Jury Trials in Probate

 Our firm regularly demands jury trials in probate matters.  There are a variety of reasons for doing so, including the simple fact that it is a constitutional right of all citizens to preserve and guarantee a trial by jury in all proceedings.  Also important is the fact that jury trials are vital to maintaining the public’s confidence and trust in our judicial system.  The value of jury trials in probate has become even more critical with the dramatic decline in the number of jury trials in recent years.

One of the evolving and developing areas of the law that assists probate litigators in providing access to jury trials is the theory of liability founded in what is referred to as “tortious interference with an inheritance” or “intentional interference with an expectancy.”   Our firm regularly handles these cases on behalf of relatives who have been victimized by some unscrupulous person who has interfered with an elderly loved one’s traditional testamentary wishes.  The unscrupulous conduct takes many forms, but typically involves the changing of the title and ownership of assets using a power of attorney, assisting an elderly person with the preparation of a new will, or the changing of bank accounts so that the elderly person’s assets do not pass to the family upon death. 

These actions are for money damages and persons who make these claims are guaranteed a right to a jury trial under the state constitution.

REMEDIES FOR BREACH OF TRUST

A trustee of a trust has several duties and obligations to the beneficiaries in administering a trust, including but not limited to: administering the trust in good faith, in accordance with its terms and purposes (Fla.Stat. §736.0801); a duty of loyalty and to administer the trust solely in the interests of the beneficiaries (Fla.Stat. §736.0802); the trustee shall act impartially in administering the trust property giving due regard to the respective interests of multiple beneficiaries (Fla. Stat. §736.0803); in administering a trust, the trustee shall only incur expenses that are reasonable in relation to the trust property, the purposes of the trust and the skills of the trustee (Fla. Stat. §736.0805); a trustee shall keep clear, distinct, and accurate records of the administration of the trust (Fla. Stat. §736.0810); a trustee shall keep the qualified beneficiaries of the trust reasonably informed of the trust and its administration (Fla. Stat. §736.0813). A violation by a trustee of a duty the trustee owes to a beneficiary is a breach of trust. In the event a breach of trust occurs, or may occur, the court has several actions it may take to remedy a breach of trust.

Florida Statute §736.1001(2), “Remedies for breach of trust,” provides a non-exclusive list of those actions the Court may take to remedy a breach of trust. The Court may:

a) Compel the trustee to perform the trustee’s duties;

b) Enjoin the trustee from committing a breach of trust;

c) Compel the trustee to redress a breach of trust by paying money or restoring property or by other means;

d) Order a trustee to account;

e) Appoint a special fiduciary to take possession of the trust property and administer the trust;

f) Suspend the trustee;

g) Remove the trustee as provided in s. 736.0706;

h) Reduce or deny compensation to the trustee;

i) Void an act of the trustee, impose a lien or a constructive trust on trust property, or trace trust property wrongfully disposed of an recover the property or its proceeds; or

j) Order any other appropriate relief.

            In addition to the above list of actions a court may use to remedy a breach of trust, it may also find that a trustee who commits a breach of trust is liable for the greater of the amount required to restore the value of trust property and trust distributions to what they would have been if the breach had not occurred including lost income, capital gain, or appreciation that would have resulted from proper administration; or the profit the trustee made by reason of the breach. (Fla. Stat. §736.1002).

            If you as a beneficiary of a trust have been damaged by a breaching trustee, do not despair as there are several remedies at the court’s disposal. The Court has full discretion when fashioning the appropriate relief based upon the unique facts of your case and the specific damages you have incurred. An experienced trust litigation attorney can present your facts and the necessary evidence the Court will require to determine what specific relief is most appropriate to remedy the specific breaches committed by your trustee.

Florida Probate:  Notice of Administration

The Notice of Administration is a formal document that notifies all interested parties of the death of the decedent, the filing of the last will and testament for probate, and that an objection to the validly of the will and the probate proceedings must be filed within a certain period of time or be forever barred.

The recipient of a Notice of Administration may have a variety of legal bases (e.g., Lack of Mental Capacity, Undue Influence, Duress, Intentional Interference with an Expectancy, and/or Improper Signing of the Will) to try to stop the administration of the estate or the challenge the validity of the Will.  If you receive a Notice of Administration informing you that you have a limited time-frame, the Notice provisions will override any deals, promises or assurances that if you don’t contest the will you will get your fair share.  So be wary of any promises made that things will be “evened out” in the estate or someone will “take care of it” – those verbal agreements are unenforceable.  In other words, once you are served with a Notice of Administration and the time period (usually 20 days) passes, any promises, representations or guarantees to settle any estate dispute or disagreement are worthless and unenforceable.

THE TRUSTEE’S DUTY OF IMPARTIALITY WITH BENEFICIARIES OF A TRUST.

Impartial – unable to perceive any promise of personal advantage from espousing either side of a controversy.  Ambrose Bierce

Recently, the problem of a trustee financially favoring one beneficiary over another presented itself.  In this case, the trustee was making distributions to one beneficiary without question, while denying the other beneficiary of similar distributions.  When this occurs, it is imperative that a competent attorney review the trust document and any amendments to the trust to determine if there exists any specific language allowing for the inequity in distribution.  If no such language exists, then the trustee has breached their fiduciary duty of impartiality to the beneficiaries of the trust.

Florida Statute 736.0803 states that “[i]f a trust has two or more beneficiaries, the trustee shall act impartially in administering the trust property, giving due regard to the beneficiaries’ respective interests.”   The trustee cannot favor one beneficiary over the other, unless there is language in the trust document that allows the trustee to do so.

Also, the Uniform Trust Code Section 803 states that the duty of a trustee to act impartially does not mean that the trustee is required to treat the various beneficiaries equally.  Rather, the trustee must treat the beneficiaries equally in light of the purposes and terms of the trust.  The Restatement (Third) of Trusts, Section 79(2) states that the trustee has a duty of loyalty which is the specific duty to treat all trust beneficiaries impartially, that is, not favor one beneficiary over another unless authorized to do so by the governing instrument. 

Even when so authorized, the trustee’s discretionary acts favoring one beneficiary over another must be in furtherance of the intentions of the settlor/grantor and not in furtherance of the trustee’s own personal biases and preferences.  The trustee must be impartial when dealing with conflicting equitable interests of beneficiaries.  Therefore, a trustee must deal impartially with the trust beneficiaries, treat them even-handedly, and act in the best interest of the trust as a whole.  Friedman v. Friedman, 844 So.2d 789 (Fla. 4^th DCA 2003); Morse v. Stanley, 732 F.2d 1139, 1145 (2d Cir. 1984). 

If you believe a trustee is breaching their fiduciary duty to act impartially, it is imperative that you have a competent attorney review the trust documents to determine the specific intentions of the settlor/grantor.  If you find that the trustee did, in fact, breach their fiduciary duty to act impartially, and the trustee has favored one beneficiary over another, then it may be necessary to commence litigation in order to remove the trustee, have a successor trustee appointed, and have the trust disbursements equalized between the beneficiaries.

Florida Trust Termination

It is not uncommon for people to place real estate in a trust as part of their estate plan. What happens when the person dies and the real estate is unproductive or the value gets reduced?  Recently a client had a one-half interest in a trust that was to last for several years, the primary asset of which was a house.  The owner of the house wanted it to be available for his sibling to use after his death.  Unfortunately, the house had fallen behind in monthly dues with the homeowner’s association and was not used or lived in after the death of the owner.  Of course, expenses (such as property taxes and homeowner’s dues) needed to be paid and the homeowner’s association sued for past due bills.

Fortunately, Florida law permits the Court to modify an irrevocable trust if not inconsistent with the settlor’s (the creator of the trust) purpose and the purposes of the trust have been fulfilled or have become illegal, impossible, wasteful or impractical to fulfill.  The law allows for modification of the trust for other reasons as well.  The law even allows termination of the trust, in whole or in part!

The client feared that the expenses on the real estate would greatly diminish his interest in trust when it ended after the set term of years.  Fortunately, through application of Florida Statute 736.04113, we were able to request the trust be terminated and the real estate sold, with the proceeds distributed in accordance with the terms of the trust.  This use of the probate law in Florida worked to our client’s advantage and allowed the settlor’s intent to be followed.  This is a great example of how circumstances can change after signing estate planning documents, but with the help of an experienced probate attorney everyone was pleased with the outcome.

Florida Trust Decanting:  Phipps v. Palm Beach Trust Co., 196 So. 299 (Fla. 1940) and Florida Statute §736.04117

“Decanting” is the legal term used to describe the distribution of trust property from one trust to another trust pursuant to the trustee’s discretionary authority to make distributions to or for the benefit of one or more beneficiaries.  Common law provides authority for trust decanting, but several states – including Florida – have codified the common law.  Florida Statute §736.04117 became effective on July 1, 2007.

Under common law, a trustee with absolute power to invade principal is the equivalent of a donee of a special power of appointment.  Restatement (Second) of Prop.: Donative Transfers §11.1  Absent a contrary provision in the governing document, a donee of a power of appointment may exercise such power in a manner which is less extensive than authorized by the instrument creating the power.  Thus, “the rationale underlying decanting is that if a trustee has the discretionary power to distribute property to or for the benefit of one or more current beneficiaries, then the trustee, in effect, has a special power of appointment that should enable the trustee to distribute the property to a second trust for the benefit of such beneficiaries.”  William R. Culp, Jr. & Briani Bennett Mellen, Trust Decanting: An Overview and Introduction to Creative Planning Opportunities, Real Property, Trust and Estate Law Journal, Spring 2010, p. 3. The theory is that if there is authority to distribute outright, then there is authority to distribute in further trust. Alan Halperin and Michelle R. Wandler, Decanting Discretionary Trusts:  State Law and Tax Considerations, 29 Tax Management Estates, Gifts & Trusts Journal, 219, 221 (2004).

In 1940, the Supreme Court of Florida considered whether a trustee, who was specifically authorized by the trust document to appoint the trust property among beneficiaries in whatever proportions he desired in his sole discretion, could create a second trust for the benefit of the beneficiaries funded with property distributed from the first trust.  Phipps v. Palm Beach Trust Co., 196 So. 299 (Fla. 1940).  In Phipps, the settlor, Margarita Phipps, created a trusts for the benefit of her four children.  She named Palm Beach Trust Company and her husband as co-trustees.  Her husband was given a personal power of appointment, exercisable during life by written instrument delivered to the corporate trustee or at death in his Last Will & Testament, in favor of the four children and/or their descendants in whatever proportions as he shall determine.  In compliance with the express terms of the trust, Mr. Phipps provided written directions to the corporate trustee to create a second trust for the descendants.  The corporate trustee, in an abundance of caution, brought a suit in equity praying for construction of the original trust. 

The Phipps court held that the creation of the second trust was permissible because the trustee had both a lifetime and a specific testamentary power to direct distributions to trust beneficiaries.  Ergo, the trustee’s power was a power of appointment instead of a discretionary power to distribute trust property.  The Phipps holding does not provide authority for the position that a trustee with a purely discretionary power held in a fiduciary capacity can transfer assets to a new trust.  Florida Statute §736.04117 codifies the principal holding in Phipps. 12 Fla.Prac., Estate Planning §6:41 (2010-2011 ed.).  In summary, the statute provides that a trustee who has absolute power under the terms of the trust to invade principal may make distributions to a second trust if those beneficiaries include only those beneficiaries of the first trust without reducing any fixed income interest.  The exercise of the decanting power is to be done by an instrument in writing, signed and acknowledged by the trustee and filed with the records of the first trust.  Additionally, the trustee shall notify all qualified beneficiaries of the first trust, in writing, at least 60 days prior to the effective date of the trustee’s exercise of the power to invade the principal and must set forth the manner in which the trustee is planning to exercise the power.  The trustee’s notice under this section shall not limit the right of any beneficiary to object to the exercise of the trustee’s power to invade the principal.  Fla.Stat. §736.04117.

Procedurally, the documents employed for a trust decanting should be similar to those used with respect to a resolution to distribute property.  A written document providing the terms of the trustee’s discretionary exercise of the power to decant should set forth the terms of the exercise of the power to appoint trust property further in trust.  It should set forth background information or recitals identifying (1) the current trustees of the original trust and the trustees that are exercising the decanting power (2) when the original trust was formed and by whom (3) the relevant terms of the original trust (4) the trustee’s authority for the decanting, whether pursuant to statute or the trust instrument, and (5) the appointee trust that will receive trust property from the original trust.  The decanting document should also include trustee resolutions designating and appointing assets of the original trust to the appointee trust and directing the appointed assets be held in accordance with the appointee trust.  William R. Culp, Jr. & Briani Bennett Mellen, Trust Decanting: An Overview and Introduction to Creative Planning Opportunities, Real Property, Trust and Estate Law Journal, Spring 2010, p. 43.

Recognition of a German Will in the USA (formal validity)

by Jan-Hendrick Frank, Esq.

This article provides an introduction to the recognition of German Wills in Florida.

German Wills:  Formal requirement under German law

Under the German Civil Code (“BGB”), the testator can choose between two forms of traditional wills (§2231 BGB): 1) The public or notarized will (§2232 BGB), and 2) the holographic or handwritten will (§2247 BGB). Witnesses are not required for the validity of a holographic or notarized will under German law. Unlike the U.S., witnessed wills are uncommon in Germany.  

State of Florida

According to 732.502 (2), Fla.Stat., a will must be in writing, signed by the testator and authenticated by two witnesses. A holographic will is without force or effect under Florida law. There is no regulation with regards to foreign wills. However, if the decedent died domiciled in Germany, it may be valid under the applicable terms of the German civil code. Additionally, from the perspective of a German court it may be valid (see decision of the German supreme court, BGH IV ZR 135/03) and, thus, it may be advisable to sue in Germany.

Recognition of a German hand-written will (holographic will): A German hand-written will not authenticated by two witnesses is therefore to be considered formally invalid in the state of Florida (Schuler v. Salathe, 703 So.2d 1167 (1997)) as far as Florida law applies.

Recognition of a German notarial will (notarized will):  A German notarized will not authenticated by two witnesses is therefore to be considered formally valid in the state of Florida as far as Florida law applies.

Here are some tips to locate a good probate lawyer in Florida:

Look at the experience level of the attorney. Does the lawyer focus their area of legal practice to probate, trusts and estates?

Review the information on the firm’s Web site.  Does the information look relevant and focused?

Ask for referrals…especially former clients.

Contact The Florida Bar to confirm the lawyer is in good standing.

Investigate whether the law firm has good infrastructure.  Ask about support staff, technology, billing practices and procedures for attorney/client communication.

Often with estates, a conflict develops between beneficiaries and the Personal Representative that leads to litigation.  This litigation can be the result of a delay in administration of the estate, distribution of assets, or differences in personality.  Recently a client hired our law firm to seek to remove a Personal Representative who had incurred very substantial fees for travelling around the country to repeatedly check on the decedent’s assets, which was an expense the client felt was unjustified.

Florida Statutes list causes for which a Personal Representative may be removed.  One of these causes include “holding or acquiring conflicting or adverse interest against the estate that will or may interfere with the administration of the estate as a whole.”  However, a dispute between the beneficiaries of an estate by itself in insufficient grounds to refuse to appoint a personal representative if otherwise qualified.  That holding, however, came in a case where two sisters filed competing petitions for administration of their mother’s estate.  One of the sisters had been appointed Personal Representative by will; the two sisters had a very adversarial relationship.  The Appellate Court reversed the trial court’s appointment of a neutral third party, preferring to give the testator’s selection deference in the absence of exceptional circumstances.     

While the Court in most circumstances will appoint the Personal Representative selected in the last will and testament, the court does not make the protesting beneficiary wait until a detriment is suffered if he can make his showing prior to the appointment.  Ironically, my client did not object to the appointment of the Personal Representative, however he did not anticipate the Personal Representative being so wasteful of the estate assets.

If you are the beneficiary of an estate and object to the appointment of the named Personal Representative, or to the conduct of the Personal Representative after appointment, it is imperative to consult a Florida probate litigation attorney to ensure your interests are not potentially diminished or squandered.

A potential client said, “you’re the lawyer who busts trusts.”  Busting a Florida trust was her non-lawyer way of describing trust termination/modification.  Florida law has three major trust code sections that allow a person to “bust a trust” (trust modification is the term lawyers use) in the event certain events or conditions occur.

For example, 736.04113 of the Florida Trust Code provides for judicial modification of irrevocable trusts when modification is not inconsistent with settlor’s purpose.

Some of the grounds that will allow judicial modification of an irrevocable trust include:

(1) Upon the application of a trustee of the trust or any qualified beneficiary, a court at any time may modify the terms of a trust that is not then revocable in the manner provided in subsection (2), if:

(a) The purposes of the trust have been fulfilled or have become illegal, impossible, wasteful, or impracticable to fulfill;

(b) Because of circumstances not anticipated by the settlor, compliance with the terms of the trust would defeat or substantially impair the accomplishment of a material purpose of the trust; or

(c) A material purpose of the trust no longer exists.

(2) In modifying a trust under this section, a court may:

(a) Amend or change the terms of the trust, including terms governing distribution of the trust income or principal or terms governing administration of the trust;

(b) Terminate the trust in whole or in part;

(c) Direct or permit the trustee to do acts that are not authorized or that are prohibited by the terms of the trust; or

(d) Prohibit the trustee from performing acts that are permitted or required by the terms of the trust.

As you can see, the bolded section above allows for a trust to be terminated in whole or in part.  So can Florida lawyers bust a trust?  The answer is clearly yes.