Taxation & Estate Planning

4th DCA: Surviving spouse trapped by life estate she cannot afford

By Juan C. Antúnez

Schneberger v. Schneberger, --- So.2d ----, 2008 WL 373243(Fla. 4th DCA Feb 13, 2008)

The linked-to case is the latest example of the lopped-sided unfairness resulting from how current Florida law treats life estates in homes.  Ft. Lauderdale attorney Jeffrey A. Baskies published in excellent article in the June 2007 edition of the Florida Bar Journal that summed up the current state of affairs as follows:

[S]urviving spouses — who are ostensibly “protected” by the Florida Constitution and statutes (given the “right” to live “rent-free in a homestead”) — are required to bear 100 percent of the burden of the state’s two largest fiscal crises: the escalation in property taxes and homeowners’ insurance. In addition, costs of ordinary upkeep, interest payments on mortgages and, in many cases, virtually all of the special assessments are also the burden of the surviving spouse. Further exacerbating the situation, many widows live in communities which have charged (and are still charging) assessments to repair common areas damaged by the hurricanes the state faced these past few years — with the promise of active hurricane seasons for the foreseeable future.

Click here for prior blog post with link to Baskies article.

Hurricane damages were at the heart of the dispute in the linked-to case between the life tenant (surviving spouse), and the remainderman (decedent's son from a prior marriage).  To make matters worse, the life tenant in this case was prohibited from renting the property; and under Florida law a life tenant can't force a sale of the property through a partition action.  Bottom line, she was stuck in the property and apparently stuck with the bills for major repairs to the home - plus taxes and insurance.  Here's how the 4th DCA summed up the trial court's ruling, which was upheld on appeal:

When the home was damaged by hurricanes, the expense of repair and insurance became an issue between the wife and the remainderman, the husband's son by a prior marriage, who was also the trustee of the husband's trust. The wife filed a complaint against the trustee and remainderman to determine who was responsible for the cost of repairs as well as the continuing cost of insurance. The remainderman filed a counterclaim for declaratory judgment as to the same issues.

After a trial, the court declared that the .  .  .  wife was entitled to a life estate in the property and as such was responsible for those duties of a life tenant, including the responsibility to pay all ordinary and necessary expenses that inure to a homeowner, including taxes, insurance, homeowner's association fees, and general repairs for the upkeep and maintenance of the property. The remainderman was responsible to pay for the hurricane repair costs from the proceeds of the insurance as an extraordinary expense to the property. He was also required to pay the special hurricane assessment by the homeowner's association.

As support for its affirmance of the trial court's ruling, the 4th DCA summarized Florida law governing the allocation of expenses between life tenants and remaindermen as follows:

In Florida, “a tenant for life or a person vested with an ordinary life estate is entitled to the use and enjoyment of his estate during its existence.” Sauls v. Crosby, 258 So.2d 326, 327 (Fla. 1st DCA 1972). “The only restriction on the life tenant's use and enjoyment is that he not permanently diminish or change the value of the future estate of the remainderman. This limitation places on the ‘ordinary life tenant’ the responsibility for all waste of whatever character.” Id. (footnote omitted). “It is well settled that life tenants are bound in law to pay property taxes during their continuance of their estate. Failure to pay taxes constitutes waste.” Chapman v. Chapman, 526 So.2d 131, 135 (Fla. 3d DCA 1988) (citations omitted). Therefore, it follows that the wife would have the responsibility to pay all ordinary and necessary expenses that inure to a homeowner, including taxes, insurance, homeowner's association fees, and general repairs for the upkeep and maintenance of the property, and not to dissipate or cause waste to the property.

Lesson learned?

If you own property and can't afford to keep it up, the best way to deal with the problem is to sell the property.  If you co-own property with someone you don't get along with (for example, your ex's children), the best way to deal with the problem is to sell the property.  Under existing Florida law a life tenant can NOT force a sale of the property.  I am assuming that the surviving spouse in the linked-to case would sell the property if she could, but her ex's son told her to take a hike.

What's needed is a legislative fix: surviving spouses with life estates in their homes should be able to force a sale of the property when the expenses become burdensome and the remaindermen wont voluntarily consent to the sale.  Fortunately, this legislative fix is in the works, as reported by Jeffrey A. Baskies (yes, same guy who wrote the Florida Bar Journal article) in the written materials for the January 2008 meeting of the Florida Probate Law and Procedure Committee.  The following is an excerpt from the Baskies report [click here for link to committee agenda containing Baskies' full report starting on page 17]:

Chapter 64 of the Florida Statutes governs partition actions. With only a few modifications, it can be amended to allow partition of protected homestead property between surviving spouses and the decedent’s lineal descendants.  The subcommittee proposes revising chapter 64 as follows:

Section 64.031 is amended to read as follows.

64.031 Parties.--The action may be filed by any one or more of several joint tenants, tenants in common, owners of life estate created by F.S. 732.401, or coparceners, against their cotenants, coparceners, or the holders of remainder interests (in the case of life estates created by F.S. 732.401), or others interested in the lands to be divided.

Section 64.041 is amended to read as follows.

64.041 Complaint.--The complaint shall allege a description of the lands of which partition is demanded, the names and places of residence of the owners, joint tenants, tenants in common, owner of life estate created by F.S. 732.401 or the holders of remainder interests (in the case of life estates created by F.S. 732.401), coparceners, or other persons interested in the lands according to the best knowledge and belief of plaintiff, the quantity held by each, and such other matters, if any, as are necessary to enable the court to adjudicate the rights and interests of the party. If the names, residence or quantity of interest of any owner or claimant is unknown to plaintiff, this shall be stated. If the name is unknown, the action may proceed as though such unknown persons were named in the complaint.

Section 64.051 is amended to read as follows.

64.051 Judgment.--
(1) The court shall adjudge the rights and interests of the parties, and that partition be made if it appears that the parties are entitled to it. When the rights and interests of plaintiffs are established or are undisputed, the court may order partition to be made, and the interest of plaintiffs and such of the defendants as have established their interest to be allotted to them, leaving for future adjustment in the same action the interest of any other defendants.
(2) In the case of an action for partition of protected homestead as defined in s. 731.201(32) where the surviving spouse owns a life estate, the surviving spouse shall be entitled to an order of partition if the action is brought by the surviving spouse.
(3) If any party to the action alleges that tax as defined in s. 733.817(1)(n) will be due by reason of a severance as ordered by the court, the court shall determine all issues concerning apportionment of that tax under applicable federal and state law. The court shall have jurisdiction to determine the probable tax due or to become due from all interested persons, apportion the probable tax, and enter orders and judgments to enforce payment of any tax as so apportioned. The court may retain jurisdiction over the parties and issues to modify the order of apportionment as appropriate until after the tax is finally determined.

This proposal only gives the spouse a right to a partition. The subcommittee debated giving remainder beneficiaries a right to seek partition, but overall the subcommittee seemed to favor only permitting surviving spouses to seek partition, while not permitting remainder beneficiaries to displace the life tenants – not affording the ability to “throw the life tenant out” at will. This proposal will go a long way to helping and protecting those surviving spouses who currently have life estates (or may receive them in the future) they don’t desire to retain, while weighing and balancing the interest of the remainder beneficiaries.

Full post as published by Florida Probate Litigation Blog on February 16, 2008 (boomark / email).