Florida Probate, Trust & Estate Blog : Florida Probate Lawyers & Attorneys : Clark Skatoff Law Firm : FL Wills, Trusts & Inheritance : Palm Beach, Broward County, Boca Raton

In probate proceedings, it is not unusual for the original of the will to be missing, and only a copy of the will can be located.  Florida law allows the copy of the will to be probated, but any person adversly affected by the copy can challenge the admission of the copy of the will to probate. 

It is well-settled under Florida law that evidence that a testator's will was in his possession prior to death and cannot be located subsequent to death gives rise to a rebuttable presumption that the testator destroyed the will with the intention of revoking it. In re Estate of Carlton, 276 So.2d 832, 833 (Fla.1973).

To order to rebut the presumption that the will was destroyed, Florida courts have permitted a variety of evidence:

In several cases, Florida courts have found the presumption of intentional revocation to be rebutted by a showing of: 1) evidence that a person with an adverse interest, and the opportunity, may have destroyed the will, see In re Estate of Washington, 56 So.2d at 547; Lonergan v. Estate of Budahazi, 669 So.2d 1062 (Fla. 5th DCA 1996); Upson v. Estate of Carville, 369 So.2d 113 (Fla. 1st DCA 1979); 2) evidence that the will was accidentally destroyed, see In re Estate of Carlton, 276 So.2d at 833 (presumption was rebutted where decedent repeatedly spoke of his will and his intention to leave his estate to the petitioner, although the decedent's safe was found waterlogged and the papers inside turned to “mush”); 3) evidence that the original will had been seen among the decedent's papers after her death, see Silvers v. Estate of Silvers, 274 So.2d 20 (Fla. 3d DCA 1973); and 4) evidence that the decedent was insane and thus did not have testamentary capacity to effectively revoke the will, see In re Estate of Niernsee, 147 Fla. 388, 2 So.2d 737 (1941).
 

Balboni v. LaRocque, 991 So.2d 993 (Fla. 4th DCA  2008).  The use of presumptions and the ability to rebut them is an integral part of Florida probate procedure (see, for example, the presumption of undue influence).
 

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With the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRA), estate planners were on notice that there would be no estate tax in 2010.  Unfortunately, very few estate plans have been drafted to take into account this one-year repeal.

Prior to the passage of EGTRA, the estate tax rate was 55%, and the exemption amount was $675,000.  During the decade, the estate tax rate was gradually lowered to 45% by 2009, and the exemption amount was gradually raised, to $3.5 million by 2009.  Under EGTRA, there is no estate tax in 2010.  In 2011, however, the estate tax springs back with a vengeance - a 55% estate tax rate, and an exemption amount of only $1 million.

For deaths that occur in 2010, the repeal is important because the level of federal estate taxation can control bequests in a will or trust.  For a married couple with a taxable estate under the pre-2010 law, the goal was to take advantage of the estate tax exemption amount to the maximum extent possible, while leaving the remainder of the estate to the surviving spouse (directly or in a marital trust).  A standard will or revocable trust would establish two trusts for this purpose.  The first is the Family Trust, into which the maximum estate tax exemption amount would be allocated.  The second trust would be the Marital Trust, into which the balance of the estate would pass, free of estate tax.  A will or revocable trust would contain an allocation clause to fund each trust.  For example:

I give to the Marital Trust the smallest pecuniary amount that, if allowed as a federal estate tax marital deduction, would result in the least possible federal estate tax being payable by reason of my death, with the remainder to the Family Trust.

If there is no estate tax, this allocation clause could fairly be read as allocating none of the estate to the Marital Trust, and all of the estate to the Family Trust.  If the Marital Trust and the Family Trust have the same disposition plan, same beneficiaries and same trustees, there is likely no problem.  Such would often be the case in a first marriage / common children situation.

If there are children from a first marriage and a second spouse, the Marital Trust and the Family Trust will often look quite different.  For example, although only a surviving spouse can be a beneficiary of a Marital Trust while alive, the Family Trust may or may not include the surviving spouse as a beneficiary.  Or, if the surviving spouse is a beneficiary of the Family Trust, there may be more severe limitations on distributions.  Sometimes, a surviving spouse will control who gets the assets in the Marital Trust upon death, while a Family Trust would not typically contain such a provision.

A surviving spouse who receives a Marital Trust of zero as a result of the spouse passing away in 2010 will have some recourse - the elective share, which would allocate to the surviving spouse a portion of the overall estate.  (The elective share in Florida is 30%.)  The elective share, however, may be less than what the passing spouse may have intended to pass to the surviving spouse.  Moreover, the expense of claiming the elective share could be considerable - especially when property is located both inside and outside of Florida.  In other words, the surviving spouse could be significantly harmed by the obsolete allocation clause.  The beneficiaries of the Family Trust may also have cause to complain, given the chaos which will have been unleashed on their situation.  

Whether estate planning documents drafted after the passage of EGTRA in 2001 which do not take into account the 2010 estate tax environment create malpractice for the drafting attorney is an open question.  Certainly any person with an outdated estate plan should seek review and guidance at once. 

How Should Obsolete Estate Planning Documents be Fixed?

One way to fix an estate plan's funding formula will be an override provision.  For example, the following clause could be added after the funding formula.

Notwithstanding the foregoing, not less than 50% of the residuary estate shall be allocated to the Marital Trust.

OR

Notwithstanding the foregoing, not less than $2 million of the residuary estate shall be allocated to the Marital Trust.

There are likely a number of ways in which to protect an estate plan from the situation that Congress has placed the American public.  The important point is to do something.

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In Re Guardianship of Deily, (Fla. 2nd DCA January 15, 2010)

Whenever a minor or incapacitated person is injured and a lawsuit is warranted, the question arises as to who has authority to hire a personal injury attorney, and on what terms. 

In the cited-to case, an adult child was injured in a bicycling accident.  His mother hired a personal injury law firm to represent her son in a potential lawsuit, signing a "standard" contingency fee agreement.  The law firm made formal demands on all of the insurance carriers potentially at risk, and the carriers all tendered full policy limits.  While the settlement of the case was pending, the mother filed an incapacity petition and a guardianship petition.  The incapacity petition was granted; however, instead of appointing the mother as the guardian, the court appointed a professional guardian. 

The professional guardian then challenged the law firm's fee arrangement.  The trial court judge rejected the fee arrangement, on the ground that the incapacitated ward's mother was not authorized to act in any capacity on his behalf when she signed the retainer with the personal injury law firm, and that firm had no contract with the guardian. 

The appellate court reversed, holding that, although the guardian had not been appointed, "neither had anyone else."  The appellate court cited to Florida Rule of Civil Procedure 1.210(b), which provides that

[a] minor or incompetent person who does not have a duly appointed representative may sue by next friend or by a guardian ad litem.

The appellate court remanded the case to the trial court to determine whether the contingency fee agreement was proper, under the authority of Phillips v. Nationwide Mutual Insurance Co., 347 So.2d 465 (Fla. 2d DCA 1977), as follows:

A contingent fee arrangement entered into on behalf of a minor will be binding on the minor if the trial court determines: 1) that it was reasonably necessary to employ an attorney on behalf of the minor; and 2) that the contract by which the attorney was employed was fair and reasonable at the time it was entered into.

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In a startling display of Congressional ineptitude, Congress allowed the estate tax to expire as of January 1, 2010.  Before the trust fund babies trade in their Porches for Lamborghinis, realize that Congress may successfully enact an estate tax for 2010, and make it retroactive to January 1, 2010.  Although such retroactivity is likely to pass scrutiny, the results of any court  test are not likely to be resolved for years.  Here's why:

Assuming our hypothetical deceased passes away on January 1, 2010, the estate tax return is due nine months from the date of death.  Therefore, the estate tax return is due to be filed by October 1, 2010.  Assuming that prior to October 1, 2010 the Federal government enacts a new estate tax retroactive to January 1, 2010, the executor of the estate is likely to file the estate tax return showing zero estate tax liability, and include a disclosure statement that the estate is challenging the retroactive nature of the estate tax.  (To avoid interest and penalties while taking such a position, an executor should consider an estate tax deposit.) 

The audit of the estate tax return is not likely to conclude for eighteen months after filing the return, which takes us to April 1, 2012.  Assuming that the audit results in the IRS assessing the full estate tax, the estate has 90 days from the receipt of the IRS Notice of Assessment to file a Tax Court Petition.  Assume that the estate files its Tax Court Petition within one month, which takes us to May 1, 2012.

A Tax Court case typically takes approximately one year to resolve (although some tax court cases go on for many, many years).  Lets assume one year, so now we are at May 1, 2013.

Assume the Tax Court rules in favor of the IRS and upholds the retroactive estate tax.  The estate appeals the Tax Court ruling to a Court of Appeals.  The appeal may take approximately one year to resolve, depending on which circuit the appeal lies.  Lets assume one year, which takes us to May 1, 2014. 

Assume the Court of Appeals rules in favor of the IRS.  The estate seeks review by the Supreme Court.  Even if the Supreme Court refuses to hear the case, that process can take approximately two months to play out.  So now we are at July 1, 2014. 

For the "test case" to challenge the retroactivity of the estate tax back to January 1, 2010 (assuming Congress enacts such a statute), the results may not be known for over four years! 

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In MacIntyre v. Wedell, 12 So.3d 273 (4th DCA 2009), the Court dismissed a challenge to the settlor's removal of funds from her revocable trust on the grounds of undue influence.  Twenty five years ago, the Florida Supreme Court, in Genova v. Florida National Bank of Palm Beach County, 460 So.2d 895 (Fla. 1984), barred an undue influence challenge to a settlor's removal of funds from her revocable trust.  The litigation in that case occured while the settlor was still alive.  In MacIntyre, the settlor had died before the litigation commenced.  The MacIntyre Court relied on the reasoning from Genova in dismissing the trust complaint.

The courts have no place in trying to save persons such
as Mrs. Genova, the otherwise competent settlor of a
revocable trust, from what may or may not b e her own
imprudence with her own assets. When she created this
trust, she provided a means to save herself from her own
incompetence, and th e courts can and should zealously
protect her from her own mental incapacity. However, when
she created this trust, she also reserved the absolute right to
revoke if she were not incompetent. In order for this to
remain a desirable feature of a trust instrument, the right to
revoke should also be absolute.

This opinion has received adverse commentary from several sources, including here.  As the prevailing attorney in the case, I believe the decision is defensible, due to the unique nature of revocable trusts.  A challenge to a competent settlor withdrawing money out of a revocable trust should fail in the same way that a competent person withdrawing money out of his or her bank account should fail.  The reported case does not address what happened to the funds after they were withdrawn.  Had the plaintiff attacked the destination of the funds, rather than the removal of the funds from the revocable trust, the case may have withstood dismissal.

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A will can be challenged in a Florida probate proceeding on a number of grounds.

• Lack of Proper Formalities. Proper execution of a will requires that the will be signed by the testator and witnessed by two witnesses, who also sign the will. A will can be contested on the grounds that it was not properly drafted, signed, or witnessed in accordance with the applicable requirements.
• Lack of Capacity. Under Florida law, a testator is required to have mental competency to make a will and to understand the nature of his or her assets and the people to whom the assets are going to be distributed. A will can be declared void if lack of capacity can be proven. Typically, incompetence is established through a prior medical diagnosis of dementia, Alzheimer’s, or psychosis, or through the testimony of witnesses as to the irrational conduct of the deceased around the time the will was executed.  Miami Rescue Mission vs. Roberts is a recent case that describes the current state of the law for proving lack of capacity and insane delusion. 
• Undue Influence. Undue influence occurs when the testator is compelled or coerced to execute a will as a result of improper pressure exerted on him or her, typically by a relative, friend, trusted advisor, or health care worker. In many cases, the undue influencer will upset a long established estate plan where the bulk of the estate was to pass to the direct descendants or other close relatives of the decedent. Some undue influencers are new friends or acquaintances of the decedent who “befriend” the decedent in the last months or years of life, typically after the decedent has suffered some decline in mental ability. In other situations, one child of the decedent, often a caregiver, will coerce the decedent to write the other children out of the will. Undue influencers can also be health care workers or live in aides who implicitly or explicitly threaten to withhold care unless the estate plan is changed in favor of the health care worker. The Estate of Carpenter is the seminal undue influence case for Florida will contest litigation.

The time for making a will contest in Florida is short, typically 90 days after the Notice of Administration has been provided by the Personal Representative, or 20 days in the event that Formal Notice of the probate proceeding is received before the will has been admitted to probate. Therefore, prompt action is required to bring your lost inheritance back to life.

Not just a will can be challenged under these grounds. A trust can be challenged under the same grounds, as well as a real estate deed or a beneficiary designation on a financial account. There are many situations where the undue influencer will trick or persuade a weakened person to sign over valuable real estate, a bank account, or other property directly to the influencer, in the hope that they will have left the scene before the wrongdoing can be discovered. Sometimes, the undue influencer will be added as a beneficiary on bank accounts in place of the heirs to whom the decedent intended the account to pass.

If the wrongdoing is discovered prior to the victim's passing, a common way for a loved one to start to clean up the situation will be to create a guardianship, which will allow the guardian to use the court's jurisdiction to reclaim assets that were fraudulently removed. If an estate plan was also changed because of undue influence, the guardianship will also allow evidence to be collected for use at a subsequent will contest proceeding.
 

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The Congressional Budget Office has just released an Issue Brief on Federal Estate and Gift Taxes, setting forth the revenue that the estate and gift tax raises, how such revenue is affected by the various proposals for estate and gift tax reform, and a detailed explanation of the various reform proposals.  

Among the highlights:

• Estate and gift tax receipts have averaged about 1.5% of federal tax revenue over the last few years
• Larger estates pay a significant portion of the estate tax.  In 2007, taxes on gross estates valued at more that $20 million were 36% of total estate tax revenue, and taxes on estates valued at more than $10 million accounted for 55% of total estate taxes.
• A permanent repeal of the estate tax would cause a revenue loss of approximately $500 billion between 2010 and 2019.
• Under current law, the 55% rate with a $1 million exemption is set to be reinstated in 2011 without a new law being put in place.  This is the rate structure that was in place in 2001.  If the federal government puts the 2009 rate structure in place for 2010 and beyond (45% rate with $3.5 million exemption), the loss in revenue as compared to doing nothing would be approximately $233 billion. 

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When a Florida resident dies without a will (known as intestacy), Florida inheritance laws provide who in the family is entitled to inherit from the estate.   If there is a surviving spouse, the surviving spouse takes the following portion of an estate (Florida Statute Section 732.102):

Spouse's share of intestate estate.--The intestate share of the surviving spouse is:

(1) If there is no surviving descendant of the decedent, the entire intestate estate.

(2) If there are surviving descendants of the decedent, all of whom are also lineal descendants of the surviving spouse, the first $60,000 of the intestate estate, plus one-half of the balance of the intestate estate. Property allocated to the surviving spouse to satisfy the $60,000 shall be valued at the fair market value on the date of distribution.

(3) If there are surviving descendants, one or more of whom are not lineal descendants of the surviving spouse, one-half of the intestate estate.

If there are heirs in addition to (or instead of) of a surviving spouse, those other heirs take as follows (Florida Statute Section 732.103):

The part of the intestate estate not passing to the surviving spouse under s. 732.102, or the entire intestate estate if there is no surviving spouse, descends as follows:

(1) To the descendants of the decedent.

(2) If there is no descendant, to the decedent's father and mother equally, or to the survivor of them.

(3) If there is none of the foregoing, to the decedent's brothers and sisters and the descendants of deceased brothers and sisters.

(4) If there is none of the foregoing, the estate shall be divided, one-half of which shall go to the decedent's paternal, and the other half to the decedent's maternal, kindred in the following order:

(a) To the grandfather and grandmother equally, or to the survivor of them.

(b) If there is no grandfather or grandmother, to uncles and aunts and descendants of deceased uncles and aunts of the decedent.

(c) If there is either no paternal kindred or no maternal kindred, the estate shall go to the other kindred who survive, in the order stated above.

(5) If there is no kindred of either part, the whole of the property shall go to the kindred of the last deceased spouse of the decedent as if the deceased spouse had survived the decedent and then died intestate entitled to the estate.

For the non-spouse heirs, the first three provisions are easy:  "down" (to children); if no children, then "up" (to parents); and if no parents, then "sideways" and "diagonally" (to siblings and the children of deceased siblings, who would be nieces and nephews). After, that, the estate would go to grandparents, if alive.  If there are no living grandparents, then the estate goes to the aunts and uncles of the deceased and their descendants. Finally, the estate passes to the family of the last deceased spouse of the decedent.

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We are often asked whether Florida imposes an inheritance tax or estate tax on the estates of deceased persons.  Thankfully, there is no Florida inheritance or estate tax.  There are estate taxes that Florida residents need to be aware of:  the Federal estate tax, and the estate taxes that other states might impose.

The Federal estate tax, through the end of 2009, is imposed at a rate of 45%, after taking into account a $3.5 million exemption.  As of the writing of this entry, the estate tax is scheduled to be eliminated for 2010, only to be reinstated in 2011 at a rate of 55% and an exemption level of $1 million.  Please read about the estate tax fix.

Residents of Florida who own real estate in states that impose a state estate tax could be subject to such taxes in the absence of good planning.  Those states with a state estate tax include many of the states where Florida residents have migrated from, including Connecticut, Delaware, Illinois, Maryland, Massachusetts, New Jersey, New York, Ohio, and Rhode Island.   

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