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

In Florida probate administration, the probate rules permit the use of "Formal Notice" to notify beneficiaries and other interested persons of a specific action or request that has been made to the probate court.  When an interested person petitions the Florida probate court, the interested person send the formal notice to all persons who may be effected by what is being requested.   The persons receiving the formal notice then have 20 days from the receipt of the formal notice to respond to the court if there is disagreement of objection to what is being requested.

Formal notice is sent, according to the Florida Probate Code, via certified mail to each interested person.  This is unlike how most relief is sought in most courts, where normally a summons must be formally served on the persons effected by litigation. 

Examples of relief requested from a Florida probate court for which formal notice needs to be served, or may be served, include the following:

• Petition for Administration
• Petition to Construe Will
• Petition to Probate Lost Will
• Petition to Determine Beneficiaries
• Petition to Remove Personal Representative
• Petition to Surcharge Personal Representative
• Petition to Cancel a Devise
• Petition to Revoke Probate of Will

Even though, in most jurisdictions in Florida, the probate court hears both probate and trust disputes, the formal notice rules apply only in probate matters.  Trust proceedings must be initiated and served through the normal Florida Rules of Civil Procedure.  

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Surviving Spouses in Florida receive certain entitlements in a Florida probate administration, including a minimum percentage of the estate (elective share), rights to a Florida homestead, support during the probate administration, and other benefits.

Marital Agreements (Prenuptial and Postnuptial Agreements)

·         MARITAL AGREEMENTS.  Martial Agreements which are often referred to as prenuptial agreements, ante-nuptial agreements, and post-nuptial agreements, can waive or create rights upon the death of a spouse.  It is imperative to have a lawyer review these agreements who is familiar with the probate process to properly any rights you may have at death or as a surviving spouse.   It is also important to have these documents properly reviewed by experienced probate lawyers to ensure any death time provisions are properly addressed prior to signing any of these agreements.  Many of the rights of a surviving spouse can be waived or increased in properly drafted agreements.

·         TIMELINE TO FILE A CREDITOR CLAIM.  If a surviving spouse of a Florida decedent has a Marital Agreement, it is imperative that his or her attorney file a protective creditor claim to preserve these contract rights of the surviving spouse, within the three months of the filing the Notice of Publication to Creditors or thirty days from the date of service of a known creditor, even if the surviving spouse is the personal representative.  A common mistake of probate lawyers in handling marital agreements is the failure to file such a creditor claim.  There is no harm in filing a protective claim, and often filing a protective creditor claim results in the payment of benefits to a surviving spouse which may otherwise be lost.  The Florida Supreme Court has even ruled that filing such a claim is necessary to enforce a surviving spouse’s right under a marital agreement. Spohr v. Berryman, 589 So. 2d 225 (Fla. 1991).  The consequence of failing to timely file a creditor claim for a spouse with rights under a marital agreement can be severe, and a spouse may potentially lose all benefits of the marital agreement if the proper procedures are not followed.

Spouse Dies Without a Will (Intestacy)

·         INTESTATE.  If a person dies without a Will he or she is considered to die intestate.

·         INTESTATE SHARE.  If a spouse dies without a Will, the surviving spouse receives an intestate share.  (If a couple is separated at the time of death, the surviving spouse is not barred from inheriting).

·         SHARE OF SURVIVING SPOUSE - NO CHILDREN OR ALL CHILDREN OF SURVIVOR.  If the only survivor is a surviving spouse, or if all the lineal descendants are also lineal descendants of the surviving spouse, then the surviving spouse receives the entire estate of the decedent.  This rule applies only for spouses passing away on or after October 1, 2011.  Under prior Florida law, if the deceased spouse had children, the surviving spouse received only one-half of the estate, or one-half of the estate plus $60,000 if all of the children were of the marriage.

·         SHARE OF SURVIVING SPOUSE IF THERE ARE SURVIVING CHILDREN FROM DECEDENT BUT NOT OF THE SURVIVING SPOUSE.  If there are children of the decedent who are not children of the surviving spouse, then the surviving spouse receives one-half of the intestate estate. 

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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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The attorney-client privilege is the oldest confidential communication privilege in the Florida common law and is codified by statute and contained in the Florida Evidence Code, section 90.502, Florida Statutes (2011).  The attorney-client privilege protects the contents of confidential communications made in the rendition of legal services and has as its purpose to "encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice." American Tobacco v. State, 697 So.2d 1249, 1252 (Fla. 4th DCA 1997) (quoting Haines v. Liggett Group, Inc., 975 F.2d 81 (3d Cir.1992)). 

But until recently, only the Florida common law extended the attorney-client privilege to Florida personal representatives and Florida trustees involved in probate and trust litigation. This meant that personal representatives and trustees would have to look to Florida case law to determine whether communications with their attorneys were privileged and protected from beneficiaries challenging their actions. Florida common law recognizes that a Florida personal representative or a Florida trustee generally holds the attorney-client privilege, but also directs that when a beneficiary attempts to gain access to privileged information during litigation concerning the probate or trust, the court must decide whose interests the attorney really represents — the fiduciary's or the beneficiary's. See Jacob v. Barton, 877 So. 2d 935 (Fla. 2d DCA 2004) (recognizing that beneficiary might be the “real party” in interest for whom attorney performs the work thus entitling beneficiary in Florida probate or trust litigation to otherwise privileged information).

As of June 21, 2011, Florida trustees and Florida personal representatives have the added protection of Fla. Stat. § 90.5021, which addresses the “fiduciary attorney-client privilege” and explicitly extends the attorney-client privilege to a personal representative and trustee in probate and trust proceedings. Fla. Stat. § 90.5021 states that:

(1)   For the purpose of this section, a client acts as a fiduciary when serving as a personal representative or a trustee as defined in ss. 731.201 and 736.0103...

(2) A communication between a lawyer and a client acting as a fiduciary is privileged and protected from disclosure under s. 90.502 to the same extent as if the client were not acting as a fiduciary. In applying s. 90.502 to a communication under this section, only the person or entity acting as a fiduciary is considered a client of the lawyer.”

So, while a beneficiary can still attempt to obtain communications between a Florida personal representative or a Florida trustee and their attorney during probate or trust litigation, Florida personal representatives and trustees have the added protection of section 90.5021 to rely on to protect privileged communications with their attorneys.

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Many clients have or are considering using an irrevocable life insurance trust to minimize estate taxes. Assets properly held in irrevocable trust are not subject to estate tax. Annual gifts can be made to the trust to pay life insurance premiums, subject to beneficiaries’ rights of withdrawal of such assets, known as a “Crummey” withdrawal right.   

Most life insurance trusts are drafted to give the beneficiaries the right to withdraw the asset put into the trust. This is intended to ensure the gift qualifies for the annual gift tax exclusion amount as codified in Internal Revenue Code section 2503(b). (The annual exclusion amount is currently $13,000 per person per year.) This withdrawal power is known as a “Crummey” power after the seminal case on the subject Crummey v. Commissioner, 397 F.2d 88 (9th Cir 1968). 

Best practice, is to gift the insurance premium amount into the trust and have the trustee give to the beneficiaries a notice or right to withdraw, known as a crummey letter or crummey notice. But, what happens when the premiums are paid straight to the insurance company and no crummey notice or crummey withdrawal power is sent?

In the recent Tax Court case of Estate of Turner v. Comm'r, T.C. Memo. 2011-209 (Aug. 30, 2011), the IRS challenged the availability of the annual exclusion for amounts used to pay policy premiums directly, among other items. The IRS asserted two arguments to prevent the policy premium payments from being treated as annual exclusion gifts:

1. First, since premium payments were not made to the trust, the beneficiaries had no meaningful rights to withdraw such amounts and therefore it was not a present interest gift qualifying for the annual exclusion amount.
2. Second, since the beneficiaries did not receive notice of the gifts, they did not know of their legal right to demand distributions and the gifts should not qualify as a present interest gift available for the annual gift tax exclusion. 

In a monumental victory for the taxpayer, the Tax Court held that both IRS arguments had no impact on the annual exclusion for gift tax purposes. First, it provided that since the trust allowed for withdrawals for direct or indirect distributions, the manner of payment of the premium was not determinative as to whether the gift qualified for the annual exclusion. Secondly, the Tax Court determined the lack of any crummey notice or crummey withdrawal right for the gift did not affect the beneficiary’s legal right to demand a withdrawal.

While it is still advisable clients follow best practices in the funding of life insurance trusts, this case does provide some comfort in circumstances where such advice is not followed (although it should be noted the terms of your trust may change the result). Furthermore, the IRS and other courts have not conceded to this interpretation, so clients not implementing best practices do so at their own peril. If you need any advice on an estate planning or tax issue, please contact Jeffrey Skatoff or Craig Dreyer at (561) 842-4868.  

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Many clients have or are considering using an irrevocable life insurance trust to minimize estate taxes. Assets properly held in irrevocable trust are not subject to estate tax. Annual gifts can be made to the trust to pay life insurance premiums, subject to beneficiaries’ rights of withdrawal of such assets, known as a “Crummey” withdrawal right. 

Most life insurance trusts are drafted to give the beneficiaries the right to withdraw the asset put into the trust. This is intended to ensure the gift qualifies for the annual gift tax exclusion amount as codified in Internal Revenue Code section 2503(b). (The annual gift exclusion amount is currently $13,000 per person per year.) This withdrawal power is known as a “Crummey” power after the seminal case on the subject Crummey v. Commissioner, 397 F.2d 88 (9th Cir 1968). 

Best practice, is to gift the insurance premium amount into the trust and have the trustee give to the beneficiaries a notice or right to withdraw, known as a crummey letter or crummey notice. But, what happens when the premiums are paid straight to the insurance company and no crummey notice or crummey withdrawal power is sent?

In the recent Tax Court case of Estate of Turner v. Comm'r, T.C. Memo. 2011-209 (Aug. 30, 2011), the IRS challenged the availability of the annual exclusion for amounts used to pay policy premiums directly, among other items. The IRS asserted two arguments to prevent the policy premium payments from being treated as annual exclusion gifts:

1. First, since premium payments were not made to the trust, the beneficiaries had no meaningful rights to withdraw such amounts and therefore it was not a present interest gift qualifying for the annual exclusion amount.
2. Second, since the beneficiaries did not receive notice of the gifts, they did not know of their legal right to demand distributions and the gifts should not qualify as a present interest gift available for the annual gift tax exclusion. 

In a monumental victory for the taxpayer, the Tax Court held that both IRS arguments had no impact on the annual exclusion for gift tax purposes. First, it provided that since the trust allowed for withdrawals for direct or indirect distributions, the manner of payment of the premium was not determinative as to whether the gift qualified for the annual exclusion. Secondly, the Tax Court determined the lack of any crummey notice or crummey withdrawal right for the gift did not affect the beneficiary’s legal right to demand a withdrawal.

While it is still advisable clients follow best practices in the funding of life insurance trusts, this case does provide some comfort in circumstances where such advice is not followed (although it should be noted the terms of your trust may change the result). Furthermore, the IRS and other courts have not conceded to this interpretation, so clients not implementing best practices do so at their own peril. If you need any advice on an estate planning or tax issue, please contact Craig Dreyer or Jeffrey Skatoff at (561) 842-4868.  

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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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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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Florida has made an important change in its inheritance law for surviving spouses. In the absence of a will, under current Florida law, an existing spouse of a deceased Florida resident is entitled to $60,000 plus 50% of the decedent’s estate if all the decedent’s children are also children of the existing spouse. However, effective October 1, 2011, Florida law has been amended so that, if all of the decedent’s children are also children of the surviving spouse, the surviving spouse is entitled to 100% of the estate.

If the deceased Florida resident has at least one child with a person other than the surviving spouse, and there is no will, the law is unchanged. The surviving spouse receives half of the estate, and the children of the deceased person share the other half of the estate. (Grandchildren take the place of a parent who has previously passed away.)

The change in law is intended to reflect the way in which most estate plans are constructed when there is a will. For married couples with children only of the marriage, the spouses do typically leave their entire estates to each other. By changing the Florida law of intestacy to better reflect how most estate plans operate, there will be more conformity of estates whether or not there is a will.

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The country music supergroup, the Pistol Annies, just released a new album, titled Hell on Heels, with a song titled "Family Feud," which describes how a typical probate dispute gets started.  Here are the lyrics: 

Fine china stacked by the kitchen sink 
Aunt Tammies in there claiming all the diamond rings 
Uncle Bobbs holding up the TV set 
The only thing they are grieving over 
Is what they ain't gonna get 
She's only been in the ground a day or two 
I'm glad Mama ain't around to watch this family fued 
[ Lyrics from: http://www.lyricsfreak.com/p/pistol+annies/family+feud_20979109.html ] 
Great gran daddy's shotgun started it all 
She wasn't even cold 
Before they ripped it off the wall 
Wondas fighting Angie over antique quilts 
Nobody even waited for the reading of the will 
If Daddy was here he'd beat us black and blue 
I'm glad mama aint around to watch this family fued 

I'm watching it all go down in shame 
Wish the whole house ould go up in flames 
Who gives a damn about a cedar chest 
When we just laid her soul to rest 
She's only been in the ground a day or two 
I'm glad Mama ain't around to watch this family fued 

She's probably rolling over in her grave 
'Cause the good lord giveth and the family taketh away

You can listen to the song here.  For inheritance funding. 

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Florida Homestead laws have long been a trap for the unwary due to the unique and specialized nature of Florida Homestead laws. To further complicate the matter, Fla. Stat. § 732.401 was revised effective October 1, 2010. This revision changed the rules for spouses and descendants receiving Homestead property at death.

Article X Section 4(c) of the Florida Constitution limits who can receive Homestead property upon the death of an owner if he or she is survived by a spouse or a minor child. The revision to Fla. Stat. § 732.401 allows the surviving spouse to make an election, within six months from the date of death, to take a one-half interest as a tenant in common in the Homestead property instead of a life estate.

A one-half tenant in common interest gives the surviving spouse an ownership interest in the Homestead, which allows the surviving spouse to bring a partition action to sell the property. If the property is sold, the surviving spouse will generally receive one-half of the proceeds of any sale. Prior to the enactment of the revised Florida Homestead statute, if the Homestead was not devised in a way that was permitted by Florida law, the surviving spouse automatically received a life estate in the Homestead property and any minor children received a vested remainder in the property.  The life estate interest could not be partitioned, which required the surviving spouse and children of the deceased to negotiate a sale of the Homestead.  If there was no agreement, the property could not be sold. 

These arcane rules strained many family relationships especially, in second marriages. In these situations, the Florida Principal and Income Act governs the allocation of expenses between the life estate and vested remainder interest. The surviving spouse is generally responsible for any interest payments on the mortgage, property taxes, property insurance and repairs and the children are generally responsible for principal mortgage payments on the residence and any substantial capital expenditures.

To add another complicating factor, if the surviving spouse ever wanted to downsize, the surviving spouse had to negotiate with the children to allow a sale and they would have to determine a value for her life estate. While many see the new statute as a beneficial change, it is also important to note that it is to the detriment of the decedent’s minor children in many cases.  A very elderly widow will receive one-half of the Homestead, rather than a life estate which may have zero value.  The real winners in some situations will be the surviving spouse's children from an earlier marriage.

Therefore, this revised statute requires additional planning at the forefront to take into consideration this new contingency, and adds an additional issue to consider during the estate administration process. It is also important to note that the revised statute also approves of new planning techniques available to those with special needs children and with other unique planning objectives.

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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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Over past 12 months, we have handled a number of cases involving outright theft of fiduciary funds by personal representatives and trustees.   In the case of a probate estate, unless the court has ordered the personal representative to post bond, the heirs of the estate have no recourse if funds are stolen, other than to obtain a judgment against the personal representative, which ends up likely as not collectable. Some jurisdictions in Florida, notably Miami, require all personal representatives to place estate funds in restricted depository accounts or to post bond.  Most other jurisdictions in Florida, however, require neither from most personal representatives. 

Beneficiaries of trusts have even less protection, because trusts are administered without court supervision, unless a court’s jurisdiction is invoked.  Such jurisdiction is invoked in Florida by the filing of a trust complaint.  Because trustees serve without bond and without restricted accounts, if a trustee steals funds, the beneficiaries are normally left without a recourse, other than to obtain a judgment against the trustee.

How can beneficiaries protect themselves?  In a probate estate, heirs of the estate are allowed to seek information regarding how an estate is being administered, including getting access to bank account statements and other documents.  If a personal representative does not comply with the requests for information, in Florida an heir can seek a court order from the probate judge requiring the turnover of the requested information.  In my experience, these types of thefts occur over time rather than all at once, so diligence on the part of an heir can sometimes stop this theft soon after it starts.

In a trust case, information can be requested similar to that of a probate estate, but until a trust complaint has been filed, there is no judge to seek relief from.  Therefore, a trust beneficiary would have to make requests for the information, and only when the information is not received, file a trust complaint and use the court’s powers to obtain the requested financial information.

If one is drafting a will or trust and wants to make sure that there is no wrongdoing, there are a few simple steps to take.  The easiest step is to name a corporate fiduciary as the personal representative or trustee.  Even if a rogue trust officer steals the funds, the deep pocket and insurance of the institution should be available to protect the heirs or beneficiaries.  Another step is to require that personal representatives and trustees post bond. 

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Establishing paternity in probate proceedings is a common issue, especially with the widespread availability of inexpensive and highly reliable DNA testing.  The rules for establishing paternity in Florida probate proceedings, however, have a number of hurdles, some of which intentionally deny biological paternity from controlling the outcome.

A.  Florida Probate Paternity Statute

The starting point for paternity determinations in probate is found at section 732.108, Florida Statutes (2011), which provides that paternity for children born out of wedlock can be established as follows: 

(a)  The natural parents participated in a marriage ceremony before or after the birth of the person born out of wedlock, even though the attempted marriage is void. 

(b)  The paternity of the father is established by an adjudication before or after the death of the father. Chapter 95 shall not apply in determining heirs in a probate proceeding under this paragraph.

(c)  The paternity of the father is acknowledged in writing by the father.

If there is an adjudication of paternity, prior to the death of the father, it will likely have taken place in the family courts, whereas an adjudication of paternity after the death will most likely end up in the probate courts. Section 732.108 permits the probate courts to adjudicate paternity rights which have not already been adjudicated in another proceeding.

Section 732.108 does not permit the probate court to address paternity issues after a prior paternity determination in family court or elsewhere.  Instead, a litigant is required to go back to the court making the original paternity determination. In Glover v. Miller, 947 So.2d 1254, (Fla. 4th DCA 2007), a probate court addressed this very issue with regard to a party’s right to contest a prior paternity adjudication.

Because any determination of paternity will involve many other parties and have effects more far reaching than a mere adjudication of the biological connection between Jerrod and Glover, we are not convinced that such a determination can and should be made as part of the probate proceedings where the only issue to be determined is intestate succession. We agree with the trial court that in order for Glover to assert a right as an heir, the existing judgment of paternity would have to be vacated. A child cannot have two legally recognized fathers.

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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 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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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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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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