whether the Genova rule applies even after the settlor has died. The 4th DCA said YES based on the following reasoning:

[T]he Genova decision itself plainly suggests the availability of an undue influence challenge to the settlor’s revocation of his or her revocable trust should not turn upon whether the action is brought when the settlor is alive or deceased. Genova reached the supreme court as a consequence of the conflict between this court’s decision in [Genova v. Florida National Bank of Palm Beach County, 433 So.2d 1211 (Fla. 4th DCA 1983)] and the Second District’s decision in Hoffman v. Kohns, 385 So.2d 1064 (Fla. 2d DCA 1980). In Genova, the settlor of the trust was alive, the settlor herself was attempting to revoke the trust, and the co-trustee bank refused to act on her attempted revocation. In Hoffman, the action challenging the decedent’s revocation of the trust was brought by a would-have-been beneficiary of the trust after the settlor died. The Second District relied upon “undue influence” to disaffirm the decedent’s revocation of the trust. The supreme court expressly disapproved this result in Hoffman after writing that “the principle of undue influence has no place in determining whether a competent settlor can revoke a revocable trust.” 460 So.2d at 896.

In sum, we hold that, as a consequence of Genova, even after the settlor’s death, the settlor’s revocation of her revocable trust during her lifetime is not subject to challenge on the ground that the revocation was the product of undue influence. Thus, having considered all issues raised, we affirm the dismissal, with prejudice, of the “undue influence” claim.

Listen to this post

John G. Grimsley of Grimsley Marker & Iseley, P.A., in Jacksonville, Florida, was on the winning side of Taylor v. Taylor, — So.2d —-, 2009 WL 186155 (Fla. 1st DCA Jan 28, 2009), a case I wrote here. I first became aware of Mr. Grimsley through his work as co-author of Florida Law of Trusts, the definitive treatise on Florida trust law (his co-author is now slouch either, Prof. Powell was the scrivener for Florida’s new Trust Code).

I invited Mr. Grimsley to share some of the lessons he drew from the Taylor case with the rest of us and he was kind enough to accept.

[Q] Looking back, what strategic decisions did you make in this case that were particularly outcome determinative at trial? On appeal?

[A] My strategy at trial was to have the two witnesses and notary testify to the circumstances surrounding the preparation and execution of the premarital agreement. Part of this strategy was to inquire into the decedent’s intentions and statements leading up to and including the execution of the premarital agreement. Any hearsay objection was met with the state of mind exception to the hearsay rule allowing the Judge to overrule the objection.

On appeal the main strategy was to rely on the plain language of the premarital agreement and place the agreement in the context of waiving marital rights by using the Black’s Law Dictionary definition of a premarital agreement. Also, we chose not to anticipate arguments from the wife (such as the absence of specific waivers of rights in the agreement), but rather to counter those arguments in our reply brief. Specifically, that unknown rights may be waived in the premarital agreement “Indeed, Florida Statute, section 732.702(2) negates the requirements of any disclosure of assets or values for an agreement entered into before marriage.”

[Q] Looking back, would you have done anything differently in terms of framing your case for the trial-court judge?

[A] When doing the brief there were several areas of testimony that I wished I had included at trial, but it turned out that relying on the plain language of the premarital agreement and the plain language of the waiver statute was sufficient.

[Q] I wrote here in 2006 about an “ambiguous” premarital agreement that the 3d DCA held was a valid waiver of a widow’s marital rights under F.S. § 732.702. After reading the 2d DCA’s opinion in your case, I stated “it’s impossible to reconcile the different approaches taken first by the 3d DCA in 2006 and then by the 1st DCA above when applying F.S. § 732.702 to what all of us can agree are less than artfully drafted prenuptial agreements.” Would you agree? Disagree?

[A] Agree – testimony on intent of parties supports the terms of the premarital agreement.

[Q] From your perspective as probate litigator, do you think there’s anything that could have been done in terms of estate planning to avoid this litigation or at least mitigate its financial impact on the family?

I believe this litigation could have been avoided by the decedent seeking the advice of an attorney in preparing a prenuptial agreement. The decedent made the same mistake in a holographic will that was notarized but had no witnesses. Even the invalid will had some probative value in showing the decedent’s intent that his assets go to his son and not to his wife.

[Q] Any final words of wisdom for probate lawyers of the world based on what you learned in this case?

[A] I learned from this case that the de novo construction of a contract on appeal applied to prenuptial agreements and allowed the appellate court to interpret the premarital agreement and apply it to the waiver statute.

Listen to this post

In Estate of Feinberg, 383 Ill. App. 3d 992 (1st Dist. June 30, 2008), an Illinois appellate court ruled a testator could NOT disinherit his grandchildren for marrying non-Jews. Here’s how the case was summarized in this piece in the Chicago Jewish News:

When Max Feinberg was in dental school in the 1920s and ’30s, he was one of only a handful of Jews in his class and was subjected to anti-Semitic slurs. He graduated at the height of the Depression and worked a seven-day week to build his dental practice. Although he did not adhere to the Orthodox Jewish practices in which he was raised, his Judaism was a crucial part of his life. He and his wife, Erla, belonged to a Conservative synagogue, observed Jewish tradition and always celebrated Jewish holidays.

Before he died in 1986 at age 77, Feinberg had his attorney insert a clause in his will concerning the distribution of his considerable financial assets. It stated that none of his grandchildren, or their children or grandchildren, would inherit the $250,000 he had allotted to each of them if they married a non-Jewish spouse unless the spouse converted to Judaism.

Max Feinberg couldn’t have known that that clause would become the subject of intense scrutiny and the basis of a lawsuit. In it, one of his grandchildren sought to prove that the clause was invalid. An Illinois court agreed. Now the Illinois Appellate Court has confirmed the decision, with one Jewish justice offering an impassioned dissent. There’s a possibility the case may go to the Illinois Supreme Court next.

The case was also written up here in Trusts & Estates Magazine and here in the Chicago Tribune.

It’s not uncommon to see estate-planning articles touching on the pros and cons of “incentive trusts”: trusts that use money to encourage or discourage certain behaviors [click here]. The take-away for Florida estate planners from the Feinberg opinion is that love ’em or hate ’em, you can only go so far with incentive trusts; get too creative and your client’s estate plan may meet the same fate Max Feinberg’s did.

By the way, I’m pretty sure a Florida court would rule the same way as the Illinois court did. If you come across this issue in your practice you’d do well to focus on Restatement of Trusts §29, which the Illinois court relied on heavily in its opinion. Here’s the key excerpt from the Feinberg opinion:

The Restatement Third of Trusts provides that trust provisions which are contrary to public policy are void. It gives as a specific example a provision that all of a beneficiary’s rights to a trust would terminate if he married a person who was not of a specified religion:

[Comment j.] Family relationships. A trust or a condition or other provision in the terms of a trust is ordinarily * * * invalid if it tends to encourage disruption of a family relationship or to discourage formation or resumption of such a relationship. * * *

* * *
In addition, a trust provision is ordinarily invalid if it tends seriously to interfere with or inhibit the exercise of a beneficiary’s freedom to obtain a divorce * * * or the exercise of freedom to marry * * * by limiting the beneficiary’s selection of a spouse * * *. * * *

* * *
[Illustration 3.] The marriage condition terminates all of [settler’s nephew] N’s rights if, before termination of the trust, he ‘should marry a person who is not of R Religion,’ with the same gift over to C College. The condition is an invalid restraint on marriage; the trust and N’s rights will be given effect as if the marriage condition and the gift over to C College had been omitted from the terms of the trust.

Restatement of Trusts § 29, Explanatory Notes, Comment j, Illustration 3, at 62-64 (3d ed.2003).

We hold that under Illinois law and under the Restatement (Third) of Trusts, the provision in the case before us is invalid because it seriously interferes with and limits the right of individuals to marry a person of their own choosing.