Learn the Language: Fifth District Court of Appeals Reverses Probate Judge and Predicates Opinion On its Own Perception of Trust Language and “Settlor’s Intent”In Brown v. Miller, — So.2d —-, 2008 WL 4600940, 33 Fla.L.Weekly D2433c, Fla.App. 5 Dist., October 17, 2008 (NO. 5D07-1356, 5D07-1288) the Fifth District Court of Appeals reversed Orange County Judge Lawrence Kirkwood’s order which had invalidated a seven million dollar transfer from a testamentary trust to its lifetime beneficiary.
Elinor Miller set up a trust naming her husband Bill as the trustee and lifetime beneficiary (the “Elinor Miller Trust”). After her death the assets remaining in the trust (after her charitable bequests and distributions to family members) were divided into three separate sub-trusts, designated as Trust A-1, Trust A-2 and Trust B with each serving a distinct purpose.
The Elinor Miller Trust provided that the Trustee should pay Bill the income from A-1 and A-2, in addition to “such amounts from the principal of Trust A-2 first and then liberally for his maintenance, health, and support in his accustomed manner of living, taking into account all of his other income and means of support known to the Trustee. The Trustee shall also pay [Bill] such additional amounts of principal from Trust A-2 as he may from time to time request.” Further, the Trust provided that upon Bill’s death, the “Trustee shall pay over and distribute the then remaining balance of Trust A-2, if any to such person or persons, and in such manner, as he shall appoint by his Last Will and Testament, which makes reference to said power of appointment, including in him the power to appoint to his estate. Any portion of Trust A-2 not effectively appointed by [Bill] shall continue to be held in trust for the lifetime of my son, [Tom].” Id.
Prior to Bill’s death, he did two significant events in connection with the Elinor Miller Trust: First, Bill executed a codicil to his Will exercising his power of appointment and directing that upon his death the asset in Trust A2 be distributed to The Elinor and Bill Miller Foundation. Secondly, Bill transferred the entire balance of A2 assets (over seven million dollars) to the Bill Miller Trust (“the Transfer”).
Importantly, it was undisputed that Bill maintained 100% control over the Bill Miller Trust assets and had the right to end the trust at any time and thereby regain absolute ownership over the trust property and thus had complete and unfettered access to the seven million dollars conveyed into his trust.
‘Til Death Do Us Part
After Bill’s death in 2004, his son Tom sued Bill’s estate and the trustees of the Bill Miller Trust and the Foundation seeking to invalidate the Transfer. Tom argued that the Transfer was invalid because the Elinor Miller Trust only authorized transfers from A2 to Bill (the trust language used the words “to my husband”), and since the Bill Miller Trust was not Elinor’s “husband” the transfer, in Tom’s view, should be invalidated and the seven million dollars should be held in trust for Tom’s benefit.
One Fell Swoop
Tom also argued that since the Elinor Miller Trust language provided that “[t]he Trustee shall also pay to [Bill] such additional amounts of principal from A2 as he may from time to time request,” Bill could not take the entire corpus of the trust “in one fell swoop” and transfer all seven million dollars as he did prior to his death.
Beyond the Borders
The Fifth District examined and relied on fifty year old decisional case law from the United States Third Circuit Court of Appeals (Pennsylvania, New Jersey, Delaware), and the Commonwealth courts of Massachusetts and Pennsylvania. Using these cases as predicate, the Court found that Bill had the absolute right to withdraw all of the funds from A2 since it was undisputed that he had unlimited access and control over the assets at issue at all times, both before and after the transfer. Also, the Court concluded that its result was likely more in line with Elinor’s intent, and in construing the provisions of a trust document, “the cardinal rule is to give effect to the grantor’s intent, if possible.”
De Novo Review
This interesting opinion is significant for probate administration attorneys and litigators for a variety of reasons. First, the Court restated its position that the interpretation of the trust documents and the language of the trust is a question of law which is entitled to de novo review. Therefore, just like the case earlier in October from the Fourth District, Duncombe v. Adderly, -So.2d-, 2008 WL 4489234, 33 Fla.L.Weekly D2367a (4th DCA October 8, 2008) which established that fee petitions are questions of law that require statutory interpretation and subject to de novo appellate review, the interpretation of trust language is another area where a challenger gets at least two judicial bites at the apple. Second, the case illustrates how different district courts can arrive at different results. A comparison of the Third District’s September 8, 2008 Cutler v. Cutler — So.2d —-, 2008 WL 4057751(Fla. 3d DCA Sep 03, 2008) and the opinion cited above reflect the varying degree that appellate court’s are willing to expand the concept of “the settlor’s intent” which may appear to be at odds with the intent of the settlor’s estate planning documents.