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

A Florida probate court and the appellate court have dealt with a number of problems regarding the administration of a trust managed by JP Morgan Chase. The case has been extensively litigated, and the appellate court has recently issued its third opinion on the matter, in the case of Siegel v. JP Morgan Chase, (Fla. Dist. Ct. App. 4th Dist., Oct. 19, 2011).  The facts of the case, according to the appellate court, included the following

The settlor of the trust, Dorothy H. Rautbord, established a trust to benefit her for her life, with the remainder to be distributed to her children who survived her, including her sons.  The trust permitted the trustee to pay from income and principal, so much “as the Trustee, in its sole discretion, shall deem appropriate or advisable for the support, maintenance, health, comfort or general welfare of the Settlor [Rautbord].”   

The trust reserved for Ms. Rautbord the power to amend, modify, or revoke the trust, and excluded a power of attorney holder from exercising these powers.  

JP Morgan Chase Bank was the trustee.  After Ms. Rautbord became incapacitated, the holder of the power of attorney made large withdrawals from the principal of the trust by signing “revocation” letters, which the trustee honored.  The trustee issued checks for many gifts and also spent “considerable” amounts for Ms. Rautbord’s general welfare. 

The woman holding a power of attorney used the power of attorney to make gifts from the trust to dozens of people, including the JP Morgan employee in charge of administering the trust.   

The settlor passed away.  The remaindermen of the trust (those who were to receive what was left in the trust after the death of the settlor), sued because of the gifts and other amounts of alleged excessive distributions. 

This decision dealt primarily with the standing of the remainder beneficiaries to challenge the distributions that were made during the life of the settlor.  The court ruled that, under New York law, the remainder beneficiaries had standing to pursue their case.  Rather than stopping at the standing issue, however, the court made a number of other rulings that are important for trustees administering trusts, especially when the trustee is faced with demands from another person holding a power of attorney.  

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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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Shannon Rountree is presenting on will contests at a National Business Institute Seminar in October, 2011, entitled Contesting a Will: Common Causes of Action and Basic Remedies.  The topics include the various ways in which wills can be contested (lack of statutory formalities in the execution of the will, undue influence in the procurement of the will, lack of capacity, fraud, mistake of fact, and insane delusion that results in the creation of a void will or trust).  Shannon will also discuss litigation strategies for prosecuting and defending will contests.  Her will contest outline can be viewed here. 

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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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