Florida Personal Representatives Acting Badly; Suing the Past P.R. (and Her Lawyer) for Malpractice

Posted By on July 8, 2014

When a loved one dies in Florida, the law immediately creates an “estate” to hold that person’s real estate and personal property until the assets can be legally determined, which are then transferred to the person who inherits it. An executor (in Florida, the person appointed by the Probate Court is known as personal representative or “P.R.”) is appointed to oversee this process – the man or woman who acts as personal representative of the estate is held to the highest standards as a fiduciary and this person is responsible to to the estate’s heirs, creditors and beneficiaries.

 

 

Normally, the personal representative is named in the decedent’s Last Will and Testament.  Often times, the person named as the personal representative isn’t accustomed to dealing with legal matters.  For that reason, Florida law requires a personal representative to be represented by an attorney to assist them in their duties. Which is a good thing. (The Florida Probate Code allows the lawyer to be paid from estate funds for advice given to the estate’s personal representative.)

However, despite having legal counsel, there are times when things go wrong and where a personal representative doesn’t stay the course. Sometimes the beneficiaries seek to have the estate’s representative ousted through court proceedings; other times, the P.R. quits and another personal representative takes over.

There can be all sorts of reasons for a change of personal representatives of an estate. It is not necessarily a red flag of wrongdoing.

However, there are times when a new, or successor, personal representative does discover that bad things have happened during the course of the prior administration of the estate and when this happens, that replacement representative has a fiduciary duty to pursue claims and seek redress on behalf of the estate and its heirs.

Which brings us to the new case of Bookman v. Davidson, where the First District Court of Appeals has held that a successor personal representative who is filing suit for alleged impropriety in the administration of an estate can sue not only the prior estate representative but the attorney or law firm that represented him or her.

Bookman v. Davidson: Case of First Impression

Deborah Irby died and Dana Ford was named as her estate’s personal representative. Dana Ford hired a lawyer to help her with the job. Time passed and Ford quit. A man named Alan Bookman took over as the representative of the estate and began work on the task of settling the estate and getting all the property held by Irby to the rightful owner (and getting her debts paid, her taxes filed, etc.).

Alan Bookman discovered what he believed to be improprieties in the handling of the Deborah Irby Estate. He filed a formal lawsuit against both Dana Ford and her lawyer.  Specifically, Bookman found that before he took the reins, assets of the estate had been transferred or disclaimed that could have been used to pay Irby’s debts.

He sued Ford for the return to the estate of the fees she had been paid to act as its personal representative and he sued the lawyer for a return of the $195,000 that had been paid in legal fees.

Bookman had no choice here. Under Florida law, an estate’s personal representative has the legal duty to act not only within “the best interests of the estate” but also in “the best interests of all interested parties, including creditors.” When Bookman found the assets had been transferred that could have been used to pay the estate’s creditors, he had no choice but to sue in order to return to the estate those assets held by the predecessor representative or her agents.

The lawyer objected to being sued for professional negligence, arguing that Florida law did not allow Bookman to sue him for malpractice regarding his work regarding the estate administration, only Ford could do so since it was Ford that hired him.

The Florida First District Court of Appeals ruled otherwise. Pursuant to Florida Probate Code, sections 733.601-733.620, as the successor personal representative, Mr. Bookman did have “standing” to sue the lawyer who had provided advice and counsel regarding administration of the Deborah Irby Estate even though a different person, Dana Ford, was the estate’s representative at the time.

[Read the full opinion:  Bookman v. Davidson, — So.3d —- ,(Fla. 1st DCA May 05, 2014)]

The Point Here: Personal Representatives Answer to Beneficiaries and Creditors

The point to remember here: the fiduciary duty of a personal representative of an estate in Florida is important and it comes with potential personal liability. The powers, duties, and obligations of that personal representative are many, and they extend to the representative himself (or herself) as well as to beneficiaries, creditors, contractors, accountants, and attorneys. When one person replaces another in the role of personal representative of a Florida Estate, all the powers as well as the duties and obligations are passed like a baton to the successor.

It’s a position of the highest responsibility and its demands are many.

If you have a reason to doubt that an estate’s personal representative, past or present, is acting fairly or accurately in the administration of a Florida estate, then you need to consider your legal rights as a beneficiary or creditor to that estate.

Discuss your situation with a Florida probate lawyer if you have concerns, knowing that the personal representative not only has great power, but great legal responsibilities.

When Are Constructive Trusts Created by Florida Judges?

Posted By on June 10, 2014

In Florida, a constructive trust is a legal remedy that judges use to help people who have been harmed in all sorts of situations, including in probate controversies, divorce cases and with business torts like tortious interference with a business relationship. Said another way, constructive trusts are used to thwart a wrongdoer who has taken advantage of a confidential relationship they have with a victim to gain an unfair advantage over the victim and gain possession or ownership of the victim’s property.

For example, in a probate setting, a wrongdoer may have exerted undue influence over a decedent to gain ownership of the decedent’s homestead requiring a Florida probate judge to hold that a constructive trust exists in order to remedy the improper transfer. In divorce proceedings, a constructive trust may be used for property that is now held unjustly by one spouse that was originally owned by the other spouse. For business deals that end up being fraudulent or unconscionable, business assets can be determined to be held in a constructive trust as a remedy to a civil lawsuit.

Bottom line, a constructive trust is created by judicial action and courtroom advocacy. The judge finds that the property at issue is in a legal trust, with the judge formally making this ruling by order or judgment. It is through this construction that the judge can move ownership of that property back to the victim when, for example, a wrongdoer refuses to sign a deed, transfer the asset, etc.

Constructive Trusts Require a Courtroom

Accordingly, the only way for a constructive trust to exist in Florida is for a Florida judge to be involved – and depending on the type of case it is, a judge can order this relief in an evidentiary proceeding and not just during a full blown trial (for example, in a divorce case).

To prove a constructive trust exists in Florida, a victim must show the following by clear and convincing evidence (a high legal standard):

  1. A promise, either expressed or implied
  2. Transfer of the property and reliance thereon
  3. A confidential relationship
  4. Unjust enrichment.

It’s important to remember that any request for relief in the form of a constructive trust must have a specific piece of property in mind. No one how badly the defendant has acted, you are not able to have a “constructive trust” placed upon the land or personal property of the wrongdoer, in an “umbrella” fashion. The trust can only be imposed upon a target — a house, a bank account — i.e., a tangible asset of some sort that has unjustly enriched the defendant in some way.

Many are confused by this requirement, especially where money is concerned. However, in probate controversies or divorce cases or tortious interference situations involving businesses, money damages from the defendant are the primary type of judicial relief that the judge will consider. It is only when specific property (including specific funds) is in dispute that a constructive trust can be imposed as a remedy.

Examples of property where constructive trusts have been imposed by Florida judges include:

  • Life insurance proceeds (Holmes by Holmes v Holmes, 463 So.2d 578 (Fla. 1st DCA 2010)
  • Residue of testator’s estate (In re Estate of Tolin, 622 So. 988 (Fla. 1993)
  • Survivorship account at a bank (Logie v. J.P. Morgan, 716 So. 2d 319 (Fla. 4th DCA 1998)
  • Real estate (Williams v. Grogan, 100 So.2d 407 (Fla. 1958).

Can a Trust Be Created By a Florida Judge to Remedy Wrongdoing Related to a Decedent’s Property?

Posted By on May 6, 2014

Ask most people what a “trust” is all about, legally-speaking, and they’ll probably describe some form of estate planning tool that goes along with a Last Will and Testament and/or a Life Insurance Policy. This answer isn’t wrong: lawyers draft trust documents all the time, where property is placed into “trust” for loved ones (”beneficiaries”). It’s a sound way to pass things down to children and grandchildren and it’s also often a wise tool to use with tax-planning.

However, that’s not the only way “trusts” are used here in Florida.

Florida takes a position that isn’t held by most states in the country. In Florida, we have something called a “constructive trust”, which is not really a trust at all. Instead, a Florida constructive trust is a form of remedy for someone who has been harmed by another’s wrongdoing – as recently explained in Swope v. Harmon (citations omitted):

In 2005, this court held that “[a] constructive trust . . . is not a traditional cause of action; it is more accurately defined as an equitable remedy.” …. Therefore, “[b]ecause a constructive trust is a remedy, it must be imposed based upon an established cause of action.” We continue to follow this rule … [and] conclude the trial court correctly dismissed the claim for a constructive trust because a constructive trust is a remedy, not a cause of action.

Constructive Trusts Imposed for Victims of Unjust Conduct

Sadly, all too often Florida probate lawyers – particularly Florida probate lawyers involved in probate litigation cases – see people who have been harmed by members of their own family or close loved ones. Family members who have stolen personal belongings and other valuable assets.  It’s often an emotional situation where serious wrongdoing has taken place.

The lawyers involved in these cases often require the help of Florida courts to rectify this type of wrong. However, before a Court will help a probate lawyer the lawyer will need to follow several  procedural steps including, pleading and proving that there was something illegal that was done to the victim, proving up the existence of valuable property and its history of ownership, and showing the present location of the property and its fair market value.

Undue Influence Example

For instance, in situations of undue influence related to a will contest, the beneficiary will need to prove that there was undue influence (see our posts on that cause of action here) and then be able to show which property is at issue (the property which has been transferred to a wrongdoer who is guilty of unduly influencing the decedent).

In this situation, the lawyer may ask the Florida judge to order that the property at issue be placed in a “constructive trust”  – with the victim being the beneficiary of the judicially created constructive trust.

Constructive Trusts in Florida are Created by Operation of Law

Constructive trusts exist only by operation of law. No one can draft a “constructive trust” for a client in Florida. Constructive trusts are created in Florida courtrooms by Florida judges in order to take back title to property that is in the possession of a wrongdoer.  The purpose of a constructive trust is to transfer title to property to the rightful owner. See, Abreu v. Amaro, 534 So.2d 771 (Fla. 3d DCA 1988).

From Abreu:

A constructive trust is a remedial device with dual objectives — to restore property to the rightful owner and prevent unjust enrichment. To impose a constructive trust there must be (1) a promise express or implied, (2) transfer of the property and reliance thereon, (3) confidential relationship, and (4) unjust enrichment…. The person seeking to impose a constructive trust must prove those factors giving rise to a trust by clear and convincing evidence.

Note:  there are other ways that constructive trusts can help people in Florida other than in probate controversies, such as divorce cases and business injury cases like tortious interference with a business relationship. More about constructive trusts in next month’s post.

Florida Inheritance: If You Didn’t Inherit Under the Will, Can You Sue the Lawyer Who Wrote It? Maybe.

Posted By on April 8, 2014

Last month, we posted about what happens here in Florida when someone believes that they are going to inherit something, money – property – jewelry – heirlooms, and then learns that the Will states otherwise.  In some situations, Florida law grants heirs or beneficiaries with the right to sue the person (or persons) that they believe illegally interfered with their expected inheritance.

Lawyers call this a case of “tortious interference with an inheritance,” “tortious interference with an expectancy,” or “tortious interference in estate planning.”

The example we gave was a daughter who sued her father’s second wife after he died for interfering with the daughter’s expected inheritance.

Most of these cases do involve family members — widow or widowers and children from a prior marriage; estranged siblings and the like. However, the Florida courts have also opened the door for another sort of defendant to be sued when there’s a inheritance issue: lawyers.

Florida Courts Allow Lawsuits against Estate Planning Lawyers

In the past, lawyers who wrote Wills and Trusts and other estate planning documents could tell unhappy heirs and beneficiaries that if they were upset, they could not sue the lawyer because of something called “privity.” Under the rule of privity, only a client (the decedent) can sue a lawyer for negligence or malpractice, not heirs and beneficiaries because they were not considered a client.  Thus, a privity defense was a strong ally to a Will drafting lawyer.

However, over time, Florida courts have created a loophole to the privity defense where Will drafting errors can now be claimed by a third party who was the intended beneficiary of the client/decedent.  In these cases, the focus is on the Will itself.  See, Hodge v. Cichon, 78 So. 3d 719, 722 (Fla. 5th DCA), review denied, 99 So. 3d 942 (Fla. 2012).

Then, in 2013, a Florida appellate court changed things even more. In the case of Dingle v. Dellinger, the rule of privity was given some grander exceptions to include other documents and other aspects of estate planning.

In the Dingle case, a lawyer was sued because the plaintiffs claimed the lawyer (and the lawyer’s law firm) made a professional error (or “legal malpractice”) when she drafted documents that gifted land to them.

It seems that a man named John Kyreakakis had hired the defendants to draft a quitclaim deed to gift the property to the plaintiffs, even though another lawsuit resulted in a determination that Mr. Kyreakakis didn’t have the legal right to make the gift. You can’t give what you don’t have, so the plaintiffs’ deed wasn’t worth the paper it was written on.

So, they sued the lawyer (and her law firm) who drafted the quitclaim deed for malpractice and they won.

The court decided that if the plaintiffs could show that the defendants owed any sort of legal duty to them, then they would have a valid legal malpractice claim (the privity rule wouldn’t hold to block them just because they weren’t clients of the lawyer). Why? One of the reasons that an estate planning client hires a lawyer is for the goal of benefiting his or her heirs or beneficiaries.  So, when the client’s intent is thwarted by an error made by a lawyer — like a will or a trust, or here, where Kyreakakis had a deed drafted that was not legally valid — it harms the intended beneficiary.

Florida Heirs and Beneficiaries May Have a Lawsuit against The Decedent’s Lawyer

Bottom line, if you are expecting to inherit something in Florida and are shocked to learn that the Last Will and Testament of your loved one does not provide for it, or that other documents have failed you in your expected inheritance, then you may have a legal claim against the person who may have interfered with your expected inheritance — or against the lawyer or law firm that was responsible for the creation of that Will or other corresponding estate planning document(s).  It all depends on the facts.

Therefore, if you suspect a problem with an inheritance (or lack of one), then it’s advisable to investigate matters and speak with a Florida probate lawyer to learn about your rights. Remember, that there are time deadlines (statutes of limitations) that apply, so don’t procrastinate because your claim, however valid a claim it may be, can be time-barred.

Tortious Interference With An Inheritance or Expectancy — Can You Sue When You Fail to Inherit Under a Florida Will?

Posted By on March 11, 2014

In Florida, unlike some other states, there is case precedent on the books (court opinions) which establishes the legal right for someone to sue and win a claim that their expected inheritance was illegally interfered with by the defendant, despite the language of the probate documents and the fact that they did not inherit under the probated will’s terms.

This case is based upon a claim of “tortious interference with an inheritance” also known as “tortious interference with an expectancy,” or “tortious interference in estate planning”.

As explained in the Restatement (Second) of Torts § 774B, this is a claim where “One who by fraud, duress, or other tortious means intentionally prevents another from receiving from a third person an inheritance or gift that he or she would otherwise have received is subject to liability to the other for loss of the inheritance. . . .”

You can sue for damages when something like this happens in Florida – knowing this is especially important for people who have moved here from other states, they may not realize this kind of cause of action exists.

This type of lawsuit is a claim for relief that has been created by the Florida judiciary: there is no specific statute drafted and passed by the Florida legislature which allows this. It is therefore something that many heirs and beneficiaries in Florida may not know exists, if they do not have a probate lawyer to counsel them, or they do not investigate Florida inheritance laws themselves (e.g., by reading blog posts like this one).

Tortious Claim Based Upon Interference with Inheritance That Was Expected But Not in the Probated Will

This tort is a valid basis for challenging a Last Will and Testament in the State of Florida and was first recognized as a valid probate litigation claim by the Florida Third Circuit Court of Appeals in the case of Allen v. Leybourne. In that 1966 case, the Florida court helped a daughter who went to court to fight for an inheritance she claimed was promised to her by her late father but did not appear in his will as it was probated, because of “wrongful acts” by the defendant, his second wife who was the sole beneficiary of the probated will.

From Allen:

It is our opinion that when there is an allegation that the testator had a fixed intention to make a bequest in favor of the plaintiff and there existed a strong probability that this intention would have been carried out but for the wrongful acts of the defendant there exists a cause of action. While it is true that such a cause of action is difficult to prove, that does not affect the existence of a ground of tort liability.

What is Needed to Prove a Tortious Interference Claim for Expected Inheritance in Florida?

These cases are not easy to bring in Florida — there may be many unhappy relatives and associates after someone dies in Florida who expected to inherit, but did not get included in someone’s will. It’s not enough to be surprised or shocked that you’ve been excluded from a Last Will and Testament.

In Florida, to win a case for Tortious Interference with An Inheritance you must jump a lot of legal hurdles.  These include:

1.  You must be able to provide evidence of these elements of this cause of action:

(1) the existence of an expectancy;
(2) intentional interference with the expectancy through tortious conduct such as duress, fraud, or undue influence;
(3) causation; and
(4) damages.
Nationwide Life Insurance Company v. Perry, citing Claveloux v. Bacotti, 778 So. 2d 399, 400 (Fla. Dist. Ct. App. 2001); Whalen v. Prosser, 719 So. 2d 2, 5 (Fla. Dist. Ct. App. 1998); Allen v. Leybourne, 190 So. 2d 825, 829 (Fla. Dist. Ct. App. 1966); see also Chase v. Bowen, 771 So.2d 1181, 1186 (Fla. Dist. Ct. App. 2000)(Sharp, J., dissenting).

2. You have to be able to show the Florida Probate Judge that you are advancing the Tortious Interference With An Expected Inheritance lawsuit as a last resort after unsuccessfully attempting to get adequate relief in other ways.

As the Florida Supreme Court explains in the case of DeWitt v. Duce, “… if adequate relief is available in a probate proceeding, then that remedy must be exhausted before a tortuous interference claim may be pursued.”

3. You must be able to show that the person who has died, the “testator” is the person who has been wronged — not you, the beneficiary.

The purpose of this tort claim is not to help beneficiaries or heirs, it is to protect the deceased person’s “… right to dispose of property freely and without improper interference. In a sense, the beneficiary’s action is derivative of the testator’s rights.” Whalen v. Prosser.

As the Whalen court explains:

Interference with an expectancy is an unusual tort because the beneficiary is authorized to sue to recover damages primarily to protect the testator’s interest rather than the disappointed beneficiary’s expectations. The fraud, duress, undue influence, or other independent tortious conduct required for this tort is directed at the testator. The beneficiary is not directly defrauded or unduly influenced; the testator is. Thus, the common law court has created this cause of action not primarily to protect the beneficiary’s inchoate rights, but to protect the deceased testator’s former right to dispose of property freely and without improper interference. In a sense, the beneficiary’s action is derivative of the testator’s rights.

4. You must be able to obtain your damage award from the defendant, the individual wrongdoer, if you win your case.

This is a tort action against this person, and any judgment for the plaintiff will be one for money damages against the defendant’s individual assets. As with other torts, both compensatory and punitive (punishment) damages are available. However, the claim will not allow you to alter the language of the will itself or amend its terms.

Florida Probate Law: Why You Need Strict, Careful Drafting or Risk a Surprise Result in Probate Court Fight: The Lesson of Cessac v. Stevens

Posted By on February 11, 2014

scales of justice, public domainThe Florida First District Court of Appeal recently ruled on a family situation that provides a real lesson for all Floridians on how important careful drafting of estate documents (wills, trusts, powers of attorney, etc.) are in the State of Florida if you want to avoid probate litigation and probate court determinations of your future property distributions.

In the case of Cessac v. Stevens, the court had before it a controversy over how a power of appointment should work under Florida law, and, in a a surprise to some, the appellate court decided that a Florida power of appointment is a power that must be strictly followed – even if there are facts which demonstrate a different intent on how to exercise the power.  This is only the second case on the books of Florida case law that deals with this particular issue (the other is Talcott v. Talcott).

Lesson in this case: if you’re not careful, you may leave a Last Will and Testament with a provision stating that certain assets are to be distributed in a certain way after your death only to have those assets later be legally found to be restricted in how they are to be distributed: your Will’s provision may be deemed unenforceable. It will not matter how clear the language is in the Will as to what you want to happen.

The result of this opinion may be viewed as harsh and rigid to some, but Florida courts have the power to decide the rights of those who come before them with controversies. In other words, once a case is in litigation and it works its way to the appellate court, the parties will most likely have to live with what the appellate court’s ruling (or appeal it to the Florida Supreme Court, if that high court agrees to review the case).

Cessac v. Stevens

In this situation, Sally Christiansen wrote a Last Will and Testament which left the remainder of her estate to Joanne Cessac. Sally Christiansen left nothing to her children. They were disinherited heirs.

Sally Christiansen was also the beneficiary of three Trusts that her father had set up long before, and it was clear in the language of her will that she intended for the assets in these three Trusts to go to Joanne Cessac.

However, the Florida court ruled that the assets in the Trusts would go to Sally Christiansen’s children instead. Why? The language that her father had placed in each of the Trusts included an identical restriction:

“Upon the death of my daughter, [Ms. Christiansen], the Trustees shall transfer and deliver the remaining principal of this share of the trust, … as my daughter may, by her will, appoint, making specific reference to the power herein granted…. If [Ms. Christiansen] … dies without exercising the power of appointment granted herein, [her] share of this trust shall be divided into equal shares so that there shall be one share for each child of [Ms. Christiansen]….”

In Sally Christiansen’s Will, she did mention the three Trusts but her will did not reference the power granted in each Trust allowing her to devise her shares in them via her Will. The fact that the Will referenced the three Trusts as existing was argued to evidence Sally Christiansen’s desire that the assets of the Trusts go to Joanne Cessac.

The children sued. They won.

The court agreed with the children’s probate lawyers: because her Will failed to provide any “specific reference to the power [of appointment]” the trust assets were to be distributed as Sally Christensen’s father provided when he drew up the original trust documentation: “divided into equal shares” between Ms. Christiansen’s children.

From the Cessac opinion:

In sum, we conclude that to properly exercise a power of appointment such as the powers provided for in the trusts at issue in this case, the decedent must at least make reference in his or her Will to the powers of appointment held by the decedent. Here, the mere reference to one of the trusts and to the location of the property of the other two trusts was not sufficient to even substantially comply with the “specific reference” requirements in the trusts. Accordingly, because the decedent failed to comply with the requirements of the trusts when attempting to execute her powers of appointment, the assets in the trusts did not become part of her estate and must pass to the decedent’s children, as directed in the original trusts, rather than to Ms. Cessac as provided in the decedent’s will. We recognize the seemingly harsh result of our conclusion that Ms. Cessac will not receive the assets the decedent apparently intended for her to receive. However, this result is a function of the intent of the original donor, who had the right to place whatever restrictions he desired on the disposition of his property. The decedent was obligated to comply with these restrictions, and compliance would not have been difficult here, as all that was necessary was some reference to powers of appointment in the decedent’s will.

Lesson of Cessac v. Stevens

Florida probate courts respect document language; they will review documents word by word to determine how the document is to be interpreted according to Florida law and determine the distribution of assets after someone has died. Estate planning documents needs to be carefully prepared in order to protect the decedent’s last wishes.

From this case, it is clear that probate litigation often involves fights over provisions that are 25 words or less but those words can be the deciding factor in who gets what in a sizable estate. However, that fight may be worth the effort in some situations.  In this case, the result is that the children were able have their mother’s wishes disavowed and instead had the wishes of their grandfather fulfilled.  Probate litigation can be tricky.

In Florida, Joint Tenancy With Right of Survivorship as an Estate Planning Tool to Avoid Probate: What Are The Risks in This Form of Florida Joint Ownership?

Posted By on December 26, 2013

Florida law allows two people (think a husband and wife, or a parent and child) the ability to own Florida property together as joint owners in several ways, one of which is known as the “joint tenancy with right of survivorship.” The Joint Tenancy With Right of Survivorship (JTWROS) is familiar to bankers, lawyers, CPAs, and especially estate planners, as a means that legally enables property in Florida to pass immediately to the surviving owner when the other owner dies.

check, banks,

Banks have respected Joint Tenants With Right of Survivorship accounts for many, many years.

Why Use a Joint Tenancy With Right of Survivorship in Florida?

Why is JTWROS used here in Florida? Because property that is held as Joint Tenancy With Right of Survivorship means there is no need for probate to transfer the property from one party to another. The asset transfers legally from one joint tenant to the sole ownership of the surviving, still living, joint tenant – Florida probate law doesn’t come into play.  Thus, this technique is a basic estate planning tool because it saves lots of people lots of trouble (and possibly money).

Usually, bank accounts between a husband and wife are held as JTWROS because when one spouse dies, the surviving widow or widower can freely use and access the account without the need to file a probate. This can be emotionally as well as financially beneficial to a spouse who has to cope with the loss of a loved one – bank accounts designated as JTWROS have been used for many years because of their ease of administration to address issues like these.

Florida banks, credit unions, and financial institutions all allow bank accounts held by ”joint tenants with right of survivorship” and usually there is no problem with a bank recognizing these accounts as being the sole property of the surviving tenant when one of the owners passes away.

Risks of Joint Tenancy With Right of Survivorship as an Estate Planning Tool: The Creditor Pops Up

Joint tenancy with right of survivorship, therefore, is a popular estate planning tool in the State of Florida. Before someone decides to use JTWROS as part of their estate plan, along with a Last Will and Testament or Trust, they need to know that there’s a risk involved with this form of ownership.

The big risk? The surprise of a creditor showing up, with a legal claim against the asset despite the fact that the other owner knew nothing about that creditor or their debt.

Creditors’ Claims Against Joint Tenancy With Right of Survivorship

Most creditors with outstanding debts will, of course, take steps to make sure that the debt owed gets paid…and one of the ways that the creditor will do this involves the creditor actually filing a lawsuit. If the creditor is successful and obtains a judgment from that lawsuit, it can use the judgment to collect against the assets of the debtor, including assets held as a Joint Tenant With Right of Survivorship — this can be done even if the other person owning the asset, had no idea that the debt existed (certain exceptions apply, including assets held by husband and wife).

Other Risks of a Florida Joint Tenancy With Right of Survivorship

There are other risks besides the surprise creditor when someone holds property in a Joint Tenancy with Right of Survivorship to someone else. One joint owner can legally take the money from the account and the other owner, the joint tenant, does not have to approve or even be aware that this has happened.

Another risk: by avoiding probate, a JTWROS may cause conflict among beneficiaries who were expecting the decedent’s estate would be spit according to a Last Will and Testament.

The Example of the Riches’ Bank Account in Wexler v. Rich: a Joint Tenancy Fight

A few years ago, a Florida man named Donald Rich died and his daughter from his 1st marriage, Linda Wexler, believed that Mr. Rich’s widow, the decedent’s second wife, was trying to take estate assets that rightfully belonged to Ms. Wexler.

Specifically, Ms. Wexler claimed that the widow had manipulated Donald Rich into moving money from a bank account where Ms. Wexler had access into another account, which Mr. And Mrs. Rich held as joint tenants with right of survivorship.

There was a huge courtroom battle over money held in the bank accounts, with the Florida appellate court deciding that the accounts were held as Joint Tenants With Right of Survivorship, reversing the trial court’s ruling, allowing the widow to be respected as the sole owner of the bank account.

Here is the Florida Court’s explanation (emphasis added):

The Supreme Court identified two ways to expressly disclaim the entities account status; first, “an express statement signed by the depositor that a tenancy by the entireties was not intended, coupled with an express designation of another form of legal ownership” and second, “if the financial institution affirmatively provides the depositors with the option on the signature card to select a tenancy by the entireties among other options, and the depositors expressly select another form of ownership option of either a joint tenancy with right of survivorship or a tenancy in common.” Id. at 60.

This case demonstrates the second type of express disclaimer contemplated by Beal Bank. Bank United provided the Riches with account agreements containing the option of a tenancy by the entireties, but that option was not selected. Rather, the agreements established joint tenancies with right of survivorship. The Riches signed the agreements after having had a chance to review them. Freedom of contract “includes freedom to make a bad bargain.” Posner v. Posner, 257 So.2d 530, 535 (Fla.1972). Florida adheres to the principle that a “party has a duty to 1101*1101 learn and know the contents of a proposed contract before he signs” it. Mfrs.’ Leasing, Ltd. v. Fla. Dev. & Attractions, Inc., 330 So.2d 171, 172 (Fla. 4th DCA 1976). Therefore, “[o]ne who signs a contract is presumed to know its contents.” Addison v. Carballosa, 48 So.3d 951, 954 (Fla. 3d DCA 2010). When the Riches signed the account agreements, they “expressly select[ed]” a form of account ownership other than a tenancy by the entireties, within the parameters set by the Supreme Court in Beal Bank.

Florida Court Rules Palm Beach’s Ruth Perelman Estate Will Be Probated in Pennsylvania: The First to File Lesson For Those Owning Homes in Florida and Elsewhere

Posted By on December 19, 2013

Ruth and Raymond G. Perelman Building of the Philadelphia Museum of Art: one of many philanthropic endeavors of the late Ruth Perelman.

This is a story about Ruth Perelman who executed a Last Will and Testament in 2010 and died in July 2011 leaving two sons, Jeffrey and Ronald. A few weeks ago, the Fourth District Court of Appeals here in Florida made national news when it published its decision about where the late Ruth Perelman’s estate would be probated. The decision is a lesson in Florida probate law that every Floridian could benefit from knowing if they own property in another state besides Florida.

Here’s the Ruth Perelman Probate Story.

Jeffrey Perelman and his father, Raymond Perelman, were on opposing sides in the Florida probate appeal.  This was a big case, not just because of the legal nuances being argued and decided but also because of the size of the estate itself: the Perelmans are a billionaire family, known for their charitable endeavors. (Read Ruth Perelman’s 2011 obituary here.)

Mrs. Perelman’s 2010 Will did not name her husband Raymond as her executor and personal representative of her estate; instead, Ruth named her son Jeffrey. Ruth died at the age of 90 years in Pennsylvania, only 2 months after she and Raymond had made a $225,000,000 donation to the University of Pennsylvania School of Medicine (she died at their hospital).

Jeffrey, as personal representative under the Ruth Perelman 2010 Will, filed his mother’s Will in the Pennsylvania probate court. Two weeks later, his father and recent widower Raymond Perelman filed to probate the late Ruth Perelman’s estate in Florida based upon her earlier 1991 Last Will and Testament.

Father and son were adversaries at this point: Raymond pointing his finger at Jeffrey, accusing the son of manipulating documentation in order to establish his mother’s legal domicile as Pennsylvania in order to file for probate in Pennsylvania and not Florida. Specifically, dad said son had forged information on the death certificate itself in order to support his legal maneuvering in Pennsylvania.

The Death Certificate Dispute

Raymond Perelman, wanting a Florida probate, argued to a Montgomery County District Attorney that his son had worked with a funeral director to alter the primary residence on Ruth Perelman’s death certificate from Palm Beach, Florida, to another residence they owned in Pennsylvania. According to Raymond Perelman, he and his wife lived in Palm Beach as their primary residence; thus, Florida was her domicile when she died. Mr. Perelman alleged that his own son acted illegally just to get his mother’s Will into a Pennsylvania court.

Son Jeffrey countered that his father was simply upset that Mom had chosen son over dad regarding administrating her estate and that nothing illegal had happened here.

Florida vs. Pennsylvania – Which State Has Probate When There are Homes in Two States?

The issue became which state would handle this probate matter when the decedent had homes in two states. Which probate court should adjudicate the dispute? The Fourth District Court of Appeals here in Florida decided the case should go back up to Pennsylvania because of the following:

1. Florida determined that the Pennsylvania court had priority because Raymond had filed first — 13 days before his dad filed his probate petition.  Pennsylvania was held to be the state that had first exercised its jurisdiction.

Under Florida’s priority test, not only was the paperwork filed in Pennsylvania first, that court actually took some action before any Florida court had done so. From their opinion:

Here, Pennsylvania was the first state to exercise jurisdiction. We conclude that Pennsylvania first exercised jurisdiction on August 12, 2011, when the Register of Wills issued a notice to Raymond’s counsel stating that Ruth’s 2010 Will would be probated “without further notice to you” unless Raymond filed a formal caveat. The notice in this case clearly stated that relief would be granted unless Raymond filed a formal caveat. Therefore, following the Second District’s reasoning in Morrison, the Register’s notice indicated that “the ball [was] rolling” in Philadelphia, twelve days before Raymond filed his Florida petition on August 24, 2011.

2. Was there any way that Florida could have probated this case? Yes, if there had been evidence of “extraordinary circumstances.”

In situations like these, where two states are involved, there are often complicated fact patterns, particularly when the estates are large in assets and monetary value. Just because another state probate court performed some action in a probate matter there does not mean that the State of Florida will automatically tip its hat to that state’s jurisdiction and either stay or dismiss the Florida probate proceeding. If the Florida probate proponent can introduce admissible evidence that there are “extraordinary circumstances” to probate the estate in Florida, then Florida will do so.

However, this evidence was not shown in the Perelman matter. From the Florida opinion:

Having concluded that Pennsylvania was the first state to exercise jurisdiction, we next consider whether the trial court abused its discretion in refusing to stay Raymond’s petition in Florida. The trial court’s order simply denied the motion to stay and did not make any finding of extraordinary circumstances that would justify refusing to apply the principle of priority as a matter of comity. Nor did Raymond make any showing that the Pennsylvania proceeding would cause undue delay. All he offered in this regard was speculation. The mere fact that Pennsylvania allows for the possibility of a de novo proceeding in the Orphans’ Court does not, without more, establish undue delay.

While Raymond argues that this case is controlled by Parker v. Estate of Bealer, 890 So.2d 508, 512 (Fla. 4th DCA 2005), we find that Parker is distinguishable. There, although the Maryland proceeding was filed first, the Maryland probate court had never admitted the will to probate, no probate proceedings in Maryland had begun, estate administration had been ongoing for six months in Florida, and significant adverse tax consequences would have occurred if the will was probated in Maryland. The extraordinary circumstances in Parker simply are not present in this case.

Accordingly, we reverse the final judgment and the order on domicile, and remand for the trial court to issue a stay pending the resolution of the Pennsylvania probate proceeding.

Bottom line: When someone dies and there is the possibility of probate in either Florida or another state in the United States, then where the decedent’s estate will ultimately be probated may rest on a “rush to the courthouse” decision (to meet that first requirement).  However, Florida probate courts will also be amenable to considering “extraordinary circumstances” in determining where a probate should occur, (for example, tax consequences), if facts are introduced into evidence to support this consideration.

Breach of Fiduciary Duty Claims by Florida Heirs and Beneficiaries: What Happens When the Estate’s Representative Goes Rogue and Does Bad Things?

Posted By on December 5, 2013

What happens to property, real and personal, in Florida after someone dies in the State of Florida is well-settled: Florida statutes and Florida case law work together to insure that there is a smooth transition in ownership of everything from raw minerals and undeveloped land to jewelry, works of art, and personal belongings like clothing and cars.  In a series of laws passed by the Florida legislature, Chapter 733 of the Florida Statutes’ Estates and Trust Code deals specifically with the administration of the probate estate.

One of the lynch-pins in the Florida probate process is the appointment of an individual to oversee this transition, the “personal representative” of the decedent’s estate.

 

Florida Personal Representative of the Estate Is Responsible for Handling Estate Matters from Start to Finish

Once someone is appointed to be the personal representative of an estate here in Florida, that person has a job to do in overseeing all the responsibilities connected with that estate (the property and liabilities left by the decedent) until the final action of closing the estate. The estate’s representative is appointed by the Florida probate judge, and the term “personal representative” under Florida law can describe the role that some may recognize as executor (executrix) or administrator (administratrix).

The Florida personal representative is often a person who was trusted by the person who has died. However, banks or trust companies are often appointed as personal representative appointees in Florida courts, especially in large or complicated estates.

Duties of a personal representative under Florida law are varied. These include:

  • Finding the probate assets — the representative must locate the assets no matter how troublesome this may be, and protect and safeguard the estate’s assets so they can be distributed to heirs and beneficiaries.
  • Finding the creditors who are owed money — the representative has to make sure that debts left by the decedent are respected; creditors must be notified so they can decide on filing claims against the estate for payment. This includes publication of an official “Notice to Creditors” in the local newspaper by the representative and taking reasonable steps to find these creditors.
  • The representative also has to provide a “Notice of Administration” that gives details about how Florida estates are probated with information of how to file objections to anything that is done in the course of the estate administration.
  • Tax returns must be completed and filed, and taxes must be paid as they come due.
  • Claims that are submitted must be reviewed to make sure they are legitimate and if they are, then the representative must pay them.
  • Claims that are suspicious must be challenged.
  • Creditors who sue the estate for payment must be fought by the personal representative on behalf of the estate.
  • To the extent necessary, the personal representative must hire those he or she needs to help him or her, including lawyers, CPAs, financial advisors, etc.
  • The personal representative must determine the amount to be paid under Florida statutes to any surviving spouse as well as other family members
  • The personal representative must distribute estate assets according to Florida law and the testamentary documents (which includes transfers of title, etc.)
  • The personal representative must close the estate (close bank accounts, etc.) and notify the court accordingly.

Breach of Fiduciary Duty – When Personal Representatives Mismanage the Estate or Take Advantage for Personal Gain

Obviously, the personal representative appointed to oversee the administration of a Florida estate undertakes lots of responsibility and wields lots of power. Heirs and beneficiaries depend on the personal representative to do the right thing and to act with integrity — however, there are occasions where temptation is too great and personal representatives take advantage of their position for their own gain, and other situations where they simply mismanages the decedent’s probate estate.

In these situations, Florida law allows the heirs and beneficiaries to file legal claims against the personal representative for any harm they suffer from the representative’s bad acts. This is done through a lawsuit based upon the personal representative’s breach of his or her fiduciary duty to the beneficiaries or heirs.

Fiduciary duty is the highest duty recognized in Florida law; as the Florida Supreme Court explained long ago in the oft-cited case of Quinn v . Phipps, a confidential relationship exists “where confidence is reposed by one party and a trust accepted by the other.”

The personal representative can be sued for either negligently performing his or her duties or for handling the estate administration in such a way that he or she has personally gained at the expense of the beneficiaries or heirs as a form of Florida probate litigation.

Self-dealing examples here can include things like renting out the decedent’s oceanfront condo to friends during the administration process at a lowball rate, or letting someone use the decedent’s car (like their teenager).

Negligent examples can include allegations of poor investment choices for estate assets during the pendency of the administration or the payment of claims without adequate vetting.

Personal representatives may mount successful defenses to these allegations; Florida probate judges understand these can be emotional cases where beneficiaries may view value of assets and investment/creditor decisions with different perspectives than a representative (particularly an institutional one). Self-executing accounting defenses may also exist if the testamentary documentation foresaw a challenge and included language that forgives any bad acts if there has been no challenge for a certain period of time.

As detailed in Florida Statute 733.504, the following are all bases for the removal of personal representative:

(1) Adjudication that the personal representative is incapacitated.
(2) Physical or mental incapacity rendering the personal representative incapable of the discharge of his or her duties.
(3) Failure to comply with any order of the court, unless the order has been superseded on appeal.
(4) Failure to account for the sale of property or to produce and exhibit the assets of the estate when so required.
(5) Wasting or maladministration of the estate.
(6) Failure to give bond or security for any purpose.
(7) Conviction of a felony.
(8) Insolvency of, or the appointment of a receiver or liquidator for, any corporate personal representative.
(9) Holding or acquiring conflicting or adverse interests against the estate that will or may interfere with the administration of the estate as a whole. This cause of removal shall not apply to the surviving spouse because of the exercise of the right to the elective share, family allowance, or exemptions, as provided elsewhere in this code.
(10) Revocation of the probate of the decedent’s will that authorized or designated the appointment of the personal representative.
(11) Removal of domicile from Florida, if domicile was a requirement of initial appointment.
(12) The personal representative would not now be entitled to appointment.

Removing a personal representative is not easy to do in Florida, but it can occur when any of the preceding elements exist, including where the personal representative is acting for their own gain and/or where the p.r. mismanages the decedent’s probate assets.

Deathbed Marriages in Florida: Why This is a Recipe For An Undue Influence and Will Contest Claim Against the Surviving Spouse

Posted By on November 21, 2013

Quick marriages or secret weddings close to someone’s death, particularly when they are of a certain age, aren’t just the stuff of murder mysteries — they happen more often than many people realize; so much so, in fact, that the Florida Legislature actually addressed the issue a few years ago and passed a special law to try and protect ill and elderly people from being manipulated into marriage (and an alternative distribution of their estates upon their death) by opportunistic spouses.

 

This law is commonly referred to as the Florida “Deathbed Marriage” law. Florida Statute 732.805 states (in part, read the full text of the Deathbed Marriage law here):

(1) A surviving spouse who is found to have procured a marriage to the decedent by fraud, duress, or undue influence is not entitled to any of the following rights or benefits that inure solely by virtue of the marriage or the person’s status as surviving spouse of the decedent unless the decedent and the surviving spouse voluntarily cohabited as husband and wife with full knowledge of the facts constituting the fraud, duress, or undue influence or both spouses otherwise subsequently ratified the marriage:

(a) Any rights or benefits under the Florida Probate Code, including, but not limited to, entitlement to elective share or family allowance; preference in appointment as personal representative; inheritance by intestacy, homestead, or exempt property; or inheritance as a pretermitted spouse.

(b) Any rights or benefits under a bond, life insurance policy, or other contractual arrangement if the decedent is the principal obligee or the person upon whose life the policy is issued, unless the surviving spouse is provided for by name, whether or not designated as the spouse, in the bond, life insurance policy, or other contractual arrangement.

(c) Any rights or benefits under a will, trust, or power of appointment, unless the surviving spouse is provided for by name, whether or not designated as the spouse, in the will, trust, or power of appointment.

(d) Any immunity from the presumption of undue influence that a surviving spouse may have under state law.

(2) Any of the rights or benefits listed in paragraphs (1)(a)-(c) which would have passed solely by virtue of the marriage to a surviving spouse who is found to have procured the marriage by fraud, duress, or undue influence shall pass as if the spouse had predeceased the decedent.

What is a Illegal Deathbed Marriage in Florida?

Not every wedding performed shortly before one of the spouses passes away is a marriage to be challenged as fraudulent and wrong.   However, there are situations where an individual is vulnerable to being swayed or conned by a caretaker, nurse, or family friend who persuades the person to enter into a husband and wife relationship with them with the intention of financial reward through inheritance once the individual passes away.

This happens all the time, and many states do not allow will contests to be filed against a surviving spouse after their spouse has died. Illinois, for example, does not allow it. Florida did not provide for this either, until 2010 when Florida Statute 732.805 was passed into law.

Now, in Florida, any interested person (as that term is defined by Florida probate law) has a legal right to file a formal challenge to a Will that has been entered into Florida probate, challenging the surviving spouse’s right to inherit because of alleged fraud, duress, or undue influence of the decedent.

What Happened?

Florida is a haven that attracts people from all over the country, as well as all over the world, as a great place to retire. Our warm climate, beautiful scenery, and large elder population (with accompanying services and benefits targeting this market sector) are all reasons that people move to the Sunshine State. Unfortunately, scam artists are also attracted to Florida because of all of the elder citizens.

And for those with sizable estates, it can be tempting for scammers to try and take advantage of some of these people by inducing them into marriage. Particularly a “deathbed marriage.”

In 2008, the Florida Bar’s Probate and Trust Litigation Committee studied this problem and compiled its findings into a report that helped get Florida Statute 732.805 passed. Florida, the report pointed out, was an enticing place for “deathbed marriage” scams because surviving spouses get great legal benefits here — like homestead rights, among other things. Couple the legal advantages to surviving spouses with the aging population here in Florida, and undue influence is bound to create lots of advantage weddings.

Read that report here, entitled “Subcommittee Report On Challenges To The Validity Of Marriage After The Death Of A Spouse In Probate Proceedings.”

Hannah’s Marriage to Charles Savage as One Example of an Illegal Florida Deathbed Marriage

The report used as one example the Florida Supreme Court case of Savage v. Olsen 9 So. 2d 363 (Fla. 1942):

At some point after the accident, the Defendant, Charles Savage, showed an unusual interest in Hannah. He subsequently proposed marriage, which was performed, but never consummated. Savage lived apart from Hannah after the ceremony, held himself out as a single person, and executed mortgages on property belonging to Hannah without her knowledge.

The Court also noted that Savage had a long criminal record. Savage lived and cohabitated with another woman before and after his wedding to Hannah.

Sixty days after they were married, Hannah died in a car accident when the automobile in which she was a passenger, driven by Savage, plunged into a canal. Savage escaped unharmed and when talking to officers and the funeral director after the accident, he referred to Hannah as a “friend.”

The funeral was held before Hannah’s relatives were informed, and two days after her death, Savage became the administrator of Hannah’s estate and immediately emptied her safe-deposit box. The Florida Supreme Court affirmed the lower court’s ruling that the marriage was void, and stated that Hanna’s mental condition, as well as Savage’s “artful practices” justified the decision.

The Court stated:

“It is true that much of the testimony was in conflict, but it was abundantly shown that the mental condition of Hannah Ford, although she would not be said to be actually insane, made her easy prey to the machinations of Charles B. Savage. Examining together her plight and his artful practices, we think the chancellor was fully justified in the decision he rendered declaring the marriage void. The testimony which he elected to give credit fully substantiated the allegations of the bill of complaint anent fraud of one and incapacity of the other.”

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