Disque v. Unger, 2007 WL 101375 (Fla. 4th DCA  Jan 17, 2007)

The linked-to case does a good job of underscoring a key concept often lost on personal representatives: they are fiduciaries.  In other words, no matter how strongly they may personally feel about a contested issue, prior to using estate funds (i.e., assets that belong to someone else) to embark on new litigation they need to be able to answer the following question with an unqualified YES: is this litigation in the best interest of the estate?

The PR in the linked-to case failed the "best interest" test when he filed a declaratory judgment action seeking construction of a marital settlement agreement.  Only problem was that no matter how the court construed the contested marital settlement agreement . . .  no assets would flow into the probate estate being administered by the PR filing the declaratory judgment suit.  Both the trial court and the 4th DCA ruled the PR had failed the best-interest test and dismissed his action.  The following excerpts from the linked-to case summarize the controlling law at play in this case:

Section 733.602(1), Florida Statutes (2003), which describes the general duties of a personal representative, provides:

A personal representative is a fiduciary who shall observe the standards of care applicable to trustees as described by s. 737.302. A personal representative is under a duty to settle and distribute the estate of the decedent in accordance with the terms of the decedent’s will and this code as expeditiously and efficiently as is consistent with the best interests of the estate. A personal representative shall use the authority conferred by this code, the authority in the will, if any, and the authority of any order of the court, for the best interest of interested persons, including creditors. (emphasis added)

The parties do not contest the trial court’s conclusion that, no matter which way the dispute was resolved, it would be of no financial benefit to the estate. The appellants contend, however, that the probate court should have resolved the issue because the property settlement agreement authorized Rose’s estate to enforce it. The fact that the estate was authorized by the property settlement agreement to enforce it, however, does not satisfy the requirement of section 733.602(1), that the personal representative act in the best interest of interested persons.

In this case the persons interested in the estate, beneficiaries or creditors, have no interest in the dispute involving Alvin’s will. We accordingly agree with the trial court that, under these specific facts, where the estate could not benefit financially, and the dispute could be resolved in a lawsuit between all of the interested parties without the estate being a party, the estate should not be involved.

*     *     *     *     *

When the personal representative found himself in a quandary as to whether to file this lawsuit, he should have sought court approval before filing the lawsuit, as is authorized by section 733.603, Florida Statutes (2003). When the trial court concluded, on its own, that pursuing this litigation was not in the best interest of the estate, it was simply doing what was contemplated by section 733.603. Because it is undisputed that the estate cannot benefit financially, and that further litigation will deplete the assets which would otherwise go to interested persons, there is no reason to prolong this proceeding.

Lesson Learned:

The concepts at play in this case can be used very effectively as defensive tools.  It will often be easier, cheaper and quicker to obtain a court order barring a PR (or any other type of fiduciary) from pursuing litigation on the grounds that the action is not in the best interests of the estate vs. obtaining a dismissal of the actual lawsuit.  For example, in the linked-to case, the initial declaratory judgment action would have probably been dismissed if at the outset the parties opposed to the action had simply filed a motion to dismiss based on the law cited above with a short affidavit stating that the outcome of the action, no matter who won, would not benefit the estate.

An AP article entitled Family Feuds Follow Famous People After Death has fun rounding up all the latest celebrity probate cases in one nice package.  I’ve written about some of the cases mentioned in the linked-to article (James Brown, Billy Graham), noted two celebrity cases not mentioned in the article (Jimmy Hendrix, Celia Cruz), and was amused to find bits of probate gossip I’d missed (Ted Williams, Peter Lawford, Marlon Brando, Ray Charles).  Here’s an excerpt from the linked-to AP piece:

James Brown has yet to rest in peace.

His embalmed body lies in a sealed casket at his South Carolina home while his family and attorneys argue over his estate and final resting place. Security guards maintain constant watch over the Godfather of Soul — whose coffin sits in a temperature-controlled room — while issues surrounding his estate are hashed out. Brown died Dec. 25.

Such posthumous problems are not new. While burial battles like Brown’s are rare, family dramas have haunted famous folks well into the afterlife.

The list includes athletes, musicians, movie stars and others.

"It’s just the nature of families," said Joelle Drucker, an attorney with Greenberg Traurig in Los Angeles. "If you don’t get along, if there’s a prior marriage with children and conflicting interests, there’s always going to be fighting. It tends to be the norm rather than the exception."

Jonathan Alper’s Asset Protection Blog had an interesting post entitled Bank Accounts to Avoid Probate: POD vs. ITF accounts.  In estate administrations you come across pay-on-death “POD” bank accounts and in-trust-for or “ITF” bank accounts (also known as Totten trusts) all the time.  Jonathan makes some interesting points regarding the differences between these two non-probate accounts on asset-protection grounds.  Although I’m not sure I agree with his conclusions, here’s an excerpt:

Here’s my understanding, although I know of no cases comparing the two types of accounts. . ITF , “in trust for” implies the existence of a trust relationship so that the beneficiary of the trust (Mary) would have equitable ownership in the account funds from the day John funds the account. . Of John opened a POD account, Mary would have no rights or interest in the account during John’s life, and Mary would first acquire an interest upon John’s death. From an asset protection standpoint, John is a trustee over Mary’s money during his life in the case of an ITF account, and John has no equitable ownership in the money which would be vulnerable to his creditors. Creation of the ITF account is an immediate gift in trust to Mary. If John’s POD account John has a life estate in the account and the beneficiary has a remainder interest. During his lifetime John has full access to money in his POD account; Mary’s interest is limited to what is left in the POD account upon John’s death.. Because John can access for his own use money in a POD account during his lifetime I expect that John’s creditors could attack money his POD account as they can get whatever rights John has in the POD account. For that reason, I believe an ITF account provides better asset protection as well as probate avoidance.

Miami Rescue Mission, Inc. v. Roberts, 943 So.2d 274, 31 Fla. L. Weekly D2979 (Fla. 3d DCA Nov 29, 2006)

In 1998 the 3d DCA held in Raimi v. Furlong, 702 So.2d 1273 (Fla. 3d DCA 1998), that just because you’re "insane" doesn’t mean you necessarily lack testamentary capacity if you happen to sign your will during a "lucid interval."  Based on this very tough standard for proving incapacity, the 3rd DCA overturned the trial court’s finding of incompetency as a matter of law because at trial the testifying neurologist was unable to determine if the testator was lucid or not at the precise moment she executed the contested will. Here’s the key text from Raimi:

It has long been emphasized that the right to dispose of one’s property by will is highly valuable and its is the policy of the law [in Florida] to hold a last will and testament good wherever possible. To execute a valid will, the testator need only have testamentary capacity (i.e., be of “sound mind”) which has been described as having the ability to mentally understand in a general way (1) the nature and extent of the property to be disposed of, (2) the testator’s relation to those who would naturally claim a substantial benefit from his will, and (3) a general understanding of the practical effect of the will as executed. A testator may still have testamentary capacity to execute a valid will even though he may frequently be intoxicated, use narcotics, have an enfeebled mind, failing memory, [or] vacillating judgment. Moreover, an insane individual or one who exhibits “queer conduct” may execute a valid will as long as it is done during a lucid interval. Indeed, it is only critical that the testator possess testamentary capacity at the time of the execution of the will.

Fast forward to 2006.  In an apparent retreat from its own "lucid interval" standard, in the linked-to opinion the 3d DCA now seems to be saying lack of testamentary capacity can be established by "clear and convincing" evidence regarding the testator’s general health and mental wellbeing in the days leading up to the will signing.  Although the 3d DCA does cite to Raimi for a procedural point, it never discusses why the "lucid interval" standard it applied in that case apparently does not apply in this case.  Instead, the 3d DCA reaches back to Florida Supreme Court precedents from 1919 and 1933 to support its current ruling.

“Where there is an insane delusion in regard to one who is the object of the testator’s bounty, which causes him to make a will he would not have made but for that delusion, the will cannot be sustained.” Newman v. Smith, 77 Fla. 633, 667 and 688, 82 So. 236, 236 (1919). Further, “an insane delusion has been defined as a spontaneous conception and acceptance as a fact of that which has no real existence except in imagination. The conception must be persistently adhered to against all evidence and reason.” Hooper v. Stokes, 107 Fla. 607, 145 So. 855, 856 (1933).

Lesson learned?

The 3d DCA notes that the trial judge, Celeste Hardee Muir, entered a 22-page order "carefully" explaining the evidence she relied on in reaching her conclusion to revoke the testator’s latest will on incapacity grounds.  That’s probably the key line in this opinion.  It’s tough (maybe impossible?) to reconcile the 3d DCA’s ruling in Raimi with its current ruling in the linked-to case. I would guess the differing outcomes may be the result of an extremely compelling set of facts in the latest case.  So is this case an example of "bad facts making bad law" or a concious retreat from the lucid-interval standard?  Who knows, the 3d DCA certainly didn’t discuss the point.  Not exactly concrete guidance for future litigants and their attorneys .  .  .

Last year’s estate tax debate was compelling on many levels.  One interesting aspect of the debate was that it forced those on both sides of the issue to consider — and articulate — their fundamental philosophical beliefs with respect to property rights, inheritance rights, and the role of taxation in our society.

Which is why I found an excellent research paper published by the IRS entitled "Federal Taxation of Inheritance and Wealth Transfers" especially thought provoking.  It contains the best summary I’ve read to date of the historical bases for the divergent philosophical world-views playing themselves out in the current estate-tax repeal debate.  The following is an extended excerpt that is well-worth reading for anyone remotely interested in the issue:

Continue Reading Philosophical arguments for and against estate taxes

I recently wrote here about a land-trust case roiling Florida’s real property and trust law landscape for the last several years.  It was against this backdrop that I found the “Young Lawyers Network” column in the January/February 2007 edition of the ABA’s Probate & Property Journal especially interesting.

The column, entitled “The Land Trust”, should be of special interest to Florida lawyers because it does a good job of explaining the unique characteristics of the typical “Illinois Land Trust” and how this form of property ownership is so far removed from classic trust law that calling it a trust can be misleading.  Here’s an excerpt:

The land trust, often referred to as an “Illinois land trust” because of its origins, is truly a unique legal entity.  And, as described by Henry W. Kenoe, the Illinois land trust scholar, it is, perhaps, unfortunate that it bears the the trust moniker  because  the designation is almost too confusing.  The land trust is very versatile and differs from a conventional trust in many ways.

The land trust is a legal arrangement in which a trustee holds legal and equitable title to property, but all managerial powers over the trust assets remain with the beneficiaries of the trust.  The trustee takes action when called upon and directed by the beneficiaries.  A classic definition of the land trust appeared in Robinson v. Chicago Nat’l Bank, 176 N.E.2d 659 (Ill. App. Ct. 1961).

A key benefit of the land trust over the most common type of alternative form of joint ownership, the tenancy-in-common, is that the land trust is not subject to partition actions.  Especially in those cases where a family wants to keep a farm or other large parcel of real property intact when passed to the next generation, the land trust can be ideal (this case is an example of how partition actions can otherwise disrupt the best laid plans).  The column in this month’s Probate & Property Journal goes on to provide the following list of the benefits of holding real property in land trusts:

  • the interest of the beneficiaries will not be disclosed without order of court;
  • the interests are not subject to partition;
  • the beneficial interest is personal property and, therefore, avoids ancillary probate requirements;
  • transferability of beneficial interest is simple;
  • the beneficial interest can be used as collateral; and
  • testamentary dispositions can be set out within the trust agreement, thereby avoiding probate.

By the way, the ABA also has solid Florida-law specific forms available for professionals considering land trusts for their clients.

For more on land trusts (including additional sample forms), Albany Bank and Trust has a comprehensive web-page here dedicated to promoting the virtues of land trusts.

I previously wrote here about virtual adoptions, and how under this doctrine persons potentially deemed to be "heirs" of an intestate estate may include non-biological descendants if the child was raised by the decedent, even if never legally adopted.  James Brown’s estate may soon have to grapple with this issue based on the brewing paternity dispute reported in Soul legend James Brown instructed lawyers before he died to carry out DNA tests to show if he was the father of his wife’s son, which provides as follows:

Brown’s family lawyer Debra Opri told CNN’s Larry King the singer never wanted five-year-old James Joseph Brown II tested when he was alive, but wanted it done for the rest of his family’s sake once he was gone.

The boy is the son of Tomi Rae Hynie, 36, who after the star’s death on Christmas Day said she was locked out of his South Carolina home after another lawyer alleged they had not been legally married.

Hynie insists they were and she has documentation to prove it, and Brown was her son’s father.

Hynie told King the little boy was "absolutely without a doubt" Brown’s son and she would welcome a test.

"There is no doubt about it," she said. "No doubt to my husband, no doubt to me and I’d be willing to take any test that they’d like to take."

Listen to this post

In Florida, a sperm donor’s parental rights are governed by Florida statute section 742.14, which provides as follows:

The donor of any egg, sperm, or preembryo, other than the commissioning couple or a father who has executed a preplanned adoption agreement under s. 63.212, shall relinquish all maternal or paternal rights and obligations with respect to the donation or the resulting children. Only reasonable compensation directly related to the donation of eggs, sperm, and preembryos shall be permitted.

As reported here, the Kansas Supreme Court is considering the constitutionality of a similar statute.  The case is generating national attention, and will probably have national ripple effects if the statute is overturned on constitutional grounds.  The Kansas Supreme Court is expected to rule by February.  Here is an excerpt from the linked-to story:

A case before the Kansas Supreme Court has become a key test of the rights of sperm donors who want to be involved with their offspring over the objection of the children’s mothers.

The dispute, which has drawn national attention, involves a single woman, identified in court papers only as S.H., who gave birth to twins in May 2005 after being inseminated with the sperm of a friend, identified as D.H.

After the mother made it clear that she did not intend to share parenting, D.H. sued to establish paternity. He lost in a trial court because of a Kansas law that says the donor of sperm provided for artificial insemination is not the legal father of the child unless the donor and mother agree to it in writing.

The major question in the case is whether requiring such written agreements in cases involving sperm donors known to the mother, not anonymous donors from sperm banks, violates the donor’s constitutional rights as a parent. Like Kansas, many states have legal hurdles for donors seeking parental status.

The case arises at a time of increasing advances in reproductive technology. According to the Centers for Disease Control and Prevention, the numbers of women being impregnated with eggs fertilized outside the womb is significantly on the rise. There are no reliable statistics on methods of conception with donated sperm.

“It’s clearly a broadening phenomenon,” New York University sociology professor Judith Stacey says of artificial insemination with donor sperm. “All of this is tied to changes in the family, including women choosing to marry later and the gay and lesbian movement. What hasn’t changed is women’s desire to have children.”

Most sperm donors are anonymous and waive parental rights. The move typically shields donors from demands for child support and protects mothers’ privacy.

However, when the donor and the mother know each other, different expectations and legal complications can arise, as is the Kansas case and others in recent years from California to Pennsylvania. The cases reflect the lack of uniformity in laws regarding sperm donors, says American University law professor Nancy Polikoff, one of 20 family law professors who filed a brief in support of the Kansas mother. They say states traditionally have had broad latitude to define parentage on factors other than biology, such as marriage.

Source:  Wills, Trusts & Estates Prof Blog

If an estate is especially large or complex, probably the single best insurance against probate litigation is designating a bank or trust company to act as personal representative of the estate (or "executor" if you’re in the North East).  A corporate PR will have the resources and expertise to get the job done while avoiding the possible land mines (see: Trust in your bank?).  This service doesn’t come for free, but it’s usually exponentially cheaper than litigation.

As reported here, the Celia Cruz estate is beginning to learn why picking the right PR can make all the difference in the world.  The following is an excerpt from the linked-to case:

 NEWARK, N.J. – A New Jersey judge next month will consider whether to remove one of the executors handling the affairs of the late Celia Cruz, a singer beloved as the "Queen of Salsa."
The hearing is to be held in response to charges by the executor that co-executor Luis Falcon has been spending money intended for Cruz’s husband, ailing trumpeter Pedro Knight.

In addition to scheduling the Feb. 9 hearing, Superior Court Judge Peter E. Doyne this week appointed a New York lawyer to represent Knight’s interests as guardian.

Falcon has drained funds from accounts for Knight, made "extravagant expenditures" and failed to account for transfers of more than $1 million from Cruz’s estate, according to a lawsuit filed by co-executor Omer Pardillo, of Cliffside Park.

In addition, Falcon is exercising improper influence over Knight, who is 85 and suffering from dementia, the lawsuit claimed. After Cruz died in 2003, Knight moved to California with Falcon, the lawsuit said.

Source: Wills, Trusts & Estates Prof Blog

Johnson v. Clark, 2006 WL 3780511 (M.D.Fla. Dec 20, 2006)

No surprises.  That, in a nutshell, is probably the single most important ingredient in any successful attorney-client relationship . . . especially so in the litigation context.  Which is why this case is an excellent resource for Florida probate counsel.

Hammering out a settlement agreement is usually considered probate-litigation Nirvana.  But just because the trustee or personal representative signs off on the deal doesn’t mean you’re home free.  If one of the beneficiaries is determined to undermine the deal then all the “what ifs” need to be anticipated and factored into the deal (remember – no surprises!).

So what can you do to ensure the deal sticks?  First of all, you’ll want to get  a court order approving the deal after a hearing where all beneficiaries were given an opportunity to object.  Counsel in this case did this.  So far so good.  But what can you do if a beneficiary starts up a whole new piece of litigation covering the same ground covered by the settlement agreement?  As we all know, you can’t stop someone from suing you, all you can do is mitigate the risk and cost of such actions.

Virtual Representation

Although the virtual-representation concept summarized below provides an effective tool for disposing of litigation by disgruntled beneficiaries in the settlement-agreement context, the cost of having to litigate this issue should have been anticipated as part of  the settlement deal and shifted over to the estate in the form of an indemnification clause (remember – no surprises!).

The doctrine of virtual representation provides that “[a] person who is not a party to an action but who is represented by a party is bound by and entitled to the benefits of a judgment as though he were a party.” Restatement (Second) of Judgments § 41(1). Further, it is well-settled that in cases involving claims by a trustee and individual beneficiaries, a trustee, in his representative capacity, acts on behalf of the trust representing the interests of the trust and its beneficiaries; a beneficiary is therefore bound by a judgment properly obtained by a trustee acting in his representative capacity. See § 737.402(t), Florida Statutes (2006); Restatement (Second) of Judgments § 41(1)(a) (“A person is represented by a party who is the trustee of an estate or interest of which the person is a beneficiary····”). In Florida, the doctrine of virtual representation has been codified [in F.S. 731.303].

Intervenor Status

But what if you happen to be the attorney representing the disgruntled beneficiary?  What kind of options can you open up for this client?  The virtual-representation concept bars your client from undoing a settlement deal entered into by his or her trustee, but what if your client had independent standing in the case?  Well, then it’s a whole new ballgame.  As discussed in the following excerpts from the linked-to opinion, if your client is granted “intervenor status” in the case, presto: independent standing!

Although [Weiss v. Courshon, 618 So.2d 255 (Fla. 3d DCA 1993)] has a similar fact pattern to that presented here, the one glaring and significant difference between the beneficiaries in Weiss and Clark in the present case-the fact that Clark never formally became an intervenor in the probate proceedings-dictates the different result here. While it is true that Clark objected to the Mediation Agreement and even appealed the court’s order approving the settlement, Clark was not an intervenor to the trustee’s claims and neither the Mediation Agreement nor the Order approving it expressly reserved his individual claims. . . . . .

FN6. Although the [Weiss v. Courshon, 618 So.2d 255 (Fla. 3d DCA 1993)] court did not specifically cite to it, Florida law provides that “[a]nyone claiming an interest in pending litigation may at any time be permitted to assert a right by intervention.” Fla. R.Civ.P.1.230. “[T]he general rule [is] that it is too late to apply for intervention after final decree has been entered, though there are cases where in the interest of justice leave to intervene has been granted after final decree.” Wags Transp. Sys., Inc. v. City of Miami Beach, 88 So.2d 751, 752 (Fla.1956) (internal citations omitted) (holding that potential loss of intervenors’ homes satisfied the interest of justice exception). Further, the Virtual Representation Statute represents a policy decision by the Florida legislature, which weighs heavily against the possibility that facts of this case would warrant a late grant of intervenor status, even if Clark had actually requested such status. See id.

The “Standard” General Release

Say it’s 11 PM on a Friday night and you’ve been negotiating a settlement deal for the last 18 hours, you’ve worked through the all the economics of the deal and someone says “how about we just agree to the ‘standard’ general release?”  Freeze, because that last statement is nonsense.  Do yourself and everyone else involved a favor and insist on the parties agreeing to the explicit text of the release.  If anyone blows a gasket at this latest middle-of-the-night example of your intransigence, you may want to share this last bit of guidance from the linked-to opinion:

The Florida Supreme Court has recognized that “there are no ‘standard’ general releases; all are unique. The fact that a proposed release is described as being ‘general’ is virtually meaningless. [I]t would be essential to know what is being released, who is being released, and any conditions or terms of the release.” Swartzel v. Publix Super Markets, Inc., 882 So.2d 449, 453 (Fla. 4th DCA 2004). In other words, the covenant to execute “mutual general releases” as set forth in the Mediation Agreement essentially had no meaning until the actual general releases were executed . . .