Every Word Counts…Be Careful How You Draft…

In drafting a document it is important to mean what you write and write what you mean. A recent case, Sibley v. Estate of Sibley illustrates what happens when the term “in existence” is not specifically defined in the document.

In Sibley, Curtiss Sibley (“Curtiss”) executed a will and a trust. Curtiss passed away on December 27, 2011. The trust provided that $250,000 be distributed to the Fellowship House Foundation (“Fellowship”) and the balance to the Curtiss F. Sibley Charitable Foundation (Charitable Foundation). If the Charitable Foundation is no longer in existence upon the settlor’s death, then the Trustee is to pay the balance to Fellowship.

Charles Sibley, Curtiss’ brother and trustee, (the “Trustee”), paid the  distribution to Fellowship. Fellowship filed a Petition to Reopen for Subsequent Administration arguing that the Charitable Foundation was not in existence at Curtiss’ death and thus, the remaining funds were to be distributed to Fellowship. Curtiss intended to pay the balance of the funds to the Charitable Foundation.

The lower court found that the Charitable Foundation was administratively dissolved 3 months before Curtiss’ death but was reinstated 7 months AFTER Curtiss’ death. Trustee never funded the Charitable Foundation, wrote checks or filed any documentation with the IRS. Trustee argued 7 years after Curtiss’ death the Charitable Foundation was ready to be funded.

The lower court determined that the Charitable Foundation was NOT in existence at Curtiss’ death. Trustee appealed.

At the appellate level, Trustee argued that Section 607.1421 of the Florida Statutes, applied. The statute provides, in part, that a dissolved corporation continues its corporate existence. However, the Trustee did not cite the rest of the statute which adds that the the only business the corporation  may do is wind up and liquidate its affairs.

Finally, Trustee argued that the reinstatement 7 months after Curtiss’ death “related back” to the date of the administrative dissolution. Relying on Section 607.1422 of the Florida Statutes which states that when reinstatement is effective it relates back to and takes effect as of the effective date of the administrative dissolution. The appellate court stated that this statute did not apply to the situation at hand.

At the point in time of Curtiss’ death, the Charitable Foundation was NOT in existence, regardless of the relation back doctrine. The court determined that if the “relation back” doctrine applied, then “the administration of an estate might never achieve finality, because an administratively dissolved beneficiary might (at some unknown point in the future) be reinstated and seek application of the relation-back provision to establish it’s nunc pro tunc existence.”

The appellate court affirmed the trial court and noted that the “basic tenent in construction of a trust is to ascertain the intent of the settlor…”. To apply the “relation-back” provision would frustrate the intent of the settlor.

ADVICE: When you have unusual standards for distribution, then be sure you specifically define what is meant by those standards. In this case it may have been better to draft, “if the Charitable Foundation has been dissolved for any reason at the date of my death” or “if the Charitable Foundation has not been funded at the date of my death.”  Ascertain what your client really means and what the client is trying to accomplish. As all know, sometimes what a person says is not what they really mean.

WORD OF THE WEEK: As discussed in this blog, administrative dissolution is a term that indicates while an entity created under Florida law is in existence, the only business that it can do is to wind up and liquidate. This author sees this happening primarily when the registered agent neglects to pay the annual fees. As discussed herein one can reinstate but fees, including late fees, will have to be paid. The fees for keeping an entity from being administratively dissolved can be found at https://dos.myflorida.com/sunbiz/forms/fees/

GENEROSITY IS A KEY TO HAPPINESS…REACH OUT AND HELP SOMEONE TODAY! 😎