THE “TRUST EXCEPTION” TO CREDITOR CLAIMS IN FLORIDA PROBATE CASES
Are you owed money or property from someone who is deceased? Do you need to file a Florida estate lawsuit against a deceased person? If so, you may need to file what West Palm Beach probate lawyers call a “statement of claim” with the court handling the estate. For more on that, you can check out the Florida Probate Code for free. Read about Florida creditor claims by clicking here.
A recent Florida appeals case in a probate tells us more about making a claim to get property from a Florida estate. But, what if you inherit from a trust? Ask your Miami estate litigator about the “trust exception” under Florida probate law.
What is a statement of claim?
If you are owed money or have rights against a Florida resident, then you may be what Palm Beach estate lawyers call a “creditor.” If you are owed something, you may have less time to make a claim then you realize. Read Florida Probate Law 733.702 on creditor claims to find out how much time you have.
A statement of claim is a document filed by a “creditor” of a deceased person. You don’t need to have a lawyer to file a statement of claim. A probate statement of claim notifies the estate of the amount and nature of the claim. Florida law has several requirements that must be followed to ensure the claim is validity made. For example, statements of claim must be in a certain form, filed with the court within a certain period, and signed by the creditor under penalty of perjury.
What happens if I don’t file a timely and valid statement of claim?
If a creditor does not timely file a timely and valid statement of claim, the claim is generally barred, and the creditor loses the ability to recover. But there are some situations where relief is still available. The outcome often turns on whether the money or property at issue is covered by the “trust exception.”
What is the “trust exception”?
The trust exception originated as a common law doctrine that allowed a creditor to pursue assets outside the probate creditor-claims process. The exception applied in many situations, including cases where a creditor sought to impose a “constructive trust” over the decedent’s money or property.
A constructive trust is a remedy that is applied where one-person holds legal title to money or property that really, in fairness (or “equity”), should belong to another. For example, if A stole money from B and purchased real property with legal title in A’s name, a court could potentially impose a constructive trust over the real property and award it to B, notwithstanding A’s legal title.
Talk to your estate litigation law firm about what legal remedy is best for you. After all, not all creditors are created equally. In fact, Florida Statute 733.707 explains some can get paid ahead of others.
If you don’t file your estate claim timely, or if it’s not valid, you are in trouble. So, talk to an experienced estate lawyer who helps creditors or estates deal with these issues. And remember: the statute of limitations for some claims may be as short as 3 months or two years.
How does the trust exception apply today?
The trust exception still exists today, but in much more limited form.
Florida’s Fifth District Court of Appeal recently addressed the limits of the modern trust-exception doctrine in Lefkowitz v. Schwartz, 2020 WL 3115998 (Fla. 5th DCA Jun. 12, 2020). You can read this Florida probate appellate decision for free.
Lefkowitz involved a creditor who sought a constructive trust over money generated from the sale of real property owned by the decedent. Prior to his death, the decedent obtained a loan from the creditor. He promised to secure the loan by providing a mortgage on the property. He also agreed to repay the loan in full when the property was sold. Unfortunately for the creditor, the decedent did not fulfill his obligations. When the creditor found out after the decedent’s death, she filed a lawsuit against the estate.
The trial court sided with the creditor and imposed a constructive trust over the property sale proceeds based on the trust exception, which, as noted above, historically applied to such claims.
The Fifth District disagreed with the trial court and reversed. It noted that the legislature substantially changed Florida law when it adopted the modern probate code and created a comprehensive scheme intended to govern all probate matters. The court recognized that those legislative changes called into question older common law doctrines, including the trust exception on which the creditor relied.
The Fifth District ultimately concluded that the trust exception is still alive, but it is limited to situations where a decedent clearly held property on behalf of the actual owner either by way of an express trust or some other clearly defined means. As such, equitable ownership claims, such as the constructive trust claim asserted by the creditor in Lefkowitz, are no longer viable.
We may be able to help!
The creditor-claim process for Florida estates can be tricky. But we may be able to help!
If you believe you have a claim against a decedent’s estate and need legal representation, please reach out to Pankauski Hauser Lazarus PPLC by calling (561) 514-0900 xt. 101 and ask for Amanda Phillips.
Brandon Forgione, Esquire is a probate & business/real estate litigator who handles trials and disputes in both state and federal court.