Florida Fifth DCA holds that disinherited beneficiaries may bring suit during the pendency of a separate will or trust contest.

Do disinherited children have standing to sue the trustee or a fiduciary who is mis-managing estate or trust assets? Typically, no. But if there is a will and/or trust contest underway to restore their inheritance rights, the answer is likely yes.

 Florida’s Fifth District Court of Appeals recently addressed this issue in Cruz v. Community Bank . Attorney Alexander Briggs, Esquire, of Pankauski Lazarus, PLLC successfully briefed and argued this case before the Fifth District Court of Appeal in Daytona Beach, Florida on behalf of the appellants.

In Cruz, two children were essentially disinherited by their father. The son received nothing, and the daughter received only a life estate in homestead property. Shortly before his death, the father executed a trust that purported to leave most of the trust and estate assets to charity. Then the father died.

The children filed an action to invalidate the will and trust on the grounds that their father did not have capacity at that time of his signature. If they succeed, they will inherit all of the trust and estate assets. While their lawsuit was pending, the trustee sent them an accounting and monthly statements with “limitations notices” that, under Section 736.1008, Florida Statutes, invoked a six-month statute of limitations for any causes of action arising from the accounting or statements. The statements tended to show that the trust property was not invested or producing income, and that it was in fact dwindling. Faced with this short deadline, the children sued for breach of trust, even though it depended upon the future success of their invalidation lawsuit.

Upon the trustee’s motion, the trial court dismissed for lack of standing. The children appealed.

The children argued that they are “interested persons” under Section 731.201(23), Florida Statutes. As “interested persons,” subsection 736.0201(2) authorized them to invoke the jurisdiction of the court to sue the trustee for issues related to administration of the trust. They were “interested persons” because they had a potential, future interest in the trust assets. Those assets were being managed by the trustee. If the trust were mismanaged or invested improperly, they needed to be able to sue to protect that property, and not sometime in the future when (1) the limitation period had already expired; and/or (2) the trust assets had already substantially dwindled.

The trustee argued that the children do not have standing because they have not yet successfully invalidated their father’s will and trust. In response, the children pointed out the flaw in the trustee’s logic: if the children have to wait until they win their invalidation case, the 6-month statute of limitations will have already expired. The trustee’s circular argument would leave the children with no present remedy for the trustee’s mismanagement, and without a right to any future remedy.

The Fifth District ruled for the children. It stated that the children’s “potential inheritance is an interest that will be affected” by the trustee’s management of the trust. Therefore, the children, who stand to receive the assets held in the contested trust, should they successfully invalidate the trust, are certainly “interested persons”.

The Fifth District’s compared this case to the First District case of Estate of Brock, 695 So. 2d 714 (Fla. 1st DCA 1996). Brock held that a disinherited son had standing to intervene in the administration of an estate while his will invalidation action was ongoing. In both Brock and Cruz,   the plaintiffs were potential future beneficiaries, but had present standing to sue a fiduciary under the Probate Code or Trust Code.

The First District in Brock relied in part on Section 733.109(2) of the Probate Code, which requires the personal representative of an estate, during the pendency of an action to invalidate a will, to administer the estate as if no invalidation action were proceeding, except, that no distributions may be made in contravention to the rights of those who, but for the will, would be entitled to inherit through the estate.

Likewise, the Florida Trust Code requires a trustee to administer a trust pending the outcome of an action to invalidate the trust, except, that no action may be taken and no distribution may be made in contravention of the rights of those who might be affected by the outcome of the invalidation proceeding. This is the directive of section 736.08165(2), Florida Statutes.

Following Cruz and Brock, it is now clearer than ever that a Florida fiduciary—whether a personal representative or a trustee—must properly administer and manage assets even while a lawsuit to invalidate the very instrument that nominates that fiduciary is under way. Furthermore, any person who might inherit under the challenged instrument, or upon the invalidation of the challenged instrument (through intestacy or through a prior will or trust) has standing to sue the fiduciary and to participate in the administration of the estate or trust.

The conclusion reached by the Fifth District is the logical one. The Cruz children obviously do not have their inheritance yet. But until that time when their inheritance rights are determined, the law charges the trustee with proper management and prudent investment of that potential inheritance, and allows the children, as potential, future beneficiaries, to sue their trustee who does not fulfill the obligations imposed on them by the law.

Pankauski Lazarus, PLLC of West Palm Beach, Florida, handles probate, trust, and guardianship litigation and appeals throughout Florida’s trial courts, appellate courts, and federal courts. Attorney Alexander Briggs personally handled the appeal in this case, as well as the underlying trial-court proceedings.