Archive for the ‘Thursday Reports’ Category

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

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FRIDAY, NOVEMBER 14, 2014

Fri. Chart 1

Fri. Chart 2 JPEGFri. Chart 3

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*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.

_________________________________

[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.

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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

 

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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)

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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

The Thursday Report – 7.3.2014 – 4th of July Edition

Posted on: July 3rd, 2014

Try Our Safety Latch Clause to Protect Your Clients and Their Inheritances

“Explaining the Surviving Spouse’s Disclaimer, Portability, and Clayton Q-TIP Choices in 577 Words or Loss”

State-by-State Summary of Inherited IRA Protection Statutes, by Edwin P. Morrow, III, J.D., LL.M., MBA, CFP, RFC

Seminar Announcement – Step-Up Your Efforts to Step-Up Clients’ Basis – Strategic Estate Planning and Stepped-Up Basis Considerations

Tea for Two Liked by Bloomberg BNA Too

Annuity Concepts and Terminology Review for Tax Advisors, an article by Alan S. Gassman, Christopher H. Price and Christopher J. Denicolo

Thoughtful Corner – What is the Helper’s High, and How Can I Get Some?

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.

Try Our Safety Latch Clause to Protect Your Clients and Their Inheritances

Many times we have used the following clause to assist a client who might be infirm, of high age, or subject to undue influence.

The clause prevents amendment of a revocable trust without confirmation of good mental status, and understanding of the change, and absence of undue influence by one or more listed individuals and/or neurology or psychiatry doctors.

We have used this provision dozens of times, and it has facilitated avoidance of undue influence or trust litigation on a number of occasions.

Try it, you’ll like it!

I recognize that I have had mental challenges and want to assure that any future changes to this Trust Agreement or my estate plan are verified to have been carefully and completely considered and understood by me, and therefore wish to have a medical or psychologist verification of any change made and to have any two of __________________, _________________, _________________ and/or a board certified psychiatrist or neurologist verify my mental capacity.

           2.01     Reservation of Power/Safety Latch Provision.  Except as provided below I expressly reserve the right, at any time and from time to time, during my lifetime, by instrument in writing delivered to the Trustee, to alter, amend, or revoke this trust instrument, either in whole or in part.

Notwithstanding the above, or any provision herein to the contrary, no amendment or revocation of this Trust, no change of trusteeship, and no withdrawal by me or any other person of more than $100,000 of principal in cash or other assets (unless such withdrawal is authorized by a Trustee not related to me) in a calendar month may be made unless it is documented that such amendment, revocation, or withdrawal is made by me at a time and under circumstances as to which I am of sound mind and full mental capacity and am acting as the result of undue influence, by means of such action being: (1) approved in writing as to such mental condition by a then serving Trustee or Co-Trustee who is not related to me or a beneficiary of this Trust; or (2) such sound mind and full mental condition is confirmed in writing by (a) my ______________, ______________________, (b) any two (2) of the following individuals: ____________________________, ______________________________, or ____________________________, or (c)  by two (2) Specialist Physicians selected as described below in this paragraph.  In the event of a dispute or uncertainty between me and an acting Trustee or Trustees with respect to my competency to make a change in trusteeship, to make a Trust Amendment, or to require payment of principal or income under this Trust Agreement, then such dispute shall be resolved by two (2) Specialist Physicians.  For the purposes of this provision Specialist Physicians shall mean licensed physicians specializing and board certified in areas relating to mental competency (psychiatrists or neurologists) who are on full-time staff at a well-respected hospital near where I reside, and are selected by the Trustee(s).  If there is a dispute as to the selection of such Physicians, then the party with the power to designate successor trusteeship in the event of vacancy under Section 6.05(d) of this Agreement shall select such Physicians.  Further, the exercise of any power of appointment by me set forth under this Agreement shall require the above confirmation as well.

“Explaining Credit Shelter Trusts, Clayton Q-TIP Trusts,       Q-TIP Trusts and GST Exemption to Clients in 577 Words or Less”

Most but not all estate tax planners have become fluent with disclaimers, portability and Clayton Q-Tip choices.

Others are not so sure.

We welcome reader comments on whether the following is understood or enlightening by estate planners.

Enjoy!

A husband dies in 2014 and leaves everything to his wife.  At the time of death, the couple has $20,000,000 worth of assets, which will be worth $40,000,000 when the wife dies.  If the wife does not disclaim any of the assets left to her, then all of the couple’s assets will be subject to federal estate taxation on her death. The wife, however, by disclaimer can allow up to $5,340,000 worth of assets to pass into a “by-pass trust,” which will benefit her for her lifetime without being subject to federal estate tax.  When the wife makes a valid disclaimer within 9 months of the husband’s death, she will be deemed to not have received the disclaimed property, but will also have to disclaim any right that she would otherwise hold to direct how the property would pass during her lifetime or upon her death.

The wife’s estate tax exemption on her death will be based upon her $5,340,000 present exemption, plus increases in the Consumer Price Index taking place after 2014, plus the husband’s unused $5,340,000 portability allowance, which does not grow with inflation.  If she receives the portability allowance but remarries and her successor spouse dies before her and does not leave her a portability allowance, then the portability allowance left by the husband in our example above completely disappears!  We are using $5,340,000 under the assumption that 2014 amounts will apply, and that the couple has not made gifts exceeding $14,000 per year to any individuals that would reduce the allowance.

Let’s assume that the wife disclaims $3,000,000 worth of assets that will be held for her benefit without being subject to federal estate tax at her death, and those $3,000,000 worth of assets grow to $7,000,000 in value before she dies, so that the wife will have $33,000,000 of individually owned assets when she dies.  That whole $7,000,000 in value passes without being subject to federal estate tax, and she still has $2,430,000 from her husband’s portability allowance, so assuming that she does not remarry, upon her death the amount that passes estate tax free for the assets outside of the $7,000,000 in the trust that is already estate tax free will be based upon $2,340,000, plus whatever the $5,340,000 allowance has grown to.

The wife, however, may decide to rely on portability completely but would like to maximize the amount that will be held in a protective trust for her children and for her descendants, so as to never be subject to estate tax at the children’s level.  In such scenario, she can  disclaim up to $5,340,000 worth of the assets that would have been coming over from the husband into the special trust.  The trustees of the special trust then would make a “Clayton Q-TIP election” so that those assets will be subject to federal estate tax as if they belong to the wife when she dies, and the wife will have the entire $5,340,000 portability allowance from the husband. The Clayton Q-TIP election allows the executor to determine how much of the Q-TIP trust should qualify for the marital deduction.  The amount not qualifying for the deduction may pass to another trust or to other beneficiaries without jeopardizing the entire marital deduction.

The advantage here is that the husband has a $5,340,000 generation skipping tax exemption that enables that amount in assets to be placed into the Clayton Q-TIP trust on the husband’s death (after the disclaimer and the Clayton Q-TIP trust election have been made) and if that $5,340,000 grows to $12,000,000 before the wife dies it will nevertheless be able to pass to a trust that can benefit the children without being subject to federal estate tax at the children’s level.

So in a situation similar to this one, upon the death of the first spouse, the surviving spouse has the disclaimer option, the using portability option, and the Clayton Q-TIP option.

State-by-State Summary of Inherited IRA Protection Statutes, by Edwin P. Morrow, III, J.D., LL.M., MBA, CFP, RFC

Our friend and writing idol, Edwin P. Morrow, III, J.D., LL.M., MBA, CFP, RFC was kind enough to updated the attached chart which shows a state-by-state summary of inherited IRA protection statutes.  To view the chart please click here.

If you have not read Ed’s materials on obtaining a step-up in basis by trust and power of appointment planning please let us know and we will be glad to send them, or you can contact Ed directly by emailing him at Edwin_p_morrow@keybank.com.

Ed’s picture and short biography are as follows:

Edwin Morrow

Ed Morrow is currently the Manager for Wealth Strategies Communications for Key Private Bank’s Wealth Advisory Services and is involved in the marketing of advanced wealth strategies and training of local teams of credentialed financial planners, trust officers, investment specialists and private bankers.  In addition, Mr. Morrow is a Wealth Specialist analyzing tax, trust and estate planning needs of high net worth and ultra-high net worth clients nationwide.  He is a Board Certified Specialist (Ohio State Bar Assn.) in Estate Planning, Trust and Probate Law, a Certified Financial Planner (CFP) and Registered Financial Consultant (RFC).  He is also a Non-Public Arbitrator for the Financial Industry Regulatory Authority (FINRA).  Mr. Morrow is a frequent speaker at CLE/CPE courses on asset protection, tax, and various financial and estate planning topics.

50 State Chart by Ed Morrow_Page_1 50 State Chart by Ed Morrow_Page_2 50 State Chart by Ed Morrow_Page_3

50 State Chart by Ed Morrow_Page_4

Seminar Announcement – Step-Up Your Efforts to Step-Up Clients’ Basis –  Strategic Estate Planning and Stepped-Up Basis Considerations

Webinar Announcement

To register for the webinar, please click here.

Tea for Two Liked by Bloomberg BNA Too

Our recent article entitled Tea for Two, and Two for TBE has been featured in the July edition of the Bloomberg BNA Tax Management Estates, Gifts and Trusts Journal, with the following introductory poem:

Tea for Two,

And two for TBE,

Many clients want to own assets jointly,

If not sure, why not try and see………..

The article explains that same gender couples residing in Florida and other states that do not recognize their marriages may still nevertheless attempt to use tenancy by the entireties in anticipation of court decisions that will quite likely provide that state law must recognize these marriages.

The first ten requesters will receive a complimentary copy of the entire Journal, which includes our article.

For a copy of the article itself please click here.

What about situations where the individuals are married and one dies owning a homestead and Florida does not recognize the marriage?  Will there be a cause of action later to the effect that the surviving spouse had homestead inheritance rights?  Time will tell, but on some days it is better to be a lawyer than a title insurance company.

Annuity Concepts and Terminology Review for Tax Advisors, an article by Alan S. Gassman, Christopher H. Price and Christopher J. Denicolo

Our article entitled Annuity Concepts and Terminology Review for Tax Advisors was published in the July 2014 edition of Estate Planning Magazine.

To read the article please click here.

Thoughtful Corner – What is Helper’s High, and How Can I Get Some?

Wikipedia defines helper’s high as “a euphoric feeling, followed by a longer period of calm, experienced after performing a kind act.”

The encyclopedia goes on to indicate that the sensation results from the release of endorphins, followed by a longer lasting period of improved emotional well being and sense of self-worth, which will reduce stress and improve health.

When you help someone make sure to enjoy your “helper’s high.”

It is better than shopping, gambling, and many other things that cause release of endorphins.

So it’s okay to get high, as long as it is the “helper’s high”, and especially if it is billable or charitable.

Humor! (Or Lack Thereof!)

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

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: TBD

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:

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 will be speaking at the Ruth Eckerd Hall Planned Giving Advisory Council event on Tuesday, September 23, 2014 at 5:00 p.m.

O'Leary

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

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 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

The Thursday Report 6.26.2014 – Monkees Trivia Edition

Posted on: June 26th, 2014

Singh Meets - USE

blattmachr gans with title - USE

“Effective immediately, the so-called ‘Covered Opinion’ rules for written advice relating to any Federal tax issues that have been contained in section 10.35 of Circular 230 essentially have been repealed.  All requirements for written advice relating to a Federal tax matter will now be contained in section 10.37.   It is important, nonetheless, to remember and be aware of the many other provisions in the Circular that practitioners must adhere to, in order to avoid discipline which may include disbarment from practice before the IRS, in giving advice, whether written or oral, about Federal tax matters.”  

Mitchell M. Gans is the Rivkin Radler Distinguished Professor of Law at the Hofstra University School of Law and an Adjunct Professor of Law at the New York University School of Law in its Masters in Tax program

Jonathan G. Blattmachr is the Director of Estate Planning for the Alaska Trust Company, a principal of Pioneer Wealth Partners, LLC, and co-developer, with Michael L. Graham, Esq., of Dallas, Texas, of Wealth Transfer Planning, a computer system produced by Interactive Legal that provides artificial intelligence advice and automated document assembly systems for practitioners.    Mitchell and Jonathan are prolific writers, lecturers and commentators, and are the authors of The Circular 230 Deskbook (PLI).

We are pleased that Jonathan Blattmachr will be presenting a free two-topic webinar moderated by Alan Gassman on Tuesday, August 12, 2014 at 12:00 p.m.  The topics that they will be discussing are as follows:

  • Foreign vs. Domestic Asset Protection Trusts; More Than Just Creditor Protection Considerations; and
  • Empowering Your Powers of Appointment: Don’t Leave Out Important Tax and Practical Provisions or Ignore Important Considerations.  With Sample Provisions.

To register for the webinar please click here.

We thank Steve Leimberg of Leimberg Information Services for allowing us to reprint this amazing article, and of course Mitchell Gans and Jonathan Blattmachr, not only for this article but also for all they have done for our industry and clients.

Here is their commentary:

EXECUTIVE SUMMARY: 

Effective immediately, the so-called “Covered Opinion” rules for written advice relating to any Federal tax issues that have been contained in section 10.35 of Circular 230 essentially have been repealed.  All requirements for written advice relating to a Federal tax matter will now be contained in section 10.37.   It is important, nonetheless, to remember and be aware of the many other provisions in the Circular that practitioners must adhere to, in order to avoid discipline which may include disbarment from practice before the IRS, in giving advice, whether written or oral, about Federal tax matters.   Among other things, the Circular 230 disclaimer attached to nearly every email sent out by tax practitioners can now be eliminated.  Indeed, Karen Hawkins, Esq., head of the Office of Professional Responsibility for the IRS has stated that practitioner should eliminate any “warning” that the disclaimer is required by Treasury regulations.

COMMENT:

Background

Under the recent amendments to Circular 230, the rules in section 10.35 that had imposed a heightened standard for Covered Opinions have been eliminated.  See T.D. 9668.  As the preamble (or explanation accompanying the new provisions) contemplates, as a result of the amendment, there will no longer be any practical need for the Circular 230 disclaimers that had become so ubiquitous in emails and other correspondence in the aftermath of the promulgation of the Covered Opinion rules.  Indeed, one can infer from the preamble that the extensive use of such disclaimers was at least partially responsible for the decision to delete these rules.   The decision was also driven by a concern about the burden on taxpayers, resulting of course in extra cost for tax advice where the Covered Opinion rules were implicated – or even, as the preamble indicates, where they were possibly implicated inasmuch as the practitioner would be required in such circumstances to engage in an analysis of section 10.35 of the Circular to determine if it applied.

More Detail

This is not to say, however, that the rules applicable to tax advice have been entirely eliminated.  To the contrary, section 10.37, which previously had imposed rules in the case of written tax advice, will continue to apply to all written advice concerning a federal tax matter.[i] And while the rules under section 10.37 are not as rigorous as the now-withdrawn Covered Opinion rules in section 10.35, they are more rigorous under the amendment than they had previously been.  Thus, the prior two-tier system – under which certain written advice was subject to the more rigorous Covered Opinion rules in section 10.35 while other written advice was subject to the less rigorous rules in section 10.37  – has now been replaced by a uniform system of rules contained in section 10.37.

Written vs. Oral Advice

It is worth emphasizing that, as indicated, section 10.37 applies only to written advice.  As a consequence, in the case of oral advice, the section does not apply.  Practitioners who give oral advice will nonetheless remain subject to other constraints.  For example, oral advice about a position to be taken on a tax return remains subject to the section 10.34 and to the penalty provision in section 6694 of the Internal Revenue Code.

Under section 10.37(a)(1), government submissions on matters of policy of a general nature do not constitute written advice on a federal tax matter and, therefore, are not subject to the section.  The preamble offers an example of a practitioner who submits written comments on a proposed regulation on behalf of a client.  Such comments, according to the preamble, are not subject to the section.  Nor are presentations made in a continuing education context subject to the section.[ii]  Such presentations are, however, subject to the section if they involve the marketing or promoting of transactions.

Basic Written Advice Requirements

Under section 10.37, as amended, the following principles apply where written advice concerning a federal tax matter is given: (1) the advice must be based on reasonable factual and legal assumptions (including assumptions about future events); (2) the practitioner must consider all relevant facts that the practitioner knows or reasonably should know; (3) the practitioner must use all reasonable efforts to identify and ascertain facts relevant to the advice; (4) the practitioner may rely on others but only if doing so is reasonable; and (5) the practitioner must not take into account the possibility that the return will not be audited or that the issue would not be raised on audit.

In a significant departure from the rules under the Covered Opinion rules in section 10.35, there is no requirement in section 10.37 that the practitioner describe the relevant facts in the written advice.  Nor is there any requirement that the practitioner analyze the application of the law to the facts in the written advice, which had also been required under section 10.35.  Likewise, there is no requirement in section 10.37 that the conclusion concerning the application of the law to the facts be set forth in the written advice.  The preamble explicitly states that, unlike former section 10.35, any analysis as to whether the practitioner has complied with section 10.37 will be based on all of the facts and circumstances, not on whether each of the required components is addressed in the writing.

As indicated, a practitioner may not, consistent with section 10.37, make unreasonable factual or legal assumptions.  The preamble, as well as the text of the section itself, makes clear that a practitioner who fails to consider the relevant legal authorities or fails to relate that law to the facts makes unreasonable legal or factual assumptions.   Therefore, while the failure to include in the written advice the relevant legal authorities or an analysis that applies the law to the facts is not necessarily problematic, a practitioner who fails to consider the relevant authorities or who fails to apply the law to the facts will be in violation of section 10.37.

While, as indicated, a practitioner who fails to include any particular piece of information or analysis in the written advice does not necessarily violate section 10.37, the preamble encourages practitioners, “in appropriate circumstances,” to describe in the writing the relevant facts, law, analysis and assumptions.  The preamble explicitly states that, in determining whether a practitioner has complied with section 10.37, it will be appropriate to consider all of the facts and circumstances, including whether it was appropriate to describe in the writing all relevant facts, law, analysis and assumptions.  In so cautioning practitioners, the preamble may have the, perhaps, unintended effect of encouraging practitioners to err in favor of including in written advice all facts, law, analysis and assumptions.  To the extent that this is the effect, the new rules may fail to accomplish one of their objectives: reducing the cost taxpayers incur in securing tax advice.  It is, of course, also possible that the effect will be an increase in the use of oral advice, which would of course enable the practitioner to avoid the requirements of the section entirely.

Audit Lottery Considerations

Although a practitioner may not in analyzing the substantive issue take into account the possibility of an audit or the likelihood that the issue would be raised on audit – a prohibition was also contained in the pre-amendment version of the section – this does not prevent the practitioner from taking into account or from informing the client about the possibility and/or likelihood that the issue could be settled if raised by the IRS.  As the preamble indicates, the provision in the pre-amended version of the section prohibiting the discussion or consideration of the settlement issue could improperly interfere with practitioner’s obligation to keep the client properly informed.[iii] As a result, the settlement-related prohibition is not carried over into the section as amended.

One commentator had suggested that the section be amended to indicate that taking into account audit-related issues is impermissible not only in the case of written advice but also in the case of oral advice.  The preamble explains that it would not have been appropriate to include such a prohibition in section 10.37 given that it is not otherwise applicable in the case of oral advice.  Nonetheless, the preamble does state that audit-lottery issues may not be taken into account in the oral-advice context under existing authority.[iv]

Under the proposed amendment to section 10.37, practitioners would have been subject to a heightened standard of review in determining whether they complied with the section where the advice would be used in a marketing context involving a significant purpose to avoid or evade tax.  This, of course, might have had the effect of bringing into section 10.37 through “the back door” the more rigorous Covered Opinion approach, at least in that context.  In response to comments that the heightened-standard approach was too vague, the preamble indicates that, as provided in section 10.37(c)(2), a “reasonable practitioner” standard will be used in determining if the advice is in compliance.  And where the advice involves the marketing of such a significant-purpose transaction, an emphasis will be given to the additional risk involved as a result of the practitioner’s limited knowledge of the taxpayer’s particular circumstances.[v]

Reliance on Advice from Others

Tax practitioners often rely on the advice of other professionals in formulating their own advice.  In section 10.37(b), the rules concerning such reliance are set forth.  The rules apply, as the preamble indicates, even where the practitioner relies on an appraiser or someone who is not subject to the Circular.  The rules contain three elements.[vi] First, if the practitioner knows or reasonably should know that the opinion of the other professional should not be relied on, the practitioner is precluded from relying on the opinion.  Second, reliance is not appropriate if the practitioner knows or should reasonably know that the other professional is not competent.  The preamble suggests that, if the practitioner is not familiar with the other professional’s background, the practitioner will have an affirmative obligation to inquire about the other professional’s competence.   Third, reliance is again not appropriate if the practitioner knows or reasonably should know that the other professional has a conflict of interest under the provisions of the Circular.  As the preamble makes clear, however, despite the conflict, reliance can be appropriate if it was waived through informed consent.

Reasonable Practitioner Standard

In section 10.37(c), the standard for reviewing compliance with the section is set forth.  Under the provision, a “reasonable practitioner” standard is to be applied.  In applying this standard, all of the facts and circumstances are to be considered, including the scope of the engagement and the type and specificity of the advice sought.  Does this suggest that, where the scope of the engagement or the nature of the advice is limited, a practitioner may more easily establish compliance with the section?  Or, conversely, does it suggest a more rigorous application of the section will be required in such a case?  Other than to indicate that the scope of the engagement and the nature of the advice are relevant, the provision does not clarify how the limited nature of the advice/engagement will impact on the analysis.

Amended Section 10.35

Section 10.35 has been, to a very large extent, gutted, with the elaborate Covered Opinion rules replaced by a general standard of competence.  Under this standard, a practitioner is required to possess the necessary level of competence before undertaking an assignment within the scope of the Circular.  For example, if a client wants to engage a practitioner to prepare written advice concerning a federal tax matter, the matter would fall within the scope of section 10.37 of the Circular and the practitioner would violate section 10.35 if he or she accepted the engagement and did not have the requisite competence.  On the other hand, section 10.35 would have no application if the subject of the engagement were not within the scope of the Circular.

Competence

Competence is defined in section 10.35 as “the appropriate level of knowledge, skill, thoroughness, and preparation necessary for the matter for which the practitioner is engaged.”  The preamble acknowledges that preparation is a function of experience.  Hence, with a practitioner who has more experience concerning the issue, less preparation for the engagement may be required in order to satisfy the competence standard.

The section indicates that a practitioner who lacks the necessary competence may nonetheless acquire it and therefore be able to accept the engagement either by relying on other experts or through study of the law.   According to the preamble, whether such consultation and/or research is sufficient to permit a practitioner who otherwise lacks competence to accept the engagement will depend on the particular facts and circumstances.

Finally, although some had requested that examples be included that would clarify the competence standard, the preamble rejects this approach.  It instead makes reference to legal and accounting ethics as sources from which the competency standard can acquire more content.[vii]

Other Changes

The Circular has been amended in several other ways, all of which will be covered in our Circular 230 book.  However, it is worth mentioning here the requirements for practitioners to establish procedures to ensure compliance with former section 10.35. Because the new regulations remove former section 10.35, these regulations also remove former section 10.36(a).  As set forth in the notice of proposed rulemaking preceding these final regulations, Treasury and the IRS, however, amended Section 10.36 to ensure compliance with Circular 230 generally.

[i] Section 10.37(d) defines federal tax matter broadly to include any matter concerning the interpretation or application of: a revenue provision as defined section 6110(i)(1)(B) of the Internal Revenue Code; any provision of the Code or regulations affecting a person’s obligations or liability; any other law or regulation administered by the IRS.  This definition replaces the definition that had been contained in section 10.35, which has been deleted, and, as indicated in the preamble, is broader than the now-deleted definition.

[ii] The preamble indicates that practitioners who provide continuing-education presentations, while not subject to section 10.37, will remain subject to the general competence and due diligence standards in sections 10.22 and 10.35.

[iii] Although the preamble does not acknowledge the First Amendment implications, the settlement-related prohibition under the pre-amended version of the section did have the potential to create an impediment to appropriate communication between practitioner and client that could have been unconstitutional.  The First Amendment implications might be different in the context of the audit-lottery prohibition that remains in the section.  See Milavetz, Gallop & Milavetz, P.A. v. U.S., __ U.S. __, 130 S.Ct. 1324 (2012) (applying a regulation concerning legal advice, although the Court explicitly indicated that the First Amendment issue was not before it).

[iv] While the preamble does not cite authority for this proposition, it would seem impermissible under section 6694 of the Code to take the audit lottery into account in formulating oral advice.  For to the extent that section 6694 (imposing penalties on certain return preparers) requires substantial authority in order to avoid the penalty it imposes, it implicitly relies on the definition of substantial authority in Treas. Reg. §1.6662-4(d)(2)), which makes audit lottery issues irrelevant.  See also section 10.34, which incorporates section 6694 principles; and further see ABA Opinion 314 (making it unethical to take the audit lottery into account).

[v] See section 10.37(c)(2).

[vi] As the preamble indicates, the rules are designed to be consistent with the provisions in section 10.22 and 10.34(d).

[vii] The preamble makes reference to Rule 1.1 of the ABA Model Rules, State Bar opinions and the AICPA competency standard – though, as the preamble indicates, these other sources are not binding on the Treasury or the IRS. While acknowledging that the standard in section 10.35 is nearly identical to the standard in the Model Rules, the preamble points out that the standard in section 10.35 will apply to all practitioners subject to the Circular, not just attorneys.

Seminar Announcement

The speakers and topics for the 40th annual Notre Dame Tax & Estate Planning Institute have been announced and are as follows:

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.

The line-up of speakers is as follows:

SPEAKER TOPIC
Bart, Susan Saving for Education: Creating Educational Dynasty Trust Using 529 Plans.
Kahn, Prof. Doug What Every Estate Planner Needs to Know About Cancellation of Indebtedness, Loan Modifications, Foreclosures and Converting Debt into Equity.
Kahn, Prof. Jeff What Every Estate Planner Needs to Know About Cancellation of Indebtedness, Loan Modifications, Foreclosures and Converting Debt into Equity.
Blattmachr, Jonathan The IRS’s Recent Attacks on Private Annuities, SCINs and Installment Sales to Grantor Trust.  How to Properly Structure These Techniques.
Jansen, Don Evaluating the Different Forms of Life Insurance Policies and Complexities in How They are Valued.
Tritt, Prof. Lee Ford Benefit of the Beneficiary: How Trustees Must Serve Their Beneficiaries.
Davis, Mickey Evaluating Portability, Portability Mistakes and the ATRA Math Impact.
Williams, Melissa Evaluating Portability, Portability Mistakes and the ATRA Math Impact.
Peebles, Laura “Blinking Trusts” When Grantor Trusts Become Complex Trusts or Complex Trusts Become Grantor Trusts: An Income Tax Conundrum.
Bloom, Prof. Ira Powers of Appointment Under The New Uniform Powers of Appointment Act: Planning and Drafting Considerations.
Lavelle, Chaz Evaluating Captive Insurance Proposals: Business Uses, Pressure Points and IRS Hot Spots.
Lapiana, Prof. William Drafting for Flexibility, Especially if Estate Taxes are No Longer a Concern.
Schlessinger, Sandy Maximizing the Chances Your Donor’s Charitable Intentions are Followed: Creating Charitable Legacies that are Workable, Sustainable and Sensible.
Berry, Turney Maximizing the Chances Your Donor’s Charitable Intentions are Followed: Creating Charitable Legacies that are Workable, Sustainable and Sensible.
Pennell, Prof. Jeff Current Developments.
Lee, Paul Obtaining Basis Step-Up at Death: Part 2 Using Illustrative Examples.
Berry, Turney Obtaining Basis Step-Up at Death: Part 2 Using Illustrative Examples.
Verdon, Jeff Asset Protection Due Diligence: What Lawyers Do to Protect Themselves.
Herzig, David Evaluating Mistakes and Risks with Commonly Used Planning Techniques: Part 2
Handler, David Evaluating Mistakes and Risks with Commonly Used Planning Techniques: Part 2
Harrington, Carol Automatic Allocation of the GST Exemption and Other Tax Traps for Trusts.
(Unavailable) Automatic Allocation of the GST Exemption and Other Tax Traps for Trusts.
Choate, Natalie NIIT Picking: Trusts, Retirement Benefits and the 3.6% Surcharge.
Lee, Henry Reinvent Yourselves and Staying “Linked” to Younger Clients Using Social Media.
Gassman, Alan Evaluating Commercial Annuities and Reverse Mortgages.
Zeydel, Diana Changing the Unchangeable?  Modifying Irrevocable Trusts by Revising, Decanting, Moving to New Jurisdictions or Early Termination.
Seal, Catherine Scams that Target the Elderly; Recognizing Ponzi Schemes and Preventing Them; Exploitation of Services by Family Members; How Predators Target Homes of Seniors.
Kirtland, Michael Scams that Target the Elderly; Recognizing Ponzi Schemes and Preventing Them; Exploitation of Services by Family Members; How Predators Target Homes of Seniors.
Fisher, Howard The New Circular 230 Guidelines; Ethical Guidelines and How to Minimize Potential Professional Liability.
Harwood, Richard Planning for Art as Unique Assets, Working with Dealers and Auction Houses.
Burda, Joan Reproductive Rights of Parents; Genetic Material and Inheritance Rights for Posthumously Conceived Children.
Teitel, Conrad Choosing Wisely Among Charitable Life Income Plans.
Kirk, David The 3.8% Surcharge: Part 2
Keebler, Bob The Final Regulations on the Section 67 2% Phase-Out for Trusts and Estates; Using Trusts and Estates for Assignment of Income and Income Tax Deferral.
Albright, Christine Looking Over the Past 30 Years: Trends That are Changing.
Kamin, Kim What It Means to be a Fiduciary: Directed Trusts, Duties of Loyalty, Surviving Spouse as a Fiduciary, The Evolving Landscape.
McBryde, Neill The Ascendancy of Income Tax Planning: Income Tax Planning Using Estate Planning Techniques.
(Wednesday Session) ESOPs: A Primer and the Burdens Put on Employees in Funding the Buyout.

Tea for Two

WHY MANY SAME GENDER COUPLES LIVING IN NONRECOGNITION STATES SHOULD TITLE THEIR ASSETS AS TENANTS BY THE ENTIRETIES?

 “With tea for two and two for tea

Just me for you and you for me alone

Read below and you will see”

Alan S. Gassman is also the co-author of two recent Haddon Hall Publishing books on planning for same gender couples.

The professional guide is entitled The Florida Advisor’s Guide to Counseling Same Sex Couples and the layman version is entitled The Florida Legal Guide for Same Sex Couples.

If you would like to purchase a copy of the professional version please click here for the paperback and here for the kindle version.

If you would like to purchase a copy of the layman version please click here  for the paperback and here for the kindle version.

To receive a 20% discount off the cost of the book please use the top secret code: K2UQPYWT.

On and well before July 4, 1776, the law of England, and thus each of the original thirteen (13) and many subsequently admitted US states provided that husbands and wives could own their assets jointly as tenants by the entireties, and as a result neither spouse alone nor any creditor would be able to break the tenancy or have a claim against such joint assets.

Today exactly one-half (2) of the states recognize tenancy by the entireties as a form of ownership between married couples, and fourteen (14) of these states prohibit creditors of one spouse from having access to the tenancy by the entireties assets.  Some of the other tenancy by the entireties states offer varying degrees of creditor protection.

The law of England did not recognize same sex marriages until this was legislated in the United Kingdom effective March 13, 2014.  As of submission of this article to the publisher, 13 of the states that recognize tenancy by the entireties, and 7 of the states that provide Apure protection@ for tenancy by the entireties have recognized same sex marriage, as set forth in the chart that follows this article.

What should same gender couples who reside in states that recognize tenancy by the entireties but not same sex marriage (Florida, Mississippi, Missouri, North Carolina, Virginia and Wyoming) do?

In the vast majority of situations, we believe that the best strategy for same gender couples, who would otherwise own their assets jointly with right of survivorship, will be to attempt to establish tenancy by the entireties status while having back-up structures and mechanisms, as they may choose. This is to protect the couple in case the tenancy by the entireties is not recognized.

For example, Brittany and Angela are a Florida couple who have shared their assets for a number of years.  They were recently married in Delaware in a legitimate ceremony, but Florida does not recognize their marriage.  Angela is an obstetrician, and has a high risk of being sued by patients.  Brittany works part-time as a podiatrist, and also drives the children to school, soccer, and other events.  She was in an accident recently and one of her friend=s children was injured.  The other driver received a ticket, and she does not expect to get sued, but unfortunately the damages could exceed the limits of her liability insurance policy.  You explain that it could be three (3) years or longer before the United States Supreme Court finally decides whether all states must recognize same sex marriages that are consecrated in a state that recognizes them, and that until then it will be unclear in Florida and many other states as to whether a same sex married couples= joint assets can be considered as held as tenants by the entireties.

Most of their assets have been owned under a limited liability company owned five percent (5%) by Angela and ninety-five percent (95%) by Brittany.  They ask about placing the ownership of the limited liability company into tenancy by the entireties so that if Brittany was in a car accident they would not lose or have a charging order against ninety-five percent (95%) of their LLC.

A large portion of their assets have been held in a limited liability company owned ninety percent (90%) by a revocable trust owned by Brittany and ten percent (10%) in a revocable trust owned by Angela.  In years past they have entered into a Marital Property Clone Agreement which provides that their assets would be equally divided in the event that either of them files a court petition to separate their assets.

You explain that if the attempted tenancy by the entireties is not recognized, the creditors can make claim to the one-half (2) ownership held by the debtor spouse, but that mechanisms can be put into place to provide a degree of protection if tenancy by the entireties will not be recognized.[1]  You also explain that since they are now married, Angela could transfer enough ownership of the LLC to Brittany so that they will be equal owners, and no gift tax return would need to be filed.  They could then transfer the ownership of the LLC to themselves as tenants by the entireties, which may or may not be recognized, as discussed below.

Each state has had a different evolution or legislative history that causes the formation and recognition of tenancy by the entireties to be different in each state. However, it is a common requirement that joint assets that are held with right of survivorship will not be considered as tenancy by the entireties assets unless and until there is a conveyance by the spouses, through a straw man, from themselves as joint tenants, to themselves as tenants by the entireties, by deed, bill of sale, establishing new accounts, cancellation and re-issuance of stock certificate, or whatever else is needed to satisfy the legal requirements that apply in that state.

For example, in Florida real estate owned before a marriage with right of survivorship as well as bank accounts and stock certificates will not be considered as tenancy by the entireties property until the couple reconveys the real estate or stock certificate from themselves as joint owners to themselves as tenants by the entireties. In the case of bank or brokerage accounts they must open new tenancy by the entireties accounts and transfer or ledger the jointly held money or assets over into tenancy by the entireties.

You also explain that bank and brokerage accounts that are held in a financial institution that exists only in a state that does not recognize tenancy by the entireties may not be considered a tenancy by the entireties asset, even if the titling is otherwise correct.

From the above discussion it seems clear that any same gender couple that wishes to own assets jointly with right of survivorship in a state that recognizes creditor protection for tenancy by the entireties assets will be well advised to re-title the assets as tenants by the entireties in order to have a degree of creditor protection that may not otherwise apply.

Nevertheless, clients need to understand that it may be many years before our courts, legislatures, and case law provide exact guidance and predictability as to the degree of protection that tenancy by the entireties will receive.

This is why many Floridians establish Florida LLCs that in turn own assets that may be situated outside of Florida to assure that the ultimate ownership qualifies as tenants by the entireties.

You also explain that under Florida law (and the laws of most other states) if a married couple owns an LLC jointly but not as tenants by the entireties, and a creditor receives a judgment against only one spouse, the creditor cannot reach into the limited liability company or take over one-half (2) ownership, but instead only receives a charging order that gives it the right to monitor the LLC and to receive one-half (2) of any LLC distributions.  Such a creditor has no right to require that the LLC make distributions, so typically charging order positions are bought off by debtors for a small percentage of the underlying value that the charging order attaches to.

Brittany and Angela might also consider establishing a Delaware tenancy by the entireties trust.  By legislation passed in 2010, Delaware law provides that assets held by a Delaware Trustee under a bona fide Delaware tenants by the entireties trust will be considered as tenancy by the entireties assets, notwithstanding the residency or other potential circumstances of the married couple.

It is unknown whether a Florida court will apply Delaware law if Florida does not recognize tenancy by the entireties for same gender marriages. Regardless, the Delaware creditor  protection trust statute may apply to provide protection from creditors of the couple. This is assuming that the full faith and credit clause of the Constitution does not require Delaware to follow a court decision in Florida that may deny applying Delaware law to a case involving a Florida LLC that has assets originating from Florida but is owned by a Delaware tenancy by the entireties trust. A decision that may indicate how a court would view this would be the 2013 case of In re Huber which has been widely discussed. In that case, a federal judge from the Western District of Washington found jurisdiction over an Alaska trust having an Alaska trustee, where the Grantor lived in Washington state and funded the trust under circumstances found to have been a fraudulent transfer (for the purpose of avoiding creditors) and the trust in Alaska held only a $10,000 account and ownership of an LLC that in turn owned Washington real estate.

It is worth noting that Tennessee has an asset protection and TBE trust statute that many commentators believe is stronger and more thoroughly drafted than Delaware=s statute.  This new Tennessee statute was legislated to go into effect on July 1, 2014.

It is also worthwhile to note that tenancy by the entireties protection also applies under the Federal Bankruptcy Code, and based on the statement issued in February 2014 by Attorney General Eric Holder same gender married couples residing in states that do not recognize their marriage may nevertheless file as married in bankruptcy under the Federal Bankruptcy Code.  Presumably, this means that if a married individual has creditors who does not have a claim against his or her same gender spouse and resides in a state that does not recognize tenancy by the entireties, the Bankruptcy Court in the state where he resides will provide protection of tenancy by the entireties. This should be true regardless of whether the law in that state provides creditor protection or recognition for same sex couples.

It would therefore seem that the protection of tenancy by the entireties assets will be more certain for same gender married individuals who file bankruptcy even when they live in a state that does not recognize their marriage or creditor protection for tenancy by the entireties assets.

Notwithstanding the above conversation, you explain that it could be decades before the law in this area is ever clear, and other creditor protection vehicles such as annuities, life insurance, homestead, and asset protection trusts may be employed as and when applicable.

More details on the state of the law and where it may be heading follows:

Will the Supreme Court confirm that tenancy by the entireties (TBE) is a viable option when  a same-gender couple is married in a jurisdiction that allows TBE, and resides in a jurisdiction that allows TBE and creditor protection for TBE?   In half of the states, TBE is utilized as a favorable type of property ownership, but is only available to those who are married.  TBE gives both parties an equal and undivided interest in the property and provides advantages like the right of survivorship and protection from creditors.[2] As the gay rights movement pushes forward, with marriage as the hot topic in the wake of the Supreme Court=s landmark decision in Windsor, other issues like this also remain unanswered.

On April 19th and 20th, Oregon and Pennsylvania became the 18th and 19th states to recognize same-gender marriages, respectively.  These are just the two most recent decisions furthering same-gender marriages since the Windsor decision, issued in June of 2013.  Windsor struck down part of the Defense of Marriage Act (DOMA) and forced the federal government to recognize same-gender marriages.  Using the logic set forth in Windsor many states, including Kentucky, Ohio, Indiana, and Tennessee, have held that bans on same-gender marriages are completely unconstitutional.  No federal court has held that such bans are constitutional.

With the same-gender marriage landscape shifting so quickly, many estate planners representing same-gender couples who are married in a Arecognition state@ are left to ponder whether traditionally recognized marital rights will also be given to same-gender couples.  Equal Protection is the constitutional guarantee that no person or class is denied the same protection of the laws that is enjoyed by other classes.  Under this definition of Equal Protection, one would assume the class of same-gender people could not be discriminated against for sexual orientation.  For this reason, it seems like a no-brainer for estate planners to use TBE in states like Delaware, Hawaii, Illinois, Maryland, Massachusetts, New Jersey, New York, Rhode Island, and Vermont, where same-gender marriage and TBE are both recognized.  Things start to get more fuzzy in states where they are only required to recognize legitimate out of state same-gender marriages.

In the recently decided Obergfell v. Kasich, which forced Ohio to recognize legitimate out of state same-gender marriages, U.S. District Judge John G. Heyburn IIsaid that Ohio=s refusal to recognize gay marriage is Aunenforceable in all circumstances.@  Also within the ruling was the acknowledgment that once the government attaches benefits to marriage, it must constitutionally grant equal protection to all.  With TBE undeniably being one of those benefits provided to heterosexual married couples, logically courts would extend that line of reasoning to recognize same-gender TBE as well.  Therefore, in states that recognize legitimate out of state same-gender marriages, couples should title their assets as TBE if state law protects such assets from the creditors of either partner.  States like Ohio are seemingly in a transition to fully allowing same-gender marriages, however, over half the states still do not recognize same-gender marital rights at all.

The states that provide significant creditor protection, but not same-gender marriage recognition, are Florida, Indiana, Michigan, Mississippi, Missouri, North Carolina, Virginia, and Wyoming.  Estate planners representing same-gender couples who reside in these states face the greatest dilemma due to the potential upside of successfully titling assets as a TBE.  These estate planners should strongly consider continuing to push the envelope and title their assets as TBE.  Since the 2013 Windsor decision, courts in these jurisdictions have been far more willing to recognize that laws favoring heterosexual couples are unconstitutional.

The chart below shows the states that recognize tenancy by the entireties, and the degree of creditor protection associated with it, as featured in our recent book The Florida Advisors Guide to Counseling Same Sex Couples and The Florida Legal Guide for Same Sex Couples.

STATE LAW PURE PROTECTION Allows Same Sex Marriage
Alaska Recording a judgment against a judgment debtor, thus creating a judgment lien against property owned by the judgment debtor, does not sever a tenancy by the entireties between the judgment debtor and spouse. Smith v. Kofstad, 206 P.3d 441 (Alaska 2009) No No
Arkansas Real property owned by the husband and wife as tenants by the entireties may be sold under execution to satisfy a judgment against the husband, subject to the wife’s right of survivorship. Morris v. Solesbee, 892 S.W. 2d 281 (1995). No No
Delaware Creditors of a spouse have no interest in realty that is held by the entireties. Johnson v. Smith, 1994 WL 643131 (Del. Ch. 1994) Pure Protection Yes
D.C. Although tenancy by the entireties property is liable for the spouses’ joint debts and for the individual debts of the surviving co-tenant, it is unreachable by the creditors of one tenant.  Morrison v. Potter, 764 A.2d 234 (D.C. 2000). Pure Protection Yes
Florida Property is subject only to the debts of both spouses. In re Matthews, 360 B.R. 732 (Bankr. M.D. Fla. 2007). Pure Protection No
Hawaii An estate by the entireties is not subject to the claims of the spouse’s individual creditors during the joint lives of the spouses. Sawada v. Endo, 561 P.2d 1291 (1977). Pure Protection Yes
Illinois Tenancy by the entireties in real property is available for homestead property only.  Premier Property Management, Inc. v. Jose Chavez, 728 N.E. 2d 476 (2000). No Yes
Indiana Generally, the creditor of one spouse may not seize, sell or attach entireties property. Anuszkiewicz v. Anuszkiewicz 360 N.E. 2d 230, 232 (Ind. App. 1977). Pure Protection No/Yes(law will take effect June 1st)
Kentucky A creditor cannot force a sale of property owned by husband and wife as tenants by the entireties with right of survivorship, but the debtor spouse’s expectant interest can be sold. Coleman American Companies, Inc. v. Leasure, 2008 WL 5191463 (2008). No No
Maryland Because entireties property is owned by the husband and wife as the marital unit, it is not subject to the claims of individual creditors of either spouse. Schlossberg v. Barney, 380 F.3d 174, 178 (4th Cir. 2004). Pure Protection Yes
Massachusetts The property is protected from creditors of the debtor spouse, so long as the nondebtor spouse lives in the house. Coraccio v. Lowell Five Cents Sav. Bank, 612 N.E. 2d 650, 654 (1993).  If the nondebtor spouse no longer occupies the residence, it is subject to the execution for the debts of the other spouse. In re Snyder, 231 B.R. 437, 443 (Bankr. D. Mass. 1999). No Yes
Michigan In re Strausbough, 426 B.R. 243 (Bankr. E.D. Mich. 2010). A tenancy by the entireties form of concurrent ownership is intended to protect the marital estate.  In a tenancy by the entireties, neither husband nor wife may sell or encumber property to a third person without consent of the other spouse.  To the extent of joint debt, entireties property is not protected from claims of the joint creditors. Pure Protection No
Mississippi Mississippi statutory authority states that assets of a debtor do not include “[a]n interest in property held in tenancy by the entireties to the extent it is not subject to process by a creditor holding a claim against only one tenant.” Miss. Code Ann. ‘ 15-3-101(b)(iii) (Supp.2010). Pure Protection No
Missouri Hanebrink v. Tower Grove Bank & Trust Company, 321 S.W. 2d 524, 527 (Mo. App. 1959). Pure Protection No
New Jersey While New Jersey recognizes tenancy by the entireties, creditors of either spouse have the right to reach entireties property, including debtor-spouse’s present interest therein, subject to the right of survivorship; thus, a creditor who does so becomes a tenant in common, in possession with nondebtor-spouse. In re Etoll, 425 B.R. 743 (Bankr. D. N.J. 2010). No Yes
New York A tenancy by the entireties cannot be divided absent consent of both spouses. Prario V. Novo, 645 N.Y.S. 2d 269 (N.Y. 1996) Applies only to real estate. No Yes
North Carolina Where property is held as tenants by the entireties, any judgment against only one of the spouses may not attach to the real property while it remains as a tenancy by the entireties.  Dealer Supply Co. v. Greene, 522 S.E. 2d 350 (N.C. App. 1992). Pure Protection No
Ohio Only recognizes Tenancy by the entireties if established prior to April 4, 1985. No No
Oklahoma Some, but not all, creditors can pursue the obligations of individual spouses in the entireties property. See 60 Okla. Stat. ‘ 74. No No
Oregon The interest of a judgment debtor spouse, as tenant by entireties with nondebtor spouse, may be sold on execution, and the execution purchaser only obtains the debtor spouse’s interest, which ceases to exist should a debtor spouse predecease the nondebtor spouse. Hoyt v. American Traders, Inc., 725 P.2d 336 (1986). No Yes
Pennsylvania Property held as tenancy by the entireties is unavailable to satisfy the claims of the creditor of one of the tenants. Johnson v. Johnson, 908 A.2d 290 (2006). Pure Protection Yes
Rhode Island In Cull v. Vadnais, 406 A.2d 1241 (1979), the court held that a creditor had the right to attach a debtor-spouse’s interest in real property held as tenancy by the entireties. No Yes
Tennessee Where the debtor owns property with a nondebtor spouse in a tenancy by the entireties, only the debtor’s survivorship interest is subject to execution, not the debtor’s present, possessory interest. 16 Tenn. Prac., Debtor-Creditor Law and Practice ‘ 15:33 (2d ed.). No No
Vermont If a tenancy by the entireties is validly created, it is protected from the sole creditors of an individual debtor. RBS Citizens, N.A., v. Ouhrabka, 30 A.3d 1266 (Vt. 2011).  The court noted that the property held by husband and wife, as husband and wife, is protected from either the sole creditors of either the husband or the wife. Anchor Foundations, Inc. v. Ingalls, 191 Vt. 641 (Vt. 2011 Unpublished LEXIS case) Pure Protection Yes
Virginia Property that is held in tenancy by the entireties by spouses is protected from the claims of the debtor’s individual creditors. In re Bradby, 455 B.R. 476 (Bankr. E.D. Va. 2011). Pure Protection No
Wyoming Wyoming law does not allow a judgment creditor to seize property held by a husband and wife as tenants by the entireties to satisfy the individual debts of one of the spouses. Colorado Nat. Bank v. Miles, 711 P.2d 390, 393-94 (Wyo. 1985). Pure Protection No

Advisors representing same-gender couples who reside in tenancy by the entireties states that offer creditor protection attributes should consider advising their clients to title assets and entities between them as tenants by the entireties, and advise on the possible impact of such titling.  The creditor protection aspects may be very important for medical or other professionals who work in areas of high risk or for business people who guarantee debts or have other possible obligations that their same gender spouse would not be responsible for.

Clients that need or wish to have a higher chance of success, if a creditor were to pursue assets, may wish to consider using a Delaware or Tennessee tenancy by the entireties trust.  Both states have legislation which specifically provides that their tenancy by the entireties rules will apply to assets held under a trust that has an active trustee and assets held in that state.  Time will tell whether the Full Faith & Credit Clause of the U.S. Constitution will permit assets held in a trust under one state to be classified pursuant to the characterization laws of that state, but it cannot hurt to try.

______________________________

[1]Many same gender couples choose to own their assets jointly, and normally this will be with right of survivorship between them.  If a creditor gets a judgment against one joint owner, then the one-half (2) ownership interest of that joint owner would normally become accessible to the creditor.

[2]In a state that recognizes creditor protection for tenancy by the entireties assets, a creditor holding a judgment against one spouse is not able to reach the tenancy by the entireties assets.

Singh Meets

Pariksith Singh, M.D. is board certified in Internal Medicine. Dr. Singh received his medical education at Sawai Man Singh Medical College in Rajasthan, India (where he was awarded honors in internal medicine and physiology).  His residency training occurred at All India Institute of Medical Services (New Delhi, India) and Mount Sinai Elmhurst Services, (Elmhurst, New York).  Upon completion of his residency, Dr. Singh relocated to Florida and worked for several years before establishing Access Health Care, LLC in 2001. 

Dr. Singh thanks Alan Gassman for his assistance in reviewing and refining this article.

We have all heard of the 80/20 rule and although it is applied to several disciplines and in several different aspects, the general premise is that there is an unequal relationship between inputs and outputs. Dr. Singh unfolds this ancient theory, known as The Pareto Principle, and provides an analysis as to how it is applied in medical practices and organizations.  Enjoy!

The Pareto principle, discovered by an Italian researcher Vilfredo Pareto in 1897, states that 20% of causes invariably produce 80% of the results. While not mathematically exact, it underlines an important principle in statistics and population medicine, quality improvement and process-corrective action. This principle has several applications in health care, some of which are described below.

1. Risk Population: In the world of managed care and ACO’s, 20% of patients cause nearly 80% of the expenses. This has significant implications in care management of high-risk population. Further study shows that the sickest 5% of a given population can cause the plan or panel to incur 60-70% of the costs. Improving morbidity and mortality for the most vulnerable and sickest members of a given population will therefore result in enormous savings. This does not mean that normal preventive testing and screening and standard primary health care of the population in the bell curve should be eschewed, however, it does show that exceptional focus and attention should be directed at the farthest end of the bell curve of the population. That 5% skews the spread of expenses and makes it uneven.

If one were to graph the disease status of a population against the expense, we would find that a bell curve might well describe the severity of disease as it spreads in the entire population. In the middle two-thirds of the bell curve would be those with minor ailments or with one or two chronic conditions. On the far left would be the extremely healthy with minimal medical issues. On the far right would be patients with more than three chronic conditions which are complex and require intense and collaborative management. If one plots this bell curve against the graph of expenses that spread across the population, one would likely see a flat line or slightly ascendant line up to the first 75-80% of the population. As the line moves towards the right side of the curve, it dramatically goes up until it ends up being almost vertical at the end. It is this far end, the vertical end of the bell curve that we are interested in, in hopes of having a proper handle on Intense Care Management, Disease Management and Daily Utilization Review.

2. Process Improvement: Used in Quality Improvement by Deming and Juran in Japan in the post-World War II world, it was discovered that a focused effort to improve the most deficient areas in operations and processing resulted in dramatic reductions in defects in factories.  Applying these principles, IBM found 80% of the time spent by its computers are on 20% of their functions.  IBM developed the fastest and best computers in the world by concentrating on the improvement of those 20% concentrated functions.

3. Marketing: In a recent book ‘The Tipping Point’, Malcom Gladwell discusses a similar principle when he points out that epidemics and marketing campaigns need just a few things to happen at the right time to cause a significant impact.

4. Network development: One does not need to enroll each physician in a geographical area to create a network.  We know from experience that a successful network can be initiated by connecting with approximately 20% of select specialties.  These 20% can have a strong impact on the health of the population and can create Care Management Initiatives and negotiate successful contracts with insurers or self-insured employers, as the case may be.

5. Billing processes and Auditing: If we study Henry Ford’s Flow Line Method and the Theory of Constraints, we realize that the focus should be on optimizing the overall flow.  It is best to study the entire supply chain step by step, process by process, and determine where the bottlenecks are as a primary goal to improve the overall flow and abolish local efficiencies. When such an approach is taken, one notices that removing bottlenecks at one step improves the flow of the entire operation and accelerates the whole chain.

With such insight, the Pareto Principle provides a very good gauge for analyzing the billing cycle of each office and, eventually, the whole organization. Oftentimes we find that the biggest bottleneck in a compliant practice is the billing department. The physicians and their staff are incentivized to see more and more patients and send the claims in a timely manner to the auditors and billers. As the auditors review the claims and either approve them or return them to the office for correction of documentation or level of billing, we find a slowing of the entire billing cycle. Thus, it makes sense to get additional help in auditing or billing by hiring temps or more billers and auditors, improving the technology and work flow for auditing review as needed, and eventually eliminating this bottleneck.

As one bottleneck is opened up, others might appear. Again, the same laser-like precise approach will impact the output of the entire Flow Line.

6. Compliance: 15-20% physicians require 80% of the time invested by operations, leadership, finance and legal departments.  At what point should these physicians be given the opportunity to work elsewhere or make major changes in their methodology and attitudes?

7.  HEDIS and outcomes: Star Ratings: in our experience, the plans that do not rely simply on processes but are extremely hands-on with patient data and address deficiencies, say use of ACE or ARB in Diabetics, or COA forms, patient by patient until the last day of the year, week by week, physician by physician, deliver the highest scores. We have seen sizeable populations of patients reach scores of 5 in Star Ratings with such detailed and precise effort.

8. Financial: One is reminded of the story of a famous consultant who was invited to hear a 3-day presentation of how a giant conglomerate of 1500 factories was hemorrhaging money day after day due to change in the industry. The consultant listened quietly and reviewed all complex recommendations on how long it would take the conglomerate to climb out of its hole and had to innovate itself out of trouble and how it was going to be an extremely difficult task. At the end of the presentation, when he was asked for his recommendations, his answer was simple. “Close the 500 factories where you are incurring these huge losses and you will be financially solvent within a month,” he said, illustrating the same principle. In our experience, we have seen a significant turnaround for a company when in times of drastically reduced premiums and decreased profits, it closed nearly ten percent of its offices and ensured liquidity within a few months.

9. Contracting and negotiating Multi-Platform Business agreements: One does not need to accept all the companies in the market; nor does one need to contract with every physician in the market. It is the key physicians or anchor-practices that can influence contract negotiations one way or other. Having a strong contract with a plan opens the door to be able to contract favorably with more suitable providers thereby causing a positive feedback loop.

Can the Pareto Principle be applied to everything medical? No, certainly not in compliance where a basic standard of adherence is needed across the board. But there too, it might be found that it is the few that skew the results of the many, and if addressed, will have maximum impact on overall scores. It is these few that can be brought ahead with concise effort.

Thoughtful corner

Our law firm currently has eight staff members participating in a book club that is held every six weeks.

The Book Club operates as follows:

A few days before the meeting, an email is circulated to members asking them to add any book suggestions to the bin in my office for possible selection at the upcoming meeting.  Members are encouraged to print out descriptions of a couple of books they are interested in reading and would like to discuss with the group.  All genres of books are welcome.

The meeting is held in our upstairs conference room and generally lasts for one hour. The participating staff members are “off the clock” but enjoy complimentary lunch.

During the meeting, we discuss the current book selection.  Sometimes this involves a list of discussion questions that we bring to the meeting and other times it is an open discussion without a set outline.  Often personal stories that relate to situations in the book are shared.  The meeting provides an opportunity to learn more about your co-workers and to enrich office friendships.

Toward the end of the meeting, we circulate the book suggestions around the table and everyone writes their initials on the book they would like to read next.  The book with the most votes is chosen as the next month’s book.

On the afternoon after a meeting, an email is circulated to members giving them the date of the next Book Club meeting and the name and author of the next book we are reading.

A few of us will get a copy of the next book from the library and then share that copy with whoever has not read the book when we are finished.  Everyone has the option of buying the book, taking a copy from the library or borrowing the book from another member.  We allow six weeks between meetings so that “borrowers” have time to read the book after someone else is finished.

A lending library is also set up in the office and Book Club members along with other staff members are encouraged to borrow and share books.  We include books that we read for Book Club and also books that we enjoyed and would like to share with our co-workers.

Prior Book Club selections are below:

Sisterland by Curtis Sittenfeld                                                                Burial Rites by Hannah Kent

The Husband’s Secret by Liane Moriarty                                           The Silent Wife by A.S.A. Harrison

Lies You Wanted to Hear by James Whitfield Thomson             The Divorce Papers by Susan Rieger

Currently reading:

How to Kill Your Boss by Anonymous

Seminars and Webinars 

NEW PORT RICHEY SEMINAR:

Alan Gassman will be speaking at the North FICPA Monthly meeting on a topic to be determined.

Date: Wednesday, July 16, 2014 | 4:30 p.m.

Location: TBD

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:  Ed 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 Gassman

Location: Online webinar

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

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FREE LIVE WEBINAR:

Jonathan 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 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.

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 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 will be speaking at the Ruth Eckerd Hall Planned Giving Advisory Council event on Tuesday, September 23, 2014 at 5:00 p.m.

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

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@gassmanp.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:

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 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.

Attendees will receive Mr. Gassman’s book entitled “Florida Law for Tax, Business and Financial Planning Advisors,” which has a retail value of $34.95.

Our informative seminar, presented by Clearwater attorney Alan Gassman, highlights issues New Jersey lawyers should be aware of when handling matters for New Jersey residents who own Florida property, reside there part time, have interest in Florida businesses, or who are considering a move to Florida.  The Florida Bar rules permit out of state lawyers to continue representation of Florida residents under rules that will be discussed.

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 Gassman and Christopher 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, and provide estate and tax planners with a number of strategies for understanding and planning with existing and contemplated contracts. With over One Trillion Dollars of US taxpayer money invested in annuity contracts, more and more clients are showing up in their estate planners’ offices with large annuity contracts and common misunderstandings about “guaranteed income” and “guaranteed rates of return” features.   The presentation will cover common policy features, what is actually happening inside of a policy, illustration techniques, and changes that can be made to defer income tax and reduce overall tax liability.   Minimum distribution rules that apply to variable annuity contracts will also be discussed.

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 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

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

 

The Thursday Report 6.19.2014 – The Monkees Edition

Posted on: June 19th, 2014

 

Titles

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.

IRA Header

Which Monkees’ songs did Neil Diamond write?  The first two readers who give us two Monkees’ songs written by Neil Diamond will receive a special gift, whether they want it or not.

Brandon Ketron is currently entering his third year of law school at Stetson University College of Law, and is a licensed CPA in the State of Virginia.  He attended Roanoke College for undergrad where he graduated cum laude with a degree in Business Administration and a concentration in both Accounting and Finance. Brandon plans to pursue an LL.M. in Taxation after successful completion of law school, and then practice in the areas of Estate Planning, Tax, and Corporate and Business Law. 

EXECUTIVE SUMMARY

On June 12, 2014, Justice Sonia Sotomayor delivered the opinion of a unanimous Supreme Court in the case of Clark v. Rameker[1] to answer the question of whether assets held under an inherited IRA (and likely other types of qualified retirement plans, such as 401(k)’s would qualify as “retirement funds” under the applicable bankruptcy exemption.  The Court held that assets held under an IRA inherited by a non-spouse beneficiary after the death of the IRA owner are not “retirement funds,” and therefore are not protected under federal bankruptcy law.

Debtors who are domiciled in states like Florida, Arizona, Alaska, and Texas, which have statutory creditor protection for inherited IRAs will not be impacted by this decision if they qualify to file bankruptcy in their state of domicile (by having been domiciled there for 730 days prior to filing of a bankruptcy petition), and they elect out of federal bankruptcy exemptions and into the state law exemptions, if applicable.  Debtors who live in states that do not have statutes which provide protection for inherited IRAs, or debtors who are domiciled in states that do have such statutes, but have not lived there for 730 days and must therefore file bankruptcy based upon a previous state of domicile, will not be able to exempt inherited IRAs as qualified “retirement funds” as a result of this opinion.

Even where contemplated beneficiaries are anticipated to reside in a state that provides favorable inherited IRA and retirement account creditor exemptions, planners may want to encourage their clients to consider leaving their retirement accounts and IRAs to spendthrift trusts which benefit their intended beneficiaries, in lieu of having such retirement accounts and IRAs payable directly to the beneficiaries.

FACTS:

In 2001, Ruth Heffron died and left an IRA worth about $450,000 to her daughter Heidi Heffron-Clark, a resident of Wisconsin.  Heidi elected to take monthly distributions from the IRA as her required minimum distributions.  In 2010, Heidi and her husband filed for bankruptcy under Chapter 7 of the Bankruptcy Code, exempting the IRA (then worth around $300,000) under 11 U.S.C. ‘ 522(b)(3)(C).  The Clarks’ creditors argued that the inherited IRA did not fall within the meaning of “retirement funds” and thus was not exempt from the bankruptcy estate.

The bankruptcy court ruled in favor of the creditors, stating that inherited IRAs are not “retirement funds, because the funds are not set aside for retirement needs, nor are they distributed upon retirement.”  The decision was then appealed to a federal district court.  The district court reversed the decision of the bankruptcy court, holding that inherited IRAs do qualify as retirement funds and are exempt from the bankruptcy estate under the ‘ 522(b)(3)(C) exemption.  The decision was appealed yet again to the Seventh Circuit, which agreed with the bankruptcy court that inherited IRAs do not qualify for the ‘ 522(b)(3)(C) exemption.  This ruling was in conflict with In re Chilton, 674 F.3d 486 (5th Cir. 2012) which held that inherited IRAs were exempt because “the defining characteristic of ‘retirement funds’ is the purpose they are ‘set apart’ for, not what happens after they are ‘set apart’.”

The Supreme Court agreed to hear the case in order to resolve the split in the circuit courts.

The Court found that the language of Title 11 of the United States Code, Section 522(b)(3)(C), which describes protected assets to include “retirement funds” that are “exempt from taxation” under Sections 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code, means that the account has to be characterized as a retirement vehicle for an employee or the contributor and compliant with the rules described in the above referenced Sections.

Further, the Court held that assets held under an IRA inherited by a non-spouse beneficiary are not “retirement funds” that are protected under Section 522(b)(3)(C) because it was Congress’s intent to “help the debtor obtain a fresh start,” and not to provide a windfall to those who would simply inherit by receiving a “free pass.”  Specifically, the Court noted that “[a]llowing that kind of exemption would convert the Bankruptcy Code’s purposes of preserving debtors’ ability to meet their basic needs and ensuring that they have a fresh start, into a ‘free pass’.”

The Court went on to note that “inherited IRAs do not operate like ordinary IRAs” because unlike ordinary IRAs or Roth IRAs, the owner of an inherited IRA “not only may, but must withdraw its funds… within 5 years of the original owner’s death or take minimum distributions on an annual basis… and “unlike a traditional or Roth IRA, the owner of an inherited IRA may never make contributions to the account.”

Accordingly, the debtors were not entitled to have their inherited IRA excluded from the bankruptcy estate as an exempt asset, and the assets held under such IRA were subject to the claims of their creditors.

COMMENT:

The Three Characteristics Referenced by the Court: Will They Be Universally Applied?

In reaching its holding, the Court described three characteristics of inherited IRAs that distinguish such accounts from tax advantaged retirement accounts that are considered as held for retirement and are therefore afforded protections from creditor claims under the Bankruptcy Code.  While the Court viewed these characteristics in the context of an inherited IRA, other types of accounts (which universally may be thought as creditor exempt) might exhibit these characteristics, and there will doubtlessly be years of litigation and uncertainty as a result of this opinion.

The first characteristic is that a holder of an inherited IRA is not able to invest additional monies into the IRA.  It is noteworthy that there are frozen pension plans (that are exempt from taxation under Sections 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code) into which contributions cannot be made, but which are clearly held for retirement.

The second characteristic is that a holder of an inherited IRA is required to withdraw monies from such account upon at least an annual (or more frequent) basis in the form of required minimum distributions.  In certain situations, an owner of or participant in a retirement account is required to take withdrawals from the account, such as after the holder reaches age 59 2 or has elected to take distributions from the account over a series of substantially equal periodic payments made at least annually.

The third and final characteristic described by the Court is that a holder of an inherited IRA is permitted to withdraw the entire balance of the account at any time, and for any reason, without penalty.  Again, an owner of or participant in a retirement account who has attained age 59 2  is entitled to withdraw as much of the assets from the retirement account as he or she desires, without penalty.  Additionally, an owner of or participant in a retirement account may be entitled to withdraw amounts as he or she determines from his or her retirement account without penalty, if such individual meets one or more of the exceptions to the 10% penalty tax for early withdrawals from retirement accounts described in Internal Revenue Code Section 72(t) (such as distributions attributable to the owner/participant being disabled or made for certain medical expenses).

The Court did not provide very much discussion with respect to these characteristics, or how they would apply to retirement accounts that are protected from creditors in bankruptcy.  In fact, the only discussion in the opinion of the first characteristic is as follows:

Inherited IRAs are thus unlike traditional and Roth IRAs, both of which are ‘quintessential retirement funds.’  For where inherited IRAs categorically prohibit contributions, the entire purpose of traditional and Roth IRAs is to provide tax incentives for account holders to contribute regularly and over time to their retirement savings.

The Court’s only discussion on the second characteristic was to the effect that the Internal Revenue Code requires the withdrawal of all of the funds in an IRA within five years of the death of the IRA owner, or over the life expectancy of the IRA beneficiary through yearly distributions from the IRA.  The Court’s sole analysis of this requirement as it relates to inherited IRAs is “that the tax rules governing inherited IRAs routinely lead to their diminution over time, regardless of their holders’ proximity to retirement, is hardly a feature one would expect of an account set aside for retirement.”

Further, the only discussion on the third characteristic indicates that the 10% penalty tax that applies to the withdrawal of funds from a traditional or Roth IRA before the owner or participant reaches the age of 59 2 encourages individuals to leave the funds untouched until they reach retirement age.  Inherited IRAs have no such provisions, and according to the Court, “constitute a pot of money that can be freely used for current consumption, not funds objectively set aside for one’s retirement.”  The Court also noted that although the 10% penalty tax does not apply to withdrawals of contributions from a Roth IRA because such contributions are made with after-tax income (i.e., they were already subject to income taxes), withdrawals of any gains or investment income from a Roth IRA are in fact subject to the 10% penalty tax absent the application of a limited exception.  This is different from an inherited IRA where no withdrawals of assets are subject to the 10% penalty tax.

It will therefore remain to be seen how and when these three characteristics might be universally applied to retirement accounts to determine what other types of accounts will qualify for protection under the Bankruptcy Code.

To Elect Out of Federal Bankruptcy Exemptions or Not to Elect Out?B That is the Question (Which Could Provide the Solution).

The Court addressed the underlying purpose of the bankruptcy exemptions, in that they “serve the important purpose of ‘protecting the debtor’s essential needs,'” and stated that the principal purpose of the Bankruptcy Code is
“to grant a fresh start to the honest but unfortunate debtor” and “exceptions to discharge should be confined to those plainly expressed.”  Thus, it can be expected that bankruptcy exemptions will be construed narrowly by the U.S. Supreme Court.  This is contrary to the typical approach taken by state law exemption statutes, which are commonly construed liberally by state courts in favor of the debtor.  Specifically, Florida, Arizona, Texas, and Nevada law expressly provide that their respective state law creditor exemptions are to be construed broadly.[2]

As stated above, a debtor who has been domiciled in a state for at least 730 days prior to the filing of a bankruptcy petition (or was domiciled in a state for the 180 day period or greatest portion thereof immediately prior to such 730 period, if his or her domicile has not been located in a single state for such 730 period) may elect to use the state law creditor exemptions afforded by such state in lieu of the federal exemptions.  Therefore, debtors who have been domiciled in a state with favorable creditor exemptions for the requisite time period will be inclined to elect of the federal bankruptcy exemptions and choose to have the applicable state exemptions apply, if the applicable state exemptions do not apply by default.  Certain states[3] provide that domiciliaries thereof who file for bankruptcy are required to utilize the applicable state law exemptions instead of the federal bankruptcy law exemptions.

In fact, the debtors in this case elected out of the federal exemptions, and the creditor exemptions afforded by their state of domicile (Wisconsin) applied instead of the federal exemptions.  However, Wisconsin does not provide for a creditor exemption for assets held under an inherited IRA as certain other states do (such as Florida, Arizona, Alaska, and Texas).[4] If the debtors had been domiciled in Florida rather than Wisconsin, then they would have been required to utilize Florida’s more favorable exemption with respect to inherited IRAs, which would have removed their inherited IRA from the bankruptcy estate.

In this vein, it is important for debtors who are contemplating the filing of a bankruptcy petition to review their state’s creditor exemptions vis-a-vis the federal exemptions to determine whether it would be advantageous to elect out of the federal exemptions and into the applicable state exemptions.  Some debtors may want to delay their bankruptcy filing until they are considered as domiciled in a state with more favorable creditor exemption laws.

Are Rollovers by a Surviving Spouse Really Safe in Bankruptcy?

As a result of this decision there will be at least some degree of continuing uncertainty as to whether IRAs inherited by surviving spouses that have been rolled over or are eligible for rollover into the surviving spouse’s own IRA will be exempt under the federal bankruptcy law.  The Court did not seem to expressly address this question in its opinion, and perhaps created uncertainty as to  whether assets held under IRAs that have been rolled over or are eligible for rollover by a surviving spouse are protected under federal bankruptcy law.  One would think that the following language confirms that the Court assumed that such assets would be protected:

The third type of account relevant here is an inherited IRA.  An inherited IRA is a traditional or Roth IRA that has been inherited after its owner’s death.  See ”408(d)(3)(C)(ii), 408A(a).  If the heir is the owner’s spouse, as is often the case, the spouse has a choice: He or she may “roll over” the IRA funds into his or her own IRA, or he or she may keep the IRA as an inherited IRA (subject to the rules discussed below).  See Internal Revenue Service, Publication 590: Individual retirement Arrangements (IRAs), p. 18 (Jan. 5, 2014).  When anyone other than the owner’s spouse inherits the IRA, he or she may not roll over the funds; the only option is to hold the IRA as an inherited account.

While a number of commentators have noted that a spousal rollover IRA will be protected, the lack of an express statement by the Court will at least create doubt as to this proposition.  Additionally, the Court did not discuss whether an IRA inherited by a spouse that has not yet been rolled over but is eligible for rollover by such spouse will be eligible for the federal creditor exemption for retirement funds.  A spousal rollover of an inherited IRA may be effectuated through passive acts, such as the failure to take a required minimum distribution from the decedent’s IRA, in addition to affirmative acts, such as the re-titling of the inherited IRA, the addition of assets to the inherited IRA or a transfer of the assets in the inherited IRA into the spouse’s own IRA.  Further, there is no time limit as to when a surviving spouse can roll over an IRA from his or her spouse into his or her own IRA.[5]  The IRS has permitted a surviving spouse to roll over an IRA into her own IRA even though she was treated as a beneficiary of the inherited IRA for two tax years following her late husband’s death.[6]

Accordingly, what is the treatment of assets held under an inherited IRA that has passed to a surviving spouse before the spouse has rolled over the inherited IRA?  Further, if the surviving spouse effectuates a rollover while she has creditors or an impeding bankruptcy, is it a fraudulent transfer?

The Court’s failure to address these questions will thus create uncertainty with respect to IRAs inherited by surviving spouses.

 Spendthrift Accumulation Trusts – The Answer, and Perhaps a Panacea. 

Well versed practitioners already know that retirement accounts and IRAs can be made payable to spendthrift “Accumulation Trusts” which can provide for beneficiaries without being subject to their creditor claims, and stretch out the required minimum distributions from the retirement account or IRA over the life expectancy of the oldest beneficiary of the trust (referred to as the “Designated Beneficiary” under the Regulations).

The Treasury Regulations and a number of Private Letter Rulings have approved the use of discretionary or ascertainable standard trusts as beneficiaries of the retirement accounts and IRAs in order to avoid the 5-year minimum distribution rule.[7]  A trust can therefore be structured so that  the beneficiaries can only receive distributions as determined by an independent trustee, and can have a spendthrift provision that would prevent the creditors of a beneficiary from reaching the assets of the trust.  The trust can receive the retirement account or IRA of the decedent, and the required minimum distributions can be “accumulated” by the trustee for distribution to the beneficiary only if and when the trustee deems it to be appropriate.  The life expectancy of the oldest beneficiary of the trust will be used to determine the amount of the required minimum distributions that must be made each year so that, for federal income tax purposes, it is treated similar to the oldest beneficiary having been directly named as the retirement account or IRA beneficiary.

Naming an Accumulation Trust with a spendthrift provision as the beneficiary of a retirement account or IRA will enable the protection of the beneficiaries and their descendants from potential divorce claims, child support claims, poor self-management, and/or spendthrift tendencies.  Further, using an Accumulation Trust as a receptacle to receive a retirement account or IRA on the death of the participant/owner can provide creditor protection for those beneficiaries who live outside of states that have exemptions for inherited IRAs.  Many practitioners will continue to make the mistake of assuming that all beneficiaries will be protected if the law of the state where the retirement account or IRA participant/owner provides protection, notwithstanding that the creditor exemption status of an inherited IRA will be determined by the law of the state where the beneficiary resides, which cannot be definitely known before the death of the retirement account or IRA participant/owner.

Moreover, a retirement account or IRA that is inherited directly by an individual will be subject to federal estate tax in such individual’s estate, which will not be the case if inherited under an Accumulation Trust that is generation-skipping tax exempt.  A beneficiary of an inherited retirement account or IRA typically cannot name his or her own beneficiaries that would inherit such account in the event of the beneficiary’s death before the account is exhausted.  However, a beneficiary of an Accumulation Trust can have a power of appointment over the assets of the Trust that will in effect allow the beneficiary to control the disposition of the retirement account or IRA after his or her death.

Planners will want to be careful with drafting powers of appointment under Accumulation Trusts because the ages of the possible appointees are taken into account in determining the Designated Beneficiary under the Trust whose life expectancy will control the amount of the annual required minimum distributions.  The authors recommend drafting the power of appointment under the Trust so that it may only be exercisable in favor of individuals who are younger than the applicable beneficiary of the Trust in order to prevent a more rapid required minimum distribution schedule from applying.

There is a downside to having a retirement account or IRA payable to an Accumulation Trust instead of having it payable directly to a surviving spouse.  The surviving spouse is unable to roll over the retirement account or IRA into his or her own if it is made payable to an Accumulation Trust.  This would result in the surviving spouse being required to take larger required minimum distributions each year than if he or she rolled over the decedent’s retirement account or IRA into his or her own.

One way to mitigate this downside and to provide for flexibility is to name the surviving spouse directly as the primary beneficiary of the retirement account or IRA, to name an Accumulation Trust for his or her benefit as the secondary beneficiary, and to name an Accumulation Trust established for the benefit of the children and other descendants as the tertiary beneficiary.  The surviving spouse could then disclaim all or a portion of the retirement account or IRA into the Accumulation Trust and remain a beneficiary thereof (albeit without a power of appointment), and the trustee of such Trust could further disclaim all or a portion of the retirement account or IRA  into an Accumulation Trust for the descendants if the surviving spouse is not in need of the retirement benefits.

Thus, with appropriate disclaimer language, the family and advisors can decide after the decedent’s death whether to have the retirement account or IRA pass (1) directly to the surviving spouse as a rollover IRA; (2) to an Accumulation Trust for the surviving spouse so that payments will come out over the life expectancy of the spouse; or (3) to an Accumulation Trust for a child or children so that the payments will come out over the life expectancy of the oldest child who is a beneficiary of the Trust.

The following chart that shows the required minimum distribution percentages that would apply in each of the three scenarios described above, and the advantages and disadvantages of each scenario, based upon a 75-year-old surviving spouse and the oldest child being 50 years old at the time of the decedent’s death:

Chart for Artilce

CONCLUSION:

Notwithstanding the negative result for the debtor, this Supreme Court decision may do more good than harm by propelling estate planning practitioners and advisors to encourage clients to leave retirement accounts and IRAs into properly structured Accumulation Trusts.  Another consequence of this decision will be that many state legislatures will undoubtedly consider the question of providing state law exemption for inherited IRAs so that the bankruptcy will protect these for state citizens who file bankruptcy.

This Court decision provides certainty for retirement accounts and IRAs inherited by individuals other than surviving spouses, but unfortunately also exposes inherited retirement accounts and IRAs of many Americans that are in bankruptcy or might be contemplating bankruptcy.  The ramifications of the opinion should cause many Americans with substantial retirement accounts or IRAs to update their estate planning documents and beneficiary designations to protect their children or other beneficiaries from creditors.  Further, this case puts the burden on practitioners to carefully navigate the Treasury Regulations and literature on using Accumulation Trusts in order to provide for the creditor protection of retirement accounts and IRAs while avoiding application of the requirement that all retirement account and IRA benefits be distributed within 5 years of the decedent’s death.

The decision does not provide as much certainty as the authors hoped that it would for spousal rollover retirement accounts and IRAs, but it seems probable that they will be protected in bankruptcy.  It is also important to remind clients and advisors that this decision will virtually have no impact with respect to beneficiaries who reside in states that have statutes that protect inherited retirement accounts and IRAs as creditor exempt.

Nevertheless, this decision stresses the importance of planners making sure to provide their clients with the advantages and disadvantages (both tax and non-tax) applicable to the various methods of structuring beneficiary designations of retirement accounts and IRAs.

________________________________________

[1]  Clark v. Rameker, 573 U.S. _____ (2014)
[2] Goldenberg v. Sawczak, 791 So. 2d 1078, 1081 (Fla. 2001); Gardenhire v. Glasser, 226 P. 911, 912 (Ariz. 1924); Hickman v. Hickman, 234 S.W.2d 410, 413 (Tex. 1950); In re Christensen, 149 P.3d 40, 43 (Nev. 2006).
[3] These states are Alabama, Alaska, Arizona, California, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Utah, Virginia and Wyoming.
[4] Fla. Stat. ‘ 222.21; Ariz. Rev. Stat. ‘ 33-1126; Alaska Stat. Ann. ‘ 09.38.017; Tex. Prop. Code ‘ 42.0021
[5] Treas. Reg. _ 1.408-8, A-5(a).
[6] PLR 9534027.
[7] Treas. Reg. ‘ 1.401(a)(9); PLR 200438044; PLR 200228025

Seminar AnnouncementTO REGISTER FOR THIS WEBINAR PLEASE CLICK HERE

IRS Commissioner Says Taxpayers Have Rights
by Denis Kleinfeld

IRS Commissioner John A. Koskinen has announced that “respecting taxpayer’s rights continues to be a top priority for IRS employees…”

I bet you didn’t know that your rights as a taxpayer were one of the IRS’s top priorities.  In fact, according to Nina Olsen, the National Taxpayer Advocate for the IRS, “…taxpayer surveys conducted by my office have found that most taxpayers do not believe they have rights before the IRS and even fewer can name their rights.”

There are in fact three separate laws and each one is called “the Taxpayer Bill of Rights”—The Taxpayer Bill of Rights #1 (1988), the Taxpayer Bill of Rights #2 ((1996), and the Taxpayer Bill of Rights #3 (1998).

Sound confusing?

Of course it is. This is your federal tax law. Nothing done by Congress is intended to be fathomable by taxpayers, or, for that matter, understandable by the IRS employees.

There is nothing new in this new list of taxpayer rights.  It is just a list of 10 aspirational concepts meant to educate taxpayers.  At best, this is merely a symbolic gesture.

There are no new rights that do not already exist buried someplace in the tax code, and there are no new enforcement protocols or safeguards to help make sure that the IRS respects whatever rights a taxpayer may have.

Curiously, this public relations announcement does not mention any of the specific rights which taxpayers would find helpful. For example, the right to make an audio recording of any interview,  or the right to have the Taxpayer Advocate (previously named the IRS Ombudsman)  intervene in an enforcement action if the taxpayer is “suffering or about to suffer a significant hardship as the result of the manner in which the Internal Revenue Service is operating.”

What are the 10 core concepts that the IRS Commissioner is touting as part of an effort to regain the taxpayers’ trust in the tax system?

1. The Right to be Informed.  That is, somebody from the IRS is going to let you know you are in a world of hurt and that the process is going to be painful.

2. The Right to Quality Service.  This should be interesting since the National Taxpayer Advocate told Congress that the IRS is badly underfunded, undermanned, and overburdened with a complex tax law that is incomprehensible under the best of circumstances and far more work than it can handle.  Practitioners are commonly faced with situations where IRS personnel simply cannot or will not respond to requests to fix IRS errors, or to give guidance in situations where taxpayers are being wrongly treated or inconvenienced.

3. The Right to Pay No More than the Correct Amount of Tax.  A highly unlikely occurrence since dealing with the IRS is an intense adversarial process where they are presumed to be correct and the taxpayer is presumed to be wrong.  In other words, the game is rigged.

4. The Right to Challenge the IRS’s Position and Be Heard.  Basically, you can tell them you object to being robbed and they can tell you to stuff it.

5. The Right to Appeal an IRS Decision in an Independent Forum.  This means you can take the case to Appeals where the appeals’ officer is an employee of the IRS and even to the Tax Court where the judges are either former IRS people or government prosecutors.

6.  The Right to Finality.  Even if you are dead, the IRS will go after your estate.

7. The Right to Privacy.  Meaning that the IRS will be only as intrusive as they want, and will provide each taxpayer with the amount of due process as Congress has allowed in passing the tax statutes.  Effectively, the taxpayers will have more privacy in a hostile divorce than a tax audit.

8. The Right to Confidentiality.  Think Lois Lerner or what it would be like appearing before Senator Levin’s Subcommittee on Permanent Investigations.

9. The Right to Representation.  This is at your own expense. Tax professionals do not come cheap.

10. The Right to a Fair and Just Tax System.  Well, the United States doesn’t have one.  The taxpayers and the people working at the IRS are both made victims by Congress, confusion, and underfunding.

While I can appreciate the IRS Commissioner’s good intentions in publicly expressing that taxpayers have rights, it is clearly a futile bureaucratic effort to try and rectify a tax system that is fundamentally and profoundly beyond hope.

 Book Announcement

We are pleased to announce the publication of our two latest books, The Florida Legal Guide for Same Sex Couples – a layman edition, and The Florida Advisor’s Guide to Counseling Same Sex Couples – a professional edition.

For a discount use the top secret 20% off promotional code K2UQPYWT and click here to order the Professional Version ] or here to order the layman version.

Please send us your questions, comments and suggestions on topics related to these books for possible publication, or we might just laugh at you!

Thoughtful Corner

 

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Consider a Corporate DOG

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Upcoming Seminars

LIVE CLEARWATER PRESENTATION:

FICPA SUNCOAST CHAPTER MONTHLY MEETING

Alan S. Gassman will be speaking at the FICPA Suncoast Chapter’s monthly meeting on HOW TO PLAN, STRUCTURE, AND PROTECT WEALTH USING REVOCABLE AND IRREVOCABLE TRUSTS AND TRUST SYSTEMS.  A COMPREHENSIVE OVERVIEW WITH A PRACTICAL PLANNING CHECKLIST AND PRACTITIONER TAX COMPLIANCE GUIDE.

Speaker: Alan S. Gassman

Date: TODAY, June 19, 2014 | 4:00 p.m. (100 minute presentation)

Location: Feather Sound Country Club, Clearwater, Florida

Additional Information:  For more information, to register and a discount code please email agassman@gassmanpa.com

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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 FT. LAUDERDALE PRESENTATION:

FICPA ANNUAL ACCOUNTING SHOW 

Alan 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 NEW JERSEY PRESENTATION:

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

Alan 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.

Attendees will receive Mr. Gassman’s book entitled Florida Law for Tax, Business and Financial Planning Advisors, which has a retail value of $34.95.

Our informative seminar, presented by Clearwater attorney Alan Gassman, highlights issues New Jersey lawyers should be aware of when handling matters for New Jersey residents who own Florida property, reside there part time, have interest in Florida businesses, or who are considering a move to Florida.  The Florida Bar rules permit out of state lawyers to continue representation of Florida residents under rules that will be discussed.

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 PRESENTATION:

Alan Gassman, Christopher Denicolo and Kenneth Crotty will be speaking at the Pasco-Hernando State College’s Planned Giving Consortium Luncheon on Hot Topics and Creditor Protection including Inherited IRAs and Planning for Same Gender Couples.

Date: Thursday, October 23, 2014 | Time to be determined

Location:  TBD

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, and provide estate and tax planners with a number of strategies for understanding and planning with existing and contemplated contracts. With over One Trillion Dollars of US taxpayer money invested in annuity contracts, more and more clients are showing up in their estate planners’ offices with large annuity contracts and common misunderstandings about “guaranteed income” and “guaranteed rates of return” features.   The presentation will cover common policy features, what is actually happening inside of a policy, illustration techniques, and changes that can be made to defer income tax and reduce overall tax liability.   Minimum distribution rules that apply to variable annuity contracts will also be discussed.

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 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

 

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

The Thursday Report 6.12.2014 – BP, Annuity, CLE, Cartoons, and me

Posted on: June 12th, 2014

Planning with Variable Annuities – Part 2

A Letter to the Editor of the Thursday Report, by Gene Stern

Like Its Oil Rig, BP’s Last Attempt to Dodge Payments Goes Up in Flames

Contempt of Court – Part 2: Self-Created Impossibility Defense, an article by Howard Rosen, Esq.

Thoughtful Corner – Are You Smarter Than Your Cell Phone?

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.

Planning with Variable Annuities – Part 2

When planning with variable annuities the first question is whether you should be doing this.

A great many clients come to us with variable annuities that they do not understand and are possibly not well suited for.

The following is Part 2 of excerpts from our recent live webinar entitled Planning with Variable and Other Annuity Products and may be of interest.  We have had a great deal of feedback with respect to this, and criticism from those who are proponents of variable annuities.

 If you would like to view the webinar please email agassman@gassmanpa.com

We welcome any and all questions, comments and suggestions for variable annuity planning.

We are working on a book with respect to this.

Here is Part 2 which covers items 7 through 12 of the 12 Reasons to be Cautious About Variable, “Index”, and “Guaranteed Income” Annuities:

7. Lifetime Gifts of Annuities Can Trigger Deferred Income.  The transfer of an annuity other than to a spouse will generally cause the transferor to be subject to income tax as if all of the deferred income in the annuity had been withdrawn.  This is treated as ordinary income to the donor at the time of the transfer.  In other words, Section 72(e)(4)(C) provides that if a deferred annuity contract is transferred without adequate consideration, then a deemed distribution of the built-in gain in the contract gain occurs to the donor.  An exception applies when the donee is a spouse or the transfer is made incident to a divorce.  The donee or divorced recipient spouse will have the same investment in the contract as the donor spouse had.

 8.  Borrowing or Pledging Can Trigger Income Tax. Unlike life insurance products, monies borrowed from annuity contracts or by pledging of the contract are taxable to the extent that the contract has taxable income built up, and the transfer by gift of a contract (other than to a spouse) will trigger income tax as if the contract were sold to the transferee.  Life insurance death benefits and loan elimination on death happens tax free, which is contrary to what occurs with annuities when the moneys therein are eventually paid out.

9.  Not Necessary Under IRAs.  Oftentimes annuities are sold to be held under IRA’s, where tax deferral is already in place, and costs imposed in these situations will normally reduce performance significantly.

10. Trusts as Holders of Annuity Contracts.  Trusts are frequently constructed with the goal of preserving and protecting assets and avoiding federal estate tax at the level of a surviving spouse or one or more generations.

Annuities held by or payable to a revocable trust during the lifetime of a grantor will be treated for tax purposes as if they are owned by the grantor, although state law creditor protection might be compromised if a Statute protects individual owners and beneficiaries but not trusts.

Irrevocable trusts may be disregarded for income tax purposes, in which event annuity contracts owned by such trusts will be considered as owned by the grantor or a beneficiary depending upon which “grantor trust” rules apply.

Irrevocable trusts may also be “complex trusts” which are taxed as separate taxable entities in their own income tax brackets, the highest bracket of which is presently 39.6% on income not distributed that exceeds $12,150 a year.  The 3.8% Medicare tax also applies above the $12,150 threshold for undistributed trust income.

11.  Commissions Can Influence Judgment.  Clients are not apprised of high commissions that can be 7% or more, annual 12b-1 fees that may be .3% per year or more, and other rewards that can influence a sales person in an organization to favor these over mutual funds or other investments that may pay much smaller commissions and cost the client much less in fees and much less exposure for surrender charges.

If an irrevocable trust requires that all income be distributed annually to the income beneficiaries, then the trust may be a Asimple trust@ for federal tax purposes.

Under Section 72(u) annuity contracts must be held by natural persons, or by an agent for a natural person. Private Letter Rulings 9204014 and 9204010 concluded that annuity contracts owned by trusts for specified individual beneficiaries would be treated as being owned by Anatural persons@ for tax deferral purposes.  In these Rulings, the IRS ruled that where a non-grantor trust that has only one individual beneficiary holds an annuity contract, the contract can be treated as owned by a natural person.

Since then, a number of private letter rulings have come to the same conclusion, but none of these rulings (except possibly for one of them) have stated that an irrevocable trust that benefits multiple beneficiaries can be the owner of a tax-deferred annuity where the trustee has the ability to “spray” income and/or principal among multiple beneficiaries.

In addition, the IRS has not yet ruled on whether an unborn person is a “natural person” for the purposes of Section 72(u), which can be an important issue if a trust holding an annuity contract does not pay out to individual beneficiaries, but instead is held for the benefit of future generations indefinitely (or at least until the perpetuities period runs). However, Private Letter Rulings 199933033 and 200449016 suggest that unborn heirs are considered “natural persons.”

Most of the private letter rulings have been based upon factual scenarios where the trust documents specifically require that any one or more annuity contracts will be used solely for one named beneficiary, and in many of the rulings the contract itself is to be transferred to the one individual beneficiary that the contract has been purchased to benefit.  For example, Private Letter Ruling 201124008 allowed a multiple beneficiary trust to hold multiple annuity contracts, but the trust required that each separate contract was designated for a separate individual beneficiary, and that each contract would eventually be distributed to the designated beneficiary.  It is not known why each of the letter rulings were couched in these terms.

12. Difficult to Get an Objective Second Opinion.  It is very hard to get an objective 2nd opinion from those who feel strongly that these are worthwhile investments and those who would oppose them cannot be nearly as well compensated as those who support them.

The non commissioned annuities sellers and those who structure low cost private annuity wrappers for larger situations may be good sources of advice in this area.

We have enclosed a number of articles, both pro and con, and it seems clear to us that clients will be well advised to carefully consider their alternative and not jump blindly into an annuity product situation.

13.  Large Surrender Charges.  A typical surrender charge schedule would be 8% in years one and two, 7% in year three, 6% in year four, 5% in year five, 4% in year six, 3% in year seven, and 2% in year eight.

A Letter to the Editor of the Thursday Report
by Gene Stern

For over 30 years, Gene Stern has helped develop and service numerous corporate retirement plans. He has assisted hundreds of employees implement suitable retirement accounts. Economic uncertainty has jeopardized the viability of some of these employees to meet their retirement income needs.

As President of Innovative Retirement Income Solutions™ (IRIS), LLC, Gene has embarked on a mission to work with these and other employees to objectively understand and implement creative solutions that will assist them in finding a retirement date to be anticipated instead of dreaded.

Gene has earned the Chartered Retirement Planning Counselor (CRPC®) designation. He is a registered representative with Lincoln Financial Advisors Corp. and is one of its many Chartered Retirement Planning Counselors® located throughout the United States. Lincoln Financial Advisors Corp. is a member of Lincoln Financial Group, a Fortune 500 Company. For more information, including a copy of the most recent SEC reports containing current balance sheets, please visit www.LFG.com.

Alan:

 Thank you for your attempt to produce an evenhanded report on Variable Annuities.  I use both variable and fixed annuities in my practice for the right reasons, as described herein.

 I agree that many annuities have been sold for the wrong reasons, but please do not paint the entire industry with a bias.

 I cannot tell you how many clients have thanked me for protecting a portion of their income in retirement without having to worry about market downturns.

 One thing that you have not yet mentioned is that the built up income in a deferred annuity can be used to pay for long term care insurance.  I think that it is very important that you cover that in a future edition of your newsletter.

 Here is an example to show you what the populace is thinking:  I recently did a financial plan for a couple, each aged 65.  $2MM net worth and no debt and both will qualify for the maximum SS benefit.  In doing my plan, I did not recommend that they consider the purchase of an annuity as they did not need protected income to meet their “needs expense”.  I did suggest the annuity purchase of One America to protect assets from LTC needs on a joint basis.  When all was said and done, the husband, who is an engineer, asked me why I did not propose a Fixed Index Annuity.  I asked him why he thought he needed it and he said:  I have to RMD on my 401k of $550K and I would like to have the highest possible income from those assets without having to worry about the market tanking.  With drawdown rates now being purported to be 3.5%, I was able to use that 401K to create an average of 5.5% drawdown factor of an increasing value for the first few years and even when the account value fell to zero, this contract from Allianz, will still have a potentially increasing income due to the fact the index does not go away and this was on a joint life basis.  This $550K was able to generate the same income that an invested account needed to be worth $748K at a 3.5% drawdown.

 I love your humor.  Keep up the good work.  I hope my comments help you.

 Gene

Like Its Oil Rig, BP’s Last Attempt to Dodge Payments Goes Up in Flames

By John D. Goldsmith, J.D. and Alan S. Gassman, J.D., LL.M.

— A historic decision made in an unusual manner by the Supreme Court on an emergency motion gives good insight to predict that the class action settlement agreement will be enforced.

 — Claimants, CPAs, and lawyers are ready to receive adjudications and appeal and contest individual claim appeals.

 GENERAL HISTORY  Delay tactics until recently.

 The BP class action settlement that was blessed by U.S. Federal District Court Judge Barbier in March 2012 led to the appointment of Patrick Juneau as the Claims Administrator, and the hiring of the PricewaterhouseCoopers and the Postlethwaite & Netterville APAC accounting firms as program vendors for the Court-Supervised Settlement Program to facilitate the adjudication of claims using the court approved  private adjudication process.

 Up through October 2, 2013, the date BP swayed an appellate court to order a re-examination of the settlement to gauge the validity of payments, a high percentage of those claims were appealed, however, BP still paid out over $3.5 billion.

 While claims have continued to flow in at a high velocity, BP was successful in delaying the payment of claims by actions that it filed with the Fifth Circuit Court of Appeal, on the grounds that the class settlement action should have explicitly required claimants to show that their damages were directly attributable to the April 2010 oil spill.[1]

 On March 3, 2014 a three judge panel of the Fifth Circuit Court of Appeal found by 2-1 decision that no such direct causation would need to be proven, recognizing that the entire economy of the counties in Louisiana, Mississippi, Alabama, and Florida that are on or have direct water access to the Gulf of Mexico suffered miserably as the result of the spill.1

 In exchange for waiving any proof of causation requirement, BP avoided what could have been more than $40 billion in criminal and civil penalties for the criminal acts that it was later indicted for and pled guilty of.[2]

 After the 2-1 decision of the Fifth Circuit Court of Appeals’ panel, the question was posed to the entire panel of 14 judges and the majority of those judges decided to reject BP’s request to override the three judge panel on May 19, 2014.

 IMMEDIATE HISTORY – U.S. denies a stay while it determines whether it will hear an appeal on BP’s claim that it should not have to pay claimants who cannot prove that the spill caused their reduction of income or losses.

 On May 28, 2014, BP appealed to the U.S. Supreme Court for a stay, which is an order that would have enabled BP to not pay claims while it now appeals the causation decision of the three judge Fifth Circuit  panel to the U.S. Supreme Court.

 Procedurally, only Judge Scalia, who handles emergency motions to the Supreme Court, needed to consider the requested stay. He has the right to rule on the motion himself.

 Instead, Judge Scalia brought the entire nine member U.S. Supreme Court into deliberation on the matter, and the decision of the Court, rendered only 12 days after BP filed for its emergency stay was a resounding thumbs down to what it asked for. This heavy-handed action suggests that the Supreme Court will not rule in BP’s favor on the question of causation.

  The “mandate” to pay class action claims now stands and requires the Claims Administrator to again process and pay business economic loss claims. Payment of almost all business economic loss claims has been shut down since the initial stay on October 2, 2013 by an earlier court order, so there is a very large backlog.

 While the denial of BP’s emergency motion does not mean the Supreme Court will not agree to hear the case, it now seems unlikely.  The reason is that if the majority of the Court had found that BP’s arguments had merit, it would have granted the stay, preventing payment.  BP argued that, “Unless the mandate is recalled and stayed, countless awards totaling potentially hundreds of millions of dollars will be irretrievably scattered to claimants that suffered no injury traceable to BP’s conduct.”

 To obtain a stay, BP had to show that (1) there was a “reasonable probability” that the Court would grant cert; (2) that there was a “significant possibility” that the Fifth Circuit’s decision would be reversed; and (3) that BP would be irretrievably harmed if the stay were not granted.

 BP claimed that the class action settlement could not be interpreted consistent with Rule 23 and Article III of the Constitution[3] to “require payment to claimants who have no plausible claim that their injuries were caused by the spill.”  By rejecting the emergency motion the Supreme Court gave a strong hint that it will deny hearing the appeal. That is very good news for the business claimants, and their employees, who have suffered from BP’s continued actions to evade its class action settlement.

 BP has thirty (30) days to appeal each adjudicated claim, and typically does so on the thirtieth (30th) day.  Appealed claims have typically taken at least 14 days to resolve and about 20 business days after ruling to receive payment.  BP has to pay an additional five percent (5%) when it loses an appeal to help compensate the claimant and/or its advisors for the additional work needed.

 If BP is successful in its ultimate appeal of the Fifth Circuit’s decision, those claims that have been paid before any such victory occurs will be cows out of the barn that cannot be brought back in, and it seems doubtful that the U.S. Supreme Court will accept BP’s appeal or adjudicate in its favor given the timing and unanimity of the Fifth Circuit’s decision.

 The other issue at hand involves whether claimants will have to match cash revenues to expenses at different times based on an order dated December 24, 2013 whereby the Fifth Circuit Court of Appeals ordered the Claims Administrator to, “adopt and implement an appropriate protocol or policy for handling BEL claims in which the claimant’s financial records do not match revenue with corresponding variable expenses”. As a result of this, the Claims Administrator issued 88 pages of Policy 495 which is aimed at a small number of industries which are professional services, farming, construction, and education.

Please stay tuned as this situation continues to develop, and BP pays the price for negligence and criminal action that will be studied and criticized in historical and business textbooks for centuries to come.

__________________________

[1]http://www.nytimes.com/2012/02/21/us/ahead-of-bp-oil-spill-trial-settlement-talks-pick-up.html?pagewanted=all&_r
[2] BP plead guilty to manslaughter charges and agreed to pay $4.5 billion in government penalties to resolve the criminal charges that stemmed from the oil spill. http://money.cnn.com/2012/11/15/news/bp-oil-spill-settlement/
[3] Rule 23 deals with class action lawsuits and can be found here: http://www.law.cornell.edu/ rules/frcp/rule_23. The pertinent sections of Article III of the Constitution is as follows:
Section 1.The judicial power of the United States, shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish. The judges, both of the supreme and inferior courts, shall hold their offices during good behavior, and shall, at stated times, receive for their services, a compensation, which shall not be diminished during their continuance in office.
Section 2.The judicial power shall extend to all cases, in law and equity, arising under this Constitution, the laws of the United States, and treaties made, or which shall be made, under their authority;–to all cases affecting ambassadors, other public ministers and consuls;–to all cases of admiralty and maritime jurisdiction;–to controversies to which the United States shall be a party;–to controversies between two or more states;–between a state and citizens of another state;–between citizens of different states;–between citizens of the same state claiming lands under grants of different states, and between a state, or the citizens thereof, and foreign states, citizens or subjects.
 In all cases affecting ambassadors, other public ministers and consuls, and those in which a state shall be party, the Supreme Court shall have original jurisdiction. In all the other cases before mentioned, the Supreme Court shall have appellate jurisdiction, both as to law and fact, with such exceptions, and under such regulations as the Congress shall make.
 The trial of all crimes, except in cases of impeachment, shall be by jury; and such trial shall be held in the state where the said crimes shall have been committed; but when not committed within any state, the trial shall be at such place or places as the Congress may by law have directed.

Contempt of Court – Part 2: Self-Created Impossibility Defense, an article by Howard Rosen, Esq. and Patricia Donlevy-Rosen

                                           Rosen Headshot - Square                                            Donlevy-Rosen Headshot - Sqaure

HOWARD ROSEN is an “AV Preeminent” rated Attorney and a Certified Public Accountant practicing law in Miami, Florida, as a partner in the Coral Gables firm of Donlevy-Rosen & Rosen, P.A. Mr. Rosen served as an ADJUNCT PROFESSOR and LECTURER AT LAW at the University of Miami School of Law for twenty years, and is a frequent lecturer on the subject of asset protection.

Mr. Rosen is the founding author of the BNA TAX MANAGEMENT PORTFOLIO titled “ASSET PROTECTION PLANNING”, which is used by lawyers, CPA’s, and estate planners nationwide in researching asset protection issues. He was also the co-author of another BNA TAX MANAGEMENT PORTFOLIO titled “U.S. TAXATION OF FOREIGN ESTATES, TRUSTS, and BENEFICIARIES” and has published numerous articles in professional and academic journals on these subjects, and he is the Editor/Publisher of The ASSET PROTECTION NEWS.

Mr. Rosen is the CHAIRMAN OF THE ASSET PROTECTION COMMITTEE OF THE AMERICAN ASSOCIATION OF ATTORNEY-CPA’S, he is a member of TAX MANAGEMENT’S ADVISORY BOARD ON ESTATES, GIFTS AND TRUSTS, the SOUTHPAC OFFSHORE PLANNING INSTITUTE ADVISORY BOARD, and the Tax and International Law Sections of the Florida Bar.

Mr. Rosen concentrates his nation-wide law practice in asset protection planning.

PATRICIA DONLEVY-ROSEN is an “AV Preeminent” rated Attorney practicing law in Miami, Florida, as a shareholder in the firm of Donlevy-Rosen & Rosen, P.A. She is also admitted to practice law in New York. Ms. Donlevy-Rosen is a frequent lecturer on asset protection, corporate and business planning subjects.

Ms. Donlevy-Rosen is the author of an RIA Tax Advisors Planning Series publication, “ASSET PROTECTION PLANNING”, which is used by lawyers, CPA’s, and estate planners nationwide in researching asset protection issues. Ms. Donlevy-Rosen is the author of three chapters on asset protection in “THE BIGGEST LEGAL MISTAKES PHYSICIANS MAKE AND HOW TO AVOID THEM”, and has also published asset protection articles in professional and other publications such as Tax Management’s Estates, Gifts and Trusts Journal, and others.

Ms. Donlevy-Rosen is a member of the Board of Advisors of the Southpac Offshore Planning Institute, the Asset Protection Planning Committee of the Real Property, Probate and Trust Law Section of the ABA and the Business Law and Real Property, Probate and Trust Law Sections of the Florida Bar.

Ms. Donlevy-Rosen’s nation-wide law practice is concentrated in asset protection planning and related matters.

INTRODUCTION. “Will I go to jail if I set up an offshore trust?” The short answer continues to be “no” (See, APN Vol. XVII, No. 1, for background on contempt). The more complete answer is “not if the trust is competently prepared and properly implemented” (See, APN Vol. VII, No. 2, for background on the importance of competent counsel). Case in point: the 2014 Bellinger case.

 BELLINGER CASE.   In 2006 the predecessor of the plaintiff bank made a loan to a company Mr. Bellinger was involved in and obtained personal guarantees from him and two others. Although not mentioned in the Court’s decision, the other two individuals had agreed to indemnify Mr. Bellinger should his personal guarantee be called upon. Those individuals had made good on previous indemnifications, and Mr. Bellinger believed that they would continue to honor their agreements.

 The loan went into default in February 2011, and Mr. Bellinger and the others were sued by the bank on their personal guarantees in May 2011. On November 30th, 2011, Mr. Bellinger created a Cook Islands Trust (“Trust”), funded with approximately $1.7 million in assets. MAKE NO MISTAKE: it is always best to set up an asset protection trust BEFORE a claim arises, because, depending upon the specific circumstances, it is often not possible to set up a trust after a claim arises. To be clear: in this case the claim arose when the loan went into default.

 The bank won the case in January 2013, and the Court entered a final judgment against Mr. Bellinger for $4,923,797.57, plus post-judgment interest. The bank then sought to collect its judgment from Mr. Bellinger, but was unable to do so. Mr. Bellinger, as ordered by the Court, requested the Cook Islands trustee to send back all of the funds in the Trust to pay the judgment. The trustee considered his request and refused. The bank then asked the Court to incarcerate Mr. Bellinger for contempt, pointing out that “[p]rior to the entry of the final judgment, but several months after [Plaintiff] filed [its] lawsuit, Bellinger created an offshore Cook Islands Trust.”  The bank alleged that “Bellinger created the Cook Islands Trust in order to shield his assets from the final judgment that was ultimately entered against him by this Court.” The bank further asserted that Mr. Bellinger could not argue that it was impossible for him to comply with the final judgment because, by creating the Trust, his inability to comply was self-created.

 In opposition to the bank’s motion to have him incarcerated, Mr. Bellinger argued that the bank was overreaching by seeking to have him incarcerated because he lacked the financial ability to pay the monetary judgment entered against him. In response to the bank’s argument that the Solow case (APN, Vol. XIX, No. 1) should be controlling, Mr. Bellinger argued that his case was not a disgorgement action seeking the refund of wrongfully-obtained funds (as in Solow), but rather a garden variety civil action on a personal guaranty following a failed commercial loan. Mr. Bellinger argued that the Trust was lawfully created before any final judgment was entered against him, and that the bank was improperly seeking to have him held in contempt because he was unable to pay a civil judgment. Additionally, Mr. Bellinger argued that he should not be held in contempt because he lacked the power to have assets released from the Trust in order to comply with the final judgment. Mr. Bellinger explained that he established the Trust because he had recently been divorced, needed to revise and update his estate planning (quite customary), and, in particular, he wanted his updated estate planning to assure the financial security of his daughter (who was in need of financial assistance). Mr. Bellinger testified that he could not compel payment of the judgment from the Trust (he had asked and the trustee refused), that he could not replace the trustee, and that the Trust was irrevocable. The Court found Mr. Bellinger to be a credible witness, and the Court concluded that he had adequately shown an inability to comply with its final judgment.

 It is noteworthy that from March 2012 to May 2013, Mr. Bellinger had received a monthly distribution from the Trust which he used to cover “overhead costs of [his] support.” After May 2013, such monthly trust distributions were made to Mr. Bellinger’s girlfriend (who was also a discretionary beneficiary of the Trust). Thus, he was able to benefit from his Trust while the creditor was trying to reach his assets – not possible with a domestic trust.

 In reaching its decision, the Court correctly relied on the controlling U.S. Supreme Court case of Maggio v. Zeitz“Civil contempt orders are coercive in nature. … “To jail one for contempt for omitting an act he is powerless to perform would reverse [that] principle and make the proceeding purely punitive, to describe it charitably. Contempt orders will not be issued if the court finds no willful disobedience but only an inability to comply.” (emphasis added) (See, APN  Vol. XVII, No. 1Mr. Bellinger was (properly) not held in contempt.

 ONE MORE THING.    The Court stated that the bank appeared to assert a fraudulent transfer allegation in support of its contempt motion. However, even if the bank had successfully argued and won a fraudulent transfer argument, it would have been to no avail. Consider this: since the trustee refused to return trust assets when Mr. Bellinger was faced with contempt incarceration, it is very likely to have refused to honor a “return the assets” order of a U.S. federal court. After all, no U.S. court has jurisdiction (power) over a Cook Islands trustee (as it would with a domestic trustee), and, in order for any fraudulent transfer finding to have effect, a court must have jurisdiction over the transferee (in this case, the trustee) so it can enforce its return order with threats of sanctions.

 SUMMARY. Court decisions have consistently held that civil contempt incarceration can only be used to obtain compliance with a court order – it cannot be used to punish, and, it can only be used when the party subject to the court order has the present ability to comply. Incarcerating a party for failing to comply with an order which is impossible to comply with is punishment and, under the long-standing law set forth by the U.S. Supreme Court, cannot be done.

 To read part 1 of Howard’s article please click here.

Thoughtful Corner –Why Your Smart Phone May Be Much Smarter Than You Are.  Who Works For Who And Why

It is great to get messages and be able to reply to them on the go, or anywhere, but the great majority of professionals make a grave mistake by routinely answering questions and addressing opportunities with one finger, one letter at a time, without circling back to expound, connect or follow up.

Here is why that is a grave mistake:

  1. When you type, dictate a response for transcription, or call someone you have a much easier flow of information, detail and creativity and warmth to convey.
  1. When you reply by phone you are much less likely to follow up or think through what the other person wants or needs.
  1. The recipient is not going to give as much credence or thought to what comes back with the suffix “please excuse typos and grammar from this phone”.
  1. And, for Pete’s sake, gosh darn it, why do so many people on phones reply only to the sender?  Is there an epidemic of “reply all” keys not working?

               So when I am away from the office and answering emails on my phone:

1. I copy key people in my organization as a signal for them to follow up with me on the matter.  In fact, if I cc “PP” my assistant gets this email and prints it and puts it on my printer so that I can follow up later, and I make sure that I do.

2. I have my assistant print up the emails I send on my phone whenever I am away from the office for a long period of time.  I use these to also make sure that I have billed for any significant time spent reviewing messages or documents on my phone.

3. I am mindful that responses and interaction will not be as rich, warm, or meaningful than it would be if I had a keyboard or a dictaphone in front of me, and act accordingly.

So do not become a scattered mess like so many of those who we observe.

The phone is to be our servant, not our master or downfall.

Humor! (Or Lack Thereof!)

Sign 6.12.14.pdf

Upcoming Seminars and Webinars

BLOOMBERG BNA WEBINAR:

HIRING AND TERMINATING EMPLOYEES; WHAT TO DO, WHAT TO AVOID

Speaker: Alan S. Gassman, Esq., Colleen Flynn, Esq. and Dr. Stephanie Thomason

This is a very practical guide that your office manager is sure to enjoy.  Let us know if you would like to see Alan Gassman’s slides for this presentation.

Date: Wednesday, June 18, 2014 | 2:00 – 3:00 p.m.

Location: Bloomberg BNA Tax & Accounting Online webinar

Additional Information:  For more information, to register and a discount code please email agassman@gassmanpa.com

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LIVE CLEARWATER PRESENTATION:

FICPA SUNCOAST CHAPTER MONTHLY MEETING

Alan S. Gassman will be speaking at the FICPA Suncoast Chapter’s monthly meeting on HOW TO PLAN, STRUCTURE, AND PROTECT WEALTH USING REVOCABLE AND IRREVOCABLE TRUSTS AND TRUST SYSTEMS.  A COMPREHENSIVE OVERVIEW WITH A PRACTICAL PLANNING CHECKLIST AND PRACTITIONER TAX COMPLIANCE GUIDE.

Speaker: Alan S. Gassman

Date: Thursday, June 19, 2014 | 4:00 p.m. (100 minute presentation)

Location: Feather Sound Country Club, Clearwater, Florida

Additional Information:  For more information, to register and a discount code please email agassman@gassmanpa.com

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LIVE FT. LAUDERDALE PRESENTATION:

FICPA ANNUAL ACCOUNTING SHOW 

Alan 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 NEW JERSEY PRESENTATION:

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

Alan 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.

Attendees will receive Mr. Gassman’s book entitled “Florida Law for Tax, Business and Financial Planning Advisors,” which has a retail value of $34.95.

Our informative seminar, presented by Clearwater attorney Alan Gassman, highlights issues New Jersey lawyers should be aware of when handling matters for New Jersey residents who own Florida property, reside there part time, have interest in Florida businesses, or who are considering a move to Florida.  The Florida Bar rules permit out of state lawyers to continue representation of Florida residents under rules that will be discussed.

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 SOUTH BEND, INDIANA PRESENATION:

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, and provide estate and tax planners with a number of strategies for understanding and planning with existing and contemplated contracts. With over One Trillion Dollars of US taxpayer money invested in annuity contracts, more and more clients are showing up in their estate planners’ offices with large annuity contracts and common misunderstandings about “guaranteed income” and “guaranteed rates of return” features.   The presentation will cover common policy features, what is actually happening inside of a policy, illustration techniques, and changes that can be made to defer income tax and reduce overall tax liability.   Minimum distribution rules that apply to variable annuity contracts will also be discussed.

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 NAPLES PRESENTATION:

2nd ANNUAL AVE MARIA SCHOOL OF LAW ESTATE PLANNING CONFERENCE

Date: Friday, May 1, 2015

Location: Ave Maria School of Law, Naples, Florida

Speakers:   Alan S. Gassman will be once again be speaking at the Ave Maria School of Law Estate Planning Conference in Naples, Florida along with Jonathan Gopman, Bill Snyder, Elizabeth Morgan, Greg Holtz, Jerry Hesch, 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 does not know!  Domino’s Pizza is extra.

Additional Information: Please contact Karen Grebing at kgrebing@avemarialaw.edu for more information.

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

Applicable Federal Rates JuneThe 7520 rate for June is 2.2% and for May was 2.4%.

 

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