SPRING 2012 CASE LAW UPDATE DADE COUNTY BAR PROBATE AND GUARDIANSHIP COMMITTEE by Eric Virgil, Esquire The Virgil Law Firm

Transcription

1 SPRING 2012 CASE LAW UPDATE DADE COUNTY BAR PROBATE AND GUARDIANSHIP COMMITTEE by Eric Virgil, Esquire The Virgil Law Firm Presented 04/12/12 *FAMOUS MIAMI RESIDENTS EDITION* 1. It Cuts Both Ways (Gloria Estefan). The 3 rd DCA reminds us of the consequences of an invalid devise of homestead property. Aronson v. Aronson, So.3d (Fla. 3d DCA 2012). In 1996 Mr. Aronson deeded a condo located on Key Biscayne to his revocable trust. At that time the condo was not his homestead. Under the trust, his wife received a life estate in the condo and at her death it was to go to Mr. Aronson's sons from a prior marriage. In 2000 the couple sold a home in Massachusetts, which had been titled in the wife s name alone, and moved into the Key Biscayne condo, which became their homestead. The wife applied over $100,000 of the sale proceeds from the sale of her house toward paying down the mortgage on the Key Biscayne condo. Mr. Aronson then died in This case has been the subject of several appeals but this decision ultimately decided the rights of the various parties to the condo. The Third DCA held that the condo was not an asset of the trust and that it was not subject to the control of the trustee. Under Florida homestead law when Aronson was survived by his wife the only valid devise of the property would be outright to her. Since the trust did not provide for outright distribution to the wife, the trust was not effective as to the homestead property and it passed pursuant to Art. X, 4(c), Fla. Const. and F.S. Sec (1) to the wife for a life estate with the remainder to the children. The wife got stuck with a life estate where she has to pay the ongoing costs of the property and is not reimbursed for the money she put into it prior to the death of her husband. Application: There are several applications to this case. First, trustees need to carefully review the potential homestead status of any real property purportedly owned by the trust. As in this case, it may turn out that the trust has no rights over homestead real property and, on the flip side, no obligations to pay for the upkeep of homestead property. A trustee unsure of its duties would be wise to seek a determination of homestead status from the court if all interested parties cannot agree regarding what should be done. Second, surviving spouses now have a choice with regard to whether they want to keep a homestead life estate or to elect a one-half tenancy in common to the decedent s homestead pursuant to F.S. Sec The election has a six-month deadline from the decedent s death. This election will be advantageous to the surviving spouse in many situations. Finally, estate planners should see this case as a reminder of how homestead law can trump provisions in documents and advise clients accordingly. 1

2 2. That s the Way I Like It (KC and The Sunshine Band). Second DCA follows Morgenthau to bar creditor who did not seek extension to file a claim after publication period expired. Lubee v. Adams, So.3d (Fla. 2d DCA 2012). Caufield (the decedent) died on December 18, An estate administration was opened and Notice to Creditors was published. Lubee was not served with the notice to creditors. On December 18, 2008, Lubee filed his claim in the probate proceedings. Lubee did not file his claim in the probate proceeding within three months following the publication of notice to creditors and he did not file a motion for extension of time or otherwise seek an extension. Lubee contended on appeal that because he was a readily ascertainable creditor entitled to be served with a copy of the notice to creditors pursuant to sections (1) and (3)(a), he was only required to file his claim in the probate proceeding within thirty days after service of the notice on him or, at a maximum, within two years of the decedent's death. The Second DCA disagreed and held that because he was not served with a copy of the notice to creditors, Lubee was required to file his claim in the probate proceeding within the three-month window following publication. Alternatively, Lubee could have sought an extension from the probate court to file the claim pursuant to section (3) within the two-year window of section Since he did neither, the Court held his claim to be untimely and barred. Under the Court s analysis, the issue of whether Lubee was an ascertainable creditor was immaterial. Lubee did not follow the proper procedure in the Court s eyes to tee-up the issue of his ascertainable status and whether he got insufficient notice under that status. This case confirms the reasoning of Morgenthau v. Estate of Andzel, 26 So.3d 628, 632 (Fla. 1 st DCA 2009). Application: Hung Nguyen did a fine presentation about the issues and pitfalls presented to creditors by this case and Morgenthau at our March meeting. There are constitutional issues presented by the decisions in these cases and they are currently being reviewed by the RPPTL Section of The Florida Bar. Until there is some statutory change, or a decision by the Florida Supreme Court offering further guidance, creditors must seek an extension of time if they desire to file a claim after the publication period even if they believe they are ascertainable and entitled to service of notice. They have the burden to prove their status as reasonably ascertainable creditors and must follow the procedure set forth in the case law. Personal representatives should move to strike any claims filed outside the publication period where no motion for extension is filed. 3. I m Not Making This Up (Dave Barry). The Second DCA injects the pesky need for evidence into probate proceedings. Bowdoin v. Rinnier, So.3d (Fla. 2d DCA 2012). Bowdoin died intestate leaving her husband and a minor child as the sole heirs of her estate. The decedent's mother, Rinnier, filed a petition for administration requesting appointment as personal representative of her daughter's estate and alleging negative issues related to Mr. Bowdoin. Mr. Bowdoin filed a counter-petition for administration seeking the appointment as the decedent's surviving spouse. After a hearing, but 2

3 without receiving any evidence of Bowdoin s lack of fitness to serve, the probate court granted Rinnier's petition. The Second DCA reversed. The Court stated that under F.S. Sec Mr. Bowdoin had priority for appointment as he was the surviving spouse. The court has discretion to appoint someone other than the preferred person as personal representative of an intestate estate but the record must show that the preferred person is not fit to serve as personal representative. The DCA found that Rinnier produced no witnesses or evidence at the hearing to show that Bowdoin was disqualified from serving. Lacking an evidentiary basis, the trial court cannot appoint someone other than the person with priority under the statute. Application: This case is a reminder that it is difficult to overcome the priority scheme set forth for appointment of personal representatives. Arguments of counsel are insufficient to overcome the priority unless allegations in a petition are supported by evidence the court can use to justify a ruling. 4. Double Whammy (Carl Hiaasen). First DCA holds that an expectancy is not a property right waived by a quitclaim deed during life. Layne v. Layne, 74 So.3d 161 (Fla. 1 st DCA 2011). Son owned a townhouse 50/50 with Dad and Dad's wife. Later, Son deeded his ½ interest in the townhouse to Dad and Dad's now ex-wife, resulting in Dad and ex-wife each owning a 1/2 interest in the townhouse as tenants in common. Dad died intestate and Son claimed a share of the townhouse pursuant to his interest in Dad's intestate estate. Ex-wife argued Son shouldn't inherit any part of the townhouse. Her theory was Son was not entitled to any interest in the property because his quitclaim deed conveyed any and all interest he had in the property, including the right to take by the intestacy laws. She further argued that the doctrine of after-acquired title barred Son from regaining his interest in the property. The probate court agreed with this argument but was reversed by the 1 st DCA. The Court held first that the after-acquired title doctrine has no application here. That doctrine addresses a situation in which a person purports to convey to another an interest in property he does not possess and then, after actually obtaining that interest, seeks to avoid the consequences of the conveyance on the ground that he had no interest to convey in the first place. With regard to the afteracquired property doctrine, the underlying concern is fraud or inequity. Fraud or inequity may result from a party conveying or attempting to convey an interest in property which the purported conveyor does not possess and then, when that person later acquires that interest, the conveyor attempts to convey the property to someone else. Then the Court held that any right Son had to take an interest in the property as an heir did not exist at the time he executed the quitclaim deed. A quitclaim deed conveys only that interest in a property held by the grantor at the time of the conveyance. The Court explained that the possibility that a person will inherit property from another is but an expectancy and not an interest in property. The decedent s death is the event that vests the heirs right to the decedent s intestate property. Application: Real property title issues can be confusing. This case confirms that property rights in an intestate decedent s estate vest at the decedent s death. As a side note, it is possible to convey an expectancy but it must be done clearly and expressly. 3

4 The deed here only conveyed the Son s present interest. 5. River of Grass (Marjorie Stoneman Douglas). The Fourth DCA confirms the importance of the settlor s intent with regard to trusts. Jervis v. Tucker, So.3d (Fla. 4 th DCA 2012). Meikle executed a trust agreement in She later amended this trust agreement. This first trust amendment contained language providing for the suspension of Meikle s power to revoke or amend the trust [i]f, at any time during the continuance of [the] trust, Grantor is adjudicated incapacitated by a court of appropriate jurisdiction. Further, the trust amendment stated that, The Grantor's powers and those of Grantor/Trustee may be restored either by virtue of [1] an order of an appropriate court having jurisdiction over Grantor, or [2] upon the issuance and receipt by the Trustee of a written opinion from... two... licensed physicians who have examined the Grantor. In 2000, Meikle was adjudicated incapacitated. On December 27, 2001, Meikle executed a second amendment to her trust without obtaining a court order authorizing the amendment or restoring her capacity to amend the trust and without 2 written opinions from two licensed physicians. Meikle died in 2007 and the second amendment to her trust was challenged. Based on her adjudication of incapacity in 2000, Meikle was presumed incapacitated when she executed her second amendment in This evidentiary presumption can, however, be overcome at trial so the beneficiary of the trust argued that Meikle had sufficient capacity to execute the second amendment. The contestants argued her capacity was irrelevant because the amendment was not made in compliance with the terms of the trust. The trial court agreed with the contestants and the Fourth DCA affirmed. The Court held that intent of the settlor must be honored and under the terms of the trust and its first amendment Meikle did not have the power to execute the second amendment to the trust. Application: The starting point in reviewing any trust controversy is the language of the trust itself. If that language is clear it may allow the court to resolve the dispute without a trial being necessary. This case, which was resolved through a summary judgment hearing, is an example. 6. As Influential as I Have Been, Do You Think One of These People Has Ever Called Me?... No. (Ferdie Pacheco). Fifth DCA holds estate beneficiaries can sue a guardian s lawyer for malpractice. Hodge v. Cichon, So.3d (Fla. 5 th DCA 2012). Plaintiffs were named beneficiaries of the decedent's will. Prior to his death, the decedent was adjudicated to be incapacitated and guardians were appointed for him. The guardians then obtained a court order authorizing them to implement further estate planning for the ward for the purpose of saving estate taxes. When the decedent died, over 2 ½ years later, the plan hadn't been fully implemented and the tax savings therefore were not realized. The plaintiffs were never represented as counsel by the lawyers for the guardians. Post-death, plaintiffs sued the attorneys citing the rationale that they were the intended third-party beneficiaries of the lawyers' work. A limited exception to the privity requirement in the area of will drafting allows an intended 4

5 beneficiary to file a legal malpractice claim for losses resulting from a lawyer's actions or inactions, where it was the apparent intent of the client to benefit that third party. Here, the Court held that the third party intended beneficiary exception to the rule of privity is not limited to will drafting cases. The purpose of the estate plan change was to benefit all named and intended beneficiaries so the Court allowed the malpractice suit against the guardians attorneys to continue and not be dismissed at the summary judgment level of the case. Application: Guardianship lawyers are not necessarily tax and estate planning specialists, as well. In guardianships with significant assets, it might be advisable to have the ward s estate plan reviewed by an experienced planner. This case is reason to be cautious, though. If you proceed, you should make sure the guardian retains someone who specializes in this area (if that s not you) and that the specialist actually follows through as necessary. Query whether the guardians attorneys could have been sued for not undertaking any planning? 7. He Only Has 12 Million (Drew Rosenhaus). Fourth DCA explains that a beneficiary s interest in a trust vests at death, not the date of trust execution. Darian v. Weymouth, So.3d (Fla. 4 th DCA 2012). In 1999, James E. Hughes and Martha Mayfield entered into a prenuptial agreement. Shortly thereafter, they were married. In August of 2000, James executed a living trust in compliance with the prenuptial agreement. The trust made provisions for disposition of Hughes estate upon his death. Upon his death, Martha would receive property in Florida and North Carolina, one million dollars, the contents of the residences, and various other items. His will was a pour-over will that expressly incorporated the terms of the trust. The trust did not specifically indicate what was to be done with the property devised to Martha in the event that James survived Martha. In 2004, James and Martha Hughes were murdered by Martha s adopted son from a prior marriage. Because the coroner was unable to determine which spouse predeceased the other, the probate court deemed their deaths to be simultaneous, pursuant to F.S. Sec (1). Therefore, James property was to be disposed of as if he survived Martha. To determine whether Martha was required to survive Mr. Hughes in order to receive benefits under the trust, the personal representative of the estate filed for construction of the trust. Weymouth, daughter of Martha and personal representative of her estate, sought to enforce the provisions of both the prenuptial agreement and the trust. Weymouth argued that her mother s interest became vested upon the creation of the trust and was contingent solely upon Mr. Hughes not revoking it prior to his death. The estate argued that Martha s interest was contingent upon her surviving Mr. Hughes, and lapsed when she predeceased him. You might be thinking, but Eric, wouldn t the order of death be irrelevant here due to F.S. Sec (2) (the antilapse statute applicable to Florida trusts)? If that statute applied, then Martha s heirs would inherit her share of Hughes estate in this situation. Unfortunately for them, given the year of death and the year the trust was drafted, no antilapse statute (old or new) applied and the common law rule was in effect. The Court held that the creation of a living trust, standing alone, is not an event which vests the interests provided by a trust agreement. A beneficiary s interest vests at death of the settlor and under the common law the beneficiary s interest lapses 5

6 if she does not survive the settlor. Application: The peculiar timing of this case renders the lapse/antilapse issue less important than the issue of the coroner s report. A takeaway from this case is to carefully review the report of a coroner or medical examiner where cause of death or timing of death is at issue. It may be necessary to stress to that official the importance of the determination for a case at issue and even to retain an independent expert to review the issue if necessary. 8. Helping Others is Like Helping Yourself (Henry Flagler). The Fourth DCA reminds us about the potential application of the cy pres doctrine to save charitable gifts from failing. SPCA Wildlife Care Center v. Abraham, So.3d (Fla. 4 th DCA 2011). Ericson executed a will that created a trust for the lifetime benefit of her close friend, Brown. Upon Brown's death, the trust's remaining assets were to be distributed to the "International Wildlife Society. Unfortunately, there is no such charitable entity known as the "International Wildlife Society. According to Brown, it was the intent of Ericson to have the trust assets distributed to a local Broward County benevolent animal organization which would attempt to aid and care for animals and not consider destruction of animals except as a last resort. The trust was brought before the court for clarification and several charities were notified and given an opportunity to file responses. SPCA Wildlife Care Center asserted that the assets of the trust should be distributed to it based on the cy pres doctrine. The trial court then ruled the trust's residuary bequest was vague, and thus failed. Therefore, no charity benefitted and the property would pass by intestacy. This order was appealed and the 4 th DCA reversed. The Court held the testator s intent is the polestar that guides a court s interpretation of a will and intestacy is not favored where the will can be construed to lead to a valid testamentary disposition. Further, regarding charitable gifts Florida courts have applied the cy pres doctrine under equity to make specific a general charitable intent of a settlor. The doctrine also applies when an original specific intent becomes impossible or impracticable to fulfill and courts will substitute another plan of administration which is believed to approach the original scheme as closely as possible. The Court found that from the language of the will and the affidavits in the record, it appeared that the decedent had a general charitable intent for the residue of her testamentary trust to pass to a charitable organization for the benefit of animals. Where it cannot be determined which organization the testator had in mind, interested parties should have the opportunity to present evidence to demonstrate that the cy pres doctrine should apply. The Court remanded for an evidentiary hearing. Application: The opinion did not cite it, but the Florida Trust Code has codified the cy pres doctrine at F.S. Sec As funds are tight all around these days, it makes sense for charities to be active in seeking good legal advice and assistance from the court where a potential charitable gift was made but is unclear in application. 6

7 9. This is Just Going to Start Another War (Jose Canseco). The Third DCA holds that Probate Rule is not a statute of limitations or nonclaim provision. Rocca v. Boyansky, So.3d (Fla. 3d DCA 2012). Boyansky died in He executed two wills, one in 2004 and one in The respective wills poured over to different revocable trusts of Boyansky. Rocca s interest was affected by which trust ended up being the beneficiary of the estate. In 2009, a petition was filed for probate of the 2007 will. Rocca filed a caveat. Formal notice of the proceeding was served on Rocca and his designated agent on August 31, In accordance with Probate Rule 5.040(a), the formal notice served on Rocca notified him he had twenty days within which to serve written defenses to the petition, and his failure to do so may result in a judgment or order for the relief demanded in the pleading or notice, without further notice. Rocca did not file a responsive pleading within the period allotted by the rule. Instead, on September 21, 2009, he filed an Objection to the Amended Petition for Administration, Objection to Admission of Last Will and Testament to Probate and Motion for Enlargement of Time to File and Serve an Answer to the Petition for Administration and Counter Petition for Administration. Thereafter on three separate occasions the court granted requests for additional time to file the responsive pleading. Finally, the court ordered that the responsive pleading be filed December 15, On November 13, 2009, the petitioners noticed a fifteen-minute special set hearing for December 22, 2009 before the trial court on the petition for administration so Rocca had over a month s notice of the hearing. Rocca, however, filed his Answer, Affirmative Defenses, and Counter Petition for Administration thirty minutes before the commencement of the December 22, 2009 hearing. After hearing arguments of counsel, the trial court entered the 2007 will to probate. The 3 rd DCA reversed. First the Court explained that a caveator is entitled to due process. In this case, there is nothing further petitioner s counsel could have done since they served the appropriate formal notice and noticed a hearing appropriately. The trial court was lenient in granting extensions to Rocca but the Third DCA apparently believed the ruling entering the 2007 will was on the basis that Rocca had defaulted on a time limit to file a responsive pleading. The Court explained that Probate Rule 5.040(a) is not a statute of limitations or non-claim provision and that it only operates to allow a court to enter orders ex parte and without further notice to a person given formal notice under the rule. Since Rocca filed an Answer prior to the hearing on the court s entry of the order admitting the will to probate, the court must allow for an evidentiary hearing regarding the validity of the 2007 will. Application: As a practical matter this is a troublesome decision. It appears the court bent over backwards to give Rocca ample opportunity to timely file an Answer to the petition for administration and Rocca was still able to delay the proceedings with his late-filed response of the same day as the hearing. Attorneys dealing with an opponent engaging in such delays should remind the court of this case when multiple extensions are sought by an opponent when commencing the administration. A hearing on the petition for administration might also be set for immediately after the deadline to object so as to smoke out a response that might be filed on the day of the hearing. 7

8 10. If Somebody Thinks I Have an Integrity Problem, then the Honest Thing to do is to Tell Me What They Think it is and Let Me Address It (Janet Reno). Fourth DCA holds that solicitation of a gift by a lawyer through a client s will is potentially unethical but not void per se. Agee v. Brown, So.3d (Fla. 4 th DCA 2011). Decedent Birck died in On November 17, 2009, Brown filed a petition for administration of the decedent s estate. Brown sought to have the decedent s last will and testament, which was executed on February 11, 2009, admitted to probate and to have himself appointed as personal representative of the estate in accord with the 2009 will. In April 2010, Agee filed a verified petition to revoke the probate of the 2009 will. Agee alleged that he was the beneficiary of a will executed in Brown asserted that Agee lacked standing to contest the 2009 will because the 2007 will was void as a result of it having been drafted by Agee who was the decedent s attorney at the time. Brown s argument was that because it is a violation of Rule 4-1.8(c) of the Rules Regulating The Florida Bar for an attorney who is not related to a client to prepare a will on the client s behalf that includes a substantial gift for the attorney, the bequest to Agee from the 2007 will was void as contrary to public policy, and therefore, Agee had no interest in the decedent s estate. The common law rule in Florida is that gifts made to lawyers in violation of Rule 4-1.8(c) aren t per se void, but they do trigger a rebuttable presumption of undue influence by the lawyer. However, in this case, the trial court ruled the will was per se void as contrary to public policy. The 4 th DCA reversed. The Court noted the case law regarding the presumption of undue influence and stated that a per se rule of invalidity imposed by case law would not be the proper solution to the perceived ethical issue in the case. The Court stated that the methodology to protect the public from unethical attorneys in the drafting of wills is within the province of the Florida Legislature. The court noted that the standard causes of action for contesting wills do provide protections against this situation. Application: The rule of professional conduct does not prevent lawyers from receiving substantial gifts from their clients but the gift should not be from documents drafted by that lawyer. The client should have independent legal advice regarding the gift to the lawyer and the lawyer should advise the client to seek that advice. 11. No matter how successful you are, you are not invincible (Brett Ratner). The Florida Supreme Court disbars lawyer who also engaged in financial planning transactions with client without conflict of interest disclosure. The Florida Bar v. Doherty, So.3d (Fla. 2012). Doherty provided estate planning advice to a client and also began selling annuities to his client. His sale of annuities earned him commissions. Doherty also drafted documents for the client that appointed him as personal representative of her will and trustee of the client s trusts. This was problematic since one of the trusts was also drafted in a way that compelled the trust to buy annuities from two companies for which Doherty sold annuities as an agent. The Court held that Doherty had earned commissions from prior sales of annuities and stood to earn a commission from the sale of the annuities to the trustee had those transactions been completed. Doherty did not 8

9 disclose his financial interest in the transactions to the client in writing as required by Rule 4 1.8(a). Doherty s conduct created a clear conflict of interest in that there was a substantial risk that his representation of the client would be limited by his own interests. The Supreme Court held that the actions amounted to egregious misconduct and Doherty was disbarred. Application: If you are going to engage in business transactions with clients then you must make the specific written disclosures required by Rule 4-1.8(a). Failing to do so opens you to bar discipline, including the ultimate sanction of disbarment. 9