Case Name: Jack ALTER, individually and as Trustee, Appellant, v. Sharon ZUCKERMAN and Beverly Kanter, Appellees
Court: Florida District Court of Appeal
Jurisdiction: Florida
Decision Date: 1991-06-25
Citations: 585 So. 2d 303
Docket Number: No. 89-2209
Parties: Jack ALTER, individually and as Trustee, Appellant, v. Sharon ZUCKERMAN and Beverly Kanter, Appellees.
Judges: Before HUBBART, COPE and LEVY, JJ.
Reporter: Southern Reporter, Second Series
Volume: 585
Pages: 303–311

Head Matter:
Jack ALTER, individually and as Trustee, Appellant, v. Sharon ZUCKERMAN and Beverly Kanter, Appellees.
No. 89-2209.
District Court of Appeal of Florida, Third District.
June 25, 1991.
On Motion for Rehearing Sept. 17, 1991.
Podhurst, Orseck, Josefsberg, Eaton, Meadow, Olin & Perwin and Joel Eaton, Miami, for appellant.
Steel, Hector, Davis, Burns & Middleton and Robert W. Goldman, West Palm Beach, for appellees.
Before HUBBART, COPE and LEVY, JJ.

Opinion:
COPE, Judge.
Jack Alter appeals an adverse summary final judgment. The judgment determined that an inter vivos trust created by the decedent, Celia Kahn, was ineffective to transfer the trust corpus to Alter on her demise. As a result, the trust assets were held to be part of Kahn's probate estate, and pass through the residuary clause of the will. We reverse.
I.
In 1977 and 1980, Kahn made two wills which left the majority of her assets to her nephew, Alter. In 1982 she executed a declaration of trust naming herself trustee of a brokerage account at Norstar Brokerage Corporation for the use and benefit of Alter. The instrument was notarized, but did not contain the signature of a second witness. Kahn opened a new brokerage account at Norstar in her name as trustee for the benefit of Alter. She transferred her stock holdings from her existing Nors-tar account to the new account. Under the terms of the declaration of trust, the trust corpus was to pass to the beneficiary, Alter, upon Kahn's demise.
In 1982 Kahn also opened a bank account at 1st Nationwide Bank naming herself as trustee for the benefit of Alter. The account title referenced a trust agreement dated June 11, 1982. Kahn placed funds in the bank account which were there at her demise.
In 1983, Kahn changed her will. Alter was named personal representative and devisee of Kahn's household goods and personal effects. The residue of the estate was left to appellees Sharon Zuckerman and Beverly Kanter, Kahn's nieces.
Kahn died in 1986. The residuary beneficiaries, Zuckerman and Kanter, petitioned for a determination that the declaration of trust was ineffective to transfer the trust assets to Alter (the trust beneficiary) upon the decedent's demise. Under that theory, the trust assets remained as part of Kahn's estate and passed under the will to the residuary beneficiaries. The residuary beneficiaries initially claimed entitlement to the Norstar account, and later, the 1st Nationwide account as well.
The residuary beneficiaries moved for summary judgment. Relying on the Florida Supreme Court's decision in Hanson v. Denckla, 100 So.2d 378 (Fla.1956), reversed on other grounds, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958), they argued that the inter vivos trust could not transfer the trust assets upon Kahn's demise unless the trust instrument complied with the formalities required for the execution of wills. Those formalities require that a will be executed before two witnesses. It is undisputed that the declaration of trust was signed before one witness — the notary— but not two. Agreeing with that analysis, the court entered summary judgment in favor of the residuary beneficiaries. The court ruled that no assets of the decedent were left in trust by the decedent and that her assets pass through probate in accordance with her last will and testament.
II.
We first consider the Norstar account. The declaration of trust recited that Kahn held the Norstar account in trust for Alter, as beneficiary. The instrument provided that upon Kahn's demise, the successor trustee would transfer all right, title, and interest in the account to the beneficiary absolutely and terminate the trust. Under the terms of the declaration of trust, Kahn retained the right to exercise day-to-day control until her demise, or physical or mental incapacity, and also retained the right to amend or revoke the trust in whole or in part.
In Hanson v. Denckla, the Florida Supreme Court considered the effect of reservations of power by the settlor of a revocable inter vivos trust. 100 So.2d at 383-85. In Hanson the settlor had created an inter vivos trust. The trust instrument gave the settlor the trust income for life. Id. at 380. The settlor reserved the right to designate beneficiaries by the exercise of powers of appointment, as well as the right to amend or revoke the trust agreement at any time. Id. at 383. Although there was a corporate trustee, many of its powers could be exercised only upon the direction of the trust adviser, who was settlor's husband. Id. at 383.
Hanson was decided in 1956. Under the view expressed at that time by the first Restatement of Trusts, the reservation of over-much power in the hands of the settlor would render an inter vivos trust illusory. Section 57 of the first Restatement provided:
Where the settlor transfers property in trust and reserves not only a beneficial life estate and a power to revoke and modify the trust but also such 'power to control the trustee as to the details of the administration of the trust that the trustee is the agent of the settlor, the disposition so far as it is intended to take effect after his death is testamentary and is invalid unless the requirements of the statutes relating to the validity of wills are complied with.
Restatement of Trusts § 57 (1935) (emphasis added).
Following the first Restatement's approach, the Hanson court reasoned that the settlor's reservation of power had "divested the settlor of virtually none of her day-to-day control over the property or the power to dispose of it on her death, and the trust was illusory." 100 So.2d at 383-84 (citations omitted). This did not, however, signify that the actions of the settlor were entirely meaningless. The trust instrument was treated as having created a valid contractual relationship during the life of the settlor, id. at 382, which as described in the Restatement would be an agency relationship between settlor and trustee. Restatement of Trusts § 57. The death of the settlor would, however, revoke the agency. Those portions of the trust instrument purporting to transfer trust property upon the settlor's demise would be testamentary in nature. Id. Upon decedent's demise, the trust instrument would be ineffective to convey trust property " 'unless the requirements of the statutes relating to the validity of wills are complied with.' " 100 So.2d at 384 (quoting Restatement of Trusts § 56). Since in Hanson the court concluded that the critical documents had not been executed in accordance with the formalities for wills, 100 So.2d at 382, no property passed by way of the trust. Id. at 385. The judgment was later reversed on jurisdictional grounds. Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958).
In 1957 the Restatement (Second) of Trusts was adopted, which modified section 57 significantly. In criticizing the first Re statement, and explaining the reason for the modification contained in Restatement (Second), Professor Scott explained:
The purpose of the Statute of Wills in requiring certain formalities is to prevent fraudulent claims. If the disposition is evidenced by a formal trust instrument, the danger of fraud is not increased by the fact that the settlor may have reserved extensive powers.
[Restatement of Trusts § 57] made the validity of the disposition dependent entirely on the amount of control reserved by the settlor. It failed to take into consideration the formality or lack of formality evidencing the disposition of the property. A formal trust instrument is very different from an instruction given orally or in a letter. If a trust is formally created, the danger of false claims is no greater because of the reservation of powers of control over the trustee reserved by the settlor, than it would be if no such power had been retained. Accordingly, in the Restatement of Trusts Second that was adopted in 1957, § 57 was modified to read as follows:
Where an interest in the trust property is created in a beneficiary other than the settlor, the disposition is not testamentary and invalid for failure to comply with the requirements of the Statute of Wills merely because the settlor reserves a beneficial life interest or because he reserves in addition a power to revoke the trust in whole or in part, and a power to modify the trust, and a power to control the trustee as to the administration of the trust.
The trend of the modern authorities is to uphold an inter vivos trust no matter how extensive may be the powers over the administration of the trust reserved by the settlor.
1A A. Scott & W. Fratcher, The Law of Trusts § 57.2 at 139-40 (footnote omitted).
In 1969 the legislature enacted a statute pertaining to inter vivos trusts which, with subsequent amendments, is now codified as section 689.075, Florida Statutes (1989). The thrust of the statute is to adopt the position of the Restatement (Second) of Trusts, § 57. While the parties agree on the general purpose of the statute, they disagree on the interpretation of paragraph 689.075(l)(g), which is pivotal for the present case. The statute provides:
689.075 Inter vivos trusts; powers retained by settlor.—
(1) A trust which is otherwise valid, including, but not limited to, a trust the principal of which is composed of real property, intangible personal property, tangible personal property, the possible expectancy of receiving as a named beneficiary death benefits as described in s. 733.808, or any combination thereof, and which has been created by a written instrument shall not be held invalid or an attempted testamentary disposition for any of the following reasons:
(a) Because the settlor or another person or both possess the power to revoke, amend, alter, or modify the trust in whole or in part;
(b) Because the settlor or another person or both possess the power to appoint by deed or will the persons and organizations to whom the income shall be paid or the principal distributed;
(c) Because the settlor or another person or both possess the power to add to, or withdraw from, the trust all or any part of the principal or income at one time or at different times;
(d) Because the settlor or another person or both possess the power to remove the trustee or trustees and appoint a successor trustee or trustees;
(e) Because the settlor or another person or both possess the power to control the trustee or trustees in the administration of the trust;
(f) Because the settlor has retained the right to receive all or part of the income of the trust during his life or for any part thereof;
(g) Because the settlor is, at the time of the execution of the instrument, or thereafter becomes, sole trustee; provided that at the time the trust instrument is executed it is either valid un der the laws of the jurisdiction in which it is executed or it is executed in accordance with the formalities for the execution of wills required in such jurisdiction.
(Emphasis added).
We agree with Alter that paragraph (g) creates two alternative tests. If either test is satisfied the validity of the trust will be sustained. Under the first test, the trust instrument need only be executed in accordance with the required formalities for an inter vivos trust. Under the second alternative, the trust instrument will also satisfy the statutory test if executed in accordance with the formalities required for the execution of wills. This interpretation accords with Professor Scott's view that either set of formalities provides adequate safeguards against fraud and provides sufficient assurance that the trust assets will be disposed of in accordance with the settlor's intent.
The residuary beneficiaries argue in essence that the first alternative should, as a matter of Florida law, be interpreted as being coterminous with the second alternative. On the contrary, we will not lightly assume that the two different statutory formulations contained within paragraph (g) are merely redundant. Only one of the two alternatives contained in paragraph (g) refers to the formalities required for the execution of wills. We see no basis on which to read that reference into the other alternative as well. More important, the statutory formulation appears to have been adopted for very sound reasons, as thoroughly expressed by Professor Scott. As the inter vivos trust document complied with the statutory formalities, the summary judgment must be reversed.
III.
The trial court treated the 1st Nationwide account as being covered by the same declaration of trust. The court ruled that the 1st Nationwide account, as well as the Norstar account, would pass as part of Kahn's probate estate. For the reasons already stated, the summary judgment must be reversed with respect to the 1st Nationwide account as well. In view of that fact, we need not reach Alter's alternative arguments with respect to the 1st Nationwide account.
Reversed and remanded.
. Norstar was known as Discount Brokerage Corp. at the time the declaration of trust was executed, but subsequently changed its name. For present purposes it will be referred to as Norstar, although the declaration of trust refers to Discount Brokerage.
. The declaration of trust was a standard form Kahn had obtained. She also obtained an opinion from her counsel that the form was valid under Florida law. However, she filled out the form herself. The form had signature spaces for two witnesses, as well as a notary. Only the notary signed. The spaces for additional witness signatures were left blank.
. Alter was also designated successor trustee.
. The United States Supreme Court found that Delaware, not Florida, had jurisdiction over the trust. The Delaware courts held the trust valid. See generally 1A A. Scott & W. Fratcher, The Law of Trusts § 57.2, at 148 (4th ed. 1987) (criticizing Florida view).
. Because the statute is clear we need not reach Alter's alternative argument that he is also entitled to relief under Florida decisions which have in terms, or in effect, distinguished Hanson v. Denckla. See, e.g., Lane v. Painter First Natl Bank & Trust Co. of Sarasota, 213 So.2d 301, 302-04 (Fla. 2d DCA 1968).
. This ruling is without prejudice to such further proceedings as may be appropriate with respect to the sufficiency of the pleadings, and any amendment which may be needed, with respect to the First Nationwide account, and such proceedings as may be appropriate with respect to the identity (and effect) of the declaration of trust referred to in the 1st Nationwide account title.