In Duff-Esformes v. Mukamal, a trial court overruled an objection by a beneficiary of an estate. The beneficiary of the estate was also a beneficiary of the trust into which the estate “poured over”.
Nathan Esformes died in 2015. His beneficiaries in his will were his wife, Duff-Esformes (“Wife”) and the Nathan J. Esformes Revocable Trust (the “Trust). The co-personal representatives (PRs) and co- trustees (Trustees) were Barry Mukamal and David Appel.
The PRs filed an estate final distribution showing distributions and a “hold back” of $50,000 as a reserve to pay expenses. Later, they filed a petition for payment of additional administration expenses. Wife objected. The trial court struck Wife’s objection stating that “she lacked standing to object to the payment of Estate administration expenses because she had already received her complete distribution from the Estate” and ordered the bank to pay attorney fees and co-trustee fees. The Wife appealed.
The appellate court cited Florida law stating that an interested person can increase or decrease compensation. Thus, the definition of interested person was critical. An interested person is “any person who may reasonably be expected to be affected by the outcome of the particular proceeding involved.” Because Wife was a lifetime income beneficiary of the trust, she was an interested person as any money paid from the estate would affect how much she would receive from the trust.
However, the same statute states that an “interested person” does not include a beneficiary who has received complete distribution. As Wife received her full distribution from the estate, the PRs and Trustees argued that Wife had no standing as an “interested person”.
The appellate court then discussed the definition of a “beneficiary” which is defined in the same statute as “interested person”. A beneficiary is an heir in an intestate estate and a named devisee in the will. However, the term “beneficiary” does not include a devisee after that person’s interest in the estate has been satisfied. Thus, this definition of beneficiary correlates with the definition of interested person. If the interested person or beneficiary receives a complete distribution of their share of the estate, then they are no longer an interested person nor a beneficiary of an estate. However, the analysis does not end there.
When an estate “pours over” into a trust which has own trust beneficiaries, the trust beneficiaries are NOT considered estate beneficiaries entitled to probate notices. However, if each trustee is also a personal representative, then each qualified beneficiary of the trust shall be regarded as a beneficiary of the estate, entitled to notice. Thus, EVEN though the beneficiary of an estate receives a complete distribution and is not considered a beneficiary of the estate, if that same beneficiary is also a trust beneficiary AND the personal representatives and trustees are the same, then such beneficiary is considered a beneficiary of the estate, entitled to notice. The appellate court stated that all statutes must be read together.
The policy is that, if the personal representative and trustee are the same person and the personal representative only has to account to the trustee as the beneficiary of the estate, then there is a conflict of interest as the trustee is approving actions of itself as a personal representative. Thus, the beneficiaries of the trust should have notice of the estate proceedings.
In this case, as the PRs and the Trustees were the same individuals, Wife was considered a beneficiary of the estate, regardless of the complete distribution from the estate. Thus, Wife was entitled to object to the compensation.
The appellate court then remanded the case to the lower court for further proceedings.
ADVICE: Be sure that you read the will and the trust to determine ALL interested persons and notice them all. You may want to consider advising your clients in the planning phase that, IF the personal representative and trustee are the same people, then the beneficiaries of the trust must also be noticed in the probate proceedings. In most cases, it will not matter. However, if you have different personal representatives and trustees, then you may avoid noticing contentious trust beneficiaries of the estate proceeding.
WORD OF THE WEEK: A remanded appeal means that the case is sent back to the lower court, usually when the lower court’s judge made some error related to the laws or facts in your case.
In a criminal case, a remand prisoner is someone held in custody while waiting for their trial or sentencing. A remand prisoner may be held in prison, or in police cells, court cells, or psychiatric facilities as required.
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