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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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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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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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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