Picking the right person to serve as personal representative or trustee can make all the difference in the world.  The wrong person can convert what should be an uncontested estate into a quagmire of never-ending litigation (see here).  The right person (or entity) can take a difficult situation and smoothly work through the issues with minimum fuss and expense to the benefit of all concerned.

Forbes on-line recently published Choose The Right Executor, which does a solid job of underscoring the importance of picking the right personal representative ("executor" if you live in the North East). Here’s an excerpt from the linked to piece:

Most people tend to choose a family member or a close friend to act as an executor and to administrate their wills upon their death. But because of the intricacies that go with the job, people must realize that the most competent person (not the closest in relation) should be chosen. As mentioned before, this does not mean that the chosen individual must do everything themselves. Executors are allowed to hire others to help with various aspects of the process (such as an accountant to help with the taxation portion).

With that in mind, if you don’t have a friend or a relative who you think can complete these duties in a satisfactory manner, don’t worry–attorneys, accountants and other professionals can act as an executor for a fee, usually derived from the deceased person’s estate. And while that fee may be in the hundreds or even thousands of dollars (depending on the size of the estate and difficulties involved) it may be worthwhile, especially if it means that your family will receive their inheritance intact and on a timely basis.

The bottom line is that most people assume that being an executor is an easy task that can accomplished by anyone, but because the probate process is so involved and may entail interaction with tax and legal professionals, only an intelligent, dependable person should be named as executor.

Source: Death & Taxes Blog

Listen to this post

Article X, section 4(c) of the Florida Constitution, which declares that “homestead shall not be subject to devise if the owner is survived by a spouse or minor child,” is one of the few “forced heirship” rules applicable under Florida law (the only other example of significance would be Florida’s spousal elective share rules).  These rules provide an opportunity to challenge a will that is exponentially easier than traditional grounds for challenging a will in Florida (see here).

Case Study

Phillips v. Hirshon, — So.2d —-, 2007 WL 1263475 (Fla. 3d DCA May 02, 2007)

In this case dad devised a life estate in his Key Biscayne penthouse to his girlfriend.  One of his two surviving sons was a minor, so they challenged this devise by arguing that the property was homestead property.  Here’s how the 3d DCA summarized their argument:

After their father’s death, Joseph and David filed separate petitions to determine homestead. The thrust of their argument to the trial court was that the co-op was homestead property in the hands of their father at the time of his death and therefore not subject to devise by him under Article X, section 4(c) of the Florida Constitution, which declares that “homestead shall not be subject to devise if the owner is survived by a spouse or minor child.” The brothers contend that because David was a minor, the bequest under the will fails and the property passes outside of the estate, and therefore, the brothers now share the father’s interest in the co-op on an equal basis as a matter of law.

3d DCA says NO to homestead status for co-op

The trial court didn’t buy this argument, and neither did the 3d DCA based on a conflicting Florida Supreme Court opinion.  However, the 3d DCA made clear that it felt the sons should have prevailed, and took the extra step of certifiying the issue to the Florida Supreme Court for reconsideration.  Here’s ow the 3d DCA summarized its holding:

The Levine brothers urge that because their father occupied the co-operative apartment under a long-term proprietary lease received in conjunction with his purchase of his interest in the co-op, the property is protected homestead property under Florida law. Applying the principle of stare decisis, we affirm the decision of the trial court on authority of In re Estate of Wartels v. Wartels, 357 So.2d 708 (Fla.1978), which expressly holds “that a cooperative apartment may not be considered homestead property for the purpose of subjecting it to Florida Statutes regulating the descent of homestead property.” Id. at 711 (construing Article X, section 4(a)(1), Fla. Const.). At the same time, we certify to the Florida Supreme Court as a question of great public importance under Article V, section 3(b)(4) of the Florida Constitution, whether its decision in Wartels has continuing vitality in light of subsequent legislative action. We also find certifiable, direct conflict between our decision today and the decision of the Fourth District Court of Appeal in S. Walls, Inc. v. Stilwell Corp., 810 So.2d 566 (Fla. 5th DCA 2002), which construed the same section of Article X, section 4 of the Florida Constitution upon which the Wartels court relied to deny the benefit of homestead to an heir in the devise and descent context of Article X, section 4(c) to nevertheless afford the benefit of homestead protection from a forced sale under Article X, sections 4(a) and 4(b) of the same constitutional provision.

Legislative Update: Cooperative Unit as Homestead

In 2021 the Florida legislature statutorily settled the question of whether a cooperative unit is real property for homestead devise and descent purposes by amending the definition of a cooperative “unit” in F.S. 719.103(26), which now clearly states that “[a]n interest in a [cooperative] unit is an interest in real property.” According to The Fund’s title note 19.03.05, this means that “a cooperative unit qualifying as homestead is both protected from creditors and treated as homestead for purposes of devise and descent.”

Intellectual property rights may be the single most valuable asset owned by a decedent’s estate, and in the case of celebrities, the dollar amounts can easily be in the millions (see here).  This recent news item is but the latest example of pseudo probate litigation addressing the issue (see here for others).  The following is an excerpt from Lensman’s Estate Wins Battle Over Images of Marilyn Monroe:

A federal judge in Manhattan has sided with the family of late photographer Sam Shaw in a dispute over the rights to images of Marilyn Monroe.

Southern District of New York Judge Colleen McMahon rejected a claim that the estate of Shaw had violated Monroe’s right of publicity by selling photos without the consent of Marilyn Monroe LLC, a company founded by the Hollywood icon’s heirs.

The judge, writing in Shaw Family Archives Ltd. v. CMG Worldwide, Inc., 05-CV-3939, said the laws of New York, California and Indiana, which were at the heart of the dispute, did not grant a retroactive right of publicity to Monroe after her death.

"Ms. Monroe could not devise by will a property right she did not own at the time of her death in 1962," the judge wrote.

The ruling is the first of its kind involving the image of the legendary sex symbol. The attorneys who represent the Shaw estate, David M. Marcus and Christopher Serbagi, said "tens of millions" of dollars are at stake because of the ruling. They will pursue counterclaims against Monroe’s heirs for interfering with licensing relationships.

As reported in When the Rich Die, Lawsuits Sometimes Fly by WSJ columnist Robert Frank, the widow of famed nutritionist Dr. Robert Atkins is suing the trustees of her $400 million marital trust.  Ms. Atkins’ lawsuit is also summarized in greater detail in a press release (interesting litigation tactic?).  And there’s a Florida connection: as reported here, Ms. Atkins’ attorney is celebrity Florida attorney Roy Black.

Here is an excerpt from the linked-to WSJ column:

Ms. Atkins’ tale, recounted in my print column today, is a lesson in choosing advisors. When Dr. Robert Atkins, of Atkins diet fame, died suddenly in 2003 after slipping and falling on an icy New York City sidewalk, he had a relatively small investible fortune, since most of his wealth was tied up in his business. When the business was sold after his death, his wife was left with $400 million. Dr. Atkins had appointed two of his business partners as trustees for the marital trust. But shortly after his death, Veronica Atkins got a call from a family acquaintance to offer to help manager her money. She got rid of the two advisors appointed by her late husband and hired a new team, led by a Miami businessman.

Over time, however, Ms. Atkins felt that the advisors were taking her for a ride. So in 2006, she stopped paying part of their hefty salaries — $1.2 million a year each — and asked that they be terminated. The advisors sued, claiming breach of contract. They also say Ms. Atkins has fallen prey to a financial predator, Alexis Mersentes, now Ms. Atkins’ husband. They say Mr. Mersentes had the advisors fired so he could get his hands on the Atkins fortune.

Lesson learned?  When the stakes are high, hire corporate fiduciaries to avoid disputes.

Mr. Frank ends his quick summary of the Atkins litigation with this bit of sage advice:

The case offers an important lesson: hire a bank or trust firm. Sure, they can be irresponsible too. But if Dr. Atkins had hired a private bank or trust company to give advice to Veronica – who had little financial experience – she might not have been vulnerable to all manner of advisors and “friends.”

I agree with Mr. Frank and have previously said the same myself (see here).

Original source: Death & Taxes Blog

Miller v. Goodell, — So.2d —-, 2007 WL 1201892 (Fla. 4th DCA Apr 25, 2007)

One of the standard documents included in most estate plans is a “designation of preneed guardian.”  The purpose of this document is to tell the world whom you would like appointed as your guardian if ever needed.  I always make a point of reminding clients that the ultimate authority to determine whom your guardian will be rests with the courts – NOT the client.

This case provides a good example of how the statutory scheme governing these documents actually works in real life.  The key statutes are:

  • 744.3045 – Creates statutory presumption in favor of appointing client’s designated preneed guardian.
  • 744.309 – Provides list of who is automatically disqualified as a matter of law from being appointed guardian (e.g., a felony conviction will automatically disqualify you).
  • 744.312 – Gives court authority to appoint someone other than the designated preneed guardian if it’s in the ward’s best interest.

Court says NO to designated preneed guardian:

The linked-to case is instructive because it provides an example of when a court will NOT abide by the client’s wishes, as expressed in his or her designation of preneed guardian:

[A]ppellants contend the trial court erred in refusing to appoint Fanning as Audrey’s plenary guardian because Audrey had executed a preneed guardian declaration naming Fanning as Audrey’s alternate preneed guardian. This argument fails for the following reasons: (1) Audrey and her attorneys agreed to the appointment of a neutral professional guardian; and (2) the trial judge determined that the rebuttable presumption that Fanning is entitled to serve as guardian had been overcome, and that it is not in Audrey’s best interests for Fanning to be appointed plenary guardian.

*     *     *     *     *
In this case appellants have failed to establish the trial court abused its discretion. Section 744.3045(4), Florida Statutes (2005), provides in pertinent part: “Production of the declaration in a proceeding for incapacity shall constitute a rebuttable presumption that the preneed guardian is entitled to serve as guardian.” The trial judge considered the evidence presented but found the rebuttable presumption of the appointment of the designated preneed guardian had been overcome. In conjunction with finding the rebuttable presumption had been overcome, the trial court also considered the application of section 744.312(4), Florida Statutes (2005), which provides:

If the person designated is qualified to serve pursuant to s. 744.309, the court shall appoint any standby guardian or preneed guardian, unless the court determines that appointing such person is contrary to the best interests of the ward.

The trial court specifically found that it was contrary to Audrey’s best interests to appoint Fanning as plenary guardian of the person and property.

According to this recently published survey, probate litigators can be assured of much gainful employment for years to come.  Here are a few excerpts from the linked-to press release:

You can’t take it with you, according to the adage, but many Americans seem to be planning to do just that.

That’s because over half (55 percent) of all adult Americans do not have a will, a new survey shows, a percent that has remained virtually unchanged over the past three years.

*     *     *     *     *

Among non-white adults, the lack of wills is even more pronounced. Only one in three African American adults (32 percent) and one in four Hispanic American adults (26 percent) have wills, compared to more than half (52 percent) of white American adults.

The Jolly Testator Who Makes His Own Will

While these statistics may drive estate planners bananas, those of us who make a living litigating estate disputes should be more philosophical, taking comfort in the following words of wisdom penned over 150 years ago by Lord Neaves:

The Jolly Testator Who Makes His Own Will

-Lord Neaves, Judge and Solicitor General – Edinburgh, Scotland

circa 1852

Ye lawyers who live upon litigants’ fees,
And who need a good many to live at your ease,
Grave or gay, wise or witty, whate’er your degree,
Plain stuff or Queen’s Counsel, take counsel of me.
When a festive occasion your spirit unbends,
You should never forget the Profession’s best friends;
So we’ll send round the wine and bright bumper fill,
To the jolly testator who makes his own will.

He premises his wish and his purpose to save
All dispute among friends when he’s laid in the grave;
Then he straightaway proceeds more disputes to create
Than a long summer’s day would give time to relate.
He writes and erases, he blunders and blots,
He produces such puzzles and Gordian knots,
That a lawyer, intending to frame the thing ill,
Couldn’t match the testator who makes his own will.

Testators are good, but a feeling more tender
Springs up when I think of the feminine gender!
The testatrix for me, who, like Telemaque’s mother,
Unweaves at one time what she wove at another;
She bequeaths, she repeats, she recalls a donation,
And ends by revoking her own revocation;
Still scribbling or scratching some new codicil,
Oh! success to the woman who makes her own will.

‘Tisn’t easy to say, ‘mid her varying vapors,
What scraps should be deemed testamentary papers.
‘Tisn’t easy from these her intention to find,
When perhaps she herself never knew her own mind.
Every step that we take, there arises fresh trouble:
Is the legacy lapsed? Is it single or double?
No customer brings so much grist to the mill
As the wealthy old woman who makes her own will.

Source: see here, here and here.

Morrison v. West, — So.2d —-, 2007 WL 1135659 (Fla. 4th DCA Apr 18, 2007)

The linked-to case is a good example of why estate funds MUST remain subject to court control until all reasonably foreseeable debts are paid — including attorney’s fees.  Once estate funds are distributed no one should be misled by false expectations about the power of lawyers or even the courts to get those funds back.  The old saying we learned as children that "possession is nine-tenths of the law" is all too true when it comes to estate funds.

In the linked-to case client, Ms. Carla Morrison, hired North Carolina attorney William West to represent her in litigation against her husband’s multi-million dollar estate.  He did so and worked out a settlement agreement that included a $1 million pay out to Morrison.  Morrison then fired West and hired attorney Gary Woodfield to represent her.  At a hearing to approve the settlement agreement Mr. Woodfield represented to the court that his client had agreed to retain the $1 million payment in his firm’s trust account until a fee dispute with West was worked out.

COURT: [Morrison] agrees that it goes to your trust account until the fee arrangements are resolved?

WOODFIELD: She does. I have discussed that with her. She is in agreement with that, Mr. West is in agreement with that, and Mr. Pressly is in agreement with that.

And hopefully we will be able to amicably resolve the matter and that will be the end of it.

The trial court approved the settlement and executed the final judgment on January 20, 2005. Neither the final judgment nor the settlement agreement referred to the disbursement of the $1 million to West.

For reasons unexplained in the linked-to opinion, the funds left Mr. Woodfield’s trust account the very next month – and have yet to be returned despite a standing court order directing client to give the money back.

In February 2005, West learned that Woodfield released the $1 million in the Edwards & Angell trust account to Morrison. On June 30, 2005, West filed a motion to modify the final judgment and requested that Morrison be ordered to redeposit the $1 million into the court registry pending further proceedings. On February 21, 2006, the trial court held a hearing on West’s motion to modify the final judgment. West, Woodfield, and Morrison testified at the hearing.  The trial court ruled:

And having observed the witness testimony today I find that Carla Morrison did in fact authorize Mr. Woodfield to withhold that $1 million and place it in a trust account, bank account, interest bearing until the fee issue has been resolved. I find that that portion of her testimony regarding it be for a short time only is not credible. And I find the testimony of Mr. West regarding these fee disputes to be credible.

So I am directing that this money be placed back in the Edwards and Angell trust account, interest bearing, not to be released under any circumstances without a further Court order until the fee issues are resolved.

The trial court directed that the money be returned to the Edwards & Angell account within 30 days. Morrison never complied.

Lesson learned?

Always keep your eye on the money.  When in doubt, make sure you have the appropriate orders in place to ensure estate funds don’t get distributed until you’re sure all interested parties – including the attorneys – have been provided for.  Sure, you can always sue for the return of wrongfully distributed estate funds (733.812), but why put yourself in that position to begin with?

In a blog post entitled Offshore trust scheme leads to former U.S. Attorney pleading guilty to tax fraud, I wrote about two North Carolina attorneys who had been charged with conspiring to commit tax fraud in connection with a tax evasion scheme revolving around the use of off-shore trusts.

One attorney, Samuel T. Currin, a former North Carolina U.S. Attorney, state judge and state Republican chairman, agreed to plead guilty to conspiring to launder $1.45 million through his law firm’s client trust account and to lying on his taxes by failing to report an offshore debit card account.  The second attorney caught up in the prosecution was North Carolina tax attorney Rick Graves.

In fairness to Mr. Graves, I feel compelled to follow up on my original blog posting by reporting that he was recently cleared of all charges by a unanimous jury verdict of NOT GUILTY.  The following are excerpts from this post on the North Carolina Estate Planning Blog:

Mr. Graves is a lawyer in Wilmington, North Carolina, who was charged a year ago with two federal crimes: 1) Conspiring to Defraud the IRS and 2) Obstructing the IRS. Both charges arose from Mr. Graves’ association with other individuals who engaged in “off-shore” criminal activities – without Mr. Graves’ knowledge — relating to tax planning and asset protection. Mr. Graves has always asserted his complete innocence, and based upon all the evidence, including a 7-hour cross-examination of Mr. Graves, the jury agreed.

*     *     *     *     *

Co-counsel, Will Terpening added that, “over the last two weeks, during the trial, Rick Graves was finally given an opportunity to defend himself and to clear his name. With the jury’s verdict —- He has done both.” Reflecting on the investigation, the trial, and the jury’s verdict, Rick Graves wondered how he gets his good reputation back. More specifically, he stated that “the case against me was based on false assumptions and guilt by association.” He added that, “the prosecutors indicted first, and investigated later.”

Lawyer Anderson also added that:
The investigation of Rick Graves raises important issues about the increasing use of criminal punishment in highly regulated areas, like tax planning. In this arena, the line between mistakes” and “crimes” is often too blurry for fair prosecutions. Criminal charges should only
be used for truly “bad actors.”

Lawyer Terpening added that:
Mr. Graves was a lawyer with an impeccable reputation, who was a deacon in his church, and who had a 20-year military career. At a minimum, he should have been given the chance to address the government’s concerns before being indicted. In the end, Rick Graves was thrilled with the outcome and with the hard work of his legal team. He concluded by stating that: “Justice has finally been served. This nightmare is over. My name is finally cleared.”

Lesson learned: Make sure you get paid for taking on the risks associated with an estate tax practice.

My personal belief is that estate planning attorneys often take on risks they are not paid for.  In other words, the fees they charge for the tax services they provide do not adequately compensate them for the risks they assume.  This case is a prime example.  I have no idea what Mr. Graves was paid for the tax work he did in this case.  But I am absolutely certain that it in no way adequately compensated him for the risk of possibly being the subject of a two-year nightmare/criminal prosecution.  In the corporate context, CPAs and tax attorneys charge very large sums of money to compensate them for the risks they assume when they give their corporate clients tax advice.  Much of those fees are generated in the "due diligence" phase of the corporate engagement.  My sense is that this rarely happens in the estate-planning context.

Fach v. Brown Bros. Harriman Trust Co. of Florida, 949 So.2d 260 (Fla. 4th DCA Feb 07, 2007)

The issue explicitly addressed by the linked-to opinion is relatively simple: is an order appointing a successor trustee a final appealable order?  The 4th DCA held it is not:

In this consolidated appeal, Barbara A. Fach and her daughter Lauren K. Cain appeal two non-final orders denying, without hearing, their emergency motions for relief from orders, filed pursuant to Rule 1.540(b), Florida Rules of Civil Procedure. The orders from which they sought relief were entered in an adversarial proceeding in which the probate court appointed U.S. Trust as the successor trustee to Brown Brothers Harriman Trust Company on an emergency basis in two separate cases. The appellees argue that this court lacks jurisdiction because the orders from which the appellants sought relief in the probate court were not final orders, and thereby not subject to Rule 1.540. We agree and dismiss the appeal.

What was really driving this appeal? .  .  .  VENUE!

Although never stated in the linked-to opinion, I think the real issue driving this appeal was venue.  Appointing a new corporate trustee may result in the trust’s "principal place of administration" changing to the location of the new corporate trustee’s "usual place of business" (736.0108), which in turn may result in a change of venue for trust litigation purposes (736.0204) (see here for real life example).

With this background in mind, the following excerpt from the linked-to opinion now makes sense:

At oral argument, the appellants essentially agreed that this appeal was taken to insure that the trial court had left certain issues open for consideration. In fact, in this case the probate court specifically asked whether it could appoint U.S. Trust as successor trustee and leave the situs of the trust in Palm Beach County, without prejudice to addressing the latter issue at a subsequent hearing. The court then dictated its order to counsel, again reiterating that the appointment was without prejudice to addressing the situs of the trust at a later time.

The Florida Bar v. Maurice, — So.2d —-, 2007 WL 1074948 (Fla. Apr 12, 2007)

Practicing law is not an easy way to make a living.  As this case shows, even when you’re well intentioned and cause no real harm to anyone . . . you can end up losing your license.  This case also underscores the fact that probate matters can be very technically demanding.  Attorneys – like the respondent in this case – who simply "dabble" in probate as an ancillary to their primary practice do so at their own risk.

The following excerpts from the linked to case do a good job of summing up the relevant issues:

Findings:

The evidence and factual findings support the referee’s conclusion that Maurice violated rules 4-1.1 and 4-1.7(b). Maurice’s belief that the condominium could be treated as an estate asset although it had previously been deeded to Gerard and William Spelker is sufficient to establish a violation of rule 4-1.1. See generally Fla. Bar v. Batista, 846 So.2d 479 (Fla.2003) (holding that an attorney violated the competence rule by failing to determine the probable outcome in his clients’ cases within a reasonable time and failing to communicate the unavailability of a result to his clients). The referee found that probate proceedings were unnecessary, as most of Helen Spelker’s property was either exempt or transferred upon her death. Maurice failed to explain this to the heirs. Maurice opened an estate in an attempt to ensure that Oliveri was given the opportunity to purchase the condominium from Gerard and William Spelker. She did not tell Pamela Spelker or her attorney that the ownership of the condominium had been transferred to Gerard and William in November 1998 and she did not provide a copy of the quitclaim deed she had prepared. The referee found that Maurice’s judgment regarding the necessity of an estate was clouded by her expressed concern for Helen Spelker’s caretakers, one of whom was Oliveri. These actions establish a violation of rule 4-1.7(b) in that her desire to ensure that Gerard and William Spelker gave Oliveri a chance to purchase the condominium conflicted with her duty to her clients, Helen Spelker’s heirs.

Veteran attorney, clean record:

Maurice has been a member of the Bar for over two decades and has no prior discipline. Maurice’s actions resulted in the heirs and true owners of the condominium having to wait several months to obtain what was rightfully theirs, but she did not profit from it. Rather, she seems to have been motivated by a genuine but misguided desire to fulfill what she believed were Helen Spelker’s true wishes for the disposition of her property. According to her brief, she has already reimbursed the Bar for its costs and has already taken the CLE courses recommended by the referee.

90-day suspension:

Accordingly, based on the caselaw discussed above imposing one-year suspensions for more egregious misconduct of a repetitive nature, we conclude that the two-year suspension recommended by the referee is not reasonably supported by the caselaw. We disapprove that recommendation and instead suspend Maurice for ninety days. The other conditions recommended by the referee are approved.

 

Briefs: