“My problem lies in reconciling my gross habits with my net income.”  ~ Errol Flynn

A trust is a fiduciary arrangement that allows a third party (“Trustee”) to hold assets on behalf of a beneficiary or multiple beneficiaries. Trusts can be written in many ways and can specify exactly how and when the assets pass to the beneficiaries.  Trusts provide several benefits, including avoidance of probate and minimization of estate and generation-skipping transfer taxes, but perhaps one of the most important functions trusts serve is to protect beneficiaries from their own improvident spending habits and from creditors.  One of the most common provisions in a trust document is a “spendthrift” provision.  Everyone knows a spendthrift – someone who, like Errol Flynn, spends more money than he or she has – but a Settlor (the person creating the trust) can add provisions to the trust document that protect a beneficiary from reckless spending.  ”Spendthrift Trusts are created with the intention of providing a fund for the maintenance of another, and at the same time securing it against his own improvidence or incapacity for self-protection.”  Miller v. Kresser, 34 So.3d 172 (Fla. 4th DCA 2010).  The Miller court noted that “a valid spendthrift provision prevents a beneficiary from transferring his or her interest in the trust as well as prevents creditors or assignees of the beneficiary from reaching any of he trust funds until they are dispersed to the beneficiary.”  Id.

A recent decision by the Fifth District Court of Appeals illustrates the protection provided by a spendthrift provision.  In the recently-decided Zlatkiss v. All America Team Concepts, LLC, 38 Fla. L. Weekly D1194 (Fla. 5th DCA June 7, 2013), Robert and Linda Zlatkiss made a $350,000 loan to Louis Steinmetz, who signed a personal guarantee on the representation that he was the beneficiary of a $6,850,000 trust, which was true.  Steinmetz defaulted on the loan and the Zlatkisses sued Steinmetz and Wells Fargo (the trustee); however, it turned out that Steinmetz’s trust is a spendthrift trust, which prevents the trustee from making distributions if the distributions would be available to creditors.  ”When Steinmetz failed to repay the loan, trustee Wells Fargo refused to make trust distributions to cover the debt owed to the Zlatkisses.” Id.  The court noted that “spendthrift provisions have long been recognized as valid in Florida” and Florida Statutes 736.0501-.0507 provide for the enforcement of spendthrift trusts.  Id.  Thus, the Zlatkisses were unsuccessful in their attempt to have the trust repay Steinmetz’s debt to them.  The end of the Zlatkiss-Steinmetz story sounds patently unfair, but Mr. Steinmetz is going to find himself in the frustrating position of being the beneficiary of a multimillion dollar trust that will not distribute any money to him as long as the judgment validly exists.  So, the Zlatkisses can get a judgment against Steinmetz and as long as that judgment is out there Wells Fargo will not make any distribution to Mr. Steinmetz because once it does that distribution can be attached by the Zlatkisses.  The only ones who win are Wells Fargo (because it continues to serve as trustee and to collect trustee’s fees) and Wells Fargo’s attorneys (because they get paid by the trust).

There are many morals to this story: 1) if you are loaning money to someone who claims an interest in a trust, ask an attorney to read the trust first to make sure the funds in it are available to satisfy the loan in the event of a default; 2) if you have assets and are leaving them to beneficiaries, consider putting them in a trust with spendthrift provisions to protect those beneficiaries from themselves; 3) if you are a trustee and dealing with a spendthrift beneficiary, be very careful about the distributions made to that beneficiary so that the terms of the trust are not violated; and 4) if you are the beneficiary of a spendthrift trust and think you can borrow with abandon because no one can get at your trust money, think again because the trustee – in order to comply with the terms of the trust – may have to shut off your spigot, too.

If you have a question about a spendthrift trust, please call the attorneys at Adrian Philip Thomas, P.A. for a free consultation.

 Remedies Available in Florida Courts

Tortious interference with an inheritance is a relatively new but widely recognized tort that is currently accepted in Florida and half of the United States.  Many other states have reported cases from their state Supreme Court or appellate level addressing the tort, but declining to determine whether it is recognized.  Clearly, the trend is moving toward national acceptance and recognition of the tort.

The importance of availability of the tort cannot be understated.  It serves many purposes, especially in Florida, where elderly and vulnerable adults are preyed upon by unscrupulous persons seeking to financially exploit Florida’s elderly citizens.    The tort provides a remedy in the form of money, a civil remedy, to a person who believes that another has wrongfully interfered with an inheritance.  The remedy is awarded by the civil court, not the probate court, and the money award is paid by the person who interfered with the inheritance, not the estate.

In Florida, as inheritance dispute lawyers, we see that the tort provides a remedy to a variety of wronged persons who would otherwise be left without a remedy without the tort, while the person who has committed the wrong and interfered with the inheritance can act with impunity.  Sometimes, these wrongdoers are financial institutions and banks who have committed the tort for their own selfish financial gain.  These institutions wield a powerful weapon in the form of unlimited litigation budget to contest any challenge to the institution’s unlawful conduct.  However, because Florida recognizes the tort of interference with an inheritance, wrongfully excluded beneficiaries who have been victimized by a person or bank’s bad conduct, may present their case to a jury, a group of other Florida citizens, who are well equipped with common sense to recognize a case of tortious interference when evidence demonstrates that an elderly or vulnerable person has been taken advantage of.

The availability of a civil jury trial in these cases serves many useful functions, including the ability of the jury to award punitive damages and to deter similar conduct by banks and other unscrupulous persons.    Equitable remedies such as a constructive trust, restitution, or the mere voiding of an invalid trust amendment procured by fraud, offer no deterrent at all to the tortious conduct frequently encountered in the probate context

The primary function of jury trials and tort liability is to deter certain kinds of conduct by imposing liability when that conduct causes harm. The idea of deterrence is not so much that an individual, having been held liable for a tort, would thereafter conduct himself better, it is rather the idea that all persons, recognizing potential tort liability, would tend to avoid conduct that could lead to tort liability.  Prosser and Keaton on Torts, 5^th Edition.   Many commentators and judges have observed the need for a civil jury trial in circumstances where a person or a bank has wrongfully interfered with a lifetime or testamentary gift a donor intended an aggrieved person to receive.  As one commentator has observed, the need for application of tort liability is especially critical when the available equitable remedies offer no deterrent at all to the tortious conduct (i.e, where the tortfeasor, after judgment, is simply returned to the same place he was prior to his tortious conduct):  “For example, assume a testator-parent wishes to divide the estate equally between a son and a daughter, but the son tortuously induces the parent to make a will much more favorable to him.  Perhaps this will also names the son as executor.  Should his sister bring a will contest, the estate will pay the costs of defending the will, and we can assume the son will defend the will vigorously. Should the sister succeed in her contest, and have the will struck down, the tortfeasor will still collect his one-half share by intestacy or a prior will-the same inheritance he would have received had he never committed the tort (albeit reduced by half the cost of the defense, if he, as executor, elects to mount one).” See, Diane J. Klein, the Disappointed Heir’s Revenge, Southern Sytle:  Tortious Interference with Expectation of Inheritance—A Survey with Analysis of State Approaches in the Fifth and Eleventh Circuits,  55 Baylor L. Rev. 769 (2008).

HOMESTEAD PROPERTY AND JOINT OWNERSHIP

“The home to everyone is to him his castle and fortress, as well for his defense against injury and violence, as for his repose.”  Edward Coke.

Recently, new case law has established that exactly how the Deed is worded it is very important in the determination of whether the property was a homestead property when one of the owners of the property dies. 

Article X, section 4( c) of the Florida Constitution provides that “[t]he homestead shall not be subject to devise if the owner is survived by spouse or minor child.”  If a Florida resident acquires property as a joint tenant with rights of survivorship while he has a minor child and lives in the primary residence, the property will not be deemed the decedent’s homestead, as it passes entirely at the time of his death to the other joint tenant.

The recent case of Marger v. DeRosa, 57 So.3d 866 (Fla. 2^nd DCA 2011) holds that since the property was not homestead property at the time of the joint purchase, the homestead restriction was determined not to apply.  In Marger, Mr. DeRosa and his mother, Harriet S. DeRosa purchased a home in Largo, Florida as joint tenants with full right of survivorship and not as tenants in common.  Id.  At the time of the conveyance, Mr. DeRosa had two minor children.  When he died intestate in 2008, Mr. DeRosa had no surviving spouse, but he did have two minor children and one adult child.  Id.  At the time of Mr. DeRosa’s death, his mother, Harriet, claimed title to the property, but the Administrator ad Litem of Mr. DeRosa’s estate claimed that the house should have homestead status for the benefit of the two minor children.  Id.

Both the trial court and the Second District Court of Appeals found that the property was not homestead property of Mr. DeRosa when it was jointly purchased with his mother, as Mr. DeRosa’s property interest ceased upon his demise, and his mother, Harriet, became the sole owner of the property.  Id.  The Court held that “this language [in the Constitution] does not restrict the type of interests in real property a person may acquire or how a person may title his or her property.  Instead, it restricts a person’s attempt to devise property he or she owns when homestead status has attached to that property.”  Id.

Since the property purchased by Mr. DeRosa and his mother was not homestead property at the time of the purchase by the two of them as joint tenants with full right of survivorship and not as tenants in common, the homestead restriction was determined not to apply.  Id.

If you believe that a decedent’s property should be determined to be homestead property, it is imperative that you have a competent attorney review the deed and purchase documents to determine the specific language used to purchase the property, as it may be necessary to commence litigation in order to have the Court determine whether the decedent’s property was considered a homestead property at the time of purchase and at the time of his or her demise.

Broward County Trust Litigation cases are filed in the Seventeenth Judicial Circuit in Fort Lauderdale, Florida.  Broward County cities include:  Coconut Creek, Cooper City, Coral Springs, Dania Beach, Davie, Deerfield Beach, Fort Lauderdale, Hallandale, Hollywood, Lauderdale-by-the-Sea, Lauderdale Lakes, Lauderhill, Lighthouse Point, Margate, Miramar, Plantation, Pompano Beach, Pembroke Pines, Sunrise, Tamarac, and Weston.

For more information about various Broward County Trust Litigation causes of action, click here.

If you have a Broward County Trust Litigation question, call the attorneys at Adrian Philip Thomas, P.A. for a no obligation consultation at 800-249-8125.

The Gold Digger

“She take my money when I’m in need

Yeah, she’s a triflin’ friend indeed

Oh, she’s a gold digger way over town

That digs on me.”

~ Ray Charles and Kanye West

While the lyrics may be slightly tongue-in-cheek, there is nothing funny about elder abuse.  Elderly people are uniquely vulnerable to exploitation in many forms.  One of the most insidious forms is exploitation masquerading as romantic love.  Traditional notions that the “gold digger” was always a young, attractive female exploiting an older man have given way to the reality of gender equality.  Just as often, it is a younger male exploiting an older woman of financial means.  Oftentimes, the exploiter is a contemporary, but the sirens don’t go off for family as quickly as they do when someone younger starts showing interest.

Elderly people are uniquely vulnerable to this particular type of exploitation for several reasons.  First, they have often been able to accumulate some assets.  Second, they may find themselves alone for the first time in decades after the death of a spouse.  Third, they may live away from their children and extended family.  All of these factors make an elderly person an easy target for would-be gold diggers.

Money magazine recently featured an article called “When Dad Marries a Gold Digger.”   The article recounts sad stories of gold diggers moving in, isolating an elderly adult from his or her family and then squandering their money while neglecting the person they “love” or abandoning them when the family steps in to put an end to it.  Sadly, our office sees these types of cases too often.

It is difficult to prevent exploitation and it is often difficult to deal with it once it is discovered.  Depending on when it is discovered (before marriage or after? before death or after? before accounts have been drained or after?) there are various legal mechanisms to intervene and address the exploitation.  Some require the cooperation of the exploited senior (a restraining order keeping the gold digger away) and some do not (petition to determine incapacity).  Causes of action include, but are not limited to, exploitation of the elderly, civil theft and undue influence.  Finally, there is the ever-frustrating reality that spent money is nearly impossible to recover from someone with no assets.  Sometimes families will spend their own money on principle just to teach the gold digger a lesson and make his or her life miserable and sometimes a cost-benefit analysis means the gold digger gets away with it. 

Families with healthy dynamics who stay in touch and visit often are the least likely to fall victim to a gold digger.  However, sometimes even routine communication is not enough protection.  

If you are concerned that an elderly family member is being exploited, call the offices of Adrian Philip Thomas, P.A. to find out what your options are to protect a loved one. 

Removal of Personal Representative:  When conflicts between Personal Representatives and Beneficiaries create grounds for removal.

            The administration of an estate can sometimes be a difficult and tedious process, which is further aggravated when the ever-present emotional aspects continue to linger, especially amongst heirs who have lost a loved-one.  Nevertheless, personal representatives are bound to their statutory duties and to properly administer the estate in the best interest of the beneficiaries.  But what happens when that duty is breached or there appears to be a clear conflict between the personal representative and a beneficiary?  Florida statutes and case law have provided several avenues for beneficiaries to seek appropriate remedies in such cases; however, one thing that beneficiaries need to remember and understand is the extreme dislike between beneficiaries and personal representatives is not sufficient grounds for removal of a personal representative.  Parker v. Shullman, 843 So.2d 960 (Fla. 4^th DCA 2003). 

             So, what does that mean exactly?  If a personal representative withholds funds properly owed to a beneficiary, is that sufficient for removal?  If a personal representative and a beneficiary cannot stand to look at each other, is that sufficient?  Although the Florida statutes in section 733 do enumerate the grounds for the removal of a personal representative, there is no clear guidance in the case law regarding whether the statutes are exclusive.  In a 1985 appellate case, the personal representative was accused of murdering the decedent, yet a beneficiary’s petition for removal of personal representative was dismissed and affirmed by the appellate court.  Anderson v. Anderson, 468 So.2d 528 (Fla. 3d DCA 1985).  In Anderson, there appeared to be a conflict between the personal representative and the best interest of the beneficiaries, yet, the petition for removal was dismissed by the courts. 

             The remedies available and appropriate in an estate where there exists a conflict between the personal representative and a beneficiary are determined on a case-by-case basis.  As there is not a strict, exclusive list for the beneficiaries to review as to whether grounds for removal of a personal representative exist, it is always best to consult with a Florida probate attorney in assessing the properness of a personal representative’s appointment and conduct and what steps should be taken in the probate process.         

If you have questions about removal of a personal representative, you should contact the attorneys at Adrian Philip Thomas, P.A. for a free consultation.

WHAT IS THE STATUTE OF LIMITATIONS FOR BREACH OF FIDICUARY DUTY OF A TRUSTEE IN A TRUST ACTION?

“Man must cease attributing his problems to his environment, and learn again to exercise his will – his personal responsibility in the realm of faith and morals.”  Albert Schweitzer

When a trustee is appointed, the trust instrument and Florida law direct and authorize the trustee to perform their duties as fiduciaries.  When a trustee breaches his fiduciary duty, what is the statute of limitations time frame in which to bring a lawsuit against the trustee?  Florida law (section 736.1008 and chapter 95) provides specific time-frames within which lawsuits can be filed against a trustee. 

The law first imposes a short, six-month limitation period for bringing an action against a trustee for a breach of trust if the beneficiary has received a final, annual, or periodic account “fully disclosing the matter”.  Florida Statute 737.307; Taplin v. Taplin, 2012 WL 1605253 (Fla. App. 3 Dist.).   Second, there is the imposition of a four-year limitation period for bringing an action against a trustee for a breach of trust if the beneficiary “has received a final account or statement” and the trustee “has informed the beneficiary of the location and availability of records.”  Id. 

The distinguishing characteristic between the two limitation provisions is whether the account or statement “fully discloses the matter” to the beneficiary.  Id.  The four year limitation applies to a trustee when a “final account” or “statement” provided by a trustee does not satisfy the “full disclosure” threshold required of the first, but the trustee also makes pertinent trust records available as required by the statute.  Importantly, a precondition to the commencement of either limitation period is the receipt by the beneficiary of an “account” or “statement”, whether it is final, annual, or periodic.  Id., Davis v. Monahan, 832 So.2d 708, 711 (Fla. 2002)(articulating the Florida Legislature’s statute codifying the limitations period for claims against a trustee under Florida Statute 737.307 is triggered after the beneficiary receives an accounting).

Florida Statute 95.11(3)(o) states that actions other than for recovery of real property shall be commenced as follows: . . .(3) within four years . . .(o) an action for assault, battery, false arrest, malicious prosecution, malicious interference, false imprisonment, or any other intentional tort . . . (emphasis added).  A breach of trust is an intentional tort under Florida Law.  Patten v. Winderman, 965 So.2d 1222, 1225 n.1 (Fla. 4^th DCA 2007).  But it has long been recognized at common law that a statute of limitations is inapplicable to shield trustees from their responsibilities to their beneficiaries. (Emphasis added).  Nayee v. Nayee, 705 So.2d 961, 963 (Fla. 5^th DCA 1998). 

As the Florida Supreme Court stated before the turn of the last century:  “[I]n cases of continuing trusts that are strictly such, and recognized and enforced in courts of equity only, so long as the relation of trustee and cestui que trust continues to exist, no length of time will bar the cestui que trust of his rights in the subject of the trust as against the trustee [subject to certain exceptions not relevant here].”  Taplin v. Taplin, 2012 WL 1605253 (Fla. App. 3 Dist.); Anderson v. Northrop, 30 Fla. 612, 12 So. 318, 324 (Fla. 1892); Sewell v. Sewell Props., 30 So.2d 361, 362-63 (Fla. 1947)(“Where the trustee by fraud or deception, or even by keeping quiet when he should speak and account to his cestui, causes the cestui to be ignorant of the rights of the cestui and of the duties of the trustee, laches will not be imputed to the cestui until discovery of the true condition.”). 

In fact, when the Legislature created Chapter 95 in 1872, a statute-denominated “limitations on actions,” the Legislature expressly precluded the applicability of the statute to cases against a trustee of an express trust.  See Florida Statute 95.02 (1892)(“This chapter shall not apply to any action . . . with respect to any moneys or property held or collected by any officer or trustee or his sureties.”).  In the same legislative session which section 95.02 was repealed, section 737.307, Florida Statutes was created.

So absent the fulfillment by a trustee of the two conditions set forth in Florida Statute 737.307, the common law remains in full force and effect with respect to actions brought by a beneficiary against a trustee of a trust.  To hold otherwise would be contrary to the express language of the law provided to us by the Legislature.  Taplin v. Taplin, 2012 WL 1605253 (Fla. App. 3 Dist.); Butler v. State, 838 So.2d 554, 556 (Fla. 2003).

The elements of a cause of action against the trustee for breach of fiduciary duty are: 1) the existence of a duty; 2) breach of that duty; and 3) damages flowing from the breach of that duty.  Crusselle v. Mong, 59 So.3d 1178 (Fla. 5^th DCA 2011).  In the event you believe a trustee or successor trustee has breached their fiduciary duty which resulted in damages flowing from the breach of fiduciary duty, it is imperative that you contact competent counsel to review the trust document and any amendments to the trust document as soon as possible, so that the statute of limitations issues can be addressed and to seek the appropriate relief, including but not limited to filing the appropriate action against the trustee to impose personal liability upon the trustee, to compensate the beneficiaries for the breach of fiduciary duty, and to ensure that the trust assets are preserved and properly maintained.

If you have a question about the statute of limitations for a breach of fiduciary duty claim, contact the attorneys at Adrian Philip Thomas, P.A. for a free initial consultation.

How many witnesses are required for a Trust in Florida?

The Florida Trust Code sets forth the requirements for how many witnesses are required for a Trust in Florida.  Specifically, Fla.Stat. 736.0402(1), provides:

1. The settlor has capacity to create a trust;
2. The settlor indicates an intent to create the trust;
3. The trust has a definite beneficiary (with some exceptions, e.g. trust for care of animals);
4. The trustee has duties to perform; and
5. The same person is not the sole trustee and sole beneficiary.

There are also certain formalities required for creation of a revocable trust.  Fla.Stat. 736.0403(2) provides that “the testamentary aspects of a revocable trust, executed by a settlor who is a domicilary of this state at the time of execution, are invalid unless the trust instrument is executed by the settlor with the formalities required for the execution of a will in this state.”  This begs the question “what are the execution formalities for a Will in Florida?”

Execution of Wills is controlled by Fla.Stat.732.502, which provides that:

1. Every Will must be in writing;
2. The testator must sign the Will at the end; and
3. At least two (2) witnesses must sign the Will acknowledging that they have signed the Will in the presence of the Testator and in the presence of each other.

So the answer to the question “how many witnesses are required for a Trust in Florida?” is two.

If you have a question about Florida Trust Execution Requirements, call the Law Offices of Adrian Philip Thomas, P.A. to schedule a free consultation.

Oftentimes people die owing money; this can be in the form of unpaid bills, loans, or other obligations.  Florida law is very specific regarding the procedure for submitting creditor claims against a decedent’s estate.  Under Florida Statute 733.2121, the Personal Representative of a Florida estate shall promptly make a diligent search to determine the names and addresses of creditors of the decedent who are reasonably ascertainable, even if the claims are unmatured, contingent, or unliquidated, and shall promptly serve a copy of the notice on those creditors.  Florida law further establishes deadlines for filing claims by creditors, as well the proper procedure for the Personal Representative to handle such claims.

Recently, the Second District Court of Appeal reviewed a case where a creditor filed his statement of claim in the probate case over ten months after notice to creditors was first published, but two years to the day after decedent’s death.  The creditor then later filed an independent civil action as a creditor in an effort to secure payment for services rendered to the decedent.   This creditor was not served with a copy of the notice to creditors, despite his contention that he was a reasonably ascertainable creditor.  The appellate court found that the creditor was required to file his claim in the estate proceeding within the three (3) month limitations period (pursuant to Florida Statute 733.702(1)) or move for an extension of time from the probate court (under 733.702(3)) within two-years of decedent’s death.  As he failed to do either, the civil action was barred and the Court held that the fact the creditor was readily ascertainable was immaterial in the civil proceeding.

This case illustrates the importance of contacting a Florida probate attorney regarding your rights as a creditor of a decedent.  The attorneys at the Law Offices of Adrian Philip Thomas can assist in filing a creditor claim in Florida probate proceedings and, if necessary and appropriate, filing a civil lawsuit in an effort to secure payment. 

CREDITOR CLAIMS IN THE FLORIDA PROBATE PROCEES

            As is often the case, people pass away with a debt owed to another person or entity.  When this occurs, the proper manner for a creditor to collect on such a debt is to file a Statement of Claim in the decedent’s estate pursuant to Fla. Stat. §733.703.  The primary time limitation that creditors must be wary of stems from Fla. Stat. §733.702, which states that the claim must be filed within three (3) months after the time of the first publication of the notice to creditors (which is published by the personal representative near the commencement of the estate administration) or, if the creditor is a known and/or reasonably ascertainable creditor, thirty (30) days after being served with the notice to creditors.  Typically, the proper person to file an objection to any such claim is the personal representative.  However, under the Florida Probate Code, any interested person in the estate, whether a beneficiary or another creditor, may also file an objection to a filed claim.

            Fla. Stat. §733.705 describes the procedure of paying and objecting to claims that are filed in an estate.  In regards to objections, the statute states as follows:

(2)   On or before the expiration of 4 months from the first publication of notice to creditors or within 30 days from the timely filing or amendment of a claim, whichever occurs later, a personal representative or other interested person may file an objection to a claim. 

An “interested person” under the Florida Probate Code is one who may be reasonably expected to be affected by the outcome of a particular proceeding involved.  Of course, a beneficiary or a creditor of an estate would come under this definition and have the authority to file an objection to a filed claim.  This often occurs when a beneficiary or creditor does not believe that the personal representative has been performing his or her duties diligently and in the best interest of the estate and/or if there is a suspicion of a conflict of interest.  Although such impropriety is not required for an interested person to file an objection to a claim, this is the typical scenario where one would see a non-personal representative filing an objection to a creditor claim.

Once the objection is filed, however, the claimant has their own time limitation to consider.  Pursuant to Fla. Stat. §733.705(5), a claimant is limited to thirty (30) days from the date of service of this objection to bring an independent action upon the claim filed.  In other words, the creditor has to file a separate lawsuit against the estate in order to collect on his, her or its claim.  Moreover, Florida case law is clear that this lawsuit must be an “independent” lawsuit, meaning that it cannot be filed in the probate estate.  Williams v. Estate of Williams, 493 So.2d 44 (Fla. 5^th DCA 1986); In re Estate of Fornash, 372 So.2d 128 (Fla. 2d DCA 1979). 

If you are involved in an estate administration that requires some attention to the collecting or defending of a creditor claim, it is in your best interest to consult with an attorney experienced in the probate process in order to ensure that the proper steps are being taken to prosecute or defend such a claim.