Articles
Trust Drafting: Restriction of Class Gifts to "Descendants by Blood" May Not Accomplish Such a Result
October 12, 2009
A trust will often include specific language limiting its beneficiaries to particular classes. One common example of such language is a limitation to "only children and descendants by blood." This expression and others like it began long before genetic testing became available. The Florida Second District Court of Appeals recently held in Doe v. Doe that in the modern era this expression should not be read so strictly as to require genetic testing to determine membership in the class.
In 1988, Chester Jr. and Eleanor, his wife, executed mutual revocable trust agreements containing language restricting the class gifts to "only children and descendants by blood." Catherine Doe was born in wedlock to the settlors' son Chester III. Chester III later acknowledged his paternity of Catherine and agreed to pay support for her in a marital settlement agreement. At the age of 32, Catherine received DNA test results which excluded Chester III as her biological father.
The Court held that the settlors intended to include Catherine as a beneficiary. Furthermore, it concluded that a proper interpretation of this language would include Catherine as a beneficiary because she was the legitimate daughter of Chester III by operation of law. To reach this conclusion, the Court closely examined the meaning of the term "descendants by blood" as it has been historically used in wills and trusts. Generally such expressions were used as a term of art to exclude adopted persons as beneficiaries. Because the blood restriction came to be used long before genetic testing became available, the Court did not want to extend its meaning "to disqualify descendants who were not adopted and who would otherwise qualify as a beneficiary." Therefore, "[A]s a legitimate child of one of the settlors' sons, Catherine qualifies as one of the settlors' descendants by blood."
The Court's decision was intended to provide a clear result for possible situations that may arise in the future. With the scientific advances in today's world, "to look no further than biological fatherhood to interpret the restriction of the trust's class gifts to blood decedents would lead to difficulties in other analogous factual situations." Issues may arise where a child has been conceived by artificial insemination from sperm donated by a third party. However, so long as the mother and father have consented in writing to the artificial insemination, there will be an irrebuttable presumption that the child belongs to the father. "The phrase "descendants by blood" is a legal term of art, not a scientific one."
Doe v. Doe, 2009 WL 2841190 (Fla.App. 2 Dist.)
Estate Planning: Probate and Homesteads Do Not Go Together
June 3, 2009
Homesteads are not probate assets. Recently, the 4th District Court of Appeals reversed the trial courts decision which allowed a lien to be placed on a homestead property in order for the curator of the estate, basically the personal representative, to collect her fees for administering the estate.
The court based its reasoning on Florida Statute 733.608 which only allows for a lien to be placed on the homestead property when (1) the personal representative has taken possession of the homestead property and (2) the personal representative had made expenditures for the maintenance of that property. These provisions were not met here because the house was occupied by the decedent’s widow and the curator placed the lien in order to collect her fees for administering the estate, not protecting homestead property.
The Catch… What you need to know is that, by definition, homestead property is not a probate asset. Florida law allows personal representatives to take possession of homestead property when it is unclear who has rights to the homestead. As a result, the only time a personal representative is entitled to collect fees against homestead property is when the personal representative rightfully takes possession of the homestead and performs work for the specific purpose of preserving or maintaining the property.
Herrilka v. Yates, 2009 WL 1531772 (Fla.App. 4 Dist.)
Real Estate Transactions: And the Deposit Goes To…
May 27, 2009
The deposit is a fundamental part of any real estate transaction. When transactions fall through there is always a question of whether the buyer or the seller is entitled to keep or receive the deposit. When cases like that arise, the real estate contract always governs.
The Third District Court of Appeals recently determined in Bellon v. Acosta, where a contract contains a financing contingency that requires notice within a certain period of time, notice must be given in order for the buyer to receive his deposit back in the event the contract is canceled. Here, the Bellons were entitled to keep the deposit because the Acostas failed to provide written notice to them within the 20 day period prescribed in the contract that they were unable to receive financing.
The Catch… What you need to know is that your attorney must make the terms of the financing contingency (which is usually one of very few contingencies in any residential real estate contract) must be extremely specific. Do not rely on forms which can be far to general. The contract's financing contingency clause must contain "a procedure for notifying the Seller that the contingency is met, that the contingency is not met, or that the contingency is waived.” The real estate investment purchase you make may be the most important investment in your life. When it comes to protecting your money, demand that the financing contingency is clear and easy to understand.
Bellon v. Acosta, 2009 WL 1457111 (Fla.App. 3 Dist.)
Cases from Around the Country…
Trust Drafting: Public Policy May be Against Your Policy
June 30, 2008
Courts generally frown against any kind of restraint on marriage. Recently, an Illinois court struck down a provision in a trust document which stated, “A descendant of mine other than a child of mine who marries outside the Jewish faith (unless the spouse of such descendant has converted or converts within one year of the marriage to the Jewish faith) and his or her descendants shall be deemed to be deceased for all purposes of this instrument as of the date of such marriage.”
The Illinois Court of Appeals voided the “Jewish Clause” because it was against public policy. The dissent in this case argued that the creators of the trust sought to preserve “their 4,000-year-old heritage by providing that upon their death, a grandchild who married outside the Jewish faith shall be deemed to have predeceased the testators, but if they have complied with the restrictions, are to immediately receive their legacy.” While this may seem like a noble goal, the concurrence to the opinion specifically critiques this by saying; if the trust creator had wanted to preserve his heritage he would have made the clause applicable to his children and not just his grandchildren.
Taylor v. Feinberg (In re Estate of Feinberg), 900 N.E.2d 1118 (Ill. 2008)
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