Vigliani v. Bank of Am., N.A.

• Decision Date: 09 March 2016
• Docket Number: No. 2D14–4595.,2D14–4595.
• Citation: 189 So.3d 214
• Parties: Marguerite VIGLIANI ; Gloria Vigliani; Sylvia Vigliani; Mario A. Vigliani; Lina Clark; Alessandra Clark Benson; Camilla Clark; Julia Clive; and Pia Clive, Appellants, v. BANK OF AMERICA, N.A., in its capacity as trustee for the Mario Vigliani Revocable Living Trust, Appellee.
• Court: Florida District Court of Appeals

189 So.3d 214

Marguerite VIGLIANI ; Gloria Vigliani; Sylvia Vigliani; Mario A. Vigliani; Lina Clark; Alessandra Clark Benson; Camilla Clark; Julia Clive; and Pia Clive, Appellants,

v.BANK OF AMERICA, N.A., in its capacity as trustee for the Mario Vigliani Revocable Living Trust, Appellee.

No. 2D14–4595.

District Court of Appeal of Florida, Second District.

March 9, 2016.

Rehearing Denied March 30, 2016.

Susan E. Stenger, Brian D. Bixby, and Melissa E. Sydney of Burns & Levinson LLP, Boston, MA, for Appellants.

Bernard A. Jackvony of Pannone Lopes Devereaux & West LLP, Boca Raton; and John R. Hargrove of Hargrove Law Group, Boca Raton, withdrew after briefing, for Appellee.

ALTENBERND, Judge.

The appellants in this case are the children and grandchildren of Mario Vigliani, who is the deceased settlor of the trust that is at the center of this dispute. When this lawsuit commenced in the trial court, Maryann Vigliani, the wife of the settlor, was a co-trustee along with the Appellee, Bank of America, N.A. Unfortunately, Mrs. Vigliani died following the recent oral argument in this case, and the bank is now the sole trustee. The children and grandchildren are the beneficiaries of the "Family Trust," and we will refer to them as "the Beneficiaries." We will refer to the bank as the "Trustee."

The very narrow issue presented by this case is whether the terms of the 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 perhaps with some other amount. The co-trustees filed an action for declaratory relief, and the Beneficiaries fully cooperated to obtain a judicial determination at summary judgment. The trial court decided 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.¹ On de novo review, we conclude that the trial court erred in establishing this amount.

The Beneficiaries would have this court hold that the amount payable to the Family Trust must be $5 million. In reviewing the trust agreement, and specifically Article VIII and the "Statements of Intentions" therein, we are unconvinced that this court can safely set the amount at $5 million based on the record before us. If in fact the co-trustees filed an estate tax return in which they utilized a $5 million estate tax exemption, the Beneficiaries may be correct in their position. Because the "Statement of Intentions" played no role in the trial court's decision, we simply are not confident that this record allows us to resolve a question that appears to involve significant tax issues upon which the parties have not stipulated or presented undisputed evidence. Moreover, the actual division of the trust depending on the circumstances at the date of the settlor's death would appear, under both the terms of the trust and statutory law, to be a task for Bank of America to perform as trustee. See § 736.0801, Fla. Stat. (2009). Thus, on remand, it may be appropriate for the Trustee to make a new decision about the division of the trust before the trial court is called upon to take any action. Accordingly, we reverse the judgment and remand for further proceedings in the trial court.

The facts involved in this case, at least to this point, are undisputed and relatively simple. The estate tax laws applicable to the facts, however, are complex. Mario Vigliani created a revocable trust in 1994. He executed a "Restatement of the Trust Agreement" (the "Restatement") in September 2009. The Restatement provided that its interpretation and the meaning and effect of the terms of the Restatement would be governed by the laws of Florida. Mario Vigliani died on May 1, 2010.

Under the terms of the Restatement, upon Mr. Vigliani's death, the co-trustees were required to make certain distributions and then divide the remainder of the trust corpus, or the "Trust Estate," into two shares so long as Mr. Vigliani's wife survived Mr. Vigliani. The first share is described as the "Marital Share," and the second share is the Family Trust. Article VII of the Restatement describes the division. The Marital Share is the balance of the Trust Estate after the share for the Family Trust has been funded. Article VII continues: "The Family Trust shall 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. " (Emphasis added.)

The content of Article VIII in its entirety, with the most important portions underlined to assist the reader, states:

Economic Growth and Tax Relief Reconciliation Act Control Article Introductory Provision. Congress enacted the Economic Growth and Tax Relief Reconciliation Act (the Act), which has created some uncertainty as to the application and the extent of the application of the federal estate tax and the generation-skipping tax on an individual's estate. It is also possible that Congress will make further changes in the application of these taxes. The preceding Article reflects my plan for division into shares/trusts for my beneficiaries based on my death occurring at the time this Trust Agreement is executed. This Article is intended to control the actual division in shares/trusts depending on the circumstances at my actual date of death. It is, therefore, my intention that this Article at my death will control whether the disposition of the Trust Estate is as provided in the preceding Article or as specifically modified or provided in this Article. In this Article reference to "the Trust Estate" shall mean that portion of the Trust Estate disposed of by the preceding Article.(1) Federal Estate Tax Repealed And Wife Survives. If the federal estate tax has been repealed and is not in effect upon my death, rendering no federal estate taxes due, and my wife shall survive the Settlor, then the Trust Estate shall be divided into two shares. One share shall be made up of the 2009 federal exemption amount of $3.5 million and one share shall be the remainder of my Trust Estate. The share made up of the 2009 federal exemption amount of $3.5 million shall be held in the Family Trust, as provided herein. The remainder share shall be distributed outright to my wife as the Marital Share, as provided herein.

(2) Federal Estate Tax Repealed And Wife Does Not Survive. If the federal estate tax has been repealed and is not in effect upon my death, and my wife shall not survive the Settlor, then the Trust Estate shall be held, administered and distributed under the Family Trust as provided herein.

(3) Statement of Intentions.

(a) These are statements of my intentions:

(i) that my wife be adequately provided for during her lifetime;

(ii) that, after my wife's death, my children and a child's issue, if a child is deceased, be adequately provided for;

(iii) that the smallest amount of estate taxes (if any) be paid at my death and my wife's subsequent death;

(iv) that the smallest amount of generation-skipping transfer tax (if any) be paid at my death and my wife's subsequent death;

(v) if carryover basis is in effect at my death, the Settlor intends for his personal representative or trustee to allocate basis exemptions in a way to benefit his family as described above;

(vi) that no adverse tax consequences occur as a result of some subsequent act by Congress not anticipated by the Settlor[.]

(4) Discretion to Deal with Carryover Basis. If carryover basis becomes applicable, the Settlor grants to the personal representative and/or trustee the authority to make decisions and allocations of any exemptions associated with carryover basis to benefit my Trust Estate consistent with the statement of intentions of the Settlor as may be provided in this Trust Agreement and to take any other actions which would be beneficial in achieving these objectives.

To understand Article VIII, one must understand the historical context in which it was written. As explained in the parties' filings in the trial court and in this court,² when the Restatement was executed, the applicable federal estate tax law was provided for under the "Economic Growth and Tax Relief Reconciliation Act of 2001," Pub. L. No. 107–16, 115 Stat. 38 (2001). That law provided for a gradually increasing estate tax exemption that peaked for individuals who died in 2009 at $3.5 million. Pub. L. No. 107–16, § 521(a). The exemption was accompanied by a step-up in the basis for any inherited assets, meaning that for purposes of income taxes on capital gains the basis of these assets would be valued at whatever their fair market value was at the time of the decedent's death. See 26 U.S.C. § 1014(a) (2001) ; cf. Pub. L. No. 107–16 § 541. The 2001 act also provided for the repeal of the estate tax for individuals dying in 2010. Pub. L. No. 107–16 §§ 501(a), 901(a)(2); see also Beim v. Hulfish, 216 N.J. 484, 83 A.3d 31, 38 (2014) (discussing aspects of the 2001 act). The tax savings associated with this repeal, however, were offset to some extent by the creation of a carry-over of the decedent's basis on inherited assets, which in theory would ultimately increase income tax paid by the inheritors on capital gains experienced upon disposition of the inherited property. See Pub. L. No. 107–16 §§ 541, 542.³ The act was also subject to sunset in 2011, which would have revived the estate tax law in existence prior to the effective date of the 2001 act. Pub. L. No. 107–16 § 901 ; see also Beim, 83 A.3d at 38.

In 2009, there were political pressures to revise the 2001 law, but no one knew what the final outcome might be. Thus, Article VIII in the Restatement directly addresses two possible outcomes in sections (1) and (2) and then provides a "Statement of Intentions" to guide other possible outcomes.

Congress did not allow the federal estate tax to be repealed. Instead, it enacted the "Tax Relief, Unemployment Insurance...