PROBATE CORNER

By: David M. Garten, Esq.

ARTICLE: Oral Trusts Of Personal Property

Neither the Florida Trust Code nor case law requires a writing to create a trust of personal property. See §§736.0403(2)(b) and 736.0407, F.S. However, the testamentary aspects of a revocable trust of personal property must be executed by the settlor with the formalities required for the execution of a will [§736.0403(2)(b)]. The creation of an oral trust and its terms may be established only by clear and convincing evidence. [§736.0407; Calderόn v. Vazquez, 251 So. 3d 303(Fla. 3rd DCA 2018)].

Relevant Statutes:

  • 736.0407: “Except as required by s. 736.0403 or a law other than this code, a trust need not be evidenced by a trust instrument but the creation of an oral trust and its terms may be established only by clear and convincing evidence.”
  • 736.0403(2)(b): “The testamentary aspects of a revocable trust, executed by a settlor who is a domiciliary of this state at the time of execution, are invalid unless the trust instrument is executed by the settlor with the formalities required for the execution of a will in this state. For purposes of this subsection, the term “testamentary aspects” means those provisions of the trust instrument that dispose of the trust property on or after the death of the settlor other than to the settlor’s estate.”
  • 689.05: “All declarations and creations of trust and confidence of or in any messuages, lands, tenements or hereditaments shall be manifested and proved by some writing, signed by the party authorized by law to declare or create such trust or confidence, or by the party’s last will and testament, or else they shall be utterly void and of none effect;…”

Scrivener’s Summary: The Florida Trust Code Scrivener’s Summary provides the following aspects to the application of §736.0403(2)(b) that may not be apparent from a casual reading:

  • The section applies both at the creation of a revocable trust and to any subsequent amendments because trust amendments are included within the definition of trust instrument. See § 736.0103(20).
  • A failure to comply with the requirements of section 736.0403(2)(b) does not result in the initial invalidity of a revocable trust. Rather, only the testamentary aspects of the trust are void.
  • The formalities required are those for a will in Florida. Complying with the formalities for a will in some other state is not enough.
  • Section 736.0403(2(b) has no applicability to trusts created by non-Florida domiciliaries whether or not the trust was executed in Florida.
  • Conversely, section 736.0403(2)(b) does not contain an “out” for trusts executed in other states. The section applies to revocable trusts created by Florida domiciliaries regardless of the place of execution and regardless of the location of the property held in the trust.

Prerequisite: In order to constitute a valid oral trust in personalty, three circumstances must occur: sufficient words to raise it; a definite subject matter; and a certain and ascertained object. See In re Estate of Craft, 320 So. 2d 874 (Fla. 4th DCA 1975); Bay Biscayne Co. v. Baile, (Fla. 1917); Fraser v. Lewis, 187 So. 2d 684 (Fla. 3rd DCA 1966); In re Estate of Herskowitz, 338 So. 2d 210 (Fla. 3rd DCA 1976).

Case Summaries:

In Bay Biscayne Co. v. Baile, 73 Fla. 1120; 75 So. 860 (Fla. 1917), Bay Biscayne Company (“Bay Biscayne”) was in the business of managing business transactions and collecting rents and interest due on loans. Baile was vice-president and Ogden was the president of the company. Baile personally retained a note and mortgage owned by Bay Biscayne. Baile subsequently sold and assigned his stock in Bay Biscayne to Ogden and Ogden demanded the return of the note/mortgage. In defense, Baile testified that the note/mortgage were held in trust for the benefit of Carhart, i.e., Ogden’s former housekeeper of 12 years, and that the agreement between himself and Ogden being that he shall hold the note/mortgage in trust to pay to Carhart the sum of twelve hundred dollars per annum so long as she may live, or remain dependent, and finally to refund to Ogden the amount in notes or money when it is shown that Carhart is married, or is no longer dependent, or is no longer living. Baile refused to turn over the note/mortgage to the Ogden for the reason that the said security was transferred to him in trust and that to return the same without instructions from both parties to the trust agreement would be a violation of the trust. The court determined that the trust was created by parol as it was evidenced by separate writings of both Ogden and the trustee as well as testimony at trial that showed the intention of Ogden to create a trust. The evidence also showed that it was Ogden’s intention that the trustee act as such. The court held that the note/mortgage were held in trust with the consent of Ogden until the trust’s termination.

In Calderόn v. Vazquez, 251 So. 3d 303(Fla. 3rd DCA 2018), René obtained a life insurance policy on his life and designated his brother Juan as the beneficiary of the policy. He made it clear to Juan that the proceeds of the policy were to be held in trust by Juan for his wife and son for their education and living expenses after René’s death. René also left a will referencing the policy and that the purpose of the policy was to ensure the education and living expenses of his wife and son. René passed away and Juan received the full proceeds of the policy. Over the next nine years, Juan made distributions to René’s wife and son for their education and living expenses. When René’s wife and son asked Juan to deliver the balance of the proceeds, Juan refused and claimed that the funds are his. The issue presented to the court was whether Juan, by agreement or operation of law, became a trustee with respect to the proceeds paid over to him as designated beneficiary. The lower court dismissed the complaint with prejudice and the appellate court reversed and remanded for further proceedings consistent with their opinion.

In Estate of Craft, 320 So. 2d 874 (Fla. 4th DCA 1975), the court held that that there was sufficient evidence to give rise to the establishment of a valid oral trust. First, the words giving rise to the trust were reflected in a will and trust which were mailed to and received by the trustee bank. Second, the object of the trust was clearly reflected in the trust as providing an education for the children and grandchildren of the decedent. And third, the subject matter of the trust was in existence at the time of the execution of the new will, and creation of the new trust and was ascertainable with reasonable certainty through the testimony of the trust officer of the trustee bank and the writings of the decedent. Further indication of the sufficiency of the words to create the trust was reflected by a telephone conversation between decedent and a trust officer of the trustee bank on directing the cancellation of the old trust and the creation of the new one, and a letter of confirmation written by decedent to the trustee bank pursuant to which the bank transferred the assets on its books to the new trust. The court found that the procedures followed by the trustee bank in facilitating the establishment of the new trust cannot serve to defeat the validity of the trust if all other requisites necessary to its establishment of the oral trust were properly present.

In Estate of Pearce, 481 So. 2d 69 (Fla. 4th DCA 1985), the co-personal representative, John F. Pearce (“JP”), sought leave to file an amended inventory determining that certain stock was held by decedent as trustee and not individually. When the lower court granted JP’s request, the other co-personal representative, Dewitt L. Pearce (“DP”), appealed the removal of the stock from the probate inventory maintaining that the plain language of the stock certificates indicated that they were issued to the decedent, individually. The appellate court, in affirming the lower court’s judgment, found, in part, as follows: the decedent transferred certain real property to her revocable trust. Thereafter, she formed a corporation and transferred the real property to the corporation. The estate plan involved converting the real property into shares of stock (personal property) and then issuing the shares to herself, as trustee of her revocable trust. The shares of stock were mistakenly issued to the decedent, individually and not as trustee. The decedent subsequently executed an amendment to her revocable trust wherein she listed the stock as an asset of the trust. Before and after issuance of the stock, the decedent orally declared she was holding the stock in trust and that she had instructed her attorney to prepare the necessary legal documents to transfer the stock to her trust. The decedent’s attorney testified that title to the stock should have been issued to the decedent as trustee, that the issuance to the decedent in her individual name was a mistake, and that he accepted responsibility for this mistake. The attorney further testified that he was responsible for including the stock on the probate inventory and this, too, was a mistake. The court held that while the meaning of a written document generally should be determined solely from the language of the instrument where such language was clear, parol evidence could serve to establish a trust in personalty. The parol evidence in this case was not offered to change the terms of a written contract; it was utilized to establish a trust in personalty. The evidence was introduced to demonstrate further that the stock certificates were the corpus or res of the trust. The court reasoned that “[o]f course, looking at the stock certificates alone one would assume that they were owned individually by Mrs. Pearce, but an examination of the amendment to the trust and the oral declarations made after issuance of the stocks indicate that the stocks were held in trust, as found by the trial court.”

In Spearman v. Estate of Spearman, 618 So. 2d 276 (Fla. 4th DCA 1993), the personal representative (“PR”) of the estate of the deceased former husband brought an action against the former wife alleging conversion and seeking an accounting of $984,000 allegedly transferred to her during his lifetime. The PR alleged the existence of a trust in which the corpus was to be held by the former wife for the use and benefit of her husband during his lifetime and who was incarcerated at the time such funds were transferred. The trial court determined that the former wife received the money for the use and benefit of her husband and that it was not intended as a gift to the former wife. The appellate court reversed and held that in all cases wherein relief is predicated upon an oral agreement for an express trust in personalty, proof of such an agreement or of such facts must be weighed cautiously and should be clear, positive and unequivocal, citing, Columbia Bank for Cooperatives v. Okeelanta Sugar Cooperative, 52 So. 2d 670 (Fla. 1951). Here, the PR presented no direct evidence in support of its claim that the former wife held the money as trustee for her husband during his lifetime and that the record contains no other evidence from which the trial court could have determined the existence of a trust.