In Lanford v. Phemister, an April 8, 2022 opinion, the Florida Fifth District Court of Appeals reversed a probate court’s order permitting the personal representative fees and costs to be paid from proceeds of the sale of protected homestead property, following the well-established law that constitutionally protected homestead property is not subject to the expenses of estate administration.
The Facts of Lanford v. Phemister
Mary Lee Dillard died in 2016. After leaving some personal property to her sister, Billie Jo Schell, most of Decedent’s assets, including her homestead real property, was left to a testamentary trust. Schell was the primary beneficiary of the testamentary trust, and the Kirk Family Charitable Trust was the contingent remainder beneficiary.
Robin Phemister was appointed the personal representative of Decedent’s estate, and the trustee of the testamentary trust created in Decedent’s will.
In separate final orders, the Florida probate court determined Decedent’s home constituted exempt homestead property, and that constitutional homestead protections inured to Phemister, as testamentary trustee, for Schell’s benefit. The Florida probate court entered an order authorizing Phemister, as testamentary trust trustee, to sell the homestead property. Phemister stipulated that the sale would occur, and that Phemister would place the sale proceeds in escrow. The property sold.
Schell died in 2018 and the residuary of Decedent’s estate passed to the Kirk Trust. J. Scott Lanford was the trustee of the Kirk Trust.
Phemister thereafter petitioned the Florida probate court to disburse the homestead property’s sale proceeds to pay for her fees as personal representative, her fees as testamentary trustee, and her attorney’s fees and costs incurred in both capacities. Lanford objected, contending that homestead sale proceeds could not be used for these purposes. He also argued the amounts Phemister and her attorneys sought were categorically unreasonable.
The Florida probate court ultimately awarded reimbursement of Phemister’s and her attorney’s fees and costs and authorized payment to Phemister and her lawyers from the escrowed homestead sale proceeds. Lanford appealed.
Can Proceeds From the Sale Of Protected Homestead Property Pay Personal Representative Fees and Costs?
No! A Florida probate court cannot order personal representative fees and costs to be paid from the proceeds of protected homestead property over the objection of its owners. Why? Because the Florida homestead property inures immediately at death to the heirs, and is not an asset of the estate subject to administration or estate expenses. As reviewed by the appellate court:
The Florida Constitution protects a homestead from “judgment[s], decree[s] or execution[s],” except for payment of certain limited debts. Art. X, § 4(a), Fla. Const. These homestead exemptions inure to the owner’s “surviving spouse or heirs.” Art. X, § 4(b), Fla. Const. After a decedent’s death, her heir “has legal ownership of the property,” and “she may sell it without regard to decedent’s creditors or administrative expenses.” Morey v. Everbank, 93 So. 3d 482, 488 (Fla. 1st DCA 2012) (quoting Est. of Shefner v. ShefnerHolden, 2 So. 3d 1076, 1078 (Fla. 3d DCA 2009)).
Here, Schell, as the Decedent’s sister and beneficiary of the testamentary trust, was Decedent’s heir for the purposes of homestead protection. The Florida appeals made an interesting note that “we do not determine whether a trust’s beneficiary is entitled to constitutional homestead protections as an “heir” under Florida law. Our decision is not intended, and should not be cited, to stand for this proposition.”
This qualification seems unnecessary under Florida law, but nevertheless, it is in the opinion, perhaps because Phemister argued that the Kirk Trust was not Decedent’s heir for purposes of the constitutional homestead protection, but it was too late for that argument. The Florida probate court found that Decedent’s homestead, complete with its constitutional protections, passed to Schell at the moment of Decedent’s death, and this order was not appealed. Therefore, the sale proceeds could not be used to pay the estate’s administrative fees and costs.
The appellate court reversed the Florida probate court’s order reimbursing the personal representative fees and costs from homestead sale proceeds, stating:
Here, the escrowed funds are proceeds from the sale of Decedent’s protected homestead. The homestead passed outside of the probate estate, and the proceeds from the sale became an asset of the testamentary trust to be used for Schell’s benefit. See Thompson v. Laney, 766 So. 2d 1087, 1088 (Fla. 3d DCA 2000) (reiterating that in absence of will provision stating otherwise, devisee entitled to sell homestead property and keep proceeds of sale); see also Est. of Shefner, 2 So. 3d at 1078 (“The heir’s sale of the property, after the decedent’s death, does not change the legal consequences of the bequest from the decedent to the heir.”). Accordingly, we reverse that portion of the probate court’s final order reimbursing Phemister and her attorneys, in her capacity as personal representative of Decedent’s estate, their fees and costs from the homestead sale proceeds.
Are Proceeds From The Sale Of Florida Protected Homestead Authorized To Pay Trustee’s Fees and Costs?
According to this appellate court, yes, in this case, the proceeds from the sale of the homestead were authorized to pay trustee’s fees and costs:
Under Florida law, trustees have the power to pay trust expenses, their own compensation, and their attorney’s fees from trust assets. § 736.0816(15), (20), Fla. Stat. (2021). Decedent’s will is silent on how the testamentary trustee will be paid, but it did not contemplate that the testamentary trustee would work for free. Further, Florida law also does not require trustees to work for free. Under Florida law, trustees have the power to pay trust expenses, their own compensation, and their attorney’s fees from trust assets. § 736.0816(15), (20), Fla. Stat. (2021). Trustees are “entitled to compensation that is reasonable under the circumstances.” § 736.0708(1), Fla. Stat. (2021); see also § 736.05053(4), Fla. Stat. (2021) (providing that trust administration fees, including trustee fees and trustee’s attorney’s fees, should be paid before estate administration fees). Trustees are also allowed reimbursement for reasonable trust expenses. § 736.0709(1), Fla. Stat. (2021). Similarly, an attorney who provides “services to a trust may be awarded reasonable compensation from the trust” following an application for fees. § 736.1005(1), Fla. Stat. (2021).
Here, Lanford argued that a homestead willed to a trust is entitled to the same constitutional protections against claims from the trustee as it is to estate administration claims. The appellate court apparently was not presented with any legal authority regarding this argument, and determined that Lanford could not demonstrate the probate court erred in awarding Phemister and her lawyers statutorily authorized fees and costs for administering the trust, including allowing reimbursement from homestead sale proceeds.
The accuracy of this aspect of the appellate court opinion is questionable. The constitutional protections for homestead apply whether or not the property is held in trust or not, and the homestead sale proceeds should not be subject to expenses of estate or trust administration. Read the Complete Guide To Florida Homestead and see section 736.1109, Florida Statutes. Time will tell if this aspect of the court’s opinion is challenged or criticized.
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