Monday, August 26, 2013

Fintak v. Fintak

Fintak v. Fintak, 120 So.3d 177, 2013 WL 4483101 (Fla. 2d DCA 2013)

This case involved a challenge to a decedent's self-settled irrevocable trust.  The trust was established during the decedent's life, was funded with the decedent's money and during his life, the decedent was the sole beneficiary.  On his death, the trust was to be divided into separate shares for the decedent's children, and made no provisions for the decedent's life.  The decedent and two of his sons were named as the initial trustees of the trust.

Before he passed away,  the decedent sought to challenge the trust but unfortunately he died before the litigation was concluded, and his wife was substituted as the plaintiff as his personal representative.  The trial court granted summary judgment in favor of the trustees, because the decedent failed to renounce the benefits he received under the trust and because his wife took inconsistent positions in the probate proceeding and the trust litigation.  

The Appellate Court disagreed with the trial court on all grounds and gave four reasons why the summary judgment was improper:

(1)  The Renunciation Rule

Typically, "one who receives and retains a gift under a ... will or other instrument is estopped to contest the validity of the instrument under which he derives his interest.  Barnett Nat'l Bank of Jacksonville v Murrey, 49 So.2d 535, 536 (Fla. 1950).  However, all of the cases decided under this "renunciation rule" have involved the receipt of benefits from an instrument executed by a third party.  Here, where the decedent funded the trust with his own assets, the Court held that he was not required to renounce the benefits from the trust as a condition precedent to instituting a challenge to the validity of the trust because there can be no gift or devise to a settlor/beneficiary of a self-settled trust because his interest does not derive from the trust itself.

(2)  Estoppel by Acceptance of Benefits

Similarly, the doctrine of estoppel holds "that a person should not be permitted to unfairly assert, assume or maintain inconsistent positions."  Head v. Lane, 495 So.2d 821, 824 (Fla. 4th DCA 1986). The Court held that an individual cannot be estopped from challenging an instrument by accepting that which he is already entitled to receive regardless of whether the instrument is overthrown.

Interestingly, the Court's arguments for rejecting the renunciation rule and the estoppel arguments seemed to give no credence to the idea that a self-settled irrevocable trust for the benefit of the settlor is anything but the settlor's own personal piggy bank.  

(3) Estoppel by Demand for Performance

The trial court also held that since the decedent made demands for money from the trust and even executed a codicil exercising a power of appointment granted to him in the trust, he should be barred from challenging the trust.  The Appellate Court held that like the rule allowing a party to plead in the alternative during litigation, a party may also take inconsistent actions in his own affairs to "hedge his bets," so long as that action does not prejudice another party.

(4)  Judicial Estoppel

The decedent's wife listed the trust as a beneficiary of his estate on her initial inventory (filed outside of Florida).  The Court did not view this as taking an inconsistent legal position or an admission that the trust was valid.  

Thursday, August 15, 2013

Staum v. Rubano

Staum v. Rubano, 120 So.3d 109, 2013 WL 4081055 (Fla. 4th DCA 2013)

In 2007, a decedent died while domiciled in New York, owing a debt to his nursing home in New York.  The nursing home filed a claim in both the domiciliary estate in New York, and subsequently in the ancillary estate here in Florida.  The nursing home also sought an accounting of the ancillary estate, and asked the court to transfer the ancillary estate's assets to the New York domiciliary estate.

The personal representative sought to dismiss the nursing home's petition because its claim was untimely, as it was filed more than two years after the decedent's death.  The trial court agreed, and granted the motion to dismiss.

On appeal, the Appellate Court agreed that the claim was untimely in Florida, but stressed that to the extent the trial court found that the claim against the New York estate was untimely, it reversed.  Even though it said the claim was untimely, the Court then found that since the nursing home's claim remained pending in New York, the nursing home was an interested person entitled to seek an accounting and the transfer of the assets, since Florida Statutes § 734.102(6) provides that, "After the payment of all expenses of administration and claims against the estate, the court may order the remaining property held by the ancillary personal representative transferred to the foreign personal representative or distributed to the beneficiaries."  

Gordon v. Kleinman

Gordon v. Kleinman, 120 So.3d 120, 2013 WL 4081027 (Fla. 4th DCA 2013):

Florida Statutes § 733.109(1) provides that a proceeding to revoke probate of a will can be commenced by any interested person, including a beneficiary under a prior will.  The Probate Code defines an "interested person" as "any person who may reasonably be expected to be affected by the outcome of the particular proceeding involved." Fla. Stat. § 731.201(23).

To withstand a motion to dismiss, a petition for revocation of probate must do two things: (1) state the interest of the petitioner in the estate, and (2) present the facts constituting the grounds on which the revocation is demanded.  Fla. P. R. 5.270.  Petitioner here sought to revoke probate of a 2009 will.  She was a beneficiary of the decedent's 1983 will, but was not a beneficiary under any subsequent wills leading to the 2009 will.  Because she alleged that she was a beneficiary under the 1983 will, and that all of the decedent's other wills under which she was not a beneficiary were the result of undue influence and/or testamentary and therefore invalid, the Court found that she had pleaded sufficient allegations of standing to withstand the motion to dismiss.

Wednesday, August 14, 2013

McCormick v. Cox

McCormick v. Cox, 38 Fla. L. Weekly D1723b (Fla. 3d DCA 2103):

Here, McCormick, an attorney, prepared two trusts which owned a single asset- 100 acres in Massachusetts. At the time of the decedent/settlor's death, the property operated as a nine-hole golf course.  Following the decedent's death, McCormick arranged for an appraisal of the property as of his date of death.  The appraiser reported a fair market value of the property, as an operating golf course, of $2,500,000.  McCormick's billing records indicated that almost immediately McCormick began work to convert the property from a golf course to residential property.  Yet the appraisal he used on the decedent's estate tax return did not reflect this "highest and best use" of the property, nor did McCormick communicate with the beneficiaries about the value. The property ultimately sold to the Town of Lynnfield for $12,000,000.  To avoid capital gain tax, McCormick structured a like-kind exchange under section 1031 of the Internal Revenue Code.  The beneficiaries supported the like-kind exchange, but did not waive their right to contest the initial under-valuing of the property.

Ultimately the trial court removed McCormick for breach of fiduciary duties, found that McCormick and his law firm breached their fiduciary duties as attorney's for the trusts, surcharged the trustee and his law firm $2,146,812 in expenses incurred due to their undervaluation of the property, found the legal fees were unreasonable and required disgorgement of $1,348,000 in attorney's and trustee's fees.

The Appellate Court upheld McCormick's removal because the beneficiaries introduced competent substantial evidence of his breaches.  They used an experienced probate and trust attorney as an expert, they presented evidence that McCormick was required to post bond but did not, McCormick conceded that he did not provide the beneficiaries with annual accountings, and he took a seven-figure trustee fee from trust funds.  The Court also upheld the surcharge and disgorgement.