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This case is the latest example of the lopsided unfairness resulting from how current Florida law treats life estates in homes.  To better understand the problem you’ll want to read The New Homestead Trap: Surviving Spouses Are Trapped by Life Estates They No Longer Want or Can Afford, published in the June 2007 edition of the Florida Bar Journal. Here’s an excerpt:

[S]urviving spouses — who are ostensibly “protected” by the Florida Constitution and statutes (given the “right” to live “rent-free in a homestead”) — are required to bear 100 percent of the burden of the state’s two largest fiscal crises: the escalation in property taxes and homeowners’ insurance. In addition, costs of ordinary upkeep, interest payments on mortgages and, in many cases, virtually all of the special assessments are also the burden of the surviving spouse. Further exacerbating the situation, many widows live in communities which have charged (and are still charging) assessments to repair common areas damaged by the hurricanes the state faced these past few years — with the promise of active hurricane seasons for the foreseeable future.

Case Study

Schneberger v. Schneberger, — So.2d —-, 2008 WL 373243(Fla. 4th DCA Feb 13, 2008)

Hurricane damages were at the heart of the dispute in the linked-to case between the life tenant (surviving spouse), and the remainderman (decedent’s son from a prior marriage).  To make matters worse, the life tenant in this case was prohibited from renting the property; and under Florida law a life tenant can’t force a sale of the property through a partition action.  Bottom line, she was stuck in the property and apparently stuck with the bills for major repairs to the home – plus taxes and insurance.  Here’s how the 4th DCA summed up the trial court’s ruling, which was upheld on appeal:

When the home was damaged by hurricanes, the expense of repair and insurance became an issue between the wife and the remainderman, the husband’s son by a prior marriage, who was also the trustee of the husband’s trust. The wife filed a complaint against the trustee and remainderman to determine who was responsible for the cost of repairs as well as the continuing cost of insurance. The remainderman filed a counterclaim for declaratory judgment as to the same issues.

After a trial, the court declared that the .  .  .  wife was entitled to a life estate in the property and as such was responsible for those duties of a life tenant, including the responsibility to pay all ordinary and necessary expenses that inure to a homeowner, including taxes, insurance, homeowner’s association fees, and general repairs for the upkeep and maintenance of the property. The remainderman was responsible to pay for the hurricane repair costs from the proceeds of the insurance as an extraordinary expense to the property. He was also required to pay the special hurricane assessment by the homeowner’s association.

As support for its affirmance of the trial court’s ruling, the 4th DCA summarized Florida law governing the allocation of expenses between life tenants and remaindermen as follows:

In Florida, “a tenant for life or a person vested with an ordinary life estate is entitled to the use and enjoyment of his estate during its existence.” Sauls v. Crosby, 258 So.2d 326, 327 (Fla. 1st DCA 1972). “The only restriction on the life tenant’s use and enjoyment is that he not permanently diminish or change the value of the future estate of the remainderman. This limitation places on the ‘ordinary life tenant’ the responsibility for all waste of whatever character.” Id. (footnote omitted). “It is well settled that life tenants are bound in law to pay property taxes during their continuance of their estate. Failure to pay taxes constitutes waste.” Chapman v. Chapman, 526 So.2d 131, 135 (Fla. 3d DCA 1988) (citations omitted). Therefore, it follows that the wife would have the responsibility to pay all ordinary and necessary expenses that inure to a homeowner, including taxes, insurance, homeowner’s association fees, and general repairs for the upkeep and maintenance of the property, and not to dissipate or cause waste to the property.

Lesson learned?

If you own property and can’t afford to keep it up, the best way to deal with the problem is to sell the property.  If you co-own property with someone you don’t get along with (for example, your ex’s children), the best way to deal with the problem is to sell the property.  Under existing Florida law a life tenant can NOT force a sale of the property.  I am assuming that the surviving spouse in the linked-to case would sell the property if she could, but her ex’s son told her to take a hike.

What’s needed is a legislative fix: surviving spouses with life estates in their homes should be able to force a sale of the property when the expenses become burdensome and the remaindermen wont voluntarily consent to the sale.  Fortunately, this legislative fix is in the works, as reported by Jeffrey A. Baskies (yes, same guy who wrote the Florida Bar Journal article) in the written materials for the January 2008 meeting of the Florida Probate Law and Procedure Committee.  The following is an excerpt from the Baskies report [click here for link to committee agenda containing Baskies’ full report starting on page 17]:

Chapter 64 of the Florida Statutes governs partition actions. With only a few modifications, it can be amended to allow partition of protected homestead property between surviving spouses and the decedent’s lineal descendants.  The subcommittee proposes revising chapter 64 as follows:

Section 64.031 is amended to read as follows.

64.031 Parties.–The action may be filed by any one or more of several joint tenants, tenants in common, owners of life estate created by F.S. 732.401, or coparceners, against their cotenants, coparceners, or the holders of remainder interests (in the case of life estates created by F.S. 732.401), or others interested in the lands to be divided.

Section 64.041 is amended to read as follows.

64.041 Complaint.–The complaint shall allege a description of the lands of which partition is demanded, the names and places of residence of the owners, joint tenants, tenants in common, owner of life estate created by F.S. 732.401 or the holders of remainder interests (in the case of life estates created by F.S. 732.401), coparceners, or other persons interested in the lands according to the best knowledge and belief of plaintiff, the quantity held by each, and such other matters, if any, as are necessary to enable the court to adjudicate the rights and interests of the party. If the names, residence or quantity of interest of any owner or claimant is unknown to plaintiff, this shall be stated. If the name is unknown, the action may proceed as though such unknown persons were named in the complaint.

Section 64.051 is amended to read as follows.

64.051 Judgment.–
(1) The court shall adjudge the rights and interests of the parties, and that partition be made if it appears that the parties are entitled to it. When the rights and interests of plaintiffs are established or are undisputed, the court may order partition to be made, and the interest of plaintiffs and such of the defendants as have established their interest to be allotted to them, leaving for future adjustment in the same action the interest of any other defendants.
(2) In the case of an action for partition of protected homestead as defined in s. 731.201(32) where the surviving spouse owns a life estate, the surviving spouse shall be entitled to an order of partition if the action is brought by the surviving spouse.
(3) If any party to the action alleges that tax as defined in s. 733.817(1)(n) will be due by reason of a severance as ordered by the court, the court shall determine all issues concerning apportionment of that tax under applicable federal and state law. The court shall have jurisdiction to determine the probable tax due or to become due from all interested persons, apportion the probable tax, and enter orders and judgments to enforce payment of any tax as so apportioned. The court may retain jurisdiction over the parties and issues to modify the order of apportionment as appropriate until after the tax is finally determined.

This proposal only gives the spouse a right to a partition. The subcommittee debated giving remainder beneficiaries a right to seek partition, but overall the subcommittee seemed to favor only permitting surviving spouses to seek partition, while not permitting remainder beneficiaries to displace the life tenants – not affording the ability to “throw the life tenant out” at will. This proposal will go a long way to helping and protecting those surviving spouses who currently have life estates (or may receive them in the future) they don’t desire to retain, while weighing and balancing the interest of the remainder beneficiaries.

McKoy v. DeSilvio, — So.2d —-, 2008 WL 343255 (Fla. 2d DCA Feb 08, 2008)

Inheritance disputes usually play themselves out in one of three forums: [1] trust litigation, [2] probate litigation and [3] real property litigation.  The linked-to case provides solid guidance on the real-property-litigation front by addressing two frequently-litigated points involving contested deeds:

What counts as valid consideration?

One way to challenge a deed is on lack-of-consideration grounds: it’s an indicator of undue influence or lack of capacity.  In the linked-to case the trial court granted summary judgment invalidating a contested deed in part on lack-of-consideration grounds.  The 2d DCA reversed the trial court’s ruling on this point reminding us that when it comes to weighing consideration, it’s the thought that counts, not the dollars exchanged:

Both deeds recited “consideration of the sum of $1.00 and other good and valuable consideration.” In the quiet title action, DeSilvio alleged that the deeds failed for lack of consideration. There were disputed issues of material fact on this issue. See Diaz v. Rood, 851 So.2d 843, 846 (Fla. 2d DCA 2003) (stating that “a promise, no matter how slight, can constitute sufficient consideration so long as a party agrees to do something that they are not bound to do”) (citations omitted). Notwithstanding, the circuit court ruled that the deeds were void due to a lack of consideration. In granting DeSilvio’s motion for summary judgment on this ground, the circuit court erred. See Fla. R. Civ. P. 1.510(c) (directing that summary judgment shall be granted only when the record evidence shows “there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law”); see also Holl v. Talcott, 191 So.2d 40 (Fla .1966). Accordingly, we reverse on this point.

Is failure to properly execute a deed fatal?

The second issue on appeal was whether a deed with only one subscribing witness was fatally flawed.  The trial court said yes and the 2d DCA affirmed.  From a probate attorney’s viewpoint, what’s interesting about this portion of the linked-to opinion is the reference to a remedy for such cases that is NOT available when the grantor is dead:

Our reversal affects only the Herron deed, however, because the Earnshaw deed suffers from an additional deficiency. As alleged in DeSilvio’s motion for summary judgment, the Earnshaw deed contained the signature of only one subscribing witness. As to this deed, the summary judgment was also based on the undisputed fact that the deed was not signed by the requisite number of subscribing witnesses. See § 689.01, Fla. Stat. (2003) (requiring presence of two subscribing witnesses to convey real estate).

The McKoys claimed that the notary also acted as a subscribing witness. But she did not sign the deed as such, and the McKoys did not file a counterclaim seeking to reform the deed. See Smith v. Royal Auto. Group, Inc., 675 So.2d 144, 153-54 (Fla. 5th DCA 1996) (stating that reformation action may be used to supply missing signature). In any event, any such action would have required that the original grantor be joined as an indispensable party. See Palm v. Taylor, 929 So.2d 566 (Fla. 2d DCA 2006) (reversing judgment reforming deed when claim was not raised until amendment of complaint during trial, over objection, and when original grantor was not party to suit). Therefore, although we reverse the summary judgment as to Herron’s deed, we affirm the summary judgment as to Earnshaw’s deed.

Sarasota attorney Barry F. Spivey, who also chairs the Florida Bar’s Trust Law Committee, circulated the following email and link to the Treasury Department’s recently published white paper on the U.S. gift tax.  If tax planning is a part of your estate planning practice, this paper is probably a must read.  Here’s Barry’s email and a link to the referenced white paper:

"For you tax geeks or just plain intellectually curious on the Committee, the Office of Tax Analysis of the Treasury Dept. has published a paper titled "The Federal Gift Tax: History, Law, and Economics." The paper traces the evolution of the gift tax, its structure, and interactions with the income and estate taxes. It concludes with a discussion of the behavioral effects of the gift tax."

Barrett v. Barrett, — So.2d —-, 2008 WL 239032 (Fla. 4th DCA Jan 30, 2008)

Pro se (self-represented) litigants are not sensitive to the sanctions normally applied to counsel for bringing frivolous actions, and indigent litigants are not sensitive to fee-shifting or fines.  Little wonder then that an out of control pro se litigant can be especially difficult for both courts and opposing parties to contend with. I’ve written before about the "inherent power" Florida courts have to manage a vexatious pro se litigants [click here].

In the linked-to case the trustee of a family trust admitted that he had taken "several hundred thousand dollars" from the trust in the early 80’s; when confronted by his brothers, he promised not to do it again and to pay the money back.  Fast forward to 2005, wayward trustee is again "experiencing financial difficulties" and again tries to dip into trust funds.  This time his brothers sued to have him formally removed as trustee.

Although he was represented by counsel for the appeal, it’s unclear whether wayward trustee ("Marc"), was pro se for the underlying trial.  To me, it looks like he was pro se.  The issue on appeal was whether the trial court erred when it denied his last-minute attempt to amend his answer and claim a new affirmative defense.  The trial court said no, and the 4th DCA upheld that decision as follows:

In 2005, when Marc was again experiencing financial difficulties, he attempted to interfere with the management of the trust, and his brother’s filed this lawsuit seeking to have him removed as co-trustee and a declaratory judgment ordering that any funds improperly taken from the trust by Marc would be deemed advancements, to be recouped as an offset against future disbursements to Marc from the trust.

The first issue Marc raises, and the only one we address, is the denial of his motion to amend his answer to raise the defense that any money he owed the trust had been discharged in bankruptcy. The complaint was filed in October, 2005, and seventeen days before the trial in July, 2006, Marc filed a motion for leave to amend with his proposed amendment attached. The proposed amendment alleged that Marc had gone through a bankruptcy in 1985 in Colorado and that the indebtedness to the trust was based on promissory notes he had executed in the early 1980’s before the bankruptcy.

*     *     *     *     *

Significantly, Marc did not attach any documents to support his statements about the bankruptcy. The court entered an order denying the motion to amend without prejudice.

The non-jury trial did not begin as scheduled in July, 2006, but did take place at the end of September, 2006. At the beginning of the trial, Marc asked the court to continue the trial for a week or two stating that the bankruptcy court had reopened his bankruptcy case. The court refused to delay the trial but agreed to “incorporate whatever the bankruptcy court says” into the final judgment. No orders or any other documents from the bankruptcy court were filed.

Amendments to pleadings under rule 1.190 should be liberally granted when justice requires, but the closer a case is to trial when amendment is requested, the less likely a denial of amendment will be an abuse of discretion. Zikofsky v. Robby Vapor Sys., Inc., 846 So.2d 684 (Fla. 4th DCA 2003).

If Marc, who alleged that he had just reviewed the court file of his bankruptcy, had attached documents supporting his proposed affirmative defense that these claims were discharged, we have no doubt that the trial court would have allowed him to amend. Notably, the court denied the motion without prejudice, and the trial was postponed for several months, yet Marc made no effort to support his claim by attaching documents. Under these circumstances the court did not abuse its discretion in denying the motion.

Lesson learned?

Motions to amend pleadings under Rule 1.190 of the Florida Rules of Civil Procedure are almost always granted.  I have never objected to such motion.  This case is a good example of when "NO" might be the right answer to a motion to amend.  If a litigant appears to NOT be acting in good faith, the trial court should be willing to call him or her on it; and opposing counsel shouldn’t feel constrained from asking a trial court to reign in this type of behavior . . . which in my opinion is most often seen in cases involving pro se litigants.

UPDATE:

This is a first, I just received a demand letter from a firm in California requesting that I “remove [this] posting from [my] blog forthwith.”  [Click here for copy of demand letter].  Apparently, I “should” have known that the original story was pulled by the Orange County Business Journal.  No, I didn’t know, and am at a loss as to why I “should” have known this fact.

I have to say I’m somewhat flattered that someone in California thinks this Florida-focused blog is important enough to warrant a demand letter.  Anyway, as stated in the demand letter, the offending report has been pulled by the Orange County Business Journal, so who am I to say no.  The post below has been redacted accordingly.

ORIGINAL BLOG POST – AS REDACTED:

I’ve previously written about Florida probate litigants successfully claiming the Fifth Amendment privilege against self-incrimination [click here].  The reason why litigants claim this constitutional right in a probate proceeding is because they don’t want their testimony used against them in a criminal investigation.  This is a legitimate concern.

A probate case out of California involving the estate of Vitamin C entrepreneur Jay Patrick and his California-based Alacer Corp. is a good example of how estate litigation can spill over into a criminal investigation.  .  .  .

[Original text deleted in response to the demand letter linked-to above.]

Nasser v. Nasser, — So.2d —-, 2008 WL 239073 (Fla. 4th DCA Jan 30, 2008)

Fees and costs.  Attorneys say those words all the time, and we can all agree on what we mean by the word "fees," even when we don’t agree on the amount of fees; what’s usually much less clear is what mean by the word "costs" for purposes of a costs order.  Understanding the scope of the word "costs" is important because it enables parties to better weigh the pros/cons of seeking a costs order (i.e., will the expense of getting a costs order exceed the benefit) as well as assessing the economic risks when you’re being threatened with a costs order.

The linked to case is useful on two fronts: (i) it gives probate counsel a ready resource for anticipating which expenses are likely to be included within a costs order; and (ii) it explains the proponent’s burden of proof when seeking costs.  In this case the personal representative appealed an order taxing costs that did not include deposition costs.  Here’s how the 4th DCA addressed this point:

As to the award of costs, appellant contends that the trial court erred in failing to tax as costs the expense of two depositions. Pursuant to the recently revised Uniform Guidelines for Taxation of Costs, deposition expenditures are included in the category of items that should be taxed. In re Amendments to Unif. Guidelines for Taxation of Costs, 915 So.2d 612, 616 (Fla.2005). It is the moving party’s burden to show that the requested costs were reasonably necessary to defend the case at the time the action precipitating the cost was taken. Id. During the hearing on the motion for attorney’s fees and costs, it does not appear that there was ever any inquiry into whether the requested costs were reasonably necessary to defend the case at the time the action precipitating the cost was taken. As the appellant failed to meet her burden in the trial court to show that the requested costs were reasonably necessary, we must affirm the court’s denial of these additional costs.

In re Estate of McKibbin, — So.2d —-, 2008 WL 161322 (Fla. 2d DCA Jan 18, 2008)

This case is yet another example of the distinction between the agency-law principals governing power-of-attorney disputes, versus the fiduciary-law principals governing trustee and personal-representative disputes.  This distinction is significant and goes a long way towards understanding how Florida’s appellate courts have consistently interpreted Florida law governing powers of attorney.

Florida law is clear: an attorney-in-fact’s authority is limited solely to actions “specifically enumerated in the durable power of attorney.” F.S. 709.08(7)(a). This authority is much narrower than the general scope of authority granted to personal representatives and trustees [click here for past examples].

In the linked-to case the issue was whether a decedent’s estate was bound by an arbitration agreement signed prior to her death by her son and attorney-in-fact.  Nothing in the power of attorney granted the attorney-in-fact authority to enter into an arbitration agreement.  Unfortunately this point was lost on the trial-court judge, who ruled the arbitration agreement was binding.  The 2d DCA explained its rationale for reversing the trial-court’s ruling as follows:

Ms. McKibbin’s son presented a durable power of attorney to Alterra to demonstrate that he had the legal authority to enter into the residency agreement on behalf of his mother. Nothing in that power of attorney, however, gave Ms. McKibbin’s son the legal authority to enter into an arbitration agreement on behalf of his mother. See Kotsch v. Kotsch, 608 So.2d 879, 880 (Fla. 2d DCA 1992) (holding that powers of attorney are strictly construed to grant only the powers specified). Furthermore, there was no other basis upon which to bind Ms. McKibbin to the arbitration agreement. Hence, the Estate was not bound to arbitrate, and the trial court erred in granting Alterra’s motion to compel binding arbitration. See id.; Regency Island Dunes, Inc. v. Foley & Assocs. Constr. Co., 697 So.2d 217, 218 (Fla. 4th DCA 1997) (“One who has not agreed, expressly or implicitly, to be bound by an arbitration agreement cannot be compelled to arbitrate.”). Accordingly, we reverse the trial court’s order granting the motion to compel binding arbitration.

Lesson learned?

If you’re an estate planner, you want to make sure the powers of attorney you draft explicitly authorize those actions that are most important to your clients.  If you’re a litigator, the starting and end point of your case will be the actual text of the power of attorney.  If the disputed action is not expressly authorized by the text of the power of attorney, chances are it’s not legally binding.

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Wheeler v. Powers, — So.2d —-, 2008 WL 160881 (Fla. 5th DCA Jan 18, 2008)

In this case the primary issue on appeal was whether the Florida Probate Code’s interested-person definition includes a nominated personal representative under a prior will.  The probate court said no, the 5th DCA said YES . . . but added the following proviso:

However, we do not suggest that every personal representative from every prior will should be granted standing. As stated in [Hayes v. Guardianship of Thompson, 952 So.2d 498, 507 (Fla.2006)], the definition of “interested person” is fluid and “must be determined according to the particular purpose of, and matter involved in, any proceeding.” 952 So.2d at 507. In this case, Dorothy was of sound mind when she prepared her 2001 Will and placed Mr. Wheeler in fiduciary positions. Nearly four years later and six weeks before she was involuntarily hospitalized with late stage Alzheimer’s disease, she removed Mr. Wheeler from the Will and added her previously disinherited stepson.

Mr. Wheeler allegedly lost standing under Dorothy’s 2001 Will due to undue influence. He was the alternate personal representative and co-trustee for approximately four years until Dorothy changed her Will under suspicious circumstances. Under these circumstances, we find that Mr. Wheeler is an “interested person” within the meaning of section 731.201(21). Therefore, we reverse the trial court’s denial of relief on this claim.

Because we conclude that Mr. Wheeler has standing as an alternate personal representative under a prior Will, we need not reach the issue of whether Mr. Wheeler has standing as a co-successor trustee under a prior trust.

The take-away from this part of the case is that the named PR under a prior will “may” have standing if a win at trial would result in the appointment of the PR under the prior will.  It’s also important to note that unlike most other forms of litigation, standing for purposes of contested probate proceedings is not limited to parties having an economic stake in the outcome.  A testator’s right to designate whom will be his PR is of such importance that this status alone can be the basis for standing to litigate.  I’ve written before about the deference given under Florida law to a testator’s selection of his PR [click here].

What if you file a caveat and the local Clerk’s Office messes up and fails to provide you with notice?

In this case the named PR  had also taken the  prudent step of filing a caveat.  Unfortunately, the clerk of the court failed to comply with its obligation to notify him when a petition to file the later-signed will was filed. When the named PR sought to have the probate proceeding revoked on this basis the probate court ruled against him, and was again reversed on appeal for the following reason:

Another issue raised on appeal is whether probate of the 2005 Will should be revoked because timely notice was not provided to a caveator. Florida Probate Rule 5.260(f) states that “[a]fter the filing of a caveat by an interested person other than a creditor, the court shall not admit a will of the decedent to probate or appoint a personal representative without service of formal notice on the caveator or the caveator’s designated agent.” Additionally, the Florida Supreme Court has long recognized that the filing of a caveat precludes the admission of a will to probate until the caveator is provided statutory notice. See Street v. Crosthwait, 186 So.2d 516 (Fla.1939); Barry v. Walker, 137 So.2d 711 (Fla.1931); Grooms v. Royce, 638 So.2d 1019 (Fla. 5th DCA 1994); In re Estate of Hartman, 836 So.2d 1038 (Fla. 2d DCA 2002); Nardi v. Nardi, 390 So.2d 438 (Fla. 3d DCA 1980). Since we find that Mr. Wheeler was an “interested person” within the meaning of section 731.201(21), we hold that the trial court erred in not revoking the probate of the 2005 Will because timely notice was not provided to a caveator as required by Florida Probate Rule 5.260(f) and Florida case law. Thus, the orders appointing the personal representative and admitting the 2005 Will to probate must be set aside to provide notice to the caveator.