A Cautionary Tale from the First District Court of Appeal: exercise a power of appointment with great care to avoid harsh results.
In general, Florida Circuit Courts sit in equity over trust and will dispute and are thus empowered to look to the intent of the settlor of a trust or testator of a will when deciding the rights of litigants. However, Florida’s 1st District Court of Appeal recently authored an opinion which indicates that in situations regarding powers of appointment, strict compliance with the written instrument is absolutely necessary, regardless of the apparent intent of the testator attempting to exercise the power through a provision in her will. The case, Cessac v. Stevens, 2013 Fla. App. LEXIS 18525 (Fla. Dist. Ct. App. 1st Dist. Nov. 20, 2013), is one of only two Florida cases that speak directly to this issue.
A power of appointment is, generally speaking, the authority conferred by one person (“the donor”) upon another (“the donee”) to appoint the person or persons who are to receive and enjoy an estate or income from the estate upon the donor’s death, upon the donee’s death, or after the termination of an existing right or interest. See Black’s Law Dictionary 1134 (Revised 4th ed. 1968). Often, a power of appointment is found in a will or trust to communicate the donor’s intent that the donee is given the right to determine who should receive those benefits after the donee’s death, rather than the benefits reverting to the donor’s estate or passing through the laws of intestacy. In Florida, cases involving the exercise of a power of appointment are rare. Up until the 1st DCA addressed the issue in Cessac v. Stevens, there was only one other published Florida opinion regarding the issue: Talcott v. Talcott, 453 So.2d 951 (Fla. 3d DCA 1982).
In Talcott, a widow sought a declaration of her rights under a trust agreement executed by her late husband’s father. The trust agreement required that the husband exercise his power of appointment by making specific reference to the power in his will. The husband died testate, and in his will devised all of his estates to his wife. However, the husband’s will did not reference his father’s trust agreement or the power of appointment. Although the widow attempted to offer extrinsic evidence of her husband’s intent to exercise the power of appointment and confer the benefits of the trust agreement to her, the trial court found that such evidence was immaterial. The 3rd DCA agreed, holding that such evidence was inadmissible in light of the husband’s failure to comply with the specific reference requirement of his father’s trust agreement.
The Cessac Court faced a slightly dissimilar set of facts from those recited in Talcott. In Cessac, the decedent died testate and her will provided for the devise of “the rest and remainder of [her] estate, both personal and real property” to Cessac. The will also include a provision stating:
Included in my estate assets are the STANTON P. KETTLER TRUST, FBO, SALLY CHRISTIANSEN, under will drafted July 30, 1970, currently held at the Morgan Stanley Trust offices in Scottsdale, Arizona, and two (2) currently being held at Northern Trust of Florid in Miami, Florida.
The will did not contain any other references to the trusts, nor did it mention any powers of appointment held by the decedent. The trusts alluded to in the decedent’s will contained powers of appointment which authorized the decedent to appoint who would receive assets from the trusts after the decedent’s death. However, the trusts included the specific requirement that decedent, “by her will, appoint … such persons … [to receive the remaining assets of the trust], making specific reference to the power herein granted…” The trusts also contained the provision that if the decedent failed to exercise her power of appointment, the trust assets would be divided into equal shares among the original donor’s children.
The Cessac Court, in its opinion, acknowledged that the decedent made a definite attempt to confer the power of appointment upon Cessac through the language of her will. The decedent’s intent in this regard was clear; the will reference one trust by name and the other by location. They will also clearly indicated that Cessac was to inherit the residue of the decedent’s estate, and thus the assets held in the trusts. However, the Court resisted Cessac’s legal arguments urging the adoption of an “equitable construction standard” which would allow the court to “do equity” by ignoring the strict requirements that the decedents will specifically reference the power of appointment. The Court, recognizing the harsh result of its ruling upon Cessac, explained its rationale behind this strict compliance approach: “This result is a function of the intent of the original donor, who had the right to place whatever restrictions he desired on the disposition of his property. The decedent was obligated to comply with these restrictions…”
The rationale behind the 1st DCA’s decision in Cessac v. Stevens is that, when a testamentary instrument makes a specific provision for a beneficiary to exercise a power of appointment, it is the intent of the original donor and not the intent of the testator attempting to exercise the power of appointment that controls. Because the original donor’s intent is set forth in the trust instrument instructing the testator as to how to exercise the power, strict compliance with the terms of the instrument is necessary and courts generally will not look to extrinsic evidence of the beneficiary’s intent.
It has been said that the intention of the testator is the polestar to guide in any construction and interpretation of a will. In Cessac, the 1st DCA reminded litigants of the importance of determining whose intent should guide.
