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Can a contract defeat testamentary intent?

Written by on May 26, 2015| Posted in: Estate Litigation

In a word, yes.

In a blow to the unwed in the State of Florida, the Fourth District Court of Appeal recently held that an operating agreement entered into by a deceased business owner (the “Decedent”) trumped his stated testamentary intent to provide his longtime girlfriend with a lifetime payment of $5,000.00 per month, which was to be paid out of distributions from the company the Decedent formed with his sister.  Blechman v. Estate of Blechman, 160 So.3d 152 (Fla. 4th DCA 2015).  Despite the fact that the Decedent in Blechman had amended his trust to “to provide a ‘specific gift’ of his residence and ‘one half of the distributions from [his company], to’ a trustee for the benefit of  the Decedent’s girlfriend,” the Court refused to uphold the trial court’s order, which would have ensured the Decedent’s girlfriend received the $5,000.00 per month gift the Decedent’s estate plan provided. Id. at 155.  While the Fourth’s opinion may, at first glance, appear to conflict with the rule of construction contained in Fla. Stat. §732.6005(1), which states “[t]he intention of the testator as expressed in the will controls the legal effect of the testator’s dispositions,” the decision was based on the longstanding “general principle” that “’express language in a contractual agreement “specifically addressing the disposition of [property] upon death’ will defeat a testamentary disposition of said property.” Id. at 158-159 (citing  Murray Van & Storage, Inc. v. Murray, 364 So.2d 68, 68 (Fla. 4th DCA 1978)).

The reason the Court refused to uphold the decedent’s testamentary intent was because the operating agreement of the company that the Decedent and his sister formed provided that “unless the member ‘bequeaths’ his or her membership interest via will ‘to members of the Immediate Family,’ the interest vests immediately with the member’s children.”  Id. at 159.  The operating agreement defined “immediate family” as comprising his or her “living children and issue of any deceased child,” not, as the court noted, “spouses . . . or paramours.” Id. at 155.  The Court concluded that, because “the Decedent through the Trust amendment ‘bequeathed’ his membership interest to a trustee for the benefit of [his girlfriend],” the Decedent’s death triggered the provision of the operating agreement that immediately vested his membership interest with his children, which were the Decedent’s “immediate family” within the meaning of the operating agreement. Id. at 159-60.  As a result, rather than upholding the Decedent’s testamentary intent to provide for his longtime girlfriend, the Court upheld the “clear intent of the Agreement,” which the Court noted was to place limitations on the Decedent and his sister’s ability to transfer their respective interests in the company,” so as to keep the company within the family bloodlines.” Id. at 159.  Because the company immediately vested in the Decedent’s children at the time of the Decedent’s death, it passed outside of probate, “thus nullifying [the Decedent’s] testamentary devise as an attempted disposition of property not subject to his ownership.” Id. at 160; Fla. Stat. § 731.201(14).

While the Court noted that the Decedent’s “immediate family,” as defined by the operating agreement does not include “spouses . . . or paramours,” both of which the Decedent apparently had at his time of death, Florida law treats spouses and paramours very differently in these situations. Id. at 154.  While the Court did not address the issue in its opinion, the Decedent’s interest in the company would have very likely been treated as part of the Decedent’s “elective estate,” as defined in Fla. Stat. § 731.2035, had the Decedent’s surviving spouse sought a portion of the company.  Under Florida law, the surviving spouse of a person who dies domiciled in Florida, unlike a girlfriend, mistress, or paramour, “has the right to a [thirty percent] share of the elective estate of the decedent.” Fla. Stat. §§  731.201 and 731.2065.  Thus, had the Decedent, as Beyonce said, “put a ring on it,” the Decedent’s girlfriend would have been entitled to thirty percent of the value of the company (and thirty percent of all of the other assets that make up the “elective estate”), even if the Decedent unknowingly—or even intentionally—left nothing for her in his estate plan.  Unlike the probate estate, which is limited to the “the property of a decedent that is the subject of administration,” the “elective estate” includes both probate assets as well as certain non-probate assets. Fla. Stat. § 731.201(14) and Fla. Stat. § 731.2035.  Here, the Decedent’s interest in the company would likely have been treated as part of the elective estate, entitling a surviving spouse to at least thirty percent of the value of the Decedent’s interest.  In other words, while a testator may be able to cut a girlfriend out of his estate plan by way of non-probate transfers, even after executing estate planning documents that appear to make provisions for the girlfriend, the Florida legislature has enacted legislation designed to give spouses protections that simply do not exist for girlfriend, mistresses, and paramours.

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