Articles Posted in Reopening an Estate

Ademption: When devises are actually not part of the estate

Many unexpected things can happen in the period between the execution of a will and the death. For example, a decedent may devise the family house in Key West to her granddaughter. Several years after executing the will, the decedent gets into financial troubles and sells the Key West house. With other matters on her mind, the decedent never gets to adjust the will and passes away. Does the granddaughter still have a right to the house? Does she get money instead? Does she get anything at all?

The legal term describing a situation when a particular asset devised in the will is not part of the estate is ademption by extinction. The Florida statutes cover ademption in Section 732.606 for specific devises, and Section 732.605 for securities. Ademption is not uncommon. The decedent may have owned the asset and later sold it, or could have never owned it all. The situation would be different if the grandmother gave the granddaughter the Key West house as a gift before passing away. In that situation, the granddaughter’s devise would have been satisfied during the grandmother’s lifetime. Accordingly, this legal concept is called ademption by satisfaction and is not discussed in this blog post.

Estate Planning: Income Tax Strategies

            Law firms have had to take a spike in income tax rates, a decline in the estate tax rate, and an increasing annual estate tax exemption threshold into account in devising estate planning strategies. There has been a decreasing gap between the income tax rates and estate tax rates: estate tax has moved to a maximum rate of 40% and a $5.45 million exclusion in 2016, from a 55% percent tax rate and a $675,000 exclusion in 2001; the maximum tax rate on ordinary income is 39.6%, up from a low of 35 percent in 2003; the maximum long-term capital gains tax rate increased to 20% from 15% in that same time frame. Furthermore, in 2013 an additional 3.8% surtax was added for net investment of individuals, estates, and trusts over statutory threshold amounts in certain cases. While these numbers might make you think that estate planning is only necessary for the super wealthy, financial planners advise that it is not. Taxes are just one consideration of estate planning: it is critical to plan for an orderly transfer of assets or for other circumstances such as incapacitation.

The capital gains tax rate – the long-term rate of 20% plus the 3.8% surtax – is significant because it affects the basis of assets. When a decedent dies, her beneficiaries get the benefit of a step-up in basis, which is appreciated assets held in the decedent’s estate are readjusted to fair market value at the time of inheritance. Through this mechanism, the beneficiary receives an income tax advantage because she is not liable for the capital gains tax on any appreciation that occurs up to the point she inherits the asset.

The importance of a Semicolon – Does property partially used as primary residence and partially for business purposes qualify as Homestead?

Does property partially used as primary residence and partially for business purposes qualify as homestead under Article X, Section 4 of the Florida Constitution? Surprisingly, the answer apparently rests on a semicolon.

This question was addressed in 2003 by the Florida Court of Appeal for the First District in Davis v. Davis, 864 So. 2d 458 (Fla. 1st DCA 2003). The facts of this case are as follows: Mr. Horace Davis lived with his wife Carolyn on a contiguous piece of property measuring less than 160 acres outside of municipality in an unincorporated portion of Nassau County. The property included the couple’s residence and on a portion separate from the residence, Mr. Davis operated a mobile home park generating profit through rent. Mr. Davis died in 2000 having written a will.

Is Investing Homestead Sale Proceeds Okay?

Florida Constitution provides protection from forced sale to homestead property from most creditors. Art. X, § 4, Fla. Const. The protection covers not only the physical homestead property but also the proceeds from the sale of the homestead, provided the proceeds are reinvested in another homestead property. In a scenario where you invest the homestead sale money in securities and then buy another homestead with it, does the money retain homestead protection?

The Florida Supreme Court answered this question in the affirmative in a recent 2016 decision JBK Assocs. v. Sill Bros., 191 So. 3d 879 (Fla. 2016). In that case, JBK Associates, Inc. (“JBK”) obtained a final judgment against Mr. Sill for $740,487.22.  Mr. Sill had consequently opened a brokerage account with Wels Fargo and deposited the sale proceeds from the marital home of Mr. Sill and his ex-wife. The account was titled “FL Homestead Account” and was split into three sub-accounts, one containing cash and two containing mutual funds and unit investment trusts.

The Hunt for Tom Clancy’s Estate Comes to an End

Popular author Tom Clancy wrote many iconic novels, and the story of his estate battle sounds like it comes straight out of a book. The author, who died at the age of 66 of heart failure, left an estate valued at $82 million. This $82 million estate includes an ownership interest in the Baltimore Orioles baseball team worth $65 million, a working World War II tank, a mansion on Chesapeake Bay and over $10 million in business interests from his novels and movie adaptations.

According to the original will, Clancy left his Chesapeake Bay home and other properties, along with any of his joint bank or investment accounts to his wife Alexandra. Clancy also left a portion of the residue of the estate to the Hopkin’s Wilmer Eye Institute, which he had previously given a $2 million donation in 2005. The rest of his estate was to be divided between a series of trusts. The 2007 will originally provided for three trusts and divided the rest of the estate as follows: one-third for Alexandra, one third for Alexandra to use while she was alive and then passing to their daughter, and one-third to be divided among his four children from his previous marriage.

E-Filing in Probate Court – It’s Mandatory!

As a Creditor to an estate, you must be wary of your time limits to file a statement of claim against an estate. Section 733.702(1), Florida Statutes (2012) states that creditors must file any statements of claim against a decedent’s estate within three months of the first publication date of the notice to creditors or within the thirty days of being served with notice, whichever is later. If you do not file the claim within the time frame, the claim is time barred, unless the court grants an extension. § 733.702(3), Fla. Stat. (2012). The only available grounds for an extension are fraud, estoppel, or insufficient notice of the claims period. Id. Since April 1, 2013, electronic filing of court documents has been mandatory in civil, probate, small claims, and family divisions of Florida circuit courts. In re Amendments to Fla. Rules of Civil Procedure, 102 So.3d 541, 461 (Fla. 2012). While Rule 2.525(d) of the Florida Rules of Judicial Administration does provide exceptions to the electronic filing requirement, those exceptions are only available in specific circumstances. But, what happens if you mail a paper copy to the clerk, which is received within the applicable time period, but you do not electronically file a copy until after the time period has passed? According to the Fourth District Court of Appeal, you are out of luck and will be barred.

In United Bank v. Estate of Edward G. Frazee, Edward G. Frazee passed away on December 24, 2012. A petition for administration was filed and the decedent’s last will and testament was admitted to probate. A notice to creditors was published on February 14, 2013. On April 11, 2013, United Bank (the “Bank”) was served with a copy of the notice to creditors. Under § 733.702(1), the Bank’s deadline to file a statement of claim was May 15, 2013.  Through an out of state attorney licensed to practice in Florida, the Bank mailed the claims on May 10, 2013, but the Clerk did not receive the paper claims until May 14, 2015. On May 23, 2013, the Clerk notified the Bank that the claim needed to be filed electronically, and the Bank submitted the claims through the e-portal on the same day.

In addition to Florida’s strict two-year rule discussed last week in Part 1 of this blog post, there may also be shorter time periods to bring a claim depending on the type of creditor and the nature of the claim. Whereas Section 733.710 is a jurisdictional statute of nonclaim, Section 733.702 is a statute of limitation that may bar claims not instituted in a timely manner. Section 733.702 has been described as “‘an absolute bar’ to untimely filed claims,” with only very limited grounds upon which to seek an extension to the time limitation, the two primary grounds for extension being fraud or estoppel. Morgenthau v. Estate of Andzel, 26 So.3d 628, 631 (Fla. 1st DCA 2009). In Mr. Robson’s case, the fact that he was almost certainly not an ascertainable creditor (especially given his repeated denials, under oath, that Jackson molested him) means that no personal service of creditor notice would be required, and notice by publication would be sufficient. For claims “against the decedent’s estate that arose before the death of the decedent,” potential claimants that are not ascertainable are given a three month window in which to bring the claim. § 733.702(1), Fla. Stat. In addition to Jackson’s estate publishing a notice of administration on December 22, 2009, there is a fairly high probability that Mr. Robson knew about Mr. Jackson’s demise and the administration of his estate; that is, of course, unless Mr. Robson was on an extended vacation in Amish Pennsylvania, or perhaps on a walkabout in the Australian Outback. Because time periods to bring a claim vary depending on a multitude of factors, you should contact a probate attorney as soon as possible upon learning of EITHER the death of an individual against whom you believe that you have a claim or the probate of that individual’s estate. While every individual’s best course of action will vary and he or she should have individualized legal advice, as a general rule of thumb, it is not advisable to sit by idly for nearly four years before bringing a claim, especially when you repeatedly denied during the life of the decedent the exact underlying facts upon which your claim is premised.
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June 25, 2013 will mark the four-year anniversary of the untimely demise of the man affectionately referred to by the masses as the King of Pop: Michael Joseph Jackson. Despite suffering from an infirmity that has ended the professional pursuits of actors, entertainers, and businessmen alike (Death!), Forbes Magazine reported in 2012 that Michael Jackson earned more money in the three years following his death than any other living artist. In fact, during those three years, Michael Jackson’s estate generated nearly half a billion dollars. Although unclear whether the result of Jackson’s vastly expanding fortune or his use of high priced attorneys during his life to defend him on multiple legal fronts, more than 55 creditor’s claims were filed in the months following the following Michael Jackson’s Last Will being admitted to probate on August 3, 2009 when Special Letters of Administration were issued and the notice of death was published. With claims ranging from the thousands of dollars to over one billion dollars, the 24 months following his death saw a flurry of creditors asserting claims against Jackson’s estate. While new claims have been nearly nonexistent over the past year and a half, May of 2013 saw an explosive new claim levied by a familiar face from Michael’s past: Wade Robson, star defense witness in Michael Jackson’s 2005 criminal trial. Robson, who had for years maintained that Jackson never sexually molested him, claimed that he had uncovered repressed memories of molestation by Jackson and asked a California probate court to allow him to file a late creditor’s claim against the Estate of Michael Jackson, based on new allegations sexual abuse alleged to have occurred over 20 years ago.
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Perhaps the most important goal when it comes to settling one’s estate is to make sure that the desires of the decedent are properly met. In other words, a probate court’s goal is to make sure that the deceased’s assets are being distributed to those parties intended by the testator or those whom are legally entitled to benefit. If it can be demonstrated that a will was not settled in accordance with the decedent’s wishes, or certain individuals were improperly excluded or enriched a dispute may arise. Therefore, Florida Statute §733.903 allows for reopening of estate after it has been closed. In order to petition and then successfully reopen an estate that has been settled by a court, someone, whether in Miami, Fort Lauderdale or Palm Beach, must have good cause and for that reason, petitions to reopen estates are usually unsuccessful.

Good cause is limited to certain circumstances. For example, a trustee of an estate must show facts that allege some sort bad faith, such as fraud, or intentional errors in the initial estate determination. In some situations, motives such as greed and spite will influence an individual’s decision with regard to settling a family member’s estate. In this regard, if an estate was settled by a relative of a decedent, and this relative had reason to know that there were other family members (such as cousins, children, siblings, etc) that should also be considered heirs to the estate at issue, and the relative knowingly settled the estate without notifying or including these people, then those individuals could petition to a court to reopen the estate.

Another example that would justify the reopening of an estate under Florida law would be when a beneficiary under the will knew that the Testator was legally incompetent before settling the will, therefore making the will invalid. In other words, a person cannot a will is invalid if the testator is found to be incompetent. Incompetence can be established by legal disabilities which include being convicted of a felony, having been adjudicated as being mentally unable to understand the nature of the assets or implications of the will, or if one is under the age of 18. In estate cases, a beneficiary that knew of a Testator’s incompetence when the will was executed has a duty to notify the court and other beneficiaries. If it can be shown that the beneficiary knowingly neglected this duty, the other beneficiaries could reopen the estate if they properly petition the court.