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

Title: Pressing the “Do Over” Button: Strategies for Modifying Wills and Trusts after Formation

Presenter: Joshua S. Rubenstein

                Mr. Rubenstein opened his presentation discussing a few current events that weren’t expected such as the European debt crisis, the Asian spring, and the Yankees failing to reach the World Series. He noted that you cannot anticipate all changes and issues that may arise in the future.   Clients often make bad decisions regarding their estate plans, and lawyers sometimes make mistakes. In addition, people are living longer than ever before which raises the question, so how long does a person have to wait to inherit? There is an increase in litigation, and trust beneficiaries often few trusts negatively. Mr. Rubenstein divided the presentation into four different sections in discussing how to address some of these issues:  I) Tax Considerations Underlying Modifications: Income and Transfer Taxes, II) Retroactive Modifications, III) Prospective Modifications, and IV) Special Considerations with Respect to Litigation Settlements. 

I) Tax Considerations

                In describing the tax consideration’s underlying modifications, he noted the current low income tax rates, which he only expects to increase.  Historically income tax rates are as high as 90% for the top rates as opposed to the current 35-40% income tax rates and 15-28% capital gains rates.   He also discussed the various forms of taxation for different entities and how gifts, legacies and distributions from estate/and or trusts are generally tax exempt, except for income in respect of a decedent, distributable net Income, and gifts to employees.   The most common deductions are charitable, businesses, and administration expenses which are all subject to substantial limitations. He also noted many states and municipalities impose income tax rates, while eight states levy no income tax. 

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Florida Rule of Appellate Procedure 9.110(a)(2) currently governs what orders can be appealed in probate and guardianship litigation and authorizes appeals of "orders entered in probate and guardianship matters that finally determine a right or obligation of an interested person as defined by the Florida Probate Code."

Determining if a right or obligation of an interested person has been finally determined is often a confusing undertaking and has been the subject of much debate by attorneys and jurists. See In re Estate of Bierman, 587 So. 2d 1163 (Fla. 4th DCA 1991).

However, on January 1, 2012, a new Florida Rule of Appellate Procedure – Rule 9.170 – will govern appeals in probate and guardianship litigation. Rule 9.170 provides detailed guidance as to whether or not an order is one that finally determines a right or obligation of an interested person, listing 24 types of appealable orders in probate and guardianship matters.

Pursuant to Rule 9.170(b) orders that finally determine a right or obligation include, but are not limited to, orders that:

(1) determine a petition or motion to revoke letters of administration or letters of guardianship;

(2) determine a petition or motion to revoke probate of a will;

(3) determine a petition for probate of a lost or destroyed will;

(4) grant or deny a petition for administration pursuant to section 733.2123, Florida Statutes;

(5) grant heirship, succession, entitlement, or determine the persons to whom distribution should be made;

(6) remove or refuse to remove a fiduciary;

(7) refuse to appoint a personal representative or guardian;

(8) determine a petition or motion to determine incapacity or to remove rights of an alleged incapacitated person or ward;

(9) determine a motion or petition to restore capacity or rights of a ward;

(10) determine a petition to approve the settlement of minors' claims;

(11) determine apportionment or contribution of estate taxes;

(12) determine an estate's interest in any property;

(13) determine exempt property, family allowance, or the homestead status of real property;

(14) authorize or confirm a sale of real or personal property by a personal representative;

(15) make distributions to any beneficiary;

(16) determine amount and order contribution in satisfaction of elective share;

(17) determine a motion or petition for enlargement of time to file a claim against an estate;

(18) determine a motion or petition to strike an objection to a claim against an estate;

(19) determine a motion or petition to extend the time to file an objection to a claim against an estate;

(20) determine a motion or petition to enlarge the time to file an independent action on a claim filed against an estate;

(21) settle an account of a personal representative, guardian, or other fiduciary;

(22) discharge a fiduciary or the fiduciary's surety;

(23) award attorneys' fees or costs; or

(24) approve a settlement agreement on any of the matters listed above in (1)-(23) or authorizing a compromise pursuant to section 733.708, Florida Statutes.

With the implementation of Rule 9.170, it will be easier to determine — and less subject to debate — whether or not an order is appealable in probate and guardianship matters. Keep in mind that the list in Rule 9.170(b) is not exhaustive, and therefore orders not listed could still qualify as appealable orders that finally determine a right or obligation of an interested person.

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In a dramatic change from previous law, the Florida Legislature has enacted Florida Statute section 732.615 to allow the reformation of a will. Previously under Florida probate law, a trust could be reformed for a mistake of fact or law, but a will could not. The new statute allowing the modification of wills is effective as of July 1, 2011 and reads as follows:

732.615 Reformation to correct mistakes.—Upon application of any interested person, the court may reform the terms of a will, even if unambiguous, to conform the terms to the testator's intent if it is proved by clear and convincing evidence that both the accomplishment of the testator's intent and the terms of the will were affected by a mistake of fact or law, whether in expression or inducement. In determining the testator's original intent, the court may consider evidence relevant to the testator's intent even though the evidence contradicts an apparent plain meaning of the will. 

Previously, if a will was ambiguous, a Florida court could allow a reformation since the primary intent was to ascertain the intent of the testator. However, in some circumstances a mistake did not involve ambiguity, but instead involved a mistake of fact or law. One such example is where a bequest was for $10,000 instead of $100,000. In such cases, courts were previously barred from introducing evidence to determine the true intent of the testator, even if it was obvious what the testator’s true intent was from evidence other than the will. 

New Florida Statute section 732.615 will give support for beneficiaries who were deprived of an inheritance or part of an inheritance under a will when it was clear from other evidence that the decedent’s intent was not properly reflected in the will.  If you have any questions, or we can help you with an estate planning or probate matter, please contact Craig Dreyer or Jeffrey Skatoff at (561) 842-4868.

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On May 4, 2011, the Florida Legislature passed Senate Bill 670, which revises the power of attorney statute, Florida Statutes Chapter 709.   Effective, as of October 1, 2011, power of attorneys will be subject to new rules. A power of attorney is a written instrument to which an individual (the “principal”) grants power to another (the “agent”) to act on behalf of the principal. Florida recently revised its power of attorney statute to more closely conform to the Uniform Power of Attorney Act enacted by many other states. After October 1, 2011 (the “Effective Date), the following rules will apply to any powers of attorney executed in Florida.  

Execution Requirements. A Power of Attorney must be executed by the principal and two subscribing witnesses, and be acknowledged by the principal before a notary public. 

Elimination of Springing Powers. Springing power of attorneys are no longer permitted if they are signed after September 30, 2011. 

Co-Agents. Under the prior law, if two people were named in a Power of Attorney, concurrence of both agents were required to act. Conversely after the Effective Date, any time there is more than one agent, each agent may exercise the power independently unless the power of attorney indicates otherwise.

Revocation. Executing a new power of attorney will not revoke a previous power of attorney unless it specifically states that it does.   

Specified Powers of Agent. Under the new law, each agent must be specified specific duties under a Power of Attorney. No longer can a drafter be generic by giving the agent all powers of the principal. In addition, certain specific powers in a power of attorney must also be specifically signed or initialed next to each enumerated power to be effective. Examples of these specific powers that must be signed or initialed include:

·         creating an intervivos trust;

·         amend, modify, revoke or terminate any trust created by or on behalf of the principal (provided the trust provides for amendment, modification, revocation or termination);

·         to make gifts (annual gift tax exclusion amount unless trust specifies otherwise);

·         create or change survivorship rights;

·         create or change beneficiary designations;

·         waive a principals right to be a beneficiary of a joint and survivor annuity, including survivor benefit under a retirement plan;

·         disclaim property and powers of appointment.

Specified Powers Prohibited. Agents are specifically precluded from performing the following acts under a power of attorney:

·         to perform duties under contract that require personal services of the principal;

·         to make any affidavit as to the personal knowledge of the principal;

·         to vote in any public election on behalf of the principal;

·         to execute or revoke any will or codicil for the principal; or

·         to exercise powers and authority granted to the principal as trustee or as court-appointed fiduciary.

In addition, if an agent is not an ancestor, spouse or descendant of the principal, such agent cannot exercise any authority or grant an interest in the principal’s property to an agent or to an individual to whom the agent owes a legal obligation of support, unless the instrument states otherwise. Furthermore, the agent’s ability to make gifts is limited to the annual exclusion amount unless the instrument provides otherwise.

With the revisions to the power of attorney statute, it is an excellent time to update your estate planning documents. Please contact Jeffrey Skatoff or Craig Dreyer if you are interested in setting up or revising your estate plan.

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Powers of attorney create enormous temptations for the power-holder to alter the principal's estate plan through the retitling of assets.  In Beane v. Suntrust Banks, ___ So.3d ___ (Fla. 4th DCA November 10, 2010), a power-of-attorney holder did just that.  The deceased had funds in Suntrust Bank in a Totten trust account, which named Frances Wallin as the beneficiary of the account, to be paid upon the deceased's passing.  The deceased gave a general power of attorney to Deborah Lorenzo.  The next day, Lorenzo withdrew all of the money from the Suntrust account, placing all of the money in a different account, in the name of a relative of Lorenzo.  

After the passing of the deceased, the personal representative of her estate sued Suntrust for the value of the money in the account prior to Lorenzo's actions, alleging that the activity engaged in by Lorenzo was improper, and that Suntrust should not have allowed the improper transaction to have taken place. The personal representative relied primarily on Florida's power of attorney statute, which provides (Florida Statute Section 709.08(7)(b)):

an attorney in-fact may not "create, amend, modify, or revoke any document or other disposition effective at the principal's death or transfer assets to an existing trust created by the principal unless expressly authorized by the power of attorney."

The personal representative argued that the removing the funds from the Totten trust and placing the funds into another account in the name of another is a disposition effective at death, hoping to create liability on Suntrust for allowing the transaction to take place. 

The Court disagreed. Because the owner of the Totten trust retained the unfettered ability to withdraw any or all of the funds, the attorney-in-fact retained the same authority as a result of the power of attorney.  Because an owner of a Totten trust can withdraw from the account without constraint, the prospective Totten trust beneficiary cannot object to the depositor's withdrawal from the Totten trust.  

The result makes a great deal of sense - no bank should be held liable when a power-of attorney holder simply removes funds from a bank account.  The opinion does not address what liability the power-of-attorney holder and the recipient of the funds may have.  Even though the power-of-attorney holder may have had the legal power to engage in the subject transaction, such transaction may have been a violation of her fiduciary duty that is owed to the principal (Florida Statute Section 709.08(8)):

Standard of Care - Except as otherwise provided in paragraph (4)(e), an attorney in fact is a fiduciary who must observe the standards of care applicable to trustees as described in Section 736.0901.

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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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