Archive for the ‘Thursday Reports’ Category

The Thursday Report – 9.11.14 – Joke Contest, New Trust Creditor Case, Unclaimed Property, and More!

Posted on: September 11th, 2014

Illinois Bankruptcy Case on Inherited Trust Should Not Be of Concern to Knowledgeable Planners

How to Detect and Claim Unclaimed Property in Florida

Should a New Doctor Buy a Tail When Moving to Florida?

Seminar Announcement – Pinellas County Estate Planning Council Annual Seminar, Thursday, October 23, 2014

Thoughtful Corner – Enhancing Your Professional Practice

Who Said What Joke Contest!

Humor! (or Lack Thereof!)

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

 This report and other Thursday Reports can be found on our website at www.gassmanlaw.com.

In This Issue of The Thursday Report

Don’t miss our Who Said What Joke Contest, featuring classic jokes and one-liners by Robin Williams, Joan Rivers, and Joey Bishop. Winners will receive recognition in next week’s Thursday Report and, of course, a bucket of Kentucky Fried Chicken!

Illinois Bankruptcy Case on Inherited Trust Should Not Be of Concern to Knowledgeable Planners

On August 6, 2014, a bankruptcy judge in Illinois decided that the daughter of a deceased Grantor committed a fraudulent transfer by declining to receive an outright distribution where the trust stated that if she was insolvent the trust assets would be held based upon a spendthrift trust and a restrictive distribution right.

The trust had stated that the daughter would receive trust benefits solely in the discretion of the Trustee if she was insolvent when the Grantor died.

The judge seems to have been dead-set against her being able to benefit from the trust arrangement, although it is clear that the trust was solely funded by the debtor’s mother, and that the trust language clearly provided that the debtor had no right to receive anything beyond what would be paid in the discretion of the Trustee.  The debtor was not the Trustee, and had no control over the Trusteeship.

The Castellano case dealt with a provision in the trust that stated as follows:

If by reason of bankruptcy or insolvency . . . then the interest of that beneficiary shall immediately terminate thereafter, the [Spendthrift] Trustee shall pay to or for the benefit of that beneficiary only those amounts that the [Spendthrift] Trustee, in its sole and absolute discretion, deems advisable . . .

The judge concluded that the transfer was somehow an indirect transfer by the debtor. He apparently thought that games were being played, and noted that:

Rather than accepting direct receipt of [the] assets and then transferring them in to a self-settled trust or the like, she recruited the Spendthrift Trustee to accomplish the equivalent result, schooling him in the Insolvency Letter, in his “obligation to exercise his authority consistent with the provisions of the [Living Trust].”

The judge offered no analysis whatsoever as to whether the debtor was in fact insolvent at the time of her mother’s death, so we must assume that she was, and that the judge made a bad call here.

Florida Statute Section 736.0504 clearly provides that creditors of the beneficiary of a third party settled trust cannot reach trust assets, even if the beneficiary is the Trustee, if the beneficiary’s right to receive distributions is limited to an ascertainable standard (the ability to receive payments only as and when reasonably needed for health, education, and maintenance of the beneficiary and other named individuals and/or family members).

The Castellano case should not change the normal approach to protective trust planning in Florida, or probably in any other state, as it is not mandatory authority.

One lesson from the case is that judges can be very skeptical where trustees are related to beneficiaries, even when this is not relevant.  Here is what the judge had to say about that:

Further, the Court cannot ignore the family relationship between the Debtor and the Spendthrift Trustee, as well as the total absence of any court supervision or control over the Spendthrift Trustee’s decisions concerning disposition of the assets of the Spendthrift Trust.  Family ties militate against any Trustee exercising completely unfettered, independent discretion in administering a spendthrift trust.  Lack of judicial oversight exacerbates the risk that the Spendthrift Trustee’s independent judgment will be compromised by family entanglements.  The Debtor had reason to assume that despite the creation of the Spendthrift Trust she would have every opportunity to influence, if not simply instruct, the Spendthrift Trustee to disburse funds according to her own discretion.  Whether the Spendthrift Trust was a self-settled trust or similar device, the practical effect is the same–the Debtor can justifiably expect to exercise a significant degree of control over its assets

Two recent articles from the Leimberg information services and the case itself can be obtained by emailing agassman@gassmanpa.com.

In the famous words of Douglas Adams, “Don’t panic” and “Always bring your towel,” there may be a mess.

Notwithstanding the above, do you have a provision in your trust documents which provides that any outright distribution will instead be held only for the health, education, and maintenance of the individual and their descendants if they are insolvent on the death of the Grantor?

The Castellano opinion appears to be plainly mistaken, and will hopefully be overturned by the federal district court that has the right of review, if this is appealed, to reduce the confusion that will doubtlessly be interjected into the creditor protection world by commentary, example, and discussions.

Bad facts often make for bad decisions, but bad decisions should not make for erroneous future planning.

How to Detect and Claim Unclaimed Property in Florida

It is now very easy to check the Florida Bureau of Unlicensed Medicine to determine whether you or a client (or your mother-in-law or Colonel Sanders) have unclaimed property. You can hand this to an assistant with some names and see how you do!

Step 1: Log on to www.fltreasurehunt.org

Step 2: Click “Search Unclaimed Property”

Step 3: Fill in your last name, first name, and the security text then click “search”

Step 4: Depending on the commonness of your name, the search may yield numerous results. Once the search results are there, you then must look through the listed names and find which address is associated with you.

 Helpful Hint: When the search results produced numerous names, we found it easier to press Ctrl + F (the “find” function) and type the name of the city in which you currently live or have lived. This usually highlights the search term and you can find your name a lot easier.

Step 5: If your name is found in the search results, click on the hyperlinked “account number” and this will take you to a page titled “Property Detail”

Step 6: After reviewing the property description and verifying that the unclaimed property does in fact belong to you, proceed to mark the circle next to the claim type option that reads, “I am the Original Owner listed on this account.” Then click “Claim It!”

Step 7: The next page will bring up a disclaimer in a yellow box; after reading, click “Continue”

Step 8: Enter the Claimant Information on the next page. The only required entries are the claimant’s last name, full address, and country. Once you have entered the information, click “Save and Continue”

Step 9: If you have more than one account of unclaimed property, now is the time to add those claims. To add additional claims, click “Search Results” and you will be taken back to the list. Follow steps 5 & 6 to add the claims to the account.

Step 10: After you have identified all of your unclaimed properties, on the “Account Summary” page, click the button titled “Get Claim Form.” A pop-up will appear and ask if you are finished adding accounts. If you are, click the “ok” button.

Step 11: The next page will display your “claim number” and you will have the option to immediately print your claim form or to receive the form by mail. If you choose the option to print the form immediately, a yellow disclaimer box will appear on the following page along with a hyperlink that says “Click Here.” Your form will then be downloaded as a PDF, and you are ready to print.

 How to File the Claim

 To file the claim you must complete the downloaded claim form, provide proof of ownership of the property (utility bills, correspondence, etc.), and a legible copy of a valid driver’s license. Be sure to sign and date the claim form.

The completed claim form and documentation must be sent to:

                       Department of Financial Services

                       Bureau of Unclaimed Property

                       P.O. Box 8599

                       Tallahassee, FL 32314

You should allow up to 90 days from the date in which the claim is deemed “complete” for the Bureau of Unclaimed Property to make a decision on the claim.

And there you have it! Happy Searching!

Should a New Doctor Buy a Tail When Moving to Florida?

Recently a client asked us the question if buying a tail is necessary when you move to Florida.  Our response to the client is below:

Dear Client:

This is a tough call.

Chances are that he/she will save $8,000 (really, about $4,800 after taxes, if you pay it from your PA and settle up with him/her on the side).

I have had doctors sued in these situations without coverage, and then it becomes horrific.  In his/her case, I am guessing that he/she could file a bankruptcy and be free of a suit without losing much but his/her credit rating.

A big question is whether the practice he/she left has a corporate policy that would provide coverage and defense costs (at least for the company) in which case, he/she is under a lot of risk.

Another question is whether it is a licensing violation in the state he/she practiced in to not buy a tail and have coverage.  If so, then the patient might file a license complaint and this could implicate the Florida license because of cross-state reporting.  Florida would not punish a doctor who does buy a tail, last I heard.

Also, is he/she contractually required to pay for the coverage, and if so, will the practice sue him/her, or accept perhaps $4,000 paid to them if they have a corporate policy?

Finally, is there any way to buy less than the offered amount of coverage or to have a large deductible?

Please let me know if I can provide any further information or ideas.

Best personal regards,

Alan S. Gassman

Seminar Announcement – Pinellas County Estate Planning Council Annual Seminar, Thursday, October 23, 2014

See Alan Gassman, Michael Halloran and Sean Casey at the Annual Pinellas County Estate Planning seminar on Thursday, October 23, 2014 from 8:00 am to 11:50 am.

Sean Casey is the Regional Director of Portfolio Management for Fifth Third Bank. He is a successful global portfolio manager for high net-worth individuals and institutions specializing in relative value positioning among equities, fixed income and currencies, commodities, and alternatives.  He earned his degree in International Economics and Finance from Fairleigh Dickinson University.

Michael W. Halloran is a Wealth Management Advisor with Northwestern Mutual. Mr. Halloran has been in the financial services industry for over 40 years. Mr. Halloran is a graduate of Florida State University and the American College. Mr. Halloran holds the following designations: CFP®, AEP®, CLU®, ChFC®, LUTC®, RHU®, REBC®. Additionally, he is Series 7, 8, 63, 65, and Life, Health, Long Term Care, and Annuity licensed.

Mr. Halloran guides clients in reaching financial security from every aspect through long-term relationships that are based on value and integrity. His approach to financial planning involves analyzing, planning, and implementing customized strategies. More specifically, Mr. Halloran’s expertise lies in estate and business planning for individuals and businesses.

In recognition of his skills and expertise, Mr. Halloran has received several industry awards, has been featured in publications including National Underwriter, Capital Executive, New York University Review, Money, Life Association News, Life Insurance Selling, USA TODAY, New York Times, Chicago Tribune, Congressional Quarterly, Dow Jones News Wire, and has spoken in numerous states on various financial planning topics.

Mr. Halloran is the immediate Past President of the National Association of Estate Planners and Councils, past National Director of the Society of Financial Services Professionals, past Board of Directors of Florida Association of Insurance and Financial Advisors, past President of Jacksonville Association of Insurance and Financial Advisors, past President of the Estate Planning Council of Northeast Florida, is the Executive Director of Physicians Nationwide, is a Member of the Estate Strategies Group, and other community organization boards.

The topics and schedule are as follows:

7:15 am – 8:00 am – Breakfast/Networking

8:00 am – 8:50 am – Presentation #1 – “Economic Overview”

Sean Casey, Fifth Third Private Bank

Casey pic

8:50 am – 9:00 am – Break

9:00 am – 9:50 am – Presentation #2 – “Planning for Same Sex Couples”

Alan S. Gassman, Esq., Gassman, Crotty & Denicolo, P.A.

9:50 am – 10:00 am – Break

10:00 am – 10:50 am – Presentation #3 – “Charitable Remainder and Charitable Lead Trusts”

Michael Halloran, Estate Strategies Group

Halloran

10:50 am – 11:00 am – Break

11:00 am – 11:50 am – Presentation #4 – “Combining a Domestic Asset Protection Trust with a Double LLC for Maximum Protection”

Michael Halloran, Estate Strategies Group

This seminar qualifies for 4 hours of continuing education credit.

Cost: $95 per person.

Contact Alan Gassman at agassman@gassmanpa.com or Ellen Mantegna at emantegna@verizon.net to register for this program.

All attendees will receive our latest, 102 page book, The Florida Advisor’s Guide to Counseling Same-Sex Couples. We have had very good reviews from this book so far. It will also be available on Amazon in the coming weeks. If you would like a pre-publication discount, please let us know by contacting Alan Gassman at agassman@gassmanpa.com.

We thank Fifth Third Bank, Pinellas Community Foundation, Ruth Eckerd Hall, and the Clearwater Marine Aquarium for their support of this excellent annual event, which will take place at Ruth Eckerd Hall, 1111 N McMullen Booth Rd, Clearwater, FL 33759.

Thoughtful Corner – Enhancing Your Professional Practice

The Miami Lakes Bar Association presents “ENHANCING YOUR PROFESSIONAL PRACTICE” on Sunday, October 19, 2014 from 1:00 to 5:00 P.M. This program consists of strategies and approaches for making your professional practice more enjoyable and effective while increasing profitability and team member participation. It will also qualify for 4 hours of CLE and CPE credit.

Alan S. Gassman and Phil Rarick will lead a half-day, continuing education workshop for improving the efficiency, effectiveness and profitability of your professional legal practice.  This workshop is well suited for both experienced and successful lawyers, as well as new lawyers and those who would like to change their present situations.

WHAT WILL BE COVERED:

Drawing from many years of study and trial and error with a great many tools and techniques that have worked for Mr. Gassman’s firm and others, the exercises and discussion group process has been shown to dramatically help professionals stop wasting time and money, gain control of their priorities, and create a working environment where employees, including lawyers, are excited to show up every morning.

Workshop participants can expect dynamic one-one-one and small group conversations that are right on point to help with decision making and problem solving, and to enable participants to identify and take advantage of opportunities that they have not realized exist. Office managers are also welcome.  For the best results bring a list of some goals, trouble spots, and an open mind for brainstorming good decision making.

An optional cocktail and social hour following the workshop is a great opportunity for solidifying thinking and decisions and getting to know the other participants once the day is over. A follow-up event may be scheduled to help assure that promises made are not promises broken!

TIME:  1-5pm

DATE: Sunday, October 19, 2014

LOCATION: Shula’s Hotel, 6842 Main Street, Miami Lakes, FL 33014 | Boardroom

COST: $35 per person

RSVP: This workshop will be limited to a small number of participants to ensure that everyone receives individualized attention, so please contact Christy at cmedina@raricklaw.com or (305) 556-5209 to secure your spot today!

WHAT OTHERS HAVE SAID:

The following are testimonials from past workshop participants:

 I am super charged from the workshop.  I have already started to work towards my written goals and my subconscious has me waking up almost 2 hours earlier ready to start my day – one of my goals!  It really works.  I am very grateful to be a part of this and part of your professional community.  All of this came from a New Year’s resolution last year – I was determined to reach out to professionals I admired even if I felt silly.  I wrote you an email when you were in the Galapagos with Marcia & you responded!  I was amazed.  I had no idea how that email would change my life.  Thanks for everything you do and all the ways you help me develop professionally and personally.

 -Debbie Faulkner, Esquire, The Faulkner Firm, P.A.

 By having the opportunity to discuss my goals and the obstacles keeping me from achieving those goals with other professionals I was able to define my path to achieve those goals like never before.

 Not only was I able to improve myself personally, but I also had the unexpected opportunity of being able to have very candid discussions about law practice management and what actually works and doesn’t work with experienced lawyers who provided great advice for me as a new lawyer entering the field.           

 The entire experience was invaluable and far more than what I thought it may be. I am very much looking forward to our next session to continue to develop as a young lawyer both personally and professionally.

 – Brandon Ketron, Stetson Law Student

 The Workshop was extremely helpful for both my professional and personal development.  Alan Gassman made the seminar informative and engaging.  I would recommend attending the seminar if you are serious about increasing productivity, meeting goals, and becoming a happier person.

 – Travis Arango, Stetson Law Student

 ABOUT PHIL RARICK, J.D.:

Phillip B. Rarick, J.D. has over 30 years of experience in both private and public legal work.  Mr. Rarick concentrates in the fields of estate planning (wills and trusts), asset protection, probate, and corporate law.  Integrated asset protection with an estate plan designed to protect wealth and secure tax advantages are a primary focus of his practice.  He is an active member of the Elder Law Section of the Florida Bar, and the Real Property, Probate and Trust Law section of the Florida Bar Association.

 Mr. Rarick is the author of a number of popular guides for fellow attorneys and the public, including Florida Probate Quick Reference Guide and Understanding Living Trusts for Florida Residents.

 Mr. Rarick is a past President of the Miami Lakes Bar Association, and has served as a board member there for 11 years.  Mr. Rarick’s email address is PhilRarick@raricklaw.com

A similar full-day workshop will be held in Clearwater, Florida on Sunday, October 5, 2014, and will also be repeated on a date to be determined in November of this year at the Ave Maria School of Law. Please contact agassman@gassmanpa.com if you are interested in attending.

Who Said What Joke Contest!

Guess who each of the following jokes belong to and win recognition, KFC chicken, and two Haddon Hall Publishing books of your choice. Second place will receive one book. Last place will receive three books.

Each joke listed below is by Robin Williams, Joan Rivers, or Joey Bishop.

Robin Williams was a comedian best known for his stand-up comedy routines and his roles in Mork & Mindy, Mrs. Doubtfire, and Good Will Hunting, for which he won an Academy Award. Robin Williams died on August 11, 2014 at age 63.

Joan Rivers was a comedienne widely known for her red carpet interviews and her comedic style in which she poked fun at celebrities or at herself. She was the first woman to host a late-night network television talk show, winning an Emmy for The Joan Rivers Show. Joan Rivers died on September 4, 2014.

Joey Bishop was an American entertainer who appeared on television as early as 1948, eventually hosting his own late-night talk show. He was also a member of the “Rat Pack” with Frank Sinatra and Dean Martin. Joey Bishop died on October 17, 2007.

  1. “People say that money is not the key to happiness, but I always figured if you have enough money, you can have a key made.”
  2. “In England, if you commit a crime, the police don’t have a gun and you don’t have a gun. If you commit a crime, the police will say: ‘Stop, or I’ll say stop again.’”
  3. “I once called my mother during a hurricane. She got on the phone and said, ‘I can’t talk to you. The lines are down.’”
  4. “I’ve actually gone to the zoo and had monkeys shout to me from their cages, ‘I’m in here when you’re walking around like that?!’”
  5. “I was so ugly that they sent my picture to Ripley’s Believe It or Not and he sent it back and said, ‘I don’t believe it.’”
  6. “My doctor is wonderful; once, when I couldn’t afford an operation, he touched up the X-rays.”
  7. “My daughter and I are very close, we speak every single day and I call her every day and I say the same thing, ‘Pick up, I know you’re there.’”
  8. “Do you think God gets stoned? I think so — look at a Platypus.”
  9. “Today you can go to a gas station and find the cash register open and the toilets locked. They must think toilet paper is worth more than money.”
  10. “Every so often, Rumsfeld comes out and goes, “I don’t know where. I don’t know when. But something awful’s going to happen. Thank you, that’s all for today, no further questions.” Excuse me, can you give me a clue? What is it, the Central “Intuitive” Agency now?”
  11. “The other day I drove home filled with pride and a sense of achievement. ‘Mama,’ I said proudly, ‘I have a new Corvette outside.’ Mama looked at me, shook her head and said sadly, ‘Please, don’t bring her in.’”
  12. “She doesn’t understand the concept of Roman numerals; she thought we fought in World War Eleven.”
  13. “And what’s George W. Bush doing now? He’s a motivational speaker. It’s kind of cool. It’s kind of like having Lindsay Lohan as a guidance counselor.”

Bonus Round: What famous comedy TV show did Joan Rivers and Robin Williams appear on together in 1977?

Email your answers to agassman@gassmanpa.com!

Humor! (Or Lack Thereof!)

For our readers who don’t make it down to Clearwater, Florida often, here’s a look at our latest Gassman Law Associates sign!

Sign - FINAL

Upcoming Seminars and Webinars

LIVE FT. LAUDERDALE PRESENTATION:

FICPA ANNUAL ACCOUNTING SHOW 

Alan S. Gassman will be speaking at the FICPA Annual Accounting Show on Thursday, September 18, 2014 on the topic of TRUST PLANNING FROM A TO Z for 50 minutes.

This presentation will introduce basic and intermediate trust planning background and provide attendees with an orderly list of the most commonly used trusts, practical features and traps for the unwary, including revocable, irrevocable and hybrid.  The discussion will include tax, creditor protection and probate and guardian considerations.

Date: Wednesday, September 17 through Friday, September 19, 2014

Location:  Fort Lauderdale, Florida

Additional Information:  For more information about this program, please contact Stephanie Thomas at ThomasS@ficpa.org

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LIVE CLEARWATER PRESENTATION:

Board Certified Tax Attorney Michael O’Leary from the Trenam Kemker firm in Tampa, Florida and Christopher Denicolo from Gassman Law Associates will be speaking at the Ruth Eckerd Hall Planned Giving Advisory Council event on Tuesday, September 23, 2014.

O'Leary

Mr. O’Leary’s topic is HOT TOPICS IN CHARITABLE PLANNING AND MORE.

Chris
Mr. Denicolo’s topic is PLANNING FOR INHERITED IRAs.

Date: Tuesday, September 23, 2014 | 5:00 p.m.

This presentation is free to members of the Ruth Eckerd Hall Planned Giving Advisory Council, Ruth Eckerd Hall members, and professionals who are attending a Ruth Eckerd Hall Planned Giving Advisory Council event for the first time.

Additional Information: You can contact Suzanne Ruley at sruley@rutheckerdhall.net or via phone at 727-791-7400, David Abelson at david.abelson@morganstanley.com or via phone at 727-773-4626, Alan S. Gassman at agassman@gassmanpa.com or via phone at 727-442-1200 or the Kentucky Fried Chicken located at 1960 Gulf to Bay Blvd, which is close in proximity to this location and available to provide you with crisp, spicy or even crispier chicken, mashed potatoes and gravy, rolls, and slaw!  Bring your 32 oz. Kentucky Fried Chicken drink container to the presentation and we will fill it with your choice of club soda or seltzer water, but no sharing permitted.

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LIVE AVE MARIA SCHOOL OF LAW PROFESSIONAL ACCELERATION WORKSHOP

Alan Gassman will present a full day workshop for third year law students, alumni and professionals at Ave Maria School of Law.  This program is designed for individuals who wish to enhance their practice and personal lives.

Date: DATE TO BE DETERMINED | 8:30am – 5pm

Location: Ave Maria School of Law, 1025 Commons Cir, Naples, FL 34119

Additional Information: To register for this program please email agassman@gassmanpa.com

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FREE LIVE WEBINAR:

Attorney Leslie A. Share will be joining Alan Gassman for a free 30 minute webinar on DEMYSTIFYING U.S. TAX AND ESTATE PLANNING CONSIDERATIONS FOR FOREIGN INVESTORS – CONCEPTS THAT YOU CAN CLEARLY UNDERSTAND AND EXPLAIN TO CLIENTS

Date:   Monday, September 29, 2014 | 5:00 p.m.

Location: Online webinar

Additional Information: To register for the webinar please click here.

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LIVE CLEARWATER PROFESSIONAL ACCELERATION WORKSHOP

Alan Gassman will be joined by several experienced attorneys and other well respected industry experts during a full day workshop for lawyers and other professionals who wish to enhance their practice and personal lives.

Date: Sunday, October 5, 2014 | 8:30am – 5pm

Location: Clarion Hotel, 20967 US 19 N., Clearwater

Additional Information: To register for this program please email agassman@gassmanpa.com.

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FREE LIVE WEBINAR

THE BCA’s OF REVERSE MORTGAGES

Alan Gassman will be presenting a webinar about reverse mortgages.

Date:  Wednesday, October 8, 2014 | 12:30 p.m.

Location: Online webinar

Additional Information:  To register for the webinar please click here.

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LIVE NEW JERSEY PRESENTATION – WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW TO REPRESENT SNOWBIRDS AND FLORIDA BASED BUSINESSES:

NEW JERSEY INSTITUTE FOR CONTINUING LEGAL EDUCATION (ICLE) SPECIAL 3 HOUR SESSION

New Jersey song trivia:  What song includes the words “Counting the cars on the New Jersey Turnpike, they’ve all gone to look for America”?  What year was it recorded and who wrote it?

Alan S. Gassman will be the sole speaker for this informative 3 hour program entitled WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW

Here is some of what the New Jersey Bar Invitation for this program provides:

New Jersey residents have always had a strong connection to Florida.  We vacation there (it is our second shore), own Florida property (or have favored relatives that do) and have family and friends living there.  Sometimes our wealthiest clients move to Florida and need guidance, and you need background in order to continue representation.

There are real and significant differences between the two states that every lawyer should be cognizant of.  For example, holographic wills are perfectly legitimate in New Jersey and anyone can serve as an executor of an estate, which is not the case in Florida.  Also, Florida=s new rules regarding LLCs are different, and if you are handling estates of New Jersey decedents who owned Florida property, there are Florida law issues that must be addressed.  Asset protection differs significantly in Florida too.

Gain the knowledge you need to assist your clients with Florida matters including:

  •  Florida specific laws involving businesses, trusts, and estates
  • Florida tax planning
  • Elective share and homestead rules
  • Liability Insulation and Planning
  • Creditor Protection and Strategies
  • Medical Practice Laws
  • Staying within Florida Bar Guidelines that allow representation of Florida clients

Comments from past attendees of this program:

  •  Excellent seminar and materials!!!
  • This was one of the best ICLE seminars yet!
  • One of the best seminars I have attended.
  • Better than mashed potatoes and gravy. Glad he didn’t serve grits!

Date: Saturday, October 11, 2014

Location:  TBD

Additional Information: This is a repeat of the same program that we gave last year, but our book is now updated for the new Florida LLC law and changes in estate and trust law.  Please tell all of your friends, neighbors, and enemies in New Jersey to come out to support this important presentation for the New Jersey Bar Association.  We will include discussions of airboats, how to get an alligator off of your driveway, how to peel a navel orange and what collard greens and grits are. For additional information, please email agassman@gassmanpa.com

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LIVE NEW PORT RICHEY PRESENTATION:

Alan S.  Gassman, Kenneth J.  Crotty and Christopher J.  Denicolo will address the North FICPA Group on Financial Analysis and Tax Planning for Investment Products, Including Variable Annuities, Fixed Annuities, Life Insurance Contracts, and Mutual Funds – What Should the Tax and Financial Advisor Know and Advise?

Be there or be an equilateral triangle!

Date: Wednesday, October 15, 2014 | 4:30 p.m.

Location: Chili’s Port Richey, 9600 US 19 N, Port Richey, Florida

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LIVE MIAMI LAKES PROFESSIONAL ACCELERATION WORKSHOP

Alan Gassman and Phil Rarick will be presenting a free half-day workshop for lawyers and other professionals who wish to enhance their practice and personal lives.

Date: Sunday, October 19, 2014 | 1pm – 5pm

Location: Shula’s Hotel, 6842 Main Street, Miami Lakes, FL 33014 | Boardroom

Cost: $35 per person

Additional Information: To register for this program please email agassman@gassmanpa.com

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LIVE CLEARWATER PRESENTATION

Alan Gassman will be speaking at the Pinellas County Estate Planning Council Fall Seminar on PLANNING FOR SAME GENDER COUPLES.

Date: Thursday, October 23, 2014 | 8:00 am

Location: Ruth Eckerd Hall, 1111 N. McMullen Booth Road, Clearwater, FL

Additional Information: To register for this event please email agassman@gassmanpa.com

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LIVE PASCO COUNTY PLANNED GIVING (AND DRINKING!) COCKTAIL HOUR AND PRESENTATION:

Alan S. Gassman and Christopher J. Denicolo will be speaking at the Pasco-Hernando State College’s Planned Giving Consortium Luncheon on Planning for Inherited IRA’s in View of the Recent Supreme Court Case – and Demystifying the “Stretch in Trust” Ira and Pension Rules

Date: Thursday, October 23, 2014 | 4:30 p.m.

Location:  Spartan Manor, 6121 Massachusetts Avenue, Port Richey, Florida

Additional Information:  For more information, please contact Maria Hixon at hixonm@phsc.edu

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LIVE SARASOTA PRESENTATION:

2014 MOTE VASCULAR SURGERY FELLOWS – FACTS OF LIFE TALK SEMINAR FOR FIRST YEAR SURGEONS

Alan Gassman will be speaking on the topic of ESTATE, MEDICAL PRACTICE, RETIREMENT, TAX, INSURANCE, AND BUY/SELL PLANNING – THE EARLIER YOU START THE SOONER YOU WILL BE SECURE

Date: October 25 – 26, 2014 | Alan Gassman is speaking on Sunday, October 26, 2014

Location: TBD

Additional Information: Please contact agassman@gassmanpa.com for additional information.

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LIVE CLEARWATER PRESENTATION:

TAMPA BAY CPA GROUP

Alan Gassman, Ken Crotty and Christopher Denicolo will be presenting THE MATHEMATICS OF ESTATE PLANNING in a 2 hour session at the Tampa Bay CPA Group Fall 2014 Seminar.

Date: November 7, 2014

Location: Marriott Hotel, 12600 Roosevelt Blvd North, St. Petersburg, FL 33716

Additional Information: For more information please contact Richard Fuller at richardf@fullercpa.com.

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LIVE UNIVERSITY OF NOTRE DAME PRESENTATION:

40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Topic #1: PLANNING WITH VARIABLE ANNUITIES AND ANALYZING REVERSE MORTGAGES

This presentation will cover the unique income tax and financial planning characteristics of fixed and variable annuities.

Topic #2: THE MATHEMATICS OF ESTATE AND ESTATE TAX PLANNING

Christopher J. Denicolo, Kenneth J. Crotty and Alan S. Gassman will also be presenting a special Wednesday late p.m. two hour dive into math concepts that are used or sometimes missed by estate and estate tax planners.  This will be an A to Z review of important concepts, intended for estate planners of all levels, sizes and ages.  Donald Duck has rated this program A+.

Date: November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

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LIVE PORT RICHEY PRESENTATION:

Alan Gassman will be speaking to the North Suncoast Estate Planning Council on Planning Opportunities for Same Sex Couples.

Date: Tuesday, November 18, 2014 | 5:30 p.m.

Location: Seven Springs Gold and Country Club, 3535 Trophy Blvd, Port Richey, FL 34655

Additional Information:  For more information please contact agassman@gassmanpa.com.

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LIVE FORT LAUDERDALE PRESENTATION:

Alan Gassman will be speaking at the 2015 Representing the Physician Seminar on the topic of DISASTER AVOIDANCE FOR THE DOCTOR’S ESTATE PLAN.

Others speakers include D. Michael O’Leary on Really Burning Hot Tax Topics, Radha V. Bachman on Checklists for Purchase and Sale of a Medical Practice, Cynthia Mikos on Dangers of Physician Recruiting Agreements and Marlan B. Wilbanks on How a Plaintiff’s Lawyer Evaluates Cases Brought by Whistleblowers

Date: January 16, 2015

Location: Renaissance Fort Lauderdale Cruise Port Hotel, 1617 SE 17th Street, Ft. Lauderdale, FL.

Additional Information: For more information, please email Alan Gassman at agassman@gassmanpa.com

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LIVE NAPLES PRESENTATION:

2nd ANNUAL AVE MARIA SCHOOL OF LAW ESTATE PLANNING CONFERENCE

Date:  Friday, May 1, 2015

Location:  Ave Maria School of Law, 1025 Commons Circle, Naples, Florida

Additional Information:  Jerry Hesch and Alan Gassman will present The Mathematics of Estate Planning.  If you liked Donald Duck in Mathematics Land, you will love The Mathematics of Estate Planning.  This will not be a Mickey Mouse presentation.

Other speakers include Jonathan Gopman, Bill Snyder, Elizabeth Morgan, Greg Holtz, and others.

Please let us know any questions, comments, or suggestions you might have for this amazing conference, which features dual session selection opportunities in one of the most beautiful conference facilities that we have ever seen.

And don’t forget to have a great weekend in Naples with your significant other or anyone who your significant other doesn’t know!  Domino’s Pizza is extra. 

NOTABLE SEMINARS BY OTHERS
(We aren’t speaking but don’t tell our mothers!)

 LIVE ORLANDO PRESENTATION

49th ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 12 – 16, 2015

Location: Orlando World Center Marriott 8701 World Center Drive, Orlando, Florida

Additional Information: For more information please visit: https://www.law.miami.edu/heckerling/?op=0

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION

Date: Thursday, February 12, 2015

Location: St. Petersburg, FL

Additional Information: Please contact Lydia Bennett Bailey at Lydia.Bailey@allkids.org for more information.

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LIVE PRESENTATION:

2015 FLORIDA TAX INSTITUTE

Date: Wednesday through Friday, April 22 – 24, 2015

Location: Grand Hyatt Tampa Bay, 2900 Bayport Drive, Tampa, FL 33607

Additional Information: Please contact Bruce Bokor at bruceb@jpfirm.com for more information.

Applicable Federal Rates

Applicable Federal Rates

 

The Thursday Report – 9.4.2014 – Bankruptcy, QLACs, and Washington, D.C.

Posted on: September 4th, 2014

 What Estate Planning and Other Lawyers Need to Know About Bankruptcy, an article by Alberto F. Gomez and Alan S. Gassman

QLAC Article Revisited – Part 3 of 3

Washington D.C. is America’s Greatest Threat, an article by Denis Kleinfeld

Humor! (or Lack Thereof!)

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

 This report and other Thursday Reports can be found on our website at www.gassmanlaw.com.

What Estate Planning and Other Lawyers Need to Know About Bankruptcy, an article by Alberto F. Gomez and Alan S. Gassman, Part 7

This is the final installment of the series on bankruptcy law that has recently been updated by Al Gomez and Alan Gassman.  Click here if you would like to print out the entire article.

HOMESTEAD EXEMPTION

The “mansion loophole closing” provisions of the 2005 Bankruptcy Act will reduce the protected homestead equity value to as low as $155,675 if one of three exception provisions applies:

(1) The entire value of homestead property will not be protected where its value has been increased by a disposition of non-exempt property made by the debtor during the 10 years prior to filing bankruptcy with the intent of hindering, delaying, or defrauding creditors. 51

The reduction is based upon the value of the homestead resulting from such “fraudulent transfers.”  The courts must determine how to apportion appreciation in the value of a homestead that occurs after the “fraudulent conversion” has occurred.

(2) A debtor cannot exempt any amount of homestead property worth in excess of $155,675 that is acquired during the 1,215 days (three years and four months) before the bankruptcy filing.52

This was originally $125,000, but under the legislation adjusted to $155,675 on April 1, 2010, and will adjust with the Consumer Price Index each three years thereafter pursuant to U.S.C. Section 104(b).

This is not an intent-based provision, but applies automatically when a person does not have the requisite time period to qualify for protection.

As an exception to this $155,675 cap, money derived from the sale of a prior residence can be applied to facilitate the purchase of a replacement property if certain requirements are met. Where the new homestead costs significantly more than the prior homestead, the amount of homestead protection is limited to $155,675 plus the proceeds from the sale of the prior residence used to purchase the new residence.

Several issues will arise with respect to how to handle appreciation, depreciation, and amortization of mortgage indebtedness in the context of successor homes.

In a post-BAPCPA case decided in October of 2005, In re Charles H. Wayrynen, a debtor who had not lived in Florida 1,215 days filed bankruptcy with a homestead and was found not to be subject to the $136,875 cap.53  The court found that the statute would only apply where the debtor elects to use state exemptions, and Floridians are required to use the state exemptions, and have no elective choice between the federal and state exemptions.

Whoever drafted the statute must have assumed that all debtors have the opportunity to elect to use the federal exemptions or the state exemptions, not realizing that in Florida the debtors are required to use the state exemptions. Congress’ obvious intent was to limit the Homestead Exemption to $155,675 for debtors who choose to flee to debtor-friendly Homestead Exemption states, the most notable being Florida and Texas, unless the debtor resides in the Homestead protection state for at least 1,215 days before filing.54

At least three courts have found that the clear intent of the statue overrides the literal reading, and have enforced the 1,215-day rule in states, such as Florida and Nevada, that allow debtors to “opt out” of the federal exemptions in favor of using the state exemptions.55

(3)       The homestead exemption can be limited to an absolute cap of $155,675 where the debtor is convicted of a felony, which evidences that the filing of the bankruptcy was abusive (perhaps the rationale here is that the debtor will not need a house if he is going to jail).56

The homestead protection is limited to $155,675 where the debt involved arises from the violation of federal or state securities laws, fiduciary fraud violations of RICO, intentional torts or willful or reckless conduct resulting in serious physical injury or death in the preceding five years.57 Doubtlessly, there will be more suits filed against doctors alleging willful and reckless conduct in malpractice actions.

The Section 522(q)(1) reduction to $155,675 will not apply to the extent that the homestead property is reasonably necessary for the support of the debtor and any dependant of the debtor.58   How much of a home will debtors be found to need?

a.   Two spouses enjoy the benefit of two caps?  In In re Rasmussen,59 349 B.R. 747 (M.D. Fla. 2006), the Bankruptcy court in the Middle District of Florida ruled that two spouses could stack their state law homestead exemptions together creating $250,000 of coverage for their home.  The court cited Section 522(m) which applies Section 522 separately to individuals filing joint bankruptcy cases.  The court went on to analogize the homestead exemption to other exemptions married bankrupts may file together such as $2,000 total for automobile exemptions and $2,000 total for personal property exemptions.

b.  The homestead of a married debtor residing in a tenants by the entireties state may be protected if the homestead is owned as tenants by the entireties, thus, circumventing the exceptions to homestead protection described above.

c. The home to be protected does not appear to be required to be actually occupied as a principal residence for the 1,215 days.60  Many individuals will therefore be advised to acquire a second home in a homestead protective state such as Florida or Texas to start the 1,215-day period, and then to move to such state 730 days before filing a bankruptcy.

d. A debtor can lose his or her house if he or she loses the discharge.  Paying one’s mortgage down with non-exempt monies can be detrimental where the payment causes the debtor to lose his bankruptcy discharge.  In the case of In re Chauncey, a pre-BAPCPA case, the United States District Court affirmed the Bankruptcy Court opinion where the debtor went bankrupt within one year from having a personal injury settlement applied to pay down her mortgage.61

Because the personal injury settlement was non-exempt money, the Bankruptcy Court denied the discharge.  Moreover, the Bankruptcy Court imposed an equitable lien upon Mrs. Chauncey’s home in order to allow the creditor to recover the monies that were secreted into the home from the personal injury settlement.

e. Fear and loathing in Florida – A married physician owing a joint mortgaged house and individual exposed assets meets a potential judgment creditor. Assume that a married physician has cash or similar liquid assets exposed to creditor claims and a serious malpractice action against her.

The Florida Supreme Court has held that a fraudulent transfer into a homestead owned by her would not be susceptible to the Florida Fraudulent Transfer Statute.62  This means that a creditor would not be able to force her to sell the home if it is her legitimate homestead when the creditor attempts to collect upon a judgment.

A “transfer into a homestead” can include buying a new home, paying to improve a home, or paying down a mortgage on a home.63

The creditor might attempt to force the doctor into bankruptcy.  If the doctor has 12 legitimate creditors, which could include “material” credit card debts and/or other individual (including joint) indebtedness, then it would take three creditors to force her into bankruptcy. One issue is if the doctor is not eligible to file then can the involuntary petition stick? 64 For instance, a possible argument is that in order to qualify as a debtor, the debtor must pass a “means test”. If the debtor is not eligible, then the involuntary petition should be dismissed.

If the doctor is forced into bankruptcy with her “fraudulently acquired” home, then under the Bankruptcy Code she loses the homestead protection (exemption) to the extent of the value of the homestead attributable to such fraudulent transfers65 (but there will be at least $155,675 of protection notwithstanding).66

The transfer into the homestead may not actually be a fraudulent transfer under the Bankruptcy Code.  For example, if the doctor buys the home because she wants to have a larger home for her family, and at the time she buys the house it is the opinion of reputable legal counsel that the lawsuit is nothing to worry about because she has enough malpractice insurance or other assets set aside to cover any likely potential verdict, then the creditor may not be able to satisfy its burden of showing that the homestead transfer was subject to the fraudulent transfer rules.

How about if the doctor transfers her cash into a jointly owned homestead, either by simply purchasing a joint homestead, or improving or paying down the mortgage on a jointly owned homestead.

Using this approach, the doctor could later file bankruptcy and would not have to “take the homestead exemption” in bankruptcy because her Florida jointly owned property can qualify under the “tenancy by the entireties” exception.  Therefore, the bankruptcy code 10-year look back for fraudulent transfers into a homestead would not apply, because the exemption in bankruptcy would be based upon tenancy by the entireties, and not homestead.

A possible problem here is that the transfer of monies by the debtor into a joint homestead could be considered a fraudulent transfer of one half of those monies to the husband under the BAPCPA.  While the Florida Fraudulent Transfer Rules are trumped by the state law homestead exemption, if the doctor is forced into bankruptcy it is possible that the Bankruptcy Court’s ability to pursue the “transferee of a fraudulent transfer” could result in the husband being pursued for one-half (½) of the amounts transferred.

If the husband has no other significant assets, then this may not be a problem.  Even if there is a judgment against the husband for having received a fraudulent transfer, the creditor will not be able to attach the husband’s homestead under Florida law, unless the husband could then be forced into bankruptcy and then be subject to the 10-year look back rule.  If the husband has other assets that would be subject to creditor claims in bankruptcy, then this alternative of transferring assets into a joint homestead, as opposed to moving such assets into a solely held homestead, may not be advantageous.

What about if the doctor uses her money to buy out her husband’s half of the homestead? If the wife has $500,000 in cash and the jointly owned home has $1,000,000 in equity, she can transfer the $500,000 in cash to her husband in exchange for 100% ownership of the home.  In effect she has purchased the husband’s ownership in the home.

The question becomes whether the husband has then received $500,000 as a fraudulent transfer that could be set aside under the fraudulent transfer rules?

When the debtor (doctor) has transferred assets as “good and valuable consideration” in exchange for 100% ownership in a homestead, then the creditor is going to have a more difficult burden to satisfy, because under the fraudulent transfer rules a “fraudulent transfer” made for “adequate consideration” can only be set aside if it can be proven that the transfer was made with actual intent to hinder, delay, or defraud” a creditor.67

If a transfer is not made for valuable consideration, then the creditors have a lower burden in establishing that the “fraudulent transfer statute” applies.  Under such circumstances (where there is not adequate consideration for the transfer) the fraudulent transfer statutes allow for the transfer to be set aside under circumstances defined in the statute.68

Thus, if a physician senses impending insolvency she may be wise to buy her spouse’s half of the homestead property and have him hold the cash in a separate account, portfolio, or other liquid form. If the transfer is deemed “fraudulent” the spouse can return the money to the doctor’s creditor without penalty, none-the-worse for having tried. If the transfer is not deemed “fraudulent” the physician has in effect saved a substantial asset by keeping it in the family.

CONCLUSION 

Bottom line: Estate planners giving asset protection advice need to help make their client aware of the many pitfalls that can exist in the world of bankruptcy. We recommend consultation with a bankruptcy lawyer before undertaking planning steps that may someday be criticized by a bankruptcy judge and/or litigation counsel.

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5111 U.S.C. Section 522(o) (2007).
5211 U.S.C. Section 522(p) (2007); but see Steve Leimberg’s Employee Benefits and Retirement Planning Newsletter #75 (Dec. 9, 2005) at www.leimbergservices.com which discussed In re Blair, No. 05-35922-HDH-7 (Bankr. Ct. N.D. Texas) in which an increase in the value of a debtor’s homestead (increase of value of over $136,875 in 12 day period) was not subject to the $136,875 cap; however, the article cautioned that irregular payments of a mortgage may not be disregarded.
53In re Charles H. Wayrynen, 2005 WL 2756059 (Bankr. S.D. Fla. 2005).
54Some states may offer unlimited protection like Florida, Texas, Kansas and Iowa while other states provide protection well below the federal limit like Arkansas, which only offers $2,500 as a state homestead exemption protection.
55See Steve Leimberg’s Asset Protection Planning Newsletter # 74 (Nov. 17, 2005) at www.leimbergservices.com which discussed In re Virissimo and In re Heisel,Chapter 7, Case Nos. BK-s-13605-LBR and BK-S-05-15667-LBR, a decision by U.S. Bankruptcy Judge Linda B. Riegle which resolved both In re Robert and Virissimo and In re Cheryl Heisel. The court applied the federal $136,875 cap to debtors in Nevada which provides a $200,000 cap on homestead and $350,000 effective July 1, 2005; see also In re Kaplan, 331 B.R. 483 (S.D. Fla. 2005) which applied the federal $136,875 to a Florida (a state that requires state exemptions and does not allow debtors to choose between state or federal exemptions) debtor and stated, “[d]etermining whether the homestead caps apply in Florida should not be in dispute and should not distract us further. This Court sincerely hopes that there will be uniformity amongst the Florida judges in finding, as this Court does with certainty, that the limitations in Bankruptcy Code Section 522(p) and (q) apply to debtors claiming exemptions under Florida law.”
5611 U.S.C. Section 522(q) (2010).
5711 U.S.C. Section 522(q)(1) (2010).
5811 U.S.C. Section 522(q)(2) (2010).
59 349 B.R. 747 (M.D. Fla. 2006).
6011 U.S.C. Section 522(p) (2007).
61In re Chauncey, 2005 WL 2456223 (S.D. Fla. 2005).
62Havoco of America, LTD. v. Hill, 790 So.2d 1018 (Fla. 2001).
63Fla. Stat. Section 193.155(4) (2007).
64See 11 U.S.C. Section 303(b)(2) (2007) indicating that a debtor must have at least 12 legitimate creditors before filing a voluntary petition.
65Fla. Stat. Section 222.29 (2007).
6611 U.S.C. Section 522(p) (2007).
67Fla. Stat. Section 726.105(1) (2007).  See also Fla. Stat. Section 726.105(2) and the Bankruptcy Code for factors used in determining whether there exists actual intent to hinder, delay, or defraud with respect to fraudulent transfers which include the following: (a) whether the transfer was to an insider, (b) whether the debtor retained control over the transferred property, (c) whether the transfer was concealed, (d) whether the debtor was involved or threatened by a suit prior to, or at the time of, the transfer, (e) how much of the debtor’s assets were transferred, (f) whether the debtor absconded, (g) whether the debtor concealed assets, (h) the value of the property received in exchange for the property transferred, (I) Whether the debtor was insolvent at the time of, or shortly after the transfer, (j) the timing of the transfer in relation to the incurrence of a substantial debt by the debtor, and (k) whether the debtor transferred essential business assets to a lienor, who then transferred the assets to an insider.
68See 11 U.S.C. Section 548(a)(1) (2007).

QLAC Article – Revisited, Part 3 

The following is part 3 of our article that was featured on Leimberg Information Services two weeks ago.  We thank Steve Leimberg and his staff at Leimberg Information Services for allowing us to reprint this article for Thursday Report readers.

 Alan Gassman, Christopher Denicolo & Brandon Ketron:
A Practical Approach to
Qualifying Longevity Annuity Contracts (QLACs) – Using the (King) L.E.A.R. (Life Expectancy And Return) Analysis to Determine Whether Clients Should Invest in Specially Designed Annuity Products under Their IRA or Qualified Retirement Plans

COMMENT:

QLACs offer taxpayers the opportunity to defer income taxes that would otherwise result from the larger required minimum distributions that would apply if a portion of the taxpayer’s IRA or other retirement plan were not used to purchase a QLAC.  However, the widespread prevalence of QLACs in the marketplace might not occur for some time, as the authors are not aware of any life insurance or annuity companies having released their QLAC products as of the time of this writing.  In any event, the choice of investing in a QLAC turns on several factors, the most significant of which are whether the taxpayer wants fixed income features in the portfolio and whether the taxpayer will live long enough to realize a positive rate of return.  Therefore, it is important to run an appropriate analysis, such as the L.E.A.R. analysis, to take into account the taxpayer’s life expectancy and possible rates of return on the investment in the QLAC.

Under a typical QLAC arrangement, a taxpayer could invest $125,000 (the maximum amount that can be invested is the lesser of (1) 25% of the value of the qualified account at the time of the investment; or (2) $125,000) into a deferred income annuity contract that would pay-out monthly income at an elected age (not to exceed 85) to the taxpayer.

One very knowledgeable advisor, Michael Morrissey of Vanguard’s annuity division gave the authors the following example of how a hypothetical QLAC might perform:

A 65 year-old male who wants to receive a monthly income of $1,000 per month for life beginning at age 80 can pay $47,920 for a life annuity right now.  The annuity contract would include not only the above payments, but also a refund on death to the extent that the total payments received before death did not amount to $47,920.  The value of this contract would not be subject to the required minimum distribution rules until the gentleman reaches age 80.

The new Regulations require that payments from a QLAC must begin to be made by age 85.  A 65 year-old male who wants to receive $1,000 a month for life beginning at age 85 would only have to pay $26,634 for a Vanguard life annuity contract, which would also provide a refund to the extent that total payments are less than $26,634 upon death.

In both of the above arrangements there is a death benefit feature, which provides that if the account holder dies before receiving payments equal to the amount invested, then the deficit amount will be paid to the account holder’s beneficiaries (typically without interest) shortly after his or her death.  In the alternative, payments might continue for the lifetime of a surviving spouse who could roll the annuity over to his or her own IRA and continue to have the benefit of payment rights.  If the account holder dies before the elected age to begin distributions, the new Regulations allow a contract to return only the principal amount invested.

The death benefit restrictions are a major drawback of the new Regulations.  These restrictions essentially require an account holder to outlive his or her life expectancy in order to receive a positive rate of return.

In the above-mentioned example, a 65 year-old male who contributes $47,920 to receive monthly income of $1,000 at the age of 80 would have to live for 48 months (age 84) in order to receive a positive rate of return.  If the gentleman passed away before this time period, then he would receive only a return of principal, meaning that his rate of return would be zero.  Based on IRS published life expectancy Table 2000CM, the average 65 year-old male has a 46% chance to live long enough to receive a positive rate of return. In order to receive a rate of return of roughly 3%, the gentleman would have to live until age 86.  Under Table 2000CM, the gentleman has a 37% chance of living until age 86.

The authors have prepared a spreadsheet to illustrate the financial utility and tax implications of acquiring a QLAC under an IRA, relative to retaining in the IRA and continuing to invest in accordance with past practices the funds otherwise used to acquire the QLAC.  One example assumes that a 65 year-old male taxpayer has $500,000 in an IRA that is growing at 3.5% per year.  The taxpayer invests the maximum premium amount of $125,000 into a QLAC that will provide yearly payments of $51,948 beginning when the taxpayer attains age 85.  When required minimum distributions from the IRA begin upon the taxpayer attaining the age of 70 1/2, the QLAC will not count as part of the IRA balance, resulting in a reduction of the minimum distribution for that year by $5,697.02 and resulting tax savings (deferral) for that year of $2,220.73. At the age of 85 when the QLAC will begin to make payments, the taxpayer will have total tax savings of $40,916.31.

All payments from the QLAC are fully taxable and made directly to the taxpayer, not into the IRA or other applicable retirement plan.  The taxpayer is still required to take the required minimum distributions from the non-QLAC portion of his or her IRA or other applicable retirement plan, because neither the value of the QLAC nor the payments therefrom will count in determining the minimum distribution requirements.  Any payments from the QLAC that occur after the annuitization beginning date will satisfy the required minimum distributions relating to the value of the QLAC.

From an investment standpoint, the benefit of investing in a QLAC backfires and causes more harm than good if the taxpayer does not live long enough to have the contract provide a positive rate of return.  For example, assume that the taxpayer does not invest $125,000 in the QLAC, and instead leaves the funds in the IRA growing at 3.5% per year in order to compare the two options.

For the investment in the QLAC to provide a greater rate of return, than 3.5%, the individual would have to live to the age of 90.  If the IRA was to grow at 6% per year, then the individual would have to live to the age of 95 in order for the QLAC to provide a higher rate of return.  The longer that the individual lives, the greater the rate of return will be.  Below is a chart comparing the two options at a 3.5% rate of return and at a 6% rate of return, based upon the value of the applicable portion of the IRA.  A detailed spreadsheet showing the results of these options is available upon request.

QLAC Chart 1

 

 

QLAC Chart 2

Conclusion

The QLAC Regulations provide a flexible and possibly advantageous (but complicated) planning opportunity that could boost the popularity of longevity annuities as a retirement planning tool.  The applicable Regulations provide potential tax savings by allowing a taxpayer to delay a portion of required minimum distributions from a retirement plan until the taxpayer attains the age of 85, although the potential tax savings could be offset by the financial performance of the QLAC relative to other investments if the taxpayer does not live to a certain age.

There will doubtlessly be interaction and confusion between these rules and the QLAC products, and between the traditional IRA and retirement plan investments typically undertaken by taxpayers and/or their plan administrators and QLACs from a financial investment standpoint.  Practitioners would greatly benefit from literature and illustrations showing the real financial impact and results (taking into account both tax savings AND financial performance) of investing in a QLAC, which hopefully will be made available to the public when (or soon after) carriers release QLAC into the marketplace.  It is important that planners run appropriate analysis to determine whether a QLAC is a right fit for the client, in light of the client’s possible life expectancy and expected rates of return from the investment.

Washington, D.C. is America’s Greatest Threat
By: Denis Kleinfeld

Kleinfeld

The Political Establishment of Washington D.C. comprises the Congress, the President, the bureaucracy, and the lobbyists.

It sees the public as docile fools to be duped at election time and looted at will, a criminal class that must be carefully controlled by all means.  Washington, D.C. is politically using a feudal system in the age of the internet.

Polls consistently reflect that Congress is less valued to the voters than cockroaches. The President, even to his supporters and defenders, is no longer trusted. The bureaucracies are viewed as bloated organizations, hostile to the public that supports them, and unnecessary. Lobbyists are parasites who live off this culture of corruption.

Congress asserts a right of unlimited power all blessed by the Supreme Court as the King was blessed by the Church. Congress has little hesitation to control every aspect of life from before birth to after death. Their power of enforcement is based on the age old ability to inflict terrible harm and violence on any who are deemed offenders. Those in power understand the usefulness of terror.

Lawyer and non-lawyers alike maintain, out of tradition, some amount of respect for the Supreme Court. Nonetheless, its stature is tarnished by the Court’s inability to articulate in their decisions any clear principles that can be respected.

The Supreme Court follows the self-created rule of deference to the government instead of deference to constitutional personal liberties of the people.  It is accepted that Court’s decisions are made on the basis of the Justices’ personal politics and private agendas. They don black robes, but they are still flawed human beings.

It is all so terribly wrong.

The primary weapon of institutional enforcement is the income tax system.  It is the most inefficient system that could possibly be devised for raising revenue to finance a government. Its complexity defies any comprehension. So-called tax experts disagree on what it means, how it should be applied, or why we do not repeal it altogether. It tells that these same attributes trouble the demoralized people working at the Internal Revenue Service.  This nightmare of a tax system is maintained solely because it is the money machine which fuels re-elections, allowing the expansion of governmental power.

The government has over a thousand federal agencies.  Waste, fraud, abuse, and outright theft of tax dollars are annually ignored by Congress and the Administration. It is easier to just rubber-stamp the unread spending bills.

The enacted budget for government’s expenses vastly exceeds tax revenues. Four of every ten dollars of expenditures, before supplemental spending bills, has to be borrowed. Interest on that debt is the fourth largest expenditure after Medicare, Social Security, and defense.

The government has no auditable books and records in the sense those in the private sector must keep them or go to jail. There is no recognizable financial statement.  The government operates according to special rules that if used by private industry would land them behind bars.

Recently, forty-seven Inspector Generals have collectively claimed in a letter that the Administration is stone-walling their respective investigations.   The Government Accountability Office diplomatically prepares numerous reports of governmental operations, makes no specific accusations against anyone for consistent systemic failures, and nobody in Congress acts on those reports.

Any form of congressional oversight is a charade. The most intense of its investigations are acted out as if just another one of those pseudo-reality shows that continues viewing season after season.  There is no actual purpose other than to keep the advertising revenues, that is, the campaign contributions, coming in. Expect more investigations to be announced since more money will be needed for the upcoming election.

The United States is being undermined by its own government. Its weakness internally means it is perceived feeble externally as well. There is not one country in the world, other than Israel, who is a true ally.

The continuation of the United States as a country based on personal liberty and a free-market economy is in jeopardy. Its greatest threat comes from its own government in Washington, D.C.

Humor! (Or Lack Thereof!)

LEGAL CONSEQUENCES OF FAMOUS NURSERY RHYMES

After Humpty Dumpty had a great fall, the owner of the wall was cited for not having a warning sign indicating that if a being was made out of eggshell, they would be sitting on the wall at their own risk. All the king’s horses and all the king’s men were cited for practicing medicine without a license. A doctor who stood by and refused to help Humpty Dumpty was not charged because he had a legitimate fear of being sued if he intervened.

Mrs. Humpty Dumpty was unable to collect on her husband’s life insurance because of a clause banning “dangerous hobbies.” When Mrs. Dumpty took the insurance company to court, the judge threw out the case because defendants cited a legal precedent, Rock-a-Bye Baby v. Law of Gravity.

Upcoming Seminars and Webinars

FREE LIVE WEBINAR

THE BCA’s OF REVERSE MORTGAGES

Alan Gassman will be presenting a webinar about reverse mortgages.

Date:  Tuesday, September 16, 2014 | 12:30 p.m.

Location: Online webinar

Additional Information:  To register for the webinar please click here.

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LIVE FT. LAUDERDALE PRESENTATION:

FICPA ANNUAL ACCOUNTING SHOW 

Alan S. Gassman will be speaking at the FICPA Annual Accounting Show on Thursday, September 18, 2014 on the topic of TRUST PLANNING FROM A TO Z for 50 minutes.

This presentation will introduce basic and intermediate trust planning background and provide attendees with an orderly list of the most commonly used trusts, practical features and traps for the unwary, including revocable, irrevocable and hybrid.  The discussion will include tax, creditor protection and probate and guardian considerations.

Date: Wednesday, September 17 through Friday, September 19, 2014

Location:  Fort Lauderdale, Florida

Additional Information:  For more information about this program, please contact Stephanie Thomas at ThomasS@ficpa.org

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LIVE CLEARWATER PRESENTATION:

Board Certified Tax Attorney Michael O’Leary from the Trenam Kemker firm in Tampa, Florida and Christopher Denicolo from Gassman Law Associates will be speaking at the Ruth Eckerd Hall Planned Giving Advisory Council event on Tuesday, September 23, 2014.

O'Leary

Mr. O’Leary’s topic is HOT TOPICS IN CHARITABLE PLANNING AND MORE.

Chris

Mr. Denicolo’s topic is PLANNING FOR INHERITED IRAs.

Date: Tuesday, September 23, 2014 | 5:00 p.m.

This presentation is free to members of the Ruth Eckerd Hall Planned Giving Advisory Council, Ruth Eckerd Hall members, and professionals who are attending a Ruth Eckerd Hall Planned Giving Advisory Council event for the first time.

Additional Information: You can contact Suzanne Ruley at sruley@rutheckerdhall.net or via phone at 727-791-7400, David Abelson at david.abelson@morganstanley.com or via phone at 727-773-4626, Alan S. Gassman at agassman@gassmanpa.com or via phone at 727-442-1200 or the Kentucky Fried Chicken located at 1960 Gulf to Bay Blvd, which is close in proximity to this location and available to provide you with crisp, spicy or even crispier chicken, mashed potatoes and gravy, rolls, and slaw!  Bring your 32 oz. Kentucky Fried Chicken drink container to the presentation and we will fill it with your choice of club soda or seltzer water, but no sharing permitted.

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LIVE AVE MARIA SCHOOL OF LAW PROFESSIONAL ACCELERATION WORKSHOP

Alan Gassman will present a full day workshop for third year law students, alumni and professionals at Ave Maria School of Law.  This program is designed for individuals who wish to enhance their practice and personal lives.

Date: Saturday, September 27, 2014 | 8:30am – 5pm

Location: Ave Maria School of Law, 1025 Commons Cir, Naples, FL 34119

Additional Information: To register for this program please email agassman@gassmanpa.com

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FREE LIVE WEBINAR:

Attorney Leslie A. Share will be joining Alan Gassman for a free 30 minute webinar on DEMYSTIFYING U.S. TAX AND ESTATE PLANNING CONSIDERATIONS FOR FOREIGN INVESTORS – CONCEPTS THAT YOU CAN CLEARLY UNDERSTAND AND EXPLAIN TO CLIENTS

Date:   Monday, September 29, 2014 | 5:00 p.m.

Location: Online webinar

Additional Information: To register for the webinar please click here.

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LIVE CLEARWATER PROFESSIONAL ACCELERATION WORKSHOP

Alan Gassman will be joined by several experienced attorneys and other well respected industry experts during a full day workshop for lawyers and other professionals who wish to enhance their practice and personal lives.

Date: Sunday, October 5, 2014 | 8:30am – 5pm

Location: Clarion Hotel, 20967 US 19 N., Clearwater

Additional Information: To register for this program please email agassman@gassmanpa.com

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LIVE NEW JERSEY PRESENTATION – WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW TO REPRESENT SNOWBIRDS AND FLORIDA BASED BUSINESSES:

NEW JERSEY INSTITUTE FOR CONTINUING LEGAL EDUCATION (ICLE) SPECIAL 3 HOUR SESSION

New Jersey song trivia:  What song includes the words “Counting the cars on the New Jersey Turnpike, they’ve all gone to look for America”?  What year was it recorded and who wrote it?

Alan S. Gassman will be the sole speaker for this informative 3 hour program entitled WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW

Here is some of what the New Jersey Bar Invitation for this program provides:

New Jersey residents have always had a strong connection to Florida.  We vacation there (it is our second shore), own Florida property (or have favored relatives that do) and have family and friends living there.  Sometimes our wealthiest clients move to Florida and need guidance, and you need background in order to continue representation.

There are real and significant differences between the two states that every lawyer should be cognizant of.  For example, holographic wills are perfectly legitimate in New Jersey and anyone can serve as an executor of an estate, which is not the case in Florida.  Also, Florida’s new rules regarding LLCs are different, and if you are handling estates of New Jersey decedents who owned Florida property, there are Florida law issues that must be addressed.  Asset protection differs significantly in Florida too.

Gain the knowledge you need to assist your clients with Florida matters including:

  • Florida specific laws involving businesses, trusts, and estates
  • Florida tax planning
  • Elective share and homestead rules
  • Liability Insulation and Planning
  • Creditor Protection and Strategies
  • Medical Practice Laws
  • Staying within Florida Bar Guidelines that allow representation of Florida clients

Comments from past attendees of this program:

  • Excellent seminar and materials!!!
  • This was one of the best ICLE seminars yet!
  • One of the best seminars I have attended.
  • Better than mashed potatoes and gravy.  Glad he didn’t serve grits!

Date: Saturday, October 11, 2014

Location: TBD

Additional Information: This is a repeat of the same program that we gave last year, but our book is now updated for the new Florida LLC law and changes in estate and trust law.  Please tell all of your friends, neighbors, and enemies in New Jersey to come out to support this important presentation for the New Jersey Bar Association.  We will include discussions of airboats, how to get an alligator off of your driveway, how to peel a navel orange and what collard greens and grits are. For additional information, please email agassman@gassmanpa.com

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LIVE NEW PORT RICHEY PRESENTATION:

Alan S.  Gassman, Kenneth J.  Crotty and Christopher J.  Denicolo will address the North FICPA Group on Financial Analysis and Tax Planning for Investment Products, Including Variable Annuities, Fixed Annuities, Life Insurance Contracts, and Mutual Funds – What Should the Tax and Financial Advisor Know and Advise?

Be there or be an equilateral triangle!

Date: Wednesday, October 15, 2014 | 4:30 p.m.

Location: Chili’s Port Richey, 9600 US 19 N, Port Richey, Florida

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LIVE MIAMI LAKES PROFESSIONAL ACCELERATION WORKSHOP

Alan Gassman and Phil Rarick will be presenting a free half-day workshop for lawyers and other professionals who wish to enhance their practice and personal lives.

Date: Sunday, October 19, 2014 | 1pm – 5pm

Location: TBD

Additional Information: To register for this program please email agassman@gassmanpa.com

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LIVE CLEARWATER PRESENTATION

Alan Gassman will be speaking at the Pinellas County Estate Planning Council Fall Seminar on PLANNING FOR SAME GENDER COUPLES.

Date: Thursday, October 23, 2014 | 8:00 am

Location: Ruth Eckerd Hall, 1111 N. McMullen Booth Road, Clearwater, FL

Additional Information: To register for this event please email agassman@gassmanpa.com

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LIVE PASCO COUNTY PLANNED GIVING (AND DRINKING!) COCKTAIL HOUR AND PRESENTATION:

Alan S. Gassman and Christopher J. Denicolo will be speaking at the Pasco-Hernando State College’s Planned Giving Consortium Luncheon on Planning for Inherited IRA’s in View of the Recent Supreme Court Case – and Demystifying the “Stretch in Trust” Ira and Pension Rules

Date: Thursday, October 23, 2014 | 4:30 p.m.

Location:  Spartan Manor, 6121 Massachusetts Avenue, Port Richey, Florida

Additional Information:  For more information, please contact Maria Hixon at hixonm@phsc.edu

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LIVE SARASOTA PRESENTATION:

2014 MOTE VASCULAR SURGERY FELLOWS – FACTS OF LIFE TALK SEMINAR FOR FIRST YEAR SURGEONS

Alan Gassman will be speaking on the topic of ESTATE, MEDICAL PRACTICE, RETIREMENT, TAX, INSURANCE, AND BUY/SELL PLANNING – THE EARLIER YOU START THE SOONER YOU WILL BE SECURE

Date: October 25 – 26, 2014 | Alan Gassman is speaking on Sunday, October 26, 2014

Location: TBD

Additional Information: Please contact agassman@gassmanpa.com for additional information.

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LIVE CLEARWATER PRESENTATION:

TAMPA BAY CPA GROUP

Alan Gassman, Ken Crotty and Christopher Denicolo will be presenting THE MATHEMATICS OF ESTATE PLANNING in a 2 hour session at the Tampa Bay CPA Group Fall 2014 Seminar.

Date: November 7, 2014

Location: Marriott Hotel, 12600 Roosevelt Blvd North, St. Petersburg, FL 33716

Additional Information: For more information please contact Richard Fuller at richardf@fullercpa.com.

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LIVE UNIVERSITY OF NOTRE DAME PRESENTATION:

40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Topic #1: PLANNING WITH VARIABLE ANNUITIES AND ANALYZING REVERSE MORTGAGES

This presentation will cover the unique income tax and financial planning characteristics of fixed and variable annuities.

Topic #2: THE MATHEMATICS OF ESTATE AND ESTATE TAX PLANNING

Christopher J. Denicolo, Kenneth J. Crotty and Alan S. Gassman will also be presenting a special Wednesday late p.m. two hour dive into math concepts that are used or sometimes missed by estate and estate tax planners.  This will be an A to Z review of important concepts, intended for estate planners of all levels, sizes and ages.  Donald Duck has rated this program A+.

Date:November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

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LIVE PORT RICHEY PRESENTATION:

Alan Gassman will be speaking to the North Suncoast Estate Planning Council on Planning Opportunities for Same Sex Couples.

Date: Tuesday, November 18, 2014 | 5:30 p.m.

Location: Seven Springs Gold and Country Club, 3535 Trophy Blvd, Port Richey, FL 34655

Additional Information: For more information please contact agassman@gassmanpa.com.

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LIVE FORT LAUDERDALE PRESENTATION:

Alan Gassman will be speaking at the 2015 Representing the Physician Seminar on the topic of DISASTER AVOIDANCE FOR THE DOCTOR’S ESTATE PLAN.

Others speakers include D. Michael O’Leary on Really Burning Hot Tax Topics, Radha V. Bachman on Checklists for Purchase and Sale of a Medical Practice, Cynthia Mikos on Dangers of Physician Recruiting Agreements and Marlan B. Wilbanks on How a Plaintiff’s Lawyer Evaluates Cases Brought by Whistleblowers

Date: January 16, 2015

Location: Renaissance Fort Lauderdale Cruise Port Hotel, 1617 SE 17th Street, Ft. Lauderdale, FL.

Additional Information:For more information, please email Alan Gassman at agassman@gassmanpa.com

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LIVE NAPLES PRESENTATION:

2nd ANNUAL AVE MARIA SCHOOL OF LAW ESTATE PLANNING CONFERENCE

Date:  Friday, May 1, 2015

Location:  Ave Maria School of Law, 1025 Commons Circle, Naples, Florida

Additional Information:  Jerry Hesch and Alan Gassman will present The Mathematics of Estate Planning.  If you liked Donald Duck in Mathematics Land, you will love The Mathematics of Estate Planning.  This will not be a Mickey Mouse presentation.

Other speakers include Jonathan Gopman, Bill Snyder, Elizabeth Morgan, Greg Holtz, and others.

Please let us know any questions, comments, or suggestions you might have for this amazing conference, which features dual session selection opportunities in one of the most beautiful conference facilities that we have ever seen.

And don’t forget to have a great weekend in Naples with your significant other or anyone who your significant other doesn’t know!  Domino’s Pizza is extra.

NOTABLE SEMINARS BY OTHERS
(We aren’t speaking but don’t tell our mothers!)

 LIVE ORLANDO PRESENTATION

49th ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 12 – 16, 2015

Location: Orlando World Center Marriott 8701 World Center Drive, Orlando, Florida

Additional Information: For more information please visit: https://www.law.miami.edu/heckerling/?op=0

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION

Date: Thursday, February 12, 2015

Location: St. Petersburg, FL

Additional Information: Please contact Lydia Bennett Bailey at Lydia.Bailey@allkids.org for more information.

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LIVE PRESENTATION:

2015 FLORIDA TAX INSTITUTE

Date: Wednesday through Friday, April 22 – 24, 2015

Location: Grand Hyatt Tampa Bay, 2900 Bayport Drive, Tampa, FL 33607

Additional Information: Please contact Bruce Bokor at bruceb@jpfirm.com for more information.

Applicable Federal Rates

Applicable Federal Rates

The Thursday Report – 8.28.14 – Labor Day Edition

Posted on: August 28th, 2014

What Estate Planning and Other Lawyers Need to Know About Bankruptcy, an article by Alberto F. Gomez and Alan S. Gassman, Part 7

QLAC Article – Revisited, Part 2 of 3

Making the Most of an American Express Platinum Card

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

 This report and other Thursday Reports can be found on our website at www.gassmanlaw.com.

What Estate Planning and Other Lawyers Need to Know About Bankruptcy, an article by Alberto F. Gomez and Alan S. Gassman, Part 7

This is a continuation of the series on bankruptcy law that has recently been updated by Al Gomez and Alan Gassman.  Click here if you would like to print out the entire article.  Next week we will cover homestead.

10 YEAR RULE FOR ASSET PROTECTION TRUSTS AND SIMILAR ARRANGEMENTS

Asset protection trusts are arrangements whereby creditors of a beneficiary may not have access to trust assets, based on the law of the jurisdiction where the trust is formed and operated.  Asset protection trust jurisdictions in the United States and abroad have proliferated.

The 2005 Bankruptcy Act makes transfers to self-settled trusts or similar devices subject to being set aside in bankruptcy when made within 10 years of filing.  A self-settled trust is a trust established by an individual that allows for the trust assets to be held for the possible benefit of that individual.  This 10-year set aside statute applies if the transfer was made with the “actual intent” to hinder, delay or defraud present or future creditors.46

The 10-year rule should not apply if the debtor forms an offshore trust for the benefit of the debtor’s family, and not for the debtor himself. “Substantial de facto control,” however, has been found to be sufficient for a court to find that the trust should be disregarded for creditor protection purposes.47

New Bankruptcy Code Section 548(e)(1) applies to both domestic and offshore asset protection trusts.  Time will tell whether asset protection trusts that have been funded for more than 10 years before the filing of bankruptcy will be better respected than they have been in the past by bankruptcy courts.

As discussed above, several bankruptcy court decisions have concluded that offshore asset protection trusts are either invalid, or that the debtors involved with offshore asset protection trusts can be jailed on contempt.48

Nevertheless, informal reports of favorable settlements reached by debtors whose creditors would apparently prefer not to “go the distance” to obtain offshore trust assets have been reported.  Further, there is no case known to the authors where the assets of an offshore asset protection trust have been involuntarily obtained by a creditor.

ANNUITIES AND LIFE INSURANCE

Some states offer unlimited protection of life insurance and the cash values of annuity contracts.  Some states only protect certain financial products if and to the extent that they are reasonably necessary for the support and/or retirement of a debtor. The life insurance, annuity, and offshore financial service industries have come to market with mutual fund wrapped products that provide income tax deferral and creditor protection for policyholders and their families.

Is an annuity a “similar device” that would not be protected in bankruptcy, under the provision applying to asset protection trusts described above, where within 10 years of filing, a transfer is made into an annuity or life insurance product with the actual intent to hinder, delay or defraud present or future creditors?

The only case that has considered this question is In re Portco, which is a March 30, 2011 Bankruptcy Court decision that held that Congress only intended to capture “a similar device [to an asset protection trust] that had the same effects as a self-settled trust, and that only an express trust was within that definition.” The court stated that the purpose of the Bankruptcy Code Section 458(c) was to thwart the protection of “domestic asset protection trust jurisdiction.” In this case a debtor company was entitled to receive real estate from a third party by contract, and instead allowed the real estate to go to a separate company owned by the same shareholder.49

At one point in the legislative process this asset protection trust 10-year set aside provision was to specifically exclude qualified retirement plans. Does this mean that the legislative intent was to specifically include many financial products that would be similar to qualified retirement plans, such as annuities?  Is the language “self-settled trust or similar device” broad enough to include annuity and life insurance arrangements where money is given to a life insurance company that invests it and makes cash available at a later time, subject to state or foreign jurisdiction creditor protection laws and arrangements?50

The conclusion of the article will appear in next week’s Thursday Report.

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4611 U.S.C. Section 548(a)(1) (2007).
47See Steve Leimberg’s Asset Protection Planning Newsletter # 70 (Sept. 12, 2005) at www.leimbergservices.com, which discusses Federal Trade Commission v. Ameridebt, 373 F. Supp.2d 558 (D. Md. 2005) in which the debtor, under FTC investigation, transferred nearly $24 million to offshore trusts and used other money to pay for lavish expenses.
48            For more information on asset protection see Barry S. Engel’s Asset Protection Planning Guide (3rd edition).
49            447 BR 590 (Bankr.S.D.Ill 2011).
50See 11 U.S.C. Section 548(e) (2007); See also Alan S. Gassman, Steven Holub, and Jeffrey M. Gad, Steve Leimberg’s Estate Planning Newsletter, No. 485.

QLAC Article – Revisited, Part 2 of 3

 The following is part 2 of our article that was featured on Leimberg Information Services last week.  We thank Steve Leimberg and his staff at Leimberg Information Services for allowing us to reprint this article for Thursday Report readers.

Alan Gassman, Christopher Denicolo & Brandon Ketron: A Practical Approach to Qualifying Longevity Annuity Contracts (QLACs) – Using the (King) L.E.A.R. (Life Expectancy And Return) Analysis to Determine Whether Clients Should Invest in Specially Designed Annuity Products under Their IRA or Qualified Retirement Plans

Other QLAC Requirements

When the QLAC is issued, the taxpayer must be notified that it is intended to be a QLAC. This is to make sure the issuer, taxpayer, plan sponsor, and IRS all know that the QLAC rules apply to this contract.  This requirement is satisfied if this language is in the contract, or in a rider or endorsement to the contract. It can also be satisfied if a certificate is issued under a group annuity contract, and the certificate states that the taxpayer’s interest is to be a QLAC.

In order to avoid surrender charges on current contracts that do not qualify as QLACs because of inadequate notice, there is a transition rule where any annuity contract dated before January 1, 2016 will not fail due to the notification requirement as long as the taxpayer is notified that the contract is intended to be a QLAC and is amended (or a rider, amendment to the certificate, or endorsement to the contract is issued) no later than December 31, 2016 to indicate that the contract is intended to be a QLAC.

Distributions must satisfy the requirements of Internal Revenue Code Section 401(a)(9) dealing with annuities in Treasury Regulation Section 1.401(a)(9)-6, except for the requirement that annuity payments commence on or before the taxpayer’s  beginning date.

Section 403(b) Plans and Section 457(b) Plans

The Final Regulations apply the QLAC qualified plan rules when a QLAC is purchased under an eligible Section 403(b) or Section 457(b) plan, rather than the rules applicable to IRAs, which are described below.

IRAs

The QLAC rules that apply to IRAs are significantly similar to the QLAC rules that apply to defined contribution retirement plans and Section 403(b) or 457(b) plans, as described above, with a few minor differences.

As applicable to defined contribution retirement plans and Section 403(b) or 457(b) plans, the amount of premiums paid for the contract under an IRA cannot exceed the lesser of 25% of the IRA account balance or $125,000 in order to be a QLAC.  This limit is reduced by the amount of premium payments made for the same contract or any other contract that was meant to be a QLAC under the IRA or any IRA, plan, or annuity.

However, the Final Regulations allow a QLAC that may be bought under an IRA within these premium limits to be purchased under another, separate IRA.  Thus, the amount of the premium paid cannot be more than the lesser of 25% of the aggregate account balance of all of such accounts or $125,000. This limit is reduced by the amount of premium payments made for the same contract or any other contract that was meant to be a QLAC under the IRA or any IRA, plan, or annuity. The Regulations also state that the trustee, custodian, or issuer of the IRA may rely on the IRA owner’s information on the amount of premiums for the dollar and percentage limits, and the amount of the IRA account balances for the purposes of the percentage limits, unless the trustee, custodian, or issuer of the IRA has knowledge to the contrary.

Since Roth IRAs are only subject to the minimum distribution rules after the death of the owner, an annuity bought under a Roth IRA is not treated as a QLAC. If a QLAC was purchased under a non-Roth IRA and that IRA is later converted or rolled over to a Roth IRA, then the QLAC would cease being a QLAC at the time of the conversion.

IRA QLACs Better for Men, Non-IRA QLACs Better for Women

One important consideration is that QLACs purchased under an IRA must use gender-distinct life expectancy tables to determine the premium or monthly payout, and QLACs purchased under a non-IRA retirement plan must use gender-neutral life expectancy tables.  This means that if a male taxpayer was faced with the alternative of purchasing the same QLAC under an IRA or under a non-IRA retirement plan, the IRA would result in a higher payout due to a shorter life expectancy being applicable to males versus the life expectancy that would apply under the gender-neutral tables.

In comparison, if a female taxpayer purchased the same QLAC under an IRA or a non-IRA retirement plan, then the non-IRA retirement plan would result in a higher payout because the female-specific life expectancy tables reflect a longer life expectancy than the gender-neutral tables.  For example a 72 year old woman might have a 17.32 year life expectancy under the IRA gender-distinct tables, and a 15.59 year life expectancy (as does a man) under the gender-neutral tables that are applicable to non-IRA retirement plans.  A 72 year old man might have a 14.26 year life expectancy under then IRA gender-distinct tables.

Defined Benefit Plans

The QLAC Regulations do not allow for the changed minimum payout rules to apply for defined benefit pension plans.  Many defined benefit plans can be converted in to rollover IRAs and can then purchase QLAC contracts.

Initial Disclosure and Annual Reporting Requirements

The Final Regulations do not call for an initial disclosure requirement specifically applicable to QLACs because of the disclosure practices that are in place for qualified retirement plans under state law and Title I of ERISA.  The Proposed Regulations had disclosure requirements that are fortunately not required by the Final Regulations.

There are pension plan annual reporting requirements under Internal Revenue Code Section 6047(d) that require annual reports to be filed with the IRS and a statement be given to the employee with the status of the contract.  The report must contain, at a minimum, the following:

  • The name, address, and identifying number of the issuer of the contract, along with information on how to contact the issuer for more information about the contract;
  • The name, address, and identifying number of the individual in whose name the contract has been purchased;
  • If the contract was purchased under a plan, the name of the plan, the plan number, and the Employer Identification Number (EIN) of the plan sponsor;
  • If payments have not yet commenced, the annuity starting date on which the annuity is scheduled to commence, the amount of the periodic annuity payable on that date, and whether that date may be accelerated;
  • For the calendar year, the amount of each premium paid for the contract and the date of the premium payment;
  • The total amount of all premiums paid for the contract through the end of the calendar year; and
  • The fair market value of the QLAC as of the close of the calendar year.

The issuer of the QLAC is also required to furnish to the taxpayer a statement with this information on or before January 31 following the year the report is required. These reports must be given each year starting with the year premiums are paid, and ending when the taxpayer attains the age of 85 or dies.  If the sole beneficiary of the QLAC is the spouse and the taxpayer dies, the reporting requirement continues until the earlier of the year when distributions to the surviving spouse begin or the year in which the surviving spouse dies.

Effective/Applicability Dates

These Regulations became effective July 2, 2014.  If an existing contract is traded for a contract that meets the QLAC requirements on or after this date, then the new contract may qualify as a QLAC and will be treated as obtained on the date of the exchange. In this situation, the fair market value of the original contract will act as the premium that counts towards the QLAC premium limit.

The conclusion of this article will be featured in next week’s Thursday Report.

Making the Most of an American Express Platinum Card

We reported on American Express Platinum Card benefits last year, but the benefits have changed somewhat and we have updated our coverage. 

If you have an American Express Platinum Card you can get a lot more benefits than you even know about by reading the following report. 

For more information you can call American Express Platinum at 1-800-443-7226.

You do not have to have your card number to call them.  They can look you up by last name and date of birth if you explain that you do not have the card or that you are driving.  They are always friendly, and usually very helpful. 

If you cannot get a reservation at a great restaurant, ask the American Express Concierge to call for you.  The success rate has been pretty good.  Restaurants will make room for American Express. 

The same can apply for hotels and other vendors – they want to have a good reputation with the American Express Travel System. 

American Express Platinum credit cards are popular because of the travel perks associated with the card, and we have included discussion of this before, which is now updated.  Below is a summary of benefits included in card membership that card holders may not be taking advantage of.  All this information can be verified by contacting American Express Platinum Card Services.

Cardholder benefits include the following travel perks:

  • Booking Travel. There are two ways to book travel with American Express when you have an American Express Platinum card.  A cardholder can call American Express Platinum Travel (1-800-443-7672) concierge service to book your travel with an agent over the phone.  A cardholder can also book online through the American Express Travel website at www.americanexpress.com/travel.  Note, however, that the American Express Platinum Travel concierge services office and the online travel office are completely separate offices.  There are different benefits depending on which service you use to book your travel.

o   Booking Online.  Booking online will allow you to earn double Membership Rewards ® points on each eligible dollar of eligible purchases made. You will receive the lowest rates guaranteed on hotels, and special rates on other travel discounts.  The cost is $6.99 per flight for domestic and $10.99 per flight for international.

o   Booking By Phone.  Platinum Travel concierge service will provide special rates and additional access to Platinum benefits and perks that you cannot get online.  This cost $39.00 per ticket. Multiple passengers, and multiple legs of the flight (including round-trip) can be included on one ticket, however the number of people and/or legs of the flight that can be included on one ticket depend on the circumstances of the travel and are determined on a case-by-case basis. The Platinum benefits include:

      • You can receive a free companion ticket anytime you buy a qualifying business or first-class ticket for an international flight with Delta, Virgin, Air France, Lufthansa, KLM Royal Dutch and Emirates and select other airlines.
        • You only have to pay tax and service fees.
        • There is no limit on the number of companion tickets you can get in a year.
        • You must be flying with two people and departing from the United States.
      • The international airline program
      • Fine Hotels and Resorts, Starwood, etc.
      • When you book travel through American Express Platinum Travel the concierge desk has a special corporate relationship with each airline that allows American Express to get through to the airlines and to have instant information access in many ways that you as a direct airline customer do not have. For example, Platinum Travel can access and unblock preferred seating on American Airlines, which is normally reserved for those with American Airlines status.
  • Travel Concierge. An added convenience is that when you book travel on American Express, they will have your travel itinerary.  The service is open 24/7 and able to help card holders in the event there is a problem, including a lost passport, or emergency medical or legal referrals.
  • Airline Lounge Access

o   Platinum card members gets you free access to participating American Airlines Admirals Club, Delta Sky Club and US Airways Club lounges when flying with that airline on that day.  The typical admission price these days for clubs is $50.  It is hard to eat and drink $50 worth of beer, apples, cheese and carrots when you have to pay a $50 admission fee, but worth a try.  If you want peace and quiet in an airport it is worth the $50, but there is no charge for the airline clubs described above if you are flying on their airline and have your platinum card.  You can also bring one guest in for free.

o   Lounges offer free internet, phone, fax, food and drinks.

o   Card members also get complimentary access to the Airspace Lounge in the Baltimore/Washington International Airport, Concourse D.

o   Card members can request to enroll in “Priority Pass Select” at no additional charge.

      • Gives access to over 600 participating airline lounges worldwide, no matter which airline you are flying that day.
      • Includes lounges located in 300 cities in the Unites States and international such as Atlanta, Houston, Miami, Orlando, Chicago, Dallas, Los Angeles, London, Paris, Stockholm, Milan, Munich, Beijing, Tokyo, Bangkok, and Santiago (but none in Tampa).
  • Baggage and Fees Perks. Every year, card members can select one of 11 airlines to get up to $200 per year in incidental airline fees credited to your account.

o   Includes fees for charges such as checked baggage, in-flight refreshments, and in-flight phone calls. Card members must register in advance online to receive this benefit.

o   Enrollment is free.  Eleven airlines are available, including Delta, American, United/Continental, JetBlue, Southwest, and Airtran.

o   Travel insurance benefits include lost baggage and trip cancellation at no additional cost when you use your card.

      • Card members get the benefit of being refunded for items, such as plane tickets, which are normally non-refundable.
      • Baggage insurance protection will cover you for losses of checked or carry-on luggage, up to $3,000 for checked items and $2,000 for carry-on.
      • Certain high-risk items, however, are only covered up to $250 each and that includes computers, jewelry, and furs.
  • Insurance

o   The Basic Cardholder, any additional cardholder, and each of these card member’s spouses or domestic partners and dependent children (under 23 years old) can receive up to $500,000 death benefit, subject to certain exclusions, if the plane crashes and the entire fare was purchased with the Platinum Card.

      • The Platinum Delta SkyMiles Card has a death benefit of up to $100,000.
      • Paid out to an estate, unless you designate a beneficiary.

o   For $9.95 per flight, you can choose to also enroll in travel delay insurance. With this, you can be reimbursed for up to $250 for expenses caused by travel delays of more than four hours, whether you are spending on additional travel or just eating at a restaurant while you wait for your flight to depart.

  • Global Entry.  American Express will refund your application fee of $100 if you apply for “Global Entry,” a government program that allows expedited clearance for pre-approved travelers returning from international destinations.

o   Global Entry is available at many major US airports including Ft. Lauderdale, Orlando, Dallas, Houston, Boston, Detroit, Charlotte, San Juan, Newark Liberty, JFK, Chicago, and Miami. GlobalEntry.gov has complete list of airports and application instructions.

  • Hotel Perks. Platinum card members have the Fine Hotel and Resort program, which has the best contract with hotels for Platinum cardholders. If these hotels are not available in the city you are visiting or those hotels are out of your budget for that trip, there are two alternate discounts that may offer a few benefits, including the Starwood program.

o   American Express Starwood Preferred Guest card, which costs an additional enrollment fee.

      • Allows card members to earn points for every dollar spent at applicable hotels, which can be redeemed for free nights, flights and more, with no blackout dates
      • Hotels include Le Méridien, Westin, W Hotels, Sheraton, and St. Regis, among others.
      • AmEx cardholders who use their card to pay will receive AmEx member rewards points, which do not expire and can be transferred to your Starwood Account to be redeemed.
      • Platinum Starwood Preferred Guest members receive free concierge services, free in-room Wi-Fi, late 4:00 pm check-outs, and free upgrades to the best available room at check-in.
      • Card members can enroll in the Starwood Gold program without actually having a separate Starwood card.  The American Express Platinum Travel concierge can sign you up for this program.  If you choose to stay at a Starwood Hotel, many hotels offer a $75 food and beverage credit for a stay of 2 or more nights.  They also may throw in free internet or other upgrades.
  • Vehicle Perks.

o   Complimentary enrollment in Hertz, Avis, and National Car Rental preferred customer programs allow you to avoid lines and get free vehicle upgrades. All you have to do is visit the Hertz, Avis, or National website, use your card number, and sign up free of charge.

o   Platinum members receive free roadside assistance for up to four service calls per year, covering $50 per service call. Services include towing, jump starts, flat tire change, and lockout service when the key is in the vehicle. Just call the number on the back of your card for assistance.

  • Purchase Protection.  Platinum cards have purchase protection on eligible purchases like clothing, electronics, and cell phones for up to $10,000 to repair, replace or reimburse you.

o   This benefit is available on items that were accidentally lost, damaged or stolen within 90 days of purchase.

  • Travel-Specific Credit Cards. American Express also offers six Delta SkyMiles Cards for those who frequently fly Delta. The Delta SkyMiles Platinum American Express card allows you to get a free checked bag for up to 9 people traveling in your party, receive Zone 1 priority boarding, double miles on Delta purchases, 20% savings on eligible in-flight purchases of food, beverages, movies, etc. You can also get coverage for eligible purchases for up to 90 days against theft or accidental damage.

American Express travel agents are available to help you with any travel related questions 24/7.  In addition, you can work with a specific agent.  We contacted Celeste (agent # 58839), Debbie (agent #6405), and Kristi (agent #56096) to help us confirm this information.  All were very helpful.

You can also authorize your assistant, secretary, or another person to get information on your behalf from American Express. You can do this and find answers to any other questions by calling customer service at 1-800-492-3344. The information gathered in this guide was verified by agents, and the full American Express Platinum Benefits Guide is available at AmericanExpress.com/benefits guide.

American Express provided the following examples to us of how they have helped card members:

“Card member had given up all hope of find a hotel in Chicago for 2 days when he contacted us.  Through one of our booking engines I was able to find a Ramada.  It was the only hotel available and with only 2 rooms left.  I booked them.”

“Card member is going on a spiritual journey to India.  He stayed at the Taj Mahal Palace previously under Fine Hotel and Resort.  Card member checked online booking sites and saw a rate of $220.00 per night plus taxes.  We compared the rates under Fine Hotel and Resort for $357.00 including amenities.  However, this card member stated that the additional amenities were not needed, so we called the facility and negotiated a much better room, buffet breakfast, and taxes for $243.35 a night.”

If you do not have an American Express Platinum Card and are interested in enrolling you can call 1-800-223-2670, and a representative will assist you with the process. The annual fee on the card is $450.

A round up of the biggest differences between booking travel through a non-AmEx website, through American Express Travel on-line, and by calling American Express Platinum Travel.

Chart

Upcoming Seminars and Webinars

LIVE ISLE OF MAN PRESENTATION:

Alan S. Gassman will be speaking on US TRUST, LLC AND TAX LAWS FOR INTERNATIONAL INVESTORS at Cayman National Bank and Trust Company on the Isle of Man

Sign up now and you will receive a free lunch!  Transportation not included.

“Half-way between England

And Ireland in the Irish Sea.”

Is a great place to discuss trusts with glee.”

Date: Wednesday, September 3, 2014

Additional Information:  If you would like to receive a copy of the materials that will be presented please email Janine Gunyan at janine@gassmanpa.com and we will send them to you once they are ready.

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FREE LIVE WEBINAR:

Ken Crotty will be presenting a free live webinar entitled AVOIDING DISASTER ON HIGHWAY 709.  The 50 minute guide to disaster avoidance with respect to gift tax returns.  This webinar will qualify for 1 hour of CLE and CPE credit.

Date: Wednesday, September 3, 2014 | 12:30 p.m. (50 minutes)

Location: Online webinar

Additional Information: To register for the webinar please click here.

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FREE LIVE WEBINAR

THE BCA’s OF REVERSE MORTGAGES

Alan Gassman will be presenting a webinar about reverse mortgages.

Date:  Tuesday, September 16, 2014 | 12:30 p.m.

Location: Online webinar

Additional Information:  To register for the webinar please click here.

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LIVE FT. LAUDERDALE PRESENTATION:

FICPA ANNUAL ACCOUNTING SHOW 

Alan S. Gassman will be speaking at the FICPA Annual Accounting Show on Thursday, September 18, 2014 on the topic of TRUST PLANNING FROM A TO Z for 50 minutes.

This presentation will introduce basic and intermediate trust planning background and provide attendees with an orderly list of the most commonly used trusts, practical features and traps for the unwary, including revocable, irrevocable and hybrid.  The discussion will include tax, creditor protection and probate and guardian considerations.

Date: Wednesday, September 17 through Friday, September 19, 2014

Location:  Fort Lauderdale, Florida

Additional Information:  For more information about this program please contact Stephanie Thomas at ThomasS@ficpa.org

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LIVE CLEARWATER PRESENTATION:

Board Certified Tax Attorney Michael O’Leary from the Trenam Kemker firm in Tampa, Florida and Christopher Denicolo from Gassman Law Associates will be speaking at the Ruth Eckerd Hall Planned Giving Advisory Council event on Tuesday, September 23, 2014.

O'Leary

Mr. O’Leary’s topic is HOT TOPICS IN CHARITABLE PLANNING AND MORE.

Chris

Mr. Denicolo’s topic is PLANNING FOR INHERITED IRAs.

Date: Tuesday, September 23, 2014 | 5:00 p.m.

This presentation is free to members of the Ruth Eckerd Hall Planned Giving Advisory Council, Ruth Eckerd Hall members, and professionals who are attending a Ruth Eckerd Hall Planned Giving Advisory Council event for the first time.

Additional Information: You can contact Suzanne Ruley at sruley@rutheckerdhall.net or via phone at 727-791-7400, David Abelson at david.abelson@morganstanley.com or via phone at 727-773-4626, Alan S. Gassman at agassman@gassmanpa.com or via phone at 727-442-1200 or the Kentucky Fried Chicken located at 1960 Gulf to Bay Blvd, which is close in proximity to this location and available to provide you with crisp, spicy or even crispier chicken, mashed potatoes and gravy, rolls, and slaw!  Bring your 32 oz. Kentucky Fried Chicken drink container to the presentation and we will fill it with your choice of club soda or seltzer water, but no sharing permitted.

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LIVE AVE MARIA SCHOOL OF LAW PROFESSIONAL ACCELERATION WORKSHOP

Alan Gassman will presenting a full day workshop for third year law students, alumni and professionals at Ave Maria School of Law.  This program is designed for individuals who wish to enhance their practice and personal lives.

Date: Saturday, September 27, 2014 | 8:30am – 5pm

Location: Ave Maria School of Law, 1025 Commons Cir, Naples, FL 34119

Additional Information: To register for this program please email agassman@gassmanpa.com.

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FREE LIVE WEBINAR:

Attorney Leslie A. Share (not related to Sonny and Cher) will be joining Alan Gassman for a free 30 minute webinar on DEMYSTIFYING U.S. TAX AND ESTATE PLANNING CONSIDERATIONS FOR FOREIGN INVESTORS – CONCEPTS THAT YOU CAN CLEARLY UNDERSTAND AND EXPLAIN TO CLIENTS

Date:   Monday, September 29, 2014 | 5:00 p.m.

Location: Online webinar

Additional Information: To register for the webinar please click here.

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LIVE CLEARWATER PROFESSIONAL ACCELERATION WORKSHOP

Alan Gassman will be joined by several experienced attorneys and other well respected industry experts during a full day workshop for lawyers and other professionals who wish to enhance their practice and personal lives.

Date: Sunday, October 5, 2014 | 8:30am – 5pm

Location: Clarion Hotel, 20967 US 19 N., Clearwater

Additional Information: To register for this program please email agassman@gassmanpa.com

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LIVE NEW JERSEY PRESENTATION – WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW TO REPRESENT SNOWBIRDS AND FLORIDA BASED BUSINESSES:

NEW JERSEY INSTITUTE FOR CONTINUING LEGAL EDUCATION (ICLE) SPECIAL 3 HOUR SESSION

New Jersey song trivia:  What song includes the words “Counting the cars on the New Jersey Turnpike, they’ve all gone to look for America”?  What year was it recorded and who wrote it?

Alan S. Gassman will be the sole speaker for this informative 3 hour program entitled WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW

Here is some of what the New Jersey Bar Invitation for this program provides:

New Jersey residents have always had a strong connection to Florida.  We vacation there (it is our second shore), own Florida property (or have favored relatives that do) and have family and friends living there.  Sometimes our wealthiest clients move to Florida and need guidance, and you need background in order to continue representation.

There are real and significant differences between the two states that every lawyer should be cognizant of.  For example, holographic wills are perfectly legitimate in New Jersey and anyone can serve as an executor of an estate, which is not the case in Florida.  Also, Florida=s new rules regarding LLCs are different, and if you are handling estates of New Jersey decedents who owned Florida property, there are Florida law issues that must be addressed.  Asset protection differs significantly in Florida too.

Gain the knowledge you need to assist your clients with Florida matters including:

  • Florida specific laws involving businesses, trusts, and estates
  • Florida tax planning
  • Elective share and homestead rules
  • Liability Insulation and Planning
  • Creditor Protection and Strategies
  • Medical Practice Laws
  • Staying within Florida Bar Guidelines that allow representation of Florida clients

Comments from past attendees of this program:

  • Excellent seminar and materials!!!
  • This was one of the best ICLE seminars yet!
  • One of the best seminars I have attended.
  • Better than mashed potatoes and gravy.  Glad he didn’t serve grits!

Date: Saturday, October 11, 2014

Location: TBD

Additional Information: This is a repeat of the same program that we gave last year, but our book is now updated for the new Florida LLC law and changes in estate and trust law.  Please tell all of your friends, neighbors, and enemies in New Jersey to come out to support this important presentation for the New Jersey Bar Association.  We will include discussions of airboats, how to get an alligator off of your driveway, how to peel a navel orange and what collard greens and grits are. For additional information, please email agassman@gassmanpa.com

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LIVE NEW PORT RICHEY PRESENTATION:

Alan S.  Gassman, Kenneth J.  Crotty and Christopher J.  Denicolo will address the North FICPA Group on Financial Analysis and Tax Planning for Investment Products, Including Variable Annuities, Fixed Annuities, Life Insurance Contracts, and Mutual Funds – What Should the Tax and Financial Advisor Know and Advise?

Be there or be an equilateral triangle!

Date: Wednesday, October 15, 2014 | 4:30 p.m.

Location: Chili’s Port Richey, 9600 US 19 N, Port Richey, Florida

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LIVE MIAMI LAKES PROFESSIONAL ACCELERATION WORKSHOP

Alan Gassman and Phil Rarick will be presenting a free half-day workshop for lawyers and other professionals who wish to enhance their practice and personal lives.

Date: Sunday, October 19, 2014 | 1pm – 5pm

Location: TBD

Additional Information: To register for this program please email agassman@gassmanpa.com

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LIVE CLEARWATER PRESENTATION

Alan Gassman will be speaking at the Pinellas County Estate Planning Council Fall Seminar on PLANNING FOR SAME GENDER COUPLES.

Date: Thursday, October 23, 2014 | 8:00 am

Location: Ruth Eckerd Hall, 1111 N. McMullen Booth Road, Clearwater, FL

Additional Information: To register for this event please email agassman@gassmanpa.com.

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LIVE PASCO COUNTY PLANNED GIVING (AND DRINKING!) COCKTAIL HOUR AND PRESENTATION:

Alan S. Gassman and Christopher J. Denicolo will be speaking at the Pasco-Hernando State College’s Planned Giving Consortium Luncheon on Planning for Inherited IRA’s in View of the Recent Supreme Court Case – and Demystifing the “Stretch in Trust” Ira and Pension Rules

Date: Thursday, October 23, 2014 | 4:30 p.m.

Location:  Spartan Manor, 6121 Massachusetts Avenue, Port Richey, Florida

Additional Information:  For more information, please contact Maria Hixon at hixonm@phsc.edu

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LIVE SARASOTA PRESENTATION:

2014 MOTE VASCULAR SURGERY FELLOWS – FACTS OF LIFE TALK SEMINAR FOR FIRST YEAR SURGEONS

Alan Gassman will be speaking on the topic of ESTATE, MEDICAL PRACTICE, RETIREMENT, TAX, INSURANCE, AND BUY/SELL PLANNING – THE EARLIER YOU START THE SOONER YOU WILL BE SECURE

Date: October 25 – 26, 2014 | Alan Gassman is speaking on Sunday, October 26, 2014

Location: TBD

Additional Information: Please contact agassman@gassmanpa.com for additional information.

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LIVE CLEARWATER PRESENTATION:

TAMPA BAY CPA GROUP

Alan Gassman, Ken Crotty and Christopher Denicolo will be presenting THE MATHEMATICS OF ESTATE PLANNING in a 2 hour session at the Tampa Bay CPA Group Fall 2014 Seminar.

Date: November 7, 2014

Location: Marriott Hotel, 12600 Roosevelt Blvd North, St. Petersburg, FL 33716

Additional Information: For more information please contact Richard Fuller at richardf@fullercpa.com.

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LIVE UNIVERSITY OF NOTRE DAME PRESENTATION:

40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Topic #1: PLANNING WITH VARIABLE ANNUITIES AND ANALYZING REVERSE MORTGAGES

This presentation will cover the unique income tax and financial planning characteristics of fixed and variable annuities.

Topic #2: THE MATHEMATICS OF ESTATE AND ESTATE TAX PLANNING

Christopher J. Denicolo, Kenneth J. Crotty and Alan S. Gassman will also be presenting a special Wednesday late p.m. two hour dive into math concepts that are used or sometimes missed by estate and estate tax planners.  This will be an A to Z review of important concepts, intended for estate planners of all levels, sizes and ages.  Donald Duck has rated this program A+.

Date:November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

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LIVE PORT RICHEY PRESENTATION:

Alan Gassman will be speaking to the North Suncoast Estate Planning Council on Planning Opportunities for Same Sex Couples.

Date: Tuesday, November 18, 2014 | 5:30 p.m.

Location: Seven Springs Gold and Country Club, 3535 Trophy Blvd, Port Richey, FL 34655

Additional Information: For more information please contact agassman@gassmanpa.com.

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LIVE FORT LAUDERDALE PRESENTATION:

Alan Gassman will be speaking at the 2015 Representing the Physician Seminar on the topic of DISASTER AVOIDANCE FOR THE DOCTOR’S ESTATE PLAN.

Others speakers include D. Michael O’Leary on Really Burning Hot Tax Topics, Radha V. Bachman on Checklists for Purchase and Sale of a Medical Practice, Cynthia Mikos on Dangers of Physician Recruiting Agreements and Marlan B. Wilbanks on How a Plaintiff’s Lawyer Evaluates Cases Brought by Whistleblowers

Date: January 16, 2015

Location: Renaissance Fort Lauderdale Cruise Port Hotel, 1617 SE 17th Street, Ft. Lauderdale, FL.

Additional Information:For more information, please email Alan Gassman at agassman@gassmanpa.com

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LIVE NAPLES PRESENTATION:

2nd ANNUAL AVE MARIA SCHOOL OF LAW ESTATE PLANNING CONFERENCE

Date:  Friday, May 1, 2015

Location:  Ave Maria School of Law, 1025 Commons Circle, Naples, Florida

Additional Information:  Jerry Hesch and Alan Gassman will present The Mathematics of Estate Planning.  If you liked Donald Duck in Mathematics Land, you will love The Mathematics of Estate Planning.  This will not be a Mickey Mouse presentation.

Other speakers include Jonathan Gopman, Bill Snyder, Elizabeth Morgan, Greg Holtz, and others.

Please let us know any questions, comments, or suggestions you might have for this amazing conference, which features dual session selection opportunities in one of the most beautiful conference facilities that we have ever seen.

And don’t forget to have a great weekend in Naples with your significant other or anyone who your significant other doesn’t know!  Domino’s Pizza is extra.

 NOTABLE SEMINARS BY OTHERS

(We aren’t speaking but don’t tell our mothers!)

 LIVE ORLANDO PRESENTATION

49th ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 12 – 16, 2015

Location: Orlando World Center Marriott 8701 World Center Drive, Orlando, Florida

Additional Information: For more information please visit: https://www.law.miami.edu/heckerling/?op=0

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION

Date: Thursday, February 12, 2015

Location: St. Petersburg, FL

Additional Information: Please contact Lydia Bennett Bailey at Lydia.Bailey@allkids.org for more information.

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LIVE PRESENTATION:

2015 FLORIDA TAX INSTITUTE

Date: Wednesday through Friday, April 22 – 24, 2015

Location: Grand Hyatt Tampa Bay, 2900 Bayport Drive, Tampa, FL 33607

Additional Information: Please contact Bruce Bokor at bruceb@jpfirm.com for more information.

AFR August

The Thursday Report – 8.21.14 – Back to School Edition

Posted on: August 21st, 2014

Thinking Through When Equal Division of Assets May Become Distorted by Lifetime Gifts, Loans, Joint Accounts, and Beneficiary Designations

School Bus Yield Laws

QLAC Article – Revisited – Part 1 of 3

Special Saturday Professional Acceleration Workshop – Saturday, September 27, 2014 in Naples, Florida

What Estate Planning and Other Lawyers Need to Know About Bankruptcy, an article by Alberto F. Gomez and Alan S. Gassman, Part 6

Thoughtful Corner – Why Good Things Happen to People Who Help Others

Coming Next Week

Humor! (or Lack Thereof!)

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

 This report and other Thursday Reports can be found on our website at www.gassmanlaw.com.

 Thinking Through When Equal Division of Assets May Become Distorted by Lifetime Gifts, Loans, Joint Accounts, and Beneficiary Designations

How often have you prepared Wills or Trusts that provide for equal division between certain individuals, and later find that the client has done things outside of the Will or Trust that will impact the economics of the situation?

The following clauses should be self-explanatory, and useful to many estate planners and clients:

I recognize that my daughters, ___________________and ___________________, and their descendants, are beneficiaries of the ___________________ 2012 IRREVOCABLE TRUST dated January 15, 2012, the ___________________IRREVOCABLE TRUST dated July 29, 2010, and the ___________________REVOCABLE LIVING TRUST and the trusts established thereunder to the extent that any assets held thereunder are not made payable to this Trust by exercise of a power of appointment or otherwise (the “Other Trusts”). It is my desire that the assets held under this Trust or payable to this Trust that comprise the Trust estate, and all assets held under the above-referenced Other Trusts be taken into account upon my death for the purposes of the two-thirds (2/3) and one-third (1/3) dispositions described in subsection (a), (b) above for the primary benefit of my descendants and ___________________, respectively, notwithstanding that ___________________ is not a permissible beneficiary of said Other Trusts.

Therefore, the trusts established under this Agreement upon my death for my descendants and for ___________________ as provided above in subsections (a) and (b) shall be balanced so that all assets held under the trust or trusts established for ___________________ are equal in value to one-third (1/3) of the sum of (i) the aggregate net value of the assets comprising the rest, remainder and residue of the Trust estate; and (ii) the aggregate net value of the assets held under said Other Trusts, upon my death. The remaining two-thirds (2/3) of the value of the assets held under or made payable to this Trust that comprise the Trust estate shall be payable to the trust or trusts established for my descendants, per stirpes, as provided in subsection (b) above.

It is my intention presently that ___________________ and I will not have significant assets owned jointly with right of survivorship, and that I will not be using pay on death accounts. It is further my intention that IRA accounts will be made payable to one-third to the trust established for ___________________, and two-thirds to the trust established for my descendants, and I acknowledge that I am modifying the applicable beneficiary designation paperwork to facilitate same on or about even date with the execution of this Trust Agreement. Notwithstanding these intentions, if the inheritance of ___________________ and/or my descendants is changed by the use of joint assets held with right of survivorship or as tenants by the entireties that exceed $50,000 in the aggregate and/or pay on death accounts, then the shares above shall be adjusted so that the overall benefits passing to and for the benefit of ___________________ and my daughters, ___________________and ___________________, result in the one-third (1/3) and two-thirds (2/3) division described above. For example, if all assets passing under this Trust to be divided are worth $1,000,000 at the time of my death and there is a $250,000 joint account held with ___________________ that was fully funded by me (including interest accruing on that account after I have placed it in joint names), then there will be a total of $1,200,000 to be divided, so that ___________________ would receive $200,000 in trust in recognition of the $250,000 joint account assets being hers, and the Trusts for my daughters and their descendants would be based upon $400,000 each passing from the Trust.

Further, while I do not intend to lend money to ___________________ or to any of my descendants or to give them large gifts, the above division shall be changed to take into account any loans exceeding $20,000 that I have given to any individual who becomes a Primary Beneficiary under this Trust or any Trust established hereunder upon my death that have not been repaid by having the amounts owed under such loan or loans, with accrued interest, considered as being held by the applicable trust for such beneficiary, regardless of whether such loan or loans are collectible, and even if payment or collection on such loan or loans have been written off or cancelled by reason of uncollectibility or the running of any statutes of limitations. Further, any gift given after execution of this Second Amended and Restated Trust Agreement to an individual who becomes a Primary Beneficiary of this Trust or any trust established hereunder at the time of my death during my lifetime that has exceeded $20,000 during any calendar year shall cause further reduction in the share of such Primary Beneficiary, as if such gifts were added as a trust asset. For example, if before my death I have loaned one of my daughters $100,000 and gifted her $50,000 in a single year, then, based on the example in the previous paragraph, $1,350,000 would be the total amount of assets considered to be divided for the purposes of the one-third/two-thirds dispositions described in subsections (a) and (b) above, and the trust for ___________________ would receive $250,000 of assets held under this Trust (in addition to the $250,000 passing to her outright by virtue of our joint account with right of survivorship), the trust for the daughter to whom I have gifted and loaned funds would be $400,000 of assets (which will be comprised of the $100,000 loan to said daughter during my lifetime), and the trust for my other daughter would receive $450,000 of assets.

School Bus Yield Laws

School is back, and so are school buses.

The primary function of a school bus is to get children safely to school and then back.

We can all help, and also avoid getting tickets, by knowing and following the below summarized traffic rules relating to school buses:

When a school bus stops and displays the stop signal, any person driving on the road or highway, in either direction, must come to a complete stop. The vehicle may not pass the bus until the stop signal has been withdrawn.

If a vehicle is traveling in the opposite direction of the school bus on a highway that is divided by at least five (5) feet of unpaved space, a raised median, or a physical barrier, the vehicle is not required to stop. 1

And while at it, let’s refresh our knowledge of what to do when there is an ambulance or police vehicle with a siren:

Upon the approach of an emergency vehicle displaying lights and sirens, the driver of every vehicle must pull over to the right-of-way in a position parallel to the closest edge of the curb and shall remain there until the emergency vehicle has passed.

If an emergency vehicle is parked on the side of the two-lane road and emergency signals are being displayed, the driver of any approaching vehicle must change lanes so that the lane closest to the emergency vehicle is empty. If the approaching vehicle is not able to change lanes, the driver must reduce his/her speed down to 20 MPH if the posted speed limit is 25 MPH or greater or 5 MPH if the posted speed limit is 20 MPH or less. 2

 What are the requirements when you have been in a small accident and you and the people who rear ended you have your vehicles in the middle of the road and you have called the police?

If a vehicle has been involved in a “fender bender” where there is only vehicle damage, the driver must immediately stop the vehicle at the scene of the crash. Every stop must be made without obstructing traffic more than necessary, however, if the vehicle is obstructing traffic the driver must make every reasonable effort to move the vehicle so it does not block the regular flow of traffic. 3 

And it never hurts to remind ourselves of red light etiquette, especially with the overpopulation of red light cameras:

When approaching a red light, the driver of the vehicle must come to a complete stop either at the stop line or before entering the crosswalk. If the driver has a view on the approaching traffic at the red light intersection, the driver may make a right turn, but must yield the right-of-way to pedestrians and to the proceeding traffic.

When driving on a one-way street that intersects another one-way street where the traffic flows to the left, the driver must come to a complete stop at the red light; however, the driver may make a left turn onto a one-way street. The vehicle must yield the right-of-way to pedestrians and to the proceeding traffic.4

1Florida Statute 316.172
2 Florida Statute 316.126
3 Florida Statute 316.061
4 Florida Statute 316.075

QLAC Article – Revisited, Part 1

The following is part 1 of our article that was featured on Leimberg Information Services yesterday.  We thank Steve Leimberg and his staff at Leimberg Information Services for allowing us to reprint this article for Thursday Report readers.

Alan Gassman, Christopher Denicolo & Brandon Ketron: A Practical Approach to Qualifying Longevity Annuity Contracts (QLACs) – Using the (King) L.E.A.R. (Life Expectancy And Return) Analysis to Determine Whether Clients Should Invest in Specially Designed Annuity Products under Their IRA or Qualified Retirement Plans

 “Who loses and who wins; who’s in, who’s out; And take upon’s the mystery of things…”

EXECUTIVE SUMMARY:

The insurance industry received a July 4th gift from the Internal Revenue Service in the form of a Final Regulations released on July 1, 2014 which make it possible to place a portion of IRA and retirement plan investments into fixed annuities called “Qualified Longevity Annuity Contracts” (QLACs) that will enable the IRA holder or plan participant to avoid the required minimum distribution rules that apply after age 70½ to the extent that IRA or plan assets are held under such vehicles.  The maximum amount that can be contributed into such fixed annuities under an IRA or pension will be the lesser of $125,000 or 25% of the value of the IRA or retirement plan account as of the time of the investment.  The $125,000 limitation applies cumulatively to all IRAs and retirement accounts that the taxpayer has, and the 25% limitation applies cumulatively to the account balance of all of such IRAs and retirement accounts.

Essentially, the value of such contracts will not be considered to be assets of the IRA or retirement plan for purposes of the required minimum distribution rules until the owner is age 85.  The authors have developed the L.E.A.R. (Life Expectancy And Return) analysis spreadsheets to enable planners to determine if and when QLACs will be worthwhile for their clients.  The main factor is the expected life expectancy of the account holder and their surviving spouse.

The basic QLAC requirements are that the annuity contract must state that it will pay fixed dollar amounts at stated intervals over a number of years for the life of a taxpayer, beginning no later than when the taxpayer attains the age of 85.  These payments distributed from the QLAC are fully taxable, and will not count towards the individual’s required minimum distribution obligations relating to non-QLAC retirement plan assets.

If the taxpayer dies before he or she has received payments equal to the amount paid for the contract, the contract may offer a return of premium option, but this option is not required by the Regulations.  The return of premium amount can be paid to the beneficiary’s IRA or retirement account, but no more than the premium amount can be paid under this option.  Thus, if the taxpayer dies before he or she has received more than his or her investment back there is, at best, a zero rate of return.

On the other hand, if the taxpayer or his or her designated beneficiaries have a life payment contract, and outlive their applicable life expectancy, then the rate of return on the contract can be positive, and they can be assured of “never running out of money.”  However, inflation and taxes may cause the real value of the payments to be lower than one might expect.  Wealthy clients with long life expectancies may therefore be well suited to purchase $125,000 in QLACs for their IRA or retirement plans.

FACTS:

The applicable Final QLAC Treasury Regulations at Sections 1.401(a)(9)-5, Q & A-3, 1.401(a)(9)-6, Q & A-12, 1.401(a)(9)-6 Q & A-17, 1.403(b)-6(e)(9) and 1.408-8, Q & A-12 allow QLACs to be held under non-Roth IRAs, defined contribution plans, and Section 403(b), and 457(b) plans, but not under defined benefit plans or Roth IRAs[i].  These Final Regulations replace Proposed Regulations that were issued in 2012 to allow commentary on this concept.    The Final Regulations are substantially similar to the 2012 Proposed Regulations, with minor changes that are noteworthy as to policy and application.

According to the Final Regulations, QLACs may not be variable or equity indexed annuities, even if they offer a guaranteed minimum rate of return, unless or until explicitly approved by the Internal Revenue Service. Instead, QLACs must be annuity contracts with a fixed rate of return, life payment, or other similar features.  The preamble to the new Regulations point out that variable and equity indexed annuities with contractual guarantees provide an unpredictable level of income to the holder and are therefore inconsistent with the purpose of the new Regulations.  It is interesting that hybrid index annuity sales literature often touts protection of principal and reliable rates of return.  The drafters of the new Regulations seem to disagree with these assertions.

QLAC Math: Donald Duck in Mathematics Land?

The premiums paid for a QLAC cannot exceed the lesser of $125,000 or 25% of the IRA or pension account balance as of the last valuation date preceding the date of a premium payment. This is increased for post-valuation date contributions added to the account and decreased for post-valuation date distributions made from the account.  The QLAC’s value is excluded from the account balance that is used to calculate the annual required minimum distributions. However, the value of the QLAC is included for applying the 25% limit. The IRS kept the dollar and percentage limit to “constrain undue deferral of distribution of an employee’s interest.”[ii]

Next Calendar Year Correction Right – The Proposed Regulations stated that if the above premium limits were exceeded, then the contract would fail to be a QLAC.  Fortunately, the Final Regulations provide that the contract will not fail to be a QLAC if any such excess portion is returned to the taxpayer’s non-QLAC portion of his or her retirement plan or IRA by the end of the calendar year following the calendar year in which the excess premium was paid.  This excess can be returned to the account in cash or in the form of an annuity contract that is not intended to be a QLAC. If at any time the QLAC or intended QLAC contract fails for reasons other than exceeding premium limits, the contract will not be treated as a QLAC from the date of the first premium payment.

Inflation Adjustments to $125,000 Amount in $10,000 Increments – The $125,000 dollar amount limitation described above will be adjusted for inflation in the same time and manner as under section 415(d) except: (1) The base period will be the quarter beginning six months before the effective date of the Regulation (the effective date of the Regulations is July 2, 2014, so the quarter beginning six months before the effective date appears to be January 1, 2014); and (2) any increase must exceed $10,000 to apply for a given year.  The 2012 Proposed Regulations had provided for a $25,000 multiple to apply.

QLAC Payment Deferral Can Only Last Until Age 85, Or Possibly Later If Mortality Tables Change – The annuity contract must provide for distributions to be made no later than a specific annuity starting date. This date cannot be later than the first day of the month following the taxpayer attaining age of 85.  A taxpayer can elect to have an earlier annuity starting date, but the contract is not required to have an option to start distributions before the annuity starting date.  The maximum age may be adjusted based on changes in mortality, although in Bulletin 2014-30, the IRS stated that it believes that these changes will not occur more often than the dollar limit adjustment.

Must be a Fixed Annuity – A variable contract under Internal Revenue Code Section 817, an indexed contract or, a similar contract will not qualify as a QLAC but the Commissioner may create an exception to this rule. However, a participating annuity contract is not similar to a variable contract or indexed contract just because it has payments of dividends as described in Treasury Regulation Section 1.401(a)(9)-6, A-14(c)(3). The Regulation also noted that a contract that has a cost-of-living adjustment discussed in Section 1.401(a)(9)-6, A-14(b), is not considered similar to a variable or indexed contract.

Illiquidity Required – A QLAC cannot make available any commutation benefit, cash surrender value, or other similar feature.  In other words, the money invested in the QLAC is illiquid and irrevocable, which is an important factor to consider before a taxpayer invests in a QLAC. According to Bulletin 2014-30, this prohibition is in place because this “feature would significantly reduce the benefit of mortality pooling under the contracts.”[iii]

Death Benefits of a QLAC

A QLAC may offer a return of premium after the death of the account holder that can be paid before or after the annuity starting date to the extent that the contract has not provided a return of the aggregate premium amount paid for the QLAC[iv].  The return of premium can be in place of a life annuity provided to a surviving spouse or designated beneficiary.  A return of premium payment must be paid in a single lump sum to the beneficiary of the QLAC before the end of the year following the year of the account holder’s or surviving spouse’s death, as applicable.

If the applicable death occurs on or before the required annuitization date for the account holder or his or her surviving spouse (no later than age 85), then the return of premium is considered as the balance of the retirement plan or IRA account value that can be rolled over by the surviving spouse into his or her own IRA, or can be transferred into an inherited IRA for the benefit of the non-spouse beneficiary.  However, if the applicable death occurs after the required annuitization date then the return of premium is seen as a required minimum distribution for the year in which it is paid.  The return of premium must be paid out to the account beneficiary when received from the carrier, and is fully taxable and cannot be rolled over into another qualified retirement plan.

If the only beneficiary of the QLAC is the account holder’s surviving spouse, and the account holder’s death occurs on or after the annuity start date, then the only benefit allowed to be paid (other than a return of premium) is a life annuity that cannot exceed 100% of the annuity payment payable to the account holder.[v]  There is a special exception that allows a QLAC to provide a qualified preretirement survivor annuity defined in Internal Revenue Code Section 417(c)(2) in order to compensate the surviving spouse for the loss of retirement benefits that would have otherwise been paid to the deceased employee.

If there are multiple beneficiaries where one of which is the surviving spouse, then the QLAC can be treated as if there were a separate QLAC for each beneficiary so that the special rules applicable only to the surviving spouse would apply.  This is only allowed if certain rules are satisfied.[vi] If the account holder’s death occurs before the annuity starting date, the only benefit payable (other than a return of premium as described above) is a life annuity where the periodic annuity payment is not more than 100% of the annuity payment that would have been available to the account holder.[vii]  However, it may exceed 100% if necessary to satisfy the requirements for a qualified preretirement survivor annuity.

If the surviving spouse is not the only beneficiary, and the account holder’s death occurs on or after the annuity starting date, then the only benefit to be paid (other than a return of premium) is a life annuity payable to a beneficiary.[viii]  The life annuity is not allowed to exceed an applicable percentage of the annuity payment payable to the employee under Treasury Regulation Section 1.401(a)(9)-6 A-17(c)(2)(iii).[ix]  The percentage is provided in one of the two tables listed in the Section.  Determining which table applies depends on the different types of death benefits that can be paid to the beneficiary under the contract.

The first table described in A-2(c) of Treasury Regulation Section 1.401(a)(9)-6[x] provides the applicable percentage distribution that must be made to the non-spouse beneficiary after the account holder’s death, and this table may only be used if the contract provides that if the account holder dies before the annuity start date, then no death benefits are payable to a non-spouse beneficiary.  However, if the account holder dies on or after his or her annuity start date, then the non-spouse beneficiary can receive a life annuity based on the above-referenced table.

Additionally, this table is available only if no benefits are payable under the contract where the taxpayer selects an earlier annuity starting date than the specified starting date under the contract, and dies less than 90 days after making that election.  This second part of the requirement is to avoid taxpayers with shortened life expectancies from circumventing the first part of the rule.

The second table is described in Treasury Regulation Section 1.401(a)(9)-6 A-17(c)(2)(iii)(D).[xi] This table is used where the contract provides a pre-annuity start date death benefit to a non-spouse beneficiary.  Under the 2012 Proposed QLAC Regulations, the use of this table was limited to contracts that only allowed non-spouse beneficiaries to be irrevocably selected as of the annuity start date. However, the Final QLAC Regulations changed this rule to allow non-spouse beneficiaries to be selected at a different time in certain situations.

It is important to note that there is no violation of this irrevocability requirement when an account holder substitutes his or her spouse as the beneficiary.  If the account holder’s spouse is not the only beneficiary, and the account holder’s death occurs before the annuity starting date, then the only payment available (other than a return of premium) is a life annuity where the payment is not more than the applicable percentage, under 1.401(a)(9)-6, A-17(c)(2)(iii), of the amount that would have been payable to the account holder.

To be continued next week.

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[i] For the purposes of this commentary, all references to “IRAs” refer only to non-Roth IRAs, including traditional IRAs described in Internal Revenue Code Section 408, SEP IRAs and SIMPLE IRAs, but not Roth IRAs unless specifically provided.

[ii]Internal Revenue Bulletin 2014-30, TD 9673.

[iii] Internal Revenue Bulletin 2014-30.

[iv]Treasury Regulation Section 1.401(a)(9)-6 A-17(c)(4)- Return of premiums—(i) In general. In lieu of a life annuity payable to a designated beneficiary under paragraph (c)(1) or (2) of this A-17, a QLAC is permitted to provide for a benefit paid to a beneficiary after the death of the employee in an amount equal to the excess of—

(A) The premium payments made with respect to the QLAC over

(B) The payments already made under the QLAC.

[v]Treasury Regulation Section 1.401(a)(9)-6, A-17(c)(1)(i): If the employee dies on or after the annuity starting date for the contract and the employee’s surviving spouse is the sole beneficiary under the contract then, except as provided in paragraph (c)(4) of this A-17, the only benefit permitted to be paid after the employee’s death is a life annuity payable to the surviving spouse where the periodic annuity payment is not in excess of 100 percent of the periodic annuity payment that is payable to the employee.

[vi]Treasury Regulation Section 1.401(a)(9)-8, A-2(a) and A-3.

[vii] Treasury Regulation Section 1.401(a)(9)-6 A-17(c)(1)(ii)(A): Amount of annuity. If the employee dies before the annuity starting date and the employee’s surviving spouse is the sole beneficiary under the contract then, except as provided in paragraph (c)(4) of this A-17, the only benefit permitted to be paid after the employee’s death is a life annuity payable to the surviving spouse where the periodic annuity payment is not in excess of 100 percent of the periodic annuity payment that would have been payable to the employee as of the date that benefits to the surviving spouse commence.  However, the annuity is permitted to exceed 100 percent of the periodic annuity payment that would have been payable to the employee to the extent necessary to satisfy the requirement to provide a qualified preretirement survivor annuity (as defined under section 417(c)(2) or ERISA section 205(e)(2)) pursuant to section 401(a)(11)(A)(ii) or ERISA section 205(a)(2).(B) Commencement date for annuity.  Any life annuity payable to the surviving spouse under paragraph (c)(1)(ii)(A) of this A-17 must commence no later than the date on which the annuity payable to the employee would have commenced under the contract if the employee had not died.

[viii] Treasury Regulation Section 1.401(a)(9)-6 A-17(c)(2)(i): If the employee dies on or after the annuity starting date for the contract and the employee’s surviving spouse is not the sole beneficiary under the contract then, except as provided in paragraph (c)(4) of this A-17, the only benefit permitted to be paid after the employee’s death is a life annuity payable to the designated beneficiary where the periodic annuity payment is not in excess of the applicable percentage (determined under paragraph (c)(2)(iii) of this A-17) of the periodic annuity payment that is payable to the employee.

[ix](iii) Applicable percentage—(A) Contracts without pre-annuity starting date death benefits. If, as described in paragraph (c)(2)(iv) of this A-17, the contract does not provide for a pre-annuity starting date non-spousal death benefit, the applicable percentage is the percentage described in the table in A-2(c) of this section.

[x] The table can be found at this link: table

[xi]Adjusted employee/beneficiary age difference  Applicable percentage:

 2 years or less                100%

3                                             88%

4                                             78%

5                                             70%

6                                             63%

7                                             57%

8                                             52%

9                                             48%

10                                          44%

11                                          41%

12                                          38%

13                                          36%

14                                          34%

15                                          32%

16                                          30%

17                                          28%

18                                          27%

19                                          26%

20                                          25%

21                                          24%

22                                          23%

23                                          22%

24                                          21%

25 and greater                  20%

Special Saturday Professional Acceleration Workshop
Saturday, September 27, 2014 in Naples, Florida

Alan Gassman will be presenting a full day workshop for third year law students, alumni and professionals at Ave Maria School of Law in Naples, Florida on Saturday, September 27, 2014 from 8:30 am – 5:00 pm.

This program is designed for individuals who wish to enhance their practice and personal lives, and is based upon previous presentations and programs that have received very positive reviews.

If you are ready to take the next step to improve your practice, or just about anything else, please consider joining us.

The workshop will take place at Ave Maria School of Law, located at 1025 Commons Cir, Naples, FL 34119.

The invitation to this event can be viewed by clicking here. You can RSVP by emailing agassman@gassmanpa.com.

The workshop is free of charge to law students and alumni of Ave Maria School of Law.  Small donations will be requested from others.

What Estate Planning and Other Lawyers Need to Know About Bankruptcy, an article by Alberto F. Gomez and Alan S. Gassman, Part 6

This is a continuation of the series on bankruptcy law that has recently been updated by Al Gomez and Alan Gassman.  Click here if you would like to print out the entire article. 

PREFERENTIAL TRANSFERS

While most planners understand state fraudulent transfer rules, which are usually similar to the Bankruptcy Code fraudulent transfer statute, many planners are not conversant with the code’s preferential transfer provisions.  Transfers made by a debtor to an “insider” within one year of filing a bankruptcy may be set aside, notwithstanding whether the transfer would be considered a “fraudulent transfer” under fraudulent transfer rules.40  Also, preferential transfers made to any party within one year (if an insider) or 90 days (if not an insider) of the filing of a bankruptcy petition can be set aside as well.41  Reasonable compensation paid for services actually rendered will not be considered to be a preferential transfer,42 but dividends paid by a professional practice corporation to its owner or member can be considered a preferential transfer.  In addition, repayment of shareholder loans may be set aside as a preference.

A case that deals with this insider creditor issue is  In re Halling, 449 B.R. 911 (2011). Here, the debtor’s son was a guarantor on a loan that was given to his mother. The mother made regular payments to the bank for this loan and eventually filed for bankruptcy. The trustee sought to avoid the transfers as preferential stating the son was an inside creditor and transfers made up to a year before bankruptcy were avoidable. The Court stated that guarantors are creditors within the bankruptcy code. The payments to the bank benefitted the son because each payment reduced his liability to the bank. Thus, the Court allowed the trustee to recover the transfer’s from the son because preference claims against non-insiders (the bank in this case) are limited to transfers within 90 days. Thus, for transfers between 90 days and 1 year the trustee can only get transfers to inside creditors (in this case the son).

Transfers also are illegal if asset protection planners intend to evade the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration Board’s Comptroller of the Currency or the Director of the Office of Thrift Supervision43 under 18 U.S.C. Section 1032.  In U.S. v. Brown,44 the appellant’s conviction for concealing property from the FDIC and the trustee in bankruptcy was affirmed.  There, the appellant transferred his interests in a home, fitness center and a corporation to family members and friends.  He did not reveal the transfers or his interests to the FDIC, to whom he owed $2.4 million, or to the bankruptcy trustee.

COMPETING CREDITORS

Oftentimes a debtor will want to settle or give a mortgage and/or lien on all assets to a “friendly creditor” to avoid the possible loss of those assets to one or more other creditors. If the friendly creditor is considered an insider45, then actions taken that benefit such creditor may be set aside by the other creditors within one year of when they occur. On the other hand, an unrelated friendly creditor (i.e., a creditor who is not an insider) may be able to hold whatever liens or assets it has been given as part of an arm’s-length debt relief or workout arrangement as long as the debtor has not filed or been forced into bankruptcy within 90 days of the transfer.

DISTRIBUTIONS FROM “INSOLVENT” ENTITIES

Also many accountants advise their clients to “keep wages low and dividends high,” but this advice often does not take into consideration fraudulent transfer and preferential transfer rules in the event the client finds himself in a bankruptcy.

Estate and financial planners also need to consider state laws concerning distributions made from a company under circumstances in which sufficient reserves have not been set aside to pay known or expected creditors.  The board of directors of a company allowing such distributions can become liable to a creditor.  The liability of the directors would be based upon the amount of monies or other assets that should have been left in the company as opposed to being paid out.  For example, Florida Statutes Section 607.0640(3), no distributions to shareholders may be made, if after such distribution

 (a)       the corporation would not be able to pay its debts as they become due in the usual course of business; or

(b)       the corporation’s total assets would be less than the sum of its total liabilities plus (unless the articles of incorporation permit otherwise) the amount that would be needed, if the corporation were to be dissolved at the time of distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.

If the distribution falls within the bounds of either of the above definitions, then the distribution is characterized as a wrongful distribution.  The director’s personal liability is addressed by Florida Statutes Section 607.0834, which places personal liability on any director who votes affirmatively for such a distribution.

 The director is personally liable for the amount of the distribution that exceeds what could have been distributed without violating Section 607.06401or the articles of incorporation if it is established that the director did not perform his or her duties as required by Section 607.0830 (good faith; reasonable, prudent person standard; in the best interest of the corporation).

Additionally, subsection (2) states that a director held liable under subsection (1) is entitled to contribution from each shareholder for the amount that such shareholder accepted knowing the distribution was made in violation of Section 670.06401.

Further, the director is entitled to contribution from every other director who could be liable under subsection (1) for the unlawful distribution.  For example, if there were two director shareholders who split the initial $150,000 distribution, then they could each be held to be jointly and severally responsible for the entire $150,000.

WAGE STATUTE INTERACTION

Some states allow for exemption of wages and even deferred compensation from creditor claims.  The 2005 Bankruptcy Act provides that a Trustee may void a transfer of property or an obligation (including any “transfer to or for the benefit of an insider under an Employment Agreement”) if made within two years before filing, as a fraudulent conveyance or a preferential transfer for less than adequate consideration.

It is therefore important to be able to document that any compensation was actually owed when wages are paid to related parties or “insiders” if a company may become insolvent.

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4011 U.S.C. Section 547(b)(4)(B) (2007).

4111 U.S.C. Section 547(b)(4)(A) (2007).

42In re Double Eagle Const. Co., 188 B.R. 406 (Bankr. D. W. Mo. 1995).

43810-2nd Tax Mgmt. Est., Gifts & Tr. J. II.B.1 (2006). Punishment includes fines and/or up to 5 years in prison.

44 1999 U.S. App. Lexis 18225 (10th Cir. 1999).

45            The definition of an insider can be found at 11 U.S.C. section 101(31), which reads as follows: The term “insider” includes (A) if the debtor is an individual – (i) relative of the debtor or of a general partner of the debtor; (ii) partnership in which the debtor is a general partner; (iii) general partner of the debtor; or (iv) corporation of which the debtor is a director, officer, or person in control; (B) if the debtor is a corporation – (i) director of the debtor; (ii) officer of the debtor; (iii) person in control of the debtor; (iv) partnership in which the debtor is a general partner; (v) general partner of the debtor; or (vi) relative of a general partner, director, officer, or person in control of the debtor; (C) if the debtor is a partnership – (i) general partner in the debtor; (ii) relative of a general partner in, general partner of, or person in control of the debtor; (iii) partnership in which the debtor is a general partner; (iv) general partner of the debtor; or (v) person in control of the debtor; (D) if the debtor is a municipality, elected official of the debtor or relative of an elected official of the debtor; (E) affiliate, or insider of an affiliate as if such affiliate were the debtor; and (F) managing agent of the debtor.

Thoughtful Corner
Why Good Things Happen to People Who Help Others, by Alan S. Gassman, J.D., LL.M.

As a practicing lawyer I have been told for a number of decades by wealthy donors that they believe that “what goes around comes around” and their generosity during earning and entrepreneurial years caused a direct positive impact to them from a business, professional, and health standpoint.

A number of individuals who I have represented over the years have given far above and beyond what the community knows – a majority, and sometimes even a vast majority of their wealth has gone to charity.  Children have been informed that they better get jobs and be able to support themselves because “mom and dad’s fortune” will not be available to them.

I have found these clients to be among the most positive, life loving, and sincere down to earth individuals that I have had the opportunity to work with. 

Much of this was validated in the book Why Good Things Happen to Good People which was published by Professor Stephen Post, who was a bioethicist at Case Western Reserve University and is now with Stony Brook University in New York in the Department of Preventive Medicine.  He is the Director of the Center for Medical Humanities, Compassionate Care, and Bioethics, as well as a Professor of Bioethics.  He is also the founder of the Institute for Research on Unlimited Love. The idea for this center was suggested to him by Sir John Templeton, who is well known as having been probably the best mutual funds manager and investment advisor of all time.  Mr. Templeton, who died in 2008, was a zealous advocate of the interplay between science and religion.  Since 2001, Post has explored the extraordinary power of giving by funding over 50 studies at 44 major institutions. This research has focused on the traits and qualities that create happiness, health, contentment, and lasting success in life.

The following is an excellent synopsis of the book, which is reprinted with permission.

Synopsis of  Why Good Things Happen to Good People*

Authors: Frederic and Mary Ann Brussat and Jill Neimark, SpiritualityandPractice.com

Why Good Things Happen to Good People looks at 10 ways of giving: (1) celebration and gratitude, (2) generativity (nurturing others), (3) forgiveness, (4) courage, (5) humor and joy, (6) respect, (7) compassion, (8) loyalty, (9) listening, and (10) creating. These traits or character qualities can be expressed in the following four domains: family, friends, community, and humanity. Post writes: “The remarkable bottom line of the science of love is that giving protects overall health twice as much as aspirin protects against heart disease.”

Generous behavior is good medicine that benefits the giver and the recipients of our giving. Each chapter ends with 20 questions from The Love and Longevity Scale for the reader who wants to evaluate him- or herself. Then throughout the book, the author has various exercises and practices to try.

In “The Way of Celebration: Turn Gratitude into Action,” Post reveals how research on giving thanks shows that it can spread to every aspect of our daily lives. Gratitude can shift the nervous system toward a calm state; it can result in surges of happiness and joy; and it can engender celebrations of all kinds, such as savoring the day, rejoicing in the lives of others, and reframing our moods.

In the chapter on “The Way of Generativity: Help Others Grow,” Post defines this character trait as “selfless giving to others, in particular to future generations. [It] means nurturing others so that they are better able in turn to manifest their own gifts of love.” This brand of giving brings meaning to others’ lives; it inspires and supports volunteerism; it brings out the best in youth; and it brings fulfillment to the elderly who have time to be generous.

Post’s “The Way of Forgiveness: Set Yourself Free” contains reports and insights from the latest research on this virtue which alleviates depression, boosts moods and reduces anger, lowers stress hormones, and preserves close relationships. There is a lot of misunderstanding about forgiveness, so the author reports on what it does not mean. Some other insights to be gleaned here are learning the limits of a grudge, seeing forgiveness as a process, and practicing the power of an apology.

According to Post, courage is the hallmark of every human who has changed the world. This character quality is explored in Chapter 6, “The Way of Courage: Speak Up, Speak Out.” The five lessons outlined in this chapter are:

1. Courage comes in many forms.

2. Learn Hardi-coping – See your stress in a broader and more realistic perspective.

3. En-courage others

4. Confront with care

5. Trauma can lead to transformation.

In “The Way of Humor: Connect with Joy,” Post celebrates humor as a way of love that brings a lightness of being and reframes the world. In this chapter, he provides plenty of exercises to promote this quality. Here are a few of them:

1. Keep funny truisms around the house

2. Keep a joy jar at home – A jar of silly sayings to make you laugh when you need a pick up.

3. Laugh at life, but not at yourself or others

By now, you get the point and the structure of this extraordinary paperback that offers ample insights into the power of giving when it is translated into so many different character transforming facets! You will come away from Why Good Things Happen to Good People knowing that love is alive, giving is receiving, positive emotions are lifelines, and doing good is a spur to mental health and well-being.

* Review reprinted with permission. Copyright (c) by Frederic and Mary Ann Brussat. Used with permission.

Coming Next Week

Next week’s topics will include:

  1. Getting the most out of your American Express Platinum Card.
  2. Reverse Mortgage Planning.
  3. Much more, including fun surprises.

Humor! (Or Lack Thereof!)

Some of our favorite back to school jokes:

Child: I think we need a new teacher.

Parent: Why is that?

Child: Our teacher doesn’t know anything….she keeps asking us for the answers!

<<<<<<<<<<<<<<<<<<<<<<<<<<

Who is the king of all school supplies?

……the ruler!

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Our Sign

Thursday Report readers who do not go to Clearwater much may not be familiar with our smart aleck sign and the many important messages that we have displayed on it.

One of our favorites is as follows:

dolphin crossing

 Upcoming Seminars and Webinars

LIVE ISLE OF MAN PRESENTATION:

Alan S. Gassman will be speaking on US TRUST, LLC AND TAX LAWS FOR INTERNATIONAL INVESTORS at Cayman National Bank and Trust Company on the Isle of Man

Sign up now and you will receive a free lunch!  Transportation not included.

“Half-way between England

And Ireland in the Irish Sea.”

Is a great place to discuss trusts with glee.”

Date: Wednesday, September 3, 2014

Additional Information:  If you would like to receive a copy of the materials that will be presented please email Janine Gunyan at janine@gassmanpa.com and we will send them to you once they are ready.

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FREE LIVE WEBINAR:

Ken Crotty will be presenting a free live webinar entitled AVOIDING DISASTER ON HIGHWAY 709.  The 50 minute guide to disaster avoidance with respect to gift tax returns.  This webinar will qualify for 1 hour of CLE and CPE credit.

Date: Wednesday, September 3, 2014 | 12:30 p.m. (50 minutes)

Location: Online webinar

Additional Information: To register for the webinar please click here.

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FREE LIVE WEBINAR

THE BCA’s OF REVERSE MORTGAGES

Alan Gassman will be presenting a webinar about reverse mortgages.

Date:  Tuesday, September 16, 2014 | 12:30 p.m.

Location: Online webinar

Additional Information:  To register for the webinar please click here.

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LIVE FT. LAUDERDALE PRESENTATION:

FICPA ANNUAL ACCOUNTING SHOW 

Alan S. Gassman will be speaking at the FICPA Annual Accounting Show on Thursday, September 18, 2014 on the topic of TRUST PLANNING FROM A TO Z for 50 minutes.

This presentation will introduce basic and intermediate trust planning background and provide attendees with an orderly list of the most commonly used trusts, practical features and traps for the unwary, including revocable, irrevocable and hybrid.  The discussion will include tax, creditor protection and probate and guardian considerations.

Date: Wednesday, September 17 through Friday, September 19, 2014

Location:  Fort Lauderdale, Florida

Additional Information:  For more information about this program please contact Stephanie Thomas at ThomasS@ficpa.org

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LIVE CLEARWATER PRESENTATION:

Board Certified Tax Attorney Michael O’Leary from the Trenam Kemker firm in Tampa, Florida and Christopher Denicolo from Gassman Law Associates will be speaking at the Ruth Eckerd Hall Planned Giving Advisory Council event on Tuesday, September 23, 2014.

O'Leary

Mr. O’Leary’s topic is HOT TOPICS IN CHARITABLE PLANNING AND MORE.

Chris

Mr. Denicolo’s topic is PLANNING FOR INHERITED IRAs.

Date: Tuesday, September 23, 2014 | 5:00 p.m.

This presentation is free to members of the Ruth Eckerd Hall Planned Giving Advisory Council, Ruth Eckerd Hall members, and professionals who are attending a Ruth Eckerd Hall Planned Giving Advisory Council event for the first time.

Additional Information: You can contact Suzanne Ruley at sruley@rutheckerdhall.net or via phone at 727-791-7400, David Abelson at david.abelson@morganstanley.com or via phone at 727-773-4626, Alan S. Gassman at agassman@gassmanpa.com or via phone at 727-442-1200 or the Kentucky Fried Chicken located at 1960 Gulf to Bay Blvd, which is close in proximity to this location and available to provide you with crisp, spicy or even crispier chicken, mashed potatoes and gravy, rolls, and slaw!  Bring your 32 oz. Kentucky Fried Chicken drink container to the presentation and we will fill it with your choice of club soda or seltzer water, but no sharing permitted.

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LIVE AVE MARIA SCHOOL OF LAW PROFESSIONAL ACCELERATION WORKSHOP

Alan Gassman will presenting a full day workshop for third year law students, alumni and professionals at Ave Maria School of Law.  This program is designed for individuals who wish to enhance their practice and personal lives.

Date: Saturday, September 27, 2014 | 8:30am – 5pm

Location: Ave Maria School of Law, 1025 Commons Cir, Naples, FL 34119

Additional Information: To register for this program please email agassman@gassmanpa.com

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FREE LIVE WEBINAR:

Attorney Leslie A. Share (not related to Sonny and Cher) will be joining Alan Gassman for a free 30 minute webinar on DEMYSTIFYING U.S. TAX AND ESTATE PLANNING CONSIDERATIONS FOR FOREIGN INVESTORS – CONCEPTS THAT YOU CAN CLEARLY UNDERSTAND AND EXPLAIN TO CLIENTS

Date:   Monday, September 29, 2014 | 5:00 p.m.

Location: Online webinar

Additional Information: To register for the webinar please click here.

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LIVE CLEARWATER PROFESSIONAL ACCELERATION WORKSHOP

Alan Gassman will be joined by several experienced attorneys and other well respected industry experts during a full day workshop for lawyers and other professionals who wish to enhance their practice and personal lives.

Date: Sunday, October 5, 2014 | 8:30am – 5pm

Location: Clarion Hotel, 20967 US 19 N., Clearwater

Additional Information: To register for this program please email agassman@gassmanpa.com.

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LIVE NEW JERSEY PRESENTATION – WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW TO REPRESENT SNOWBIRDS AND FLORIDA BASED BUSINESSES:

NEW JERSEY INSTITUTE FOR CONTINUING LEGAL EDUCATION (ICLE) SPECIAL 3 HOUR SESSION

New Jersey song trivia:  What song includes the words “Counting the cars on the New Jersey Turnpike, they’ve all gone to look for America”?  What year was it recorded and who wrote it?

Alan S. Gassman will be the sole speaker for this informative 3 hour program entitled WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW

Here is some of what the New Jersey Bar Invitation for this program provides:

New Jersey residents have always had a strong connection to Florida.  We vacation there (it is our second shore), own Florida property (or have favored relatives that do) and have family and friends living there.  Sometimes our wealthiest clients move to Florida and need guidance, and you need background in order to continue representation.

There are real and significant differences between the two states that every lawyer should be cognizant of.  For example, holographic wills are perfectly legitimate in New Jersey and anyone can serve as an executor of an estate, which is not the case in Florida.  Also, Florida=s new rules regarding LLCs are different, and if you are handling estates of New Jersey decedents who owned Florida property, there are Florida law issues that must be addressed.  Asset protection differs significantly in Florida too.

Gain the knowledge you need to assist your clients with Florida matters including:

  • Florida specific laws involving businesses, trusts, and estates
  • Florida tax planning
  • Elective share and homestead rules
  • Liability Insulation and Planning
  • Creditor Protection and Strategies
  • Medical Practice Laws
  • Staying within Florida Bar Guidelines that allow representation of Florida clients

Comments from past attendees of this program:

  • Excellent seminar and materials!!!
  • This was one of the best ICLE seminars yet!
  • One of the best seminars I have attended.
  • Better than mashed potatoes and gravy.  Glad he didn’t serve grits!

Date: Saturday, October 11, 2014

Location: TBD

Additional Information: This is a repeat of the same program that we gave last year, but our book is now updated for the new Florida LLC law and changes in estate and trust law.  Please tell all of your friends, neighbors, and enemies in New Jersey to come out to support this important presentation for the New Jersey Bar Association.  We will include discussions of airboats, how to get an alligator off of your driveway, how to peel a navel orange and what collard greens and grits are. For additional information, please email agassman@gassmanpa.com

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LIVE NEW PORT RICHEY PRESENTATION:

Alan S.  Gassman, Kenneth J.  Crotty and Christopher J.  Denicolo will address the North FICPA Group on Financial Analysis and Tax Planning for Investment Products, Including Variable Annuities, Fixed Annuities, Life Insurance Contracts, and Mutual Funds – What Should the Tax and Financial Advisor Know and Advise?

Be there or be an equilateral triangle!

Date: Wednesday, October 15, 2014 | 4:30 p.m.

Location: Chili’s Port Richey, 9600 US 19 N, Port Richey, Florida

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LIVE MIAMI LAKES PROFESSIONAL ACCELERATION WORKSHOP

Alan Gassman and Phil Rarick will be presenting a free half-day workshop for lawyers and other professionals who wish to enhance their practice and personal lives.

Date: Friday, October 17, 2014 | 2pm – 6pm

Location: The Law Offices of Rarick & Beskin, P.A., The Colonnade at Miami Lakes, 6500 Cowpen Rd, Suite 204, Miami Lakes, FL 33014

Additional Information: To register for this program please email agassman@gassmanpa.com.

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LIVE CLEARWATER PRESENTATION

Alan Gassman will be speaking at the Pinellas County Estate Planning Council Fall Seminar on PLANNING FOR SAME GENDER COUPLES.

Date: Thursday, October 23, 2014 | 8:00 am

Location: Ruth Eckerd Hall, 1111 N. McMullen Booth Road, Clearwater, FL

Additional Information: To register for this event please email agassman@gassmanpa.com.

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LIVE PASCO COUNTY PLANNED GIVING (AND DRINKING!) COCKTAIL HOUR AND PRESENTATION:

Alan S. Gassman and Christopher J. Denicolo will be speaking at the Pasco-Hernando State College’s Planned Giving Consortium Luncheon on Planning for Inherited IRA’s in View of the Recent Supreme Court Case – and Demystifing the “Stretch in Trust” Ira and Pension Rules

Date: Thursday, October 23, 2014 | 4:30 p.m.

Location:  Spartan Manor, 6121 Massachusetts Avenue, Port Richey, Florida

Additional Information:  For more information, please contact Maria Hixon at hixonm@phsc.edu

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LIVE SARASOTA PRESENTATION:

2014 MOTE VASCULAR SURGERY FELLOWS – FACTS OF LIFE TALK SEMINAR FOR FIRST YEAR SURGEONS

Alan Gassman will be speaking on the topic of ESTATE, MEDICAL PRACTICE, RETIREMENT, TAX, INSURANCE, AND BUY/SELL PLANNING – THE EARLIER YOU START THE SOONER YOU WILL BE SECURE

Date: October 25 – 26, 2014 | Alan Gassman is speaking on Sunday, October 26, 2014

Location: TBD

Additional Information: Please contact agassman@gassmanpa.com for additional information.

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LIVE CLEARWATER PRESENTATION:

TAMPA BAY CPA GROUP

Alan Gassman, Ken Crotty and Christopher Denicolo will be presenting THE MATHEMATICS OF ESTATE PLANNING in a 2 hour session at the Tampa Bay CPA Group Fall 2014 Seminar.

Date: November 7, 2014

Location: Marriott Hotel, 12600 Roosevelt Blvd North, St. Petersburg, FL 33716

Additional Information: For more information please contact Richard Fuller at richardf@fullercpa.com.

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LIVE UNIVERSITY OF NOTRE DAME PRESENTATION:

40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Topic #1: PLANNING WITH VARIABLE ANNUITIES AND ANALYZING REVERSE MORTGAGES

This presentation will cover the unique income tax and financial planning characteristics of fixed and variable annuities.

Topic #2: THE MATHEMATICS OF ESTATE AND ESTATE TAX PLANNING

Christopher J. Denicolo, Kenneth J. Crotty and Alan S. Gassman will also be presenting a special Wednesday late p.m. two hour dive into math concepts that are used or sometimes missed by estate and estate tax planners.  This will be an A to Z review of important concepts, intended for estate planners of all levels, sizes and ages.  Donald Duck has rated this program A+.

Date:November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

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LIVE PORT RICHEY PRESENTATION:

Alan Gassman will be speaking to the North Suncoast Estate Planning Council on Planning Opportunities for Same Sex Couples.

Date: Tuesday, November 18, 2014 | 5:30 p.m.

Location: Seven Springs Gold and Country Club, 3535 Trophy Blvd, Port Richey, FL 34655

Additional Information: For more information please contact agassman@gassmanpa.com.

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LIVE FORT LAUDERDALE PRESENTATION:

Alan Gassman will be speaking at the 2015 Representing the Physician Seminar on the topic of DISASTER AVOIDANCE FOR THE DOCTOR’S ESTATE PLAN.

Others speakers include D. Michael O’Leary on Really Burning Hot Tax Topics, Radha V. Bachman on Checklists for Purchase and Sale of a Medical Practice, Cynthia Mikos on Dangers of Physician Recruiting Agreements and Marlan B. Wilbanks on How a Plaintiff’s Lawyer Evaluates Cases Brought by Whistleblowers

Date: January 16, 2015

Location: Renaissance Fort Lauderdale Cruise Port Hotel, 1617 SE 17th Street, Ft. Lauderdale, FL.

Additional Information:For more information, please email Alan Gassman at agassman@gassmanpa.com

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LIVE NAPLES PRESENTATION:

2nd ANNUAL AVE MARIA SCHOOL OF LAW ESTATE PLANNING CONFERENCE

Date:  Friday, May 1, 2015

Location:  Ave Maria School of Law, 1025 Commons Circle, Naples, Florida

Additional Information:  Jerry Hesch and Alan Gassman will present The Mathematics of Estate Planning.  If you liked Donald Duck in Mathematics Land, you will love The Mathematics of Estate Planning.  This will not be a Mickey Mouse presentation.

Other speakers include Jonathan Gopman, Bill Snyder, Elizabeth Morgan, Greg Holtz, and others.

Please let us know any questions, comments, or suggestions you might have for this amazing conference, which features dual session selection opportunities in one of the most beautiful conference facilities that we have ever seen.

And don’t forget to have a great weekend in Naples with your significant other or anyone who your significant other doesn’t know!  Domino’s Pizza is extra.

 NOTABLE SEMINARS BY OTHERS

(We aren’t speaking but don’t tell our mothers!)

 LIVE ORLANDO PRESENTATION

49th ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 12 – 16, 2015

Location: Orlando World Center Marriott 8701 World Center Drive, Orlando, Florida

Additional Information: For more information please visit: https://www.law.miami.edu/heckerling/?op=0

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION

Date: Thursday, February 12, 2015

Location: St. Petersburg, FL

Additional Information: Please contact Lydia Bennett Bailey at Lydia.Bailey@allkids.org for more information.

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LIVE PRESENTATION:

2015 FLORIDA TAX INSTITUTE

Date: Wednesday through Friday, April 22 – 24, 2015

Location: Grand Hyatt Tampa Bay, 2900 Bayport Drive, Tampa, FL 33607

Additional Information: Please contact Bruce Bokor at bruceb@jpfirm.com for more information.

AFR August

 

The Thursday Report – 8.14.14 – Sizzling Summer Edition

Posted on: August 14th, 2014

Continuing Education Conference News

What Estate Planning and Other Lawyers Need to Know About Bankruptcy, an article by Alberto F. Gomez and Alan S. Gassman

Surrogates: The Proverbial Stork – How to Hire Someone to Carry and Birth Your Baby – The High Price of Stretch Marks

FATCA is Here – Now What? by Denis Kleinfeld

Thoughtful Corner – Reusable Fedex Envelopes Help to Cut Down on Waste

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

 This report and other Thursday Reports can be found on our website at www.gassmanlaw.com.

Continuing Education Conference News

If you have ever been involved with a continuing education program you know it takes a lot of hard work and can be thankless.

Today we thank everyone who worked so hard to organize continuing education conferences, and would like to point out some quite wonderful conferences coming up, along with topic and presenter information to the extent available.

Please let us know any questions you may have and support your local conference!

University of Notre Dame Tax and Estate Planning Institute

We thank Jerry Hesch and his team at Notre Dame for putting together what we believe is the very best program in the nation for estate planners who want to make sure that they understand income tax planning challenges and opportunities, and the dual program system at Notre Dame cannot be beat.

Notre Dame University is located in South Bend, Indiana, and the South Bend Airport is a pleasure to use.

Don’t forget that on Saturday, November 15th Notre Dame Fighting Irish will be playing Northwestern University in a not-to-be-missed football game!

    • Date: November 13 -14, 2014
    • Location: Century Center, South Bend, Indiana
    • Schedule of Events

WEDNESDAY, NOVEMBER 12, 2014

3:30 – 5:30 p.m.        Running the Numbers for Commonly-Used Estate Planning Techniques and Products: How to Evaluate if They Are Financially Viable?

Speakers: Alan Gassman, Kenneth Crotty and Christopher Denicolo

THURSDAY, NOVEMBER 13, 2014

Thurs. Chart 1

Thurs. Chart 2

FRIDAY, NOVEMBER 14, 2014

Fri. Chart 1

Fri. Chart 2 JPEGFri. Chart 3

fri. chart 4

*Ethics Sessions.

  • How to Register: Please contact Dawn Boulac Howard at 574-631-2616 or via email at dboulac@nd.edu

Representing the Physician 2015: Protecting Physicians and Medical Practices from Liability and other Diseases

    • Date: Friday, January 16, 2015
    • Location: Renaissance Fort Lauderdale Cruise Port Hotel, Ft. Lauderdale, FL
    • Schedule of Events

8:15 a.m. – 8:30 a.m.
Introduction
Lester J. Perling, Esq.
Broad and Cassel
Fort Lauderdale, FL

8:30 a.m. – 9:05 a.m.
Essential Guide to What to Do When A Client is Sued – Including Bad Faith Letters and Medical Malpractice Defense Issues
Jeffrey M. Goodis, Esq.
Thompson, Goodis, Thompson, Groseclose, Richardson & Miller, P.A.
St. Petersburg, FL

9:05 a.m. – 9:30 a.m.
Really Burning Hot Tax Topics
D. Michael O’Leary, Esq.
Trenam, Kemker, Scharf, Barkin, Frye, O’Neill & Mullis
Tampa, FL

9:30 a.m. – 9:40 a.m.  Break

9:40 a.m. – 10:40 a.m.
FIPA, HIPAA and HITECH – The ABC’s of Privacy and Security for Physician Practices
William Dillon, Esq.
Messer Caparello, P.A.
Tallahassee, FL

10:40 a.m. – 11:05 a.m.
Disaster Avoidance for the Doctor’s Estate Planning
Alan S. Gassman, Esq.
Gassman, Crotty & Denicolo, P.A.
Clearwater, FL

11:05 a.m. – 11:30 a.m.
Checklists for Purchase and Sale of a Medical Practice
Radha V. Bachman, Esq.
Carlton Fields
Tampa, FL

11:30 a.m. – 12:30 p.m. – Lunch

12:30 p.m. – 1:30 p.m.
Ethical and Practical Considerations for Lawyers Who Represent Physicians
Denis A. Kleinfeld, Esq.,
The Kleinfeld Law Firm P.A.,
Miami, FL

Lew W. Fishman, Esq.
Lew W. Fishman, P.A.
Miami, FL

1:30 p.m. – 2:30 p.m.
Recent Congressional Developments and the 2015 Outlook for Physicians
Kim Brandt, Esq.
Chief Oversight Counsel, Minority
U. S. Senate Finance Committee
Washington, D.C.

2:30 p.m. – 2:40 p.m. – Break

2:40 p.m. – 3:40 p.m.
Physicians and The False Claims Act:  The Perspective of Whistleblower Counsel
Marlan B. Wilbanks, Esq.
Wilbanks and Bridges Law
Atlanta, GA

3:40 p.m. – 4:05 p.m.
Deficits and other Downsides for Risk-Contracting Physicians
Cynthia A. Mikos, Esq.
Allen Dell, P.A.
Tampa, FL

4:05 p.m. – 4:55 p.m.
Medicare and Medicaid – How They Get Rid of Your Clients and What to do About It
Lester J. Perling, Esq.
Broad and Cassel
Fort Lauderdale, FL

4:55 p.m. – 5:00 p.m.
Closing Remarks
Alan S. Gassman, Esq.

Florida Tax Institute

    • Date: April 22 – 24, 2015
    • Location: Grand Hyatt, Tampa, Florida
    • Schedule of Events

Wednesday, April 22, 2015
Prof. Martin J. McMahon – University of Florida Levin College of Law

Prof. Bruce A. McGovern – South Texas College of Law
TOPIC: Recent Developments in Federal Income Taxation (2 hours)

Eric Solomon – Ernst & Young

Prof. Charlene Luke – University of Florida Levin College of Law
TOPIC: Anti-Abuse Rules

Luncheon Speaker – TBA

Abraham N.M. (Hap) Shashy – King & Spalding LLP

Prof. Michael K. Friel – University of Florida Levin College of Law
TOPIC: Debt vs. Equity

Stewart L. Kasner – Baker & McKenzie
TOPIC: Inbound Cross-Border Taxpayer Relocation

Peter J. Genz – King & Spaulding
TOPIC: Dealer vs. Investor

Welcome Reception – Open to All Conference Attendees

Thursday, April 23, 2015

James B. Sowell – KPMG LLP

Prof. Karen Burke – University of Florida Levin College of Law
TOPIC: Partnership Options and Profits-Only Interests

Ronald A. Levitt – Sirote & Permutt, PC
TOPIC: Defending Conservation Easements in an Adverse IRS Environment

David D. Aughtry – Chamberlin Hrdlicka
TOPIC: Defending Against IRS Penalty Assertions

Luncheon Speaker: The Honorable L. Paige Marvell – United States Tax Court
TOPIC: A View From the Bench

Sheldon M. Kay – Sutherland, Asbill & Brennan
TOPIC: Effective Taxpayer Representation in Audits and Appeals

William B. Sherman – Holland & Knight
TOPIC: Foreign Investments in U.S. Real Property

Larry A. Campagna – Chamberlin Hrdlicka
TOPIC: “Professionalism” in Tax Practice (Ethics Credit)

Univeristy of Floriday Foundation Reception – Open to All Conference Attendees

Friday, April 24, 2015

Steve R. Akers – Bessemer Trust
TOPIC: Post Mortem Income and Transfer Tax Planning

Paul S. Lee – Bernstein Global Wealth Management
TOPIC: The Modern Uses of Partnerships in Estate Planning

Jonathan G. Blattmachr – Eagle River Advisors
TOPIC: Examining & Restructuring Pre-ATRA Estate Planning Strategies

Lauren Detzel – Dean Mead

John J. Scroggin – Scroggin & Company, P.C.
TOPIC: A Potpourri of Tax Planning Ideas and Strategies

Luncheon

Lou Nostro – Nostro Jones, PA

Don Tescher – Tescher & Spallina, P.A.

Prof. Grayson McCough – University of Florida Levin College of Law
TOPIC: Innovative Charitable Gift Planning Strategies

Prof. Sam Donaldson – Georgia State University College of Law
TOPIC: Update on Estate Planning

Fundamentals of Asset Protection

Denis Kleinfeld and Alan Gassman are working towards building a Fundamentals of Asset Protection course that is tentatively scheduled for Thursday, May 7 and Friday, May 8, 2015 in Miami, Florida.

DAY 1 – ASSET PROTECTION

8:45 – 9:00 a.m.                    Introduction to the Program
9:00 – 9:25 a.m.                    Defining the Asset Protection Plan Goals and Establishing  Strategies to Achieve Them
9:30 – 9:55 a.m.                    Basic Bankruptcy – Welcome to the Fish Bowl
10:00 – 10:25 a.m.              A Road Map on How A Judgment Creditor Collects on a Judgment
10:30 – 10:55 a.m.               The Trick and Traps of Creditors Remedy of Fraudulent Conveyance
11:00 – 11:25 a.m.                The Florida Advantage in Exemption Planning
11:30 – 11:55 a.m.                Blending Estate Planning and Asset Protection
LUNCH                                    Stump the Panel – Audience participation required
1:00 – 1:25 p.m.                    Limited Liability Entities – Distinguishing One From Another
1:30 – 1:55 p.m.                    Charging Orders – How to File and How to Defend
2:00 – 2:25 p.m.                   Solving Tax and Valuation Issues of Limited Liability Entities
2:30 – 3:55 p.m.                   What’s So Special About Domestic Asset Protection Trusts?
4:00 – 4:25 p.m.                   How to Spot Asset Protection Scams, Shams and Fraud
4:30 – 4:55 p.m.                   What you Must Know About The Bar Association Rules on Marketing of Asset Protection                                                          Planning Services
7:00 p.m.                               Cocktails and Dinner – optional

DAY 2 – ADVANCED ASSET PROTECTION

9:00 – 9:25 a.m.                     Drilling Deep to Get the Facts – What to Look for in Obtaining Due Diligence
9:30 – 9:55 a.m.                     Retainer Agreements and Trust Accounts – Protecting Yourself First
10:00 – 10:45 a.m.                Key Provisions Drafting Documents for Asset Protection – Trusts and Operating                                                                             Agreements
10:30 – 10:45 a.m.                BREAK
11:00 – 11:55 a.m.                 How to Review Liability Insurance Policies
LUNCH                                      Stump the Panel – Audience participation required
1:00 – 1:25 p.m.                     Update on Exemptions and Immunities
1:30 – 1:55 p.m.                     Choosing Domestic Asset Protection Trust Jurisdictions; Why and How One State is                                                                     “Better” than Another
2:00 – 2:25 p.m.                    Choosing a Foreign Asset Protection Jurisdiction – Why and How One Country is “Better”                                                        than Another
2:30 – 3:55 p.m.                    How You Can Avoid Ethical, Civil and Criminal Liability Exposure
4:00 – 5:00 p.m.                    Workshop: Ten Examples of How to Effectively Put An Asset Protection Plan Together

How to Register: Please click here to register.

What Estate Planning and Other Lawyers Need to Know About Bankruptcy, an article by Alberto F. Gomez and Alan S. Gassman, Part 5

Last week we continued our discussion on limiting risk and deciding if and when to ever file a bankruptcy, limiting risk, and fraudulent transfers. Today we discuss preferential transfers, competing creditors, distributions from insolvent entities, and wage statute interaction.

PREFERENTIAL TRANSFERS

While most planners understand state fraudulent transfer rules, which are usually similar to the Bankruptcy Code fraudulent transfer statute, many planners are not conversant with the code’s preferential transfer provisions.  Transfers made by a debtor to an “insider” within one year of filing a bankruptcy may be set aside, notwithstanding whether the transfer would be considered a “fraudulent transfer” under fraudulent transfer rules.40  Also, preferential transfers made to any party within one year (if an insider) or 90 days (if not an insider) of the filing of a bankruptcy petition can be set aside as well.41  Reasonable compensation paid for services actually rendered will not be considered to be a preferential transfer,42 but dividends paid by a professional practice corporation to its owner or member can be considered a preferential transfer.  In addition, repayment of shareholder loans may be set aside as a preference.

A case that deals with this insider creditor issue is  In re Halling, 449 B.R. 911 (2011). Here, the debtor’s son was a guarantor on a loan that was given to his mother. The mother made regular payments to the bank for this loan and eventually filed for bankruptcy. The trustee sought to avoid the transfers as preferential stating the son was an inside creditor and transfers made up to a year before bankruptcy were avoidable. The Court stated that guarantors are creditors within the bankruptcy code. The payments to the bank benefitted the son because each payment reduced his liability to the bank. Thus, the Court allowed the trustee to recover the transfers from the son because preference claims against non-insiders (the bank in this case) are limited to transfers within 90 days. Thus, for transfers between 90 days and 1 year the trustee can only get transfers to inside creditors (in this case the son).

Transfers also are illegal if asset protection planners intend to evade the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration Board’s Comptroller of the Currency or the Director of the Office of Thrift Supervision43 under 18 U.S.C. Section 1032.  In U.S. v. Brown,44 the appellant’s conviction for concealing property from the FDIC and the trustee in bankruptcy was affirmed.  There, the appellant transferred his interests in a home, fitness center and a corporation to family members and friends.  He did not reveal the transfers or his interests to the FDIC, to whom he owed $2.4 million, or to the bankruptcy trustee.

COMPETING CREDITORS

Oftentimes a debtor will want to settle or give a mortgage and/or lien on all assets to a “friendly creditor” to avoid the possible loss of those assets to one or more other creditors. If the friendly creditor is considered an insider45, then actions taken that benefit such creditor may be set aside by the other creditors within one year of when they occur. On the other hand, an unrelated friendly creditor (i.e., a creditor who is not an insider) may be able to hold whatever liens or assets it has been given as part of an arm’s-length debt relief or workout arrangement as long as the debtor has not filed or been forced into bankruptcy within 90 days of the transfer.

DISTRIBUTIONS FROM “INSOLVENT” ENTITIES

Also many accountants advise their clients to “keep wages low and dividends high,” but this advice often does not take into consideration fraudulent transfer and preferential transfer rules in the event the client finds himself in a bankruptcy.

Estate and financial planners also need to consider state laws concerning distributions made from a company under circumstances in which sufficient reserves have not been set aside to pay known or expected creditors.  The board of directors of a company allowing such distributions can become liable to a creditor.  The liability of the directors would be based upon the amount of monies or other assets that should have been left in the company as opposed to being paid out.  For example, Florida Statutes Section 607.0640(3), no distributions to shareholders may be made, if after such distribution:

(a)       the corporation would not be able to pay its debts as they become due in the usual course of business; or

(b)       the corporation’s total assets would be less than the sum of its total liabilities plus (unless the articles of incorporation permit otherwise) the amount that would be needed, if the corporation were to be dissolved at the time of distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.

If the distribution falls within the bounds of either of the above definitions, then the distribution is characterized as a wrongful distribution.  The director’s personal liability is addressed by Florida Statutes Section 607.0834, which places personal liability on any director who votes affirmatively for such a distribution.

 The director is personally liable for the amount of the distribution that exceeds what could have been distributed without violating Section 607.06401or the articles of incorporation if it is established that the director did not perform his or her duties as required by Section 607.0830 (good faith; reasonable, prudent person standard; in the best interest of the corporation).

Additionally, subsection (2) states that a director held liable under subsection (1) is entitled to contribution from each shareholder for the amount that such shareholder accepted knowing the distribution was made in violation of Section 670.06401.

Further, the director is entitled to contribution from every other director who could be liable under subsection (1) for the unlawful distribution.  For example, if there were two director shareholders who split the initial $150,000 distribution, then they could each be held to be jointly and severally responsible for the entire $150,000.

WAGE STATUTE INTERACTION

Some states allow for exemption of wages and even deferred compensation from creditor claims.  The 2005 Bankruptcy Act provides that a Trustee may void a transfer of property or an obligation (including any “transfer to or for the benefit of an insider under an Employment Agreement”) if made within two years before filing, as a fraudulent conveyance or a preferential transfer for less than adequate consideration.

It is therefore important to be able to document that any compensation was actually owed when wages are paid to related parties or “insiders” if a company may become insolvent.

*************************************************************************

4011 U.S.C. Section 547(b)(4)(B) (2007).

4111 U.S.C. Section 547(b)(4)(A) (2007).

42In re Double Eagle Const. Co., 188 B.R. 406 (Bankr. D. W. Mo. 1995).

43810-2nd Tax Mgmt. Est., Gifts & Tr. J. II.B.1 (2006). Punishment includes fines and/or up to 5 years in prison.

44 1999 U.S. App. Lexis 18225 (10th Cir. 1999).

45            The definition of an insider can be found at 11 U.S.C. section 101(31), which reads as follows: The term “insider” includes (A) if the debtor is an individual – (i) relative of the debtor or of a general partner of the debtor; (ii) partnership in which the debtor is a general partner; (iii) general partner of the debtor; or (iv) corporation of which the debtor is a director, officer, or person in control; (B) if the debtor is a corporation – (i) director of the debtor; (ii) officer of the debtor; (iii) person in control of the debtor; (iv) partnership in which the debtor is a general partner; (v) general partner of the debtor; or (vi) relative of a general partner, director, officer, or person in control of the debtor; (C) if the debtor is a partnership – (i) general partner in the debtor; (ii) relative of a general partner in, general partner of, or person in control of the debtor; (iii) partnership in which the debtor is a general partner; (iv) general partner of the debtor; or (v) person in control of the debtor; (D) if the debtor is a municipality, elected official of the debtor or relative of an elected official of the debtor; (E) affiliate, or insider of an affiliate as if such affiliate were the debtor; and (F) managing agent of the debtor.

Surrogates: The Proverbial Stork – How to Hire Someone to Carry and Birth Your Baby – The High Price of Stretch Marks

Adoption and surrogacy are the primary options for couples who want to become parents but cannot have a child on their own.  Those who choose the surrogate route must navigate through a number of hoops and hurdles to get the bun in the oven and the baby born and formally adopted.  If, however, the parents can afford the process and remain patient and careful, they will likely have success.  The obstacles vary based on the type of surrogacy the parents choose and the state they are planning to do this in.  This article addresses two surrogacy options:  “gestational surrogacy” and “pre-planned adoption” and applies to surrogacy in Florida only.

Gestational surrogacy, the best surrogacy option, involves one parent donating either the egg or sperm for the child.  If, for example, the father donates his sperm, Florida statute 742.151 requires that the egg must come from someone other then the surrogate.  This is to avoid the surrogacy from being classified as a pre-planned adoption, which this article discusses later on.

The parents can either choose the surrogate through an agency or choose someone they know who is willing to serve as a surrogate for them. The surrogate will have to have a health physical to make sure they are capable and a good candidate for this undertaking. The in vitro fertilization clinic generally requires the surrogate to undergo a health physical and, sometimes, the surrogacy agency has some additional requirements.  The government, however, does not regulate the agencies.

The creation of the contract is a crucial step in gestational surrogacy.  In order to have an enforceable surrogacy, a court must make two findings after the child’s birth: (1) the child is related to one of the parents; and (2) there is an enforceable surrogacy contract. The couple should hire an experienced practitioner to draft the contract to minimize any chance of error. The typical surrogacy contract has five categories of payments that the couple must make to the surrogate: reasonable living, legal, medical, psychological, and psychiatric expenses. The payments for living expenses are the only funds that the surrogate receives directly, and these amounts must be reasonable.

While the contract is a crucial element in gestational surrogacy, the method of conception can render a carefully constructed surrogacy contract meaningless.  Courts likely will honor the surrogacy contract when the pregnancy results from clinical intervention.  If, however, the pregnancy results from “old-fashioned” conception or “do-it-yourself” artificial insemination, a court will likely deem the surrogacy contract irrelevant.  See, e.g., Budnick v. Silverman, 805 So.2d 1112 (Fla. 4th DCA 2002); see also A.A.B. v. B.O.C., 112 So.3d 761 (Fla. 2d DCA 2013).  In Budnick v. Silverman, Budnick (mother) approached her friend Silverman (father) about helping her conceive a child “old-fashioned” way.  The parties agreed and entered into a surrogacy contract specifying that if Silverman impregnated Budnick, that she would (1) be the sole custodian of the child; (2) be primarily responsible for the child’s expenses; (3) not list Silverman on the child’s birth certificate; and (4) refrain from bringing a paternity action against Silverman.  See id.  Ten years after the child’s birth Budnick brought a paternity action again Silverman seeking child support from Silverman. Silverman sought to avoid the child support obligation by claiming that he should be viewed as a surrogate rather than as a natural father.  See id.  The court determined that Silverman was not a surrogate because it did not believe the surrogacy statute applied to conception that happened the “old-fashioned” way.  See id.  Since the court found that Silverman was not a surrogate, it ignored the preconception contract and concluded that he was liable for child support payments.  See id.  Thus, it is important for couples relying on surrogacy statutes for contractual protections to utilize reproduction technology through clinical intervention when conceiving the child.

The second surrogacy form falls under Florida Statute 63.213, the pre-planned adoption statute.  Under this scenario, generally the surrogate donates her own egg or the embryo is not related to either parent. In a pre-planned adoption, the surrogate can rescind her consent to give over the child within 48 hours of the birth if she is genetically related to the child, although the surrogate rarely rescinds her consent. Also, either party can terminate the contract at any time. A couple typically uses this form of surrogacy only when neither parent can donate a sperm or egg.  Further, when utilizing this surrogacy method, it is essential and common for the couple to select an experienced or well-known and understood surrogate with a good track record.

Surrogacy for same-sex couples 

Prior to 2013, Florida surrogacy law allowed only legally married opposite sex couples to use surrogates.  In D.M.T. v. T.M.H. (2013), the Florida Supreme Court held that Florida Statute 742.14 was unconstitutional because it allowed only legally married heterosexual couples to retain parental rights to children born resulting from donated genetic material from one party to the other.  The court said that the statute defining a “commissioning couple” as a heterosexual married couple failed to extend equal protection to same-sex couples.  The case involved a lesbian couple where one woman donated her egg (“biological mother”) to her partner (“birth mother”) to carry the child. Years after the birth of the child, the birth mother refused to give the biological mother parental rights and asserted that the biological mother was only a donor of the egg with no parental rights.  Since they were not a legally married couple, the statute viewed the biological mother, the one who donated her egg, as an egg donor only, and therefore, she failed to retain any rights to the child. The court held that the donor statute was unconstitutional because it denied the biological mother the right to raise her child.  This decision opens the door to challenging Florida Statute 742.15, which has similar language in regard to the “commissioning couple” and provides heterosexual couples with more protection than same-sex couples are offered under Florida Statute 62.213.

Under current Florida law, same-sex couples are able to adopt only under the pre-planned adoption agreement statute.  The contract with the surrogate is somewhat different than a contract used by a heterosexual couple, and the court process is different as well. After selecting a surrogate, the same-sex couple enters into a pre-planned adoption agreement in which the surrogate agrees to bear a child and relinquish parental rights to the commissioning couple. Florida law has mandatory requirements of what must be included in this type of agreement to be effective in terminating the surrogate’s parental rights. Upon the birth of the child(ren), the non-biological parent files a Second Parent Adoption to obtain full parental rights to the child(ren) so that both parents can be placed on the child’s birth certificate.

Florida surrogacy law is well-developed and offers more protection than most; however, surrogacy law is state specific and constantly evolving.  Therefore, it is imperative that you consider your jurisdiction’s laws prior to entering into a surrogacy arrangement.

The relevant statutes are reproduced below:

742.15 Gestational surrogacy contract.—

(1) Prior to engaging in gestational surrogacy, a binding and enforceable gestational surrogacy contract shall be made between the commissioning couple and the gestational surrogate. A contract for gestational surrogacy shall not be binding and enforceable unless the gestational surrogate is 18 years of age or older and the commissioning couple are legally married and are both 18 years of age or older.

(2) The commissioning couple shall enter into a contract with a gestational surrogate only when, within reasonable medical certainty as determined by a physician licensed under chapter 458 or chapter 459:

(a) The commissioning mother cannot physically gestate a pregnancy to term;

(b) The gestation will cause a risk to the physical health of the commissioning mother; or

(c) The gestation will cause a risk to the health of the fetus.

(3) A gestational surrogacy contract must include the following provisions:

(a) The commissioning couple agrees that the gestational surrogate shall be the sole source of consent with respect to clinical intervention and management of the pregnancy.

(b) The gestational surrogate agrees to submit to reasonable medical evaluation and treatment and to adhere to reasonable medical instructions about her prenatal health.

(c) Except as provided in paragraph (e), the gestational surrogate agrees to relinquish any parental rights upon the child’s birth and to proceed with the judicial proceedings prescribed under s. 742.16.

(d) Except as provided in paragraph (e), the commissioning couple agrees to accept custody of and to assume full parental rights and responsibilities for the child immediately upon the child’s birth, regardless of any impairment of the child.

(e) The gestational surrogate agrees to assume parental rights and responsibilities for the child born to her if it is determined that neither member of the commissioning couple is the genetic parent of the child.

(4) As part of the contract, the commissioning couple may agree to pay only reasonable living, legal, medical, psychological, and psychiatric expenses of the gestational surrogate that are directly related to prenatal, intrapartal, and postpartal periods. 

63.213 Preplanned adoption agreement.—

(1) Individuals may enter into a preplanned adoption arrangement as specified in this section, but such arrangement may not in any way:

(a) Effect final transfer of custody of a child or final adoption of a child without review and approval of the court and without compliance with other applicable provisions of law.

(b) Constitute consent of a mother to place her biological child for adoption until 48 hours after the birth of the child and unless the court making the custody determination or approving the adoption determines that the mother was aware of her right to rescind within the 48-hour period after the birth of the child but chose not to rescind such consent. The volunteer mother’s right to rescind her consent in a preplanned adoption applies only when the child is genetically related to her.

(2) A preplanned adoption agreement must include, but need not be limited to, the following terms:

(a) That the volunteer mother agrees to become pregnant by the fertility technique specified in the agreement, to bear the child, and to terminate any parental rights and responsibilities to the child she might have through a written consent executed at the same time as the preplanned adoption agreement, subject to a right of rescission by the volunteer mother any time within 48 hours after the birth of the child, if the volunteer mother is genetically related to the child.

(b) That the volunteer mother agrees to submit to reasonable medical evaluation and treatment and to adhere to reasonable medical instructions about her prenatal health.

(c) That the volunteer mother acknowledges that she is aware that she will assume parental rights and responsibilities for the child born to her as otherwise provided by law for a mother if the intended father and intended mother terminate the agreement before final transfer of custody is completed, if a court determines that a parent clearly specified by the preplanned adoption agreement to be the biological parent is not the biological parent, or if the preplanned adoption is not approved by the court pursuant to the Florida Adoption Act.

(d) That an intended father who is also the biological father acknowledges that he is aware that he will assume parental rights and responsibilities for the child as otherwise provided by law for a father if the agreement is terminated for any reason by any party before final transfer of custody is completed or if the planned adoption is not approved by the court pursuant to the Florida Adoption Act.

(e) That the intended father and intended mother acknowledge that they may not receive custody or the parental rights under the agreement if the volunteer mother terminates the agreement or if the volunteer mother rescinds her consent to place her child for adoption within 48 hours after the birth of the child, if the volunteer mother is genetically related to the child.

(f) That the intended father and intended mother may agree to pay all reasonable legal, medical, psychological, or psychiatric expenses of the volunteer mother related to the preplanned adoption arrangement and may agree to pay the reasonable living expenses and wages lost due to the pregnancy and birth of the volunteer mother and reasonable compensation for inconvenience, discomfort, and medical risk. No other compensation, whether in cash or in kind, shall be made pursuant to a preplanned adoption arrangement.

(g) That the intended father and intended mother agree to accept custody of and to assert full parental rights and responsibilities for the child immediately upon the child’s birth, regardless of any impairment to the child.

(h) That the intended father and intended mother shall have the right to specify the blood and tissue typing tests to be performed if the agreement specifies that at least one of them is intended to be the biological parent of the child.

(i) That the agreement may be terminated at any time by any of the parties.

(3) A preplanned adoption agreement shall not contain any provision:

(a) To reduce any amount paid to the volunteer mother if the child is stillborn or is born alive but impaired, or to provide for the payment of a supplement or bonus for any reason.

(b) Requiring the termination of the volunteer mother’s pregnancy.

(4) An attorney who represents an intended father and intended mother or any other attorney with whom that attorney is associated shall not represent simultaneously a female who is or proposes to be a volunteer mother in any matter relating to a preplanned adoption agreement or preplanned adoption arrangement.

(5) Payment to agents, finders, and intermediaries, including attorneys and physicians, as a finder’s fee for finding volunteer mothers or matching a volunteer mother and intended father and intended mother is prohibited. Doctors, psychologists, attorneys, and other professionals may receive reasonable compensation for their professional services, such as providing medical services and procedures, legal advice in structuring and negotiating a preplanned adoption agreement, or counseling.

(6) As used in this section, the term:

(a) “Blood and tissue typing tests” include, but are not limited to, tests of red cell antigens, red cell isoenzymes, human leukocyte antigens, and serum proteins.

(b) “Child” means the child or children conceived by means of a fertility technique that is part of a preplanned adoption arrangement.

(c) “Fertility technique” means artificial embryonation, artificial insemination, whether in vivo or in vitro, egg donation, or embryo adoption.

(d) “Intended father” means a male who, as evidenced by a preplanned adoption agreement, intends to assert the parental rights and responsibilities for a child conceived through a fertility technique, regardless of whether the child is biologically related to the male.

(e) “Intended mother” means a female who, as evidenced by a preplanned adoption agreement, intends to assert the parental rights and responsibilities for a child conceived through a fertility technique, regardless of whether the child is biologically related to the female.

(f) “Party” means the intended father, the intended mother, the volunteer mother, or the volunteer mother’s husband, if she has a husband.

(g) “Preplanned adoption agreement” means a written agreement among the parties that specifies the intent of the parties as to their rights and responsibilities in the preplanned adoption arrangement, consistent with the provisions of this section.

(h) “Preplanned adoption arrangement” means the arrangement through which the parties enter into an agreement for the volunteer mother to bear the child, for payment by the intended father and intended mother of the expenses allowed by this section, for the intended father and intended mother to assert full parental rights and responsibilities to the child if consent to adoption is not rescinded after birth by a volunteer mother who is genetically related to the child, and for the volunteer mother to terminate, subject to any right of rescission, all her parental rights and responsibilities to the child in favor of the intended father and intended mother.

(i) “Volunteer mother” means a female at least 18 years of age who voluntarily agrees, subject to a right of rescission if it is her biological child, that if she should become pregnant pursuant to a preplanned adoption arrangement, she will terminate her parental rights and responsibilities to the child in favor of the intended father and intended mother.

FATCA is Here – Now What?

Kleinfeld

 By: Denis Kleinfeld

The United States has given birth to FATCA and demands that the international financial industry legitimize its existence. If FATCA is helpful to stabilizing and enhancing the global economy, then continuing to implement the FATCA compliance regime may well be warranted.  If it is determined to be a perilous threat to a financial institution’s or jurisdiction’s sustainability or viability, then a different decision may be justified.

The world’s income tax system dependent countries quickly adopted this latest tax enforcement creation almost as a knee-jerk reaction. It is bewildering that neither the U.S. nor the other countries performed any significant detailed cost-benefit analysis. They jumped on board the train without fully knowing its destination.   Every action, however, has consequences.

No one credibly doubts the necessity of the U.S. government or any other government to raise money by way of taxation or borrowing to pay the enormous costs of providing services to its citizens and residents. However, history tells us that the need of government for tax revenues has always been a point of conflict between those who are in a position of political power to set the rules and demand payment as opposed to those whose hard work and earnings are being taken.  The stuff that makes for political revolutions.

The FATCA regime was intended as a heavy-handed enforcement mechanism.  Without that, getting everyone to comply would be impossible. This is true for the jurisdictions affected, the respective taxpayers, and the international financial industry caught in between.

FATCA was enacted as part of a revenue enhancement mechanism to pay for the additional outlays incurred by passing the Hiring Incentives to Restore Employment Act (HIRE Act) of 2010.  It was projected to increase tax revenue by $879 million a year for ten years.  Not much of revenue goal considering the multitude of direct and indirect cost being incurred. For the U.S., that amount is chump change or a budget rounding error.

The avowed goal of the Hire Act was to put Americans back to work by providing tax breaks for small business.  It hasn’t worked.  The U.S. labor participation rate is the lowest it has been in decades.

It makes one wonder, if it doesn’t raise revenue nor helps provide an economic environment to create jobs in the private sector, and then what good is FATCA?

The answer seems to be that notwithstanding the government’s own revenue projection of $897 million annually, it is an article of faith there are hidden offshore accounts to be discovered that will yield vast amounts of new tax revenues. Not unlike an adventurer venturing into the unknown dreaming of finding the lost city of gold.

The IRS reports it has collected approximately $6.5 billion in tax, interest, and penalties because of FATCA.  Most of that are penalties and interest so little more tax than projected has been collected. The FATCA believers say, “The gold is there it just takes more time to find it.”  Given the number of delays already required, doubts about FATCA ever being feasible are not unreasonable.

The virtue and propriety of FATCA is a matter being hotly debated. As a political matter, FATCA’s continued existence is not assured.

Its most vocal supporters seem to be the service industry providers in the new FATCA compliance industry.   FATCA promises to provide them an endless and increasing stream of fees.   The tax justice crowd sees FATCA as enabling the fulfillment of their goal to redistribute money from the people who earned it to people who they feel are more deserving. It’s another way of making a good living while appearing to be socially relevant.

Contrary to this, FATCA has its political opponents who are highly motivated to see its demise. Legislation for the repeal of FATCA has been introduced into Congress. While FATCA is safe from repeal for now, the Democratic senator who has been the primary and most vocal proponent behind the U.S. anti-offshore tax policy will not be in the Congress next term.  While still speculation for the moment, after this coming election the senate itself may come under Republican control.

The Republican National Committee has promised to make FATCA repeal a reality if their party gets control of both the House of Representatives and the Senate in the upcoming election. This could be merely an election year ploy to get the American expat vote.  FATCA is the number one hot button issue for some 7 million potential voters who are U.S. expats. They have been vociferous in their opposition to it.

Even now one Republican senator (under the Senate’s unique procedural rules) has placed a hold on all tax treaties to be approved by the Senate because of opposition to FATCA. A new tax treaty hasn’t been approved since 2010.

Both Republican senators and Republican members of the House of Representatives assert that the Treasury had no authority to enter into any FATCA International Governmental Agreements (IGAs).  They say that any purported IGA is actually a treaty. While the administration–the Treasury–can negotiate a treaty, the Constitution requires Senate approval to bring it into force.

The Treasury takes the opposite position claiming it has general authority and does not need specific statutory authority or Senate approval.  In point of fact, the FATCA legislation has no provision for IGAs.  How this political power battle will turn out is a matter of speculation.

Both sides of this debate agree that without IGAs, FATCA implementation fails.

What also should be understood is that on certain model IGAs with the U.S.’s major trading partners and OECD members, those IGAs require reciprocity by the United States. FATCA for you and FATCA for me. Essentially, what is good for the goose is good for the gander.

However, there is no statutory authority for the Treasury to impose a FACTA type regime on the domestic U.S. financial industry. While Treasury has issued a regulation requiring U.S. banks to report on foreign depositor’s interest and dividends, the matter is being vigorously litigated by the Florida and Texas banking associations.

While the not too big to fail banks will go with anything the Treasury and Federal Reserve want, there are well over 10,000 other banks, credit unions, and other financial facilities, and all the thousands of businesses that depend on them, that have their Washington, D.C. lobbying organizations pressing Congress in opposition. (One commentator pointed out this could involve 90 million voters.)They understand that imposing a FACTA regime domestically will drive them out of business.

These are local businesses not the big money center publicly held banks. For elections, it is accepted that politics is predominantly a local matter. A curiosity of the parochial nature of U.S. politics.  Most U.S. politicians probably would not support legislation which would endanger their re-election chance.  Certainly not over a few measly billions of dollars of tax.

Even if FATCA survives politically there are doubts as to whether the IRS has the capacity to administer FATCA. The Government Accountability Office (GAO), the National Taxpayer Advocate Service (NTAS), and the Treasury Inspector General for Tax Administration (TIGTA), among other governmental oversight bodies, all say that the IRS is already overburdened, undermanned, and underfunded.  The IRS has been described as an agency in crisis even before being charged with administering FATCA.

For years, decades really, the utter complexity of the U.S. tax law has teetered over the cliff of being both unadministratable by the government and uncompliable by the taxpayers.  In this, the IRS and the taxpayers are victims of tax politics.  IRS may get the blame, but the fault lies with Congress.

The IRS and the administration are under a microscope both in Congress and in the courts. There are at least five Congressional investigations and numerous lawsuits against the IRS accusing it, and indirectly the President, of engaging in many despicable and nefarious actions. Against this backdrop, it is conceivable that the IRS will not be given the additional resources by Congress it needs to fulfill its duties and responsibilities.

FATCA depends on the IRS getting a significant increase in its budget to modernize its computer systems to meet the difficult job of administering a FATCA regime.  FATCA depends on there being a cutting edge computer system in place to handle the volume and complexity required in its operations. Onboarding 600,000 foreign financial institutions into a computer system is a daunting challenge even if a bureaucracy had virtually unlimited resources.

Reports by the GAO, NTAS, TIGTA and others have repeatedly pointed out the existing systemic failures of all the governmental computer systems including the IRS. Even the simple task of keeping track of emails is a problem.

This computer failure came under focus in the current Congressional investigations and court cases, when the Commissioner of the IRS explained why there were problems in producing emails as required. Besides having the hard-drives in 20 out of 82 computers in question crash, the Commissioner also explained that the IRS is hampered by an “archaic” information technology system that averages 15 years old.

The IRS not only does not have the requisite computer technology neither does it have the personnel. Under its current budget, it can hire only one new employee for every five it loses. It’s projected that some 40% of the management will retire in the next five years. Competing with private industry for trained IT personnel will take money.  The Republicans in the House of Representatives, where all spending bills originate, plan to cut the IRS budget

This calamitous situation is made even graver since Congress and the President imposed on the IRS the burden of implementing simultaneously two enormously complex tax regimes– The Patient Protection and Affordable Care Act a/k/a Obamacare (the controversial health care law) and FATCA. The readily recognizable consequences being that the real world ability of the IRS, or any bureaucracy, to implement and administer FATCA and Obamacare may be little more than an aspirational dream.

Concerns over the cybersecurity compound the dilemma.  Security of private financial information is a dominate issue for everyone in government and the global financial industry.  Considering the computer security breaches already a daily occurrence, it is prudent to assume that no computer system is secure. The governments own reports backs that up. Whatever information is loaded on a computer system connected to the internet can be hacked. Even if not internet connected, if it is on a computer it can be stolen by someone on the inside. It is not a question of if; it is only a question of when.

FATCA compliance demands that substantial and  intimate private financial information must be obtained by a financial institution to determine if an account holder, customer, or investor is a U.S. person or company–or isn’t. Essentially, this puts all that valuable financial information on a silver platter.  One computer expert referred to this situation as a hacker’s wet dream.

U.S. financial institutions attempting to comply with FATCA’s requirements are experiencing extreme difficulties.  U.S. financial institutions play an important role in the collection of withholding taxes for the government and education of global investors in U.S. markets.   Letters sent to the IRS Commissioner by some of the major U.S. banks explicitly make this point.

They explain that while their “advisors and software vendors continue to work diligently…to establish the processes and procedure necessary to implement FATCA” …”We need more time to fully understand the guidance provided to date and its interaction with local IGA requirements, provide comments to the government, change our internal processes and systems, train our employees, and educate clients.”

“FATCA is unparalleled in its complexity, size, and global reach, and there is simply not enough time left to ensure a successful launch by July 1, 2014 [Which IRS has now delayed until next year and allowed transition patch].  The open questions are too numerous and the time needed to implement all the rules that we do not understand is too short.”

Any decision by an institution which involves both the expenditure of precious capital and its continued existence as a viable entity is not made in a vacuum. Context becomes everything. Whether FATCA compliance is in the best interest of any player in the global financial industry or jurisdiction is a decision that each must make on their own.

FATCA is here. What needs to be determined by all who are affected is what are they going to do now?

Thoughtful Corner
Reusable Fedex Envelopes 
Help to Cut Down on Waste

Have you ever asked yourself “how do I reuse the Legal Size Reusable FedEx Envelope” to help our environment?

If so, it is your lucky day because we have the answer.

If the envelope is in good condition, you can cover or mark through any previous shipping information so that it may be used a second time.  Please note that FedEx is not liable for damages caused by improper or insufficient packaging.

These instructions are also indicated on the back of the Legal Size Reusable FedEx Envelope and further information can be found at fedex.com or 1-800-GoFedEx (1-800-463-3339) for US domestic shipments and 1-800-247-4747 for international shipments.

What can you do in your office to cut down on waste?  Are you using the other side of non-client paperwork or documents to print other non-client paperwork or documents?

Upcoming Seminars and Webinars

LIVE ISLE OF MAN PRESENTATION:

Alan S. Gassman will be speaking on US TRUST, LLC AND TAX LAWS FOR INTERNATIONAL INVESTORS at Cayman National Bank and Trust Company on the Isle of Man

Sign up now and you will receive a free lunch!  Transportation not included.

“Half-way between England

And Ireland in the Irish Sea.”

Is a great place to discuss trusts with glee.”

Date: Wednesday, September 3, 2014

Additional Information:  If you would like to receive a copy of the materials that will be presented please email Janine Gunyan at janine@gassmanpa.com and we will send them to you once they are ready.

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FREE LIVE WEBINAR:

Ken Crotty will be presenting a free live webinar entitled AVOIDING DISASTER ON HIGHWAY 709.  The 50 minute guide to disaster avoidance with respect to gift tax returns.  This webinar will qualify for 1 hour of CLE and CPE credit.

Date: Wednesday, September 3, 2014 | 12:30 p.m. (50 minutes)

Location:Onlinewebinar

Additional Information: To register for the webinar please click here.

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FREE LIVE WEBINAR

THE BCA’s OF REVERSE MORTGAGES

Alan Gassman will be presenting a webinar about reverse mortgages.

Date:  Tuesday, September 16, 2014 | 12:30 p.m.

Location: Online webinar

Additional Information:  To register for the webinar please click here.

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LIVE FT. LAUDERDALE PRESENTATION:

FICPA ANNUAL ACCOUNTING SHOW 

Alan S. Gassman will be speaking at the FICPA Annual Accounting Show on Thursday, September 18, 2014 on the topic of TRUST PLANNING FROM A TO Z for 50 minutes.

This presentation will introduce basic and intermediate trust planning background and provide attendees with an orderly list of the most commonly used trusts, practical features and traps for the unwary, including revocable, irrevocable and hybrid.  The discussion will include tax, creditor protection and probate and guardian considerations.

Date: Wednesday, September 17 through Friday, September 19, 2014

Location:  Fort Lauderdale, Florida

Additional Information:  For more information about this program please contact Stephanie Thomas at ThomasS@ficpa.org

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LIVE CLEARWATER PRESENTATION:

Board Certified Tax Attorney Michael O’Leary from the Trenam Kemker firm in Tampa, Florida and Christopher Denicolo from Gassman Law Associates will be speaking at the Ruth Eckerd Hall Planned Giving Advisory Council event on Tuesday, September 23, 2014.

O'Leary

Mr. O’Leary’s topic is HOT TOPICS IN CHARITABLE PLANNING AND MORE.

Chris

Mr. Denicolo’s topic is PLANNING FOR INHERITED IRAs.

Date: Tuesday, September 23, 2014 | 5:00 p.m.

This presentation is free to members of the Ruth Eckerd Hall Planned Giving Advisory Council, Ruth Eckerd Hall members, and professionals who are attending a Ruth Eckerd Hall Planned Giving Advisory Council event for the first time.

Additional Information: You can contact Suzanne Ruley at sruley@rutheckerdhall.net or via phone at 727-791-7400, David Abelson at david.abelson@morganstanley.com or via phone at 727-773-4626, Alan S. Gassman at agassman@gassmanpa.com or via phone at 727-442-1200 or the Kentucky Fried Chicken located at 1960 Gulf to Bay Blvd, which is close in proximity to this location and available to provide you with crisp, spicy or even crispier chicken, mashed potatoes and gravy, rolls, and slaw!  Bring your 32 oz. Kentucky Fried Chicken drink container to the presentation and we will fill it with your choice of club soda or seltzer water, but no sharing permitted.

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FREE LIVE WEBINAR:

Attorney Leslie A. Share (not related to Sonny and Cher) will be joining Alan Gassman for a free 30 minute webinar on DEMYSTIFYING U.S. TAX AND ESTATE PLANNING CONSIDERATIONS FOR FOREIGN INVESTORS – CONCEPTS THAT YOU CAN CLEARLY UNDERSTAND AND EXPLAIN TO CLIENTS

Date:   Monday, September 29, 2014 | 5:00 p.m.

Location: Online webinar

Additional Information: To register for the webinar please click here.

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LIVE NEW JERSEY PRESENTATION – WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW TO REPRESENT SNOWBIRDS AND FLORIDA BASED BUSINESSES:

NEW JERSEY INSTITUTE FOR CONTINUING LEGAL EDUCATION (ICLE) SPECIAL 3 HOUR SESSION

New Jersey song trivia:  What song includes the words “Counting the cars on the New Jersey Turnpike, they’ve all gone to look for America”?  What year was it recorded and who wrote it?

Alan S. Gassman will be the sole speaker for this informative 3 hour program entitled WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW

Here is some of what the New Jersey Bar Invitation for this program provides:

New Jersey residents have always had a strong connection to Florida.  We vacation there (it is our second shore), own Florida property (or have favored relatives that do) and have family and friends living there.  Sometimes our wealthiest clients move to Florida and need guidance, and you need background in order to continue representation.

There are real and significant differences between the two states that every lawyer should be cognizant of.  For example, holographic wills are perfectly legitimate in New Jersey and anyone can serve as an executor of an estate, which is not the case in Florida.  Also, Florida=s new rules regarding LLCs are different, and if you are handling estates of New Jersey decedents who owned Florida property, there are Florida law issues that must be addressed.  Asset protection differs significantly in Florida too.

Gain the knowledge you need to assist your clients with Florida matters including:

  • Florida specific laws involving businesses, trusts, and estates
  • Florida tax planning
  • Elective share and homestead rules
  • Liability Insulation and Planning
  • Creditor Protection and Strategies
  • Medical Practice Laws
  • Staying within Florida Bar Guidelines that allow representation of Florida clients

Comments from past attendees of this program:

  • Excellent seminar and materials!!!
  • This was one of the best ICLE seminars yet!
  • One of the best seminars I have attended.
  • Better than mashed potatoes and gravy.  Glad he didn’t serve grits!

Date: Saturday, October 4, 2014

Location: TBD

Additional Information: This is a repeat of the same program that we gave last year, but our book is now updated for the new Florida LLC law and changes in estate and trust law.  Please tell all of your friends, neighbors, and enemies in New Jersey to come out to support this important presentation for the New Jersey Bar Association.  We will include discussions of airboats, how to get an alligator off of your driveway, how to peel a navel orange and what collard greens and grits are. For additional information, please email agassman@gassmanpa.com

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LIVE NEW PORT RICHEY PRESENTATION:

Alan S.  Gassman, Kenneth J.  Crotty and Christopher J.  Denicolo will address the North FICPA Group on Financial Analysis and Tax Planning for Investment Products, Including Variable Annuities, Fixed Annuities, Life Insurance Contracts, and Mutual Funds – What Should the Tax and Financial Advisor Know and Advise?

Be there or be an equilateral triangle!

Date: Wednesday, October 15, 2014 | 4:30 p.m.

Location: Chili’s Port Richey, 9600 US 19 N, Port Richey, Florida

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LIVE CLEARWATER PRESENTATION

Alan Gassman will be speaking at the Pinellas County Estate Planning Council Fall Seminar on PLANNING FOR SAME GENDER COUPLES.

Date: Thursday, October 23, 2014 | 8:00 am

Location: Ruth Eckerd Hall, 1111 N. McMullen Booth Road, Clearwater, FL

Additional Information: To register for this event please email agassman@gassmanpa.com.

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LIVE PASCO COUNTY PLANNED GIVING (AND DRINKING!) COCKTAIL HOUR AND PRESENTATION:

Alan S. Gassman and Christopher J. Denicolo will be speaking at the Pasco-Hernando State College’s Planned Giving Consortium Luncheon on Planning for Inherited IRA’s in View of the Recent Supreme Court Case – and Demystifing the “Stretch in Trust” Ira and Pension Rules

Date: Thursday, October 23, 2014 | 4:30 p.m.

Location:  Spartan Manor, 6121 Massachusetts Avenue, Port Richey, Florida

Additional Information:  For more information, please contact Maria Hixon at hixonm@phsc.edu

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LIVE SARASOTA PRESENTATION:

2014 MOTE VASCULAR SURGERY FELLOWS – FACTS OF LIFE TALK SEMINAR FOR FIRST YEAR SURGEONS

Alan Gassman will be speaking on the topic of ESTATE, MEDICAL PRACTICE, RETIREMENT, TAX, INSURANCE, AND BUY/SELL PLANNING – THE EARLIER YOU START THE SOONER YOU WILL BE SECURE

Date: October 25 – 26, 2014 | Alan Gassman is speaking on Sunday, October 26, 2014

Location: TBD

Additional Information: Please contact agassman@gassmanpa.com for additional information.

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LIVE CLEARWATER PRESENTATION:

TAMPA BAY CPA GROUP

Alan Gassman, Ken Crotty and Christopher Denicolo will be presenting THE MATHEMATICS OF ESTATE PLANNING in a 2 hour session at the Tampa Bay CPA Group Fall 2014 Seminar.

Date: November 7, 2014

Location: Marriott Hotel, 12600 Roosevelt Blvd North, St. Petersburg, FL 33716

Additional Information: For more information please contact Richard Fuller at richardf@fullercpa.com.

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LIVE UNIVERSITY OF NOTRE DAME PRESENTATION:

40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Topic #1: PLANNING WITH VARIABLE ANNUITIES AND ANALYZING REVERSE MORTGAGES

This presentation will cover the unique income tax and financial planning characteristics of fixed and variable annuities.

Topic #2: THE MATHEMATICS OF ESTATE AND ESTATE TAX PLANNING

Christopher J. Denicolo, Kenneth J. Crotty and Alan S. Gassman will also be presenting a special Wednesday late p.m. two hour dive into math concepts that are used or sometimes missed by estate and estate tax planners.  This will be an A to Z review of important concepts, intended for estate planners of all levels, sizes and ages.  Donald Duck has rated this program A+.

Date: November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

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LIVE PORT RICHEY PRESENTATION:

Alan Gassman will be speaking to the North Suncoast Estate Planning Council on Planning Opportunities for Same Sex Couples.

Date: Tuesday, November 18, 2014 | 5:30 p.m.

Location: Seven Springs Gold and Country Club, 3535 Trophy Blvd, Port Richey, FL 34655

Additional Information: For more information please contact agassman@gassmanpa.com.

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LIVE FORT LAUDERDALE PRESENTATION:

Alan Gassman will be speaking at the 2015 Representing the Physician Seminar on the topic of DISASTER AVOIDANCE FOR THE DOCTOR’S ESTATE PLAN.

Others speakers include D. Michael O’Leary on Really Burning Hot Tax Topics, Radha V. Bachman on Checklists for Purchase and Sale of a Medical Practice, Cynthia Mikos on Dangers of Physician Recruiting Agreements and Marlan B. Wilbanks on How a Plaintiff’s Lawyer Evaluates Cases Brought by Whistleblowers

Date: January 16, 2015

Location: Renaissance Fort Lauderdale Cruise Port Hotel, 1617 SE 17th Street, Ft. Lauderdale, FL.

Additional Information:For more information, please email Alan Gassman at agassman@gassmanpa.com

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LIVE NAPLES PRESENTATION:

2nd ANNUAL AVE MARIA SCHOOL OF LAW ESTATE PLANNING CONFERENCE

Date:  Friday, May 1, 2015

Location:  Ave Maria School of Law, 1025 Commons Circle, Naples, Florida

Additional Information:  Jerry Hesch and Alan Gassman will present The Mathematics of Estate Planning.  If you liked Donald Duck in Mathematics Land, you will love The Mathematics of Estate Planning.  This will not be a Mickey Mouse presentation.

Other speakers include Jonathan Gopman, Bill Snyder, Elizabeth Morgan, Greg Holtz, and others.

Please let us know any questions, comments, or suggestions you might have for this amazing conference, which features dual session selection opportunities in one of the most beautiful conference facilities that we have ever seen.

And don’t forget to have a great weekend in Naples with your significant other or anyone who your significant other doesn’t know!  Domino’s Pizza is extra. 

NOTABLE SEMINARS BY OTHERS
(We aren’t speaking but don’t tell our mothers!)

 LIVE ORLANDO PRESENTATION

49th ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 12 – 16, 2015

Location: Orlando World Center Marriott 8701 World Center Drive, Orlando, Florida

Additional Information: For more information please visit: https://www.law.miami.edu/heckerling/?op=0

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION

Date: Thursday, February 12, 2015

Location: St. Petersburg, FL

Additional Information: Please contact Lydia Bennett Bailey at Lydia.Bailey@allkids.org for more information.

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LIVE PRESENTATION:

2015 FLORIDA TAX INSTITUTE

Date: Wednesday through Friday, April 22 – 24, 2015

Location: TBD

Additional Information: Please contact Bruce Bokor at bruceb@jpfirm.com for more information.

AFR August

The Thursday Report 8.7.2014 – Tax Law Heaven Edition

Posted on: August 7th, 2014

Demystifying the RPM Trust; A Dynamic Estate Tax Planning Technique for Married Couples with Assets Exceeding $11,000,000, an article by Ken Crotty

Barry Nelson and Michael Sneeringer Review Barry Engel’s Amazing Asset Protection Planning Guide 3d Edition, a Leimberg Information Services Article

Seminar Announcement – Jonathan Blattmachr and Brandon Centula of Alaska Trust join Alan Gassman for a Double Header Free Webinar on Tuesday, August 12, 2014 at 12:00 p.m.

Is Estate Tax Repeal a Shakedown?, an article by Denis Kleinfeld

What Estate Planning and Other Lawyers Need to Know About Bankruptcy, an article by Alberto F. Gomez and Alan S. Gassman, Part 4

Thoughtful Corner – If Your Life is a Treadmill This Will Fit You Perfectly

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

This report and other Thursday Reports can be found on our website at www.gassmanlaw.com.

Demystifying the RPM Trust; A Dynamic Estate Tax Planning Technique for Married Couples with Assets Exceeding $11,000,000, an article by Ken Crotty

Some estate planning techniques are underutilized because they are difficult for practitioners to understand, and therefore difficult for practitioners to explain to clients.  One such technique is the Remainder Purchase Marital Trust (“RPM Trust”), which has been developed and discussed by David Handler and Stacy Eastland, among others.

The following was derived from a Bloomberg BNA Webinar presented by Stacy Eastland and Alan Gassman on March 27, 2012.  If you would like to receive the PowerPoint presentation from that webinar please let us know.  If you would like to view the webinar please contact Mark Carrington at mcarrington@bna.com and request a promotional code (discount).

Estate tax planners need to make sure that the RPM is one of the arrows in their arsenal.

The use of the RPM Trust is a great planning technique for clients who (1) are married; (2) want to establish a trust for the benefit of their spouse; (3) have already established a trust for the benefit of their descendants with significant assets (the “Descendants Trust”); (4) have little of their lifetime gift tax exclusion remaining or do not want to use what is left of their lifetime gift tax exclusion; and (5) have significant assets in their individual name which could generate potential estate tax liability.

For these clients, the use of the RPM Trust would allow them to establish a trust that would provide benefits for their spouse, the assets of which may not be included in the spouse’s estate on his or her death.  Further, when the trust is funded there is no gift by the client, and the Descendants Trust will receive the assets remaining in the RPM Trust after the spouse’s beneficial interest terminates.

Clients who want to use the RPM Trust technique should have an existing Descendants Trust which has significant assets.  It is best if this trust is “old and cold” to prevent the IRS from using the step transaction to recharacterize what occurs when the RPM Trust technique is used.  Many clients established trusts for the benefit of their descendants and funded these trusts with large gifts to take advantage of the increased lifetime gift tax exclusion which was available in 2012, and was scheduled to disappear in 2013.  These trusts would be potential trusts that could be involved in the RPM technique.

A slide show demonstrating the steps involved in using the RPM technique can be viewed by click here.

The first step is for the client and the Descendants Trust to establish a family limited partnership or limited liability company (the “FLP”).  In the attached example, the client contributes $10,000,000 for a 1% general partner interest and a 79% limited partner interest.  The Descendants Trust contributes $2,500,000 in exchange for a 20% limited partner interest.

After the FLP is funded, the client establishes the RPM Trust.  The RPM Trust will initially be for the benefit of the client’s spouse.  The spouse can either have an interest for a term of years or an interest for life.  If the spouse has an interest for a term of years and dies during that period, then some of the value of the RPM Trust will be included in the spouse’s estate, similar to a GRAT.  If the RPM Trust is drafted so that the spouse has the right to receive either the income of the trust or an annuity for life, then, none of the assets would be included in the spouse’s gross estate for estate tax purposes on the spouse’s death.

Clients with spouses who are in excellent health may wish to have the RPM Trust provide that the payments would only be made to the spouse for a term of years, so that the value of the remaining assets in the trust is greater at the end of the set period than it would be when the spouse dies if the spouse outlived his or her life expectancy.  For clients with spouses whose health is a potential concern, such clients probably should structure the RPM Trust to provide benefits for the spouse’s lifetime, and then on the spouse’s death, none of the assets in the trust would be included in the spouse’s gross estate, and the remaining assets would pass to the Descendants Trust.

The portion of the RPM Trust held for the benefit of the spouse will qualify for the gift tax marital deduction if it provides that a set annuity or that the income of the trust will be paid to the spouse.  To qualify this portion of the trust for the gift tax marital deduction, it is important that only the spouse be a beneficiary of the trust and that no distributions may be made from the trust except for the benefit of the spouse.  Further, to be able to quantify the interest that the spouse has in the trust, distributions should not be limited to the health, education, maintenance and support standard.  Instead, the trust should provide that the spouse has the right to receive all of the income from the trust or an annuity from the trust.

The next step in using this technique is for the grantor to fund the RPM Trust with discounted limited partner interests.  In the attached example, the grantor transfers $5,000,000 worth of limited partner interests.  Assuming a 30% discount, this is equal to a 57.14% limited partner interest.

At the time that the grantor funds the RPM Trust, the Descendants Trust purchases the remainder interest in the RPM Trust from the Grantor.  Because the grantor receives the full fair market value for the value of the remainder interest, no gift is made with respect to the remainder interest either when the RPM Trust is funded or when the assets remaining in the RPM Trust pass to the Descendants Trust after the spouse’s interest in the RPM Trust ceases.

To be certain that the grantor receives the full fair market value of the remainder interest of the RPM Trust when it is purchased by the Descendants Trust, it is important that the remainder interest be purchased by the Descendants Trust using discounted limited partner interests in the same FLP.  The reason for this is because of the possibility of the IRS challenging the planning and reducing the value of the discount taken on the limited partner interests that were gifted to the RPM Trust.

If the discount is reduced, then the value of the remainder interest would be increased.  If the Descendants Trust had purchased the remainder interest with cash or securities equal to a set dollar amount and the value of the remainder interest was increased, then the grantor no longer would have received the full fair market value of the remainder interest.  As a result, the grantor would have made a taxable gift on the funding of the trust.  For clients who have already utilized most or all of their lifetime gift tax exclusion, this would result in the client paying gift tax.

To avoid this risk, the remainder interest should be purchased with discounted limited partner interests.  Then, if the IRS on audit changes the discount associated with the value of the limited partner interests transferred to the RPM Trust, this same change in value would occur to the limited partner interests used by the Descendants Trust to purchase the remainder interest.  Because the value of the assets used to purchase the remainder interest would be adjusted by the same factor as the value of the remainder interest in the RPM Trust, the grantor still would have received the full fair market value of the remainder interest when it was purchased by the Descendants Trust.

When the RPM Trust is funded, software such as Number Cruncher or Tiger Tables can be used to determine the value of the spouse’s interest in the trust.  During periods when interest rates are low, it often makes sense to provide the spouse with an annuity interest so that the spouse’s interest in the trust is larger, and the value of the remainder in the RPM Trust purchased by the Descendants Trust is less.

The attached spreadsheet shows the potential wealth that could be transferred using this technique.  The spreadsheet is based on the assumptions stated above and further assumes that the client’s spouse was age 82 when the RPM Trust was funded, that the 7520 rate was 2.4%, and that the surviving spouse received an annuity interest for life, with the annuity payments being equal to $500,000 per year.  Based on the IRS tables, the client’s spouse had a 7.48 year life expectancy.  The example further assumes a 40% estate tax rate.

Assuming 5% growth, if the client’s spouse dies during the third year after the RPM Trust was established, $2,231,018 of wealth would have been transferred to the Descendants Trust, resulting in $892,407 of estate tax being saved.  Even if the client’s spouse died during the ninth year after the RPM Trust was established, which would be beyond her life expectancy, the technique would still transfer $1,110,769 of wealth, resulting in $444,308 of estate tax being saved.

Although the RPM Trust technique is not a planning technique that would be suitable for every client, for certain clients the technique can be a very effective way to transfer wealth to the client’s children or other descendants without utilizing any of the client’s lifetime gift tax exclusion.  It is a more sophisticated technique which may be more difficult to explain to clients.  Hopefully the discussion above and the attached slides will make the technique more understandable, so that you will then be more likely to utilize this technique with some of your clients.

Barry Nelson and Michael Sneeringer Review Barry Engel’s Amazing Asset Protection Planning Guide 3d Edition, a Leimberg Information Services Article

“Barry Engel’s Asset Protection Planning Guide is a comprehensive treatise that provides examples, citations and resources for estate planning and asset protection practitioners. The 800 plus pages of information serve as a quick desk reference for the experienced practitioner, as well as introduction for the novice practitioner seeking to learn the complex concepts of domestic and international asset protection planning.” 

In their commentary, Barry Nelson and Michael Sneeringer review the 3rd Edition of Barry S. Engel’s asset protection treatise, titled Asset Protection Planning Guide.

Barry A. Nelson, a Florida Bar Board Certified Tax and Wills, Trusts and Estates Attorney, is a shareholder in the North Miami Beach law firm of Nelson & Nelson, P.A. He practices in the areas of tax, estate planning, asset protection planning, probate, partnerships and business law. As the father of a child with autism, Mr. Nelson combines his legal skills with compassion and understanding in the preparation of Special Needs Trusts for children with disabilities.  He is a co-founder and current Board Member of the Victory Center for Autism and Behavioral Challenges (a not-for profit corporation) and served as Board Chairman from 2000-2008. A Fellow of the American College of Trust and Estate Counsel, he served as Chairman of its Asset Protection Committee from 2009 to 2012. As the Founding Chairman of the Asset Preservation Committee of the Real Property, Probate and Trust Law Section of the Florida Bar, he introduced and coordinated a project to write a treatise authored by committee members entitled Asset Protection in Florida (Florida Bar CLE 2008, 3rd Edition 2013) and wrote Chapter 5 entitled “Homestead: Creditor Issues.”  Barry is a past President of the Greater Miami Tax Institute.

Michael A. Sneeringer is an associate in the North Miami Beach law firm of Nelson & Nelson, P.A. He practices in the areas of estate planning, probate administration, tax and asset protection planning. He was recently awarded a fellowship by the Real Property, Probate and Trust Law Section of the Florida Bar.

Here is their commentary: 

EXECUTIVE SUMMARY: 

Barry Engel’s “Asset Protection Planning Guide” (the “Guide”) is a comprehensive treatise that provides examples, citations and resources for estate planning and asset protection practitioners. The 800 plus pages of information serve as a quick desk reference for the experienced practitioner, as well as an introduction  for the novice practitioner seeking to learn  the complex concepts of domestic and foreign asset protection planning. 

FACTS: 

Denver, Colorado attorney Barry S. Engel, founding principal of the law firm of Engel & Reiman pc, released the 3rd Edition of his asset protection treatise titled “Asset Protection Planning Guide”. Published in November 2013 by Wolters Kluwer (CCH), the Guide’s contributing authors are also attorneys at Engel & Reiman pc: John R. Garland (a principal); Edward D. Brown (a principal) and Eric R. Kaplan (a senior associate). Over the Guide’s 800 plus pages, Engel explains the “integrated estate planning process” (“IEP”) with a focus on the asset protection component of IEP. The Guide is divided between Planning Materials (approximately 550 pages) and Practice Tools (approximately 200 pages). 

The Guide begins with a general overview: frequently asked questions about what asset protection is and how it works.  The rest of the Guide explains in depth, with examples, numerous asset protection techniques. Among the topics covered are the following: 

·Fraudulent transfers;

·Gifting;

·Joint or concurrent ownership;

·Exemptions;

·Foreign insurance and annuities;

·Domestic insurance;

·Family limited partnerships and LLCs;

·Domestic trusts;

·Foreign trusts;

·A comparison of state law and foreign law on trusts;

·Choice of law and conflict of law issues;

·Other foreign-based planning tools;

·Expatriation;

·Protection of retirement benefits;

·Ethical, civil and criminal considerations;

·Contempt of court principals;

·Trust litigation; and

·Asset protection for an operating business 

COMMENT:  

The Guide’s audience is both experienced and novice asset protection planning attorneys. Anybody currently practicing related areas such as “estate planning,” “business planning” or “planning for professionals” should consider the Guide. For ordering and other information, click here

For the novice asset protection planning attorney, the key is that the text itself is 556 pages while the “Practice Tools” is 246 pages. What Engel is able to do is concisely form a basis for what asset protection planning tools are out there, what tools Engel favors the most, and what cases and statutes are out there that will affect the planning described in the Guide. 

The novice could essentially read the Guide over a long weekend or a vacation and instantly learn a whole host of issues and ideas that he or she can integrate into a solo practice or bring to the table at a large firm. What Engel also generously does is provide sample planning materials in the “Practice Tools” section. For example, the Guide includes: (i) solvency; (ii) testamentary powers of appointment; (iii) fee agreements; and (iv) Alaska Perpetual Family Trusts, among others. Attorneys often struggle to find “sample forms” and the Guide includes a variety of documents common to an asset protection practice. 

The Guide has many resources for the experienced asset protection planning attorney, especially in a field where laws change frequently. The Guide addresses planning with assets exempt from creditors’ claims, use of LLCs and partnerships to provide charging lien protection, homestead and use of spendthrift and discretionary trusts, domestic and foreign. 

Engel provides case summaries throughout the Guide through 2013. The case summaries provide an experienced asset protection attorney with issues he or she may have missed over the years, and the novice asset protection attorney with examples of effective planning and planning that was ineffective. 

Engel provides examples of how his clients fared where his asset protection planning was challenged. Engel’s experiences serve as a reminder that asset protection attorneys should plan as if one day planning may be challenged, and if so, describe an example of what a client may expect if asset protection is challenged. 

Engel’s unique approach is exemplified by his “Ladder of Asset Protection Tools” (the “Ladder”) and his “Maxims of Asset Protection Planning” (the “Maxims”). The Ladder is unique in that it serves as Engel’s opinion as to a rank of the planning techniques discussed in the Guide. The Ladder, which is introduced in the first Chapter, provides a roadmap for the reader to locate the chapters most relevant to the matter under consideration and then integrate the techniques into the client’s comprehensive estate and asset protection planning.  

While the Ladder may be an effective aid for the novice, the experienced asset protection attorney can compare his or her techniques with Engel’s suggestions to potentially enhance even an experienced planner’s repertoire. The Maxims are also geared more toward the novice asset protection attorney. However, for an experienced asset protection attorney, they provide what would look to be an excellent guide for discussion with new clients in that they summarize what the attorney (and client) should hope to get out of embarking on asset protection planning. 

Among the unique areas covered in the first portion of the Guide are expatriation as an estate planning tool and trust litigation issues.  The Practice Tools include uniform acts, flowcharts of domestic and foreign possible structures, sample clauses, relevant tax forms, and more.  The Guide also includes a number of charts comparing state exemptions (such as charging orders by state, homestead exemptions with reference to state laws and life insurance exemption amounts).  

Asset protection planning is driven by applicable state statutes and we reviewed with interest the author’s review of Florida homestead provisions.  The Guide provided a rather thorough analysis of Florida law and addressed some of the finer points that are difficult with a multi-jurisdictional resource reviewing applicable state laws.  In addition, the Guide cited a recently filed lawsuit in South Florida that has yet to be decided, but is an excellent example of making large gifts to a spouse as part of an asset protection plan.  

Engel’s Guide is an effective resource for the seasoned and novice estate and asset protection planner. It covers a wide variety of existing techniques and is likely to be a helpful resource at a reasonable price.

We thank Steve Leimberg of Leimberg Information Services for allowing us to reprint this article for Thursday Report readers.  Click here to visit Leimberg Information Services

Seminar Announcement – Jonathan Blattmachr and Brandon Centula of Alaska Trust join Alan Gassman for a Double Header Free Webinar on Tuesday, August 12, 2014 at 12:00 p.m.

While almost every estate and tax lawyer knows who Jonathan Blattmachr is and has benefited from his ideas and guidance, Brandon Cintula is a very well-kept secret known only to those of us who have had the opportunity to work with him at Alaska Trust Company.  Brandon has more knowledge and hands-on trust drafting assistance experience than any other trust officer we have ever worked with.

Please do not miss this lively and interactive discussion.

Blattmachr Announcement

To register for the webinar please click here.

Is Estate Tax Repeal a Shakedown?, an article by Denis Kleinfeld

Denis_Kleinfeld

While Denis Kleinfeld is well known as a Miami based estate planning and international tax lawyer, many people are not aware that Denis is a co-author of the two volume treatise “Practical International Tax Planning”, and a Professor at Thomas Jefferson School of Law in San Diego, California.

Many people think that the latest Republican attempt to repeal the estate tax is merely a political ploy.  After all, there is an up-coming election to be won.

If there is one thing politicians of all persuasions know is that they need money to win elections. Playing well-heeled competing interests off each other is a sure-fire way to generate lots of campaign contributions.

Let’s all understand this. Congress created the estate tax game and set the rules. Keeping the game alive, pitting one side against the other, changing the rules as needed to keep things at a fervor pitch is crass, but it keeps the money rolling in.

On one side of the field are the taxpayers who realize that a life time of hard-work can be expropriated by the government and there is little they can do about it. Essentially, during life you are married to the government and like a dutiful spouse pay over half your earnings.  At death, the government treats it like a divorce and you pay over half of what’s left as a property settlement.

On the other side is the entire estate tax planning industry that finds their work highly financially rewarding even if not exactly personally fulfilling. It’s a vast array of professional service providers who depend on the complexity and indecipherability of the tax law to maintain their necessity.

It is a lot of brainpower and talent which could be more useful doing something far more constructive for society.  Something like focusing on the real human and financial problems that occur to families and businesses when someone dies, without being distorted by tax considerations, would exceed useful and desirable.

Is the estate tax of any real benefit to the government?  Not really. It raised just $13.7 billion last year.  It is such a tiny fraction of the federal tax revenues it is virtually statistically insignificant.

The Congressional Joint Committee on Tax has issued numerous reports over the years that state that the estate tax is actually a net revenue loser for the government. Because all estates, taxable or not, step the basis of the estate assets up to fair market value, the loss in income tax is far greater than the estate tax received.

Supporters of estate tax claim it is necessary because it keeps wealth from accumulating in too few hands.  This is the class warfare school of logic.

The opposite happens because there is an estate tax.

Larger taxable estates use tax-exempt foundations, controlled in perpetuity by a select few, to not only hold wealth but also avoid both the estate tax and the income tax to keep on accumulating more wealth.

A typical estate planning technique is for a business or appreciated investments to be gifted to a charitable remainder trust.  That generates an income tax deduction.  The income tax savings then are used to fund a wealth replacement trust which buys life insurance. In the meantime, assets gifted to the trust can be sold without incurring a capital gains tax.

At death, the insurance usually pays off in an amount which is a multiple of the amount which eventually goes to the charity. The charity getting the remainder of the trust is many times the family’s own private tax-exempt foundation run by the heirs.

Will all these intricate and complicated estate tax planning schemes continue to be necessary? The answer to that question will only be revealed after the coming election.

In the meantime, those running for Congress will expect the estate tax adversaries to keep the campaign contributions coming.

What Estate Planning and Other Lawyers Need to Know About Bankruptcy, an article by Alberto F. Gomez and Alan S. Gassman, Part 4

The July 24 edition of the Thursday Report discussed cases and situations where courts have allowed planning actions finalized shortly before a bankruptcy to stand and not be considered “fraudulent transfers” when clearly performed for business or planning purposes, notwithstanding prejudice to creditors.  To view the July 24 Thursday Report please click here.

This week we continue with our discussion on limiting risk and deciding if and when to ever file a bankruptcy, limiting risk, and fraudulent transfers.

LIMITING RISK:

For many clients, there is no need to file a voluntary petition: Their asset protection plan provides enough creditor protection and the non-bankruptcy forum appears to be more debtor-friendly since there are no “strong arm” powers such as the ones provided to a bankruptcy trustee.  Outside of bankruptcy, there is no trustee and no strong-arm powers with which to contend.

When an estate planning strategy is put into place; the estate tax, income tax, and financial and family advantages of the arrangement should be emphasized.  While important, creditor protection should not be the primary reason of an estate-planning strategy. Rather, estate tax, income tax and other financial considerations should be the motivating factors.  For example, if a family were to choose between having an offshore protection trust or a domestic FLP to hold significant long-term assets, the FLP may be more desirable, if discounts for tax purposes, greater control, and expense are important considerations.

On the other hand, offshore asset protection trust arrangements may be more advantageous when there are significant business reasons for their use.  For example, if there are family marital agreements in place in which each spouse agrees to allow premarital assets to be held in offshore trusts. Such agreements may provide to hold such assets in jurisdictions that clearly uphold separate non-marital asset rights, and to resolve any dispute under the law of a jurisdiction that protects such premarital assets.  Other examples are longer or eliminated perpetuity statutes, and the ability to use in terrorem clauses.

Also, it is common for non-U.S. clients to want their assets held in a jurisdiction that allows free movement between the country where many of their relatives reside, and the jurisdiction where some portion of their wealth is held.  An example would be clients who have relatives that they support or may need to support in the future.

One author has also recently found that many spouses holding significant tenancy by the entireties assets want “contractual assurances” from a surviving spouse that the assets will not be mishandled or lost to a creditor of the surviving spouse.  Married couples may choose to execute agreements whereby the surviving spouse agrees to immediately fund and become co-trustee of a trust established in a “creditor protection trust” jurisdiction.

Clients who have offshore asset protection trust motivation factors, and particularly those who live in states that provide protection for the “cash value” of life insurance policies, also should consider offshore life insurance arrangements that can facilitate holding the underlying policy investments in favorable jurisdictions while offering income tax avoidance under the life insurance provisions of the Internal Revenue Code.  Annuity contracts with offshore life insurance companies are also a popular way of attempting to defer income tax on investments that cannot be held under U.S.-sponsored annuities because of insurance commissioner limitations that do not apply in offshore jurisdictions.

The age of the client, tax issues, current stage in life or business and family support factors are all important in fashioning and defending a legitimate plan.  At every opportunity, the documents relating to the plan should contain “recitals” or specifically mention the non-creditor protection factors which result in the creation of the plan.

PAPER TRAIL

In defending any estate or asset protection plan, it is important to have a paper trail that justifies the estate-planning purposes behind the transfers.  Again, assuming that the timing is in favor of the debtor, documentation that proves adequate and reasonable non-creditor planning purposes for the transfers may provide a bankruptcy judge with sufficient ammunition to defeat efforts by a bankruptcy trustee to enforce a claim against the protected assets.  For instance, if a debtor’s medical condition is one factor that supports an estate or asset protection plan, it is wise to document the debtor’s health and include letters from treating physicians.

LLCS AND FLPS

Limited liability companies (LLCs) and FLPs―integral parts of many estate plans―are popular vehicles to hold valuable family assets.  Indeed, typical estate and gift tax planning recognize the advantage of discounting that can occur for gift tax purposes, and transfer partial interests in an LLC to family members and or trusts for their benefit.

There are some state statutes that limit creditors of a debtor-limited partner.  For example, Florida Statute Section 608.433(4) safeguards the membership interest of an LLC owner or member by limiting creditors of a debtor-limited partner to a “charging order.”   A charging order provides the creditor with the right to receive any distributions that may be paid to the debtor-limited partner, but does not allow the creditor to exercise any rights otherwise held by the limited partner.

A charging order may turn the creditor into a partner for federal tax purposes, although the tax law is not clear on this.  The one Revenue Ruling reaching this result involved a situation where the debtor-limited partner voluntarily gave the creditor an assignment of the limited partnership interest.  Many authorities believe that a creditor will not be subject to federal income tax by reason of merely holding a charging order.[1] If income is allocated but not distributed, then the creditor has the risk of being taxed on income that is never received.

One suggestion is to make an LLC or limited partnership agreement impose affirmative obligations on members and partners to make future capital calls and to be involved in partnership management.[2] This conclusion is based upon the Bankruptcy Court decision in Ehmann,[3] where a bankruptcy judge concluded that charging order protection does not apply once a limited partnership interest is subjected to the Bankruptcy Court’s jurisdiction when the debtor-limited partner has filed or has been forced into bankruptcy if the partnership arrangement is non-executory. If executory, a trustee is bound by the operating agreement.  LLC and FLP agreements should state that they are intended to be executory contracts, that is to say, a contract in which obligations exist on both sides that are unperformed.

There is very little case law addressing the question of whether a limited liability company’s operating agreements are an executory contract . . . although the Bankruptcy Code does not define the term “executory contract,” legislative history and case law cite with approval Professor Vern Countryman’s definition:  “a contract under which the obligations of both the bankrupt and the other party to the contract are so far unperformed that the failure of either to complete performance would constitute a material breach excusing performance of the other.”  Vern Countryman, Executory Contracts in Bankruptcy:  Part 1, 57 Minn.L.Rev. 439, 460 (1973). However, in In re Warner, the Bankruptcy Court held that operating agreements do not qualify as an executory contract.[4]

Where a debtor is a limited partner in a limited partnership with no affirmative duties to the partnership, the contract may be considered non-executory, and thus not binding upon the trustee in bankruptcy.  On the other hand, if a debtor, as limited partner, has affirmative duties to contribute money and to perform services for the partnership, then the partnership agreement may be considered executory, and may, therefore, receive charging order protection in bankruptcy.

Moreover, LLC members and FLP partners should assume an active role in the management of the entity.  Changes to the limited partnership statutes in many states permit participation of limited partners in the management of the entity with loss of limited liability.[5]

Another suggestion made in the article is to include contractual provisions which are authorized by state statute to require the consent of the remaining members when one member seeks to transfer a membership interest.

Another example of bankruptcy court “interjection” in this area is the case of In re Ashley Albright,[6] where a Colorado bankruptcy court held that the trustee in bankruptcy, as the successor of the LLC that had been owned by a debtor, had the ability to provide consent to the transfer of member interest in a single-member LLC, and could therefore exercise management control over the LLC and liquidate the assets of the LLC to realize the value as the sole member.  The bankruptcy judge concluded that the purpose of the Colorado charging order statute was to protect other members, even though the language of the statute itself had no mention of the charging order protection only applying in a multiple member situation.

We suggest that an LLC have multiple members, so that if one member ends up in bankruptcy, the presence of other members (hopefully) could strengthen the possibility of applying charging order protection.

Finally, given the discounting that can occur for gift tax measurement purposes, it will often be inconsistent with normal estate and gift tax planning not to transfer partial interests in an LLC to family members and/or trusts for their benefit.

FRAUDULENT TRANSFERS

A fraudulent transfer is defined under the Bankruptcy Code as a transfer that can be avoided by a trustee if the transfer was made with (1) the intent to actually defraud, hinder and delay creditors or (2) in exchange for less than reasonably equivalent value while the debtor was insolvent.[7]

A fraudulent transfer also can be found to have occurred when a debtor has assumed a creditor’s obligation instead of making a transfer.  If a debtor makes a transfer to a creditor and does not receive equivalent value,[8] a fraudulent transfer exists if

  1. the debtor’s business (or impending business) held assets unreasonably low in value;
  1. the debtor incurred or believed it would incur debts beyond what the debtor could repay; or
  1. at the time of the transfer, the debtor was either already insolvent or became insolvent as a result of the transfer.

There is a popular misconception that a “fraudulent transfer” is a transfer that involved defrauding one or more creditors in the bankruptcy court.  Under debtor-creditor law, the term “fraudulent transfer” means a transfer made for the purpose of avoiding creditors, or in a situation where the transferor is undercapitalized when business operations and potential risk relating thereto is taken into account.  This is certainly different than “committing fraud,” which occurs when one party actively misleads another party.

Committing a “fraudulent transfer” in the debtor-creditor law context is generally not a crime, although some states have passed bar rules that prevent lawyers from being integrally involved in helping or advising clients to effectuate fraudulent transfers,[9] even though it may be unconstitutional, and seems at least distasteful by many to prohibit lawyers from advising their clients to take actions that are in the client’s best interests.  At the least, a client has the right to know all potential actions and potential implications thereof.

A recent case involved an attorney having to pay for the transfer he made on behalf of a client. Harwell establishes that a lawyer may be held liable for disbursing funds in the way a client wishes, if they are being disbursed with the intent to defraud creditors.[10] The bankruptcy trustee tried to recover the funds under 11 U.S.C. § 550(a)(1) claiming the attorney was the initial transferee.[11] Eventually, the bankruptcy court held the attorney was the initial transferee and was liable to the trustee for the funds.

Some transfers that are intended to defeat creditors may be illegal, such as transfers intended to evade collection of taxes by the Internal Revenue Service, under Internal Revenue Code Sections 7206(4) and 7201.[12]

Any person who 1) conceals a debtor’s assets, 2) receives the debtor’s assets fraudulently, or 3) transfers or conceals assets on behalf of a corporation intending to defeat the Bankruptcy Code will find himself, and possibly his lawyer, in prison for up to five years.[13]  Take for instance U.S. v. Smithson,[14] in which the debtor and his lawyer were both convicted and served jail time for a transfer made two days before filing bankruptcy.

Prosecutors also apply 18 U.S.C. Section 371, which prohibits individuals from committing fraud on the United States.  The government must prove

1) an agreement between two people,

2) a scheme to defraud the United States, and

3) an overt act committed in furtherance of the agreement.[15]

An attorney was convicted of conspiring to transfer the assets of one corporation to another in contemplation of bankruptcy under both 18 U.S.C. Section 371 and Section 152.[16]  There, the attorney counseled the client to transfer some of the corporation’s inventory to another company and then auction off the rest of the company’s assets. The attorney, Switzer, set up the transactions and prepared confessions of judgment for some favored creditors.  The transaction took place prior to the judicial sale for the trustee in bankruptcy’s benefit.  The Switzer’s conviction was upheld on appeal because he was found to have attempted, through his advice and participation in the transactions, to defeat the bankruptcy statutes, and thereby defraud the United States of the client’s assets in bankruptcy.

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[1]812-2nd Tax Mgmt. Est., Gifts & Tr. J. IX.D.2 (2006).

[2]See Thomas O. Wells & Jordi Guso, Business Law: Asset Protection Proofing Your Limited Partnership or LLC for the Bankruptcy of a Partner or Member, 81 Fla. Bar J. 34 (2007).

[3]This decision was subsequently vacated when the parties settled and the Court approved same. See Movitz v. Fiesta Investments, LLC, 337 B.R. 228 (Bank. D. Ariz. 2005).

[4]480 B.R. 641 (Bankr. N.D.W. Va. 2012). An article about this case can be found here: http://www.llclawmonitor.com/tags/executory-contract/

[5]See, Thomas O. Wells & Jordi Guso, Business Law: Asset Protection Proofing Your Limited Partnership or LLC for the Bankruptcy of a Partner or Member, 81 Fla. Bar J. 34 (2007).

[6]291 B.R. 538 (Bankr. D. Co. 2003).

[7]11 U.S.C. Section 548(a)(1) (2007).

[8]Value is defined in 11 U.S.C. Section 548(d)(2)(a) as property, or satisfaction or securing of a present or antecedent debt of the debtor.  Thus, a promise to remain employed does not satisfy this definition and is not enough to prevent a fraudulent transfer.

[9]See, for example,Connecticut Informal Opinion 91-23-: “A lawyer may not counsel or assist a client to engage in a fraudulent transfer that the lawyer knows is either intended to deceive creditors or that has no substantial purpose other than to delay or burden creditors.” The opinion went on to say that the determining factor of impropriety was whether the lawyer knew that the transfer was intended to deceive, embarrass, delay or burden a creditor.  But see South Carolina Bar Ethics Advisory Opinion 85-02, which specifically held that it was ethical for an attorney to transfer a client’s assets to protect against the potential claims of future creditors.  There, the Committee held that if there was no immediate reasonable prospect of judgment against the client, to transfers to avoid future creditors was not a violation of the ethics code.

The Florida Supreme Court in the case of Freeman v. First Union Nat’l Bank, 329 F.3d 1231 (2003), held that Florida’s fraudulent conveyance statute is only a creditor collection tool and is not a basis for damage claims against nontransferees such as third-party financialconsultants or legal advisors.

[10]Harwell Trans. at 24:23-25:4 (M.D. Fla. Nov. 20, 2012). The attorney in question was representing his client in two separate matters, a shareholder dispute and a judgment entered in Colorado. The first matter resulted in the client receiving a substantial settlement from a shareholder dispute action that was to be deposited into an escrow account held by the attorney’s firm. The second matter was a judgment entered against the client for over one million dollars. Neither the client nor the attorney revealed to the party which held the million dollar judgment that the client was receiving settlement payments. Instead of satisfying the existing million dollar judgment, the client instructed the lawyer to disburse the funds to third parties which included the client’s wife, father, and other various people. The attorney followed the client’s instructions with the knowledge that there was this substantial judgment in place.

[11]Section 550(a)(1) states:  (a) Except as otherwise provided in this section, to the extent that a transfer is avoided under section 544, 545, 547, 548, 549, 553(b), or 724(a) of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from– (1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; (2) any immediate or mediate transferee of such initial transferee

[12]Fines in the amounts of not more than $100,000 ($500,000 for corporations) and not more than 3 years in prison or both.  See U.S. v. Hook, 781 F.2d 1166 (6th Cir. 1986), in which the court affirmed appellant’s conviction under IRC Section 7201 for concealing assets from the IRS, by forming a corporation to hold stock and automobiles with his wife and daughter as the sole shareholders. He also conducted other transactions not in compliance with the tax code.  In dicta, the court also discussed the effect of Section 7206(4) providing that any attempt to conceal assets after a tax assessment, notice and demand of payment, and refusal to pay is a felony under that statute.  This case effectively states that some transfers and transactions intended to conceal assets for tax purposes prior to a tax deficiency assessment will be illegal under IRC Section 7201, and that any transfer or concealment of assets after an assessment will be illegal.

[13]18 U.S.C. Section 152. Punishment includes fines and/or up to 5 years in prison.

[14]49 F.3d 138 (5th Cir. 1995).  The case was remanded for re-sentencing.

[15]18 U.S.C. Section 371 (2007).

[16]U.S. v. Switzer, 252 F.2d 139 (2nd Cir. 1958).

Thoughtful Corner – If Your Life is a Treadmill This Will Fit You Perfectly

We purchased a Lifespan TR 5000 DT Treadmill.  It has a 3-1/2 by 6 foot table that is very stable and also rises up or goes down by switch so that you can put your elbows on it to have a firm hold.

The maximum speed is 4 mph, which is 15 minute miles and requires a jog.

It is comfortable to walk at 3 miles an hour while reviewing documents, marking them and dictating changes.

The ability to walk 3 miles a day while also having uninterrupted time to review documents and draft revisions has been fantastic.

6 of our employees have been on the treadmill so far, and we anticipate purchasing a second one as others try and become quite happy with the reduction in stress, increase in burned calories, and enhanced concentration that being at a higher than stationary heart rate provides.

One team member walked 6.2 miles while doing routine paperwork last Thursday and felt that his powers of concentration and stress levels were greatly enhanced.  Try it, you’ll like it!

Upcoming Seminars and Webinars

FREE LIVE WEBINAR:

Blattmachr.Cintula

A POWERFUL 40 MINUTE DOUBLE HEADER WITH JONATHAN BLATTMACHR AND BRANDON CINTULA

Topics:

  • Foreign vs. Domestic Asset Protection Trusts: More Than Just Creditor Protection Considerations
  • Empowering Your Powers of Appointment: Don’t Leave Out Important Tax and Practical Provisions or Ignore Important Considerations.  With Sample Provisions

Date: Tuesday, August 12, 2014 | 12:00 p.m.

Location: Online webinar

Additional Information: To register for the webinar please click here.

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LIVE ISLE OF MAN PRESENTATION:

Alan S. Gassman will be speaking on US TRUST AND TAX LAWS FOR INTERNATIONAL INVESTORS at Cayman National Bank and Trust Company on the Isle of Man

Sign up now and you will receive a free lunch!  Transportation not included.

“Half-way between England

And Ireland in the Irish Sea.”

Is a great place to discuss trusts with glee.”

Date: Wednesday, September 3, 2014

Additional Information:  If you would like to receive a copy of the materials that will be presented please email Janine Gunyan at janine@gassmanpa.com and we will send them to you once they are ready.

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FREE LIVE WEBINAR:

Ken Crotty will be presenting a free live webinar entitled AVOIDING DISASTER ON HIGHWAY 709.  The 50 minute guide to disaster avoidance with respect to gift tax returns.  This webinar will qualify for 1 hour of CLE and CPE credit.

Date: Wednesday, September 3, 2014 | 12:30 p.m. (50 minutes)

Location:Onlinewebinar

Additional Information: To register for the webinar please click here.

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LIVE FT. LAUDERDALE PRESENTATION:

FICPA ANNUAL ACCOUNTING SHOW 

Alan S. Gassman will be speaking at the FICPA Annual Accounting Show on Thursday, September 18, 2014 on the topic of TRUST PLANNING FROM A TO Z for 50 minutes.

This presentation will introduce basic and intermediate trust planning background and provide attendees with an orderly list of the most commonly used trusts, practical features and traps for the unwary, including revocable, irrevocable and hybrid.  The discussion will include tax, creditor protection and probate and guardian considerations.

Date: Wednesday, September 17 through Friday, September 19, 2014

Location:  Fort Lauderdale, Florida

Additional Information:  For more information about this program please contact Stephanie Thomas at ThomasS@ficpa.org

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LIVE CLEARWATER PRESENTATION:

Board Certified Tax Attorney Michael O’Leary from the Trenam Kemker firm in Tampa, Florida and Christopher Denicolo from Gassman Law Associates will be speaking at the Ruth Eckerd Hall Planned Giving Advisory Council event on Tuesday, September 23, 2014.

O'Leary

Mr. O’Leary’s topic is HOT TOPICS IN CHARITABLE PLANNING AND MORE.

Chris

Mr. Denicolo’s topic is PLANNING FOR INHERITED IRAS.

Date: Tuesday, September 23, 2014 | 5:00 p.m.

This presentation is free to members of the Ruth Eckerd Hall Planned Giving Advisory Council, Ruth Eckerd Hall members, and professionals who are attending a Ruth Eckerd Hall Planned Giving Advisory Council event for the first time.

Additional Information: You can contact Suzanne Ruley at sruley@rutheckerdhall.net or via phone at 727-791-7400, David Abelson at david.abelson@morganstanley.com or via phone at 727-773-4626, Alan S. Gassman at agassman@gassmanpa.com or via phone at 727-442-1200 or the Kentucky Fried Chicken located at 1960 Gulf to Bay Blvd, which is close in proximity to this location and available to provide you with crisp, spicy or even crispier chicken, mashed potatoes and gravy, rolls, and slaw!  Bring your 32 oz. Kentucky Fried Chicken drink container to the presentation and we will fill it with your choice of club soda or seltzer water, but no sharing permitted.

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FREE LIVE WEBINAR:

Attorney Leslie A. Share (not related to Sonny and Cher) will be joining Alan Gassman for a free 30 minute webinar on DEMYSTIFYING U.S. TAX AND ESTATE PLANNING CONSIDERATIONS FOR FOREIGN INVESTORS – CONCEPTS THAT YOU CAN CLEARLY UNDERSTAND AND EXPLAIN TO CLIENTS

Date:    Monday, September 29, 2014 | 5:00 p.m.

Location: Online webinar

Additional Information: To register for the webinar please click here.

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LIVE NEW JERSEY PRESENTATION – WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW TO REPRESENT SNOWBIRDS AND FLORIDA BASED BUSINESSES:

NEW JERSEY INSTITUTE FOR CONTINUING LEGAL EDUCATION (ICLE) SPECIAL 3 HOUR SESSION

New Jersey song trivia:  What song includes the words “Counting the cars on the New Jersey Turnpike, they’ve all gone to look for America”?  What year was it recorded and who wrote it?

Alan S. Gassman will be the sole speaker for this informative 3 hour program entitled WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW

Here is some of what the New Jersey Bar Invitation for this program provides:

New Jersey residents have always had a strong connection to Florida.  We vacation there (it is our second shore), own Florida property (or have favored relatives that do) and have family and friends living there.  Sometimes our wealthiest clients move to Florida and need guidance, and you need background in order to continue representation.

There are real and significant differences between the two states that every lawyer should be cognizant of.  For example, holographic wills are perfectly legitimate in New Jersey and anyone can serve as an executor of an estate, which is not the case in Florida.  Also, Florida’s new rules regarding LLCs are different, and if you are handling estates of New Jersey decedents who owned Florida property, there are Florida law issues that must be addressed.  Asset protection differs significantly in Florida too.

Gain the knowledge you need to assist your clients with Florida matters including:

  •  Florida specific laws involving businesses, trusts, and estates
  • Florida tax planning
  • Elective share and homestead rules
  • Liability Insulation and Planning
  • Creditor Protection and Strategies
  • Medical Practice Laws
  • Staying within Florida Bar Guidelines that allow representation of Florida clients

Comments from past attendees of this program:

  • Excellent seminar and materials!!!
  • was one of the best ICLE seminars yet!
  • One of the best seminars I have attended.
  • Better than mashed potatoes and gravy.  Glad he didn’t serve grits!

Date: Saturday, October 4, 2014

Location: TBD

Additional Information: This is a repeat of the same program that we gave last year, but our book is now updated for the new Florida LLC law and changes in estate and trust law.  Please tell all of your friends, neighbors, and enemies in New Jersey to come out to support this important presentation for the New Jersey Bar Association.  We will include discussions of airboats, how to get an alligator off of your driveway, how to peel a navel orange and what collard greens and grits are. For additional information, please email agassman@gassmanpa.com

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LIVE NEW PORT RICHEY PRESENTATION:

Alan S.  Gassman, Kenneth J.  Crotty and Christopher J.  Denicolo will address the North FICPA Group on Financial Analysis and Tax Planning for Investment Products, Including Variable Annuities, Fixed Annuities, Life Insurance Contracts, and Mutual Funds – What Should the Tax and Financial Advisor Know and Advise?

Be there or be an equilateral triangle!

Date: Wednesday, October 15, 2014 | 4:30 p.m.

Location: Chili’s Port Richey, 9600 US 19 N, Port Richey, Florida

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LIVE CLEARWATER PRESENTATION

Alan Gassman will be speaking at the Pinellas County Estate Planning Council Fall Seminar on PLANNING FOR SAME GENDER COUPLES 

Date: Thursday, October 23, 2014 | 8:00 am

Location: Ruth Eckerd Hall, 1111 N. McMullen Booth Road, Clearwater, FL

Additional Information: To register for this event please email agassman@gassmanpa.com

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LIVE PASCO COUNTY PLANNED GIVING (AND DRINKING!) COCKTAIL HOUR AND PRESENTATION:

Alan S. Gassman and Christopher J. Denicolo will be speaking at the Pasco-Hernando State College’s Planned Giving Consortium Luncheon on Planning for Inherited IRA’s in View of the Recent Supreme Court Case – and Demystifing the “Stretch in Trust” Ira and Pension Rules

Date: Thursday, October 23, 2014 | 4:30 p.m.

Location:  Spartan Manor, 6121 Massachusetts Avenue, Port Richey, Florida

Additional Information:  For more information, please contact Maria Hixon at hixonm@phsc.edu

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LIVE SARASOTA PRESENTATION:

2014 MOTE VASCULAR SURGERY FELLOWS – FACTS OF LIFE TALK SEMINAR FOR FIRST YEAR SURGEONS

Alan Gassman will be speaking on the topic of ESTATE, MEDICAL PRACTICE, RETIREMENT, TAX, INSURANCE, AND BUY/SELL PLANNING – THE EARLIER YOU START THE SOONER YOU WILL BE SECURE

Date: October 25 – 26, 2014 | Alan Gassman is speaking on Sunday, October 26, 2014

Location: TBD

Additional Information: Please contact agassman@gassmanpa.com for additional information.

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LIVE CLEARWATER PRESENTATION:

TAMPA BAY CPA GROUP

Alan Gassman, Ken Crotty and Christopher Denicolo will be presenting THE MATHEMATICS OF ESTATE PLANNING in a 2 hour session at the Tampa Bay CPA Group Fall 2014 Seminar.

Date: November 7, 2014

Location: Marriott Hotel, 12600 Roosevelt Blvd North, St. Petersburg, FL 33716

Additional Information: For more information please contact Richard Fuller at richardf@fullercpa.com.

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LIVE UNIVERSITY OF NOTRE DAME PRESENTATION:

40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Topic #1: PLANNING WITH VARIABLE ANNUITIES AND ANALYZING REVERSE MORTGAGES

This presentation will cover the unique income tax and financial planning characteristics of fixed and variable annuities.

Topic #2: THE MATHEMATICS OF ESTATE AND ESTATE TAX PLANNING

Christopher J. Denicolo, Kenneth J. Crotty and Alan S. Gassman will also be presenting a special Wednesday late p.m. two hour dive into math concepts that are used or sometimes missed by estate and estate tax planners.  This will be an A to Z review of important concepts, intended for estate planners of all levels, sizes and ages.  Donald Duck has rated this program A+.

Date:November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

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LIVE PORT RICHEY PRESENTATION:

Alan Gassman will be speaking to the North Suncoast Estate Planning Council on Planning Opportunities for Same Sex Couples.

Date: Tuesday, November 18, 2014 | 5:30 p.m.

Location: Seven Springs Gold and Country Club, 3535 Trophy Blvd, Port Richey, FL 34655

Additional Information: For more information please contact agassman@gassmanpa.com.

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LIVE FORT LAUDERDALE PRESENTATION:

Alan Gassman will be speaking at the 2015 Representing the Physician Seminar on the topic of DISASTER AVOIDANCE FOR THE DOCTOR’S ESTATE PLAN.

Others speakers include D. Michael O’Leary on Really Burning Hot Tax Topics, Radha V. Bachman on Checklists for Purchase and Sale of a Medical Practice, Cynthia Mikos on Dangers of Physician Recruiting Agreements and Marlan B. Wilbanks on How a Plaintiff’s Lawyer Evaluates Cases Brought by Whistleblowers

Date: January 16, 2015

Location: Renaissance Fort Lauderdale Cruise Port Hotel, 1617 SE 17th Street, Ft. Lauderdale, FL.

Additional Information:For more information, please email Alan Gassman at agassman@gassmanpa.com

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LIVE NAPLES PRESENTATION:

2nd ANNUAL AVE MARIA SCHOOL OF LAW ESTATE PLANNING CONFERENCE

Date:  Friday, May 1, 2015

Location:  Ave Maria School of Law, 1025 Commons Circle, Naples, Florida

Additional Information:  Jerry Hesch and Alan Gassman will present The Mathematics of Estate Planning.  If you liked Donald Duck in Mathematics Land, you will love The Mathematics of Estate Planning.  This will not be a Mickey Mouse presentation.

Other speakers include Jonathan Gopman, Bill Snyder, Elizabeth Morgan, Greg Holtz, and others.

Please let us know any questions, comments, or suggestions you might have for this amazing conference, which features dual session selection opportunities in one of the most beautiful conference facilities that we have ever seen.

And don’t forget to have a great weekend in Naples with your significant other or anyone who your significant other doesn’t know!  Domino’s Pizza is extra.

Notable Seminars by Others (We aren’t speaking but don’t tell our mothers!)

LIVE ORLANDO PRESENTATION

49th ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 12 – 16, 2015

Location: Orlando World Center Marriott 8701 World Center Drive, Orlando, Florida

Additional Information: For more information please visit: https://www.law.miami.edu/heckerling/?op=0

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION

Date: Thursday, February 12, 2015

Location: St. Petersburg, FL

Additional Information: Please contact Lydia Bennett Bailey at Lydia.Bailey@allkids.org for more information.

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LIVE PRESENTATION:

2015 FLORIDA TAX INSTITUTE

Date: Wednesday through Friday, April 22 – 24, 2015

Location: TBD

Additional Information: Please contact Bruce Bokor at bruceb@jpfirm.com for more information.

AFR August

The Thursday Report – 7.31.14 – BP Paying and Nevis Trusts

Posted on: July 31st, 2014

BP Opens the Spicket – Claims are Being Processed, Appeals are Proceeding and Payments are Being Issued and Received on BP Claims – Make Sure Your Claim is Right and Do Not Delay Filing or Correcting Existing Claims

Spot the Grammar Errors Answers! 

Phil Rarick’s Informative Blog: 12 Asset Protection Advantages of the Nevis Trust

Humor! (or Lack Thereof!)

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

This report and other Thursday Reports can be found on our website at www.gassmanlaw.com.

BP Opens the Spicket – Claims are Being Processed, Appeals are Proceeding and Payments are Being Issued and Received on BP Claims – Make Sure Your Claim is Right and Do Not Delay Filing or Correcting Existing Claims

By Dean A. Kent and Alan S. Gassman

On June 9, 2014, the U.S. Supreme Court denied BP’s application that claims administration be stayed pending appeal of the Fifth Circuit Court of Appeal decision that the BP class settlement will be binding upon BP and BP claimants.

Since then we have waited to see when the claim administrator would actually be back into the payment mode and the appeals coordinator processing the numerous appeals, and it has occurred.

We are happy to report that payments have commenced for all claims that were approved and not in the appeals process prior to the October 2, 2013, injunction and stay issued by the Fifth Circuit.   Such claims are moving to payment processing quickly and final payments are being issued and received by claimants.

As for appeals, by subsequent order dated June 27, the District Court allowed for the continued processing of appeals for claims where matching of revenues and expenses is “very clearly” not an issue.   If no matching objection has been raised, the appeal will proceed to final resolution.  Notably, for these claims several arbitration rulings and Post Appeal Eligibility Notices have been issued in the past week.

If there is a possibility of BP raising an objection regarding matching with a claim on appeal, the appeal will go back to the Claims Administrator to determine whether the financial records previously provided sufficiently “match” revenues to related expenses under new Policy 495.  If so, the claim will proceed with the appeal and arbitration.  If not, a new damages model will be prepared by the Claims Administrators after being screened that “matches” revenues to expenses under Policy 495 and a new Notice of Eligibility will be issued that may differ from any previous Eligibility Notice.

The issuance of a new Eligibility Notice will trigger rights to request re-review, reconsideration and appeal.  Likewise, issuance of the new Eligibility Notice will trigger BP’s right to seek appeal.

Spot the Grammar Errors Answers!

Two weeks ago, we challenged Thursday Report readers to spot the typos and misspellings in the July 17th edition of the Thursday Report.  You can view that Thursday Report by clicking here, and you can review the marked up copy that shows the errors by clicking here.

Last week, we challenged readers to spot 3 grammar mistakes made in the Thursday Report.  To see the mistakes, please click here.

Phil Rarick’s Informative Blog: 12 Asset Protection Advantages of the Nevis Trust

Rarick

We are playing hooky today but were pleased to see Phil Rarick’s blog post on 12 Advantages of Using Nevis Trusts.  We have been using Nevis LLC’s and trusts for many years, for a number of good reasons.  The culture, professionalism, stability, and last but not least a very nice Four Seasons Hotel make this a jurisdiction worth knowing.  We thank Phil for this reminder.

According to a recent Florida Bar treatise, Nevis, along with the Cook Islands, are recognized as foreign jurisdictions with “the most modern and comprehensive asset protection trusts legislation.”  See Offshore Asset Protection Trusts, Asset Protection In Florida, by James J. Flick and Jonathan Gopman, p. 10-11, The Florida Bar (Third Edition, 2013)

To learn more about this interesting topic, please click here.

Humor! (Or Lack Thereof!)

Alan is in New York City this weekend, and if you email him while he’s away, you’ll get the below vacation message (but don’t worry! He’ll be back in time for the Young Lawyers Workshop on August 3rd!)

I’m in New York,
On business and knife and fork,
When the business is done,
I’ll be seeing breweries with my sons,
And Carnegie Deli daily,
Without fail-y,
Not to mention Bullets over Broadway,
And the Book of Mormon,
In memory of my dear departed Uncle Norman
See you Monday, real world folks,
And others sooner, if your fun invokes,
I’ll miss the office and all it offers,
While doing my best to maximize New York’s coffers.
Thanks to Marcia for letting me go,
And BB Kings and Birdland for music that flows,
And as our tastes refine and fun is more often,
I thank NYC for events and times that never soften

Here is a response to Alan’s vacation message that we received this afternoon from a really neat client….thanks Denise!

There once was a lawyer named Al
Who played in NY with his pal(s)
When the pubs they did close
He watched Broadway shows
And sent selfies back home to his gal!

While he’s gone, here are some of our favorite pieces of Thursday Report humor, starting with a cartoon by Gassman Law Associates assistant Amy Bhatt.

Robin Hood Cartoon 1

Robin Hood Cartoon 2

Robin Hood Cartoon 3

 THE BALCONY SCENE, IF ROMEO AND JULIET WERE ATTORNEYS

JULIET: Deny thy father, and refuse thy name, and petition in chancery court for a name change, and file before the office of vital statistics.

ROMEO: My name, dear saint, is hateful to myself, because it is an enemy to thee.  I will therefore show that my petition is filed for no ulterior or illegal purpose and granting it will not in any manner invade the property rights of others, according to Title VI, Chapter 68.07 (j).

JULIET: How camest thou hither, tell me, and wherefore? The orchard walls are high and hard to climb, and a person who, without being authorized, licensed or invited, willfully enters upon or remains in any property violates Title XLVI, Chapter 810.09 and the place death, if any of my kinsmen find thee here. Does thou love me? I know thou wilt say ‘Aye’, thou may prove false, at lover’s perjuries, they say, ‘Jove Laughs’.

ROMEO: Lady, by the blessed moon, I swear

JULIET: O, swear not by the moon, the inconstant moon.

ROMEO, Then I call the judge from “Merchant of Venice” and a stenographer.

JUDGE AND STENOGRAPHER: Hello.

ROMEO: Who will now depose me, under rule 1.310 of the rules of civil procedure, recording my oath or affirmation taken or administered before an officer authorized under s. 92.50, knowing that the penalty for perjury, under s775.082, s775.083 or s775.084 may result in imprisonment for up to one year, a fine of $1,000 dollars, or both, since this is not a legal proceeding for a capital felony.

JUDGE: Ready, my lady?

(JULIET HAS FALLEN ASLEEP)

Ken - Final

The Legal Problems of Cartoon Characters
by Ronald H. Ross:

Bullwinkle the Moose
Was jailed for substance abuse
His partner shouldn’t be so cocky,
He turned state’s witness against Rocky
When he couldn’t pay his debts to thugs,
It was broken bunny legs for Buggs
Popeye accidentally squeezed Olive Oil
So hard she shuffled off her mortal coil
Caught with a bone, and someone else’s shoe,
Was seasoned crime-fighter Scooby Doo
Charged with treason is Betty Boop,
Giving info and “entertaining” enemy troops
And there’s a reason they call him Speed Racer
(amphetamines with a whiskey chaser)
They almost caught Mr. Magoo,
The FBI wired one of his criminal crew
But the nearsighted guy smelled trouble because the snitch was Pepe Le Pew

Upcoming Seminars and Webinars

CLEARWATER WORKSHOP FOR YOUNG LAWYERS:

Alan Gassman will be joined by several experienced attorneys and other well respected industry experts during a full day workshop for young lawyers who wish to enhance their practice and personal lives.

Date: Sunday, August 3, 2014 | 9am – 3pm

Location: Clarion Hotel, 20967 US 19 N., Clearwater

Additional Information: To register for this program please email agassman@gassmanpa.com

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FREE LIVE WEBINAR:

HIPAA MEDICAL OFFICE DISASTER AVOIDANCE CHECKLIST

This 20-25 minute webinar includes valuable forms and important strategies that every medical office should know about. Join us for an interactive and innovative discussion of how medical practices can be decimated by HIPAA, including a number of survival techniques, tips, and tools.

Date: Tuesday, August 5, 2014 | 12:00 p.m. and 7:00 p.m.

Speakers: Alan S. Gassman, Lester Perling, and Jeff Howard

Location: Online Webinar

Additional Information: To register for the 12 p.m. webinar, please click here. To register for the 7 p.m. webinar, please click here.

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FREE LIVE WEBINAR:

SOFTWARE UPDATE WEBINAR: NEW FEATURES FOR ATTENDING CREATURES

Alan Gassman will be joined by Ken Crotty and software designer Dave Archer to discuss the new features of our EstateView software.  Additionally, there will be a session for new users to become familiar with the program.

Date: Wednesday, August 6, 2014 | 12:30 pm (30 minutes)

Location: Online webinar

Additional Information: To register for the webinar please click here.

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FREE LIVE WEBINAR:

Blattmachr

A POWERFUL 40 MINUTE DOUBLE HEADER WITH JONATHAN BLATTMACHR

Topics:

  • Foreign vs. Domestic Asset Protection Trusts: More Than Just Creditor Protection Considerations
  • Empowering Your Powers of Appointment: Don’t Leave Out Important Tax and Practical Provisions or Ignore Important Considerations.  With Sample Provisions

Date: Tuesday, August 12, 2014 | 12:00 p.m.

Location: Online webinar

Additional Information: To register for the webinar please click here.

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LIVE ISLE OF MAN PRESENTATION:

Alan S. Gassman will be speaking on US TRUST AND TAX LAWS FOR INTERNATIONAL INVESTORS at Cayman National Bank and Trust Company on the Isle of Man

Sign up now and you will receive a free lunch!  Transportation not included.

“Half-way between England

And Ireland in the Irish Sea.”

Is a great place to discuss trusts with glee.”

Date: Wednesday, September 3, 2014

Additional Information:  If you would like to receive a copy of the materials that will be presented please email Janine Gunyan at janine@gassmanpa.com and we will send them to you once they are ready.

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FREE LIVE WEBINAR:

Ken Crotty will be presenting a free live webinar entitled AVOIDING DISASTER ON HIGHWAY 709.  The 50 minute guide to disaster avoidance with respect to gift tax returns.  This webinar will qualify for 1 hour of CLE and CPE credit.

Date: Wednesday, September 3, 2014 | 12:30 p.m. (50 minutes)

Location: Online webinar

Additional Information: To register for the webinar please click here.

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LIVE FT. LAUDERDALE PRESENTATION:

FICPA ANNUAL ACCOUNTING SHOW 

Alan S. Gassman will be speaking at the FICPA Annual Accounting Show on Thursday, September 18, 2014 on the topic of ESSENTIAL GUIDE TO BASIC TRUST PLANNING for 50 minutes.

This presentation will introduce basic and intermediate trust planning background and provide attendees with an orderly list of the most commonly used trusts, practical features and traps for the unwary, including revocable, irrevocable and hybrid.  The discussion will include tax, creditor protection and probate and guardian considerations.

Date: Wednesday, September 17 through Friday, September 19, 2014

Location:  Fort Lauderdale, Florida

Additional Information:  For more information about this program please contact Stephanie Thomas at ThomasS@ficpa.org

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LIVE CLEARWATER PRESENTATION:

Board Certified Tax Attorney Michael O’Leary from the Trenam Kemker firm in Tampa, Florida and Christopher Denicolo from Gassman Law Associates will be speaking at the Ruth Eckerd Hall Planned Giving Advisory Council event on Tuesday, September 23, 2014.

O'Leary

Mr. O’Leary’s topic is HOT TOPICS IN CHARITABLE PLANNING AND MORE.

OLYMPUS DIGITAL CAMERA

Mr. Denicolo’s topic is PLANNING FOR INHERITED IRAs.

Date: Tuesday, September 23, 2014 | 5:00 p.m.

This presentation is free to members of the Ruth Eckerd Hall Planned Giving Advisory Council, Ruth Eckerd Hall members, and professionals who are attending a Ruth Eckerd Hall Planned Giving Advisory Council event for the first time.

Additional Information: You can contact Suzanne Ruley at sruley@rutheckerdhall.net or via phone at 727-791-7400, David Abelson at david.abelson@morganstanley.com or via phone at 727-773-4626, Alan S. Gassman at agassman@gassmanpa.com or via phone at 727-442-1200 or the Kentucky Fried Chicken located at 1960 Gulf to Bay Blvd, which is close in proximity to this location and available to provide you with crisp, spicy or even crispier chicken, mashed potatoes and gravy, rolls, and slaw!  Bring your 32 oz. Kentucky Fried Chicken drink container to the presentation and we will fill it with your choice of club soda or seltzer water, but no sharing permitted.

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LIVE NEW JERSEY PRESENTATION – WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW TO REPRESENT SNOWBIRDS AND FLORIDA BASED BUSINESSES:

NEW JERSEY INSTITUTE FOR CONTINUING LEGAL EDUCATION (ICLE) SPECIAL 3 HOUR SESSION

New Jersey song trivia:  What song includes the words “Counting the cars on the New Jersey Turnpike, they’ve all gone to look for America”?  What year was it recorded and who wrote it?

Alan S. Gassman will be the sole speaker for this informative 3 hour program entitled WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW

Here is some of what the New Jersey Bar Invitation for this program provides:

New Jersey residents have always had a strong connection to Florida.  We vacation there (it=s our second shore), own Florida property (or have favored relatives that do) and have family and friends living there.  Sometimes our wealthiest clients move to Florida and need guidance, and you need background in order to continue representation.

There are real and significant differences between the two states that every lawyer should be cognizant of.  For example, holographic wills are perfectly legitimate in New Jersey and anyone can serve as an executor of an estate, which is not the case in Florida.  Also, Florida=s new rules regarding LLCs are different, and if you are handling estates of New Jersey decedents who owned Florida property, there are Florida law issues that must be addressed.  Asset protection differs significantly in Florida too.

Gain the knowledge you need to assist your clients with Florida matters including:

  •  Florida specific laws involving businesses, trusts, and estates
  •  Florida tax planning
  •  Elective share and homestead rules
  •  Liability Insulation and Planning
  • Creditor Protection and Strategies
  • Medical Practice Laws
  •  Staying within Florida Bar Guidelines that allow representation of Florida clients

Comments from past attendees of this program:

  • Excellent seminar and materials!!!
  • This was one of the best ICLE seminars yet!
  • One of the best seminars I have attended.
  • Better than mashed potatoes and gravy.  Glad he didn’t serve grits!

Date: Saturday, October 4, 2014

Location: TBD

Additional Information: This is a repeat of the same program that we gave last year, but our book is now updated for the new Florida LLC law and changes in estate and trust law.  Please tell all of your friends, neighbors, and enemies in New Jersey to come out to support this important presentation for the New Jersey Bar Association.  We will include discussions of airboats, how to get an alligator off of your driveway, how to peel a navel orange and what collard greens and grits are. For additional information, please email agassman@gassmanpa.com

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LIVE NEW PORT RICHEY PRESENTATION:

Alan S.  Gassman, Kenneth J.  Crotty and Christopher J.  Denicolo will address the North FICPA Group on Financial Analysis and Tax Planning for Investment Products, Including Variable Annuities, Fixed Annuities, Life Insurance Contracts, and Mutual Funds – What Should the Tax and Financial Advisor Know and Advise?

Be there or be an equilateral triangle!

Date: Wednesday, October 15, 2014 | 4:30 p.m.

Location: Chili’s Port Richey, 9600 US 19 N, Port Richey, Florida

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LIVE CLEARWATER PRESENTATION

Alan Gassman will be speaking at the Pinellas County Estate Planning Council Fall Seminar on PLANNING FOR SAME GENDER COUPLES

Date: Thursday, October 23, 2014 | 8:00 am

Location: Ruth Eckerd Hall, 1111 N. McMullen Booth Road, Clearwater, Fl

Additional Information: To register for this event please email agassman@gassmanpa.com

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LIVE PASCO COUNTY PLANNED GIVING (AND DRINKING!) COCKTAIL HOUR AND PRESENTATION:

Alan S. Gassman and Christopher J. Denicolo will be speaking at the Pasco-Hernando State College’s Planned Giving Consortium Luncheon on Planning for Inherited IRA’s in View of the Recent Supreme Court Case – and Demystifing the “Stretch in Trust” Ira and Pension Rules

Date: Thursday, October 23, 2014 | 4:30 p.m.

Location:  Spartan Manor, 6121 Massachusetts Avenue, Port Richey, Florida

Additional Information:  For more information, please contact Maria Hixon at hixonm@phsc.edu

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LIVE SARASOTA PRESENTATION:

2014 MOTE VASCULAR SURGERY FELLOWS – FACTS OF LIFE TALK SEMINAR FOR FIRST YEAR SURGEONS

Alan Gassman will be speaking on the topic of ESTATE, MEDICAL PRACTICE, RETIREMENT, TAX, INSURANCE, AND BUY/SELL PLANNING – THE EARLIER YOU START THE SOONER YOU WILL BE SECURE

Date: October 25 – 26, 2014 | Alan Gassman is speaking on Sunday, October 26, 2014

Location: TBD

Additional Information: Please contact agassman@gassmanpa.com for additional information.

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LIVE CLEARWATER PRESENTATION:

TAMPA BAY CPA GROUP

Alan Gassman, Ken Crotty and Christopher Denicolo will be presenting THE MATHEMATICS OF ESTATE PLANNING in a 2 hour session at the Tampa Bay CPA Group Fall 2014 Seminar.

Date: November 7, 2014

Location: Marriott Hotel, 12600 Roosevelt Blvd North, St. Petersburg, FL 33716

Additional Information: For more information please contact Richard Fuller at richardf@fullercpa.com.

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LIVE UNIVERSITY OF NOTRE DAME PRESENTATION:

40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Topic #1: PLANNING WITH VARIABLE ANNUITIES AND ANALYZING REVERSE MORTGAGES

This presentation will cover the unique income tax and financial planning characteristics of fixed and variable annuities.

Topic #2: THE MATHEMATICS OF ESTATE AND ESTATE TAX PLANNING

Christopher J. Denicolo, Kenneth J. Crotty and Alan S. Gassman will also be presenting a special Wednesday late p.m. two hour dive into math concepts that are used or sometimes missed by estate and estate tax planners.  This will be an A to Z review of important concepts, intended for estate planners of all levels, sizes and ages.  Donald Duck has rated this program A+.

Date:November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

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LIVE FORT LAUDERDALE PRESENTATION:

Alan Gassman will be speaking at the 2015 Representing the Physician Seminar on the topic of DISASTER AVOIDANCE FOR THE DOCTOR’S ESTATE PLAN.

Date: January 16, 2015

Location: Renaissance Fort Lauderdale Cruise Port Hotel, 1617 SE 17th Street, Ft. Lauderdale, FL.

Additional Information:For more information, please email Alan Gassman at agassman@gassmanpa.com

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LIVE NAPLES PRESENTATION:

2nd ANNUAL AVE MARIA SCHOOL OF LAW ESTATE PLANNING CONFERENCE

Date:  Friday, May 1, 2015

Location:  Ave Maria School of Law, 1025 Commons Circle, Naples, Florida

Additional Information:  Jerry Hesch and Alan Gassman will present The Mathematics of Estate Planning.  If you liked Donald Duck in Mathematics Land, you will love The Mathematics of Estate Planning.  This will not be a Mickey Mouse presentation.

Other speakers include Jonathan Gopman, Bill Snyder, Elizabeth Morgan, Greg Holtz, and others.

Please let us know any questions, comments, or suggestions you might have for this amazing conference, which features dual session selection opportunities in one of the most beautiful conference facilities that we have ever seen.

And don’t forget to have a great weekend in Naples with your significant other or anyone who your significant other doesn’t know!  Domino’s Pizza is extra.

 NOTABLE SEMINARS BY OTHERS
(We aren’t speaking but don’t tell our mothers!)

 LIVE ORLANDO PRESENTATION

49th ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 12 – 16, 2015

Location: Orlando World Center Marriott 8701 World Center Drive, Orlando, Florida

Additional Information: For more information please visit: https://www.law.miami.edu/heckerling/?op=0

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION

Date: Thursday, February 12, 2015

Location: St. Petersburg, FL

Additional Information: Please contact Lydia Bennett Bailey at Lydia.Bailey@allkids.org for more information.

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LIVE PRESENTATION:

2015 FLORIDA TAX INSTITUTE

Date: Wednesday through Friday, April 22 – 24, 2015

Location: TBD

Additional Information: Please contact Bruce Bokor at bruceb@jpfirm.com for more information.

Applicable Federal Rates

Below we have this month, last month’s, and the preceding month’s Applicable Federal Rates, because for a sale you can use the lowest of the 3.

federal rates

 

The Thursday Report 7.24.14 – Spot the Grammar Errors Edition!

Posted on: July 24th, 2014

Spot the Typos Answers! There were 38 typos in last week’s edition, as described below.

Special Thanks

More on Qualified Longevity Contracts – Having Life Insurance Carriers Take the Risk of People Living Beyond Their Life Expectancy, with Tax Benefits for IRA Owners – Zero Rate of Return if the Person Dies at or Before Their Life Expectance as a Trade-Of, an article by Brandon Ketron and Travis Arango, Part 1

What Estate Planning and Other Lawyers Need to Know About Bankruptcy, an article by Alberto F. Gomez  and Alan S. Gassman, Part 3

Quote of the Week

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

This report and other Thursday Reports can be found on our website at www.gassmanlaw.com.

Spot the Typos Answers!

We thank all of the many people who responded to our challenge to spot the number of typos we included in last week’s Thursday Report.  In total, there were 38 typos in the report.  No one guessed correctly but some came close.  Click here to see last week’s report with the changes circled.

We are sending Kentucky Fried Chicken gift certificates to the closest three contestants, and thank you for your support.

It is a little known fact that your brain can process misspellings without you even knowing.  If the first letter of a word and the last letter of a word are correct then it does not matter what order the rest of the letters are in.  Perhaps that is why no one correctly guessed that there were 38 typos in last week’s Thursday Report.  Thanks for playing along!

Special Thanks

We thank Jay Adkisson for his expressive praise for a recent Leimberg article that we published:

“Alan,

Another great article!

Of all the LISI articles, yours are the ones that I’ll pull over to the side of the road to read immediately.

–   Jay”

To which Steve Leimberg responded:

“Jay,

That’s very nice of you but we are not responsible for any road accidents you may have.

Seriously, nothing nicer than a brilliant guy taking the time to be thoughtful and complimentary!

Warmest,

Steve”

We thank both Jay and Steve for their kind words and look forward to publishing future articles with Leimberg Information Services.

Jay Adkisson and his partner Chris Riser are the authors of the best-selling book, Asset Protection: Concepts & Strategies for Protecting Your Wealth, that can be purchased by clicking here.

They also have the best website available for reviewing the creditor protection laws of all 50 states, which can be viewed by clicking here.

Also, Jay’s nationally recognized website, Quatloos, which details scams and frauds, can be viewed by clicking here.

Hats off to Jay and Chris for everything they have done for the creditor protection and wealth preservation industries.

More on Qualified Longevity Contracts – Having Life Insurance Carriers Take the Risk of People Living Beyond Their Life Expectancy, with Tax Benefits for IRA Owners – Zero Rate of Return if the Person Dies at or Before Their Life Expectance as a Trade-Of, an article by Brandon Ketron and Travis Arango, Part 1

We are very pleased that summer law clerks Brandon Ketron, CPA && Travis Arango are writing and analyzing law, financial products, and general situations so well that we have turned them loose this week to create the following article on the new July 1 regulations that permit insurance companies to issue annuity contracts under IRAs that will not count as assets under the minimum distribution rules until payments begin (or age 85 if earlier) and will provide lifetime payments for the IRA holder (and spouse if chosen as an option).

Take it away Brandon and Travis!

The $125,000 question:

Should your clients over age 70 ½ reduce their IRA minimum distributions by investing in specially designed annuity products?

Introduction:

The insurance industry received a July 4th gift from the Internal Revenue Service in the form of a new regulation released on July 1, 2014 that makes it possible to place IRA and pension plan investments into fixed annuities that will enable the IRA holder or plan participant to avoid the minimum distribution rules that apply after age 70 ½ to the extent that IRA or plan assets are held under such vehicles.  The maximum amount that can be contributed into such fixed annuities under an IRA or pension will be the lesser of $125,000 or 25% of the value of the pension or IRA account as of the time of the investment.  Basically, the value of such contracts will not be considered to be assets of the IRA or pension for purposes of the minimum distribution rules until the owner is age 85.

None of the life insurance or annuity companies have released their products as of yet.

These rules will also allow QLAC’s to be held under 403(b), and 457(b) plans, but not under defined benefit plans or Roth IRA’s.

Under the regulations these annuity contracts will not be variable or equity indexed annuities, even if they offer a guaranteed minimum rate of return, unless or until explicitly approved by the Internal Revenue Service. Instead, the products available will be ones with a fixed rate of return, life payment, or other similar contract that can be expected to guarantee a minimum rate of return, and to actually credit a slightly higher rate of return in the same manner that many whole life insurance products now offer. The preamble to the new regulation points out that variable and equity indexed annuities with contractual guarantees provide an unpredictable level of income to the holder and are therefore inconsistent with the purpose of the new regulation.

A typical arrangement would be that a taxpayer could invest $125,000 (the maximum amount that can be invested is the lesser of 25% of the value of the qualified account at the time of the investment or $125,000) into a deferred income annuity contract that would pay-out monthly income at an elected age (not to exceed 85) to the account holder or plan participant.

One very knowledgeable advisor, Michael Morrissey of Vanguard’s annuity division gave us the following example of how a hypothetical QLAC might perform.

A 65 year old male who wants to receive a monthly income of $1,000 per month for life beginning at age 80 can pay $47,920 for a life annuity right now.  The annuity contract would include not only the above payments, but also a refund on death to the extent that the total payments received before death did not amount to $47,920.  The value of this contract would not be subject to the minimum distribution rules until the gentleman reaches age 80.

The new regulations require that payments from a QLAC must begin to be made by age 85.  A 65 year old male who wants to receive $1,000 a month for life beginning at age 85 would only have to pay $26,634 for a Vanguard life annuity contract, which would also provide a refund to the extent that total payments are less than $26,634 upon death.

In both of the above arrangements there is a death benefit feature, as is permitted under the new regulations, which will provide that if the account holder dies before receiving payments equal to the amount invested, then the deficit amount will be paid to the account holder’s beneficiaries  (typically without interest) shortly after death.  In the alternative, payments might continue for the lifetime of a surviving spouse who could roll the annuity over to his or her own IRA and continue to have the benefit of payment rights.  If the account holder dies before the elected age to begin distributions, the new regulations allow a contract to return only the principal amount invested ($125,000).

Definition of a QLAC According to the New Regulation

A QLAC’s premiums paid for the contract cannot exceed the lesser of $125,000 or 25% of the account balance as of the last valuation date preceding the date of a premium payment. This is increased for contributions added to the account and decreased for distributions made from the account after the valuation date but before the premium payment date. The QLAC’s value is excluded from the account balance that is used to figure out the required minimum distributions. However, the value of the QLAC is included for applying the 25% limit. The IRS kept the dollar and percentage limit to “constrain undue deferral of distribution of an employee’s interest.”

If an annuity contract is not a QLAC simply because the premiums for the contract are over the premium limits then the contract will still be a QLAC if the excess premium is returned to the non-QLAC part of the account by the end of the year following the year the excess was paid. This excess can be returned to the account by cash or in an annuity contract that is not intended to be a QLAC. If at any time the QLAC or intended QLAC contract fails for reasons other than exceeding premium limits, the contract will not be treated as a QLAC from the date of the first premium payment.

This dollar limitation will be adjusted in the same time and manner as under section 415(d) except: (1) The base period will be the quarter beginning six months before the effective date of the regulation and (2) Any increase that is not a multiple of $10,000 will be rounded down to the next multiple of $10,000.

The contract must provide for distributions to be made no later than a specific annuity starting date. This date cannot be later than the first day of the month following the employee’s age of 85. An employee can elect to have an earlier annuity starting date but the contract is not required to have an option to start distributions before the annuity starting date. The maximum age may be adjusted based on changes in mortality. However, the IRS believes that these changes will not occur more often than the dollar limit adjustment.

A variable contract under section 817, an indexed contract or, a similar contract do not count as a QLAC but the Commissioner may create an exception to this rule. However, a participating annuity contract is not similar to a variable contract or indexed contract just because it has payments of dividends shown in A-14(c)(3) of section 1.401(a)(9)-6. The regulation also noted that a contract that has a cost-of-living adjustment, discussed  in A-14(b) of section 1.401(a)(9)-6, is not considered similar to a contract that is variable or indexed.

Other QLAC requirements will be covered in next week’s issue, which should be reviewed carefully.

Hypothetical Example and Chart

We have prepared a spread sheet that illustrates the use of a QLAC in an IRA.  This example assumes that a male age 65 has $500,000 in an IRA that is growing at 3.5%.  The male invests the maximum amount of $125,000 into a QLAC, that will provide yearly payments of $51,948 beginning at age 85.  When required minimum distributions kick in at the age of 70, the QLAC will not count as part of the IRA balance, resulting in a tax savings of $2,220.73.  At the age of 85 when the QLAC will begin to make payments, the individual will have a total tax savings of $40,916.31.

From an investment standpoint, the benefit of investing in a QLAC depends on how long the individual survives.  We assumed the same individual did not invest the $125,000 in the QLAC and left the money in the IRA growing at 3.5% in order to compare the two options.  For the investment in the QLAC to provide a greater rate of return, the individual would have to live to the age of 88.  The longer the individual lives, the greater the rate of return.  Below is a chart comparing the two options, and a detailed spreadsheet of the options is available upon request.

QLAC vs. NO QLAC

What Estate Planning and Other Lawyers Need to Know About Bankruptcy, an article by Alberto F. Gomez and Alan S. Gassman, Part 3

We left off describing cases, and, situations, where, courts, have, allowed, planning actions finalized shortly before a bankruptcy to stand, and not be considered as “fraudulent transfers” when clearly performed for business or planning purposes, notwithstanding prejudice to creditors.

For example, in In re Agnew,[1] a farmer owned an undivided 1/5 interest in farmland along with some farming equipment; his mother, in trust, owned the remaining 4/5 undivided interest in the land.  The farmer leased the 4/5 parcel from his mother for farming purposes and to live on.  Before filing bankruptcy, the farmer transferred his 1/5 interest in the land and his farm equipment to his mother’s trust, in exchange for the parcel of land on which he lived.  Years before the transfer, the farmer and his mother had discussed making this transfer to ensure that his siblings would not evict him after his mother died.

At issue was whether this transfer should be defeated by Bankruptcy Code Section 522(o)(4), which authorizes the reduction of the amount claimed by a bankruptcy debtor as to homestead property in the amount of any such property that was disposed of in a 10-year period prior to the filing of the bankruptcy petition, if the transfer was made with the intent to hinder, delay, or defraud creditors.  Fortunately for the debtor/farmer, the court found there was no intent to defraud creditors; the anticipated bankruptcy filing was not the reason for this transfer even though it was admitted to have been recommended by a bankruptcy consultant shortly before the bankruptcy filing.

In contrast,  In re Lacounte,[2] the court found that a husband and wife debtor did violate Bankruptcy Code Section 522(o) by selling assets to intentionally divert funds away from creditors.  Anticipating bankruptcy, the debtor’s daughter sought counsel of an attorney who advised the husband and wife to sell off what they did not need, and use the proceeds to pay down their home mortgage.  The Debtors sold 3 family cars and the husband’s future interest in his mother’s 680 acre farm.  They used the proceeds from these sales to pay down the mortgage on their home even though debtors had incurred more than $180,000 in gambling debts on their credit cards.  The debtors also transferred the wife’s future interest in her mother’s home back to her mother because they understood that in bankruptcy proceedings she would most likely lose this family asset to creditors.

The court held that selling the assets and utilizing the proceeds to pay down the home mortgage was done solely to keep the assets out of reach of creditors.  The court found this violated 522(o) and the debtor’s homestead exemption was reduced by the amount they received as proceeds from sales of their assets.

Keep in mind that in each of the cited cases, the debtors chose to file voluntarily.  In most cases, the debtor may very well be judgment proof and would not have to defend against a creditor with strong-arm powers, such as a trustee.  If a debtor has implemented an estate plan with creditor protection features, it is logical to ask, why voluntarily file a bankruptcy?

The point:  Often it will be best to “hunker down,” live with a judgment and occasional depositions in aid of execution and continually attempt to settle as the years roll on. Keep in mind that as the years roll on, the statutes of limitation continue to click away. 

If a planning or asset protection plan is implemented aftera demand for payment by a creditor and/or entry of a judgment, a bankruptcy court will be more inclined to find that the plan was a fraudulent transfer.

Planners should advise clients that the risk of a bankruptcy court setting aside or disregarding an asset protection plan increases exponentially based upon the timing of the plan and the existence of a creditor claim.  While the burden is on the trustee in bankruptcy to prove that a transfer can be set aside as fraudulent, evidence other than the debtor’s testimony, such as communication with third parties, and lack of non creditor planning reasons may be used to determine if sufficient proof exists.

A court evaluating whether sufficient “badges of fraud” exist to demonstrate a fraudulent transfer may consider whether:

1) the transfer is to an insider;

2) the debtor has retained control of the asset;

3) the transfer was concealed;

4) before the transfer, the debtor was sued or demand was made;

5) the transfer was of substantially all of the debtor’s assets;

6) the debtor absconded;

7) the debtor removed or concealed assets; and

8) there was no reasonable equivalent value or consideration for the transfer.

Ideally, the Plan should be implemented before any creditor claim arises.  Many times, the timing of the Plan cannot be controlled, but will be a significant factor.

Under the 2005 Bankruptcy Act, a debtor must maintain a domicile within a certain state for the two years (730 days) prior to filing a petition in order to have that state’s exemption laws apply in the bankruptcy.[3]  If the debtor’s domicile was not located in a single state for that 730-day period, then it is necessary to determine where the debtor resided for the 180 days before those 730 days (days 731 through 910).[4]  In those situations the exemption laws of the state where the debtor was domiciled the greatest number of days between day 910 before filing and day 730 before filing will be the state law to apply in the bankruptcy.[5]

Further, as discussed below, a 1,215 day rule applies to qualify a “non-fraudulent transfer into a homestead” for full protection in bankruptcy, even where the state fraudulent transfer rules would not cause a set aside to occur (such as in Florida).[6]  A ten-year statute, as described below, will provide for loss of equity in homestead attributable to fraudulent transfers made into the homestead within ten years of filing bankruptcy.

LIMITING RISK: 

As a threshold matter, the first decision is whether to file a voluntary bankruptcy petition.

Our discussion on limiting risk and deciding if and when to ever file a bankruptcy will be provided next week.

________________________________

[1]In re Agnew, 355 B.R. 276 (Bankr. D. Kans. 2006).

[2]In re Lacounte, 342 B.R. 809 (Bankr. D. Mont. 2005).

[3]11 U.S.C. Section 522(b)(3)(A) (2007).

[4]Ibid.

[5]Ibid.

[6]Fla. Const. Art. X § 4 providing, in general, that Florida homestead shall be exempt from forced sale; see Fla. Stat. § 222.20 excluding the availability of federal exemptions to Florida residents.

Quote of the Week

“[T]he pursuit of greatness…is as much or more about flair, grotesque mistakes, eccentricity, and passion as it is about ‘failproof’ systems.  In short, reduce to zero the odds of nothing going wrong and you’ll also reduce to zero the odds of anything interesting happening.”

– Tom Peters

While we need to get client work exactly right, and there is no substitution for accuracy, the development of our practices, the way we do things, and the way we communicate has to change in order to keep up with the times.  Try something new this week, it might just knock your socks off!

Tom Peters is the author of In Search of Excellence, Thriving on Chaos, The Little Big Things: 163 Ways to Pursue Excellence and many other books.  More information on Tom Peters can be found by clicking here.

Upcoming Seminars and Webinars

FREE LIVE WEBINAR:

GAUGING AND HANDLING ENTITLEMENT TENDENCIES OF BENEFICIARIES, EMPLOYEES AND OTHERS – A FASCINATING AND EXTREMELY PRACTICAL GUIDE ON SOCIETY’S NEWEST ISSUE

Date: Tuesday, July 29, 2014 | 12:30 p.m. (30 Minute Webinar)

Speakers: Stephanie Thomason, Ph.D. and Alan S. Gassman, Esq.

Location: Online webinar

Additional Information: To register for the webinar please click here.

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CLEARWATER WORKSHOP FOR YOUNG LAWYERS:

Alan Gassman will be joined by several experienced attorneys and other well respected industry experts during a full day workshop for young lawyers who wish to enhance their practice and personal lives.

Date: Sunday, August 3, 2014 | 9am – 3pm

Location: Clarion Hotel, 20967 US 19 N., Clearwater

Additional Information: To register for this program please email agassman@gassmanpa.com

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FREE LIVE WEBINAR:

HIPAA MEDICAL OFFICE DISASTER AVOIDANCE CHECKLIST

This 20-25 minute webinar includes valuable forms and important strategies that every medical office should know about. Join us for an interactive and innovative discussion of how medical practices can be decimated by HIPAA, including a number of survival techniques, tips, and tools.

Date: Tuesday, August 5, 2014 | 12:00 p.m. and 7:00 p.m.

Speakers: Alan S. Gassman, Lester Perling, and Jeff Howard

Location: Online Webinar

Additional Information: To register for the 12 p.m. webinar, click here. To register for the 7 p.m. webinar, please click here.

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FREE LIVE WEBINAR:

SOFTWARE UPDATE WEBINAR: NEW FEATURES FOR ATTENDING CREATURES

Alan Gassman will be joined by Kenneth J. Crotty and software designer Dave Archer to discuss the new features of our EstateView software.  Additionally, there will be a session for new users to become familiar with the program.

Date: Wednesday, August 6, 2014 | 12:30 pm (30 minutes)

Location: Online webinar

Additional Information: To register for the webinar please click here.

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FREE LIVE WEBINAR:

A POWERFUL 40 MINUTE DOUBLE HEADER WITH JONATHAN BLATTMACHR

Topics:

  • Foreign vs. Domestic Asset Protection Trusts: More Than Just Creditor Protection Considerations
  • Empowering Your Powers of Appointment: Don’t Leave Out Important Tax and Practical Provisions or Ignore Important Considerations.  With Sample Provisions

Date: Tuesday, August 12, 2014 | 12:00 p.m.

Location: Online webinar

Additional Information: To register for the webinar please click here.

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LIVE ISLE OF MAN PRESENTATION:

Alan S. Gassman will be speaking on US TRUST AND TAX LAWS FOR INTERNATIONAL INVESTORS at Cayman National Bank and Trust Company on the Isle of Man

Sign up now and you will receive a free lunch!  Transportation not included.

“Half-way between England

And Ireland in the Irish Sea.”

Is a great place to discuss trusts with glee.”

Date: Wednesday, September 3, 2014

Additional Information:  If you would like to receive a copy of the materials that will be presented please email Janine Gunyan at janine@gassmanpa.com and we will send them to you once they are ready.

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FREE LIVE WEBINAR:

Kenneth J. Crotty will be presenting a free live webinar entitled AVOIDING DISASTER ON HIGHWAY 709.  The 50 minute guide to disaster avoidance with respect to gift tax returns.  This webinar will qualify for 1 hour of CLE and CPE credit.

Date: Wednesday, September 3, 2014 | 12:30 p.m. (50 minutes)

Location:Onlinewebinar

Additional Information: To register for the webinar please click here.

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LIVE FT. LAUDERDALE PRESENTATION:

FICPA ANNUAL ACCOUNTING SHOW 

Alan S. Gassman will be speaking at the FICPA Annual Accounting Show on Thursday, September 18, 2014 on the topic of ESSENTIAL GUIDE TO BASIC TRUST PLANNING for 50 minutes.

This presentation will introduce basic and intermediate trust planning background and provide attendees with an orderly list of the most commonly used trusts, practical features and traps for the unwary, including revocable, irrevocable and hybrid.  The discussion will include tax, creditor protection and probate and guardian considerations.

Date: Wednesday, September 17 through Friday, September 19, 2014

Location:  Fort Lauderdale, Florida

Additional Information:  For more information about this program please contact Stephanie Thomas at ThomasS@ficpa.org

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LIVE CLEARWATER PRESENTATION:

Board Certified Tax Attorney Michael O’Leary from the Trenam Kemker firm in Tampa, Florida and Christopher Denicolo from Gassman Law Associates will be speaking at the Ruth Eckerd Hall Planned Giving Advisory Council event on Tuesday, September 23, 2014.

O'Leary

Mr. O’Leary’s topic is HOT TOPICS IN CHARITABLE PLANNING AND MORE.

OLYMPUS DIGITAL CAMERA

Mr. Denicolo’s topic is PLANNING FOR INHERITED IRAS.

Date: Tuesday, September 23, 2014 | 5:00 p.m.

This presentation is free to members of the Ruth Eckerd Hall Planned Giving Advisory Council, Ruth Eckerd Hall members, and professionals who are attending a Ruth Eckerd Hall Planned Giving Advisory Council event for the first time.

Additional Information: You can contact Suzanne Ruley at sruley@rutheckerdhall.net or via phone at 727-791-7400, David Abelson at david.abelson@morganstanley.com or via phone at 727-773-4626, Alan S. Gassman at agassman@gassmanpa.com or via phone at 727-442-1200 or the Kentucky Fried Chicken located at 1960 Gulf to Bay Blvd, which is close in proximity to this location and available to provide you with crisp, spicy or even crispier chicken, mashed potatoes and gravy, rolls, and slaw!  Bring your 32 oz. Kentucky Fried Chicken drink container to the presentation and we will fill it with your choice of club soda or seltzer water, but no sharing permitted.

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LIVE NEW JERSEY PRESENTATION – WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW TO REPRESENT SNOWBIRDS AND FLORIDA BASED BUSINESSES:

NEW JERSEY INSTITUTE FOR CONTINUING LEGAL EDUCATION (ICLE)_SPECIAL 3 HOUR SESSION

New Jersey song trivia:  What song includes the words “Counting the cars on the New Jersey Turnpike, they’ve all gone to look for America”?  What year was it recorded and who wrote it?

Alan S. Gassman will be the sole speaker for this informative 3 hour program entitled WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW

Here is some of what the New Jersey Bar Invitation for this program provides:

New Jersey residents have always had a strong connection to Florida.  We vacation there (it’s our second shore), own Florida property (or have favored relatives that do) and have family and friends living there.  Sometimes our wealthiest clients move to Florida and need guidance, and you need background in order to continue representation.

There are real and significant differences between the two states that every lawyer should be cognizant of.  For example, holographic wills are perfectly legitimate in New Jersey and anyone can serve as an executor of an estate, which is not the case in Florida.  Also, Florida’s new rules regarding LLCs are different, and if you are handling estates of New Jersey decedents who owned Florida property, there are Florida law issues that must be addressed.  Asset protection differs significantly in Florida too.

Gain the knowledge you need to assist your clients with Florida matters including:

  • Florida specific laws involving businesses, trusts, and estates
  • Florida tax planning
  • Elective share and homestead rules
  • Liability Insulation and Planning
  • Creditor Protection and Strategies
  • Medical Practice Laws
  • Staying within Florida Bar Guidelines that allow representation of Florida clients

Comments from past attendees of this program:

  • Excellent seminar and materials!!!
  • This was one of the best ICLE seminars yet!
  • One of the best seminars I have attended.
  • Better than mashed potatoes and gravy.  Glad he didn’t serve grits!

Date: Saturday, October 4, 2014

Location: TBD

Additional Information: This is a repeat of the same program that we gave last year, but our book is now updated for the new Florida LLC law and changes in estate and trust law.  Please tell all of your friends, neighbors, and enemies in New Jersey to come out to support this important presentation for the New Jersey Bar Association.  We will include discussions of airboats, how to get an alligator off of your driveway, how to peel a navel orange and what collard greens and grits are. For additional information, please email agassman@gassmanpa.com

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LIVE NEW PORT RICHEY PRESENTATION:

Alan S.  Gassman, Kenneth J.  Crotty and Christopher J.  Denicolo will address the North FICPA Group on Financial Analysis and Tax Planning for Investment Products, Including Variable Annuities, Fixed Annuities, Life Insurance Contracts, and Mutual Funds – What Should the Tax and Financial Advisor Know and Advise?

Be there or be an equilateral triangle!

Date: Wednesday, October 15, 2014 | 4:30 p.m.

Location: Chili’s Port Richey, 9600 US 19 N, Port Richey, Florida

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LIVE CLEARWATER PRESENTATION

Alan Gassman will be speaking at the Pinellas County Estate Planning Council Fall Seminar on PLANNING FOR SAME GENDER COUPLES 

Date: Thursday, October 23, 2014 | 8:00 am

Location: Ruth Eckerd Hall, 1111 N. McMullen Booth Road, Clearwater, Fl

Additional Information: To register for this event please email agassman@gassmanpa.com

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LIVE PASCO COUNTY PLANNED GIVING (AND DRINKING!) COCKTAIL HOUR AND PRESENTATION:

Alan S. Gassman and Christopher J. Denicolo will be speaking at the Pasco-Hernando State College’s Planned Giving Consortium Luncheon on Planning for Inherited IRA’s in View of the Recent Supreme Court Case – and Demystifing the “Stretch in Trust” Ira and Pension Rules

Date: Thursday, October 23, 2014 | 4:30 p.m.

Location:  Spartan Manor, 6121 Massachusetts Avenue, Port Richey, Florida

Additional Information:  For more information, please contact Maria Hixon at hixonm@phsc.edu

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LIVE SARASOTA PRESENTATION:

2014 MOTE VASCULAR SURGERY FELLOWS – FACTS OF LIFE TALK SEMINAR FOR FIRST YEAR SURGEONS

Alan Gassman will be speaking on the topic of ESTATE, MEDICAL PRACTICE, RETIREMENT, TAX, INSURANCE, AND BUY/SELL PLANNING – THE EARLIER YOU START THE SOONER YOU WILL BE SECURE

Date: October 25 – 26, 2014 | Alan Gassman is speaking on Sunday, October 26, 2014

Location: TBD

Additional Information: Please contact agassman@gassmanpa.com for additional information.

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LIVE CLEARWATER PRESENTATION:

TAMPA BAY CPA GROUP

Alan S. Gassman, Kenneth J. Crotty and Christopher J. Denicolo will be presenting THE MATHEMATICS OF ESTATE PLANNING in a 2 hour session at the Tampa Bay CPA Group Fall 2014 Seminar.

Date: November 7, 2014

Location: Marriott Hotel, 12600 Roosevelt Blvd North, St. Petersburg, FL 33716

Additional Information: For more information please contact Richard Fuller at richardf@fullercpa.com.

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LIVE UNIVERSITY OF NOTRE DAME PRESENTATION:

40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Topic #1: PLANNING WITH VARIABLE ANNUITIES AND ANALYZING REVERSE MORTGAGES

This presentation will cover the unique income tax and financial planning characteristics of fixed and variable annuities.

Topic #2: THE MATHEMATICS OF ESTATE AND ESTATE TAX PLANNING

Christopher J. Denicolo, Kenneth J. Crotty and Alan S. Gassman will also be presenting a special Wednesday late p.m. two hour dive into math concepts that are used or sometimes missed by estate and estate tax planners.  This will be an A to Z review of important concepts, intended for estate planners of all levels, sizes and ages.  Donald Duck has rated this program A+.

Date:November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

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LIVE FORT LAUDERDALE PRESENTATION:

Alan Gassman will be speaking at the 2015 Representing the Physician Seminar on the topic of DISASTER AVOIDANCE FOR THE DOCTOR’S ESTATE PLAN.

Speakers will include Radha Bachman, J.D. who will speak on items that need to be handled on the purchase or sale of a medical practice, with a comprehensive checklist; Cynthia Mikos, J.D. on the dangers of physician recruiting agreements; Michael O’Leary, J.D. will be speaking on Really Hot Tax Topics, and there will be many other amazing speakers and topics, not to mention a very pleasant happy hour the evening before at the beautiful Ft. Lauderdale Renaissance Hotel.

Date: January 16, 2015

Location: Renaissance Fort Lauderdale Cruise Port Hotel, 1617 SE 17th Street, Ft. Lauderdale, FL.

Additional Information:For more information, please email Alan Gassman at agassman@gassmanpa.com

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LIVE NAPLES PRESENTATION:

2nd ANNUAL AVE MARIA SCHOOL OF LAW ESTATE PLANNING CONFERENCE

Date:  Friday, May 1, 2015

Location:  Ave Maria School of Law, 1025 Commons Circle, Naples, Florida

Additional Information:  Jerry Hesch and Alan Gassman will present The Mathematics of Estate Planning.  If you liked Donald Duck in Mathematics Land, you will love The Mathematics of Estate Planning.  This will not be a Mickey Mouse presentation.

Other speakers include Jonathan Gopman, Bill Snyder, Elizabeth Morgan, Greg Holtz, and others.

Please let us know any questions, comments, or suggestions you might have for this amazing conference, which features dual session selection opportunities in one of the most beautiful conference facilities that we have ever seen.

And don’t forget to have a great weekend in Naples with your significant other or anyone who your significant other doesn’t know!  Domino’s Pizza is extra.

NOTABLE SEMINARS BY OTHERS

(We aren’t speaking but don’t tell our mothers!)

LIVE ORLANDO PRESENTATION

49th ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 12 – 16, 2015

Location: Orlando World Center Marriott 8701 World Center Drive, Orlando, Florida

Additional Information: For more information please visit: https://www.law.miami.edu/heckerling/?op=0

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION

Date: Thursday, February 12, 2015

Location: St. Petersburg, FL

Additional Information: Please contact Lydia Bennett Bailey at Lydia.Bailey@allkids.org for more information.

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LIVE PRESENTATION:

2015 FLORIDA TAX INSTITUTE

Date: Wednesday through Friday, April 22 – 24, 2015

Location: TBD

Additional Information: Please contact Bruce Bokor at bruceb@jpfirm.com for more information.

Applicable Federal Rates

federal rates

 

The Thursday Report – 7.17.2014 – Spot The Typos Edition

Posted on: July 17th, 2014

 

Header.2

Sttructuring IRA and Other Retirement Plan Beneficiary Designations to Provide Flexibility for Maried Clients After Death, an article by Christopher J. Denicolo, J.D., LL.M.

What Estate Planing and Other Laywers Need to Know About Bankruptzy, an article by Alberto F. Gomez and Alan S. Gassman, Part 2

Docusign – What Is It and How Dooes It Work?

Thoughtful Corner – Estate Planners – Reaching a Certin Age is Not Enough!

Your Tex Information Is Still Not Protectd From Being Hacked, an article by Denis Kleinfeld

Student of the Yeer Award Givin to Our Own Amy Bhatt!

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

This report and other Thursday Reports can be found on our website at www.gassmanlaw.com.

Sttructuring IRA and Other Retirement Plan Beneficiary Designations to Provide Flexibility for Maried Clients After Death, an article by Christopher J. Denicolo, J.D., LL.M.

Many clients have IRAs and other qualified retirement plan accounts that will comprise a substantial portion of their estate upon their death.  It is therefore important for clients and their advisors to assure that the client’s beneficiary designations are titled appropriately to assure that the IRA and qualified retirement plan benefits will pass in a tax-advantaged manner upon the client’s death.

Married couples usually prefer to leave their retirement plan benefits to the surviving spouse after the first dying spouse’s death for asset security and other non-tax purposes.  Structuring beneficiary designations in this manner will allow the surviving spouse to roll over the first dying spouse’s retirement plan benefits into his or her own IRA, and be treated as the owner of the IRA for all purposes under the tax law.  This means that the surviving spouse would not be required to take annual required minimum distributions from the IRA until he or she reaches the age 70 ½, and that he or she can name his or her own beneficiary who would receive the IRA funds after his or her later death.

In second marriage situations and where clients wish to have spendthrift protection and other asset preservation considerations apply after the death of the first dying spouse, clients may want to leave their retirement plan benefits to their revocable trust.  This will cause the assets in the first dying spouse’s  retirement plan to pass in accordance with the client’s desired disposition under his or her revocable trust.  Further, the trust can be drafted as an “accumulation trust” that does not mandate the payment of annual or more regular distributions to the surviving spouse and to provide for a co-trusteeship or independent trustee to manage the assets, which can provide for the protection and preservation of the retirement plan benefits and prevent the surviving spouse from unilaterally  withdrawing such benefits from the trust.

However, naming the retirement plan owner/participant’s revocable trust as the primary beneficiary of the retirement plan would cause the annual required minimum distributions to be higher than what would occur if the surviving spouse was named as the primary beneficiary.  Moreover, the trust must be properly drafted in order to have the trust considered as a “see-through trust,” which the tax law looks through to the ultimate beneficiaries to determine the applicable ages to which the required minimum distribution percentages will apply.  If the Trust is not properly drafted and the other requirements of the regulations are not complied with, then the retirement plan benefits would need to be distributed within five (5) years of the decedent’s death, and the benefits would not be able to be “stretched” over the life expectancy of the beneficiaries.

For example, suppose that Husband leaves his IRA to his revocable trust upon his death, and that Wife is the primary beneficiary of the trust for her lifetime, with Husband and Wife’s descendants as the remainder beneficiaries after Wife’s death.  Wife would be able to benefit from the IRA benefits, but the annual required minimum distributions would be larger than if she was named as the sole beneficiary of the IRA and she rolled over the IRA into her own IRA.  This is illustrated in the chart described below.

The age of the oldest beneficiary of the trust is used to determine the applicable required minimum distribution percentages, so advisors want to be sure that the Trust does not provide benefits for older individuals or allow beneficiaries the power to appoint assets to individuals that are older than them.

If the revocable trust of the decedent provides for benefits for an older beneficiary, then the beneficiary designation should be structured to pay to a separate trust established under the decedent’s revocable trust for the younger beneficiary to avoid accelerating the required minimum distribution payments.

As a variation to the above example, if Husband’s father is also a beneficiary of Husband’s revocable trust after his death, then the father’s age will be used for the purposes of determining the annual required minimum distribution payouts of Husband’s IRA after his death.  This would cause  the required minimum distributions to be higher each year, which reduces the tax efficiency of “stretching out” the retirement plan benefits of the IRA after Husband’s death.  Husband may instead want to have his revocable trust drafted to provide that Wife will be the oldest beneficiary of a separate trust established for her benefit under his revocable trust, and that his father will be the oldest beneficiary of a separate trust established for his benefit under the revocable trust.  Husband can then structure his beneficiary designation so that all or a desired portion of his IRA will pass to the trust established for Wife, and that all or a desired portion of his IRA will pass to the trust established for his father.

If Husband and Wife want their children to receive retirement plan benefits on the death of the first dying spouse (or at least have this available as an option after the death of the first dying spouse), and want to take advantage of the lower required minimum distribution payouts based on the children’s longer life expectancy, then they can form an irrevocable trust solely for the benefit of the clients’ children and other descendants and name the trust as a beneficiary of all or a desired portion of their retirement plan assets.

This trust can be established in a manner that will cause the oldest child to be considered to be the “designated beneficiary” for the purposes of determining the annual required minimum distributions.  This will usually cause the annual required minimum distributions after the death of the retirement plan owner/participant to be significantly lower than if the surviving spouse or an older individual is also a beneficiary of the trust.  As stated above, it is important to assure that the requirements for a “see-through trust” are complied with in order to assure that the required minimum distributions can be stretched over the life expectancies of the beneficiaries of the trust.

Many clients want flexibility after the death of the first dying spouse with respect to the disposition of retirement plan assets.  A married couple therefore may want to name the surviving spouse as the first choice beneficiary under their retirement plans to enable the survivor to roll over the retirement plan into his or her own IRA, and name the separate revocable trust of the retirement plan owner/participant or a joint trust that locks up on the first death as the secondary beneficiary.  This will enable the surviving spouse to disclaim all of a portion of his or her interest in the retirement plan to cause the benefits to pass to the first dying spouse’s revocable trust or a joint trust that locks up on the first death, if such spouse wishes to do so within nine (9) months of the first dying spouse’s death and if the surviving spouse complies the other requirements for a qualified disclaimer (such as not accepting the benefits that will be disclaimed).

The clients further may want to establish an irrevocable trust for the benefit of their children, and name that trust as the tertiary beneficiary of their retirement plans.  This will afford the trustee of the first dying spouse’s revocable trust or the joint trust the ability to disclaim the retirement plan benefits after the death of the first dying spouse to cause them to pass into the irrevocable trust for the clients’ children and other descendants.

We have prepared the following chart to show clients the results and required minimum distribution payout implications of the various beneficiary designation alternatives that are described above:

Three Choices for Retirement Plan Benefits.1

While there is no “one size fits all” way to structure a beneficiary designation, many married couples will want to structure their retirement plan beneficiary designations with the surviving spouse as the primary beneficiary, the retirement plan owner/participant’s revocable trust (or a joint trust established by both spouses that locks up on the first death) as the secondary beneficiary, and an irrevocable trust established for the benefit of their children and other descendants as the tertiary beneficiary.  This can provide for flexibility in a tax-advantaged manner after the death of the first dying spouse, and can allow for the decision with respect to the ultimate disposition of retirement plan assets to be made after the death of first dying spouse when important factors and considerations are known.

What Estate Planing and Other Laywers Need to Know About Bankruptzy, an article by Alberto F. Gomez and Alan S. Gassman, Part 2

Last week’s edition provided an introduction to key bankruptcy principles, including the concept of strategizing to stay out of bankruptcy by having at least 12 creditors so that the rules would require that 3 creditors file to force a debtor into bankruptcy.  The question is to what creditors count and the extraordinary judicial powers held by bankruptcy judges are discussed below.  There have been many notable decisions, including one by the U.S. Court of Appeals for the Fifth Circuit in Denham v. Shellman Grain Elevator,[1] where the bankruptcy court refused to count small and recurring claims as “countable” under the 12 creditors requirement.  One Florida bankruptcy case, In re Smith, cited Denham and excluded creditors holding de minimis claims for $20-$275.[2] Other cases have permitted claims of $65 and $10 to be countable under Section 303 requirement that the aggregate claims must equal or exceed $12,300.

The courts that have chosen not to follow Denham, and to instead allow small and recurring claims to count, have dismissed the de minimis exception as an argument to disqualify one or more creditors, based upon the argument that Congress has not explicitly ruled out small and/or recurring debts and the statute,[3] therefore, should be applied literally.[4]  Some courts, however, such as the court in Matter of Runyan have indicated that a $25 debt would not be sufficient, and will evaluate the claims on a case-by-case basis.[5]

Filing an involuntary petition is an aggressive creditor strategy and there are serious and costly consequences if the petition is dismissed.  A creditor who files for an involuntary bankruptcy “in bad faith” can be forced to pay the debtor’s fees, costs and actual and punitive damages.[6] In In re Cannon Express Corporation,[7] the U.S. Bankruptcy Court for the Western District of Arkansas awarded compensatory damages and punitive damages where three creditors filed involuntary bankruptcy proceedings against debtor and the court found them to be in bad faith.

The decision was based on a combination of 5 tests identified in In re Landmark Distributors, Inc.[8] The Cannon court combined[9] and restated the tests finding that:

1. the claims were not well grounded in fact because the creditors did not speak with an attorney, talk to other creditors or attempt to collect the money from the debtor directly;

2. the creditors could have advanced their own interests in a different forum by using a collections agency or setting up a payment system with debtor or other forum, instead holding that using bankruptcy courts is an improper use of judicial resources.

3. the creditors used the bankruptcy proceedings to gain a disproportionate advantage over other creditors because the creditors, who were unsecured, testified that they thought filing involuntary bankruptcy proceedings would put them ahead of other unsecured creditors, thus gaining priority; and

4. the creditors were motivated, the court held, by an improper use because the creditor “knew that he was not going to be paid” but thought filing would force the debtor to make payment. Finally, the court held no other reasonable person would have filed the same or similar claim without first investigating whether or not the debtor was paying its debts on time or attempting to collect the debts in some other fashion.  For the improper filing the court awarded more than $14,000 compensatory damages and $35,000 in total punitive damages.  Had the debtor proven losses in sales by preponderance of the evidence, the court would have awarded these damages as well, which were to be $2,768,288.00 according to the debtor.

In re Adell, 321 B.R. 562 (Bankr. M.D. Fla. 2005) is a good example of an involuntary bankruptcy filing that backfired on the petitioning creditor and resulted in the petitioning creditor becoming a debtor!  In Adell, a bankruptcy court in Michigan dismissed an involuntary petition which was filed by Mr. Adell against his former builder.  The Court awarded sanctions in the amount of $6,413,230.68 against Adell.  Adell then quickly moved to Naples Florida and filed a Chapter 11 bankruptcy petition. Substantial litigation ensued resulting in the conversion of the Chapter 11 case to a Chapter 7 and ultimately the dismissal of the Chapter 7 case for substantial abuse.

The Bankruptcy Code can affect an estate plan if your client is a debtor, a recipient of a transfer from a debtor, or has an interest in a debtor. In general, upon filing a bankruptcy, assets of a debtor become property of the estate 11 U.S.C. Section 541.  Some assets are specifically excluded, such as an interest in a spendthrift trust, as defined in 11 U.S.C. Section 541(c)(2) or social security or veterans benefits under 11 U.S.C. Section 522(d)(10)(a) and (b).  If your client is a debtor, a recipient of a transfer from a debtor, or has an interest in a debtor, then bankruptcy law can dramatically affect the estate plan.

During pre-bankruptcy planning, advisors need to consider whether to leave assets in an estate that would become accessible to a trustee in bankruptcy.  On one hand, there is less likelihood that transfers made before the filing of bankruptcy would be considered “fraudulent,” when remaining assets that would be usable to pay creditors were, arguably, sufficient to pay a substantial portion of expected debt.

Also, courts may be sympathetic to situations in which debtors have lost “sacrificial lambs” as a part of their bankruptcy filings.[10] Judges may be more lenient in looking at fraudulent transfers and other issues with debtors who lose some assets upon filing bankruptcy, as compared to clients who have moved all of their assets to the exempt category and at filing show no assets going into the bankruptcy estate.

On the other hand, if a trustee has funds derived from bankruptcy estate assets to spend on attorneys’ fees and costs to pursue a debtor or recipient of a transfer, it is more likely that the bankruptcy or pre-bankruptcy transfers will be challenged.  Often, creditors do not want to “throw good money after bad,” so some planners believe that only enough money to pay a small distribution is appropriate to leave in the debtor’s name in the event of a bankruptcy.

JUDICIAL POWERS

Bankruptcy courts are courts of equity, able to fashion broad and extensive remedies typically not available to state court judges.  For instance, under 11 U.S.C. Section 105 of the Bankruptcy Code, bankruptcy judges can enter “any order, process or judgment that is necessary and appropriate to carry out the provisions of this title.” In addition to equitable powers, bankruptcy trustees are empowered with certain “strong arm powers” under the Bankruptcy Code.  Presumptions concerning fraudulent transfers and avoidance of transfers are built into the Code, for instance in 11 U.S.C. Section 548 (fraudulent transfer) and in 11 U.S.C. Section 547 (preference), which are described below.

As a matter of bankruptcy law, a trustee is the equivalent of a hypothetical judgment creditor, and the court can step into the shoes of creditors to exercise statutory strong-arm powers to set aside and recover transfers deemed to be fraudulent or preferential. For instance, Section 548 provides for a two year presumption of fraud for transfers of property owned by the debtor.

There are many bankruptcy cases in which courts have disregarded transfers that were ostensibly motivated by estate-planning purposes.  In most of these cases, the court’s decisions were fact-specific, involving transactions that occurred when the creditor claim was known or should have been known by the debtor.  One of the critical factors considered by courts is the “timing” of the specific transfers.

Lesson learned: Get your client’s estate and income tax plan underway early and document your client’s business, estate, tax, family, and other legitimate motives to ensure that a bankruptcy court will not dismantle legitimate planning that occurs before a bankruptcy petition is filed.[11]

Bankruptcy judges often apply substance over form and rely on equitable principles, in rendering decisions, which often favors the trustee and creditors. For example, in In re Larry Portnoy,[12] the bankruptcy court ignored the law of the applicable offshore jurisdiction and applied the law of the jurisdiction where the bankruptcy court resided, to determine that offshore trusts were not effective creditor protection devices.  In FTC v. Affordable Media[13] and in Lawrence v. Goldberg,[14] debtors were held in contempt and jailed for not turning over offshore assets.  The U.S. Court of Appeals for the Ninth and Eleventh Circuits, respectively, upheld the bankruptcy court’s decision in both Affordable Media and Lawrence.

TIMING CAN BE EVERYTHING

In too many cases, estate and asset protection plans miss key bankruptcy protections or ignore crucial facts that could jeopardize the plan itself.  Again the bottom line is that the timing of an asset protection or estate plan is crucial to how it will fare in bankruptcy court. Case law principles and strategy with respect to timing intent and documentation concerning pre-bankruptcy actions will be discussed next weak.

Check back next week to read the next installment of this article.

Docusign – What Is It and How Dooes It Work?
By Dena Daniels, MBA, and Stetson Law Student

What is Florida Statute 668.004 Force and effect of electronic signature.—Unless otherwise provided by law, an electronic signature may be used to sign a writing and shall have the same force and effect as a written signature.

Docusign is a program that allows you to sign documents electronically.  Using DocuSign, an individual or company can send documents all over the world to be signed by using a simple process.  First, a user of DocuSign uploads a document in Word, PDF, or other common document formats.  The user then adds the name and email of the people that need to sign the document, marks where they need to sign, and sends it out.  Once the recipients have signed the document it is returned to the original user and stored electronically for future use. This seems like a great way to be able to get documents signed quickly and efficiently, however the question is are these signatures valid and legally binding?

Legality of DocuSign Signatures

There are two major laws that govern the use of electronic signatures.  The first of these two laws is the Electronic Signatures in Global and National Commerce Act (“ESIGN”), a federal statute.  The second is the Uniform Electronic Transactions Act (“UETA”), this uniform law has been passed by 47 states, including Florida.[14]  The three states that have not implemented the UETA are New York, Washington, and Indiana.  Generally, an electronic signature may not be unenforceable simply because it is in electronic form.[16]  An electronic signature is defined in both acts as an “electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed by a person with the intent to sign the record.”[17] This can include typing a full name, clicking an “I accept” box, or scanning a signature into the file.  As you can see, most of us have likely used an electronic signature before.  DocuSign allows you to sign with your mouse, finger, upload a scanned image of your signature, or use a standard signature style provided by DocuSign.  This qualifies as an electronic signature under both ESIGN and the UETA, but other requirements must still be met.

Consent

The first requirement is that the signer has consented to sign electronically and has been given the option to sign on paper or in another non-electronic form.[18]  Consent can be established either explicitly or implicitly based on the parties interactions.  While using DocuSign, the parties accept emails and documents to sign.  This would most likely satisfy the requirement that the party consented to sign electronically.

Intent to Sign

The second requirement that must be met is that the signer has the intent to sign.[19]

Signature Associated with the Record

The third requirement is that the electronic signature must be logically associated with the record or thing that is being signed.[20]  In order to prove this the process used to sign the document must be documented. DocuSign satisfies this requirement via their digital audit trail.  This trail included the signer names, authentication history, digital signatures, email addresses, the IP address of the signer, the chain of custody of the document, etc. This information is provided if need be in a Certificate  of Completion that is tampered sealed and court admissible.

Record Retention

The final requirement is that the signed document is able to be effectively retained.  In order to satisfy this requirement the electronically signed document must accurately reflect the information set forth in the record, and remain available in a form that is able to be accurately reproduced for all parties entitled to access.[21]  DocuSign satisfies this requirement with their record keeping practices.  DocuSign securely stores information with encryptions and other methods to ensure that only the designated parties will be able to review the signed documents.

When a DocuSign signature would not work

Both the ESIGN Act and the UETA have explicitly stated exclusions to when an electronic signature will have no legal effect.  The exclusions are as follows:[22]

1. The creation or execution of wills, codicils, or testamentary trusts

2. Adoption, divorce, or other matters of family law

3. The Uniform Commercial Code except Section 1-107, 1-206, and Article 2 and 2A

4. Court orders, notices, or official court documents

5. Notice of cancellation of utility services

6. Default, acceleration, repossession, foreclosure, eviction, or a rental agreement for, an individuals primary residence.

7. Notice of cancellation or termination of health insurance or life insurance

8. The recall of a product

9. Any document related to the handling of hazardous materials

Conclusion

In conclusion, the procedures and safeguards of DocuSign will satisfy the legal requirements for an electronic signature.  Documents signed using DocuSign will be valid and legally binding, with exception of the above mentioned exclusions.  DocuSign provides a safe and efficient way for businesses and individuals to send documents around the world and have them signed in a matter of minutes with a valid and legally binding signature.

Thoughtful Corner
Estate Planners – Reaching a Certin Age is Not Enough!

We rarely draft trusts that release assets at any given age, but instead provide that the primary beneficiary of such a trust may become Co-Trustee or even sole Trustee upon reaching certain ages.

But how can we be sure that such an individual will be qualified to serve as Trustee and not “blow it?”

Please consider the following language to protect your clients’ descendants (from themselves):

6.04 Trusteeship of Separate Trusts.  After the death of myself and my spouse and after division of the Trust estate into separate trusts for my children or other descendants, then a Primary Beneficiary of a separate Trust (as defined in Article Four and/or Article Five) shall have the ability to do the following at the ages indicated below if such Primary Beneficiary meets one of the following criteria: (1) the Primary Beneficiary has attained a four-year college degree at an accredited state university or a well respected private university approved by a regional accreditation organization recognized by the United States Department of Education and the Council for Higher Education Accreditation, and is gainfully employed and self-supporting (or is a full-time homemaker raising one or more minor children) for a period of at least five (5) years; or (2) the Primary Beneficiary is determined to be stable, willing and able to support himself or herself, and responsible and thus appropriate to serve as Trustee by the individuals (other than the Primary Beneficiary) named above in Section 6.03 who are able and willing to affirm such status:

(a)         Upon having attained the age of twenty-five (25), to serve as Co-Trustee with the Trustee or Co-Trustees then serving, provided that there shall always be one individual named in Section 6.03 or a licensed trust company serving as Co-Trustee with the Primary Beneficiary; and

(b)         Upon having attained the age of thirty (30), to replace any Corporate Trustee or Co-Trustee then serving with another Corporate Trustee of the Primary Beneficiary’s choice, provided that there shall always be a Corporate Trustee serving with such Primary Beneficiary if such replacement power is exercised, until such Primary Beneficiary reaches age thirty-five (35);

(c)         Upon having attained the age of thirty-five (35), to serve as sole Trustee and to designate the successor Trusteeship to serve in the event of the Primary Beneficiary’s resignation or incapacity.

(d)       At any age as an adult, to designate the successor Trusteeship to take effect upon the death of the Primary Beneficiary of such separate trust or any trusts created therefrom, by signed writing delivered to the Trustee then serving or by specific reference to this power in the Primary Beneficiary’s Last Will and Testament.

We encourage stronger language than the above, but many clients have elected to use this looser standard.

The safest standard is to require a trusted individual and/or a licensed trust company to serve as Co-Trustee for the lifetime of the individual.

We tell the clients that if the individual beneficiary is sound they should not mind having a Co-Trustee, but if they are unsound it will be sorely needed.

6.08     Removal of Beneficiary/Trustees.   Notwithstanding any provision in this Article Six to the contrary, if a Primary Beneficiary is serving or is to serve as sole Trustee of a separate trust established for such Primary Beneficiary’s benefit, and if such Primary Beneficiary is insolvent or is unable to satisfy any financial or court or arbitration ordered obligation, or is in the process of being divorced, then such Primary Beneficiary shall be automatically removed as Trustee, and replaced with an Independent Trustee chosen by such Primary Beneficiary.  The Independent Trustee chosen as a replacement shall be a descendant of mine (other than the applicable Primary Beneficiary) who has attained the age of thirty-five (35), a licensed attorney who has represented me or who specializes in estate and trust law with an “AV” rating in the Martindale-Hubbell directory, a certified public accountant who has done my accounting work or has extensive experience preparing estate and income tax returns for a reputable trust company, or a licensed trust company.  A Trustee Beneficiary who has been forced to no longer serve by reason of this provision shall have the right to regain the trusteeship when circumstances have clearly changed such that there is no longer an insolvency and/or the applicable divorce has been resolved or withdrawn and there is no imminent threat of creditor or claims of a family nature that could cause loss of trust assets.  Further, if applicable state law where a beneficiary resides, or other applicable law, would make the Trust for such beneficiary creditor accessible if such beneficiary were the sole Trustee, then such beneficiary shall be required to choose an Independent Trustee meeting the requirements as described above with respect to trusteeship of such Trust and shall be required to serve with an independent Co-Trustee so long as the state law where such beneficiary resides requires a Co-Trustee to facilitate creditor protection.

Your Tex Information Is Still Not Protectd From Being Hacked
By: Denis Kleinfeld

Denis_Kleinfeld

“Serious weaknesses remain that could affect the confidentiality, integrity, and availability of financial and sensitive taxpayer data,” said Nancy R. Kingsbury and Gregory Wilsushusen of the Government Accountability Office (the GAO) in the latest GAO report on the IRS.

They ought to know since they are the directors for applied research and methods, and information security respectively.

Although the IRS has suffered from funding problems, an ever increasing work load of new tax laws, manpower limitations, plus Obamacare, compliance regulation impacting all financial institutions in the entire world, and morale depleting political scandals, that does not diminish the fact that your tax information is at risk of being stolen by hackers.

I have the impression that having all your most intimate financial details being in the IRS computers is somewhat analogous to a golf ball being teed up for Tiger Woods.  Only these Tiger Woods are the professional computer hackers stealing billions of dollars by getting your financial–and medical–information stored on the government’s computers.

GAO reports going back at least to 2007 have highlighted the flaws and vulnerabilities of the IRS systems.

Basically, the IRS has long standing information technology issues which can expose taxpayer data to cyber-attacks by hackers, criminals, and foreign governments.

The IRS is not alone.

The GAO report states, “Our previous reports, and those by federal inspector general, describe persistent information security weaknesses that place federal agencies, including the IRS, at risk of disruption, fraud, or inappropriate disclosure of sensitive information.”

The GAO labels the government’s computer information security as a “high-risk area since 1997.”

Yes, the IRS has made some progress, but as the GAO report says, “These weaknesses and others in the IRS’s security program increase the risk that taxpayer and other sensitive information could be disclosed or modified without authorization.”

Even when it comes to something as fundamental as passwords and preventing wrongful access, the IRS did not fully implement effective controls in the areas of user identification, authentication, authorization, cryptography, audit and monitoring, and physical security.

Other parts of the information systems are also in peril.  This is especially troubling considering that the IRS has the heavy burden of trying to keep their computer systems up-to-date with congress constantly making dramatic changes in the tax law. And now the IRS has oversight over both the entire health care system and getting U.S. tax compliance of every foreign financial account held by every financial institution world-wide.

Planning for continuity in configuring the computer system for new policies, procedures, techniques, software updates are challenges that may well be, and likely are, beyond any governmental agency or private company’s ability to keep pace.

The IRS is in the same boat as many computer owners in private industry in that it has a lot of its computers still using the Windows XP operating system which Microsoft is no longer supporting any security updates. The current IRS Commissioner explained in a recent congressional hearing that the conversion from Windows XP to Windows 7 had not been completed since the IRS didn’t have the money to do it.

No matter whether congress or the IRS is to blame for this mess, the fact is that taxpayers’ sensitive financial information is not being protected by the government from being hacked.

Student of the Yeer Award Givin to Our Own Amy Bhatt!

One great pleasure of our practice is hiring and watching high school students become mavens, and Amy Bhatt is a prime example.  Amy started working for our firm when she was 15 years old as a sophomore at Countryside High School.  She will be a fantastic lawyer!

In 10th grade, Amy took the highly demanding entrance test for the Early College Program and got accepted as one of the few selected students in Pinellas County. She has simultaneously achieved a 4.72 weighted High School GPA and a 4.0 College GPA. While in the Early College Program, she won the “Student of the Year” award after achieving the highest grade in the rigorous Honors Interdisciplinary Studies program.

With a passion for law and justice, Amy is majoring in Paralegal Studies at St. Petersburg College. Her goal is to earn a Juris Doctor from Stetson University College of Law. She currently works as a Legal Administrative Assistant at Gassman Law Associates, drawing from her education and prior office experience from the Criminal Justice Center to ease the workload of paralegals and attorneys.  If only Doogie Howser was here to see her!

Certificate

Upcoming Seminars and Webinars

FREE LIVE WEBINAR:

STEP-UP YOUR EFFORTS TO STEP-UP CLIENTS’ BASIS – STRATEGIC ESTATE PLANNING AND STEPPED-UP BASIS CONSIDERATIONS

Date:  Wednesday, July 23, 2014 |12:30 p.m. (30 Minute Webinar)

Speakers:  Edwin P. Morrow, III, Alan S. Gassman

Location: Online webinar

Additional Information: To register for the webinar please click here.

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FREE LIVE WEBINAR:

GAUGING AND HANDLING ENTITLEMENT TENDENCIES OF BENEFICIARIES, EMPLOYEES AND OTHERS – A FASCINATING AND EXTREMELY PRACTICAL GUIDE ON SOCIETY’S NEWEST ISSUE

Date: Tuesday, July 29, 2014 | 12:30 p.m. (30 Minute Webinar)

Speakers: Stephanie Thomason, Ph.D. and Alan S. Gassman, Esq.

Location: Online webinar

Additional Information: To register for the webinar please click here.

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CLEARWATER WORKSHOP FOR YOUNG LAWYERS:

Alan Gassman will be joined by several experienced attorneys and other well respected industry experts during a full day workshop for young lawyers who wish to enhance their practice and personal lives.

Date: Sunday, August 3, 2014 | 9am – 3pm

Location: Clarion Hotel, 20967 US 19 N., Clearwater

Additional Information: To register for this program please email agassman@gassmanpa.com

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FREE LIVE WEBINAR:

HIPOO MEDICAL OFFICE DISASTER AVOIDANCE CHECKLIST

This 20-25 minute webinar includes valuable forms and important strategies that every medical office should know about. Join us for an interactive and innovative discussion of how medical practices can be decimated by HIPOO, including a number of survival techniques, tips, and tools.

Date: Tuesday, August 5, 2014 | 12:00 p.m. and 7:00 p.m.

Speakers: Alan S. Gassman, Lester Perling, and Jeff Howard

Location: Online Webinar

Additional Information: To register for the 12 p.m. webinar, please click here. To register for the 7 p.m. webinar, please click here.

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FREE LIVE WEBINAR:

SOFTWARE UPDATE WEBINAR: NEW FEATURES FOR ATTENDING CREATURES

Alan Gassman will be joined by Ken Crotty and software designer Dave Archer to discuss the new features of our EstateView software.  Additionally, there will be a session for new users to become familiar with the program.

Date: Wednesday, August 6, 2014 | 12:30 pm (30 minutes)

Location: Online webinar

Additional Information: To register for the webinar please click here.

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FREE LIVE WEBINAR:

A POWERFUL 40 MINUTE DOUBLE HEADER WITH JONATHAN BLATTMACHR

Topics:

  • Foreign vs. Domestic Asset Protection Trusts: More Than Just Creditor Protection Considerations
  • Empowering Your Powers of Appointment: Don’t Leave Out Important Tax and Practical Provisions or Ignore Important Considerations.  With Sample Provisions

Date: Tuesday, August 12, 2014 | 12:00 p.m.

Location: Online webinar

Additional Information: To register for the webinar please click here.

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LIVE ISLE OF MAN PRESENTATION:

Alan S. Gassman will be speaking on US TRUST AND TAX LAWS FOR INTERNATIONAL INVESTORS at Cayman National Bank and Trust Company on the Isle of Man

Sign up now and you will receive a free lunch!  Transportation not included.

“Half-way between England

And Ireland in the Irish Sea.”

Is a great place to discuss trusts with glee.”

Date: Wednesday, September 3, 2014

Additional Information:  If you would like to receive a copy of the materials that will be presented please email Janine Gunyan at janine@gassmanpa.com and we will send them to you once they are ready.

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FREE LIVE WEBINAR:

Ken Crotty will be presenting a free live webinar entitled AVOIDING DISASTER ON HIGHWAY 709.  The 50 minute guide to disaster avoidance with respect to gift tax returns.  This webinar will qualify for 1 hour of CLE and CPE credit.

Date: Wednesday, September 3, 2014 | 12:30 p.m. (50 minutes)

Location:Onlinewebinar

Additional Information: To register for the webinar please click here.

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LIVE FT. LAUDERDALE PRESENTATION:

FICPA ANNUAL ACCOUNTING SHOW 

Alan S. Gassman will be speaking at the FICPA Annual Accounting Show on Thursday, September 18, 2014 on the topic of ESSENTIAL GUIDE TO BASIC TRUST PLANNING for 50 minutes.

This presentation will introduce basic and intermediate trust planning background and provide attendees with an orderly list of the most commonly used trusts, practical features and traps for the unwary, including revocable, irrevocable and hybrid.  The discussion will include tax, creditor protection and probate and guardian considerations.

Date: Wednesday, September 17 through Friday, September 19, 2014

Location:  Fort Lauderdale, Florida

Additional Information:  For more information about this program please contact Stephanie Thomas at ThomasS@ficpa.org

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LIVE CLEARWATER PRESENTATION:

Board Certified Tax Attorney Michael O’Leary from the Trenam Kemker firm in Tampa, Florida and Christopher Denicolo from Gassman Law Associates will be speaking at the Ruth Eckerd Hall Planned Giving Advisory Council event on Tuesday, September 23, 2014.

Mr. O’Leary’s topic is HOT TOPICS IN CHARITABLE PLANNING AND MORE.

Mr. Denicolo’s topic is PLANNING FOR INHERITED IRAS.

Date: Tuesday, September 23, 2014 | 5:00 p.m.

This presentation is free to members of the Ruth Eckerd Hall Planned Giving Advisory Council, Ruth Eckerd Hall members, and professionals who are attending a Ruth Eckerd Hall Planned Giving Advisory Council event for the first time.

Additional Information: You can contact Suzanne Ruley at sruley@rutheckerdhall.net or via phone at 727-791-7400, David Abelson at david.abelson@morganstanley.com or via phone at 727-773-4626, Alan S. Gassman at agassman@gassmanpa.com or via phone at 727-442-1200 or the Kentucky Fried Chicken located at 1960 Gulf to Bay Blvd, which is close in proximity to this location and available to provide you with crisp, spicy or even crispier chicken, mashed potatoes and gravy, rolls, and slaw!  Bring your 32 oz. Kentucky Fried Chicken drink container to the presentation and we will fill it with your choice of club soda or seltzer water, but no sharing permitted.

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LIVE NEW JERSEY PRESENTATION – WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW TO REPRESENT SNOWBIRDS AND FLORIDA BASED BUSINESSES:

NEW JERSEY INSTITUTE FOR CONTINUING LEGAL EDUCATION (ICLE)_SPECIAL 3 HOUR SESSION

New Jersey song trivia:  What song includes the words “Counting the cars on the New Jersey Turnpike, they’ve all gone to look for America”?  What year was it recorded and who wrote it?

Alan S. Gassman will be the sole speaker for this informative 3 hour program entitled WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW

Here is some of what the New Jersey Bar Invitation for this program provides:

New Jersey residents have always had a strong connection to Florida.  We vacation there (it’s our second shore), own Florida property (or have favored relatives that do) and have family and friends living there.  Sometimes our wealthiest clients move to Florida and need guidance, and you need background in order to continue representation.

There are real and significant differences between the two states that every lawyer should be cognizant of.  For example, holographic wills are perfectly legitimate in New Jersey and anyone can serve as an executor of an estate, which is not the case in Florida.  Also, Florida’s new rules regarding LLCs are different, and if you are handling estates of New Jersey decedents who owned Florida property, there are Florida law issues that must be addressed.  Asset protection differs significantly in Florida too.

Gain the knowledge you need to assist your clients with Florida matters including:

  • Florida specific laws involving businesses, trusts, and estates
  • Florida tax planning
  • Elective share and homestead rules
  • Liability Insulation and Planning
  • Creditor Protection and Strategies
  • Medical Practice Laws
  • Staying within Florida Bar Guidelines that allow representation of Florida clients

Comments from past attendees of this program:

  • Excellent seminar and materials!!!
  • This was one of the best ICLE seminars yet!
  • One of the best seminars I have attended.
  • Better than mashed potatoes and gravy.  Glad he didn’t serve grits!

Date: Saturday, October 4, 2014

Location: TBD

Additional Information: This is a repeat of the same program that we gave last year, but our book is now updated for the new Florida LLC law and changes in estate and trust law.  Please tell all of your friends, neighbors, and enemies in New Jersey to come out to support this important presentation for the New Jersey Bar Association.  We will include discussions of airboats, how to get an alligator off of your driveway, how to peel a navel orange and what collard greens and grits are. For additional information, please email agassman@gassmanpa.com

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LIVE NEW PORT RICHEY PRESENTATION:

Alan S.  Gassman, Kenneth J.  Crotty and Christopher J.  Denicolo will address the North FICPA Group on Financial Analysis and Tax Planning for Investment Products, Including Variable Annuities, Fixed Annuities, Life Insurance Contracts, and Mutual Funds – What Should the Tax and Financial Advisor Know and Advise?

Be there or be an equilateral triangle!

Date: Wednesday, October 15, 2014 | 4:30 p.m.

Location: Chili’s Port Richey, 9600 US 19 N, Port Richey, Florida

Additional Information: To attend this seminar please email agassman@gassmanpa.com

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LIVE PASCO COUNTY PLANNED GIVING (AND DRINKING!) COCKTAIL HOUR AND PRESENTATION:

Alan S. Gassman and Christopher J. Denicolo will be speaking at the Pasco-Hernando State College’s Planned Giving Consortium Luncheon on Planning for Inherited IRA’s in View of the Recent Supreme Court Case – and Demystifing the “Stretch in Trust” Ira and Pension Rules

Date: Thursday, October 23, 2014 | 4:30 p.m.

Location:  Spartan Manor, 6121 Massachusetts Avenue, Port Richey, Florida

Additional Information:  For more information, please contact Maria Hixon at hixonm@phsc.edu

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LIVE SARASOTA PRESENTATION:

2014 MOTE VASCULAR SURGERY FELLOWS – FACTS OF LIFE TALK SEMINAR FOR FIRST YEAR SURGEONS

Alan Gassman will be speaking on the topic of ESTATE, MEDICAL PRACTICE, RETIREMENT, TAX, INSURANCE, AND BUY/SELL PLANNING – THE EARLIER YOU START THE SOONER YOU WILL BE SECURE

Date: October 25 – 26, 2014 | Alan Gassman is speaking on Sunday, October 26, 2014

Location: TBD

Additional Information: Please contact agassman@gassmanpa.com for additional information.

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LIVE CLEARWATER PRESENTATION:

TAMPA BAY CPA GROUP

Alan Gassman, Ken Crotty and Christopher Denicolo will be presenting THE MATHEMATICS OF ESTATE PLANNING in a 2 hour session at the Tampa Bay CPA Group Fall 2014 Seminar.

Date: November 7, 2014

Location: Marriott Hotel, 12600 Roosevelt Blvd North, St. Petersburg, FL 33716

Additional Information: For more information please contact Richard Fuller at richardf@fullercpa.com.

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LIVE UNIVERSITY OF NOTRE DAME PRESENTATION:

40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Topic #1: PLANNING WITH VARIABLE ANNUITIES AND ANALYZING REVERSE MORTGAGES

This presentation will cover the unique income tax and financial planning characteristics of fixed and variable annuities.

Topic #2: THE MATHEMATICS OF ESTATE AND ESTATE TAX PLANNING

Christopher J. Denicolo, Kenneth J. Crotty and Alan S. Gassman will also be presenting a special Wednesday late p.m. two hour dive into math concepts that are used or sometimes missed by estate and estate tax planners.  This will be an A to Z review of important concepts, intended for estate planners of all levels, sizes and ages.  Donald Duck has rated this program A+.

Date:November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

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LIVE FORT LAUDERDALE PRESENTATION:

Alan Gassman will be speaking at the 2015 Representing the Physician Seminar on the topic of DISASTER AVOIDANCE FOR THE DOCTOR’S ESTATE PLAN.

Date: January 16, 2015

Location: TBD – Fort Lauderdale, Florida

Additional Information:For more information, please email Alan Gassman at agassman@gassmanpa.com

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LIVE NAPLES PRESENTATION:

2nd ANNUAL AVE MARIA SCHOOL OF LAW ESTATE PLANNING CONFERENCE

Date:  Friday, May 1, 2015

Location:  Ave Maria School of Law, 1025 Commons Circle, Naples, Florida

Additional Information:  Jerry Hesch and Alan Gassman will present The Mathematics of Estate Planning.  If you liked Donald Duck in Mathematics Land, you will love The Mathematics of Estate Planning.  This will not be a Mickey Mouse presentation.

Other speakers include Jonathan Gopman, Bill Snyder, Elizabeth Morgan, Greg Holtz, and others.

Please let us know any questions, comments, or suggestions you might have for this amazing conference, which features dual session selection opportunities in one of the most beautiful conference facilities that we have ever seen.

And don’t forget to have a great weekend in Naples with your significant other or anyone who your significant other doesn’t know!  Domino’s Pizza is extra.

NOTABLE SEMINARS BY MOTHERS

(We aren’t speaking but don’t tell our mothers!)

LIVE ORLANDO PRESENTATION

49th ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 12 – 16, 2015

Location: Orlando World Center Marriott 8701 World Center Drive, Orlando, Florida

Additional Information: For more information please visit: https://www.law.miami.edu/heckerling/?op=0

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION

Date: Thursday, February 12, 2015

Location: St. Petersburg, FL

Additional Information: Please contact Lydia Bennett Bailey at Lydia.Bailey@allkids.org for more information.

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LIVE PRESENTATION:

2015 FLORIDA TAX INSTITUTE

Date: Wednesday through Friday, April 22 – 24, 2015

Location: TBD

Additional Information: Please contact Bruce Bokor at bruceb@jpfirm.com for more information.

Applicable Federal Rates

Below we have this month, last month’s, and the preceding month’s Applicable Federal Rates, because for a sale you can use the lowest of the 3.

federal rates

[1]Denham v. Shellman Grain Elevator, 444 F.2d 1376 (5th Cir. 1971), the debtor listed 18 creditors with an aggregate indebtedness of only $467.13, all but one of whom were owed less than $100, to defeat an involuntary petition for bankruptcy filed by one of Denham’s very large creditors.  The court found that all of the debts were open and unliquidated, as opposed to claims reduced to judgments, and that small recurring debts cannot qualify creditors to be counted toward the necessary amount required to initiate a petition.

[2]See In re Smith, 123 B.R. 423 (M.D. Fla. 1990).

[3]11 U.S.C. Section 303(b)(2) (2007).

[4]See In re Okamoto, 491 F.2d 496 (7th Cir. 1974) which allowed eight debts, all of which were below $65 each, to count toward the 12 creditor threshold and stated that most courts abandon Denham because Denham refused to acknowledge Congressional intent by specifically differentiating betweenlarge and small debts and removing a prior provision excluding debts below $50; See Matter of Rassi, 701 F.2d 627 (7th Cir.1983) which prevented the petitioner from forcing the debtor into an involuntary bankruptcy by allowing two claims, both $10 or less; See also 11 U.S.C. Section 548(e); See also Steve Leimberg’s Estate Planning Newsletter Number 485 by Alan S. Gassman.

[5]Matter of Runyan, 832 F.2d 58 (Tex. Court App. 1987).

[6]11 U.S.C. § 303(I) (2007).

[7]280 B.R. 450 (Bankr. D. W.Ark. 2002).

[8]189 B.R. 290,309-10 (Bankr. D.N.J. 1995).

[9]Those five tests are 1) the improper use test which finds bad faith if a creditor files involuntary bankruptcy to gain a disproportionate advantage for himself over other creditors, 2) the improper purpose test which finds bad faith if creditor’s motivation for filing is ill will, malice or harassment, 3) the objective test which asks if a reasonable person would have also filed involuntary bankruptcy, 4) the subjective test which looks at the subjective motivation of the creditor (almost identical to the improper purpose test), and 5) the two part test which combines the subjective and objective tests. Cannon at 453.

[10]A common refrain from bankruptcy lawyers regarding this topic is that “pigs get fat and hogs get slaughtered.”  Leaving a sacrificial lamb may tip the scales more favorably towards a debtor since the perception of treating creditors fairly increases. Also, there is a much better chance that a settlement will result, especially with a Chapter 7 trustee. The Chapter 7 trustee is a court fiduciary who is required to promptly convert assets and disputes to cash, unlike some litigants who pursue litigation out of principle or some ulterior motive.

[11]For bankruptcy cases dealing with estate planning issues, see In Re Kossow, 325 B.R. 478 (S.D. Fla. 2005); In Re Jennings, 332 B.R. 465 (M.D. Fla. 2005); In Re Ludwig, 345 B.R. 310 (Bankr. D. Colo. 2006); Joseph J. Luzinski v. Peabody & Arnold, LLP and Joel Reinstein, P.A. (In Re Gosman), Adv. No. 03-3228-BKC-SHF-A (S.D. Fla. 2007).

[12]In re Larry Portnoy, 201 B.R. 685 (Bankr. S.D.N.Y. 2996).

[13] Federal Trade Commission v. Affordable Media, LLC, Denyse Lindaalyce Anderson and Michael K. Anderson, 179 F.3d 1228 (9th Cir. 1999).

[14]Lawrence v. Goldberg (In re Lawrence), 279 F.3d 129 (11th Cir. 2002).

[15]http://www.ncsl.org/portals/1/oldsite/programs/lis/images/uetamap.gif

[16] 15 U.S.C. § 7006 (a);   F.S. 688.50 (7)(a)

[17] 15 U.SC. § 7006 (5); F.S. 688.50 (2)(h)

[18]15 U.S.C. § 7001 (c)(1)

[19] 15 U.SC. § 7006 (5); F.S. 688.50 (2)(h)

[20] Id.

[21]15 U.S.C. § 7001 (d)(1)

[22] 15 U.S.C. § 7003; F.S. 688.50 (3)

You are receiving this email because you are a colleague, friend or client of Gassman, Crotty & Denicolo, P.A.
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The Thursday Report – 7.10.14 – Congress Quacks and Ludwig von Duck

Posted on: July 10th, 2014

Qualifying Longevity Annuity Contracts (QLAC)

What Estate Planning and Other Lawyers Need to Know About Bankruptcy, an article by Alberto F. Gomez and Alan S. Gassman – Part 1 of 3

“The IRS ‘Madoff’ with My Estate!”

Thoughtful Corner – How to Help a Client Express What They Want for Children Who May Have Mental, Addiction, or Similar Issues

Humor! (or Lack Thereof!)

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

 This report and other Thursday Reports can be found on our website at www.gassmanlaw.com.

Qualifying Longevity Annuity Contracts (QLAC)

The $125,000 question:

Should your clients over age 70 ½ reduce their IRA minimum distributions by investing in specially designed annuity products?

Introduction:

The insurance industry received a July 4th gift from the Internal Revenue Service in the form of a new regulation released on July 1, 2014 that makes it possible to place IRA and pension plan investments into fixed annuities that will enable the IRA holder or plan participant to avoid the minimum distribution rules that apply after age 70 ½ to the extent that IRA or plan assets are held under such vehicles. The maximum amount that can be invested in such fixed annuities under an IRA or pension will be the lesser of $125,000 or 25% of the value of the pension or IRA account as of the time of the investment. Basically, the value of such contracts will not be considered to be assets of the IRA or pension for purposes of the minimum distribution rules until the owner is age 85.

None of the life insurance or annuity companies have released their products as of yet.

These rules will also allow QLAC’s to be held under 403(b), and 457(b) plans, but not under defined benefit plans or Roth IRA’s.

Under the regulations, these annuity contracts will not be variable or equity indexed annuities, even if they offer a guaranteed minimum rate of return, unless or until explicitly approved by the Internal Revenue Service. Instead, the products available will be ones with a fixed rate of return, life payment, or other similar contract that can be expected to guarantee a minimum rate of return, and to actually credit a slightly higher rate of return in the same manner that many whole life insurance products now offer. The preamble to the new regulations point out that variable and equity indexed annuities with contractual guarantees provide an unpredictable level of income to the holder, and they are inconsistent with the purpose of the new regulation.

A typical arrangement would be that a taxpayer would invest $125,000 (the maximum that can be invested is the lesser of 25% of the value of the qualified account at the time of the investment or $125,000) into a deferred income annuity contract that would pay-out upon the earlier of the death of the account holder or planned participant or ratably from ages 85-90.

One very knowledgeable advisor, Michael Morrissey of Vanguard’s annuity division, gave us the following example of how a hypothetical QLAC might perform.

If a 65 year old male wants to receive monthly income of $1,000 from his IRA after the age of 80, put $47,920 into an annuity contract under his IRA, and the value of the annuity contract would not be subject to the Required Minimum Distribution rules on the value of his IRA until reaching age 80. The contract could allow access to receive payments earlier, if and when needed, based upon the terms of the contract.

The new regulations require that payments from a QLAC must begin to be made by age 85. Therefore, if a 65 year old man wants to receive $1,000 a month for life beginning at age 85, he would only have to put $26,634 into a Vanguard life annuity contract, and would receive a guaranteed payment for life beginning at age 85.

In both of the above arrangements there is a death benefit, as is permitted under the new regulations, which will provide that if the account holder dies before receiving payments equal to the amount invested, then the deficit amount will be paid into the IRA (typically without interest) shortly after death, or payments might continue for the lifetime of a surviving spouse who could roll the annuity over to his or her own IRA and continue to have the benefit of payment rights.

There will doubtless be interaction and confusion between these rules and the “stretch trust” minimum distribution rules, which we will analyze and share in the near future.

For a copy of these new regulations, please email us at agassman@gassmanpa.com.

What Estate Planning and Other Lawyers Need to Know About Bankruptcy
Part 1 of 3

Bankruptcy lawyer Al Gomez and Alan Gassman have recently updated their article on bankruptcy for publication.  We last published this in Trusts & Estates in October of 2007 under the title of “Avoid Catastrophe – Know the Bankruptcy Code to Ward Off Devastating Surprises to an Estate Plan.”

We bring this now to Thursday Report readers as a three part piece, beginning as follows:

EXECUTIVE SUMMARY – Essential Knowledge for Estate Planning Lawyers and Advisors

While many estate planners are familiar with asset protection mechanisms, even a great many lawyers who regularly provide asset protection advice have limited knowledge of the U.S. Bankruptcy Code and laws and practices associated therewith, notwithstanding that these rules can have a catastrophic effect upon an estate plan or corporate structure. Indeed, many estate tax- and income tax-oriented planning structures risk being dismantled by a bankruptcy judge, even though the plan’s primary purpose had nothing to do with creditor protection.

That is why it is critical to not only know the basics, but also to recognize certain rules that apply in the bankruptcy forum and the need to consult with a bankruptcy lawyer in certain situations. The following information will provide an update, review, or excellent introduction to this most important segment of financial services.

 FACTS:

CRUCIAL BASICS

Any estate planning client could end up in a bankruptcy proceeding, whether voluntarily or involuntarily.  In many cases, it is unlikely that a client would choose to file a voluntary bankruptcy petition.  Often, a client may be forced into a bankruptcy proceeding on an involuntary basis.1 And since the implementation of the 2005 Bankruptcy Abuse Prevention and Creditor Protection Act (2005 Bankruptcy Act), there are more stringent requirements imposed on consumer debtors that must be met for them to be eligible to file a petition.

In general, there are three types of bankruptcy:

Chapter 7 is essentially a liquidation mechanism.

Chapters 11 and 13 contemplate a repayment plan.

A Chapter 7 debtor must meet a “means test.”  Upon filing a petition to implement an automatic stay against creditor actions, a Chapter 7 trustee is appointed and the assets become property of the bankruptcy estate, many of which may qualify as exempt.  In Chapter 7, the court essentially takes a snapshot of the debtor’s assets and liabilities as of the date of filing.

This is significant because the debtor’s post-petition earnings are not property of the estate.  For example, if a debtor won the lottery post-petition, the lottery winnings would not be property of the estate. Typically, 90 days from filing, the debtor obtains a discharge from responsibility for pre-bankruptcy debt.  The debtor is afforded a fresh start. However, there are some exceptions to the discharge rule. For instance, only individuals receive a discharge, not corporations. Other debts excluded from discharge include claims not listed by the debtor on the schedules, taxes, and domestic support obligations.

Chapter 13 is only available to individuals (not corporate or other business entities).  To be eligible to file a Chapter 13, an individual must have unsecured debts of less than $383,175 and secured debts of less than $1,149,525.2  Chapter 13 repayment plans are for three to five years and are funded by the debtor’s disposable income.  In exchange for paying under a Chapter 13 plan, a debtor keeps his or her assets.  Chapter 13 is prospective as opposed to the snapshot concept of Chapter 7.  The Chapter 13 trustee administers payments under a plan once a court confirms the plan.  At the conclusion of the plan, after payments are made, the debtor obtains a discharge.

Chapter 11 is used primarily for business entities, but individuals with significant assets or who do not meet the debt limits for Chapter 13, may file a Chapter 11. Instead of a trustee, the debtor becomes the debtor-in-possession (DIP) and is afforded an opportunity to propose a plan. The DIP remains in possession and control of her assets. Chapter 11 requires the debtor to obtain the vote of creditors in order to confirm the plan, unless the debtor is able to “cramdown” the plan as authorized by the Code. The cramdown rules allow the bankruptcy judge to approve the debtor’s plan over the objections of dissenting creditors. The cramdown is only permitted if the plan does not discriminate unfairly, and is fair and equitable to the dissenting classes.

Estate planners should become well-versed in the nuances of these three types of bankruptcies, because significantly different results could occur depending on what chapter applies.  For instance, in the case of the lottery winnings, if the winnings were obtained post-petition in a Chapter 7, the debtor would keep the winnings. On the other hand, if the winnings occurred while in a Chapter 13 or Chapter 11, the winnings are property of the estate.

Moreover, the application of the attorney/client privilege differs depending on whether a client files for Chapter 7, 11, or 13. When a Chapter 7 bankruptcy petition is filed, the Chapter 7 trustee may become the owner of the attorney/client privilege, as well as all client files for purposes of asserting or waiving the privilege. There is a split of authority on this point.3

Therefore, correspondence to the client that may reveal significant risks or adverse issues with respect to potential creditor planning might cause irreparable damage to the client, and the estate planner, if and when a bankruptcy petition is filed. However, the above privilege issue would not arise in the context of a Chapter 13 or Chapter 11 bankruptcy.

INVOLUNTARY BANKRUPTCY

It only takes one creditor to force a debtor into involuntary bankruptcy when the debtor has fewer than 12 creditors. Under 11 U.S.C. Section 303, when a debtor has 12 or more creditors, an involuntary bankruptcy can be commenced only when 3 or more creditors file a petition, with each creditor holding a claim that is (1) not contingent as to liability, and (2) not subject to a bona fide dispute as to liability or amount.

A creditor cannot be counted in the three-or-more-creditor requirement if it holds a lien on the debtor’s property, unless its claim exceeds the value of the property liened by at least $12,300.  Generally, employees and “insiders” are not counted as creditors in determining whether 12 creditors exist. Because of the stricter bankruptcy rules, which are now applicable, more clients with large judgments against them will be rendered insolvent, yet will attempt to avoid or delay bankruptcy while maintaining their creditor exempt assets.  Creditors may respond by utilizing the involuntary option.

Next week, we will provide further discussion of the 12 creditor requirements and cover a number of other important bankruptcy principles that estate planners need to be aware of.

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111 U.S.C. Section 303 (2007).

211 U.S.C. Section 109(e) (2010).

3Community Futures Trading Comm’n v. Weintraud, 471 U.S. 343 (1985), held that a trustee may waive the attorney client privilege for a corporate Chapter 7 debtor, but it did not extend its holding to individual debtors. See Miller v. Miller, 247 B.R. 704 (Bankr. D. Ohio 2000), discussing the split of authority.

“The IRS ‘Madoff’ with My Estate!” 

In Estate of Kessel, the IRS argued that the value of the decedent’s estate should include the date-of-death value of the decedent’s pension account managed by Bernie Madoff.  The decedent died in July of 2006 and, at the time of his death, he purportedly held more than $4.8 million of appraised assets in his Madoff investment account.  The decedent’s federal estate tax return included the value of the Madoff account, and the estate paid the tax liability, which included value of the Madoff account in the tax determination.  Following the realization of Bernie Madoff’s Ponzi scheme, the estate determined that the decedent’s Madoff investment account had zero value.  The estate, therefore, filed a supplemental federal estate tax return seeking a $1.9 million refund based on the worthlessness of the decedent’s Madoff account.  The IRS denied the refund and, instead, IRS determined that the estate had a $339,143 deficiency in the initial federal estate tax return.

The IRS maintained that the estate was not entitled to the refund because it measured the Madoff’s account value at the time of decedent’s death as what a willing buyer would pay to a willing seller for such account.  The IRS argued since the account was purportedly valued at $4.8 million, a willing buyer would likely pay that amount for the account because at the time of the decedent’s death, a willing buyer would neither reasonably know nor foresee that Bernie Madoff was operating a Ponzi scheme.  The IRS moved for summary judgment on these grounds. The Tax Court, however, denied the IRS’s motion because the court found that whether a willing buyer had a reason to believe that Bernie Madoff was operating a Ponzi scheme was a question of material fact.  While the Tax Court denied this motion, the case is still pending.  Stay tuned.

Thoughtful Corner

How to Help a Client Express What They Want for Children Who May Have Mental, Addiction, or Similar Issues:

Give Discretion to Trustees But Have an Explicit Letter of Wishes in the File

Clients often have children or others in the family that they would like to benefit in restrictive ways without embarrassing the person in trust documents.

One solution is to provide that one or more beneficiaries will be able to take over trusteeship of trusts at certain ages, while others will not.  This does not have to be so obviously drafted so as to embarrass the beneficiary of concern.

The following Letter of Wishes can be used to express the client’s instructions to fiduciaries.  This particular one also goes into some detail about coordinating efforts with an ex-spouse who will also be on the scene if the client dies.

To my Trustees:

            As I design my estate plan I am mindful that my daughter, [NAME], has been a “straight-A kid” in all ways.  I have every confidence that she will succeed without the need for much assistance, and will be able to handle her own financial decision making upon reaching proper ages, as is or will be reflected in my estate planning documents.

             I have significant admiration for how well my son, [NAME], has done in the face of challenges beyond his control.  I am very proud that he has developed into a resourceful, caring, and admirable adult, but I also would like to make sure that he is completely protected for his entire lifetime to the extent that this is made possible by whatever legacy and wealth I am able to leave for him.

             I would strongly prefer that he support himself to the maximum extent possible, and I have been very impressed with his ability to economize and not waste money or financial opportunities, and am pleased that he is not materialistic or in need of “showing off” what he has or has access to.

            I am hopeful that in decades to come there will be improved medications and treatments for individuals who have challenging circumstances, but I am mindful that my future grandchildren may carry genes that would give them similar challenges.

             I have therefore requested special provisions for my trust documents that will give professional trustees or trust companies the ability to maintain lifetime control over trusts for my son and his descendants as they deem fit, and for my daughter’s descendants if she is no longer living, has descendants, and has not herself otherwise designated.

             I also would be remiss to not point out that my children’s mother, [NAME], is presently well off financially, and should be able to provide assistance and support, as well as input and encouragement, for our descendants.

             [EX-SPOUSE] and I had some wonderful years together, and both of us dedicated significant efforts to raising these two much loved children. I request that my fiduciaries work with her as best as possible to help assure that overall well being, opportunity, and personal achievement are maximized for our common descendants.

            Although I do not consider this document to be part of my trust agreement, I request that ____________ and _____________, as Trust Protectors under the Agreement, take such actions as they deem appropriate, but only after careful consideration and extensive testing and interviewing by well-respected, independent professionals who advise on mental health issues, special needs planning, financial budgeting, and investment managers. 

Seminar Announcement

Webinar Announcement Cartoon

To register for the 12 P.M. webinar, please click here.

To register for the 7 P.M. webinar, please click here.

 Humor! (Or Lack Thereof!)

 The Duck and the Pharmacist

A duck walks into a pharmacy and says, “Do you have any chapstick?”
When the pharmacist hands it to him, the duck replies, “Thanks, just put it on my bill.”

Kentucky Fried Duck
​a poem by Colonel Sanders

Kentucky Fried Duck
​We tried, but it wouldn’t cluck
​Ludwig and Donald tried to buy in
​And offered us Daffy again and again

But the wings were too large
​To fit in our buckets
​At first we tried boxes
​But later said chuck it!

Upcoming Seminars and Webinars

NEW PORT RICHEY SEMINAR:

Alan S. Gassman and Kenneth J. Crotty will be speaking at the North FICPA Monthly meeting on two topics:

  • Planning for Same Gender Couples and Laws that Apply to All Couples
  • A CPAs Guide to Trust, Tax Law and Compliance

Date: Wednesday, July 16, 2014 | 4:30 p.m.

Location: Chili’s 9600 US Highway 19, Port Richey, FL.

Additional Information: If you would like to attend this seminar please contact Ron Cohen at 352-257-9518 or email agassman@gassmanpa.com

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FREE LIVE WEBINAR:

STEP-UP YOUR EFFORTS TO STEP-UP CLIENTS’ BASIS – STRATEGIC ESTATE PLANNING AND STEPPED-UP BASIS CONSIDERATIONS

Date:  Wednesday, July 23, 2014 |12:30 p.m. (30 Minute Webinar)

Speakers:  Edwin P. Morrow, III, Alan S. Gassman

Location: Online webinar

Additional Information: To register for the webinar please click here.

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FREE LIVE WEBINAR:

GAUGING AND HANDLING ENTITLEMENT TENDENCIES OF BENEFICIARIES, EMPLOYEES AND OTHERS – A FASCINATING AND EXTREMELY PRACTICAL GUIDE ON SOCIETY’S NEWEST ISSUE

Date: Tuesday, July 29, 2014 | 12:30 p.m. (30 Minute Webinar)

Speakers: Stephanie Thomason, Ph.D. and Alan S. Gassman, Esq.

Location: Online webinar

Additional Information: To register for the webinar please click here.

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FREE LIVE WEBINAR:

HIPPA MEDICAL OFFICE DISASTER AVOIDANCE CHECKLIST

This 20-25 minute webinar includes valuable forms and important strategies that every medical office should know about. Join us for an interactive and innovative discussion of how medical practices can be decimated by HIPPA, including a number of survival techniques, tips, and tools.

Date: Tuesday, August 5, 2014 | 12:00 p.m. and 7:00 p.m.

Speakers: Alan S. Gassman, Lester Perling, and Jeff Howard

Location: Online Webinar

Additional Information: To register for the 12 p.m. webinar, please click here. To register for the 7 p.m. webinar, please click here.

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FREE LIVE WEBINAR:

Blattmachr

A POWERFUL 40 MINUTE DOUBLE HEADER WITH JONATHAN BLATTMACHR

Topics:

  • Foreign vs. Domestic Asset Protection Trusts: More Than Just Creditor Protection Considerations
  • Empowering Your Powers of Appointment: Don’t Leave Out Important Tax and Practical Provisions or Ignore Important Considerations.  With Sample Provisions

Date: Tuesday, August 12, 2014 | 12:00 p.m.

Location: Online webinar

Additional Information: To register for the webinar please click here.

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LIVE ISLE OF MAN PRESENTATION:

Alan S. Gassman will be speaking on US TRUST AND TAX LAWS FOR INTERNATIONAL INVESTORS at Cayman National Bank and Trust Company on the Isle of Man

Sign up now and you will receive a free lunch!  Transportation not included.

“Half-way between England

And Ireland in the Irish Sea.”

Is a great place to discuss trusts with glee.”

Date: Wednesday, September 3, 2014

Additional Information:  If you would like to receive a copy of the materials that will be presented please email Janine Gunyan at janine@gassmanpa.com and we will send them to you once they are ready.

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LIVE FT. LAUDERDALE PRESENTATION:

FICPA ANNUAL ACCOUNTING SHOW 

Alan S. Gassman will be speaking at the FICPA Annual Accounting Show on Thursday, September 18, 2014 on the topic of ESSENTIAL GUIDE TO BASIC TRUST PLANNING for 50 minutes.

This presentation will introduce basic and intermediate trust planning background and provide attendees with an orderly list of the most commonly used trusts, practical features and traps for the unwary, including revocable, irrevocable and hybrid.  The discussion will include tax, creditor protection and probate and guardian considerations.

Date: Wednesday, September 17 through Friday, September 19, 2014

Location:  Fort Lauderdale, Florida

Additional Information:  For more information about this program please contact Stephanie Thomas at ThomasS@ficpa.org

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LIVE CLEARWATER PRESENTATION:

Board Certified Tax Attorney Michael O’Leary from the Trenam Kemker firm in Tampa, Florida and Christopher Denicolo from Gassman Law Associates will be speaking at the Ruth Eckerd Hall Planned Giving Advisory Council event on Tuesday, September 23, 2014.

O'Leary

Mr. O’Leary’s topic is HOT TOPICS IN CHARITABLE PLANNING AND MORE.

Chris

Mr. Denicolo’s topic is PLANNING FOR INHERITED IRAs.

Date: Tuesday, September 23, 2014 | 5:00 p.m.

This presentation is free to members of the Ruth Eckerd Hall Planned Giving Advisory Council, Ruth Eckerd Hall members, and professionals who are attending a Ruth Eckerd Hall Planned Giving Advisory Council event for the first time.

Additional Information: You can contact Suzanne Ruley at sruley@rutheckerdhall.net or via phone at 727-791-7400, David Abelson at david.abelson@morganstanley.com or via phone at 727-773-4626, Alan S. Gassman at agassman@gassmanpa.com or via phone at 727-442-1200 or the Kentucky Fried Chicken located at 1960 Gulf to Bay Blvd, which is close in proximity to this location and available to provide you with crisp, spicy or even crispier chicken, mashed potatoes and gravy, rolls, and slaw!  Bring your 32 oz. Kentucky Fried Chicken drink container to the presentation and we will fill it with your choice of club soda or seltzer water, but no sharing permitted.

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LIVE NEW JERSEY PRESENTATION – WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW TO REPRESENT SNOWBIRDS AND FLORIDA BASED BUSINESSES:

NEW JERSEY INSTITUTE FOR CONTINUING LEGAL EDUCATION (ICLE)_SPECIAL 3 HOUR SESSION

New Jersey song trivia:  What song includes the words “Counting the cars on the New Jersey Turnpike, they’ve all gone to look for America”?  What year was it recorded and who wrote it?

Alan S. Gassman will be the sole speaker for this informative 3 hour program entitled WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW

Here is some of what the New Jersey Bar Invitation for this program provides:

New Jersey residents have always had a strong connection to Florida.  We vacation there (it=s our second shore), own Florida property (or have favored relatives that do) and have family and friends living there.  Sometimes our wealthiest clients move to Florida and need guidance, and you need background in order to continue representation.

There are real and significant differences between the two states that every lawyer should be cognizant of.  For example, holographic wills are perfectly legitimate in New Jersey and anyone can serve as an executor of an estate, which is not the case in Florida.  Also, Florida=s new rules regarding LLCs are different, and if you are handling estates of New Jersey decedents who owned Florida property, there are Florida law issues that must be addressed.  Asset protection differs significantly in Florida too.

Gain the knowledge you need to assist your clients with Florida matters including:

  • Florida specific laws involving businesses, trusts, and estates
  • Florida tax planning
  • Elective share and homestead rules
  • Liability Insulation and Planning
  • Creditor Protection and Strategies
  • Medical Practice Laws
  • Staying within Florida Bar Guidelines that allow representation of Florida clients

Comments from past attendees of this program:

  • Excellent seminar and materials!!!
  • This was one of the best ICLE seminars yet!
  • One of the best seminars I have attended.
  • Better than mashed potatoes and gravy.  Glad he didn’t serve grits!

Date: Saturday, October 4, 2014

Location: TBD

Additional Information: This is a repeat of the same program that we gave last year, but our book is now updated for the new Florida LLC law and changes in estate and trust law.  Please tell all of your friends, neighbors, and enemies in New Jersey to come out to support this important presentation for the New Jersey Bar Association.  We will include discussions of airboats, how to get an alligator off of your driveway, how to peel a navel orange and what collard greens and grits are. For additional information, please email agassman@gassmanpa.com

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LIVE PASCO COUNTY COCKTAIL HOUR AND PRESENTATION:

Alan S. Gassman and Christopher J. Denicolo will be speaking at the Pasco-Hernando State College’s Planned Giving Consortium Luncheon on Planning for Inherited IRA’s in View of the Recent Supreme Court Case – and Demystifing the “Stretch in Trust” Ira and Pension Rules

Date: Thursday, October 23, 2014 | 4:30 p.m.

Location:  Spartan Manor, 6121 Massachusetts Avenue, Port Richey, Florida

Additional Information:  For more information, please contact Maria Hixon at hixonm@phsc.edu

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LIVE UNIVERSITY OF NOTRE DAME PRESENTATION:

40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Please send us your questions, comments and suggestions for Alan Gassman’s talk on Planning with Variable Annuities and Analyzing Reverse Mortgages. 

This presentation will cover the unique income tax and financial planning characteristics of fixed and variable annuities.

Topic #2: THE MATHEMATICS OF ESTATE AND ESTATE TAX PLANNING

Christopher J. Denicolo, Kenneth J. Crotty and Alan S. Gassman will also be presenting a special Wednesday late p.m. two hour dive into math concepts that are used or sometimes missed by estate and estate tax planners.  This will be an A to Z review of important concepts, intended for estate planners of all levels, sizes and ages.  Donald Duck has rated this program A+.

Date:November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

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LIVE FORT LAUDERDALE PRESENTATION:

Alan Gassman will be speaking at the 2015 Representing the Physician Seminar on the topic of DISASTER AVOIDANCE FOR THE DOCTOR’S ESTATE PLAN.

Date: January 16, 2015

Location: TBD – Fort Lauderdale, Florida

Additional Information:For more information, please email Alan Gassman at agassman@gassmanpa.com

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LIVE NAPLES PRESENTATION:

2nd ANNUAL AVE MARIA SCHOOL OF LAW ESTATE PLANNING CONFERENCE

Date:  Friday, May 1, 2015

Location:  Ave Maria School of Law, 1025 Commons Circle, Naples, Florida

Additional Information:  Jerry Hesch and Alan Gassman will present The Mathematics of Estate Planning.  If you liked Donald Duck in Mathematics Land, you will love The Mathematics of Estate Planning.  This will not be a Mickey Mouse presentation.

Other speakers include Jonathan Gopman, Bill Snyder, Elizabeth Morgan, Greg Holtz, and others.

Please let us know any questions, comments, or suggestions you might have for this amazing conference, which features dual session selection opportunities in one of the most beautiful conference facilities that we have ever seen.

And don’t forget to have a great weekend in Naples with your significant other or anyone who your significant other doesn’t know!  Domino’s Pizza is extra. 

NOTABLE SEMINARS BY OTHERS

(We were not invited, but will attend and are still excited!)

LIVE ORLANDO PRESENTATION

49th ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 12 – 16, 2015

Location: Orlando World Center Marriott 8701 World Center Drive, Orlando, Florida

Additional Information: For more information please visit: https://www.law.miami.edu/heckerling/?op=0

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION

Date: Thursday, February 12, 2015

Location: St. Petersburg, FL

Additional Information: Please contact Lydia Bennett Bailey at Lydia.Bailey@allkids.org for more information.

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LIVE PRESENTATION:

2015 FLORIDA TAX INSTITUTE

Date: Wednesday through Friday, April 22 – 24, 2015

Location: TBD

Additional Information: Please contact Bruce Bokor at bruceb@jpfirm.com for more information.

Applicable Federal Rates

Below we have this month, last month’s, and the preceding month’s Applicable Federal Rates, because for a sale you can use the lowest of the 3.

federal rates

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