## Facts

- Carlton W. Morey, Jr. created a self-settled revocable trust in 2000 and later amended and restated it in 2004.
- Carlton purchased life-insurance policies and designated the “Carl W. Morey–Trust” as beneficiary for the policy at issue.
- The amended trust directed that, upon Carlton’s death, the trustee must pay the estate’s personal representative amounts certified as needed to satisfy “death obligations” and other obligations required under Florida law, including:
  - expenses of last illness, funeral, and estate administration;
  - “all of the Settlor’s enforceable debts” (with stated exclusions for certain secured debts); and
  - death taxes.
- After these payments, any residue was to be held for Carlton’s daughters in a further trust.
- Carlton did not change the policy beneficiary designation after restating the trust; the life-insurance proceeds were paid into the revocable trust.
- At death, the estate had limited liquid assets and liabilities far exceeding assets, such that creditor claims would consume essentially all insurance proceeds.
- Kevin A. Morey, acting as personal representative and trustee, contended the proceeds should be exempt from creditor claims and pass for the daughters’ benefit.

## Issues

1. Whether trust provisions requiring payment of the settlor’s debts and “death obligations” from trust assets made life-insurance proceeds paid to the trust available to the decedent’s creditors notwithstanding Florida’s statutory protections for life-insurance proceeds.
2. Whether the trust should be reformed to prevent creditor access to the insurance proceeds based on alleged intent and later financial deterioration.

## Decision

- The First District Court of Appeal affirmed.
- The court held the life-insurance proceeds paid to the revocable trust were not exempt from creditor claims because the trust required the trustee to use trust assets to satisfy the settlor’s debts and death-related obligations.
- The court affirmed denial of the requested reformation.

## Legal Principles

- Florida law generally protects life-insurance proceeds from the insured’s creditors when payable to a beneficiary other than the estate, but the insured may subject those proceeds to creditor claims by directing, in a trust that receives the proceeds, that trust assets be used to pay the insured’s debts and death obligations.
- When a policy pays proceeds to a revocable trust, and the trust mandates payment of the settlor’s enforceable debts and related obligations before residuary distributions, the proceeds can be treated as available for those obligations.
- Reformation of a trust requires a sufficient equitable basis (commonly proof of mistake such as a drafting error or similar defect); later adverse financial consequences, without such proof, do not justify rewriting the trust’s debt-payment provisions.

## Conclusion

The appellate court concluded that a revocable trust’s mandatory direction to pay the settlor’s debts and death obligations made life-insurance proceeds paid into the trust reachable by creditors, and it refused to reform the trust absent a showing of a qualifying mistake or other equitable ground.


Morey v. Everbank, 93 So. 3d 482 (Fla. 1st DCA 2012)