Tampa attorney Edward McGinty has a piece in the March 2011 issue of the Florida Bar Journal on the Olmstead decision, which I wrote about last year.  The article doesn’t add anything remarkable to the analysis, but it does provide perhaps the clearest statement of facts, legal issues, and holding that I have seen.

Olmstead involved a judgment by the FTC against the sole member of a number of LLCs.  The member claimed that the LLC assets should be outside the reach of the judgment creditor.  Instead, the member claimed that the sole remedy available to the creditor is Florida’s LLC charging order statute, which provides:

On application to a court of competent jurisdiction by any judgment creditor of a member, the court may charge the limited liability company membership interest of the member with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of an assignee of such interest. This chapter does not deprive any member of the benefit of any exemption laws applicable to the member’s interest.

As Mr. McGinty’s article points out, the rationale behind the charging order remedy is intended to “protect nondebtor partners from being forced unwillingly into partnership with a creditor of a debtor-partner.”  In other words, creditors aren’t allowed to seize or control the LLC assets because doing so would be unfair to the other members of the LLC.  This rationale comes apart when the LLC has only one member.  This has lead many asset protection planners to caution against counting on a single-member LLC as a charging-order protected entity.

But even more detrimental to the debtor in Olmstead was language of the Florida LLC charging order statute.  Unlike the corresponding provisions of Florida partnership law, which provide that the charging order is the exclusive remedy in the partnership context, the LLC charging order statute does not state that the charging order is the exclusive remedy for creditors of LLC members. This means that the charging order protection isn’t available for any LLCs, even if there are multiple members.

If you aren’t up to speed on this important case, McGinty’s article is worth a read.

Statutes sometimes use language that is less than clear.  Case in point: Florida Statutes 193.155 (Homestead Assessments), which borrows the phrase “naturally dependent” from the homestead language of the Florida constitution.  In Willens v. Garcia, Florida’s 3DCA had to interpret this language in an appeal from the Miami-Dade County Circuit involving inheritability of the homestead tax benefits provided under Florida law.

Shane Willens served as the “full-time, in-home, resident caretaker for his stroke-bound father” for some 20 years.  From 1992 until his death, Shane’s father was protected by the Save-Our-Homes cap, which limits the annual increase of the assessed value of homestead property to 3 percent annually.  When Shane’s father died, Shane acquired his father’s home as remainderman under a life estate deed.  The Miami-Dade County property appraiser then reassessed the home at true value.  Shane objected, claiming that the transfer of the property to him was not a true change in ownership for purposes of the Florida homestead tax statutes.

Florida Statutes 193.155(3)(a) requires that Florida homestead property be “assessed at just value as of January 1 of the year following a change of ownership.”  The change in ownership terminates any benefit that the prior owner enjoyed due to the Save Our Homes cap.  But not every change in ownership is a “change in ownership” within the meaning of the statute.  There are several statutory exceptions, one of which applies to a “transfer [at death] between the owner and another who is a permanent resident and is legally or naturally dependent upon the owner.”

Shane claimed that he was “naturally dependent” on his father and thus statutorily protected against a reassessment of the property at fair market value.  The trial court rejected this argument and allowed the property to be reassessed at true value.  On appeal, the 3DCA had to determine what the phrase “naturally dependent’ means in the context of Florida homestead tax exemption. Since the phrase “legally or naturally dependent” is not defined in the Florida statutes, the Court had to decide, with little guidance, how that phrase would apply to Shane’s situation.

Shane argued that “naturally dependent” included the concept of “moral obligation.”  Under this line of reasoning, Shane was morally obligated to support his father and thus naturally dependent on him for the years that he supported him.  Shane buttressed his argument with a 1982 Attorney General opinion that found that natural dependent included moral dependency.

The Court rejected Shane’s argument, stating that the 1982 Attorney General opinion was “based upon questionable reasoning.”  The Court found a 1938 Attorney General opinion to be more persuasive. That opinion, which interpreted a prior version of the homestead law that was similar to the one at issue, held that “naturally dependent” refers to “persons related by blood to the owner of the property” that depend on the owner for support.  Finding that Shane did not qualify under this definition, the Court upheld the reassessment of the homestead property at full value.

The opinion is full hints that the court was sympathetic to Shane’s situation.  The court repeatedly used laudatory language to refer to Shane (e.g., stating that Shane’s “multi-decade sacrifice of himself for the benefit of his father is laudable, indeed heroic in its proportions”).  But there were gaps in Shane’s reasoning.  If anyone was dependent on anyone, it was Shane’s father that was dependent on him. At the end of the day, there wasn’t a logical basis for reversing the dependency and finding that an “able-bodied adult” was somehow dependent upon the one he took care of.  And that was fatal to Shane’s position.

Willens v. Garcia, 36 Fla. L. Weekly (Fla. 3d DCA 2011)

I’m going to go slightly off-topic today because I think this case is worth it.  It involves the intersection of parental rights and freedom of religion.  And it is at least tangentially related to probate and estate planning since this type of issue could have a bearing on who to name as a guardian of a minor child.

Winters v. Brown [1] involved a court dispute between unmarried parents over the mother’s views on health care.  As stated by the court:

Mother is a chiropractor and a proponent of holistic medicine. A tenet of her religious beliefs is that God has provided the human body with an innate immune system that enables the body to heal itself. Mother believes that anything introduced into the body to prevent disease or treat illness is against the will of God. Specifically, Mother opposes vaccinations.

Father, on the other hand, thought that the child should “receive traditional medical care, including well baby exams, blood draws, urinalysis, and vaccinations.”

The trial court had to decide who had the ultimate responsibility for the child’s health care.  The law cannot restrict exposure of a child to his or her parent’s beliefs and practices.  But Florida recognizes an exception to this rule if there is “a clear, affirmative showing that these religious activities will be harmful to the child.”[2] The trial court’s job was to apply these principles to this case.

Both the mother and father had put on expert testimony in the trial.  The father’s expert witness testified, not surprisingly, that vaccinations were very safe and effective and that all sorts of calamity would ensue if children were not vaccinated on the prescribed schedule.  The mother’s expert witness testified that one in five children in the U.S. suffer from neurodevelopmental disorders that may have been caused by vaccinations.  He concluded that “it’s less harmful for a child not to be vaccinated than it is for a child to be vaccinated.”

After hearing the expert testimony, the trial court determined that the father should be allowed to make decisions regarding the minor’s health care and vaccinations.  The court stated:

The issue . . . is not one of simply exposing the minor child to the mother’s religious beliefs and practices, it involves an issue that could cause physical and serious harm to the minor child. When parents cannot agree, the court is called upon to break the impasse, and that decision must be made in the best interests of the minor child.

On review, District Court’s job was to determine if the trail court’s decision was supported by competent, substantial evidence.  Under this standard of review, the District Court can’t substitute its judgment for that of the trail court.  If there was a basis for the trial court’s decision, it will stand.

Without much comment, the District Court affirmed the trial court’s decision, claiming that it was supported by competent, substantial evidence.  But was it?  Keep in mind that, for the decision to have been upheld, the “competent, substantial evidence” must have been enough to support “a clear, affirmative showing that these religious activities will be harmful to the child.”

In this case, the mother put on testimony to from a credible expert in the field that the immunizations could actually be harmful. And there is a bourgeoning field of research to indicate just that.  The issue was not whether it could be conclusively proved that the immunizations were or were not harmful, but whether it could be clearly and affirmatively demonstrated that the mother’s health care practices would be harmful to the child.  Given the conflicting testimony involved, not to mention the mother’s educational background, can we really say that there was a “clear, affirmative showing” that going without vaccinations would be harmful to the child?  Or is this another example of the tyranny of the majority in action? I think the District Court dropped the ball on this one.

One wonders how this would have played out in the eighteenth century, when leeching was still an accepted form of practice by the medical community.  History has shown that the medical consensus has proven wrong in many cases, most often when it defies common sense.  And this hasn’t been remedied by scientific advances.  Even within today’s medical community, debates continue about the overuse of cesarean sections, tonsillectomy, appendectomy, and various other procedures that may be considered “routine” in one decade and unnecessary or harmful in the next.

In my opinion, this was an unnecessary infringement on the mother’s religious liberty and parental rights. I know families who have foregone immunizations and have children that are as healthy as any.  And I had an estate planning client recently whose adult daughter had been institutionalized all of her life due to a neurodevelopmental disorder that was caused by her vaccinations.  I get nervous when I see religious beliefs infringed just because they are a little outside the box.  Given the religious liberties and parental rights at stake in this case, the District Court was obliged to look at this a little more closely than it appears to have done.

 

---

[1] 36 Fla. L. Weekly 175a (Fla. 4^th DCA 2011).

[2] Mesa v. Mesa, 652 So.2d 456, 457 (Fla. 4^th DCA 1995) (emphasis added).

I wrote recently about the definition of an “interested person” under Florida law and gave a few examples of who is and isn’t an interested person for purposes of Florida probate.  Today I want to take a look at a few more examples of interested persons under Florida law.

• Florida Personal Representatives – It should be obvious that Florida personal representatives have an interest in Florida probate proceedings.  But Florida law has a specific provision just in case.  Florida Statutes § 732.201(23) provides: “In any proceeding affecting the estate or the rights of a beneficiary in the estate, the personal representative of the estate shall be deemed to be an interested person.”  But there is case law stating that these rights come into existence only when the estate is actually opened with the court.[1] The fact that a person is named as personal representative in an unprobated will may not be enough.
• Heirs and Devisees of the Estate – Heirs (those who inherit from the decedent through intestacy) and devisees (those who inherit through the decedent’s will) are also considered interested persons.  Again, no surprises here.  Heirs and devisees are clearly affected by the outcome of the probate proceeding. 
• Trustees of Most Revocable Trusts – As mentioned previously, trustees of trusts that were established by the decedent and, at the time of the decedent’s death, revocable by the decedent (whether acting alone or in conjunction with someone else) are considered interested persons.  This arrangement covers the traditional revocable trust/living trust estate planning arrangement.
• Assignees of Heirs – What about those who acquire an heir’s interest in the estate?  Are they considered interested persons?  The answer is a clear “yes.” “An assignee of an intestate heir of an estate steps into the shoes of the intestate heir and may appear as a party in interest in a probate proceeding.”[2]
• Prior/Alternate Personal Representatives – Personal representatives under earlier wills may have standing to contest later wills.[3]
• Creditors – Creditors may be interested persons if they are affected by the outcome of the probate proceeding.  For example, one case[4] involved a claimant’s claim against an estate had been stricken, and the order striking the claim was on appeal. The second district held that the claimant was an interested party.  Another case[5] held that a low-priority creditor was an interested person even though the estate had no assets with which to pay the claim.

I plan to wrap this up within the next couple of days with examples of individuals who are not interested persons under Florida law.

 

---

[1] Onofrio v. Johnston & Sasser, P.A., 782 So.2d 019 (Fla. 5^th DCA 2001).

[2]Morse v. Clark, 890 So.2d 496 (Fla. 5^th DCA 2004).

[3] Wheeler v. Powers, 972 So.2d 285 (Fla. 5^th DCA 2008); Engelberg v. Birnbaum, 580 So.2d 828 (Fla. 4^th DCA 1991).

[4] Montgomery v. Cribb, 484 So. 2d 73 (Fla. 2d DCA 1986).

[5] Arzuman v. Estate of Bin, 879 So.2d 675 (Fla. 4^th DCA 2004).

I answered a question from a prospective client recently about the inventory of the Florida probate estate.  Specifically, the client asked whether the personal representative had a duty to file an inventory and what disclosure requirements apply under Florida law.  I thought I’d share a beefed-up version of the answer here.

Florida law generally requires the personal representative to file an inventory of the assets of the estate, including their estimated fair market value at the time of the decedent’s death.  Clients are sometimes concerned about this requirement.  What if an unscrupulous creditor sees deep pockets and fraudulent inflates his or her claim against the estate?  Or what if a thief combs the probate records to look for valuables that can be stolen?

Thankfully, Florida law provides for confidentiality of the personal representative’s inventory.  Effective July 1, 2009, all estate inventories are confidential and not disclosed in public records.  But the confidentiality is not absolute.  The court clerk must disclose the inventory for inspection or copying to:

1. The personal representative or his attorney;
2. An  interested person; or
3. By court order upon a showing of good cause.

Under Florida Probate Rule 5.340(d), the personal representative must also serve copies of the inventory “on the Department of Revenue, the surviving spouse, each heir at law in an intestate estate, each residuary beneficiary in a testate estate, and any other interested person who may request it in writing.”

The personal representative must also notify each beneficiary that he or she has a right to request the inventory.  If the beneficiary requests the inventory, the personal representative should provide it promptly.  Florida Statutes 733.604(1)(a) provides:

Upon written request to the personal representative, a beneficiary shall be furnished a written explanation of how the inventory value for an asset was determined, or, if an appraisal was obtained, a copy of the appraisal, as follows:

(a)To a residuary beneficiary or heir in an intestate estate, regarding all inventoried assets.

(b)To any other beneficiary, regarding all assets distributed or proposed to be distributed to that beneficiary.

And interested parties can request information about how values are determined. For example, interested parties may want to know whether an appraiser was used and, if so, which appraiser was involved.  The personal representative must furnish this information to interested parties upon request.

Practice Note: To best protect the inventory from inadvertent disclosure, the Florida probate attorney should file a Notice of Confidential Information within Court Filing along with the inventory.  This puts the clerk on notice that the inventory should not be made available to the general public.