Vigliani v. Bank of America

Vigliani v. Bank of America, 189 So.3d 214 (Fla.2d DCA 2016)

This decision is an interesting one because it involves both a review of the uncertainty faced by practitioners in 2009 regarding the future of the estate tax exemption, and somewhat strange language in a trust meant to deal with that uncertainty.  

Here, the trial court was asked to consider whether a decedent's revocable trust required a Family Trust to be funded with $3.5 million (the exemption amount in 2009), $5 million (the exemption amount in 2010), or some other amount.  The trustees filed for declaratory relief to obtain a judicial determination of this issue, and the trial court held that the Family Trust should be funded with $3.5 million.

The Appellate Court disagreed with the trial court's analysis.  First, it felt that the actual division and funding of the trusts were the responsibility of the trustee of the trust under the terms of the trust and F.S. § 736.0801. The Court also went on to explain why it felt that funding the Family Trust with $3.5 million was likely an incorrect result.

The decedent amended and restated his trust in 2009, at a time when no one was quite sure what the future of the estate tax exemption would be.  To deal with that uncertainty, the trust included more language than we are used to seeing which established both what he thought the Family Trust should be funded with, as well as his intentions when creating the trust.  The trust provided that, "The Family Trust shall be funded with that portion of the Trust estate equal to the federal individual exemption amount, undiminished by any estate, inheritance, succession, death or similar taxes, subject to the provisions of Article VIII" (emphasis added).  The decedent died in 2010, so without the reference to Article VIII, one would read that provision to require the Family Trust to be funded with $5 million, the estate tax exemption amount in 2010.   Unfortunately, however, the provisions of Article VIII seem to make the decision much less straightforward.

Among other things, the provisions of Article VIII included a "Statement of Intentions" which advised that the decedent wanted the smallest amount of estate taxes to be paid at his death and at his wife's death, that he wanted the smallest amount of generation-skipping tax possible to be paid at his death and his wife's death, that if carryover basis was in effect, he intended for the trustee to allocate basis exemptions in a way to benefit his family, and that  he wanted no adverse tax consequences occur as a result of some subsequent act by Congress not anticipated by him.

The Court ultimately held that the trustees had to look at the trust as a whole to determine the decedent's intent, and that the trustees had a duty to complete the tax analysis, considering estate taxes, generation skipping taxes and income taxes, to determine the best result for the trust.  It remanded for the trustees to make such a determination.

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