Pastor v. Pastor, __ So.2d __ (Fla. 4th DCA April 19, 2006)

One of the overarching themes of Florida’s probate code is the tension between constitutionally protected due-process rights and Florida’s strong public policy favoring the speedy administration of estates. In order to move things along as quickly as possible, Florida law provides extremely short windows of opportunities for litigants to file objections. For example, under 2005->Ch0733->Section%20212#0733.212″>F.S. § 733.212 potential litigants served with a notice of administration have only 3 months to object “to the validity of the will, the qualifications of the personal representative, venue, or jurisdiction of the court” or those objections “are forever barred.” In this case the objecting party tried to get around the 3-month limitations period contained in F.S. § 733.212 by arguing that an objection to domicile was like objecting to the court’s subject matter jurisdiction, and thus not subject to waiver. Not surprisingly, this argument was shot down both at the trial court level and by the Fourth DCA, which explained its ruling as follows:

For the purpose of overcoming the bar of section 733.212(3), Appellant contends that an issue of domicile is an attack on subject matter jurisdiction and is not waived by failing to timely file. The trial court correctly recognized that subject matter jurisdiction is not determined by the decedent’s domicile; rather, it is based on the power of the court over the class of cases to which the controversy belongs. See Ruth v. Department of Legal Affairs, 684 So.2d 181, 185 (Fla.1996); Chase Bank of Texas Nat’l Ass’n. v. Department of Ins., 860 So.2d 472, 475 (Fla. 1st DCA 2003). . . . . . We are not unmindful of Appellant’s argument that finding such an objection to subject matter jurisdiction can be waived under the statute will effectively allow Florida courts to probate a non-domiciliary’s estate through domiciliary administration. Nevertheless, we conclude that Appellant may not challenge the court’s jurisdiction where he received the notice of administration, the trial court determined domicile through the verified petition, and the three-month period to object to jurisdiction passed before filing his claims. There is a “strong public policy” in this state “in favor of settling and closing estates in a speedy manner.” May v. Illinois Nat’l Ins. Co., 771 So.2d 1143, 1151 (Fla.2000). If the court were to hold that domicile is a component of subject matter jurisdiction, any estate could be re-opened based on such a belated objection. This would render section 733.212(3) meaningless and would contravene Florida’s public policy as expressed in May. See also In re Estate of Williamson, 95 So.2d 244 (Fla.1957). (Emphasis added.)

Lesson Learned:

In the probate-litigation context, there is a huge advantage to understanding how quickly claims may be cut off. If you represent the party expecting to defend against a possible challenge, the probate code provides ample opportunities for building almost air-tight defenses to litigation. If you represent a party that is thinking about filing an objection, quick decisive action is of paramount importance.

New Jersey estate planning attorney Deirdre R. Wheatley-Liss is the author of the You and Yours Blawg. In this posting, she recently provided an excellent summary of a few recently published studies “debunking” many of the myths/arguments usually put forth in favor of estate tax repeal. This is highly recommended reading for those following this debate.

The following is an excerpt from Deirdre’s blog posting:

In yesterday’s post, Who Wants Estate Tax Repeal – The Uber-Rich Lobby (98%+ chance you aren’t one of them) I highlighted a new report from Public Citizen and United for a Fair Economy that demonstrated how “18 families worth a total of $185.5 billion have financed and coordinated a 10-year effort to repeal the estate tax, a move that would collectively net them a windfall of $71.6 billion.”

In the report entitled “Spending Millions to Save Billions – The Campaign of the Super Wealthy to Kill the Estate Tax” Public Citizen’s Congress Watch and United for a Fair Economy explore and refute some common myths about the estate tax. These myths are just plain wrong “facts” that many believe to be gospel truth about the estate tax, but are, in real fact, just plain wrong. I thought the report did such an excellent job of educating readers about the true role of the estate tax, that wanted to highlight some of the information here. This is a long post, but it gets to the heart of the matter of the estate tax. The education it provides is worth scrolling down for.

It looks like Florida’s about to adopt a whole new trust code. Below is a copy of an email posted on the list service for the Dade County Bar Association’s Probate and Trust Law Committee. The email contains a link to the final version of the bill. I previously provided a link to an annotated version of the new trust code comparing it to current Florida law here. Enjoy!

—–Original Message

Second DCA Reverses Trial Court’s Grant of $410,300 in Attorneys’ Fees

Martinez v. Ipox, __ So.2d __ (Fla. 2d DCA April 07, 2006)

Probate issues do not, as they say, “drive the train” in wrongful death cases. But, as a matter of Florida law, these cases may ONLY be litigated by personal representatives. Because wrongful death cases MUST be litigated within the context of a probate proceeding, getting the probate issues “wrong” can come back to bite litigation counsel in a very big way – as demonstrated by this case.

This case started out as a medical malpractice action and was then amended to a wrongful death action when the infant at the center of the litigation died. After a jury trial the parents of the deceased child, acting as co-personal representatives of the child’s estate, were awarded a judgement of $2.3 million. On a subsequent motion for attorneys’ fees based on a proposal for settlement signed only by the child’s mother . . . and only in her individual capacity, Hillsborough County Judge Sam D. Pendino awarded the child’s parents $410,300 in attorneys’ fees (about 18% of the total damages award).

On appeal the Second DCA reversed the trial court’s fee award based on what I am sure appeared to be the height of “form” over substance to plaintiffs’ counsel. If you take a minute to think about it, however, the Second DCA probably got this one right. Adopting the statutory analysis of a 2004 Third DCA opinion addressing a similar set of facts, Saia Motor Freight Line, Inc. v. Reid, 888 So.2d 102 (Fla. 3d DCA 2004), the Second DCA explained its ruling as follows:

We agree with the holding in Reid. . . . In a wrongful death case where there are joint personal representatives, the joint personal representatives are the party plaintiffs. As the party plaintiffs, only the joint personal representatives-acting in that capacity-are entitled to make a valid demand for judgment. The demand for judgment at issue here therefore was invalid. See §§ 2005->Ch0768->Section%2020#0768.20″>768.20, 2005->Ch0768->Section%2079#0768.79″>768.79, Fla. Stat. (2001); Reid, 888 So.2d at 103.

* * * * *

Section 2005->Ch0733->Section%20615#0733.615″>733.615 provides that “multiple representatives must act in concert, and have no authority to act independently, regardless of the circumstances.” Messina v. Scionti, 406 So.2d 529, 532 (Fla. 2d DCA 1981). See also Costello v. Davis, 890 So.2d 1179 (Fla. 2d DCA 2004) (holding that one co-personal representative did not bind the other co-personal representative to a contingent fee agreement with counsel because the other co-personal representative did not join in the agreement); Pearce v. Foster, 454 So.2d 721 (Fla. 4th DCA 1984) (holding that a co-personal representative could not unilaterally file a notice of appeal without concurrence of the other co-personal representative). In addition, there was no evidence that Rebeca Ipox had been delegated to act on behalf of the other co-personal representative. See § 733.615(1) (providing that concurrence of all joint personal representatives is not required “when a joint personal representative has been delegated to act for the others”).

Because the proposal for settlement that served as the basis for the award of attorneys’ fees in this case was not served by both the Ipoxes as joint personal representatives, the trial court erred in relying on it. Therefore, we reverse the award of attorneys’ fees.

I previously wrote about “incentive trusts” here. Professor Joshua C. Tate (Associate Professor, SMU Dedman School of Law) has recently released an article addressing these types of trusts entitled “Conditional Love: Incentive Trusts and the Inflexibility Problem,” 41 REAL PROP., PROB. & TR. J. (forthcoming 2006). Here is the SSRN abstract of Prof. Tate’s article:

Abstract: This Article examines the contemporary phenomenon of incentive trusts: trusts that use money to encourage or discourage certain behaviors. Using evidence from Internet websites, practitioner articles, and newspaper articles, the Article considers the likely provisions that a typical incentive trust might have, and explains how such trusts might lead to a problem of inflexibility when they are not drafted so as to take into account the possibility of changed circumstances. The Article also examines current law regarding trust modification and termination as well as recent reform proposals, and suggests some alternatives that might better take into account the particular characteristics of incentive trusts.

Thanks to Wills, Trusts & Estates Prof Blog for pointing out this article.

In re Estate of Faskowitz, __ So.2d __ (Fla. 2d DCA Mar 31, 2006)

The decedent left no surviving spouse or lineal descendants. At a hearing on a petition for determination of heirs, Highlands County Probate Judge J. David Langford ruled that the petitioners were the decedent’s paternal heirs, and thus entitled to one-half of the estate. So far, so good. The probate court then went on to rule that because no evidence had been presented by the alleged paternal heirs that no maternal heirs existed, one-half of the estate would be held by the clerk of the court in accordance with 2005->Ch0733->Section%20816#0733.816″>F.S. § 733.816 for the unknown maternal kindred, where presumably it would escheat to the State if no maternal heirs claimed the funds within the 10-year claims period. This is where the probate court got it wrong.

The Second DCA reversed the probate court’s ruling regarding the half of the estate set aside for the decedent’s maternal kindred, providing the following excellent summary of the statutory framework governing unclaimed assets in Florida probate proceedings:

Under section 2005->Ch0732->Section%20103#0732.103″>732.103(4)(c), “[i]f there is no paternal kindred or if there is no maternal kindred, the estate shall go to such of the kindred as shall survive.” Pursuant to this provision, in the absence of any maternal kindred of Irving Faskowitz, his paternal kindred– namely, the appellant and his sisters–are entitled to inherit the whole estate. The State does not have a right to half of an intestate estate when there are lawful heirs under section 2005->Ch0732->Section%20103#0732.103″>732.103. The two specific provisions of the Florida Probate Code governing the escheat of estate property–sections 2005->Ch0732->Section%20107#0732.107″>732.107 and 2005->Ch0733->Section%20816#0733.816″>733.816–do not in any way displace the rule of descent set forth in section 2005->Ch0732->Section%20103#0732.103″>732.103(4)(c).

Section 2005->Ch0732->Section%20107#0732.107″>732.107(1) simply provides that “[w]hen a person leaving an estate dies without being survived by any person entitled to it, the property shall escheat to the state.” [FN1] Here, the paternal kindred have established their status as lawful heirs under section 2005->Ch0732->Section%20103#0732.103″>732.103(4)(c). Accordingly, the predicate for the operation of 2005->Ch0732->Section%20107#0732.107″>732.107(1) –that “a person leaving an estate [has] die[d] without being survived by any person entitled to it”–does not exist in this case.

Similarly, the provisions of section 2005->Ch0733->Section%20816#0733.816″>733.816 concerning the disposition of unclaimed property held by personal representatives do not defeat the rights the paternal kindred here have under section 2005->Ch0732->Section%20103#0732.103″>732.103(4)(c). Section 2005->Ch0733->Section%20816#0733.816″>733.816(1) addresses circumstances where “unclaimed property in the hands of a personal representative … cannot be distributed or paid … because of inability to find [the lawful owner] or because no lawful owner is known.” Neither of these circumstances have been established here. Unless it is shown that there are maternal kindred entitled to inherit from the estate, the paternal kindred are the “lawful owner[s]” of the entire estate. Contrary to the trial court’s ruling, there is nothing in the statutory scheme suggesting that once claimants have established their status as lawful heirs the State is entitled to escheat of a portion of the estate simply because there is uncertainty concerning whether there may be other lawful heirs.

Based on the clear language of the governing statutes, the Second DCA dismissed the probate court’s evidentiary burden-shifting ruling as follows:

Nothing in the case law cited by the appellees undermines this straightforward interpretation of the relevant statutory provisions. The appellees rely primarily on two cases to support the trial court’s ruling. The appellees cite In re Estate of Tim, 180 So.2d 161 (Fla.1965), and In re Estate of Russell, 387 So.2d 487 (Fla. 2d DCA 1980), for the proposition that the paternal heirs had the burden of proving the nonexistence of maternal heirs in order to avoid the operation of the statutory provisions providing for escheat of unclaimed estate property. Neither Estate of Tim nor Estate of Russell supports the position advanced by the appellees.

Demayo v. Chames, __ So.2d __ (Fla. 3d DCA Mar 15, 2006)

I previously wrote here about the Third DCA’s initial ruling in this case enforcing a charging lien against the debtor’s homestead property based on a written waiver. On its own motion the Third DCA subsequently reconsidered the case en banc and then completely reversed itself!
According to this Third DCA opinion even if a person knowingly waives his or her homestead protection against forced sale, such waiver is not enforceable unless it falls within one of exceptions specified in Article X, section 4 of Florida’s constitution, which provides in relevant part as follows:

Homestead; exemptions.–
(a) There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by a natural person….
(Emphasis added.)

The Third DCA was apparently uncomfortable with this outcome, but felt it had no choice under binding Florida Supreme Court precedent.

[Carter’s Administrators v. Carter, 20 Fla. 558, 570 (1884)] and [Sherbill v. Miller Mfg. Co., 89 So.2d 28, 31 (Fla.1956)] confirm that Article X, section 4 “protects the homestead against every type of claim and judgment except those specifically mentioned in the constitutional provision itself” and that other than for the purposes stated in this provision, cannot be waived. . . . Because the attempted waiver in this case is unrelated to those purposes stated in Article X, section 4, it is invalid.

Perhaps recognizing the unfairness of the outcome in this case, the Third DCA took the extraordinary step of essentially asking the Florida Supreme Court to overrule itself. More specifically, the Third DCA certified the following question to the Florida Supreme Court as a matter of great public importance:

WHETHER, IN LIGHT OF SUBSEQUENT PRECEDENT IN FLORIDA AND OTHER JURISDICTIONS, AND THE TEXTUAL CHANGES MADE BY THE PEOPLE OF THE STATE OF FLORIDA IN ARTICLE X, SECTION 4 OF THE FLORIDA CONSTITUTION IN THE GENERAL ELECTION OF NOVEMBER 1984, THE HOLDING IN CARTER’S ADM’RS v. CARTER, 20 Fla. 558 (1884), FOLLOWED IN SHERBILL v. MILLER MFG. CO., 89 So.2d 28 (Fla.1956), THAT A WAIVER OF THE BENEFIT AND PROTECTION OF THE EXEMPTION FOUND IN ARTICLE X, SECTION 4(A) OF THE FLORIDA CONSTITUTION IS UNENFORECEABLE AGAINST THE CLAIM OF A GENERAL CREDITOR, SHOULD BE OVERRULED?

This was too good to pass up during tax season. You know the apocalypse will soon be upon us when someone actually figured out how to make taxes . . . funny?! Stop everything and go to Taxalicious this moment to judge for yourself. This post, which I’ve reprinted below, gives you a sense of the blog’s take on taxes.

Letterman’s: Top Ten Dumb Accountant Tax Tips

10. Don’t file a W-2 form unless your name begins with “W”

9. Answer every question “Wouldn’t you like to know?”

8. Hide all money in mattress, on return write “No money hidden in mattress”

7. If you’ve just eaten, don’t do taxes for at least half an hour

6. Hire yourself as an employee, fire yourself, sue yourself for discrimination, deduct court costs

5. Report $1 billion income so IRS will think you’re some sort of big shot

4. For “charitable contributions,” list $9 you spent on last Kevin Costner movie

3. Request bonus deduction because “easy” misspelled on 1040-EZ form

2. To distract the auditor, enclose a photo of yourself naked

1. Remember, you can’t spell “taxes” without “CPA”

The on-line version of the Minneapolis/St. Paul Business Journal reported on this phenomenon here, providing national statistics that should be of interest to Florida probate attorneys. The following are portions of the article I found most interesting:

The perfect storm

The reasons for the flurry of trust-and estate-related legal battles are many.

According to an article in the Dispute Resolution Journal, an estimated $41 trillion of wealth will be transferred in the United States from the “Greatest Generation” to their kids, the baby boomers, between 1998 and 2052.

The massive transfer in wealth alone is enough to spur more family feuds, Godfrey said.

Increasingly complex family compositions makes disagreement even more likely. Disputes often arise between children and second spouses as well as between children of different marriages, said Jim Clay, a partner in the Trusts and Estates Department at Rider Bennett in Minneapolis.

That’s what’s happening in the Anna Nicole Smith case being heard by the U.S. Supreme Court. In that case, Smith is trying to claim part of the inheritance of her late husband, Howard Marshall, a Texas oil tycoon. Smith alleges that Marshall’s son, Pierce, destroyed documents, thus interfering with her expected inheritance. Pierce denied the allegations and said Marshall left Smith nothing in his will.

Some lawyers say baby boomers seem much more willing to air their family problems in court than their parents were.

Well-publicized trials also contribute to the rise in demand for estate litigation.

In the Binger case, the family disputed the former Honeywell chairman’s decision to amend his will two months before he died in November 2004 to give about $40 million to $50 million of his $200 million estate to Jane K. Mauer after his death. Mauer was his family’s wealth manager with whom he also had a close personal relationship. The family objected to that gift, arguing that Mauer manipulated Binger into giving it to her. Mauer says that’s not true. Dorsey & Whitney attorney Greg Weyandt, a member of the firm’s trust-and-estate litigation practice, represented the Binger family.

“I’ve gotten calls from people who said they read about some other case in the newspaper and it made them think they may have a claim,” said Alan Silver, a litigator with Minneapolis-based Bassford Remele.

Lack of trust in the trustee

Disputes among family members — or families vs. other beneficiaries — aren’t the only conflicts spilling over into the courtroom.

Battles between beneficiaries and trustees are becoming increasingly common.

The economic downturn of 2001 seems to have had something to do with the popularity of this kind of case.

“We had a significant decrease in the market and if trustees didn’t have a diversified portfolio or weren’t doing everything they should have been doing as trustees, there’s always the potential of being sued by beneficiaries,” Clay said.

A classic example of this kind of dispute is the clash between the heirs to the Minneapolis Creamette fortune and Lowry Hill, the trustee to the 48-year-old family trust. In that case, the family of Creamette founder James T. Williams, represented by Silver, alleged that Lowry Hill failed to properly manage the trust’s stock portfolio and caused a $13.3 million decline in the value of the trust. Lowry Hill officials maintained they handled the trust prudently. The trial court awarded the Williams family $5.4 million plus attorneys fees and return of trustees fees. The Minnesota Court of Appeals set aside the award and sent the case back to the trial court for further proceedings. The parties ultimately resolved the case out of court on a confidential basis.

Beneficiaries also may sue a trustee for failing to properly execute the orders of a trust.

Silver litigated one such case that was decided by the Minnesota Court of Appeals in 2004. In that case, Ruben Divine left his assets to his son, Perry, and to his wife and left strict instructions as to how that money was to be distributed. Perry Divine argued that the trustees abused their discretion in allowing the distribution and took them to court, but a Ramsey County District Court judge disagreed with Divine. Divine tried to get that decision reversed by the Court of Appeals, but failed.

Somogyi v. Nevai, __ So.2d __ (Fla. 4th DCA Feb 22, 2006) In the probate context it is not unusual to have multiple orders entered prior to completion of the estate administration that are subject to appeal under Florida Probate Rule 5.100 and Florida Rule of Appellate Procedure 9.110(a)(2). The Committee Note for the 1996 amendment to Florida Rule of Appellate Procedure 9.110(a)(2) recognizes this reality, and addresses it head on, stating in part as follows:

The addition of new subdivision (a)(2) is a restatement of former Florida Rule of Probate Procedure 5.100, and is not intended to change the definition of final order for appellate purposes. It recognizes that in probate and guardianship proceedings it is not unusual to have several final orders entered during the course of the proceeding that address many different issues and involve many different persons. An order of the circuit court that determines a right, an obligation, or the standing of an interested person as defined in the Florida Probate Code may be appealed before the administration of the probate or guardianship is complete and the fiduciary is discharged.

So every time the probate court issues an order, the attorney needs to immediately ask him or herself whether that order is subject to appeal under the special rule applicable to probate proceedings. The answer is not always clear (when in doubt, the prudent approach is to file the appeal and let the appeallate court determine the issue). In this case the question was whether an order denying a motion to dismiss was subject to appeal. The Fourth DCA said NO in the following one-paragraph opinion:

PER CURIAM. We grant appellee’s motion to dismiss this appeal for lack of jurisdiction. The “Order Denying Motion to Dismiss Petition for Revocation of Portions of Will and Related Relief” does not finally determine a right or obligation of an interested person under Fla. R.App. P. 9.110(a)(2), where it merely denies a motion to dismiss and does not revoke the probate of the will. See Sanchez v. Masterhan, 837 So.2d 1161 (Fla. 1st DCA 2003). Dismissed.