2nd DCA Finds the Trial Court Erred in not Considering Trust Articles in their Entirety

In Vigliani v. Bank of Am., N.A., 2016 Fla. App. LEXIS 3522 (Fla. 2d DCA, 2016), the Second DCA found that the trial court erred in not considering trust articles in their entirety. The children and grandchildren (“Appellants”) were the beneficiaries of the family trust (“Family Trust”) of Mario Vigliani’s, (“Decedent” and “Settlor”). When the lawsuit was filed in the trial court, Maryann Vigliani, wife of Decedent, was a co-trustee along with the Appellee, Bank of America, N.A. Mrs. Vigliani died following the oral argument in the case, and the bank became the sole trustee (“Trustee”).

The trial court was asked to consider whether Decedent’s revocable trust required a family trust to be funded with $3.5 million, the exemption amount in 2009 or $5 million, the exemption amount in 2010, or another amount. The confusion was because Decedent amended and restated his trust in 2009, when the future of the estate tax exemption was unclear. Thus, the Family Trust had language which established both what Decedent thought the Family Trust should be funded with and intentions when creating the Family Trust. It provided that it should be “funded with that portion of the Trust estate equal to the federal individual exemption amount, undiminished by any estate, inheritance, succession, death or similar taxes, subject to the provisions of Article VIII.”  Decedent died in 2010, meaning without considering Article VIII, the provision required the Family Trust to be funded with $5 million, the estate tax exemption amount in 2010. However, Article VIII provisions made things unclear.

For example, provisions of Article VIII included a “Statement of Intentions” which advised that Decedent wanted the smallest amount of estate taxes to be paid at his death and at his wife’s death, the smallest amount of generation-skipping tax possible to be paid at his death and his wife’s death, that if carryover basis was in effect, he intended for the trustee to allocate basis exemptions in a way to benefit his family, and that  he wanted no adverse tax consequences occur as a result of some subsequent act by Congress not anticipated by him. Trustees filed for declaratory relief seeking a judicial determination of this issue. In response, the trial court held that the Family Trust should be funded with $3.5 million, which would increase the marital share payable to the wife outside of the Family Trust.

The co-trustees filed an action for declaratory relief and the Beneficiaries cooperated to obtain a judicial determination at summary judgment. The issue on appeal to the Second DCA was whether the terms of Settlor’s revocable living trust required the funding of the Family Trust at the time of the settlor’s death with $3.5 million, $5 million, or some other amount. On de novo review, the Second DCA held that the trial court erred in establishing this amount.

In its reasoning, the Court noted that the division and funding of the trusts were the responsibility of the trustee of the trust under the terms of the trust and Section 736.0801, Fla. Stat. The Court went on to explain that funding the Family Trust with $3.5 million was an incorrect result because a trustee should be given the opportunity to exercise its fiduciary duties and be the decision-maker on this issue; the Family Trust did not have to be funded with the $5 million exemption amount. The Court held that Trustees had to look at the Family Trust as a whole to determine Decedent’s intent and that the Trustees had a duty to complete the tax analysis, considering estate taxes, generation skipping taxes and income taxes, to determine the best result for the Trust.  Thus, the Court remanded for Trustees to make such a determination.

If you or anyone you know is in need of representation in actions involving Guardianship, Probate and/or Trust Disputes, or questions pertaining to such proceedings, please contact The Law Offices of Glenn M. Mednick, P.L., at (954) 315-1154 or gmednick@mednicklawgroup.com.