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Saturday, January 23, 2016

Elective Share Rulings

Under Florida law, a surviving spouse can elect to receive 30% of the elective share estate of his or her deceased spouse, in lieu of receiving what was left to the surviving spouse under the decedent’s estate planning documents. This prevents a spouse from entirely cutting a surviving spouse out of his or her Last Will and other dispositive documents.

In determing what makes up the total value of the elective estate (against which the 30% is multiplied), Florida Statutes provide a listing of what to include. They also provide a listing, in Fla.Stats. §732.2055, of what is allowed to reduce the size of that estate for purposes of the 30% computation.

The 4th DCA recently addressed whether the total elective share estate should be reduced for charges of lawyers hired by the personal representative to litigate estate claims. The court looked at former Fla.Stats. § 732.207 (1998), the predecessor statute to Fla.Stats. §732.2055, which predecessor statute applies to the subject estate. That statute read:

732.207 Amount of the elective share. -- The elective share shall consist of an amount equal to 30 percent of the fair market value, on the date of death, of all assets referred to in s. 732.206, computed after deducting from the total value of the assets:

    (1) All valid claims against the estate paid or payable from the estate; and

    (2) All mortgages, liens, or security interests on the assets.

One can see in this statute that valid claims against the estate are deductible - does this mean that expenses of the estate to litigate those claims are likewise deductible?

No, said the appellate court. Since “the statute clearly and unambiguously sets forth only four types of expenses or costs which the probate court is to deduct from the value of the assets in the surviving spouse's elective share,” and attorney fees are not one of them, it found no basis for deducting attorneys fees. While Fla.Stats. §732.2055 is different from the prior Fla.Stats. §732.207, as to this issue the language is fairly similar, so this ruling should be strong precedent as to how the newer statute also applies.

The court also acknowledged that a delay in paying the elective share entitles the spouse to interest on the amount due for the delay period after the entry of the elective share payment order. It noted “it would be inequitable for Spouse to be denied the opportunity for a reasonable return on her court-determined minimum elective share.” Here, the probate court only allowed for interest on 40% of the elective amount due the spouse, since the court noted that she would not be able to retain the remaining portion due to taxes. The appellate court affirmed the probate court on this, stating that “it would ... have been inequitable for Spouse to enjoy a windfall of interest on a portion of the value of her minimum elective share which, due to taxes, she would not be entitled to retain.”

The opinion did not provide much background on this tax payment issue. However, it seems to me that the court should have taken into account that the spouse was either charged interest by the government on late payment of taxes while waiting for her distribution, or alternatively paid the taxes relating to the elective share assets on time out of her own other assets (or borrowings) and thus loss the economic benefit of those tax payments for the period after payment until she received the elective share assets. To me, then, I would think the estate gets the windfall here and the spouse is injured. Again, since I don’t know the underlying facts, perhaps there are some other facts or justifications that entered into the calculus of who benefitted or suffered economically from the delay in payment.

For more on this case, see also Blackburn v. Boulis in Rubin on Probate Litigation.

ACE J. BLACKBURN, JR., CHRIS A. ECONOMOU, GUS MORFIDIS and JOAN S. WAGNER, as Personal Representatives of the Estate of Konstantinos Boulis, a/k/a, Gus Boulis, Appellants, v. EFROSINI BOULIS a/k/a FRANCES BOULIS, Appellee. 4th District. Case Nos. 4D14-1579 and 4D14-2048. January 20, 2016.

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