Generally, in Florida, a beneficiary must renounce her interest in a trust before she can challenge the validity of the trust instrument. This “renunciation rule” is an equitable doctrine intended to prevent a beneficiary from “having her cake and eating it too.” In other words, it’s generally not deemed “equitable” for a beneficiary to derive a benefit from a trust instrument that she’s simultaneously claiming is invalid. But a recent ruling by an appeals court in Florida suggests that this isn’t a hard-and-fast rule.
Three rationales underlie the renunciation rule: (1) renunciation protects the trustee if the trust is invalidated; (2) the act of renunciation shows that the beneficiary’s suit is sincere and not vexatious; and (3) renunciation ensures that property is available for disposition and free from third-party claims.1
In reality, the renunciation is illusory as a beneficiary will generally still receive the bequest if her contest is ultimately unsuccessful.2 Despite being illusory in nature, Florida courts have held that a beneficiary is required to renounce any future benefit (and disgorge a prior benefit) before contesting a trust instrument.3
Gossett v. Gossett
In Gossett v. Gossett, the Fourth District Court of Appeal (the Fourth DCA) considered the applicability of the renunciation rule.4 The facts of Gossett are relatively straightforward.
Prior to his death, the decedent executed a will and revocable trust, which he subsequently amended five times. The decedent provided for his spouse in each amendment except for the third amendment. Shortly after executing the third amendment disinheriting his spouse, the decedent filed for divorce. Despite proceeding with the divorce, the decedent apparently executed a fourth amendment and fifth amendment providing for his surviving spouse. The decedent was unable to finalize the divorce prior to his death, as he died from a stroke that he suffered the day he and his spouse engaged in a divorce settlement conference.5
After the decedent died, the surviving spouse, as trustee, refused to send the decedent’s son a copy of the “operative” trust instrument (that is, the fifth amendment). Instead, she began sending the son trust distributions. Allegedly, the surviving spouse intentionally made these distributions to son, which she knew he needed due to his financial troubles, to foreclose the son’s ability to challenge the fourth and fifth amendments. While the son was a beneficiary of the third, fourth and fifth amendments, he was entitled to the largest bequest under the third amendment.
After accepting the distributions, the son filed an action seeking to invalidate the fourth and fifth amendments on numerous grounds including, undue influence, duress and tortious interference. The surviving spouse moved to dismiss the son’s claims with prejudice because he failed to return the distributions prior to filing the trust action. After considering the facts, the trial court held that son was required to renounce the benefits he received from the trust prior to filing the trust action. The trial court granted the spouse’s motion and dismissed son’s claims with prejudice. The son appealed.
On appeal, the parties disputed the effect of the renunciation rule, which they argued hinged on whether the renunciation rule is deemed an affirmative defense or a condition precedent. The Fourth DCA disregarded the parties’ arguments that failed to address the “real issue”: whether the renunciation rule even applies to the son under the facts of this case.6
The Fourth DCA took a step back and considered whether equity required the son to return the distributions he received, which were less than he would be entitled to receive under the third, fourth or fifth amendments. The Fourth DCA considered each of the three underlying rationales set forth above in light of this fact.
The Fourth DCA found that none of the three rationales weighed in favor of son returning the distribution because, regardless of whether son’s trust action was successful, son would still be entitled to additional distributions from the trust. Thus, the trustee was protected because the son would always be entitled to the distributions he received, so there wasn’t a serious risk of vexatious or insincere claims, and the property couldn’t be subject to third-party claims.
The major takeaway from Gossett is that the renunciation rule isn’t necessarily a precondition to filing a trust action. Indeed, a court can look to the facts and circumstances of a case and determine whether it is “equitable” to force a beneficiary to return distributions prior to filing an action contesting the validity of a trust instrument.
1. Barnett Nat. Bank of Jacksonville v. Murrey, 49 So. 2d 535, 537-38 (Fla. 1950).
2. In re Harby’s Estate, 269 So. 2d 433, 434 (Fla. 2d DCA 1972).
3. Supra note 3.
4. Gossett v. Gossett, 182. So. 3d 694 (Fla. 4th DCA 2015).
5. Ibid., at 697 fn. 1.
6. Ibid., at 698.