Click here for a PDF copy of the Agenda and related Reports/White Papers for the upcoming meeting of the Florida Bar’s Probate & Trust Litigation Committee at the Ritz Carlton in Key Biscayne on Friday, September 19 from 10 a.m. to 12 noon.  Any questions/comments regarding the meeting and the linked-to materials should be directed to the committee chair: William ("Bill") T. Hennessey.

Bill’s email below povides greater detail on the focus of the upcoming meeting:

At the meeting, we will, once again, focus on the spousal rights legislation with the hope that we can pass a final version at the meeting or, at least, move closer in that direction. I have included in the package written comments which I have received from Joel Sharp and Edward Downey. Eric Virgil will also continue his presentation on motions to tax fees and costs in estate and trust proceedings.

We have added a new segment- a case law update- which will be presented at this meeting by Tattiana Brenes-Stahl. I would like a volunteer to present the case law update for our next meeting in Tallahassee. If you are interested, please let me know. Tattiana will be circulating her materials by separate e-mail (or bringing them to the meeting).

For those of you who cannot make it in person, shame on you. The call-in number is 866 – 411 – 5140 Conference ID 69655328. While you are on the telephone, please no eating, typing, yelling at your secretary, or making unnecessary noises in the background. I kindly request that you place your line on mute when you are not speaking. I will try to bring our speakers closer to the phone.

Look forward to seeing you in Key Biscayne. Many thanks.

William T. Hennessey
Gunster, Yoakley & Stewart, P.A.
777 S. Flagler Dr.
Suite 500 E
West Palm Beach, FL 33401
(561) 650-0663 telephone
(561) 655-5677 fax

 

If you practice in South Florida you’ve probably heard about the the indictment of Ben Kuehne, a former president of the Dade County Bar Association, former president of the Miami chapter of the Florida Association of Criminal Defense Lawyers and member of the Florida Bar Board of Governors.  As explained here, Kuehne is being charged with money laundering for allegedly taking tainted funds for fees.

What’s scary for lawyers about the Kuehne indictment is that even if you apparently do everything right, you may end of getting arrested for simply doing your job.  Sure, you may ultimately prevail, but you’ll have to live through the personal nightmare of being arrested and charged with a crime.

I thought of the Kuehne indictment when I read here and here about a case in which two Georgia lawyers were arrested and apparently spent at least one night in jail after their client was forced to forfeit estate assets under Georgia’s Slayer Statute.  Here’s an excerpt from the ABA piece:

When Candace Rader and Valerie Cooke represented Debra Post in a murder case, they were allegedly paid $320,000 in legal fees through life insurance proceeds and real estate she deeded over to them.

The problem is, their client was accused of—and eventually pleaded guilty in 2003—to murdering her husband. And, under Georgia’s “Slayer’s Statute,” a murderer isn’t entitled to profit from his or her victim’s estate, as Rader and Cooke allegedly helped their client to do, according to the Atlanta Journal-Constitution.

The indictment against the two attorneys is the first time a criminal case has been brought under the statute, the newspaper reports.

Each is charged with six counts of theft by taking and one count of theft by receiving. They were taken to the Douglas County Jail after their Thursday arrest, the Atlanta paper says, and released the next day on $100,000 bond each, the Associated Press reports.

Lesson learned?

When it comes to staying out of trouble, spotting your risk exposures is half the battle (it’s the “unknown unknowns” that will get you).  The Georgia case gives probate attorneys something else to worry about (as if we didn’t have enough already). If your fees could in any way be characterized as tainted by criminal conduct, you need to assume the worst and take appropriate precautions.  As the Georgia lawyers learned, just because you’re the friendly neighborhood probate attorney (and not some high profile criminal defense attorney), doesn’t mean you can’t get put in jail for doing your job.

Blogging credit:

Credit goes to the Wills, Trusts & Estates Prof Blog for bringing the linked-to Georgia article to my attention in the blog post entitled Attorneys for murderer charged under slayer statute.

I’ve been a fan of the “directed trusts” idea from the time it was first talked up in the press [click here], through to its recent adoption here in Florida [click here].

Whether you make a living drafting trusts as a lawyer or administering them as a trustee, you should get to know this important new statute, and a great way to do that is to read Directed Trusts: The Statutory Approaches to Authority and Liability, written by two of Miami’s very own trusts-and-estates stars, Mary Clarke and Diana S.C. Zeydel.  Their article does a good job of zeroing in on the key issues drafters/trustees need to know about by using a compare-and-contrast approach among the various jurisdictions that have adopted a form of the directed-trusts statute, with a special focus on Florida and Delaware.

Here’s what the linked-to article had to say about Florida’s directed-trusts statute:

The Florida legislature recently passed an amendment to Florida Statutes §736.0703 intended to relieve the directed trustee of liability for acts done in reliance on the direction of a co-trustee having the authority to direct it in the trust document. Florida’s approach differs from the Delaware approach and the approach in the UTC in that it permits a directed trust only if the person giving the direction is also a trustee. The bill revises Florida Statutes §736.0703 by adding a new subparagraph (9) as follows.

Amendment to Fla. Stat. §736.0703. Cotrustees.

(9) If the terms of a trust instrument provide for the appointment of more than one trustee but confer upon one or more of the trustees, to the exclusion of the others, the power to direct or prevent certain actions of the trustees, then the excluded trustees shall act in accordance with the exercise of the power. Except in cases of willful misconduct on the part of the directed 3 trustee of which the excluded trustee has actual knowledge, an excluded trustee shall not be liable, individually or as a fiduciary, for any consequence that results from compliance with the exercise of the power, regardless of the information available to the excluded trustees. The excluded trustees shall be relieved from any obligation to review, inquire, investigate or make recommendations or evaluations with respect to the exercise of the power. The trustee or trustees having the power to direct or prevent actions of the trustees shall be liable to the beneficiaries with respect to the exercise of the power as if the excluded trustees were not in office, and shall have the exclusive obligation to account to and to defend any action brought by the beneficiaries with respect to the exercise of the power.

The significant difference between the approach in the amendment to the Florida statute and the approach of other states is that only a co-trustee may act as a “director,” thus subjecting the co-trustee with the power to direct to full liability as a fiduciary. Presumably, the governing instrument could, however, relieve the trustee with authority to direct from liability for breach of trust except for bad faith and reckless indifference to the purposes of the trust or the interests of the beneficiaries consistent with Florida Statutes §736.1011(1)(a). This should be distinguished from the authority contained in Florida Statutes §736.0808 where the power to direct the trustee does not completely exonerate the directed trustee from liability for following the direction, but the person giving the direction is limited to a fiduciary standard of “good faith,” rather than being subject to liability as a trustee.

The original bill did not include the language, “Except in cases of willful misconduct on the part of the direct[ed] trustee of which the excluded trustee has actual knowledge, ….” Surprisingly, it is not the directed trustee that is held liable for his or her own “willful misconduct” as in Delaware. Instead, the directed trustee must test the malfeasance of the directing trustee. This may present an interesting challenge for the directed trustee because the directed trustee must in effect test the state of mind of the directing trustee to determine if intentional misconduct has taken place. One wonders how the directed trustee will make such a determination. The “actual knowledge” requirement might mean that the directing trustee would have to articulate an intention to commit malfeasance regarding the trust before the directed trustee could be held liable. On the other hand, in its practical application the two tests may yield the same result. If the direction is a blatant violation of the terms of the trust, the directed trustee would likely be deemed to have engaged in willful misconduct upon following the direction, and the directing trustee would likely be deemed to have engaged in willful misconduct by giving such a direction.

Listen to this post

As I’ve written before, under Florida law you don’t need to actually produce a dead body to have someone declared dead.  If someone’s missing for over 5 years or there’s direct or circumstantial evidence of death, under F.S. 731.103 a court can enter an order declaring that person dead.

According to an AP report entitled Son of wanted Nazi wants him declared dead, the son of notorious Nazi doctor Aribert Heim is apparently relying on a similar statute to have his father declared legally dead so he can take control of a bank account with $1.78 million and other investments in his father’s name and donate some of it to help document the suffering that occurred at a former concentration camp.  Here’s an excerpt from the linked-to story:

Ruediger Heim told the Bild am Sonntag newspaper that his father — dubbed “Dr. Death” and atop the Simon Wiesenthal Center’s list of most-wanted suspected Nazi war criminals — should officially be declared missing and then dead.

He reiterated he has not had any contact with his father since he fled Germany in 1962, save two short notes in his family’s mailbox.

“Between 1962 and 1967, two notes appeared in our mailbox. There was a single sentence written on them, ‘I am doing fine.’ But if those letters were really from my father, I do not know,” the paper quoted him as saying.

Heim also said that he has no idea if his father, who would be 94, is alive or dead.

He told the paper he is working with a lawyer to see how he can have his wanted father declared missing and then dead so as to get control of the man’s bank account.

He said he, his brother and sister only discovered in 1997 that a bank account in his father’s name existed. If he could get control of the money, he told the newspaper he would donate to help document suffering in the Mauthausen concentration camp near Linz, Austria, where his father worked as camp doctor in October and November 1941.

So far, Heim’s children have made no claim to a bank account with $1.78 million and other investments in his name. To do that, they would have to produce proof that their father is dead.

Tampa probate litigator Russell R. Winer was kind enough to point me to an interesting will-contest story in the St. Petersburg Times by staff writer Chris Tisch entitled A will casts a shadow on a prominent lawyer who stands to gain millions.

When I read the linked-to story two points jumped out at me.  First, the decedent’s attorney wrote himself into the will, which is a clear ethics violation.  Fla. Bar Rule 4-1.8(c) prohibits an attorney from preparing an instrument giving the attorney or a person related to the attorney any substantial gift from a client, including a testamentary gift, unless the client is related to the proposed donee.  Second, bad facts can kill you at trial, even if these facts are arguably irrelevant as a matter of law.  On this second point read the following excerpt from the linked-to story:

But one piece of evidence convinced the judge the most that something improper was occurring. In her order, Laughlin calls it “The Agreement.”

It was signed in 2002 by Carey, DuBois and Tornwall and their spouses. It says that no breach of fiduciary duty had occurred in regard to Murphy and that “should any of the parties have a mind to upset the grand plan, they should first check with the other two parties,” Laughlin wrote.

“This document wreaks of a consciousness of fraud, and the court finds it to be persuasive evidence of undue influence,” Laughlin wrote. “The Agreement is also compelling evidence that the perpetrators knew all of the elements of undue influence were present.”

*     *     *

As for “The Agreement,” Fleece said it doesn’t reflect what should be most important in the case: Murphy’s intent.

“Does it look good? No. Did it really matter? No. It didn’t really deal with her intent,” Fleece said.

Murphy’s $7.2-million residuary estate remains in the hands of a curator until all appeals are exhausted.

As a self confessed trusts-and-estates “law geek”, I obviously believe courts (and thus litigants) are guided by the rule of law.  But I’ve also been around long enough to have a healthy respect for the “legal realism” school of thought: all law is made by human beings and, thus, is subject to human foibles, frailties and imperfections.

So thinking about what makes a particular group of human beings (judge, lawyers, clients) involved in a particular case “tick” is just as important as figuring out the law.  With that background in mind, I found a recent article by Arthur D. Burger of the New Jersey Law Journal entitled Why Do Lawyers Lie? One Word: Narcissism particularly interesting.

Next time your judge, opposing counsel or one of the clients does something baffling, take a step back and think about that person as a human being who may be under a lot of pressure and is just having a bad day.  If the particular person going crazy on you is opposing counsel, consider the following excerpt from the linked-to article:

Richard Ratner, a board-certified psychiatrist since 1973, has many lawyers as patients in his clinical work and also serves as a forensic psychiatrist in bar disciplinary cases and other types of litigation. He says a lot of "psychopathology" takes place in litigation, for a variety of reasons.

First, he notes that lawyers, generally, and litigators, in particular, tend to "have generous helpings of narcissism," which he says can be both good and bad. Narcissistic people, he states, "want to go out of their way to shine and make themselves look terrific." This is a good thing to the extent it motivates them to work hard and be prepared.

The problem, he says, comes when you put such people in the crucible of litigation, which after all is a competition with winners and losers. He says that this competition aspect creates a polarization of issues and, for narcissistic people, places their fragile egos directly onto center stage.

Ratner explains that extremely narcissistic people are so "needy for the affirmation of success," that the idea of losing is seen as unbearable. They will therefore use the psychological defenses of "rationalization" and "denial" to enable themselves to intentionally mislead — and even lie — if they believe that is the only way to win.

Ratner states that as a result of this rationalization and denial, they do not see themselves as having done anything wrong. Instead, they see themselves as justified , because they were acting for a "higher purpose." He explains that the power of rationalization can be enormous. It can even be seen in such horribly extreme examples as when the killing of innocent civilians by terrorists is seen as "heroic."

It is useful to understand this dynamic in our adversaries so we know what we are up against , and see the element of insecurity and desperation driving such behavior. It is also useful, however, to examine ourselves and look for similar symptoms.

None of us likes to lose, and nearly all of us, at times, get carried away in litigation by a certain "bunker mentality," through which we see our side as "good" and the other side as "bad." Ratner says that it’s important to take one’s own temperature during the course of a contentious case to assess whether you have maintained perspective. One good way to do this, he says, is to discuss the case with a colleague or at least to take time to calmly review the record and look at the facts.

. . .

Being aware of Ratner’s observations provides a tool for us to periodically look at ourselves, which should work to our benefit by allowing us to avoid court sanctions, see the strengths of an opponent’s case or simply avoid looking silly.

Our clients want us to fight hard — and to win. But we can do that best if we keep our wits and see reality. If that requires putting our egos in check, so be it. After all, it’s doctor’s orders.

I’ve written before about the upswing in trusts-and-estates litigation in this country [click here]. Now it’s the U.K.’s turn.  An article in the Telegraph entitled Inheritance disputes: where there’s a will there’s a war, reported on factors fueling increased probate litigation in the U.K. If you take a look at the U.S. article linked-to above and the linked-to U.K. piece it’s amazing how the same demographic and societal trends in both countries are playing themselves out in a similar fashion through probate litigation.  Here’s an excerpt from the U.K. article:

But it should not be surprising that inheritance disputes are so common: three-quarters of British citizens do not have a will, and 24 per cent of people anticipate that their inheritance could cause arguments among relatives, according to new research from Friends Provident. Lawyers from across Britain have told the Telegraph that they are handling ever-increasing numbers of will contentions. One northern firm, Brabners Chaffe Street, has reported a 200 per cent rise in the number of contested wills in the past three years alone.

While some solicitors cite high property prices, which make an estate well worth fighting over, others put the trend down to our newly litigious society and the fractured nature of modern families.

"Remarriages and children from previous relationships complicate an estate," says Simon Rylatt, head of contentious trusts and probate at law firm Boodle Hatfield. "There are more people who might be expecting to get a share ­- and more to feel resentment."

Blogging credit:

Credit goes to Prof. Gerry Beyer’s Wills, Trusts & Estates Prof Blog for bringing the U.K. article to my attention in this blog post.

Listen to this post

Florida law couldn’t be clearer, F.S. 732.518 tells us in no uncertain terms that you can’t contest a will until after the testator dies. But that doesn’t necessarily mean you can’t preempt a will contest before the testator dies.

For example, suppose you’re working with an older client with diminishing capacity whose will is sure to be contested.  What if you initiated a voluntary guardianship proceeding pursuant to F.S. 744.341 and obtained a final judgment, after a hearing in which anyone who might contest the estate plan was given notice and an opportunity to be heard, specifically approving the ward’s estate plan (be it a will or trust or some other non-probate transfer) and specifically finding that it is NOT the product of undue influence, fraud, etc?  Unlike in a traditional post-death will contest, you’d have the actual testator in front of the judge testifying as to the validity of his testamentary documents.  This judgment should collaterally estopp re-litigation of these same issues in a post-death inheritance case involving any of the same parties that were parties to the original guardianship proceeding. Presto! Inheritance litigation’s been preempted.

That’s basically what happened in Murphy v. Murphy, 164 Cal. App. 4th 376 (2008), a California case that received national attention as a possible roadmap for delivering that one thing most estate planning clients with unorthodox testamentary wishes want most of all: certainty their estate plan won’t be invalidated by a court after they’re dead and no longer around to personally defend its validity. As explained in Barred by Lunatics Law, a short piece by Chicago probate litigator Samantha E. Weissbluth:

The decision, in Murphy v. Murphy, 164 Cal. App. 4th 376 (Cal. App. 1st Dist., June 26, 2008), held that a posthumous challenge to a will was barred by collateral estoppel insofar as those issues were in fact litigated or could have been litigated in a substituted judgment proceeding while the decedent was still alive. …

The lesson here is that court approval of an individual’s estate plan when that individual is under a conservatorship will protect the plan against any posthumous contest to it (assuming, of course, that interested parties receive notice of the conservator’s petition to approve the plan).

Those of you with clients in dicey family situations in which you worry about a posthumous contest might want to weigh the risks, costs and public nature of a conservatorship proceeding (or some kind of declaratory judgment action if permitted in your state) to try and bulletproof your client’s plan.

And, attorneys representing clients disgruntled by a now incapacitated relative’s estate plan should certainly come armed and ready for battle upon receiving notice of an action for court approval of that plan.

Listen to this post

For no reason other than I find this bit of historical/T&E crossover trivia interesting, here’s a copy of the arbitration clause contained in George Washington’s will:

But having endeavoured to be plain, and explicit in all Devises–even at the expence of prolixity, perhaps of tautology, I hope, and trust, that no disputes will arise concerning them; but if, contrary to expectation, the case should be otherwise from the want of legal expression, or the usual technical terms, or because too much or too little has been said on any of the Devises to be consonant with law, My Will and direction expressly is, that all disputes (if unhappily any should arise) shall be decided by three impartial and intelligent men, known for their probity and good understanding; two to be chosen by the disputants–each having the choice of one–and the third by those two. Which three men thus chosen, shall, unfettered by Law, or legal constructions, declare their sense of the Testators intention; and such decision is, to all intents and purposes to be as binding on the Parties as if it had been given in the Supreme Court of the United States.

Not that I’m taking any credit for uncovering this gem all on my own, this clause has been popping up on various blogs for some time [click here, here, here].

Arbitration clauses in wills & trusts are a “must have”:

Washington was on to something when he incorporated an arbitration clause into his will. Two centuries later, it’s still a good idea. First, if your arbitration clause is properly drafted, your case gets decided by a specialized trusts and estates lawyer (or lawyers) with real-life experience handling complex estate matters (usually 10+ years) vs. a randomly assigned state-court judge, who almost never has any private-practice experience dealing with complex estate matters (most judges are former prosecutors). Second, by privatizing the process the parties can, to the extent permitted by law (and there are limitations), opt out of the dysfunctions inherent to an overworked and underfunded state court system. As I explain here, it’s this second point that tips the scales for me.

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 eliminated in 2007 with the adoption of F.S. 731.401, expressly authorizing mandatory arbitration clauses in wills and trusts (which I wrote about here). In that blog post I also discussed a few sample arbitration clauses for wills and trusts, including the sample clause published by the American Arbitration Association (click here) and the sample clauses provided in an excellent ACTEC article entitled Resolving Disputes with Ease and Grace.

LaCalle v. Barquin, — So.2d —-, 2008 WL 3358300 (Fla. 3d DCA Aug 13, 2008)

Sometimes even when you’re right, you still lose (yet another example of the risks inherent to litigation).  In the linked-to case the 3d DCA reversed a probate court order dismissing a properly filed petition to establish and probate a lost will.  The 3d DCA based its reversal on the following:

1.  Ongoing probate of an earlier will does not preclude a later-filed petition to probate a lost will

3d DCA: [T]he trial court might have been swayed [into granting the motion to dismiss] by Movant’s argument that a petition to administer another earlier-dated will already had been granted. [This fact] does not preclude or estop the advancement of [a petition to establish and probate a lost will]. A petition for administration of a will and a petition to establish a lost or destroyed will in probate are different proceedings. See Lowy v. Roberts, 453 So.2d 886 (Fla. 3d DCA 1984).

2.  Yes, even in probate, the rules for motions to dismiss still apply

3d DCA: The trial court might have been misled by affidavits-attached to the motion to dismiss-of the two parties alleged to have witnessed the execution of the destroyed will, stating they “do not recall” having witnessed the will’s execution  .  .  .   [I]t is apodictic that matters dehors the four corners of a complaint or petition may not be considered on a motion to dismiss. See Fla. Prob. R. 5.025(d)(2) (“[T]he proceedings [to probate a lost or destroyed will], as nearly as practicable, shall be conducted similar to suits of a civil nature and the Florida Rules of Civil Procedure shall govern, …”); see also Pizzi v. Cent. Bank & Trust Co., 250 So.2d 895, 897 (Fla.1971) (holding-on a motion to dismiss-that “[t]he court must confine itself strictly to the allegations within the four corners of the complaint” (quoting Kest v. Nathanson, 216 So.2d 233, 235 (Fla. 4th DCA 1968))); N.E. at West Palm Beach, Inc. v. Horowitz, 471 So.2d 570, 570-71 (Fla. 3d DCA 1985) (“The purpose of a motion to dismiss is to ascertain whether a plaintiff has alleged a good cause of action and the court must confine itself strictly to the four corners of the complaint.”).

Lesson learned?

Florida’s probate courts are underfunded and overworked. So it should come as a surprise to no one that smart, well meaning judges will make mistakes from time to time.  So how do we and our clients “deal” with this fact?  If at all possible, negotiate a settlement.  If that doesn’t work, take full advantage of the other ADR tools available to Florida litigants [click here].  If that doesn’t work and you find yourself in court in spite of your best efforts, plan accordingly.

First, factor in the risk of an appeal (or multiple appeals) into your litigation budget. If your client has set aside $10,000 or $100,000 or $1,000,000 to spend on your case, make sure a good % of that budget is set aside to pay for appeals.  Second, manage expectations. No matter how badly your client wants to be assured his case is a slam dunk (and how many times he asks you), don’t fall for that trap. Keep reminding him of the facts of life: in litigation, even when you’re right, you can still spend a lot of money and lose.