Archive for the ‘Thursday Reports’ Category

The Thursday Report – 7.2.15 – Hot Tub Justice & Time Travel

Posted on: July 2nd, 2015

Last Week’s Thursday Report

Ten Questions to Ask About a Client’s Life Insurance and Planning Sneak Peek

Office of Inspector General Fraud Alerts: An Interview with Lester Perling, Part 2

Tax Documents: What to Shred & What to Keep

Richard Connolly’s World – Setting Up for Post-Law School Success

Thoughtful Corner – The Project Manager

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 Stephanie at stephanie@gassmanpa.com.

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

Last Week’s Thursday Report

Last week, the Thursday Report was not ready, so we instead published the report intended for this week. In the middle of that, the US Supreme Court declared that states must recognize same-sex marriages and that a central part of Obamacare is not unconstitutional.

Therefore, a significant portion of our population can now marry their significant other and qualify for Obamacare all at the same time, except that the wedding ceremonies will presumably not be performed by Justice Roberts, Justice Scalia, Justice Thomas, or Justice Alito, who are stuck in the past and pictured below in a hot tub time machine.

Our primary concern with these new decisions was how we would incorporate them into what should have been last week’s Thursday Report. It occurred to us that any deadline can be moved back by simply moving it forward and that deadlines can be swapped in 1032 tax-free deadline-swapping exchanges, as long as there is a legitimate business purpose and the intent of the swap is not to avoid federal income taxes or to replace your significant other.

Given that Thursday, July 2 will be last week when seen from next week, we bring you last week’s Thursday Report but with a special flair (gun.)

A flare gun shoots only a display ordinance that is intended to attract the attention of those in the general vicinity to please find and save the person who shot the flare gun. Flare guns cost anywhere between $50 and $250, do not require a permit to own, and can be purchased at Walmart.

Flare guns can be very dangerous because they basically fire a phosphor-propelled rocket tube. The main ingredients in a flare are black powder (used to launch the flare) and magnesium, which produces the light. Magnesium burns at around 5,010 degrees Fahrenheit, making it impossible to put out with water or a small fire extinguisher. One misfire from a flare gun into a flammable area could cause catastrophic, fiery consequences.

A basic flare gun does not shoot a flare with enough force to penetrate the human body. If a person were shot with a flare gun, the flare would likely bounce off of them and continue flying until it ran out or caught something on fire. There is always the chance the flare will burn skin or catch a person’s clothing on fire, however. While a flare gun is not inherently deadly, if a flare hit a person in the face or neck, it could cause severe injury or in rare instances, death.

As far as we know, the last person killed by a flare gun was John David Cook, Jr., of Baytown, Texas. He died on Christmas Day 2013 from an accident resulting in severe burns to his hands and an open wound in his chest that proved to be fatal. Mr. Cook was attempting to create a bigger bang by way of combining fireworks with his flare gun. The explosion from the fireworks and flare caused the modified flare launcher he was attempting to build to become impaled in his chest. Although accidents like this are few and far between, it goes to show that flares and flare guns are to be treated with the utmost caution and safety.

In the much-lauded and critically-acclaimed (by Colonel Sanders) American “feuture” films Hot Tub Time Machine and Hot Tub Time Machine 2, four friends find themselves in a malfunctioning hot tub that turns out to be a time machine, which takes them back in time and propels them into the future, where they find that flare guns won’t work once immersed in a hot tub.

They suddenly realize that by reading a Thursday Report upside down and in a mirror, they’ll find themselves in the same predicament but one week earlier or later, depending on when they do this.

We would all like to travel in time, and we actually do, but apparently at a pre-set speed that is slower than what we would like it to be for certain events and much faster for others.

Your free subscription to the Thursday Report entitles you to move deadlines back and forth, as mentioned in the court case of Perez & Perez, M.D., P.A. v. Holder, 867 So. 2d 622 (Fla. 2d Dist. App. 2004), which you cannot view by clicking here.

Ten Questions to Ask About a Client’s Life Insurance
and Planning Sneak Peek

by Alan Gassman, Barry Flagg, and Alyssa Perez

In September, Alan Gassman will be participating in a panel discussion of life insurance products and the math associated therewith at the Notre Dame Tax Institute in Bloomberg, Indiana on Thursday, September 17, and Friday, September 18, 2015. A complimentary late Wednesday afternoon, two-hour session on The Estate Planner’s Guide to ESPOs (Employee Stock Ownership Plans) will also be available to attendees.

In preparation for this event, Alan and Barry Flagg have prepared an article for the September issue of the Bloomberg BNA estate and gift tax journal entitled “Ten Questions to Ask About a Client’s Life Insurance and Planning: What Every Estate Planning or Tax Planning Advisor Should Know.”

We will publish this article in its entirety in fall issues of the Thursday Report. For a sneak preview of the article, please email agassman@gassmanpa.com.

Office of Inspector General Fraud Alerts:
An Interview with Lester Perling, Part 2

Lester

On June 9, 2015, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services issued a fraud alert, which can be viewed by clicking here.

Alan Gassman interviewed Lester Perling of Broad & Cassel about the OIG Fraud Alert, part 1 of which can be viewed by clicking here. The conclusion of our interview is printed below:

Alan – Now, Lester, some of the people reading this might not really be aware of what the Office of Inspector General is or what the criminal aspect of this type of situation is. Can you give a little bit of background on that, and maybe update those of us who do know what it is?

Lester – Sure, Alan. Essentially, when there is a financial arrangement between a provider, like a home health agency or imaging center or whomever, and a physician and their spouse, it implicates a number of federal statutes since we are talking about the federal level right now. One is the federal anti-kickback statute which prohibits remuneration in exchange for referrals. It’s pretty straightforward.

A home health agency employing a doctor’s spouse to do nothing is going to be considered an attempt to induce the referrals of that doctor. It implicates the Stark Law, which is the federal prohibition against referrals, if the physician does not have a relationship that falls into an exception. Again, these relationships, while they were structured to look like they fit into an exception, because again, some of these spouses really weren’t doing any work, they really didn’t fit into an exception.

Alan – So where does the OIG come in?

Lester – The kickback statute is a criminal statute, but in addition to criminal penalties, there is the False Claims Act, and this is where the OIG comes in. The OIG has the authority to impose administrative sanctions against physicians and providers that violate the federal anti-kickback statute, even if they are not being prosecuted criminally. Those sanctions include either civil money penalties and/or exclusion from participating in federal health care programs.

Alan – How do the administrative sanctions differ from criminal cases?

Lester – It is a lot easier for the OIG to impose an administrative sanction than it is a criminal case because there is not a jury trial, and you don’t have the same level of proof. The criminal standard, of course, is reasonable doubt. The administrative level of proof is simply the preponderance of the evidence. So it is a much easier case to make because you do not have to prove it beyond a reasonable doubt like you do in a criminal case. There is no jury to convince. The hearing that the provider gets, if they go to that stage, is in front of an administrative bar judge, and he tends to be friendly to the government, so that is one reason the OIG pursues cases like the one described in the Fraud Alert.

So the OIG has the authority to impose sanctions against providers for kickbacks, for false claims submissions, or for any number of bad acts, but in terms of these types of relationships, it’s related to kickbacks. The submission of the claim is predicated upon a kickback, so theoretically, every claim the home health agency submitted that was a result of the referral of one of these doctors could also be considered a false claim under the US False Claims Act, as the law now stands, in addition to the extent that the Stark Law was violated, and that also forms the basis for the False Claims Liability Act.

The government has a lot of arrows in its quiver, but this one, the administrative sanctions, is probably the easiest for them to use in terms of both proof and the process they have to go through to get a sanction imposed. It is a much simpler and cheaper and more streamlined process for them, but it nonetheless sends the message and can get what they consider to be bad apples either out of the program through an exclusion, or it can get them in line and set examples for others who might consider these types of relationships. Hence the Fraud Alert – it alerts doctors of what they are in for if they don’t pay attention to these financial arrangements.

Alan – What about situations where there is no federal money involved, but there is state money involved?

Lester – Well, there are similar state laws, although they don’t involve the OIG if there is truly no federal money involved. One thing I would like to caution about here: we see a lot of times, people will structure an arrangement where the physician may be getting compensated for something that doesn’t involve federal patients, but it is a referral relationship between that physician and the provider, whether a physician refers Medicare or other federally funded patients.

So let’s say the physician is being paid by the provider, by a home health agency, to only review private patient records, and it is a dummy relationship; they’re not really doing anything. The contract reports to exclude any federal patients. The federal government would say in response to that, “Uh-uh, you have a financial relationship with this doctor. If he is referring federal patients, your arrangement clearly is intended to induce those referrals even though you are not paying him to work on federal business.” So that is going to be a distinction without a difference, as far as the Feds are concerned, if they believe there is a violation of the kickback statute or the Stark Law. It’s just not going to matter. The fact that a relationship purports to be private only stands if the physician is also either referring or in a position to refer federal business. Federal laws are still very much implicated, and the government certainly is concerned and becoming more concerned about those arrangements.

Alan – But what about if there really is no federal business?

Lester – To the extent that there really is no federal business – let’s say the provider is a home health agency that is not a Medicare provider and doesn’t bill any other federal program – then the federal laws don’t really apply. The OIG is out of the picture, as is the US Attorney’s office, and you would be dealing now with state law.

So with state law, you are talking about the Patient Brokering Act which is a state criminal statute, and you are talking about discipline under licensure statutes, whether it is the Board of Medicine for Physicians, the Agency for Health Care Administration for Home Health Agency, or Heath Care Clinic. There really isn’t a provision for administrative sanctions, although, if it involves Medicaid, which is a federal payer, there are administrative sanctions, but then the Feds would potentially be back in the picture.

With really strictly private relationship – private patients, the reality is the risks are lower because either the state brings criminal action against the participants under the Florida Patient Brokering Act or administrative sanction penalties through a licensure statute. Frankly, the state has not been good at pushing kickback and fee-splitting cases in this context, but it doesn’t mean they can’t in the right situation. It’s a very different playing field.

Alan – So what kind of arrangements come to mind besides what we saw here in this OIG opinion? What sort of arrangements come to mind that you are seeing doctors commonly engage in that just causes you some angst?

Lester – There are marketing arrangements. There are obviously medical director arrangements, leasing arrangements, equipment/space rental arrangements, being paid to serve as a medical advisor, being paid to be on a Board of Directors…there are all matters and forms of financial arrangements that providers and physicians can enter into, any of which can be perfectly legitimate under the right circumstances. It’s hard to say that any arrangement is necessarily illegal, per se. Each one really has to be evaluated based on what is going on in that particular arrangement. Does it fit within a Stark Law exception? Does it fit within a safe harbor to federal anti-kickback statutes, which are regulations that define arrangements not subject to sanctions if the elements of a safe harbor are all met, and even if they are all met, there could still be problems if the intent is to induce referrals, at least theoretically.

Even a marketing arrangement is not illegal if done correctly. Other than a straight kickback, which, obviously, a payment for a referral is illegal, relationships between providers and physicians are not illegal. It is a matter of how they are structured. Are they for legitimate services? Is the payment fair market value? Does it vary with referrals? There are various things to look at.

There is nothing that is per se illegal other than a straight kickback. Other than that, the relationship just has to be evaluated based on both what is on the surface and what is just below it, if you scratch a little bit.

Alan – Okay. Alright, very good. Is there anything else you wanted to say? I think you covered it very well, and I think it is very important to get the word out to physicians that they need to be careful. Things they may have been able to do for years on end might not really be as safe as they thought.

Lester – Yeah, you know, I encourage any physician who is thinking of entering into this type of arrangement, or any provider who is thinking of entering into one with a physician, to spend a few bucks up front and get a competent attorney to look at it and advise them about the risks in that particular arrangement from their perspective, not with an eye to making an illegal arrangement look legal, but whether or not it really is legal and the risks associated with it.

I’m often asked, “If this is no good, can you make it okay?” I won’t go to jail for a client so I generally say no in that context, unless they are really trying to form a legitimate and lawful arrangement, and that takes some judgment on the attorney’s part. It really behooves providers and physicians to do a little preventive medicine as it were.

Alan – Perfect. Lester, I can’t thank you enough for joining me for this interview. Please email any questions you might have to Lester at lperling@broadandcassel.com. Send Lester the difficult questions. Easy ones can be sent to me at agassman@gassmanpa.com. Thanks again, Lester.

Tax Documents: What to Shred & What to Keep

The New York Times recently ran an excellent article outlining which important documents should be saved and for how long, which important documents can be tossed, how to properly store the paper and electronic documents you should keep, and how to properly dispose of the documents you don’t need.

Click here to see the article in its entirety, or read on for the highlights below.

Documents to Keep Indefinitely:

  • Birth certificates
  • Social Security cards
  • Wills
  • Life insurance policies
  • Divorce decrees

Documents to Keep for at least 3 Years:

  • Federal tax returns
  • W-2 Forms
  • Utility bills, if they support a home-office tax deduction
  • Supporting federal tax documentation

Documents to Dispose of:

  • Hard copies of bank statements
  • ATM receipts

When financial documents are disposed of, do not simply toss them into a trash bin. Shred any documents containing account numbers, Social Security numbers, or dates of birth by using either an at-home cross-shredder or by utilizing a commercial shredding service. Shredding these documents will reduce the risk of identity theft.

Additionally, crucial documents that need to be kept indefinitely should be stored in a dry, safe place, such as a fireproof lock box or a safety deposit box at a bank.

Richard Connolly’s World
Setting Up for Post-Law School Success

Insurance advisor Richard Connolly of Ward & Connolly in Columbus, Ohio often shares with us pertinent articles found in well-known publications such as The Wall Street Journal, Barron’s, and The New York Times. Each week, we will feature some of Richard’s recommendations with links to the articles.

This week, the first article of interest is “Why a Top Law Firm Teaches its Lawyers to be More Like MBAs” by Natalie Kitroeff. This article was featured on the Bloomberg Business website on June 16, 2015.

Richard’s description is as follows:

Turning law students into lawyers has traditionally been the job of law schools. One major New York firm has decided three years of traditional legal training is not enough to make its rookies practice-ready.

At Skadden Arps, one of the country’s largest law firms, new hires must undergo five weeks of intensive business training, which they refer to as a mini-“virtual MBA.” The approach is part of a growing push within the legal industry to equip lawyers with a deep understanding of finance and accounting at the start of their careers.

Please click here to read this article in its entirety.

The second article of interest this week is entitled “Trusts and Estates Practices: Engines of Growth” by Russ Alan Prince. It was featured on Forbes.com on June 24, 2015.

Richard’s description is as follows:

In today’s environment, a well-managed and proactive trusts and estates practice can be a very financially rewarding specialization. This is the case for the largest law firms as well as law firms with only a few partners.

While the demand for the expertise of trusts and estates attorneys is increasing, so too are the competitive pressures. Nevertheless, those trusts and estates attorneys who are motivated to excel and who effectively implement critical business development strategies are inclined to build substantial practices benefitting their clients and themselves.

Please click here to read this article in its entirety.

Thoughtful Corner
The Project Manager

Business and professional life is a series of projects, tasks, and associated activities and reminders. Typically, the professional who the client sees as the Primary Handler is the “Project Manager,” although this is not always the highest and best use for that professional’s time and abilities. Even clients and customers will understand that many aspects of a given project are better managed and shepherded by someone other than the key professional.

Tasks that include check-listing, sending reminders, making necessary phone calls, and other similar to-dos will often be forgotten or left for later (often too late), so why not appoint a Project Manager to efficiently and effectively manage a given task and also provide an important backstop to make sure that appropriate steps and actions are taken at appropriate times to best handle any given objective?

Our reptile brain impulses of the need to control, the need for recognition, and basic insecurities will often prevent us from effectively and efficiently delegating the management of a task to someone else who can do a better and more thorough job of it, not to mention being a less expensive labor source than the primary professionals often are. Some professionals appoint a separate, independent Project Manager for every client matter, while others will only use a Project Manager occasionally, often for the largest or most involved clients or accounts.

Many people and organizations do this informally, but formalizing the arrangement and giving credit and responsibility where it is due and will be recognized will often be helpful.

Once you appoint someone other than yourself as the Project Manager, you may find responsibilities and functions, like billing, follow-up, client/customer satisfaction questionnaires, and value/revenue added services to be additional parts of an enhanced productivity and profitability equation.

Responsibilities of our Project Managers include:

  1. Attend a “debriefing” after the attorney meets or has a conference call with the client to understand exactly what we will be doing for the client.
  2. Complete and update the below Project Manager checklist.
  3. Update PC Law to include their initials in the Matter Manager, so everyone who works on that client will know who the Project Manager is.
  4. Review chart updates done by other staff members for the duration of the project.
  5. Review draft bills for the duration of the project.
  6. Write letters for the attorney as needed.
  7. Make sure components of the project are finalized and sent to the client in a timely manner.
  8. Make sure bills are finalized and sent out in a timely manner.
  9. Handle follow-up as needed.
  10. Delegate as needed and show who is responsible for what on the Project Manager checklist.
  11. Keep a clipboard with a Project Manager checklist for each active client or project. Always bring the clipboard when meeting with the attorney.

To see a form that we have used to implement Project Managers in our office can be viewed by clicking here.

Humor! (or Lack Thereof!)

Sign Saying of the Week

Sign

Upcoming Seminars and Webinars

New Announcements

LIVE BLOOMBERG BNA WEBINAR:

Alan Gassman and a guest to be determined will present WHAT TAX PLANNERS NEED TO KNOW ABOUT NORTH DAKOTA TRUST LAW for Bloomberg BNA.

Date: Wednesday, September 9, 2015 | Time TBA

Location: Online webinar

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

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LIVE BLOOMBERG BNA WEBINAR:

Alan Gassman and Lee-Ford Tritt will present a webinar on the topic of WHETHER TO MARRY AND WHAT TO CONSIDER: A TAX AND ESTATE PLANNER’S GUIDE TO COUNSELING SAME-SEX COUPLES WHO MAY TIE THE KNOT for Bloomberg BNA.

Date: Wednesday, September 30, 2015 | 12:00 PM – 1:00 PM

Location: Online webinar

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

Calendar of Events

LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on FINANCIAL RELATIONSHIPS WITH PATIENTS, CO-PAYMENTS, GIFTS, AND GRAFT – HOW TO STAY OUT OF TROUBLE UNDER FLORIDA AND FEDERAL LAW.

This is an essential guide for medical practices and those who advise them. There will be two opportunities to attend this presentation.

Date: Tuesday, July 7, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FLORIDA INSTITUTE OF CPAs (FICPA) WEBINAR:

Alan Gassman will present a webinar on the topic of WHAT FLORIDA CPAS NEED TO KNOW ABOUT ASSET PROTECTION for the Florida Institute of CPAs.

More information about this webinar will be forthcoming. Please stay tuned!

Date: Thursday, July 9, 2015 | 9:30 AM – 10:30 AM

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com. To register, please contact Thelma Givens at givenst@ficpa.org.

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LIVE CLE TELECONFERENCE PRESENTATION:

Alan Gassman will serve as a speaker and panelist for an ABA Probate, Estate Planning and Trust section CLE teleconference on the topic of COMPARING AND CONTRASTING VARIOUS METHODS TO ACHIEVE A STEP-UP BASIS ON A MARRIED COUPLE’S APPRECIATED ASSETS AT FIRST DEATH IN NON-COMMUNITY PROPERTY STATES.

Attorney David Slenn with Quarles Brady will moderate the conference. Other panelists include Edwin Morrow, III.

Date: Tuesday, July 21, 2015 | 1:00 PM – 2:30 PM

Location: Teleconference

Additional Information: For more information, please email Alan Gassman at agassman@gassmanpa.com or Edwin Morrow at edwin_p_morrow@keybank.com.

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LIVE ORLANDO PRESENTATION:

ORLANDO BUSINESS AND PROFESSIONAL PRACTICE OWNER SYMPOSIUM

Alan S. Gassman, business coach and author David Finkel, and others will present a two-day conference for high-net-worth business and professional practice owners sponsored by Maui Mastermind®.

Alan’s topics will include BASIC AND ADVANCED PLANNING TECHNIQUES FOR THE PROTECTION OF WEALTH, THE 10 BIGGEST MISTAKES THAT BUSINESS OWNERS AND PROFESSIONALS MAKE, and ESTATE TAX AVOIDANCE TECHNIQUES FOR BUSINESS OWNERS AND PROFESSIONALS.

Other topics include A Proven Map to Grow Your Business and Get Your Life Back, Building Wealth Outside of Your Company, Tax Reduction Strategies, and Understanding How Investments Work and What They Cost.

Date: July 30th and 31st, 2015

Location: Hyatt Regency Orlando | 9801 International Drive, Orlando, FL 32819

Additional Information: Interested individuals can contact agassman@gassmanpa.com or David Finkel at david@mauimastermind.com.

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LIVE WEBINAR:

Alan Gassman and Christopher Denicolo will present a live, free, 30-minute webinar on the topic of CREDITOR PROTECTION PLANNING FOR PHYSICIANS AND MEDICAL PRACTICES. There will be two opportunities to attend this presentation.

Date: Wednesday, August 12, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email agassman@gassmanpa.com.

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LIVE BRADENTON PRESENTATION:

Alan Gassman will speak at the Coastal Orthopedics Physician Education Seminar on the topics of CREDITOR PROTECTION AND THE 10 BIGGEST MISTAKES DOCTORS CAN MAKE: WHAT THEY DIDN’T TEACH YOU IN MEDICAL SCHOOL.

This 50 minute informative talk with extensive materials will cover essential aspects and trip-ups that doctors often encounter in the area of personal and practice entity asset protection. It will also discuss tax and investment planning, advisor selection, health law, compliance, and other areas of interest for physicians.

Each attendee will receive a complimentary copy of Mr. Gassman’s book, Creditor Protection for Florida Physicians and other valuable materials.

Coastal Orthopedics, Sports Medicine, and Pain Management is a comprehensive orthopedic practice which has been taking care of patients in Manatee and Sarasota Counties for 40 years. They have sub-specialized, fellowship-trained physicians as well as in-house diagnostics, therapy, and an outpatient surgery center to provide comprehensive, efficient orthopedic care.

Date: Thursday, August 13, 2015 | 6:00 PM

Location: Coastal Orthopedics and Sports Medicine | 6015 Pointe West Boulevard, Bradenton, FL, 34209

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

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LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on the topic of MEDICAL LAW UPDATE – FEDERAL AND FLORIDA DEVELOPMENTS THAT MEDICAL PRACTICES AND ADVISORS NEED TO BE AWARE OF. There will be two opportunities to attend this presentation.

Date: Tuesday, August 18, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Live webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE AVE MARIA SCHOOL OF LAW PROFESSIONAL ACCELERATION WORKSHOP:

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

Cost of attendance is $35.00. If you are a student or alumni of Ave Maria School of Law, the cost of attendance is $20.00.

Delicious lunch, snacks and amazing conversations included!

CLICK HERE TO REGISTER

Date: Saturday, August 22, 2015 | 9:00 AM – 5:00 PM

I was fortunate to attend the Law Practice and Professional Development Workshop conducted by Alan Gassman, Esq. in Clearwater, Florida on August 3, 2014.  The Workshop covered a wide range of topics from Goal Setting and Gratitude to as practical a topic as law office logistics.  Alan’s approach was intimate, self-revelatory and highly instructive.  I have been practicing law for 20 years and have never attended a program as broad ranging, practical and encouraging.  The depth of Alan’s thought and experience is obvious in the materials and in the ease with which he led the discussions.  This was not a dull lecture but a highly engaging workshop that was over before you expected it to be.

Daniel Medina, B.C.S
Board Certified in Wills, Trusts and Estates
Medina Law Group, P.A.

Course materials are available on Amazon.com for $1.99 and can be found by clicking here.

Location: Thomas Moore Commons, Ave Maria School of Law, 1025 Commons Circle, Naples, FL 34119

Additional Information: To download the official invitation to this event, please click here. To RSVP and for more information, please contact Donna Heiser at dheiser@avemarialaw.edu or via phone at 239-687-5405 or Alan Gassman at agassman@gassmanpa.com or via phone at 727-442-1200.

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LIVE SARASOTA PRESENTATION:

Alan Gassman will speak at the Southwest Florida Estate Planning Council meeting on September 8th on the topic of EVERYTHING YOU ALWAYS WANTED TO KNOW ABOUT CREDITOR PROTECTION AND DIDN’T EVEN THINK TO ASK.

Date: Tuesday, September 8, 2015 | 3:30 PM – 5:30 PM with dinner to follow

Location: Sarasota, Florida

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

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LIVE BLOOMBERG BNA WEBINAR:

Alan Gassman and a guest to be determined will present WHAT TAX PLANNERS NEED TO KNOW ABOUT NORTH DAKOTA TRUST LAW for Bloomberg BNA.

Date: Wednesday, September 9, 2015 | Time TBA

Location: Online webinar

Additional Information: For additional information, please email Alan Gassman at agassman@gassmanp.com

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of THE 10 BIGGEST MISTAKES THAT SUCCESSFUL PARENTS (AND GRANDPARENTS) MAKE WITH RESPECT TO COLLEGE AND RELATED DECISIONS FOR HIGH SCHOOL STUDENTS.

Date: Saturday, September 12, 2015 | 9:30 AM

Location: Online Webinar

Additional Information: To register for this webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FORT LAUDERDALE PRESENTATION:

Ken Crotty will be presenting a 1-hour talk on PLANNING FOR THE SALE OF A PROFESSIONAL PRACTICE – TAX, LIABILITY, NON-COMPETITION COVENANT, AND PRACTICAL PLANNING at the Florida Institute of CPAs Annual Accounting Show.

Date: Friday, September 18, 2015 | 3:30 PM – 4:20 PM

Location: Broward County Convention Center | 1950 Eisenhower Blvd, Fort Lauderdale, FL 33316

Additional Information: For additional information, please email Ken Crotty at ken@gassmanpa.com or CPE Conference Manager Diane K. Major at majord@ficpa.org.

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LIVE WEBINAR:

Alan Gassman, Christopher Denicolo, and Kenneth Crotty will present a 50-minute webinar entitled CREATIVE PLANNING FOR FLORIDA REAL ESTATE with a guest (victim) to be determined. This presentation will be free and worth every dollar!

There will be two opportunities to attend this presentation. This webinar will qualify for CLE and CPE credit.

Date: Wednesday, September 23, 2015 | 12:30 PM or 5:00 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For more information, please email agassman@gassmanpa.com.

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LIVE BLOOMBERG BNA WEBINAR:

Alan Gassman and Lee-Ford Tritt will present a webinar on the topic of WHETHER TO MARRY AND WHAT TO CONSIDER: A TAX AND ESTATE PLANNER’S GUIDE TO COUNSELING SAME-SEX COUPLES WHO MAY TIE THE KNOT for Bloomberg BNA.

Date: Wednesday, September 30, 2015 | 12:00 PM – 1:00 PM

Location: Online webinar

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

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of FAILURE TO LAUNCH: 20-SOMETHINGS WITHOUT A SOLID CAREER PATH – WHAT PARENTS (AND OTHERS) NEED TO KNOW.

Date: Saturday, October 3, 2015 | 9:30 AM

Location: Online webinar

Additional Information: Please click here to register for this webinar. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman, Ken Crotty, and Christopher Denicolo will present a webinar on the topic of WHAT EVERY NEW JERSEY ATTORNEY SHOULD KNOW ABOUT FLORIDA ESTATE PLANNING. This webinar will qualify for 2 New Jersey CLE credits.

Most advisors with Florida clients are unaware of the unique rules and planning considerations that affect Florida estate, tax, and business planning. Unlike some other states, Florida’s laws regarding limited liability companies, powers of attorney, taxation, homestead, creditor exemptions, trusts and estates, and documentary stamp taxes are not simply versions of a Uniform Act. They have been crafted by the Florida legislature to apply to various specific issues in an often counterintuitive manner.

This presentation will the following objectives:

  • Unique aspects of the Florida Trust and Probate Codes
  • Creditor protection considerations and Florida’s statutory creditor exemptions
  • The Florida Power of Attorney Act
  • Traps and tricks associated with Florida’s Homestead Law and Elective Share
  • Documentary stamp taxes, sales taxes, rent taxes, property taxes, and how to avoid them
  • Business and tax law anomalies and planning opportunities

Date: Thursday, October 8, 2015 | 12:00 PM – 1:40 PM

Location: Online Webinar

Additional Information: For more information, please email Alan Gassman at agassman@gassmanpa.com or Eileen O’Connor at eoconnor@njsba.com.

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LIVE SARASOTA PRESENTATION:

2015 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: Saturday, October 24th, 2015

Location: To Be Determined

Additional Information: Please contact Alan Gassman at agassman@gassmanpa.com for more information.

Notable Seminars by Others
(These conferences are so good that we were not invited to speak!)

LIVE ORLANDO PRESENTATION:

50TH ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 11 – January 15, 2016

Location: To be announced

Additional Information: Information on the 50th Annual Heckerling Institute on Estate Planning will be available on August 1, 2015. To learn about past Heckerling programs, please visit http://www.law.miami.edu/heckerling/.

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION 18TH ANNUAL ESTATE, TAX, LEGAL & FINANCIAL PLANNING SEMINAR

We are pleased to announce that Jonathan Blatttmachr, Howard Zaritsky, Lee-Ford Tritt, Lauren Detzel, Michael Markham, and others will be speaking at the 2016 All Children’s Hospital Estate, Tax, Legal & Financial Planning Seminar.

Lauren Detzel will be speaking on Family Law and Tax Planning for Divorce, while Michael Markham will be speaking on Bankruptcy and Creditor Protection/Fraudulent Transfer in Context with Estate Planning.

We thank Lydia Bailey and Lori Johnson for their incredible dedication (and patience with certain members of the Board of Advisors.) All Children’s Hospital is affiliated with Johns Hopkins, which is not affiliated with Anthony Hopkins.

Please provide us with your input for other topics for this year and next! Watch this space for more speaker and topic announcements.

Date: Wednesday, February 10, 2016

Location: Live Event at the All Children’s Hospital St. Petersburg Campus; Live webcasts in Tampa, Fort Myers, Belleair, New Port Richey, Lakeland, and Sarasota

Additional Information: Please contact Lydia Bennett Bailey at lydia.bailey@allkids.org 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.

July Applicable Rates

The Thursday Report – 6.25.15 – Next Week’s Thursday Report

Posted on: June 25th, 2015

Next Week’s Thursday Report

The Biel Reo Bank Case Denied Certiorari by Florida Supreme Court

Office of Inspector General Fraud Alerts: An Interview with Lester Perling, Part 1

Excerpts from Creative Tax Planning for Real Estate Transactions and Investors

Richard Connolly’s World – Settling an Estate After Death

Thoughtful Corner – 5 Steps to Relieve Procrastination – How to Begin (and End!) a Project Successfully

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 Stephanie at stephanie@gassmanpa.com.

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

Next Week’s Thursday Report

The editors regret to inform the readers that this week’s Thursday Report was not ready on time. We have therefore provided you with next week’s Thursday Report. This week’s Thursday Report will hopefully be ready by next week. If not, the Thursday Report from the following week will be provided.

As the result of the above, any amortization tables based upon the issuance of Thursday Reports will need to be changed because interest that would have accrued this week will instead accrue next week, and thus, the interest that accrues next week will not include interest on the interest that would have accrued last week. We would therefore suggest that amortization tables no longer be based upon the relative edition and timing of The Thursday Report unless you are paid by the hour to change them.

Therefore, if you feed your fish weekly based upon the edition of The Thursday Report, please give the fish next week’s food this week and this week’s food next week. If confused, the fish can explain.

New Webinar News

On September 9, 2015, Alan Gassman and a guest to be named will present a webinar entitled “What Tax Planners Need to Know About North Dakota Trust Law” for Bloomberg BNA.

On September 23, 2015, Christopher Denicolo, Alan Gassman, and Kenneth Crotty will present Creative Planning for Florida Real Estate with a guest (victim) to be determined. This will be free and worth every dollar!

For more of our upcoming presentations, please see our Seminars and Webinars section below.

The Biel Reo Bank Case Denied Certiorari by Florida Supreme Court
by Ken Crotty and Alan Gassman

Just in time, a bankruptcy court decision confirms that the extended statute of limitation on fraudulent transfer pursuits will not apply if the debtor files for bankruptcy.

In the 2014 First District Court of Appeals case of Biel Reo, LLC v. Barefoot Cottages Develop., it was concluded that the four year statute of limitations on fraudulent transfers will not apply in a proceedings supplementary.[1] The crux of the court’s decision rested on the fact that a proceedings supplementary is not an independent cause of action and instead is “collateral to the main action at law” and serves as a means to enforce a pre-existing judgment. The court held that, despite the fact that “proving and defending fraudulent transfer claims brought under §56.29 borrow substantively from the Uniform Fraudulent Transfer Act (UFTA), this does not require the adoption of the UFTA’s much shorter limitations period. This is mainly because §56.29’s contrary scheme and precedent broadly establishes the availability of proceedings supplementary for the life of the judgment, when a valid, unsatisfied execution exists.”[2]

Under §56.29, a judgment creditor may: (1) pursue assets held by the debtor; (2) pursue assets held by another, so long as the property is not exempt from execution; or (3) void any transfers to a spouse or third party that was made for purposes of delaying, hindering, or defrauding a creditor.[3] Since §56.29 is a procedural statute, claims brought under this section must be analyzed according to other substantive law since the statute borrows substantively from the UFTA.[4]

On May 12, 2015, in the Bankruptcy Court order of In re C.D. Jones & Company, Inc., Bankruptcy Judge Karen K. Specie came to the conclusion that Florida’s proceedings supplementary statute[5] would not apply to extend the statute of limitations upon setting aside fraudulent transfers in bankruptcy.[6] In the Order Denying Motion to Remand or to Abstain from Hearing Removed Matter, Judge Specie opined as follows:

The Daakes argue that the Bankruptcy Court is not the proper place for the Removed Proceeding because the causes of action do not arise in a case under Title 11; they only involve Florida law causes of action. Without question, the Removed Proceeding is styled as a proceeding supplementary to execution, under Fla. Stat. §56.29. Had C.D. Jones not filed bankruptcy, the Daakes, as judgment creditors, would have the right to pursue proceedings supplementary as long as their judgment remained valid and outstanding. But C.D. Jones did file bankruptcy and remains a Chapter 7 debtor before this Court. This Court has previously ruled that “the claims and causes of actions asserted…constitute property of the bankruptcy estate and any recover from them shall inure to the benefit of all creditors.” This ruling, and these facts, bring the Removed Proceedings squarely within this Court’s jurisdiction.

Further, footnote 18 of the Order states that:

In their memorandum, the Daakes assert that their right to avoid fraudulent transfers in the Proceedings Supplementary extends for the life of the Judgment (20 years) under Florida law, citing Biel Reo, LLC vs. Barefoot Cottages Dev. Co., LLC So.3d 506 (Fla. DCA 2014), reh’g denied (Feb. 3, 2015). While this may be true in general, it is not true when the judgment debtor files bankruptcy. Nothing in the Biel Reo, LLC opinion states otherwise.

Judge Specie further relied on the Bankruptcy case In re Fundamental Long Term Care, Inc. in determining whether jurisdiction over the supplementary proceedings is valid.[7] In Fundamental Long Term Care, the bankruptcy court held that it could, in fact, “exercise related to” jurisdiction over a judgment creditor’s supplementary proceedings in state court.”[8] In this case, a judgment creditor was attempting to recover a large sum of assets, which were owned by the debtor’s “wholly owned subsidiary,” based on fraudulent transfer and alter ego claims.[9] Regarding the validity of the jurisdiction over the proceedings, the court held:

A dispute is “related to” a case under title 11 when its result “could conceivably” have an “effect on the estate being administered in bankruptcy.” The “proceeding need not necessarily be against the debtor or against the debtor’s property,” if it could affect the administration of the bankruptcy estate. “The key word in the Lemco Gypsum/Pacor test is ‘conceivable,’ which makes the jurisdictional grant extremely broad.” As the Supreme Court recognized in Celotex Corp., “Congress intended to grant comprehensive jurisdiction to the bankruptcy courts so that they might deal efficiently and expeditiously with all matters connected with the bankruptcy estate.[10]

We understand that this decision is now being appealed. The parties have already been in litigation for over ten years.

As a result of the above, debtors who might find themselves in a proceedings supplementary more than four years after having made a transfer that might have been considered to have been “fraudulent” and need to be able to go into bankruptcy should refrain from making transfers that could be considered fraudulent for the period preceding 1 year before they would file bankruptcy.

We will be writing on these cases and associated topics with some very bright co-authors, so please stay tuned!

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[1] So.3d 506 (Fla. DCA 2014).
[2] Biel Reo, LLC at 4.
[3] Fla. Stat. §56.29.
[4] Mejia v. Ruiz, 985 So. 2d 1109, 1112-13 (Fla. Dist. Ct. App. 2008); Nationsbank, N.A. v. Coastal Utilities, Inc., 814 So. 2d 1227, 1229 (Fla. Dist. Ct. App. 2002); Morton v. Cord Realty, Inc., 677 So. 2d 1322, 1324 (Fla. 4th DCA 1996).
[5] Fla. Stat. §56.29
[6] 2015 WL 2260707 (Bankr. N.D. Fla., May 12, 2015).
[7] In re Fundamental Long Term Care, Inc., 501 B.R. 770 (Bankr. M.D. Fla. 2013).
[8] Id. At 778.
[9] Id.
[10] Id. at 777.

Office of Inspector General Fraud Alerts
An Interview with Lester Perling, Part 1

Lester

On June 9, 2015, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services issued a fraud alert, which can be viewed by clicking here.

Alan Gassman interviewed Lester Perling of Broad & Cassel about the OIG Fraud Alert, part 1 of which is printed below:

Alan – Today, we are going to talk about the OIG’s warning shot about physician compensation and medical directorships. Lester, welcome.

Lester – Thank you, Alan.

Alan – June 9, 2015, the Fraud Alert. Physician compensation arrangements may result in significant liability. Lester, what is this, and what do we learn from it?

Lester – Well, Alan, this flows from a case in which we actually represented one of the doctors who got in trouble – one of the twelve physicians and his wife. This was a home health aide. This particular case has generated this Fraud Alert.

Fraud Alerts, by the way, for those that don’t know, are a fairly rare thing for the OIG to issue. They haven’t issued one in quite some time. They might issue one every two to three years when they have a topic that they are particularly concerned about and they want to send a message. So this is a message to the physician community about natural arrangements between them and entities to which they refer. This was a case of a home health agency who had multiple medical directors, which probably, for a time, was more common than it is now. The agency also hired several physicians’ spouses to work for it, which has also been a common thing with home health agencies and other types of providers.

So this particular home health agency hired the physicians’ spouses to do various tasks like marketing, even nursing. Some of the spouses were actually nurses and did clinical work in the field. Some of the spouses did nothing but were still paid. Others did, in fact, provide services for a period of time. The facts of this case really probably aren’t the most important thing. What is really important about this Fraud Alert and what the OIG has been talking about in the recent weeks and months is the fact that they are going to start looking more at not just the entity involved in physician arrangements in terms of sanctioning them but at the physicians as well.

This is kind of going full circle. Alan, you may remember the old Clearwater lab case…

Alan – I knew it well, but can you tell us about it?

Lester – The OIG went after physicians who were involved with this laboratory, which they believed was paying kickbacks and doing other improper things, and that caused a major uproar in the physician community in the Tampa Bay area. In fact, it led to a meeting between OIG officials and the U.S. Attorney’s office and the community physicians and their representatives about the heat that physicians were taking as a result of that.

That actually, I think, caused the OIG, and to some degree, the Department of Justice, to pull back from going after individual physicians and focus more on the entities that were entering into these unnatural arrangements with them. I think that the OIG, at least, believes now that was probably a mistake, or they believe they went too far the other way.

The pendulum is now swinging back, and this case kind of represents that fact. There was nothing unusual about this case. It is one of many where there are physicians or physician spouses getting remuneration. What this signals is, like I said, a swing of the pendulum back to the OIG, who is now not going to just focus on the entity. They’ll certainly go after the entity, but they are also going to go after the physicians or their spouses who are involved in these relationships and seek to sanction them as well.

Alan – So they published the Fraud Alert as a warning to these physicians?

Lester – They published a Fraud Alert to make sure that physicians are aware that they are vulnerable. I think the physicians believe that, with the way it has been with not going after the physicians, the physicians say, and I hear this from clients, they say, “Well, what is the real risk? What’s going to happen to me?” Until recently, the answer was that there may not be much that happens to the individual physician because the OIG tends to focus on the entity. Now, the OIG is saying that is changing, and that is what is really important about this Fraud Alert.

Alan – What happened to some of the physicians involved in this case?

Lester – They all settled. They all got to pay the government various sums of money. Some were considered more culpable than others. Some, like I said, the spouses did nothing, no work at all, for their pay. Others, in fact, did work, but they all ended up settling because most of the physicians and their spouses really had no good defense. Even the lowest settlement was in the low six figures.

It was expensive. There were significant settlements. I do not believe any of them had been excluded because all of the settlements prevented exclusion. Basically, they were preventing the exclusion by settling, but like I said, some had no really good defense prepared, so it was an expensive proposition for them, obviously.

Alan – That’s very gentle compared to the Clearwater Clinical Lab experience, where several doctors were arrested in their own lobbies and then had to get bail.

Lester – Yes, the pendulum hasn’t swung back that far yet. I think other than those that are just committing outright fraud, it’s going to be this type of administrative sanction, which is probably what they should have done with the Clearwater Clinical Lab doctors, and that’s why they think they went too far the other way, where they weren’t doing enough with physicians, in terms of at least doing some sort of administrative sanction.

Alan – What kind of consequences can an administrative sanction have on a physician?

Lester – Keep in mind that this type of action on the part of the government can have licensure collateral consequences. It can lead to disciplinary investigations by the Board of Medicine. It can have collateral consequences for Managed Care Agreements and participation in networks. It’s not criminal, but it is very serious business.

Stay tuned for next week’s Thursday Report, where Lester will discuss the background of the Office of Inspector General and the case that led to the newest Fraud Alert, as well as the differences between federal and state violations.

Excerpts from Creative Tax Planning for
Real Estate Transactions and Investors

Alan Gassman, Christopher Denicolo, Jerry Hesch, and Stephen Breitstone presented a webinar entitled “Creative Tax Planning for Real Estate Transactions and Investors: A Practical Guide for Real Estate and Tax Advisors and Their Clients” on Tuesday, June 23, 2015. Some excerpts from this webinar are as follows:

Real Estate is Generally a Capital Asset, with an Important Exception

Real estate is generally treated as a capital asset for most taxpayers; however, there are certain exceptions. One important exception is real estate that is treated as inventory in hands of the taxpayer (i.e. the taxpayer is a “dealer”), which causes any gain or loss from the sale of exchange of real estate to be treated as ordinary income. Dealers in real estate are also precluded from taking advantage of certain tax deferral techniques, such as Section 1031 like-kind exchanges and Section 453 installment sales.

Courts have looked at the following factors in determining whether to classify a taxpayer as a dealer:

  1. Number, frequency, and continuity of sales;
  2. Nature and extent of improvements and/or development activities;
  3. Purpose and reason for which the property is held;
  4. Sales activities and efforts with respect to the property;
  5. The relationship of the property to the taxpayer’s business and the taxpayer’s statements concerning its business;
  6. Duration of ownership, and
  7. Whether the taxpayer purchased replacement property or has demonstrated a pattern of continuous buying and selling of real property.

Advantages to a client being a dealer include ordinary loss treatment if a loss occurs on sale and being able to take advantage of the real estate professional exception to the 1411 Tax. Disadvantages to a client being a dealer include earning ordinary income in lieu of capital gains on sale.

Passive Loss Rules Regarding Rental Activities

Losses from passive activities cannot be offset against income from non-passive activities and can only be used to offset income from passive sources. The passive loss rules are provided under Section 469. Any losses from real estate rental activities are generally treated as passive per se (i.e. without regard to whether they involve the conduct of a trade or business or whether the taxpayer has materially participated.)

There are a number of limited exceptions for certain situations where the rental activities involve short rental periods, extraordinary personal services, rentals to joint ventures, or pass-through entities in which the taxpayer has an interest. If the taxpayer is a real estate professional who meets certain criteria, then any losses from real estate rental activities are not passive per se.

The regulations prescribe a complex and fact-intensive set of tests that a taxpayer can satisfy to cause real estate rental activities to be treated as non-passive.

The Real Estate Professional Exception

To qualify for the real estate professional exception to the passive loss rules, the taxpayer must:

  1. Provide more than ½ of his or her total personal services in real property trades in which he or she materially participates, and
  2. Perform more than 750 hours of services during the tax year in real property trades or businesses in which he or she materially participates.

What is Material Participation?

Temporary Treasury Regulation Section 1.469-5T(a) lists the seven tests that an individual can satisfy to establish material participation:

  1. The individual participates in the activity for at least 500 hours during the applicable tax year;
  2. The individual’s participation in the activity constitutes substantially all of the participation in the activity of all individuals during the taxable year;
  3. The individual participates in the activity for more than 100 hours during the tax year, and his or her participation is not less than that of any other individual during the same year;
  4. The activity is a “significant participation activity” of the individual, and the individual participates in all significant participation activities for more than 500 hours in the applicable tax year;
  5. The individual materially participated in the activity for any 5 of the 10 taxable years that immediately precede the current taxable year;
  6. The individual materially participated in a personal service activity for any three prior taxable years, or
  7. The individual has regular, continuous, and substantial involvement in the activity, based on all of the facts and circumstances.

Where is Material Participation Determined?

For partnerships and S corporations, material participation is determined at the individual partner level. For non-grantor trusts, material participation is determined based upon the trustee’s activities and not upon a beneficiary’s activities.

Under the Frank Aragona Trust v. Commissioner case (142 T.C. No. 9; 2014), the Tax Court ruled that a trust can qualify for the real estate professional exception to the passive loss rules if the trustees are individuals and the individuals otherwise satisfy the material participation tests. In Frank Aragona Trust, three of the six individual co-trustees were full-time employees of the LLC that operated real properties.

This case is also important in the context of the 3.8% Net Investment Income Tax under Section 1411. Under Section 1411, “Net Investment Income” includes income from sources that are passive with respect to the taxpayer and the determination of whether income is passive is based on the passive loss rules of Section 469.

Non-grantor trusts are subject to the 3.8% Tax after reaching $12,150 of Net Investment Income, so the importance of trust income being classified as non-passive rather than passive has significantly increased with the advent of the 3.8% Tax.

Tax Consequences of Foreclosures, Deeds in Lieu of Foreclosure,
and Discharge of Indebtedness

For federal income tax purposes, the sale of real estate subject to a non-recourse mortgage to a third-party at a foreclosure sale is treated as if the mortgagor sold or exchanged the property to such third-party for the amount of the outstanding mortgage balance, not to exceed the fair market value of the property. Likewise, if property subject to a non-recourse mortgage is conveyed to the mortgagee in satisfaction of the debt, it is treated as a sale or exchange of the property by the mortgagor for the outstanding mortgage balance, without regard to the fair market value of the property.

For federal income tax purposes, the sale of mortgaged real estate to a third-party at a foreclosure sale is treated as if the mortgagor sold or exchanged the property to such third-party for the foreclosure sale price, and gain or loss is thus recognized as a result thereof (assuming that no applicable non-recognition provisions, such as the principal residence exclusion under Section 121, apply.)

Similarly, if a personally liable mortgagor conveys the property to the mortgagee as a deed in lieu of foreclosure which extinguishes the mortgage, it is treated as a sale or exchange of the property by the mortgagor for fair market value of the property. If the fair market value of the property is less than the outstanding balance of the mortgage, then the transaction is bifurcated – the transaction is treated as a sale or exchange to the extent of the fair market value of the property and as cancellation of indebtedness under Section 108 to the extent that the mortgage balance exceeds the property’s fair market value.

Discharge of Indebtedness (DOI) income occurs where a taxpayer is relieved of indebtedness by a creditor to the extent that the taxpayer did not pay consideration in exchange for such debt relief. DOI income is taxed at ordinary income rates but is subject to several exceptions that apply in certain situations.

DOI income generally is realized by the taxpayer when the debt is repurchased or satisfied at less than its outstanding balance. Under Section 108, DOI income will result if a debt is purchased for less than its outstanding balance by the debtor or by a party that is “related” to the debtor.

The following are exceptions to the recognition of DOI income:

  • The debt discharge occurs in a bankruptcy case under Title 11 of the US Code
  • To the extent that the taxpayer is insolvent at the time of the discharge or is made insolvent as a result of the discharge
    • For partnerships, insolvency is determined at the level of each partner; for S corporations and C corporations, the insolvency is determined at the corporate level.
  • The debt being discharged is “qualified farm indebtedness.”
  • The debt being discharged is “qualified real property business indebtedness,” which is:
    • Indebtedness incurred or assumed in connection with real property used in a trade or business, which was incurred or assumed to acquire, construct, reconstruct, or substantially improve such property, and with respect to which the taxpayer makes an election.
    • This exclusion only applies to taxpayers other than C corporations.
  • The debt being discharged is “qualified principal residence indebtedness,” but only if the discharge occurred between January 1, 2007 and December 31, 2014.

Using one of the above exceptions, the recognition of DOI income may result in the taxpayer having to reduce tax attributes or income tax basis in other real property.

Partnership v. S Corporation – Which is Better to Hold Real Estate?

Partnership Chart

Richard Connolly’s World
Settling an Estate After Death

Insurance advisor Richard Connolly of Ward & Connolly in Columbus, Ohio often shares with us pertinent articles found in well-known publications such as The Wall Street Journal, Barron’s, and The New York Times. Each week, we will feature some of Richard’s recommendations with links to the articles.

This week, the first article of interest is “The Widow’s Guide to Estate Planning and Wealth Transfer” by Sandra MacGregor. This article was featured on Forbes.com on June 2, 2015.

Richard’s description is as follows:

Drafting up a will can be an emotionally taxing process, but it’s one that becomes especially difficult when a spouse is left to cope with the task after their partner passes away. Suddenly, what was once a joint decision made with a lifelong partner becomes a task a widow must face alone.

Cinda J. Collins, Senior Vice President and Financial Advisor at RBC Wealth Management, knows this all too well. Despite having two years to prepare for her husband Bob’s passing when he was diagnosed with acute myeloid leukemia, Collins found the financial and emotional implications of settling his estate after he was gone were often overwhelming.

To help other widows cope with the process, Collins, along with Deborah Johnston, Senior Vice President and Financial Advisor at RBC Wealth Management, offer some advice on how couples can approach estate planning together, as well as what a surviving spouse should do in the unfortunate event their partner passes.

Please click here to read this article in its entirety.

The second article of interest this week is entitled “When Heirs Fight Over Assets with Sentimental Value” by Paul Sullivan. This article was featured in The New York Times on April 3, 2015.

Richard’s description is as follows:

Robin Williams’s widow, Susan Schneider, agreed that the rainbow suspenders he wore on the television comedy Mork & Mindy should go to his children from previous marriages, but she did want the tuxedo the comedian wore at their wedding. Simple, it might seem, but not in the complicated world of blended families.

Nearly eight months after Mr. Williams committed suicide in his home in Northern California, his children and his third wife were in court over a part of his estate plan that many people overlook. Who is entitled to stuff with more sentimental than monetary value?

But trust and estate lawyers said that this case, if stripped of its Hollywood glamour, would be no different from the many cases they see of children from previous marriages battling their parent’s last spouse over the smallest things.

Please click here to read this article in its entirety.

Thoughtful Corner
5 Steps to Relieve Procrastination –
How to Begin (and End!) a Project Successfully

We all know that there are some tasks and projects we resist doing, things we push off until the next day, next week, or next year. This is the cycle of procrastination, which, by definition, means the act of delaying or postponing something that should be done. We know what procrastination is, and we recognize that we are guilty of it. We even understand that procrastination is unproductive. Why do we continue to procrastinate, and what can we do to prevent it?

When we procrastinate, our conscious mind usually perceives obstacles or interruptions that “came up” to preclude the task in question. Have you ever found yourself suddenly organizing your sock drawer just as it was time to begin studying for a big exam? The excuses and the interruptions suddenly become very convenient. In truth, there are likely deeper reasons as to why you are putting something off, and such insights are often not immediately evident to you, the procrastinator.

Frequently, we resist the task at hand because we associate such task with pain, struggle, or discomfort in some way. Our concern that we will have to address or experience these feelings leads us to put off the task as long as possible. Often our subconscious mind blows this idea of pain or struggle way out of proportion, and the dread of anticipating the task is much worse than the short, painful experience of actually completing it.

Business advisor, author, and coach Rick Solomon, CPA, who teaches the Sedona Releasing Method, recommends that a procrastinator facing resistance should imagine living through the uncomfortable task or event and experience the struggle, challenge, or pain before the project has even begun. The fear of the unknown is usually much worse than any painful experience we actually face in our daily lives. Going to the “worst case scenario” when imagining a task may help to relieve tension, as the challenge may seem much more manageable once you have anticipated possible painful outcomes. This may also encourage you to reframe the project in a different way. You may discover a simpler solution. You may also discover that you can delegate the project to someone else or perhaps that the project is not really necessary at all.

Once you have re-evaluated the project or task, gained some perspective on what does or does not need to be done, and come to terms with the challenges you will have to experience, you can incorporate the 80/20 Rule. The 80/20 Rule has many applications, but in this setting, 20% of the effort required to effectuate any project will normally accomplish 80% of the results. The best solution is often to put your efforts toward the first 20% of the project, specifically planning and gathering required information, and then delegate to someone else or reprioritize for the remaining 80% of the work.

A sample brainstorming table for helping to organize your thoughts is below:

Procrastination Chart

The clearer and more specific you can make your process for dealing with procrastination, the easier it will be to move forward with challenging projects or tasks. The steps below will take 15-30 minutes to complete and will save you hours of delays, setbacks, and worries.

1. Discover the reason for your procrastination

Ask yourself the following two questions: Why am I procrastinating on this task? Is there a fear of pain involved?

Write the answers to these questions down, as writing often helps subconscious anxieties and fears reveal themselves. We recommend taking a few minutes to freely journal or take notes.

Hold yourself responsible for getting to the root of your procrastination. Don’t accept excuses of busyness or interruptions as your reasons for procrastination. Find out what is going on underneath these surface rationales.

2. Go to the “worst case scenario”

Imagine the full pain of the task at hand. Let yourself experience it completely. Write down the specifics of the worst case scenario if that is helpful, or close your eyes and visualize the worst case scenario happening to you. The point is to get the pain over with. Worrying about pain in advance for weeks on end is much worse in the long run than efficiently dealing with pain in the here and now.

3. Strategize about a more effective outcome

Once you have discovered the reason for your procrastination and dealt with the struggle or challenge involved, you are able to put aside the emotional aspect of the task and deal with it in a logical, strategic manner.

Write down your answers to the following questions:

Am I sure this project needs to be completed? What benefit does this project provide? At what cost?

Do I have to handle this entire project myself, or can some of it be delegated?

Which parts of the project can go to which people?

Using the 80/20 Rule, if I contribute 20% to this project, what actions will make my contribution most effective?

4. Take Action

Once you have laid out your basic strategy, create an action plan for you and others to follow. Include timelines and accountability between yourself and others to ensure the project or task is 100% completed.

Prioritize your project with reference to other projects and opportunities. Is it more or less important? More or less urgent?

Lay out specific action steps. Assign a date and a person for completion of each step. Delegate the parts of the project you have assigned to others, including a completion date that works for both parties.

Set a follow-up date for accountability with you and the people working on the project or task.

5. Celebrate your progress

Crossing a difficult project off your to-do list is a great accomplishment! Acknowledge your hard work and choose a way to reward yourself: an afternoon off, a drink with a friend, a trip to the beach, or whatever works for you.

As you practice these methods, you will find that dealing with procrastination becomes easier to identify and manage over time. Taking these 5 steps whenever you come up against resistance will boost your energy, save you time, and give you better results!

For a worksheet to help you work through these steps and stop procrastinating, please click here.

Humor! (or Lack Thereof!)

Sign Saying of the Week

Sign

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Cartoon 1

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Upcoming Seminars and Webinars

LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on FINANCIAL RELATIONSHIPS WITH PATIENTS, CO-PAYMENTS, GIFTS, AND GRAFT – HOW TO STAY OUT OF TROUBLE UNDER FLORIDA AND FEDERAL LAW.

This is an essential guide for medical practices and those who advise them. There will be two opportunities to attend this presentation.

Date: Tuesday, July 7, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FLORIDA INSTITUTE OF CPAs (FICPA) WEBINAR:

Alan Gassman will present a webinar on the topic of WHAT FLORIDA CPAS NEED TO KNOW ABOUT ASSET PROTECTION for the Florida Institute of CPAs.

More information about this webinar will be forthcoming. Please stay tuned!

Date: Thursday, July 9, 2015 | 9:30 AM – 10:30 AM

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com. To register, please contact Thelma Givens at givenst@ficpa.org.

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LIVE ORLANDO PRESENTATION:

ORLANDO BUSINESS AND PROFESSIONAL PRACTICE OWNER SYMPOSIUM

Alan S. Gassman, business coach and author David Finkel, and others will present a two-day conference for high-net-worth business and professional practice owners sponsored by Maui Mastermind®.

Alan’s topics will include BASIC AND ADVANCED PLANNING TECHNIQUES FOR THE PROTECTION OF WEALTH, THE 10 BIGGEST MISTAKES THAT BUSINESS OWNERS AND PROFESSIONALS MAKE, and ESTATE TAX AVOIDANCE TECHNIQUES FOR BUSINESS OWNERS AND PROFESSIONALS.

Other topics include A Proven Map to Grow Your Business and Get Your Life Back, Building Wealth Outside of Your Company, Tax Reduction Strategies, and Understanding How Investments Work and What They Cost.

Interested individuals can contact agassman@gassmanpa.com or David Finkel at david@mauimastermind.com.

Date: July 30th and 31st, 2015

Location: Hyatt Regency Orlando | 9801 International Drive, Orlando, FL 32819

Additional Information: To register, please click here or email agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman and Christopher Denicolo will present a live, free, 30-minute webinar on the topic of CREDITOR PROTECTION PLANNING FOR PHYSICIANS AND MEDICAL PRACTICES. There will be two opportunities to attend this presentation.

Date: Wednesday, August 12, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email agassman@gassmanpa.com.

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LIVE BRADENTON PRESENTATION:

Alan Gassman will speak at the Coastal Orthopedics Physician Education Seminar on the topics of CREDITOR PROTECTION AND THE 10 BIGGEST MISTAKES DOCTORS CAN MAKE: WHAT THEY DIDN’T TEACH YOU IN MEDICAL SCHOOL.

This 50 minute informative talk with extensive materials will cover essential aspects and trip-ups that doctors often encounter in the area of personal and practice entity asset protection. It will also discuss tax and investment planning, advisor selection, health law, compliance, and other areas of interest for physicians.

Each attendee will receive a complimentary copy of Mr. Gassman’s book, Creditor Protection for Florida Physicians and other valuable materials.

Coastal Orthopedics, Sports Medicine, and Pain Management is a comprehensive orthopedic practice which has been taking care of patients in Manatee and Sarasota Counties for 40 years. They have sub-specialized, fellowship-trained physicians as well as in-house diagnostics, therapy, and an outpatient surgery center to provide comprehensive, efficient orthopedic care.

Date: Thursday, August 13, 2015 | 6:00 PM

Location: Coastal Orthopedics and Sports Medicine | 6015 Pointe West Boulevard, Bradenton, FL, 34209

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

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LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on the topic of MEDICAL LAW UPDATE – FEDERAL AND FLORIDA DEVELOPMENTS THAT MEDICAL PRACTICES AND ADVISORS NEED TO BE AWARE OF. There will be two opportunities to attend this presentation.

Date: Tuesday, August 18, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Live webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE AVE MARIA SCHOOL OF LAW PROFESSIONAL ACCELERATION WORKSHOP:

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

Cost of attendance is $35.00. If you are a student or alumni of Ave Maria School of Law, the cost of attendance is $20.00.

Delicious lunch, snacks and amazing conversations included!

CLICK HERE TO REGISTER

Date: Saturday, August 22, 2015 | 9:00 AM – 5:00 PM

Alan Gassman’s Professional Acceleration Workshop was a fast-paced, information-packed, and highly instructional event.  Through interactive discussions of time-tested professional and personal growth strategies ranging from goal setting and problem solving to office efficiency and effective team building, Alan provides a thoughtful and measured approach to becoming a highly effective professional.  I left the workshop feeling invigorated and excited to implement the insights into my practice management and continued self-study.  The course materials and Alan’s compilation of trusted additional resources will be an invaluable resource for years to come.  Thank you for the opportunity to participate.

Christina Rankin, J.D., LL.M. (Taxation)
Trust and Estates Lawyer with Over 10 Years of Experience
Law Offices of Richard D. Green, J.D., LL.M.

Course materials are available on Amazon.com for $1.99 and can be found by clicking here.

Location: Thomas Moore Commons, Ave Maria School of Law, 1025 Commons Circle, Naples, FL 34119

Additional Information: To download the official invitation to this event, please click here. To RSVP and for more information, please contact Donna Heiser at dheiser@avemarialaw.edu or via phone at 239-687-5405 or Alan Gassman at agassman@gassmanpa.com or via phone at 727-442-1200.

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LIVE SARASOTA PRESENTATION:

Alan Gassman will speak at the Southwest Florida Estate Planning Council meeting on September 8th on the topic of EVERYTHING YOU ALWAYS WANTED TO KNOW ABOUT CREDITOR PROTECTION AND DIDN’T EVEN THINK TO ASK.

Date: Tuesday, September 8, 2015 | 3:30 PM – 5:30 PM with dinner to follow

Location: Sarasota, Florida

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

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LIVE BLOOMBERG BNA WEBINAR:

Alan Gassman and a guest to be determined will present WHAT TAX PLANNERS NEED TO KNOW ABOUT NORTH DAKOTA TRUST LAW for Bloomberg BNA.

Date: Wednesday, September 9, 2015 | Time TBA

Location: Online webinar

Additional Information: For additional information, please email Alan Gassman at agassman@gassmanp.com

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of THE 10 BIGGEST MISTAKES THAT SUCCESSFUL PARENTS (AND GRANDPARENTS) MAKE WITH RESPECT TO COLLEGE AND RELATED DECISIONS FOR HIGH SCHOOL STUDENTS.

Date: Saturday, September 12, 2015 | 9:30 AM

Location: Online Webinar

Additional Information: To register for this webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FORT LAUDERDALE PRESENTATION:

Ken Crotty will be presenting a 1-hour talk on PLANNING FOR THE SALE OF A PROFESSIONAL PRACTICE – TAX, LIABILITY, NON-COMPETITION COVENANT, AND PRACTICAL PLANNING at the Florida Institute of CPAs Annual Accounting Show.

Date: Friday, September 18, 2015 | 3:30 PM – 4:20 PM

Location: Broward County Convention Center | 1950 Eisenhower Blvd, Fort Lauderdale, FL 33316

Additional Information: For additional information, please email Ken Crotty at ken@gassmanpa.com or CPE Conference Manager Diane K. Major at majord@ficpa.org.

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LIVE WEBINAR:

Alan Gassman, Christopher Denicolo, and Kenneth Crotty will present a 50-minute webinar entitled CREATIVE PLANNING FOR FLORIDA REAL ESTATE with a guest (victim) to be determined. This presentation will be free and worth every dollar!

There will be two opportunities to attend this presentation. This webinar will qualify for CLE and CPE credit.

Date: Wednesday, September 23, 2015 | 12:30 PM or 5:00 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For more information, please email agassman@gassmanpa.com.

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of FAILURE TO LAUNCH: 20-SOMETHINGS WITHOUT A SOLID CAREER PATH – WHAT PARENTS (AND OTHERS) NEED TO KNOW.

Date: Saturday, October 3, 2015 | 9:30 AM

Location: Online webinar

Additional Information: Please click here to register for this webinar. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman, Ken Crotty, and Christopher Denicolo will present a webinar on the topic of WHAT EVERY NEW JERSEY ATTORNEY SHOULD KNOW ABOUT FLORIDA ESTATE PLANNING. This webinar will qualify for 2 New Jersey CLE credits.

Most advisors with Florida clients are unaware of the unique rules and planning considerations that affect Florida estate, tax, and business planning. Unlike some other states, Florida’s laws regarding limited liability companies, powers of attorney, taxation, homestead, creditor exemptions, trusts and estates, and documentary stamp taxes are not simply versions of a Uniform Act. They have been crafted by the Florida legislature to apply to various specific issues in an often counterintuitive manner.

This presentation will the following objectives:

  • Unique aspects of the Florida Trust and Probate Codes
  • Creditor protection considerations and Florida’s statutory creditor exemptions
  • The Florida Power of Attorney Act
  • Traps and tricks associated with Florida’s Homestead Law and Elective Share
  • Documentary stamp taxes, sales taxes, rent taxes, property taxes, and how to avoid them
  • Business and tax law anomalies and planning opportunities

Date: Thursday, October 8, 2015 | 12:00 PM – 1:40 PM

Location: Online Webinar

Additional Information: For more information, please email Alan Gassman at agassman@gassmanpa.com or Eileen O’Connor at eoconnor@njsba.com.

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LIVE SARASOTA PRESENTATION:

2015 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: Saturday, October 24th, 2015

Location: To Be Determined

Additional Information: Please contact Alan Gassman at agassman@gassmanpa.com for more information.

Notable Seminars by Others
(These conferences are so good that we were not invited to speak!)
 

LIVE ORLANDO PRESENTATION: 

50TH ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING 

Date: January 11 – January 15, 2016 

Location: To be announced 

Additional Information: Information on the 50th Annual Heckerling Institute on Estate Planning will be available on August 1, 2015. To learn about past Heckerling programs, please visit http://www.law.miami.edu/heckerling/.

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION 18TH ANNUAL ESTATE, TAX, LEGAL & FINANCIAL PLANNING SEMINAR

We are pleased to announce that Jonathan Blatttmachr, Howard Zaritsky, Lee-Ford Tritt, Lauren Detzel, Michael Markham, and others will be speaking at the 2016 All Children’s Hospital Estate, Tax, Legal & Financial Planning Seminar.

Lauren Detzel will be speaking on Family Law and Tax Planning for Divorce, while Michael Markham will be speaking on Bankruptcy and Creditor Protection/Fraudulent Transfer in Context with Estate Planning.

We thank Lydia Bailey and Lori Johnson for their incredible dedication (and patience with certain members of the Board of Advisors.) All Children’s Hospital is affiliated with Johns Hopkins, which is not affiliated with Anthony Hopkins.

Please provide us with your input for other topics for this year and next! Watch this space for more speaker and topic announcements.

Date: Wednesday, February 10, 2016

Location: Live Event at the All Children’s Hospital St. Petersburg Campus; Live webcasts in Tampa, Fort Myers, Belleair, New Port Richey, Lakeland, and Sarasota

Additional Information: Please contact Lydia Bennett Bailey at lydia.bailey@allkids.org 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.

June Rates

The Thursday Report – 6.18.15 – And Now For Something Completely Thursday

Posted on: June 18th, 2015

Fraud Alert: Physician Compensation Arrangements May Result in Significant Liability

A Logical Guide to Selecting a Buy-Sell Agreement Arrangement – Traditional Choices are Not Always Best

Tax Court Approves the Mother of All Crummey Trusts with 60 Beneficiaries, Part II

Richard Connolly’s World – Planning for the Future

John Cleese & Eric Idle in Clearwater

Thoughtful Corner – Your Email is Evidence Mail

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 Stephanie at stephanie@gassmanpa.com.

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

Fraud Alert: Physician Compensation Arrangements May Result in Significant Liability

The Office of Inspector General (OIG) of the U.S. Department of Health and Human Services conducted a criminal and also civil activities investigation of Medicare and other federal payors, and will often fire a shot over an industry’s bow at the time they begin implementing an initiative of investigation and possible prosecution.  We will discuss the below replicated June 9, 2015 fraud alert with veteran healthcare lawyer Lester Perling on a 15 minute free webinar to air on Monday, June 22, 2015 at 5:00 p.m.

The following alert language, reproduced below verbatim, says it all!

Physicians who enter into compensation arrangements such as medical directorships must ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide. Although many compensation arrangements are legitimate, a compensation arrangement may violate the anti-kickback statute if even one purpose of the arrangement is to compensate a physician for his or her past or future referrals of Federal health care program business. OIG encourages physicians to carefully consider the terms and conditions of medical directorships and other compensation arrangements before entering into them.

OIG recently reached settlements with 12 individual physicians who entered into questionable medical directorship and office staff arrangements. OIG alleged that the compensation paid to these physicians under the medical directorship arrangements constituted improper remuneration under the anti-kickback statute for a number of reasons, including that the payments took into account the physicians’ volume or value of referrals and did not reflect fair market value for the services to be performed, and because the physicians did not actually provide the services called for under the agreements.

OIG also alleged that some of the 12 physicians had entered into arrangements under which an affiliated health care entity paid the salaries of the physicians’ front office staff. Because these arrangements relieved the physicians of a financial burden they otherwise would have incurred, OIG alleged that the salaries paid under these arrangements constituted improper remuneration to the physicians. OIG determined that the physicians were an integral part of the scheme and subject to liability under the Civil Monetary Penalties Law.

Those who commit fraud involving Federal health care programs are subject to possible criminal, civil, and administrative sanctions. For more information on physician relationships, see OIG’s “Compliance Program Guidance for Individual and Small Group Physician Practices” available at http://oig.hhs.gov/authorities/docs/physician.pdf and OIG’s “A Roadmap for New Physicians: Avoiding Medicare and Medicaid Fraud and Abuse” available at http://oig.hhs.gov/compliance/physician-education/roadmap_web_version.pdf.

If you have information about physicians or other providers engaging in any of the activities described above, contact the OIG Hotline at https://forms.oig.hhs.gov/hotlineoperations/ or by phone at 1-800-447-8477 (1-800-HHS-TIPS).

For more information on the recent OIG Fraud Alerts, please join Alan Gassman and Lester Perling for a free webinar on the topic. The webinar will be held on Monday, June 22nd at 5:00 PM. Please click here to register.

webinar ad - FINAL

A Logical Guide to Selecting a Buy-Sell Agreement Arrangement:
Traditional Choices are Not Always Best

by Alan Gassman

The following memorandum offers points to consider when choosing how to best arrange a buy-sell agreement, and summarizes why Cross Purchase and Redemption Agreements are most often, in our opinion, not “the best solution”:

Entity Redemption Arrangements

In an entity redemption arrangement, the company owns the life insurance policy and is the beneficiary thereof. Upon receipt of the life insurance proceeds, the company is to use such proceeds to buy out the deceased owner.

Some questions to consider before choosing an Entity Redemption Arrangement are as follows:

  1. Will there be enough money to (A) buy out the deceased owner and (B) have the deceased owner released from any and all guarantees and obligations associated with the business?
  2. If it is not practical to have the deceased owner released for contractual or other reasons, should the part of the life insurance proceeds that would otherwise be kept by the company as key man insurance be escrowed pending satisfaction of all releases that the deceased owner may have responsibility for?
  3. How can the deceased owner’s family be sure that the monies received from the life insurance policy will actually be used to satisfy contractual buy-out agreements?
  4. What if the company claims that, for some reason, the agreement is not enforceable or that there are claims against the deceased owner that offset what would be paid to him or her?
  5. What if the company has a major creditor claim against it (what if the deceased owner died in a car accident that he or she caused while driving a company vehicle, and the company is now being sued by others who died in the accident?)
  6. What if the company goes into bankruptcy and the family of the deceased owner becomes just another creditor in a bankruptcy proceeding?
  7. For income tax purposes, the remaining shareholders do not get a stepped-up basis for the stock purchased. The stock simply becomes treasury stock.

Cross-Purchase Agreements

To avoid the above potential problems, consider a cross-purchase agreement.

Each owner may own the policy or policies on the other owners. Thus, the policy proceeds should be protected from creditors of the company.

Additionally, each purchasing shareholder will get a tax basis in the purchased stock equal to the purchase price thereof. However, policy proceeds will not be protected from creditors of the surviving owner who would receive policy proceeds.

Also, contractual disputes could result in the surviving owner using the funds for other purposes while litigating over the obligation to pay and becoming insolvent.

Further, if there are more than two shareholders, then, on the death of one, the policies owned on the others would need to be transferred to rebalance between them, thus causing issues under the transfer for value rules. For example, if there are four equal shareholders, there has to be four policies, each owned one-third each by three shareholders on the fourth, and if one leaves the company, the remaining three policies have to be readjusted as to ownership. Under the transfer for value rules, this could cause the proceeds of a policy to be subject to income tax.

Hybrids of the Above

Consider a Trusteed Corporate or Cross-Purchase Agreement. Under these arrangements, the owner and beneficiary of the policy can be a trust company, a law firm, or another trusted institution as trustee for the benefit of the company in a Trusteed Redemption arrangement, or for the benefit of the other shareholder or shareholders in a Trusteed Cross Purchase arrangement. The trust agreement can require that the policy proceeds be held safely until sale and used solely for redemption or cross-purchase purposes.

This, at least, assures the surviving family that the life insurance proceeds will not be absconded with.

Generally, for tax purposes, the policy needs to be considered as owned and payable to the company in a redemption arrangement or the surviving owner or owners in a cross-purchase agreement. Could a state court or a bankruptcy court override the trust agreement where there are creditors of the entity in a redemption arrangement or creditors of the remaining shareholders in a cross-purchase arrangement?

There would be a purchase price tax basis for the other shareholders if the Trustee appropriately characterized as an agent for the other shareholders.

The Best Solution

Use of a Related Partnership to Facilitate Purchase is the best solution. Because of the above concerns, oftentimes a separate limited partnership or limited liability company is established to own and facilitate the life insurance buy-out arrangement.

This entity will be taxed as a partnership to avoid the transfer for value rules that would otherwise be problematic if there are more than two owners. Shifts of ownership in the policy would apply if there was a redemption arrangement.

The transfer for value rules do not apply when there is a reapportionment of entitlement to the proceeds of life insurance for use in a buy-sell arrangement between partners under a partnership. The partnership may have an additional investment besides the life insurance to help assure that it is recognized as a partnership for federal income tax purposes.

If the separate partnership is purchasing the interest in the entity on behalf of its surviving partners, who are the surviving owners of the operating entity, then a creditor of the company would have no claim against the policy proceeds, and a creditor of an individual “partner” in the partnership entity might have a claim against the member or partnership interest of the individual partner, but this would not permit the creditor to reach into the partnership to have a claim against the policy proceeds if appropriate charging order protection applies.

The redemption arrangement and the separate partnership arrangement described above should avoid this result.

The above strategy was blessed by the IRA in Private Letter Ruling 200747002, which discussed having term insurance held under an LLC taxed as a partnership to facilitate the buy-sell arrangement. Under this Private Letter Ruling, the manager of the LLC was a trust company that was required to use monies contributed to the LLC to purchase and maintain life insurance to fund a separate cross-purchased buy-sell agreement between three related shareholders. It would be possible to have permanent life insurance and to have special allocations of entitlement as to policy values under an LLC/partnership agreement. See The Advanced Planner, Volume 5, Issue #1, May-June 2008 at www.zelllaw.com and the ING publication entitled “Buy-Sell Planning Using Life Insurance/Buy-Sell Arrangements Using a General Partnership.”

Tax Court Approves the Mother of All Crummey Trusts with 60 Beneficiaries, Part II
by Ed Morrow and Alan Gassman

Last week, we featured Part I of a LISI newsletter by Ed Morrow and Alan Gassman regarding the case of Mikel v. Commissioner, which you can view by clicking here. Ed and Alan’s commentary on the case is featured below, and a silly poem about it (The Tax Lawyer on the Roof) can be viewed by clicking here.

COMMENT:

One of the important takeaways from the Mikel decision is: “Don’t forget the basic garden variety Crummey trust and to draft carefully!”

After clearing away the smoke created by the in terrorem clauses and religious arbitration panels, the result remains that the taxpayers were able to transfer illiquid assets into a trust and qualify for $1.44 million of tax-free gifts (this would translate to $1.68 million in 2015 with the exclusion now adjusted to $14,000 per donor per donee). Assuming the taxpayers remain New York residents, these tax-free gifts may save the family not only 40% federal estate tax but also the 16% New York estate tax.

The Crummey power beneficiaries included minors and spouses of family members as well. The IRS conceded more than 40 years ago that minors could have a present interest if there was no impediment to appointment of a guardian to make the withdrawal, in Rev. Rul. 73-405, so this was not an issue. We can also assume that the spouses had not only withdrawal powers but also distribution rights so that they were legitimate beneficiaries of the trust having a business reason to not exercise their withdrawal rights. There was no discussion as to whether such spouses would continue or be removed as beneficiaries of the trust in the event of a divorce (aka “floating spouse provisions”), which might have also been a logical line of IRS attack.

Should practitioners use forfeiture and in terrorem clauses for Crummey trusts? To interpret the above in terrorem clause, the Tax Court resorted to a canon of construction known as noscitur a sociis, a Latin phrase meaning “it is known by its associates.” Any time a court resorts to obscure Latin canons to rule on a case, there is probably an opportunity to draft a clearer trust! Attorneys should draft any such clause to make it crystal clear that any forfeiture and/or in terrorem clause does not apply to impair the withdrawal right.

However, a narrowly crafted in terrorem and forfeiture clause can be acceptable in Crummey trusts so long as the demand right is not impaired. For instance, a practitioner may want any hanging power or other mandatory right aside from a current Crummey power to be eliminated in the event of a creditor attack. While this may cause a minor gift tax event in the event of a hanging power, this may be the lesser of two evils compared to the corpus being seized by a creditor. Forfeiture clauses were recently upheld as protecting a beneficiary’s interest in trust from creditors in the recent federal district court’s reversal of the Castellano bankruptcy court decision which had initially denied protection.

Another potential issue brought up by the case, but only tangentially discussed in the third footnote, is the effect of the trustee’s discretionary ability to exclude beneficiaries from any withdrawal rights that stem from future contributions by the settlors. The IRS and the Tax Court agreed that this provision did not apply to the contributions in 2007 that initially funded the trust, so the issue was not relevant to decide the case. However, practitioners should be extremely careful about using such a clause. Have the Mikels made contributions in 2008-2015 to this trust to which that clause may apply? If so, and the trustee can, in his discretion, exclude beneficiaries from a withdrawal right, there may not be a present interest. Ultimately, it depends on the exact wording of the clause – the entire provision was not included in the case. However, the general idea may be dangerous if not carefully considered.

Such a clause is completely different from giving such a power to the settlors to decide future withdrawal rights via deed of gift, but it could probably be drafted to ensure a present interest. Let’s compare the settlor and trustee Crummey gatekeeper varieties and contrast with a concrete example. Let’s say the Mikels decided to make another $560,000 gift to the trust in 2015. They really don’t want to give sixty beneficiaries the withdrawal right. They only need to do so for twenty ($14,000 x 2 x 20 = $560,000), assuming no other gifts.

Now assume that some of the beneficiaries have creditors, marital strife, financial aid or special needs issues. If the trustee can choose the lucky twenty beneficiaries AFTER the gift is made, whether before notice or not, then no beneficiary has a present interest at the time of gift, the withdrawal right would only vest when the trustee chooses. This may be effective to create a withdrawal right but not to retroactively create a present interest. By contrast, if the trustee chooses beneficiaries eligible for the withdrawal right before or at the time of gift, each Crummey beneficiary’s withdrawal right would exist at the time of gift.

Although there is no case or ruling on this point, practitioners may even want to examine their state decanting statute that might enable the trustee to effectively accomplish the same result as above if not effectively curbed. While most decanting statutes, such as Florida’s or Ohio’s, would prohibit the trustee from eliminating a vested withdrawal right, that is not necessarily true of all decanting statutes. If the trustee can unilaterally revoke the right, the IRS may have a better argument that the power is illusory.

While it is clear that the withdrawal right should commence at the time of gift, attorneys differ on when the withdrawal right should lapse. Should the lapse occur within a reasonable time after the gift, or not until a reasonable time after notice, which may be quite some time later. In the Mikel case, notice was sent four months later. In Turner Est. v. Comr. (T.C. Memo 2011-209 (2011)), the Tax Court found that it is the existence of the legal withdrawal power itself, and not the fact that the beneficiary had notice of it, that permits the power to qualify for the annual exclusion.

The court in Turner also found that the estate need not provide beneficiaries notice of their withdrawal powers; concluding, “the fact that some or even all of the beneficiaries may not have known that they had the right to demand withdrawals from the trust does not affect their legal right to do so.” This same conclusion was echoed in a footnote in the Cristofani case (Estate of Cristofani v. Commissioner, 97 T.C. 74 (1991), and was similar to the rationale in original Crummey case, in which the beneficiaries probably did not have notice.

So why bother with any notice? The Turner opinion is in direct contrast to Rev. Rul. 81-7, 1981-1 C.B. 474, where the IRS opined that a beneficiary must be given notice of any withdrawal right in order for the gift to be considered a present interest.

To follow Rev. Rul. 81-7, therefore, any lapse should be tied to notice. However, this may be overly conservative in light of the case law and could lead to other asset protection concerns – if a beneficiary is sued and attacked by creditors, can he/she adequately prove receipt of prior notices and the subsequent lapses? Similarly, when the beneficiary dies, the uncertain lapse may cause greater estate inclusion. Thus, perhaps the best approach may be to require that the notice be given, but to have the withdrawal power lapse within the earlier of 15 days after notice or a reasonable time after the gift, which may be longer, such as 2-6 months. This would allow a timely notice to accelerate the lapse or provide some protection in the event notice is inadvertently not given. Obviously, this is subject to the necessity of having hanging powers when used as a part of generation skipping trust and associated planning. A period no longer than sixty days from the gift would be recommended if a spouse is a Crummey beneficiary and GST will be allocated to avoid the Estate Tax Inclusion Period (ETIP).[1]

Could this case be the straw that breaks the camel’s back for million-dollar Crummey power trusts? The IRS has disliked the Crummey case and its ever more expansive progeny, such as Cristofani and Kohlsaat, for decades. In the 2015 Greenbook, the Obama Administration has heard their pleas and argued for passage of a new provision that would greatly simplify, but undercut, the use of such provisions.

Under the new proposal, the annual exclusion gift would be expanded and increased to $50,000/yr. – and the “present interest” requirement currently in §2503(b) would be eliminated. This would be a boon to small families, greatly simplifying trust administration and compliance – Crummey powers would no longer be needed. Moreover, disputes as to whether a closely held business constitutes a present interest, as litigated in the Hackl, Fisher, and Price cases, would also go away. To quote the Greenbook, “the cost to taxpayers of complying with the Crummey rules is significant, as is the cost to Internal Revenue Service (IRS) and enforcing the rules.” However, the new and improved annual exclusion would be a total annual cap of $50,000 per donor – not per donee. For a family like the Mikels, this would mean reducing the annual exclusion benefit from $1.68 million per year to only $100,000 per year.

Another reason the Administration may see this case as ammunition for change is the less obvious loophole that Crummey and its progeny create to avoid income taxes. For instance, even if the Mikels had a non-taxable estate, they can transfer $1.68 million (and increasing) in property to trusts, gift tax free, and grant older beneficiaries, or themselves (with limitations of reciprocal trusts, completed gift and other issues), powers that would cause selective estate inclusion upon any beneficiaries’ death up to the maximum amount that would not cause estate taxes. This allows a step-up in basis upon any power holder’s death, including any older power holders, which is not generally hampered by the same issues that may constrain a JEST, Estate, or Community Property Trust.

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[1] Treas. Reg. § 26.2632-1 (c)(2)(ii)(B).

Richard Connolly’s World
Planning for the Future

Insurance advisor Richard Connolly of Ward & Connolly in Columbus, Ohio often shares with us pertinent articles found in well-known publications such as The Wall Street Journal, Barron’s, and The New York Times. Each week, we will feature some of Richard’s recommendations with a link to the articles.

This week, the first article of interest is “Why Estate Planning for a Distant Future Requires Flexibility” by Anna Prior. This article was featured in The Wall Street Journal on May 4, 2015.

Richard’s description is as follows:

The very wealthy often expect their family fortune to last for generations. The challenge these days, when the pace of change seems to be ramping up, is getting them to plan that far ahead.

Financial advisers and estate planning professionals say many of their clients feel uncertain about the kind of world their heirs will inhabit, what with advances in technology, political and economic upheaval, and even fast-evolving views of what constitutes a family.

These concerns can be addressed by emphasizing flexibility and employing a variety of estate planning techniques to make sure that a multigenerational trust – and a family’s financial legacy – isn’t too rigid, advisers say.

Please click here to read this article in its entirety.

The second article of interest this week is entitled “Tips for the Future Care of Disabled Family Members” by Tara Siegel Bernard. This article was featured in The New York Times on March 27, 2015.

Richard’s description is as follows:

Planning for family members with special needs can be overwhelming, particularly when so many decisions may have lifelong consequences. Beyond figuring out the intricacies of government programs, parents fret over guardianships, how governmental services may erode, and what legal documents they need.

And soon, there will be a new savings account to consider, known as a 529A or ABLE account, which will permit people with disabilities to keep more money in their own names without losing means-tested benefits.

This article provides a few tips for families beginning to plan for individuals with special needs.

Please click here to read this article in its entirety.

John Cleese & Eric Idle in Clearwater

John Cleese and Eric Idle of Monty Python fame are bringing their show to Clearwater! This is a production not to be missed!  If you are not familiar with the work of John Cleese and Eric Idle, check out Spamalot and Fawlty Towers.

John Cleese & Eric Idle: Together Again At Last…For the Very First Time will be performed on October 14 and October 15 at Ruth Eckerd Hall. REH’s description of the show is as follows:

In Together Again At Last…For the Very First Time, Cleese and Idle will blend scripted and improvised bits with storytelling, musical numbers, exclusive footage, aquatic juggling, and an extended audience Q&A to craft a unique comedic experience with every performance. No two shows will be quite the same, thus ensuring that every audience feels like they’re seeing the show for the very first time. And now you know why the show is called that, don’t you?

As founding members of Monty Python, Cleese and Idle are unarguably among the godfathers of modern comedy, helping to pioneer an irreverent, absurdist sensibility that is emulated by comics around the world. As individuals, they have written, performed, and produced some of the most beloved and critically-acclaimed shows of all time, including Spamalot, A Fish Called Wanda, Fawlty Towers, and The Rutles.

Tickets to Together Again At Last…For the Very First Time go on sale to the public on Friday, June 19, 2015 at 10:00 AM. Please click here to purchase tickets or for more information about the show.

Thoughtful Corner
Your Email is Evidence Mail

Miami lawyer and law professor Denis Kleinfeld coined the term “evidence mail” to emphasize that emails can and will often reveal problematic messages and communications in litigation.

Even emails that you send your clients will be discoverable if the client forwards them to non-privileged parties or if the client permits the emails to be disclosed. These emails may paint you in a very negative tone from the standpoint of typographical errors, poor grammar, snappiness, or reading something the wrong way.

A client has the right to request their client file, and if you have put something flippant about the client in an email to another team member, will the client see this email, and will it be held against you?

Lawyers and CPAs are covered under the lawyer/client privilege, as are experts who are retained under a “Kovol” confidentiality letter or agreement. Even arm’s-length parties engaged in a transaction or negotiations may enter into a joint defense agreement to enable their communications through lawyers and other professionals to remain confidential under the attorney/client privilege. But what about when a tax lawyer or CPA writes a letter to a financial planner describing what the financial plan is and what possible potential tax issues might arise?

The IRS will certainly want to see any correspondence or emails that express concerns about how a certain transaction or arrangement will be taxed, and if those would be admissible to be seen by an IRS appeals officer or a Court of Claims or a federal district court judge overseeing a tax controversy, major damage may be done to a client’s case.

The law on whether communications with a financial planner will be privileged is a bit murky, and taxpayers have been successful in the past in convincing IRS auditors that such communications are privileged, but the law is not very clear on this, so care needs to be exercised.

On the other hand, how can you appropriately use the team approach and make sure everyone is on the same page if you are not able to write a letter or email confirming what has been discussed in meetings or otherwise?

One way to handle this is to have a meeting, discuss it orally, and then provide a memorandum which reviews what was said after everyone who was at the meeting agrees to as being accurate.

Humor! (or Lack Thereof!)

Sign Saying of the Week

Sign

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Marcia Gassman has survived 34 years of marriage to a tax lawyer!

Marcia 1

Her advice to other spouses is that in order to survive you must do the following:

Laugh a lot!

epeoplelaughing

Drink a lot!

kbusinessafterwork

Become a cartoon character!

Marcia 2

The Thursday Report thanks Marcia for her incredible tolerance and for not leaving Alan to become half-owner of the Thursday Report or the owner of an every other Thursday Report.  Their inability to divide this asset has kept them together for the last two years.

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IN THE NEWS
by Ron Ross

Avocados Strive for World Domination
aka The Story of Avacad-O

Until recently, scientists were confident that they had confined the avocado to California. In the past few years, however, avocados began appearing in the east, first camouflaged in salads, then in puree form next to the nachos, the salsa, and that dip pretending to be cheese.

It had been assumed that avocado and bacon could not exist in proximity to one another, much like matter and anti-matter, but this combination has now been found in sandwiches around the country, with worrying implications for the future of digestion.

Public Health officials maintain that the fear of avocados is overblown, despite the fact that guacamole, the evil offspring of avocado, looks exactly like the creeping green slime that science fiction movies always warned us about. Further, they say our unreasonable fear reminds them of the hysteria that was associated with the “killer bee” scare of the 1970s. They point out that “killer bees” came from Mexico, the original home of the avocado, and are we prejudiced or something?

These officials insist that everything is fine as long as we completely destroy the black thing inside of the avocado and under no circumstances keep it and allow something to grow out of it.

Upcoming Seminars and Webinars

LIVE WEBINAR:

Lester Perling and Alan Gassman will be presenting a free, live, 15-minutes webinar on THE OIG’S WARNING SHOT ABOUT PHYSICIAN COMPENSATION AND MEDICAL DIRECTORSHIPS.

Date: Monday, June 22, 2015 | 5:00 p.m. (15 minutes)

Location: Online webinar

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

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LIVE BLOOMBERG BNA WEBINAR:

Alan Gassman, Christopher Denicolo, Jerome Hesch, and Stephen Breitstone will present a Bloomberg BNA Webinar on CREATIVE TAX PLANNING FOR REAL ESTATE TRANSACTIONS AND INVESTORS: A PRACTICAL GUIDE FOR REAL ESTATE AND TAX ADVISORS AND THEIR CLIENTS.

Date: Tuesday, June 23, 2015

Location: Online webinar

Additional Information: To register for this webinar, please click here. For more information, please email agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman and noted trust and estate litigator, LL.M in estate planning, and blog master Juan Antunez, J.D., LL.M. will present a free 30-minute webinar on HOW AND WHEN TO USE ARBITRATION CLAUSES FOR TRUSTS AND WILLS. 

Don’t miss Juan’s wonderful blog site entitled Florida Probate & Trust Litigation Blog, which can be accessed by clicking here, and the many very useful articles thereon.

Date: Thursday, June 25, 2015 | 12:30 PM

Location: Online webinar

Additional Information: To register for this webinar, please click here.

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LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on FINANCIAL RELATIONSHIPS WITH PATIENTS, CO-PAYMENTS, GIFTS, AND GRAFT – HOW TO STAY OUT OF TROUBLE UNDER FLORIDA AND FEDERAL LAW.

This is an essential guide for medical practices and those who advise them. There will be two opportunities to attend this presentation.

Date: Tuesday, July 7, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FLORIDA INSTITUTE OF CPAs (FICPA) WEBINAR:

Alan Gassman will present a webinar on the topic of WHAT FLORIDA CPAS NEED TO KNOW ABOUT ASSET PROTECTION for the Florida Institute of CPAs.

More information about this webinar will be forthcoming. Please stay tuned!

Date: Thursday, July 9, 2015 | 9:30 AM – 10:30 AM

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com. To register, please contact Thelma Givens at givenst@ficpa.org.

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LIVE ORLANDO PRESENTATION:

ORLANDO BUSINESS AND PROFESSIONAL PRACTICE OWNER SYMPOSIUM

Alan S. Gassman, business coach and author David Finkel, and others will present a two-day conference for high-net-worth business and professional practice owners sponsored by Maui Mastermind®.

Alan’s topics will include BASIC AND ADVANCED PLANNING TECHNIQUES FOR THE PROTECTION OF WEALTH, THE 10 BIGGEST MISTAKES THAT BUSINESS OWNERS AND PROFESSIONALS MAKE, and ESTATE TAX AVOIDANCE TECHNIQUES FOR BUSINESS OWNERS AND PROFESSIONALS.

Other topics include A Proven Map to Grow Your Business and Get Your Life Back, Building Wealth Outside of Your Company, Tax Reduction Strategies, and Understanding How Investments Work and What They Cost.

Interested individuals can contact agassman@gassmanpa.com or David Finkel at david@mauimastermind.com.

Date: July 30th and 31st, 2015

Location: Hyatt Regency Orlando | 9801 International Drive, Orlando, FL 32819

Additional Information: To register, please click here or email agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman and Christopher Denicolo will present a live, free, 30-minute webinar on the topic of CREDITOR PROTECTION PLANNING FOR PHYSICIANS AND MEDICAL PRACTICES. There will be two opportunities to attend this presentation.

Date: Wednesday, August 12, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email agassman@gassmanpa.com.

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LIVE BRADENTON PRESENTATION:

Alan Gassman will speak at the Coastal Orthopedics Physician Education Seminar on the topics of CREDITOR PROTECTION AND THE 10 BIGGEST MISTAKES DOCTORS CAN MAKE: WHAT THEY DIDN’T TEACH YOU IN MEDICAL SCHOOL.

This 50 minute informative talk with extensive materials will cover essential aspects and trip-ups that doctors often encounter in the area of personal and practice entity asset protection. It will also discuss tax and investment planning, advisor selection, health law, compliance, and other areas of interest for physicians.

Each attendee will receive a complimentary copy of Mr. Gassman’s book, Creditor Protection for Florida Physicians and other valuable materials.

Coastal Orthopedics, Sports Medicine, and Pain Management is a comprehensive orthopedic practice which has been taking care of patients in Manatee and Sarasota Counties for 40 years. They have sub-specialized, fellowship-trained physicians as well as in-house diagnostics, therapy, and an outpatient surgery center to provide comprehensive, efficient orthopedic care.

Date: Thursday, August 13, 2015 | 6:00 PM

Location: Coastal Orthopedics and Sports Medicine | 6015 Pointe West Boulevard, Bradenton, FL, 34209

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

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LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on the topic of MEDICAL LAW UPDATE – FEDERAL AND FLORIDA DEVELOPMENTS THAT MEDICAL PRACTICES AND ADVISORS NEED TO BE AWARE OF. There will be two opportunities to attend this presentation.

Date: Tuesday, August 18, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Live webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE AVE MARIA SCHOOL OF LAW PROFESSIONAL ACCELERATION WORKSHOP:

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

Cost of attendance is $35.00. If you are a student or alumni of Ave Maria School of Law, the cost of attendance is $20.00.

Delicious lunch, snacks and amazing conversations included!

CLICK HERE TO REGISTER

Date: Saturday, August 22, 2015 | 9:00 AM – 5:00 PM

Alan Gassman’s Professional Acceleration Workshop was a fast-paced, information-packed, and highly instructional event.  Through interactive discussions of time-tested professional and personal growth strategies ranging from goal setting and problem solving to office efficiency and effective team building, Alan provides a thoughtful and measured approach to becoming a highly effective professional.  I left the workshop feeling invigorated and excited to implement the insights into my practice management and continued self-study.  The course materials and Alan’s compilation of trusted additional resources will be an invaluable resource for years to come.  Thank you for the opportunity to participate.

Christina Rankin, J.D., LL.M. (Taxation)
Trust and Estates Lawyer with Over 10 Years of Experience
Law Offices of Richard D. Green, J.D., LL.M.

Course materials are available on Amazon.com for $1.99 and can be found by clicking here.

Location: Thomas Moore Commons, Ave Maria School of Law, 1025 Commons Circle, Naples, FL 34119

Additional Information: To download the official invitation to this event, please click here. To RSVP and for more information, please contact Donna Heiser at dheiser@avemarialaw.edu or via phone at 239-687-5405 or Alan Gassman at agassman@gassmanpa.com or via phone at 727-442-1200.

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LIVE SARASOTA PRESENTATION:

Alan Gassman will speak at the Southwest Florida Estate Planning Council meeting on September 8th on the topic of EVERYTHING YOU ALWAYS WANTED TO KNOW ABOUT CREDITOR PROTECTION AND DIDN’T EVEN THINK TO ASK.

Date: Tuesday, September 8, 2015 | 3:30 PM – 5:30 PM with dinner to follow

Location: Sarasota, Florida

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

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of THE 10 BIGGEST MISTAKES THAT SUCCESSFUL PARENTS (AND GRANDPARENTS) MAKE WITH RESPECT TO COLLEGE AND RELATED DECISIONS FOR HIGH SCHOOL STUDENTS.

Date: Saturday, September 12, 2015 | 9:30 AM

Location: Online Webinar

Additional Information: To register for this webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FORT LAUDERDALE PRESENTATION:

Ken Crotty will be presenting a 1-hour talk on PLANNING FOR THE SALE OF A PROFESSIONAL PRACTICE – TAX, LIABILITY, NON-COMPETITION COVENANT, AND PRACTICAL PLANNING at the Florida Institute of CPAs Annual Accounting Show.

Date: Friday, September 18, 2015 | 3:30 PM – 4:20 PM

Location: Broward County Convention Center | 1950 Eisenhower Blvd, Fort Lauderdale, FL 33316

Additional Information: For additional information, please email Ken Crotty at ken@gassmanpa.com or CPE Conference Manager Diane K. Major at majord@ficpa.org.

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of FAILURE TO LAUNCH: 20-SOMETHINGS WITHOUT A SOLID CAREER PATH – WHAT PARENTS (AND OTHERS) NEED TO KNOW.

Date: Saturday, October 3, 2015 | 9:30 AM

Location: Online webinar

Additional Information: Please click here to register for this webinar. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman, Ken Crotty, and Christopher Denicolo will present a webinar on the topic of WHAT EVERY NEW JERSEY ATTORNEY SHOULD KNOW ABOUT FLORIDA ESTATE PLANNING. This webinar will qualify for 2 New Jersey CLE credits.

Most advisors with Florida clients are unaware of the unique rules and planning considerations that affect Florida estate, tax, and business planning. Unlike some other states, Florida’s laws regarding limited liability companies, powers of attorney, taxation, homestead, creditor exemptions, trusts and estates, and documentary stamp taxes are not simply versions of a Uniform Act. They have been crafted by the Florida legislature to apply to various specific issues in an often counterintuitive manner.

This presentation will the following objectives:

  • Unique aspects of the Florida Trust and Probate Codes
  • Creditor protection considerations and Florida’s statutory creditor exemptions
  • The Florida Power of Attorney Act
  • Traps and tricks associated with Florida’s Homestead Law and Elective Share
  • Documentary stamp taxes, sales taxes, rent taxes, property taxes, and how to avoid them
  • Business and tax law anomalies and planning opportunities

Date: Thursday, October 8, 2015 | 12:00 PM – 1:40 PM

Location: Online Webinar

Additional Information: For more information, please email Alan Gassman at agassman@gassmanpa.com or Eileen O’Connor at eoconnor@njsba.com.

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LIVE SARASOTA PRESENTATION:

2015 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: Saturday, October 24th, 2015

Location: To Be Determined

Additional Information: Please contact Alan Gassman at agassman@gassmanpa.com for more information.

Notable Seminars by Others
(These conferences are so good that we were not invited to speak!)
 

LIVE ORLANDO PRESENTATION: 

50TH ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING 

Date: January 11 – January 15, 2016 

Location: To be announced 

Additional Information: Information on the 50th Annual Heckerling Institute on Estate Planning will be available on August 1, 2015. To learn about past Heckerling programs, please visit http://www.law.miami.edu/heckerling/.

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION 18TH ANNUAL ESTATE, TAX, LEGAL & FINANCIAL PLANNING SEMINAR

We are pleased to announce that Jonathan Blatttmachr, Howard Zaritsky, Lee-Ford Tritt, Lauren Detzel, Michael Markham, and others will be speaking at the 2016 All Children’s Hospital Estate, Tax, Legal & Financial Planning Seminar.

Lauren Detzel will be speaking on Family Law and Tax Planning for Divorce, while Michael Markham will be speaking on Bankruptcy and Creditor Protection/Fraudulent Transfer in Context with Estate Planning.

We thank Lydia Bailey and Lori Johnson for their incredible dedication (and patience with certain members of the Board of Advisors.) All Children’s Hospital is affiliated with Johns Hopkins, which is not affiliated with Anthony Hopkins.

Please provide us with your input for other topics for this year and next! Watch this space for more speaker and topic announcements.

Date: Wednesday, February 10, 2016

Location: Live Event at the All Children’s Hospital St. Petersburg Campus; Live webcasts in Tampa, Fort Myers, Belleair, New Port Richey, Lakeland, and Sarasota

Additional Information: Please contact Lydia Bennett Bailey at lydia.bailey@allkids.org 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.

June Rates

The Thursday Report – 6.11.15 – 2704 Regulations – Watch Out Family Entities!

Posted on: June 11th, 2015

For Tax Lawyers Who Like to Worry – The Hopefully Remote Possibility of Treasury Regulations Being Issued Under Internal Revenue Code 2704

Upcoming Section 2704 Proposed Regulation May Impact Valuation Discounts for Family Entities by Steve R. Akers

Tax Court Approves the Mother of All Crummey Trusts with 60 Beneficiaries, Part I

Richard Connolly’s World – Asset Protection in a Digital World

Thoughtful Corner – Success Tips for First Year Lawyers, Part II

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 Stephanie at stephanie@gassmanpa.com.

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

For Tax Lawyers Who Like to Worry:
The Hopefully Remote Possibility of Treasury Regulations Being Issued Under Internal Revenue Code 2704

Some commentators have long anticipated that the Treasury would release regulations under Internal Revenue Code 2704, although no proposed regulations have been issued. At a recent American Bar Association Tax Section meeting, Cathy Hughes of the United States Treasury had some comments about possible proposed regulations under the IRS proposed regulations under Internal Revenue Code Section 2704.

At this time, the release of such regulations is speculation and would not have any effect until proposed regulations are released by the Treasury, at the very earliest. Nevertheless, it is important to keep abreast of further developments on this topic.

Section 2704 was enacted in 1990 with the objective of limiting discounts for certain family partnership or LLC interests that are conveyed between family members. The Section operates to disregard certain “applicable restrictions” that apply to the interests in question for the purposes of valuing such interest. This would result in the value of such interests being higher than they would otherwise be if the applicable restrictions were recognized.

Ms. Hughes indicated that the new proposed regulations might expand the scope of restrictions that would be disregarded for the purposes of valuing an interest in a family limited partnership or LLC. These regulations might also disregard restrictions that apply to a transferee of an interest in a family limited partnership or LLC, and restrictions that might apply if a third party non-family member owns an interest in the applicable entity.

At this time, the discussion of the proposed regulations to Section 2704 is speculative, but it is possible that the Treasury and the IRS could push for any such proposed regulations to be retroactively effective on the date of which they were proposed, which could be later this year.

For a more in-depth discussion of possible regulations under Section 2704, please see the excellent discussion provided by Steve Akers of Bessemer Trust, which has been reproduced below with Steve’s permission.

Upcoming Section 2704 Proposed Regulation May Impact Valuation Discounts for Family Entities
by Steve R. Akers

akers_steve

Steve R. Akers is a Managing Director with Bessemer Trust in Dallas, Texas, where he is a Senior Fiduciary Counsel of the Southwest Region. Mr. Akers is a member of the Advisory Committee to the University of Miami Philip E. Heckerling Institute on Estate Planning and is a frequent speaker at the event, as well as other estate planning seminars across the country. He is a Fellow of the American College of Trust and Estate Counsel and currently serves as a member of the Executive Committee, Regent, and Chair of the Business Planning Committee. Akers is a co-author of A Planning Guide to Buy-Sell Agreements and Estate Planning After the Tax Relief and Job Creation Action Act of 2010. He can be reached at akers@bessemer.com.

IRS and Treasury officials have indicated that a new §2704 proposed regulation may be issued sometime this year. A proposal to amend §2704 (presumably to provide legislative support for positions the IRS will take in the proposed regulation) was dropped several years ago, but that legislative proposal reportedly points to the scope of what the proposed regulation will cover. Section 2704 deals with “liquidation restrictions,” but the new proposed regulation may create additional categories of “disregarded restrictions” that may impact valuation discounts for family entities. There is a possibility that the proposed regulation will be effective when finalized retroactive to the date of the issuance of the proposed regulation.

I. OVERVIEW

Section 2704(b)(3) gives the Treasury broad authorization to issue regulations that would disregard certain “other restrictions” in determining the value of an interest in a corporation or partnership transferred to a family member if the restriction “does not ultimately reduce the value of such interest to the transferee.” IRS and Treasury officials hinted about eight years ago that they were close to issuing such a proposed regulation (reflecting a §2704 guidance project that was placed on the IRS/Treasury Priority Guidance Plan in 2003), but President Obama’s first budget proposal included a revenue proposal to revise §2704, and the §2704 regulation project was put on hold pending the possible passage of such legislation that might provide legislative support for the positions the new proposed regulation might take. Not a single bill was ever introduced addressing the legislative proposal, however, and the §2704 legislative proposal was omitted from the President’s budget proposal released in February 2012.

II. SECTION 2704 STATUTORY BACKGROUND

Section 2704 was enacted in 1990 as a part of Chapter 14. The goal in particular was to limit discounts for certain family partnership or LLC interests that are transferred to family members. Section 2704(b) is titled “Certain Restrictions on Liquidation Disregarded.” It provides that any “applicable restriction” is disregarded in valuing an interest in a corporation or partnership that is transferred to a family member if the transferor and family members control the entity. An “applicable restriction” is any restriction that (i) effectively limits the ability of the corporation or partnership to liquidate, and (ii) the restriction lapses (entirely or partially) after the transfer OR the transferor or family members can remove the restriction (entirely or partially), but an “applicable restriction” does not include “any restriction imposed, or required to be imposed, by any Federal or State law” (or commercially reasonable restrictions imposed by unrelated persons in a financing transaction).

Section 2704(b)(4) includes broad legislative authority for the IRS to issue regulations that would disregard “other restrictions”:

The Secretary may by regulations provide that other restrictions shall be disregarded in determining the value of the transfer of any interest in a corporation or partnership to a member of the transferor’s family if such restriction has the effect of reducing the value of the transferred interest for purposes of this subtitle but does not ultimately reduce the value of such interest to the transferee.

The title to §2704(b) is “Certain Restrictions on Liquidation Disregarded.” The authorization of regulatory authority in §2704(b)(4) does not specifically limit the regulations to “other liquidation restrictions” but merely refers to “other restrictions.” Does this provide legislative authority for regulations limiting discounts for reasons other than merely disregarding liquidation restrictions despite the title of §2704(b)?

III. SIGNIFICANCE OF STATE LAW EXCEPTION

The exception for “any restriction imposed, or required to be imposed, by any Federal or State law” is very important. The “state law” exception is clearly integrated into the existing regulations.

“An applicable restriction is a limitation on the ability to liquidate the entity (in whole or in part) that is more restrictive than the limitations that would apply under the State law generally applicable to the entity in the absence of the restriction…Ability to remove the restriction is determined by reference to the State law that would apply but for a more restrictive rule in the governing instrument of the entity…A restriction imposed or required to be imposed by Federal or State law is not an applicable restriction.” Treas. Reg. §25.2702-2(b).

“(c) Effect of disregarding an applicable restriction – If an applicable restriction is disregarded under this section, the transferred interest is valued as if the restriction does not exist and as if the rights of the transferor are determined under the State law that would apply but for the restriction” Treas. Reg. §25.2704-2(c).

The exception for restrictions imposed by State law has dramatically reduced the applicability of §2704 to partnership and LLC transfers. Many state legislatures have revised limited partnership and LLC laws after the passage of §2704 to provide various limitations on the rights of limited partners or LLC members to make transfers under default rules that apply unless the partnership or operating agreement specifically overrides those default rules.

IV. UPCOMING REGULATION PROJECTS

Cathy Hughes [of the Office of Tax Policy, Department of Treasury] provided insight as to the regulation projects impacting estate planners that we might expect to see in the near future. Projects that she mentioned include: (1) Final portability regulations (the temporary regulations expire June 15, 2015); (2) Guidance under the ABLE Act allowing states to create “Section 529-type” accounts for the disabled (which would also likely appear in June); (3) Final regulations regarding basis rules for interests in charitable remainder trusts; (4) Guidance regarding the §2801 tax on gifts by certain expatriates to US citizens and residents (this has been a “high priority” for several years); and after that guidance is issued (5) Section 2704 proposed regulations. (The preceding information is based on a summary of the ABA Tax Section meeting by Diane Freda. Freda, Guidance on Material Participation for Trusts, Estates May Emerge in Stages, BNA Daily Tax Report (May 12, 2015).)

This summary suggests that the §2704 regulations will not be issued within the next several months but might conceivably be issued later this summer or this fall. Cathy Hughes said that various Treasury initiatives (she did not specifically include all of the projects listed above) are likely to be delivered before the ABA Tax Section fall meeting (which is September 17-19, 2015).

V. POSSIBLE SCOPE OF NEW §2704 PROPOSED REGULATION

Cathy Hughes said that the scope of what the new regulations might include are indicated by the §2704 legislative proposal (last included in the Fiscal Year 2013 Greenbook, “General Explanations of the Administration’s Fiscal Year 2013 Revenue Proposals” dated February 2012). (This suggests that the new proposed regulations may include many of the items that were being considered eight years ago. The Treasury presumably suggested the §2704 legislative project to the Obama administration to support the provisions that it wanted to include in its new regulations.)

The §2704 legislative proposal in the Greenbooks for the Obama administration, ending with the 2013 Fiscal Year Greenbook, includes five items. The new §2704 regulation may include some or all of these subjects.

a. Additional “Disregarded Restrictions.” – An additional category of restrictions (“disregarded restrictions,” which are in addition to the liquidation restrictions addressed in §2704) may be disregarded in determining the value of interests in “family-controlled entities” (observe, this is not limited just to partnerships and LLCs) that are transferred to family members. What are those additional restrictions? They are “to be specified in regulations.” Transferred interests would be valued by substituting for “disregarded restrictions certain assumptions to be specified in regulations. Disregarded restrictions would include limitations on a holder’s right to liquidate that holder’s interest that are more restrictive than a standard to be identified in regulations.”

b. Assignee Interests. – Restrictions on a transferee being able to become a full-fledged partner (or member of an LLC) would be a disregarded restriction.

c. Third Party Involvement in Removing Restrictions. – Section 2704(b)(2)(B)(ii) says that one of the general requirements of an “applicable restriction” is that the transferor or family members can remove the restriction. (The Greenbook proposal generally retains this family-removal requirement with respect to “disregarded restrictions.”) The Fifth Circuit in the Kerr case reasoned that §2704 did not apply to the partnership in that case because charities had small limited partnership interests, and all partners had to consent to removing restrictions; thus, the family acting alone could not remove the restrictions. Kerr v. Commissioner, 292 F.3d 490 (5th 2002). Under the legislative proposal, “certain interests (to be identified in regulations) held by charities or others who are not family members of the transferor would be deemed to be held by the family.”

d. Safe Harbor. – The statute would provide regulation authority that would include “the ability to create safe harbors to permit taxpayers to draft the governing documents of a family-controlled entity so as to avoid the application of section 2704 if certain standards are met.”

e. Marital and Charitable Deduction. – The legislation would include provisions dealing with the interaction of the marital and charitable deductions for transfer tax purposes. Therefore, if an interest is valued higher than its actual fair market value for transfer tax purposes, the higher value might also be applied for marital deduction and charitable deduction purposes (a taxpayer-friendly provision).

To view the legislative proposal that was included in the President’s budget proposals for fiscal years 2010-2013, click here.

VI. EFFECTIVE DATE

Treasury regulations are typically effective on the date final regulations are issued. At least several years typically lapse from the time proposed regulations are issued until the regulations are finalized. In very limited situations, proposed regulations provide they will be effective when finalized retroactive back to the date of the proposed regulations. For example, the proposed regulations regarding the income tax effects of private annuities issued in 2006 take that approach (and interestingly, those regulations still have not been finalized, nine years after the proposed regulations were issued, see REG-141901-05k proposing changes to Reg. §§1.72-6(e) & 1.100(j)). The initial “anti-Kohler” proposed regulations that were issued in 2008 also took that “retroactive effect” approach, but the revised proposed regulation issued in 2011 dropped that harsh effective date provision. See Prop. Treas. Reg. §20.2032-1(f). Cathy Hughes suggested at the ABA Tax Section meeting that the Treasury and IRS are still considering what should be the appropriate effective date of the proposed regulation.

VII. LEGISLATIVE HISTORY

Some planners have expressed concern that the proposed regulation may limit the availability of minority and marketability discounts for transfers involving family-controlled entities. See Freda, Guidance on Material Participation for Trusts, Estates May Emerge in Stages, BNA Daily Tax Report (May 12, 2015) (summarizing comments of Richard Dees). The legislative history (the 1990 Conference Report) makes clear that Chapter 14 was not intended to “affect minority discounts or other discounts available under [former] law.” The Senate’s discussion of the former law and the impact of Chapter 14 is rather emphatic.

“The value of property transferred by gift or includable in the decedent’s gross estate generally is its fair market value at the time of the gift or death. Fair market value is the price at which the property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts (Treas. Reg. sec. 20.2031-1(b)). This standard looks to the value of the property to a hypothetical seller and buyer, not the actual parties to the transfer. Accordingly, courts generally have refused to consider familiar relationships among co-owners in valuing property. For example, courts allow corporate stock to be discounted to reflect minority ownership even when related persons together own most or all of the underlying stock.

The bill does not affect minority discounts or other discounts available under present law.

The bill does not affect the valuation of a gift of a partnership interest if all interests in the partnership share equally in all items of income, deduction, loss, and gain in the same proportion (i.e., straight-up allocations).” (136 Cong. Rec. § 15679, 15681 (October 18, 1990) (emphasis added)).”

Perhaps the existence of this legislative history is the reason that the IRS, beginning in 2009, sought legislative changes to §2704 before issuing its new proposed regulations.

To download this report, please click here.

Tax Court Approves the Mother of All Crummey Trusts with 60 Beneficiaries, Part I
by Ed Morrow and Alan Gassman

In April, we featured a LISI Newsletter article by Jonathan Gopman and others on the case of Mikel v. Commissioner, which you can view by clicking here. Last month, Ed Morrow and Alan Gassman published a follow-up LISI article on the case, which is featured below:

EXECUTIVE SUMMARY:

In the Tax Court Memorandum decision of Mikel v. Commissioner, Judge Lauber wrote a very well-reasoned opinion on summary judgment, that $1,440,000 of gifted property valued at $3,262,000 qualified for the gift tax annual exclusion, based on 60 beneficiaries having withdrawal rights of $24,000 each (the annual exclusion was $12,000 per year per donor at the time of gift). The Court ruled in favor of the Mikels despite the facts that the property was apparently illiquid, many of the beneficiaries were either minors or spouses of the immediate family, and the trust contained an ambiguous forfeiture clause and included a complicated provision for a religious arbitration panel.

This decision is contrary to a prior IRS Chief Counsel Memorandum issued in 2012 and continues a long line of defeats suffered by the IRS in this area. It gives encouragement to practitioners to maximize the use of Crummey trusts, not only for taxpayers with taxable estates, but also for those with non-taxable estates who can use such trusts for income tax and asset protection reasons. Conversely, it will give further ammunition to current Administration’s “Greenbook” proposals that limit such annual exclusion gifts to $50,000 per donor – no matter how many donees.

Ambiguities in the trust document gave the IRS a colorable argument that both the discretionary distribution language and the in terrorem clause would prevent beneficiaries from being able to exercise their withdrawal power. Judge Lauber referred to the trust language as being “not a paragon of draftsmanship,” as a reminder to us all that trust language should be as article and straightforward as possible.

While this case is instructive on a number of interesting issues, it must be stressed that it is merely a memorandum rather than a full Tax Court opinion. However, this merely indicates that the Tax Court considered any legal issues to be well-established and well-settled. After forty-seven years of attacking Crummey trusts, one would hope that the IRS will finally take the hint.

FACTS:

The Mikels, husband and wife, gifted three properties in Brooklyn and one in Florida to an irrevocable trust in 2007, with a total value of $3,262,000, the value of one property reported as “on the 2007/2008 New York City Real Property Tax Assessment Rolls” – which apparently the IRS did not contest. The trust contained a fairly standard “Crummey” provision which:

  • Granted each beneficiary the right to withdraw property, including the property transferred, by pro rata formula, limited to “the maximum federal gift tax exclusion under 2503(b),” which was $12,000 at the time;
  • Required the trustee to give notice of the withdrawal right to all beneficiaries or their guardians within a reasonable time;
  • Required the trustee to “immediately distribute to such beneficiary or guardian the property allocable to them, free of trust;”
  • Caused the withdrawal right to lapse if not exercised in writing within 30 days of receipt of such notice;
  • Permitted the trustee to distribute cash or property or borrow to satisfy any demand right;
  • Included a savings/construction clause outlining the settlors’ intent to qualify for the federal gift tax annual exclusion;
  • Permitted the trustee to exclude beneficiary withdrawal rights with respect to future contributions of property.

All points except the last one above are common to nearly every Crummey trust drafted since 1968 when the Crummey case was decided. However, the last provision is usually an option left with the settlors rather than the trustee, but we know of no reason that a trustee could not be given the power to deny withdrawal power rights to certain beneficiaries if (and only if) announced by the trustee before gifts that would otherwise be subject to the withdrawal powers are made. It is unclear whether the trust had “hanging powers” as it was not discussed in the case. The attorney and trustee both signed uncontested affidavits that notices were sent four months after funding to each beneficiary/guardian pursuant to the trust. Neither the Tax Court nor the IRS argued that this four month delay was unreasonable, and the actual notice was not an issue for the Court.

The trust agreement was read to specifically state that a beneficiary’s withdrawal power began immediately upon initial funding of the trust, but did not close until thirty days after written notice was received that the power existed. In order to obtain the benefits of the annual gift tax exclusion, drafters should be especially careful that they allow for the withdrawal power to begin at the moment of contribution, so that it is considered to be a “present” and not future interest. We discuss below whether the withdrawal power should close within a certain period of time after the contribution, or stay open until a certain period of time after written notice is given.

The interesting twist that probably caused the IRS to challenge the Crummey powers involved the somewhat ambiguous language that provided for an arbitration panel to preside over trust disputes and an in terrorem clause. The trust required a beneficiary to submit any dispute that might arise over interpretation of the trust to a beth din, which is Hebrew for an arbitration panel comprised of three Orthodox Jewish persons. If the beth din issued an adverse ruling, the beneficiary could go to state court. You would think this would be a positive factor to the IRS, based on their arguments in prior memoranda, to ensure an enforceable right, but the government argued that exercising this right would trigger an in terrorem clause, causing the beneficiary to forfeit all rights in the trust. If true, this would undercut any claim that the beneficiary had a “present interest” in the withdrawal right and make any such present interest “illusory.” Let’s review the actual clause:

In the event a beneficiary of the Trust shall directly or indirectly institute, conduct, or in any manner take part in or aid in any proceeding to oppose the distribution of the Trust Estate, or files any action in a court of law, or challenges any distribution set forth in this Trust in any court, arbitration panel or any other manner, then in such event the provision herein made for such beneficiary shall thereupon be revoked and such beneficiary shall be excluded from any participation in the Trust Estate.

The Tax Court disagreed with the IRS interpretation of the in terrorem clause, finding that the clause would only bar a beneficiary from enjoying benefits of the trust if he/she files suit to challenge distributions of trust property to another beneficiary, not mandatory ones triggered by a “Crummey” withdrawal request. Because the trust document required the trustee to comply with a beneficiary’s exercise of a Crummey withdrawal right, requiring the beth din to follow both state law and the in terrorem clause did not impair a Crummey withdrawal right. Meaning, $1.44 million of the trust qualified for the annual gift tax exclusion.

The court noted trust language to the effect that the intent of the withdrawal power provision was to qualify for the annual exclusion. Furthermore, the Court constructed the trust such that the trustee’s discretion to distribute some or all of the assets to less than all of the beneficiaries could not be exercised in a way that would deprive any beneficiaries of their withdrawal power. Based upon our reading of the trust agreement, this could have gone the other way.

Stay tuned next week for our commentary on this case!

Richard Connolly’s World
Asset Protection in a Digital World

Insurance advisor Richard Connolly of Ward & Connolly in Columbus, Ohio often shares with us pertinent articles found in well-known publications such as The Wall Street Journal, Barron’s, and The New York Times. Each week, we will feature some of Richard’s recommendations with a link to the articles.

This week, the first article of interest is “Digitally Storing Family Wealth” by Robert Milburn. This article was featured in Barron’s on February 17, 2015.

Richard’s description is as follows:

Private bankers and family office executives are rushing to upgrade their cyber security systems, after multi-billion dollar companies like Sony Pictures Entertainment, Target, and Home Depot have been hacked. Some wealth managers are spending millions of dollars per year to beef up so-called “digital vaults” that securely store their client’s confidential information, like tax returns and wills. These online safety-deposit boxes also keep track of their clients’ complex web of online brokerage, retirement, and bank accounts and their passwords – so next-gen heirs can get access, should a parent unexpectedly die.

As reassuring as that sounds, it still might not be a good enough system. To stay ahead of the slowly-evolving legislation at the state level, private bankers are advising clients they dictate in their wills precisely which heirs or trustees have access to which online accounts. That’s because a number of court cases have emerged in which surviving family members were posthumously denied access to a loved one’s online accounts.

Please click here to read this article in its entirety.

The second article of interest this week is entitled “Estate Planning for Digital Assets” by Austin Kilham. It was featured in The Wall Street Journal on May 11, 2015.

Richard’s description is as follows:

After working with an estate lawyer on plans for one client’s digital assets, Minnesota-based adviser Kelly Pedersen says she now recommends to all her clients that they adopt a similar approach. It calls for empowering a trustee to modify, control, archive, transfer, and delete all digital assets, and it defines where those assets might be stored, including on the client’s computer and other devices or in the cloud.

Please click here to read this article in its entirety.

Thoughtful Corner
Success Tips for First Year Lawyers, Part II

Alan Gassman recently gave a five hour workshop on professional acceleration for a group of LL.M. in tax law students and some practicing lawyers at the University of Florida on Saturday, May 30, 2015. Last week, we shared some of Alan’s new tips for first year lawyers. To see the first eight tips, please click here.

This week, we continue with more of Alan’s tips, which read as follows:

9.)       Always accept new work willingly and enthusiastically, but never restrain from mentioning that you will need to have it prioritized if there are other things that may not be done on time. The assignor is possibly not aware of what the new work might delay.

10.)     Consider always having a list of tasks in progress with an extra copy that you can hand to your supervising lawyer and go over whenever they might ask.

11.)     Ask for periodic feedback. In particular, ask, “What would you like for me to change in the way that I am doing things to improve your use of me and my productivity for the firm?”

12.)     Always sincerely compliment as many people as you can as often as you can within the firm and outside the firm. What goes around comes around, and you need all of the good karma you can get!

13.)     Draw up charts whenever you can to simplify matters, for purposes of memory, and for purposes of explanation. Charts with squares, circles, and lines can help significantly towards Confucius’s observation that a picture is worth a thousand words. Learn how to make charts in Excel and bring charts to meetings whenever you can with all key information that needs to be remembered for each particular client.

14.)     Consider carrying a Dictaphone with you at all times, and offer to record any instructions or explanations that anyone is giving you to help make sure you get it right later. This allows people to talk faster and to provide you with assignments quickly, knowing that you will review every word of what they have said.

15.)     Enter your time contemporaneously onto a written time slip and/or computer, and make sure all your time is entered by the end of each day. Enter all time, including time you have wasted. Make separate entries for time that you know is billable and the time that you think may be reduced or not billed for at all. Let the senior lawyer make this final decision; there may be more usable time than you think.

Firms expect to write a lot of time off, and if you are spending significantly more time than they expect, it is good for you to know and for them to know earlier rather than later.

You can have brief discussions from time to time when you feel that your wheels have been spinning or that you have wasted a lot of time. Use an apologetic tone. This is part of the mentoring process. The senior lawyers in your firm also write off a lot of time. It is a lifelong experience of an attorney to do so, so do not be bashful about it.

16.)     Have the time of your life!  Find what you like best about the practice of law and do that as much as you can, while ever improving and endeavoring to make 85% or more of your time in the office thoroughly enjoyable and satisfying.  If you can do this, there is no doubt that you will have every success in your career, not to mention your personal life.  Your wallet will thank you also!

Stay tuned for more tips for first year success next week. Alan’s next scheduled workshop for law students and professionals will be on Saturday, August 22, 2015, at Ave Maria Law School in Naples.  Schedule your tax deductible weekend in Naples, and attend this Saturday eight hour interactive workshop, while making new friends and helping others (and yourself) immensely.  Spouses are invited as well.  A splendid time is guaranteed for all, not to mention one ethics credit hour and seven general credits.

Humor! (or Lack Thereof!)

Sign Saying of the Week

Sign

IN POLITICAL NEWS:
By Ron Ross

Because of the unusually high number of candidates in this election season, the battleground state of Iowa has been forced to find an alternative to the Ames Straw Poll. In order to narrow the field, candidates will instead be forced to find their way out of an authentic Iowa corn maze. Only the survivors will be allowed to participate in the Iowa caucus, the first event of the election season that actually awards delegates.

Maze

Perhaps because of this new development, another challenger had declared her candidacy for President: Ms. Pac Man.

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On the Democratic side of our national politics, Rhode Island Governor Lincoln Chafee has thrown his hat into the Presidential race as well. The Lincoln Chafee for President theme song is reproduced below:

Lincoln Chafee, man of the people;
He stands 183 centimeters high;
He weighs about 75 kilograms;
You can’t measure how much we love this guy!

His wife Stephanie is 170 centimeters;
The perfect mother, the perfect bride.
They’re from Rhode Island, the smallest state;
Seventy-seven kilometers tall, 60 kilometers wide

Americans who love the metric system
Will rally together and follow his path;
If everyone who ever did a gram votes for him,
He’ll be elected president (do the math!)

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NOTICE TO EMPLOYEES OF GASSMAN, CROTTY & DENICOLO, P.A.

In response to the numerous complaints regarding theft from the office refrigerator, we have called in the FDLE – The Florida Department of Lunch Enforcement.

Fridge

Officers will find the guilty party by putting each of you in the refrigerator and see if the lights goes out.

Remember, you have the right to an attorney!

Upcoming Seminars and Webinars

LIVE WEBINAR:

Alan Gassman will present a live, free, 30-minute webinar on the topic of THE NEW DOCTOR’S GUIDE TO WEALTH BUILDING, CREDITOR PROTECTION, TRUST PLANNING, AND WHAT THEY DIDN’T TELL YOU IN MEDICAL SCHOOL. There will be two opportunities to attend this presentation.

Date:   Wednesday, June 17, 2015 | 7:30 PM or Saturday, June 20, 2015 | 9:30 AM

Location: Online webinar

Additional Information: To register for the Wednesday/7:30 PM webinar, please click here. To register for the Saturday/9:30 AM webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE BLOOMBERG BNA WEBINAR:

Alan Gassman, Christopher Denicolo, Jerome Hesch, and Stephen Breitstone will present a Bloomberg BNA Webinar on CREATIVE TAX PLANNING FOR REAL ESTATE TRANSACTIONS AND INVESTORS: A PRACTICAL GUIDE FOR REAL ESTATE AND TAX ADVISORS AND THEIR CLIENTS.

Date: Tuesday, June 23, 2015

Location: Online webinar

Additional Information: To register for this webinar, please click here. For more information, please email agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman and noted trust and estate litigator, LL.M in estate planning, and blog master Juan Antunez, J.D., LL.M. will present a free 30-minute webinar on HOW AND WHEN TO USE ARBITRATION CLAUSES FOR TRUSTS AND WILLS. 

Don’t miss Juan’s wonderful blog site entitled Florida Probate & Trust Litigation Blog, which can be accessed by clicking here, and the many very useful articles thereon.

Date: Thursday, June 25, 2015 | 12:30 PM

Location: Online webinar

Additional Information: To register for this webinar, please click here.

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LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on FINANCIAL RELATIONSHIPS WITH PATIENTS, CO-PAYMENTS, GIFTS, AND GRAFT – HOW TO STAY OUT OF TROUBLE UNDER FLORIDA AND FEDERAL LAW.

This is an essential guide for medical practices and those who advise them. There will be two opportunities to attend this presentation.

Date: Tuesday, July 7, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FLORIDA INSTITUTE OF CPAs (FICPA) WEBINAR:

Alan Gassman will present a webinar on the topic of WHAT FLORIDA CPAS NEED TO KNOW ABOUT ASSET PROTECTION for the Florida Institute of CPAs.

More information about this webinar will be forthcoming. Please stay tuned!

Date: Thursday, July 9, 2015 | 9:30 AM – 10:30 AM

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com. To register, please contact Thelma Givens at givenst@ficpa.org.

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LIVE ORLANDO PRESENTATION:

ORLANDO BUSINESS AND PROFESSIONAL PRACTICE OWNER SYMPOSIUM – PRIVATE EVENT OPEN ONLY TO CLIENTS OF MAUI MASTERMIND AND GASSMAN, CROTTY & DENICOLO, P.A.

Alan S. Gassman, business coach and author David Finkel, and others will present a two-day conference for high-net-worth business and professional practice owners sponsored by Maui Mastermind®.

Alan’s topics will include BASIC AND ADVANCED PLANNING TECHNIQUES FOR THE PROTECTION OF WEALTH, THE 10 BIGGEST MISTAKES THAT BUSINESS OWNERS AND PROFESSIONALS MAKE, and ESTATE TAX AVOIDANCE TECHNIQUES FOR BUSINESS OWNERS AND PROFESSIONALS.

Other topics include A Proven Map to Grow Your Business and Get Your Life Back, Building Wealth Outside of Your Company, Tax Reduction Strategies, and Understanding How Investments Work and What They Cost.

Interested individuals can contact agassman@gassmanpa.com or David Finkel at david@mauimastermind.com.

Date: July 30th and 31st, 2015

Location: Hyatt Regency Orlando | 9801 International Drive, Orlando, FL 32819

Additional Information: To register, please click here or email agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman and Christopher Denicolo will present a live, free, 30-minute webinar on the topic of CREDITOR PROTECTION PLANNING FOR PHYSICIANS AND MEDICAL PRACTICES. There will be two opportunities to attend this presentation.

Date: Wednesday, August 12, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email agassman@gassmanpa.com.

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LIVE BRADENTON, FLORIDA PRESENTATION:

Alan Gassman will speak at the Coastal Orthopedics Physician Education Seminar on the topics of CREDITOR PROTECTION AND THE 10 BIGGEST MISTAKES DOCTORS CAN MAKE: WHAT THEY DIDN’T TEACH YOU IN MEDICAL SCHOOL.

This 50 minute informative talk with extensive materials will cover essential aspects and trip-ups that doctors often encounter in the area of personal and practice entity asset protection. It will also discuss tax and investment planning, advisor selection, health law, compliance, and other areas of interest for physicians.

Each attendee will receive a complimentary copy of Mr. Gassman’s book, Creditor Protection for Florida Physicians and other valuable materials.

Coastal Orthopedics, Sports Medicine, and Pain Management is a comprehensive orthopedic practice which has been taking care of patients in Manatee and Sarasota Counties for 40 years. They have sub-specialized, fellowship-trained physicians as well as in-house diagnostics, therapy, and an outpatient surgery center to provide comprehensive, efficient orthopedic care.

Date: Thursday, August 13, 2015 | 6:00 PM

Location: Coastal Orthopedics and Sports Medicine | 6015 Pointe West Boulevard, Bradenton, FL, 34209

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

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LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on the topic of MEDICAL LAW UPDATE – FEDERAL AND FLORIDA DEVELOPMENTS THAT MEDICAL PRACTICES AND ADVISORS NEED TO BE AWARE OF. There will be two opportunities to attend this presentation.

Date: Tuesday, August 18, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Live webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE AVE MARIA SCHOOL OF LAW PROFESSIONAL ACCELERATION WORKSHOP:

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

Cost of attendance is $35.00. If you are a student or alumni of Ave Maria School of Law, the cost of attendance is $20.00.

Delicious lunch, snacks and amazing conversations included!

CLICK HERE TO REGISTER

Date: Saturday, August 22, 2015 | 9:00 AM – 5:00 PM

Quotes from previous workshops:

Alan Gassman’s Professional Acceleration Workshop was a fast-paced, information-packed, and highly instructional event.  Through interactive discussions of time-tested professional and personal growth strategies ranging from goal setting and problem solving to office efficiency and effective team building, Alan provides a thoughtful and measured approach to becoming a highly effective professional.  I left the workshop feeling invigorated and excited to implement the insights into my practice management and continued self-study.  The course materials and Alan’s compilation of trusted additional resources will be an invaluable resource for years to come.  Thank you for the opportunity to participate.

Christina Rankin, J.D., LL.M. (Taxation)
Trust and Estates Lawyer with Over 10 Years of Experience
Law Offices of Richard D. Green, J.D., LL.M.

I was fortunate to attend the Law Practice and Professional Development Workshop conducted by Alan Gassman, Esq. in Clearwater, Florida on August 3, 2014.  The Workshop covered a wide range of topics from Goal Setting and Gratitude to as practical a topic as law office logistics.  Alan’s approach was intimate, self-revelatory and highly instructive.  I have been practicing law for 20 years and have never attended a program as broad ranging, practical and encouraging.  The depth of Alan’s thought and experience is obvious in the materials and in the ease with which he led the discussions.  This was not a dull lecture but a highly engaging workshop that was over before you expected it to be.

Daniel Medina, B.C.S
Board Certified in Wills, Trusts and Estates
Medina Law Group, P.A.

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

Debbie Faulkner, J.D., LL.M. (Taxation)
The Faulkner Firm, P.A.

I want to personally thank you again for providing me with the unbelievable opportunity to attend your professional acceleration workshop.  I came away from your workshop with renewed excitement in improving my practice.  While I had long let go of the notion that doing things the old way was the only way, I found myself mentally making changes in nearly every area of my practice.  There were added bonuses that are intangible and difficult to articulate.  I love what I do, but to be able to do it better, more efficiently, add to my bottom line and, all the while, allow me to have more personal time available in a 60-plus hour week, was truly unexpected.  Simply implementing half a dozen of the changes I developed throughout the day as a result of your program will not only enhance the bottom line, but make my days innumerably easier.  Thank you so much for giving your time to help other professionals with personal and professional growth.

Hamden H. Baskin, III, J.D., LL.M. (Taxation)
AV Rated, Estates and Trust Litigation Lawyer with Over 35 Years of Experience
Baskin Fleece Attorneys at Law

By having the opportunity to discuss my goals and the obstacles keeping me from achieving those goals with other professionals I was able to define my path to achieve those goals like never before.  Not only was I able to improve myself personally, but I also had the unexpected opportunity of being able to have very candid discussions about law practice management and what actually works and doesn’t work with experienced lawyers who provided great advice for me as a new lawyer entering the field.

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

Brandon Ketron, CPA, Stetson Law Student

Course materials are available on Amazon.com for $1.99 and can be found by clicking here.

Location: Thomas Moore Commons, Ave Maria School of Law, 1025 Commons Circle, Naples, FL 34119

Additional Information: To download the official invitation to this event, please click here. To register for this event, please click here. For more information, please contact Donna Heiser at dheiser@avemarialaw.edu or via phone at 239-687-5405 or Alan Gassman at agassman@gassmanpa.com or via phone at 727-442-1200.

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LIVE SARASOTA PRESENTATION:

Alan Gassman will speak at the Southwest Florida Estate Planning Council meeting on September 8th on a topic to be determined. We are open to suggestions!

Date: Tuesday, September 8, 2015 | 3:30 PM – 5:30 PM with dinner to follow

Location: Sarasota, Florida

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

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of THE 10 BIGGEST MISTAKES THAT SUCCESSFUL PARENTS (AND GRANDPARENTS) MAKE WITH RESPECT TO COLLEGE AND RELATED DECISIONS FOR HIGH SCHOOL STUDENTS.

Date: Saturday, September 12, 2015 | 9:30 AM

Location: Online Webinar

Additional Information: To register for this webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FORT LAUDERDALE PRESENTATION:

Ken Crotty will be presenting a 1-hour talk on PLANNING FOR THE SALE OF A PROFESSIONAL PRACTICE – TAX, LIABILITY, NON-COMPETITION COVENANT, AND PRACTICAL PLANNING at the Florida Institute of CPAs Annual Accounting Show.

Date: Friday, September 18, 2015 | 3:30 PM – 4:20 PM

Location: Broward County Convention Center | 1950 Eisenhower Blvd, Fort Lauderdale, FL 33316

Additional Information: For additional information, please email Ken Crotty at ken@gassmanpa.com or CPE Conference Manager Diane K. Major at majord@ficpa.org.

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of FAILURE TO LAUNCH: 20-SOMETHINGS WITHOUT A SOLID CAREER PATH – WHAT PARENTS (AND OTHERS) NEED TO KNOW.

Date: Saturday, October 3, 2015 | 9:30 AM

Location: Online webinar

Additional Information: Please click here to register for this webinar. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman will present a webinar on the topic of WHAT EVERY NEW JERSEY ATTORNEY SHOULD KNOW ABOUT FLORIDA ESTATE PLANNING. This webinar will qualify for 2 New Jersey CLE credits.

Most advisors with Florida clients are unaware of the unique rules and planning considerations that affect Florida estate, tax, and business planning. Unlike some other states, Florida’s laws regarding limited liability companies, powers of attorney, taxation, homestead, creditor exemptions, trusts and estates, and documentary stamp taxes are not simply versions of a Uniform Act. They have been crafted by the Florida legislature to apply to various specific issues in an often counterintuitive manner.

This presentation will the following objectives:

  • Unique aspects of the Florida Trust and Probate Codes
  • Creditor protection considerations and Florida’s statutory creditor exemptions
  • The Florida Power of Attorney Act
  • Traps and tricks associated with Florida’s Homestead Law and Elective Share
  • Documentary stamp taxes, sales taxes, rent taxes, property taxes, and how to avoid them
  • Business and tax law anomalies and planning opportunities

Date: Thursday, October 8, 2015 | 12:00 PM – 1:40 PM

Location: Online Webinar

Additional Information: For more information, please email Alan Gassman at agassman@gassmanpa.com or Eileen O’Connor at eoconnor@njsba.com.

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LIVE SARASOTA PRESENTATION:

2015 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: Friday, October 23rd and Saturday, October 24th, 2015

Location: To Be Determined

Additional Information: Please contact Alan Gassman at agassman@gassmanpa.com for more information.

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION 18TH ANNUAL ESTATE, TAX, LEGAL & FINANCIAL PLANNING SEMINAR

We are pleased to announce that Jonathan Blatttmachr, Howard Zaritsky, Lee-Ford Tritt, Lauren Detzel, Michael Markham, Alan Gassman, and others will be speaking at the 2016 All Children’s Hospital Estate, Tax, Legal & Financial Planning Seminar.

Lauren Detzel will be speaking on Family Law and Tax Planning for Divorce, while Michael Markham will be speaking on Bankruptcy and Creditor Protection/Fraudulent Transfer in Context with Estate Planning. Alan Gassman will speak on Florida Law Tricks and Traps for Estate Planners.

We thank Lydia Bailey and Lori Johnson for their incredible dedication (and patience with certain members of the Board of Advisors.) All Children’s Hospital is affiliated with Johns Hopkins, which is not affiliated with Anthony Hopkins.

Please provide us with your input for other topics for this year and next! Watch this space for more speaker and topic announcements.

Date: Wednesday, February 10, 2016

Location: Live Event at the All Children’s Hospital St. Petersburg Campus; Live webcasts in Tampa, Fort Myers, Belleair, New Port Richey, Lakeland, and Sarasota

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

Notable Seminars by Others
(These conferences are so good that we were not invited to speak!)
 

LIVE ORLANDO PRESENTATION: 

50TH ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING 

Date: January 11 – January 15, 2016 

Location: To be announced 

Additional Information: Information on the 50th Annual Heckerling Institute on Estate Planning will be available on August 1, 2015. To learn about past Heckerling programs, please visit http://www.law.miami.edu/heckerling/. 

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.

April Applicable Rates

The Thursday Report – 6.4.15 – Annie Get Your Thursday Report!

Posted on: June 4th, 2015

Gun Trust Questions & Answers – Explosive Coverage that Cannot be Silenced!

Are You Using the Right Durable Power of Attorney Forms?

Avoiding the Castellano Error by Always Leaving Assets in Trust, Not Outright, Part III

Richard Connolly’s World – Health Law & Estate Planning

Thoughtful Corner – Success Tips for First Year Lawyers

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 Stephanie at stephanie@gassmanpa.com.

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

Gun Trust Questions & Answers
Explosive Coverage that Cannot be Silenced!

We hope you haven’t yet gotten dis-gun-sted with our gun trust materials. It really helps to have an audience as we gear up for our upcoming webinar with Jonathan Blattmachr, Lee-Ford Tritt, and Sean Healy, so set your sights on this!

1.     Why are Gun Trusts So Complicated?

Gun trusts can pose significant problems for all parties involved. Not only must trustees and beneficiaries comply with state laws for creating and properly maintaining a trust, but the gun trust must also address the various and equally complicated state and federal laws on gun ownership, as well as what happens to the trust property upon the death of the grantor. To gain a better understanding of just how complicated they can be, take a look at the following questions.

2.     What is the National Firearms Act and Gun Control Act?

The National Firearms Act (NFA) and Gun Control Act (GCA) were enacted to restrict who may possess, buy, and sell certain restricted firearms and firearm accessories. The NFA operates primarily as a taxing statute by imposing a $200 statutory excise tax per item. It also requires the person to register all restricted firearms with the Bureau of Alcohol, Tobacco, Firearms, and Explosives.

The GCA, on the other hand, was enacted to restrict the transfer of certain types of firearms between individuals. The GCA places weapons into two categories, and each has different rules. Title I firearms primarily include long rifles, shotguns, and handguns. Title II firearms include automatic machine guns, short-barreled rifles, sawed-off shotguns, suppressors (silencers), and destructive devices such as: grenades, bombs, explosive missiles, and poison gas weapons.

Together, the NFA and GCA impose various restrictions on the rights of gun owners to possess and transfer certain weapons.

3.     Why Use a Gun Trust When I Can Simply Register NFA Firearms as an Individual or Corporation?

A gun trust is the most comprehensive method to protect yourself and other individuals who you want to allow use or possession of NFA firearms. With a gun trust, the grantor can name as many trustees as they want to use and possess NFA firearms. A gun trust also allows you to properly pass those firearms to future beneficiaries, protecting them from criminal prosecution.

On the other hand, when a person registers an NFA firearm as an individual, they must satisfy several requirements, and even after that, it is not guaranteed they will be approved. Corporations, such as an LLC are usually easy to set up but do not offer the same estate planning tools that a gun trust does. Further, if you fail to pay the annual filing fee, the Secretary of State can dissolve the corporation, leaving you and its members in the unlawful possession of unregistered NFA firearms.

The chart below sums up the various requirements for registering a firearm as an individual, corporation, and gun trust.

Gun Trust Chart

4.     Can I Use Software like Quicken Will and Trust Maker?

While nothing is technically going to keep you from using products such as this, you should realize that they are not designed to address the complex issues involved with creating a gun trust. Substituting a generic trust form for a gun trust can also be dangerous, as they do not typically address the applicable federal and state laws.

Generic forms tend to be very simple and tend to only address how an individual’s property will pass on after death. A gun trust should have specific language on how the firearms will be managed during the grantor’s life and direct who they will pass to after death. Important consideration must be given as to who will qualify as a co-trustee and beneficiary and whether they will be permitted by law to use and possess firearms.

Furthermore, the trust must be structured to ensure that, at no time, the sole trustee is also the sole beneficiary. Otherwise, the doctrine of merger would invalidate the trust, leaving that person in the unlawful possession of unregistered firearms.

Unlike a generic trust, a gun trust should also include provisions that address what happens to the trust property if a grantor, trustee, or beneficiary becomes a prohibited person who is unable to use or possess any type of firearm. Typically, the gun trust will automatically disqualify them from any rights they had from the trust agreement, thus protecting all the other trustees from an illegal transfer of possession.

5.     Who May Access the Firearms Held by the Gun Trust?

The grantor can add as many or as few trustees as they want. Note that all trustees will have specific duties and obligations to perform pursuant to the trust’s provisions. In some states, trustees must be at least 18 years old to possess the firearms held by the trust, and in others, they must be at least 21 years old. However, in order to purchase firearms for the trust, trustees must always be at least 21 years old.

6.     What Role Do Beneficiaries Play?

As is the case with other trusts, a beneficiary is the individual entitled to the benefits of that trust. For a gun trust, that means the firearms are held under the trust for their benefit. There is no age requirement for beneficiaries, and they typically include the grantor’s minor children, if any. However, the gun trust should address the potential scenario where the grantor dies and leaves the trust property to their minor child. In this instance, there would be someone under the age of 18 in possession of restricted firearms, which is unlawful. Thus, a provision should be included that will allow the trustees to use and possess the trust property until the beneficiaries are old enough and mature enough to inherit the trust property.

Finally, it is important to note that while the law remains unclear, most conservative attorneys conclude that beneficiaries cannot solely use or possess NFA firearms owned by the gun trust outside the presence of at least one trustee. Thus, an individual who is only a beneficiary, as opposed to a trustee and beneficiary, cannot safely be in sole possession of the NFA firearm, regardless of their age. However, other attorneys are willing to take a chance in allowing beneficiaries to be in sole possession of NFA firearms by including language in the gun trust document that allows a trustee to appoint an individual as a temporary trustee so that they may lawfully use and possess NFA firearms.[1] The appointed trustee’s trusteeship will end when the firearms are returned to the permanent trustee of the gun trust.[2]

7.     What Must You Submit to the Bureau of Alcohol, Tobacco, Firearms, and Explosives When Registering and Transferring Firearms to the Trust?

First, when purchasing firearms or related items, the trust should be named as the purchaser, not the grantor or trustee. Furthermore, at the time of purchase, the trustee should submit the application form to the Bureau of Alcohol, Tobacco, Firearms, and Explosives. The most common forms include Form 1 fore firearm manufacturing, Form 4 for the taxable transfer of a firearm, Form 5 for a tax exempt firearm transfer, and Form 20 for the interstate transport of an NFA firearm.

You are also required to submit a complete copy of the gun trust document, any schedules or attachments referenced in the trust, and proof that each “responsible person” is entitled to possess firearms via a Certificate of Compliance. The last item that should be sent is a check or money order payable to the BATFE for $200.

8.     I am Single. Should I Even Bother Setting Up a Gun Trust?

Presently, you may feel that it is unnecessary to establish a gun trust to hold NFA firearms just for yourself. However, doing so now will provide you with the flexibility to amend the trust during your lifetime so that you may add or remove additional trustees and beneficiaries as the occasion arises. While you may not have a spouse or children right now, that may not be the case in the future.

Furthermore, keep in mind that individuals purchasing NFA firearms must still pay the $200 tax stamp. Later on, if you wish to set up a gun trust so that you can lawfully pass your NFA firearms to friends and family, you must pay an additional $200 tax stamp for each weapon transferred to a trust.

9.     Who are Considered to be Prohibited Persons, and Can They be a Trustee?

A prohibited person cannot be a trustee of a gun trust. Furthermore, they are precluded from directly owning, purchasing, shipping, or transferring any type of firearm. The trustees of a gun trust must also ensure that they do not inadvertently transfer firearms held by the gun trust to these individuals. The following is a list of those individuals that are deemed to be prohibited persons:

  1. Any person who has been convicted in any court of a crime punishable by imprisonment for a term greater than one year;
  2. Any fugitive from justice;
  3. Any unlawful user of or any person who is addicted to a controlled substance;
  4. Any person who has been adjudicated as having a mental defect or who has been committed to a mental institution;
  5. Any alien who is illegally or unlawfully in the United States or, except as provided in 18 U.S.C. 922 (y)(2), has been admitted to the United States under a non-immigrant visa (as that term is defined in 8 U.S.C. 1101(a)(26));
  6. Any person who has been discharged from the Armed Forces under dishonorable conditions;
  7. Any person who, having been a US citizen, has renounced his or her citizenship;
  8. Any person who is subject to a restraining order; and
  9. Any person who has been convicted of a crime of domestic violence.

10.    If a Currently Own NFA Firearms, May I Transfer Them into the Gun Trust Without Paying the Transfer Tax?

No, this type of transaction will require a $200 tax stamp for each firearm transferred.

11.    Can I Add an Individual as a Trustee of the Gun Trust if They Live in a State Where NFA Firearms are Illegal?

Yes. However, in this situation, the trustee will not be able to use or possess the NFA firearms within that state. They will only be able to use and possess them in those states that permit NFA firearms and items. Furthermore, if the trustee lives in a state that imposes additional restrictions on the use and possession of NFA firearms that are different than what the State of Florida requires, then they must also comply with those additional requirements. For example, the trustee’s state may require them to obtain a Firearms Identification Card before they can lawfully purchase or possess firearms.

12.    Can my Friends and I Form a Gun Trust and Put NFA Firearms into the Trust?

Legally, there is nothing that will prevent someone from forming a trust in this manner. However, each friend must be aware of the potential consequences of sharing a gun trust. Most importantly, what happens to the trust property if the friendship ends?

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[1] http://nwgunlawgroup.com/can-a-beneficiary-be-in-sole-possession-of-an-nfa-firearm
[2] http://nwgunlawgroup.com/beneficiary-in-sole-possession-issue-solved

Are You Using the Right Durable
Power of Attorney Forms?

Many post-September 2011 Durable Powers of Attorney are inadvertently inadequate because every single enumerated authority listed under the statute has to be signed or initialed, and initialing or signing once to indicate that all of them count together is insufficient.  Just about every bookstore we have checked with has forms that do not comply with the statute and will cause significant harm to Floridians who use them.

Florida Statute 709.2202(1) provides that certain authorities can only be provided to an Agent under a Durable Power of Attorney if the principal signed or initialed next to each specific enumeration of authority.

Certain forms are being used by lawyers which provide for the principal to “initial here only if you want every power to apply.” This is an invitation to disaster.

Please get the word out so that those friends and colleagues can get back to their clients to tell them to come back in and re-sign after initialing each power individually.

The statute reads as follows:

709.2202 Authority that requires separate signed enumeration –

(1) Notwithstanding s. 709.2201, an agent may exercise the following authority only if the principal signed or initialed next to each specific enumeration of the authority, the exercise of the authority is consistent with the agent’s duties under s. 709.2114, and the exercise is not otherwise prohibited by another agreement or instrument:

(a) Create an inter vivos trust;

(b) With respect to a trust created by or on behalf of the principal, amend, modify, revoke, or terminate the trust, but only if the trust instrument explicitly provides for amendment, modification, revocation, or termination by the settlor’s agent;

(c) Make a gift, subject to subsection (3);

(d) Create or change rights of survivorship;

(e) Create or change a beneficiary designation;

(f) Waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan; or

(g) Disclaim property and powers of appointment

Our book, Florida Law for Tax, Business, and Financial Advisors, provides further information and Durable Power of Attorney forms. You can purchase and/or take advantage of a free look inside the book by clicking here.

Avoiding the Castellano Error by Always Leaving
Assets in Trust, Not Outright, Part III

by Jonathan E. Gopman, Ryan J. Beadle, Michael A. Sneeringer,
Evan R. Kaufman, and Alan S. Gassman

Under the Castellano decision, a Will which provided that the inheritance of an insolvent beneficiary would instead be held in trust, was essentially set aside by a bankruptcy judge under the rationale that the beneficiary’s notification to the Trustee of insolvency constituted a fraudulent transfer into the trust system.

Click here to view Part I of this article. Click here to view Part II.

This article has also been published as a LISI Newsletter, which can be viewed by clicking here.

GOING FORWARD

Although Castellano I has been overruled, there remain practical lessons from Castellano II of which estate planning practitioners should be aware.

Spendthrift Provision Language

It is always better for asset protection purposes that family wealth is passed in wholly discretionary trusts for as long as possible under applicable law. If assets must be distributed outright to a trust beneficiary, practitioners may wish to draft the trust to clearly provide that such beneficiary will have no right to such distributions until the end of the trust administration or estate administration process. Additionally, practitioners may wish to give either an independent trustee or trust protector discretion over the timing of such distributions and the ability to withhold such distributions if such fiduciary is aware of creditor issues affecting the potential distributee. In those states that have adopted §504 of the Uniform Trust Code (“UTC”) or an equivalent provision, if the client insists upon the beneficiary serving as the trustee, a lifetime spendthrift trust is still possible. Such a trust would include an ascertainable standard for distributions.

Section 504 of the UTC provides:

(A) In this section, “child” includes any person for whom an order or judgment for child support has been entered in this or another State.

(B) Except as otherwise provided in the subsection (c), whether or not a trust contains a spendthrift provision, a creditor of a beneficiary may not compel a distribution that is subject to the trustee’s discretion, even if:

  1. The discretion is expressed in the form of a standard of distribution; or
  2. The trustee has abused the discretion.

(C) To the extent a trustee has not complied with a standard of distribution or has abused a discretion:

  1. A distribution may be ordered by the court to satisfy a judgment or court order against the beneficiary for support or maintenance of the beneficiary’s child, spouse, or former spouse; and
  2. The court shall direct the trustee to pay to the child, spouse, or former spouse such amount as is equitable under the circumstances but not more than the amount the trustee would have been required to distribute to or for the benefit of the beneficiary had the trustee complied with the standard or not abused the discretion.

(D) This section does not limit the right of a beneficiary to maintain a judicial proceeding against a trustee for an abuse of discretion or failure to comply with a standard for distribution.

(E) If the trustee’s or co-trustee’s discretion to make distributions for the trustee’s or co-trustee’s own benefit is limited by an ascertainable standard, a creditor may not reach or compel distribution of the beneficial interest except to the extent the interest would be subject to the creditor’s claim were the beneficiary not acting as trustee or co-trustee.

Practitioners should carefully consider applicable state law in drafting spendthrift provisions. The spendthrift clause in the Trust contained broad distribution authority (“Thereafter, the Trustee shall pay to or for the benefit of that beneficiary only those amounts that the Trustee, in its sole and absolute discretion, deems advisable…”), however, the spendthrift clause included a standard for distributions (“…for the education and support of that beneficiary until the death of the beneficiary…”).

A spendthrift provision should clearly provide that a trust beneficiary may not voluntarily and involuntarily assign such beneficiary’s interest. There is no reason to incorporate a standard (e.g., health, education, support, or maintenance) for distributions where the beneficiary is not the trustee. Finally, a trustee can be permitted to take actions or to make expenditures for the benefit of a beneficiary (such as purchasing a residence for the beneficiary to occupy rent free) without making a direct distribution to the beneficiary.

Trustee Succession

Despite Castellano II’s holding, practitioners should carefully plan for trustee succession. The court’s conclusion in Castellano I that the Debtor made a transfer was based in part on the familial relationship between Linda and Del Alcazar (albeit by marriage to Linda’s niece). Section 101(14) of the Bankruptcy Code provides:

The term “disinterested person” means a person that –

  1. Is not a creditor, an equity security holder, or an insider;
  2. Is not and was not, within 2 years before the date of the filing of the petition, a director, officer, or employee of the debtor; and
  3. Does not have an interest materially adverse to the interest of the estate or of any class of creditors or equity security holders, by reason of any direct or indirect relationship to, connection with, or interest in, the debtor, or for any other reason.

Del Alcazar likely fell within the definition of a “disinterested person,” as he had no interest “materially adverse to the interest of the estate or any class of creditors” by virtue of his relationship with Linda. “The court in Castellano I simply assumed that Linda had control of Del Alcazar due to their familial relationship; however, the Castellano I court’s conclusion that Linda made a transfer based on Linda’s alleged control over Del Alcazar had no apparent basis in fact or law.[1]

Many states have adopted some variation of § 504 of the UTC, which provides that a creditor may not compel a distribution for the trustee’s own benefit where the trustee’s discretion is subject to an ascertainable standard. Where asset protection is a concern, it is best to appoint an unrelated third party as trustee and specify that any successor trustee should be similarly unrelated. Where a related party must be appointed as a trustee, practitioners should carefully draft the ascertainable standard. It may also be helpful to have an independent trust protector appoint successor trustees to avoid any argument that the beneficiaries may install a subordinate trustee.

CONCLUSION

Castellano I will certainly not be the last case in which a court misapplies the law to benefit a creditor, and practitioners should draft very carefully and consider having all distributions held in trust and not passing outright to avoid a costly court battle that will not be resolved by the decision in Castellano II. The case is also a reminder that bankruptcy court decisions are no more than any other “court of first impression,” and can be overturned by a federal district court.

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[1] Safanda, 2015 WL 1911130 at fn 4.

Richard Connolly’s World
Health Law & Estate Planning

Insurance advisor Richard Connolly of Ward & Connolly in Columbus, Ohio often shares with us pertinent articles found in well-known publications such as The Wall Street Journal, Barron’s, and The New York Times. Each week, we will feature some of Richard’s recommendations with a link to the articles.

This week, the first article of interest is “New Wrinkle for Health Law” by Stephanie Armour. This article was featured in The Wall Street Journal on April 12, 2015.

Richard’s description is as follows:

Millions of people have gained health coverage through Medicaid since states began expanding the program under the Affordable Care Act. That also means more Americans may find themselves caught in a little-known law that lets states go after their assets after they die.

For more than 20 years, federal law has allowed states to recover almost all Medicaid costs if recipients are 55 or older when they die. This now applies to many of the 11 million people who joined Medicaid since the health law’s expansion of the state-federal insurance program.

The upshot: Some families are discovering they may have to sell a home or other assets of a deceased relative to reimburse the government.

Please click here to read this article in its entirety.

The second article of interest this week is entitled “How Freezing Eggs Can Affect Your Estate Plan” by Joan M. Burda. This article was featured on Forbes.com on December 10, 2014.

Richard’s description is as follows:

When Apple and Facebook made news for paying the expenses of their female employees to freeze their eggs, chances are you didn’t think it would have any effect on your estate plan, but if you have a daughter or a granddaughter, you may be mistaken.

If either decides to use assisted reproductive technology and freeze her eggs, you’ll need to consider whether to include unborn descendants in your estate plan.

Generally speaking, for estate planning purposes, children, descendants, and heirs refer to people who are genetically, biologically, or legally related to you. Egg freezing, however, increases the chances that you may have a descendant who is neither genetically nor biologically related to you. Then it’ll be up to you to decide whether to include him or her in your estate.

Ignoring how assisted reproductive technology could play a part in your estate plan can be a significant error. Someone you want to include as an heir may be wrongly excluded, and another you have no intention of including could be brought in to share your estate. By specifying whom you do and don’t want to include, you retain control over your estate.

Most clients are unaware of this issue. This article is one way to start the conversation.

Please click here to read this article in its entirety.

Thoughtful Corner
Success Tips for First Year Lawyers

Alan Gassman gave a five hour workshop on professional acceleration for a group of LL.M. and tax students and some practicing lawyers at the University of Florida last Saturday.  So sorry you missed it!  Some of Alan’s new tips for first year lawyers were as follows:

1.) Always show up with a legal pad and two pens in hand.

2.) Answer questions as concisely as possible and see whether more information is requested. Don’t try to explain anything beyond the absolute minimum information that the person needs when that person is another lawyer that you are working with. The person you are interacting with, be it client or other attorney, will ask you what they need to know in addition to that.

3.) Show up to a meeting with a memo you wrote on the topic to be discussed, and hand it to the lawyer you prepared it for. Bring an extra copy so you have one, too. They can glance through the memo and ask you what they need to know.

4.) Smile and be cheerful. If there is a serious situation, be serious, but in overall everyday interactions, be as friendly and humorous as you can.

5.) Say hello when you first see someone at your office during the day, and then say goodbye at the end of the day.

6.) Become the organizer of anything and everything that you are involved with. Use checklists, progress reports, and reminders. Once you manage a project, you “own it” and will become the go-to person. Always have your checklists and the latest progress on each item you are working on with you for meetings or otherwise. You never know when you will be asked about them.

7.) Consider sending anyone in the office that you have a project in progress with an email every evening at 7:00 PM enclosing where you are or anything they may want or need to see about the project. You can accomplish this by utilizing the delay function on your emails.

This email will (1) remind them that you are working on this and (2) establish a habit so that your colleagues know they can go to their 7:00 PM emails to access what you have been working on lately. Your colleagues will quickly learn that the 7:00 PM space in their Inbox always belongs to you!

8.) Work constantly to improve yourself beyond the law and what you do as a lawyer. Concentrate on what you like to do and do best to the extent that it is productive.

Stay tuned for more tips for first year success next week. Alan’s next scheduled workshop for law students and professionals will be on August 22, 2015, at Ave Maria Law School in Naples.  Schedule your tax deductible trip weekend in Naples, and attend this Saturday eight hour interactive workshop, while making new friends and helping others (and yourself) immensely.  A splendid time is guaranteed for all, not to mention one ethics credit hour and seven general credits.

Humor! (or Lack Thereof!)

Sign Saying of the Week

Sign

Cartoon

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IN THE NEWS
by Ron Ross

Fed-Ex/Kinko’s is proud to announce their latest merger, this time with Gassman, Crotty & Denicolo, PA! This exciting venture will greatly enhance Fed-Ex/Kinko’s ability to serve their customers. Now they can box and send a lawyer directly to your doorstep overnight!

Deliver by Thursday

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As you may have heard, parents across the country are complaining about the great number of standardized tests their children have to take. Here in Florida, a compromise has been reached. As an alternative to the FCAT, students may choose one of the following:

  1. Pull the sword from the stone
  2. Identify all of the Colonel’s secret herbs and spices
  3. Go on a scavenger hunt and find a well-paid teacher, a number one pencil, and someone who actually uses trigonometry in real life
  4. Attend an additional 40 days of school per year like the rest of the Western world

Test Taker

Upcoming Seminars and Webinars

LIVE WEBINAR:

Double Alice

Alice Rokahr earned her Juris Doctor at The University of South Dakota School of Law. She was a partner at the firm of Kennedy, Rokahr, Pier & Knoff, LLP for 15 years and has also worked with Wells Fargo Bank and Bankers Trust Company of South Dakota. She currently serves as the President of Trident Trust Company (South Dakota) Inc.

Alice Rokahr and Alan S. Gassman will present a free, 30-minute webinar entitled WHAT IS SO SPECIAL ABOUT SOUTH DAKOTA – DOMESTIC ASSET PROTECTION TRUST LAW AND PRACTICES.

Date: Tuesday, June 9, 2015 | 12:30 pm

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com or click here to register for this webinar.

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LIVE BLOOMBERG BNA WEBINAR:

Professor Jerome Hesch, Alan Gassman, Ed Morrow, Christopher Denicolo, and Brandon Ketron will be presenting a 90-minute webinar for Bloomberg BNA Tax & Accounting on ESTATE AND TRUST PLANNING WITH IRA AND QUALIFIED PLAN BENEFITS: AN UNDERSTANDABLE SYSTEM WITH CHARTS AND EASY-TO-UNDERSTAND MATERIALS.

This presentation will include a 300 page E-book for each attendee.

Date: Wednesday, June 10, 2015 | 2:00 PM

Location: Online webinar

Additional Information: To register for this webinar, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman will present a live, free, 30-minute webinar on the topic of THE NEW DOCTOR’S GUIDE TO WEALTH BUILDING, CREDITOR PROTECTION, TRUST PLANNING, AND WHAT THEY DIDN’T TELL YOU IN MEDICAL SCHOOL. There will be two opportunities to attend this presentation.

Date:   Wednesday, June 17, 2015 | 7:30 PM or Saturday, June 20, 2015 | 9:30 AM

Location: Online webinar

Additional Information: To register for the Wednesday/7:30 PM webinar, please click here. To register for the Saturday/9:30 AM webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman and noted trust and estate litigator, LL.M in estate planning, and blog master Juan Antunez, J.D., LL.M. will be presenting a free 30-minute webinar on ARBITRATING TRUST AND ESTATES DISPUTES. 

Don’t miss Juan’s wonderful blog site entitled Florida Probate & Trust Litigation Blog, which can be accessed by clicking here, and the many very useful articles thereon.

Date: Thursday, June 25, 2015 | 12:30 PM

Location: Online webinar

Additional Information: To register for this webinar, please click here.

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LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on FINANCIAL RELATIONSHIPS WITH PATIENTS, CO-PAYMENTS, GIFTS, AND GRAFT – HOW TO STAY OUT OF TROUBLE UNDER FLORIDA AND FEDERAL LAW.

This is an essential guide for medical practices and those who advise them. There will be two opportunities to attend this presentation.

Date: Tuesday, July 7, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FLORIDA INSTITUTE OF CPAs (FICPA) WEBINAR:

Alan Gassman will present a webinar on the topic of WHAT FLORIDA CPAS NEED TO KNOW ABOUT ASSET PROTECTION for the Florida Institute of CPAs.

More information about this webinar will be forthcoming. Please stay tuned!

Date: Thursday, July 9, 2015 | 9:30 AM – 10:30 AM

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com. To register, please contact Thelma Givens at givenst@ficpa.org.

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LIVE ORLANDO PRESENTATION:

ORLANDO BUSINESS AND PROFESSIONAL PRACTICE OWNER SYMPOSIUM

Alan S. Gassman, business coach and author David Finkel, and others will present a two-day conference for high-net-worth business and professional practice owners sponsored by Maui Mastermind®.

Alan’s topics will include BASIC AND ADVANCED PLANNING TECHNIQUES FOR THE PROTECTION OF WEALTH, THE 10 BIGGEST MISTAKES THAT BUSINESS OWNERS AND PROFESSIONALS MAKE, and ESTATE TAX AVOIDANCE TECHNIQUES FOR BUSINESS OWNERS AND PROFESSIONALS.

Other topics include A Proven Map to Grow Your Business and Get Your Life Back, Building Wealth Outside of Your Company, Tax Reduction Strategies, and Understanding How Investments Work and What They Cost.

Interested individuals can contact agassman@gassmanpa.com or David Finkel at david@mauimastermind.com.

Date: July 30th and 31st, 2015

Location: Hyatt Regency Orlando | 9801 International Drive, Orlando, FL 32819

Additional Information: To register, please click here or call Kelli Goode at 1-888-889-0944 ext. 915.

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LIVE WEBINAR:

Alan Gassman will present a live, free, 30-minute webinar on the topic of CREDITOR PROTECTION PLANNING FOR PHYSICIANS AND MEDICAL PRACTICES. There will be two opportunities to attend this presentation.

Date: Wednesday, August 12, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email agassman@gassmanpa.com.

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LIVE BRADENTON, FLORIDA PRESENTATION:

Alan Gassman will speak at the Coastal Orthopedics Physician Education Seminar on the topics of CREDITOR PROTECTION AND THE 10 BIGGEST MISTAKES DOCTORS CAN MAKE: WHAT THEY DIDN’T TEACH YOU IN MEDICAL SCHOOL.

Coastal Orthopedics, Sports Medicine, and Pain Management is a comprehensive orthopedic practice which has been taking care of patients in Manatee and Sarasota Counties for 40 years. They have sub-specialized, fellowship-trained physicians as well as in-house diagnostics, therapy, and an outpatient surgery center to provide comprehensive, efficient orthopedic care.

Date: Thursday, August 13, 2015 | 6:00 PM

Location: Coastal Orthopedics and Sports Medicine | 6015 Pointe West Boulevard, Bradenton, FL, 34209

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

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LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on the topic of MEDICAL LAW UPDATE – FEDERAL AND FLORIDA DEVELOPMENTS THAT MEDICAL PRACTICES AND ADVISORS NEED TO BE AWARE OF. There will be two opportunities to attend this presentation.

Date: Tuesday, August 18, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Live webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE AVE MARIA SCHOOL OF LAW PROFESSIONAL ACCELERATION WORKSHOP:

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

Date: Saturday, August 22, 2015 | 9:00 AM – 5:00 PM

Location: Thomas Moore Commons, Ave Maria School of Law, 1025 Commons Circle, Naples, FL 34119

Additional Information: To download the official invitation to this event, please click here. To RSVP and for more information, please contact Donna Heiser at dheiser@avemarialaw.edu or via phone at 239-687-5405 or Alan Gassman at agassman@gassmanpa.com or via phone at 727-442-1200.

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LIVE SARASOTA PRESENTATION:

Alan Gassman will speak at the Southwest Florida Estate Planning Council meeting on September 8th on a topic to be determined. We are open to suggestions!

Date: Tuesday, September 8, 2015 | 3:30 PM – 5:30 PM with dinner to follow

Location: Sarasota, Florida

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

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of THE 10 BIGGEST MISTAKES THAT SUCCESSFUL PARENTS (AND GRANDPARENTS) MAKE WITH RESPECT TO COLLEGE AND RELATED DECISIONS FOR HIGH SCHOOL STUDENTS.

Date: Saturday, September 12, 2015 | 9:30 AM

Location: Online Webinar

Additional Information: To register for this webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FORT LAUDERDALE PRESENTATION:

Ken Crotty will be presenting a 1-hour talk on PLANNING FOR THE SALE OF A PROFESSIONAL PRACTICE – TAX, LIABILITY, NON-COMPETITION COVENANT, AND PRACTICAL PLANNING at the Florida Institute of CPAs Annual Accounting Show.

Date: Friday, September 18, 2015 | 3:30 PM – 4:20 PM

Location: Broward County Convention Center | 1950 Eisenhower Blvd, Fort Lauderdale, FL 33316

Additional Information: For additional information, please email Ken Crotty at ken@gassmanpa.com or CPE Conference Manager Diane K. Major at majord@ficpa.org.

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of FAILURE TO LAUNCH: 20-SOMETHINGS WITHOUT A SOLID CAREER PATH – WHAT PARENTS (AND OTHERS) NEED TO KNOW.

Date: Saturday, October 3, 2015 | 9:30 AM

Location: Online webinar

Additional Information: Please click here to register for this webinar. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman will present a webinar on the topic of WHAT EVERY NEW JERSEY ATTORNEY SHOULD KNOW ABOUT FLORIDA ESTATE PLANNING. This webinar will qualify for 2 New Jersey CLE credits.

Most advisors with Florida clients are unaware of the unique rules and planning considerations that affect Florida estate, tax, and business planning. Unlike some other states, Florida’s laws regarding limited liability companies, powers of attorney, taxation, homestead, creditor exemptions, trusts and estates, and documentary stamp taxes are not simply versions of a Uniform Act. They have been crafted by the Florida legislature to apply to various specific issues in an often counterintuitive manner.

This presentation will the following objectives:

  • Unique aspects of the Florida Trust and Probate Codes
  • Creditor protection considerations and Florida’s statutory creditor exemptions
  • The Florida Power of Attorney Act
  • Traps and tricks associated with Florida’s Homestead Law and Elective Share
  • Documentary stamp taxes, sales taxes, rent taxes, property taxes, and how to avoid them
  • Business and tax law anomalies and planning opportunities

Date: Thursday, October 8, 2015 | 12:00 PM – 1:40 PM

Location: Online Webinar

Additional Information: For more information, please email Alan Gassman at agassman@gassmanpa.com or Eileen O’Connor at eoconnor@njsba.com.

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LIVE SARASOTA PRESENTATION:

2015 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: Friday, October 23rd and Saturday, October 24th, 2015

Location: To Be Determined

Additional Information: Please contact Alan Gassman at agassman@gassmanpa.com for more information.

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION 18TH ANNUAL ESTATE, TAX, LEGAL & FINANCIAL PLANNING SEMINAR

We are pleased to announce that Jonathan Blatttmachr, Howard Zaritsky, Lee-Ford Tritt, Lauren Detzel, Michael Markham, Alan Gassman, and others will be speaking at the 2016 All Children’s Hospital Estate, Tax, Legal & Financial Planning Seminar.

Lauren Detzel will be speaking on Family Law and Tax Planning for Divorce, while Michael Markham will be speaking on Bankruptcy and Creditor Protection/Fraudulent Transfer in Context with Estate Planning. Alan Gassman will speak on Florida Law Tricks and Traps for Estate Planners.

We thank Lydia Bailey and Lori Johnson for their incredible dedication (and patience with certain members of the Board of Advisors.) All Children’s Hospital is affiliated with Johns Hopkins, which is not affiliated with Anthony Hopkins.

Please provide us with your input for other topics for this year and next! Watch this space for more speaker and topic announcements.

Date: Wednesday, February 10, 2016

Location: Live Event at the All Children’s Hospital St. Petersburg Campus; Live webcasts in Tampa, Fort Myers, Belleair, New Port Richey, Lakeland, and Sarasota

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

Notable Seminars by Others
(These conferences are so good that we were not invited to speak!)
 

LIVE ORLANDO PRESENTATION: 

50TH ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING 

Date: January 11 – January 15, 2016 

Location: To be announced 

Additional Information: Information on the 50th Annual Heckerling Institute on Estate Planning will be available on August 1, 2015. To learn about past Heckerling programs, please visit http://www.law.miami.edu/heckerling/. 

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.

June Rates

The Thursday Report – 5.28.15 – Bullet Points for Gun Trust Webinar

Posted on: May 28th, 2015

Bullet Points for Gun Trust Webinar with Jonathan Blattmachr, Lee-Ford Tritt, Sean Healy, and Alan Gassman

Appeals Court Corrects Bankruptcy Error in Castellano, Part II

50,000 Reasons to Buy Natalie Choate’s New Internet Based and Updated Life and Death Planning for Retirement Benefits

There is No Obligation to File an Annual Minutes Requirement Statement by Mike O’Leary and Teresa Good

Richard Connolly’s World – Philanthropy and the Future

Amy Bhatt Graduates from St. Petersburg College!

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 Stephanie at stephanie@gassmanpa.com.

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

Bullet Points for Gun Trust Webinar with Jonathan Blattmachr,
Lee-Ford Tritt, Sean Healy, and Alan Gassman

Gun Trust Header

We are pleased to announce that Jonathan Blattmachr, Lee-Ford Tritt, Sean Healy, and Alan Gassman will present a one-hour, Bloomberg BNA webinar on Gun Trusts on Wednesday, August 5, 2015 at 12:00 PM.

Stay tuned for more information regarding this not-to-be-missed webinar, and don’t miss the bullet points below!

Bullet Points

Appeals Court Corrects Bankruptcy Error in Castellano, Part II
by Jonathan E. Gopman, Ryan J. Beadle, Michael A. Sneeringer,
Evan R. Kaufman, and Alan S. Gassman

Last week, we began publishing an article (and poem!) on the Castellano case, Part I of which can be viewed by clicking here. This week, we continue with Part II of the article.

We are also pleased to announce that this article was published this week as a LISI Newsletter, which can be viewed by clicking here.

Analysis Under Section 548(e)

Section 548 (e)(1) of the Bankruptcy Code provides:

(e)(1) [T]he trustee may avoid any transfer of an interest of the debtor in property that was made on or within 10 years before the date of the filing of the petition if –

(A) Such transfer was made to a self-settled trust or similar device;

(B) Such transfer was by the debtor;

(C) The debtor is a beneficiary of such trust or similar device; and

(D) The debtor made such transfer with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that the transfer was made, indebted.

Section 101(54) of the Bankruptcy Code provides:

The term “transfer” means –

(A) The creation of a lien;

(B) The retention of title as a security interest;

(C) The foreclosure of a debtor’s equity of redemption; or

(D) Each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with –

(i) Property; or

(ii) An interest in property.

The terms of the Trust allowed Del Alcazar to transfer a portion of the Trust’s assets from one account to another. The court ruled that transferring assets of the Trust between accounts did not terminate the Trust’s ownership of such assets, or constitute a distribution to Linda, or otherwise create a new trust. According to the court, Linda’s share of the Trust “remained the property of the Trust in the custody of Merrill Lunch.”[1] The court ruled further that without a “transfer” (as defined in § 101(54) of the Bankruptcy Code) of an interest to Linda, § 548(e) did not apply. The court thus rejected the bankruptcy court’s application of § 548(e) of the Bankruptcy Code.

Unlike the court in Castellano I, the court in Castellano II did not provide extensive analysis on what a transfer of an “interest in property” delineates or what a “similar device” is or is not.

According to the court in Castellano I, Linda’s “interest” in “property” was “her share of the Trust assets.”[2] In Castellano II, the court noted that Linda had no interest; the $400,000 in the Spendthrift Trust Account was an interest in property of the Trust. Section 548(e)(1) of the Bankruptcy Code uses the term “interest,” as further modified by the phrase “of the debtor in property that was made on or within 10 years before the date of the filing of the petition”; while not explicitly defined elsewhere in the statute, the term “interest” was interpreted in In re Mortensen.[3] The court in Mortensen, quoting Butner v. U.S.,[4] remarked that “[o]rdinarily, it is state law, rather than the Bankruptcy Code, which creates and defines a debtor’s interest in property. Unless some federal interest requires a different result, there is no reason why such interests should be analyzed differently simply because an interested party is involved in a bankruptcy proceeding.” However, the Mortensen court noted that Congress codified a federal “interest” in passing Section 548(e)(1) which required an interpretation of “interest” different from state law as articulated in Butner.[5]

What type of interest in the trust is required to make it a “self-settled trust” or “similar device?” Can a transfer only be avoided under this provision to the extent the trust is self-settled? Suppose a debtor transfers property to a trust and retains only the right to receive income (such as a grantor retained annuity trust) from the trust for a term of years or for life or suppose the debtor can only receive such payments in the discretion of an independent trustee where the trust is settled in a jurisdiction such as Delaware with asset protection legislation. Is an inter vivos QTIP trust a self-settled trust or similar device where the beneficiary spouse is given a power to appoint assets back to the grantor spouse?

Consider the case of a transfer of wealth to a charitable lead trust established in a jurisdiction such as Delaware with asset protection legislation where the remainder interest is directed to be distributed to a trust in which the debtor is a discretionary beneficiary of the income and/or principal. Suppose the term of the lead trust extends over ten (10) years. Query whether this is a self-settled trust under the statute or a similar device. Would the asset protection trust’s vested remainder interest in the charitable lead trust be considered an attachable property interest under this rule? This would seem to be the correct result.[6] It appears that the retention of a certain amount of control over the trust assets is an indication of the trust being classified as “something like” a similar device.

Neither the phrase “self-settled trust or similar device,” nor the individual words “self-settled trust” or “similar device” are defined in the Bankruptcy Code. Castellano I cited to Black’s Law Dictionary for the definition of a self-settled trust, which states that a self-settled trust is “[a] trust in which the settlor is also the person who is to receive the benefits from the trust, usually set up in an attempt to protect the trust assets from creditors.”[7] It appears that Congress intended that the courts turn to state law for these definitions, as articulated by Representative Chris Cannon, R-UT:

Under the Restatement of Trusts, a self-settled trust is a trust created by a person for his or her own benefit with a provision restraining the voluntary or involuntary transfer of a person’s interest, so the Restatement provides that such trust can be pierced by the person’s creditors…So what is an asset protection trust or self-settled trust? Neither the Internal Revenue Code nor the entire United States Code contain any reference to either of these terms. This is a matter of State law.[8]

In In re Porco,[9] the court highlighted commentary in Collier on Bankruptcy that states: “[t]he congressional decision to leave these terms ‘self-settled trust[s],’ a court will have the power to scrutinize them under the ‘similar device’ provision.” The Porco court ultimately stated that “consideration should be given to Congress’s purpose in enacting § 548(e)…to reverse the actions of state legislatures that had overturned the common law that a self-settled spendthrift trust could be reached by creditors or a trustee in bankruptcy.”[10]

Cases may give practitioners some insight into what a “similar device” might be. In Porco, a 2011 decision, the court noted that years after Section 548(e) of the Bankruptcy Code had been enacted (2005), no bankruptcy court opinions had yet to construe the words “self-settled” or “similar device.” Relying on the legislative history of Section 548(e) and Collier on Bankruptcy, the court determined that a resulting or constructive trust was not a “self-settled trust or similar device.” The court noted that self-settled spendthrift trusts “generally require (1) an irrevocable trust; (2) an independent trustee; (3) absolute discretion; and (4) distributions to beneficiaries, including the settlor.”[11] According to the court, the four elements contemplate the creation of an express trust. The court went on to reason that if the purpose of Section 548(e) was to reverse actions of state legislatures overturning the common law ban on self-settled spendthrift trusts and self-settled spendthrift trusts are express trusts, the language in Section 548(e) requires an express trust; therefore, resulting or constructive trusts are created by the courts and not by the express grant of a settlor.[12]

The court in Castellano II noted that in Del Alcazar’s creation of the Spendthrift Trust Account and holding of the $400,000 at Merrill Lynch, there was no act of distribution or creation of a new trust; there was merely a division of the property of the Trust pursuant to the terms of the Trust. Thus, the court in Castellano II reached the correct result in holding that there was no transfer of an interest and that § 548(e) does not apply.

Finally, it is worth noting that perhaps the term “similar device” refers to a trust that is not technically considered a “self-settled trust” nevertheless, the settlor retains (or likely retains) some significant benefit or benefits that are not necessarily apparent from the terms of the trust agreement, however, are either apparent from the facts and circumstances that occur after the trust is created and funded or because of powers and authority granted to certain parties who are closely related to the settlor or over whom a settlor can exert strong influence. Thus, for example, a trust for the benefit of a settlor’s spouse and descendants would not be considered a self-settled trust. Nevertheless, where the terms of the trust agreement grant the settlor’s spouse a broad special power of appointment that could be exercised in favor of the settlor, such a trust may be considered a “similar device.” A trust for the benefit of the settlor’s descendants may be considered a similar device where the settlor retains substantial control over the capital through broad investment authority either granted under the terms of the trust agreement or de facto control based on the facts and circumstances.

Next week, we will provide our conclusion and final thoughts regarding this important case.

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[1] Safanda, 2015 WL 1911130 at *8.
[2] In re Castellano, 514 B.R. at 560.
[3] 2011 WL 5025249 (Bankr. D. Alaska).
[4] 440 U.S. 48, 55 (1979).
[5] In re Mortensen, at *6-7.
[6] See In re Yerushalmi, 487 B.R. 98 (Bankr. E.D. N.Y. 2012).
[7] Black’s Law Dictionary 1746, 10 ed., 2014.
[8] 5 COLLIER ON BANKRUPTCY ¶ 548.10[1] (N. Alan Resnick & Henry J. Sommer eds., 16th ed.) (2005), citing H.R. Rep. No. 109-31, 109th Cong., 1st Sess. 449 (statement of Rep. Cannon).
[9] 447 B.R. 590 (S.D. IL 2001).
[10] Id. at 596.
[11] Id. at 596-97.
[12] For another example of a court scrutinizing a device that is not technically a self-settled trust, see In re Thomas, 2012 WL 2792348 (Bankr. D. Id., Slip Copy, July 9, 2012), whereby the court briefly discussed the issue of whether an IRA was a self-settled trust or similar device.

50,000 Reasons to Buy Natalie Choate’s New Internet Based & Updated
Life and Death Planning for Retirement Benefits
by Alan S. Gassman and Christopher J. Denicolo

The following article was published as a LISI Newsletter, which can be viewed by clicking here.

EXECUTIVE SUMMARY:

Your practice cannot go without Natalie Choate’s new Life and Death Planning for Retirement Benefits, and you will be amazed at the new heightened level of accessibility and speed made available in the new, updated 2015 interactive electronic version. Our firm has been using this book in the electronic version since we purchased it at the Heckerling Institute in January, and we have been nothing short of amazed at how easy it is to navigate and to find balanced, thorough discussions and answers as and when needed.

If you don’t have this updated version and are operating on the 2011 printed edition, or if you are without this book at all, then stop reading this evaluation and order the book online. If there is any doubt at all, please keep reading.

ABOUT THE DYNAMIC AUTHOR AND THE UNPRECEDENTED PLATFORM:

Choate

Natalie B. Choate practices law in Boston, Massachusetts, with the firm of Nutter McClennen & Fish, LLP, and she is the undisputed top author, lecturer, and authority in this complicated area. She is also an amazing writer and speaker and our hero in this area. Her practice is limited to consulting on estate planning and retirement benefits matters. Her books Life and Death Planning for Retirement Benefits and The QPRT Manual are leading resources for estate planning professionals. Any professional attempting to practice in these areas needs to have these books. Her amazing writing talents and supremacy in this area are made all the more cogent and relevant by what Jonathan Blattmachr and his team at Interactive Legal Systems have done with Life and Death Planning by putting it on an interactive platform in the Cloud that is nothing short of amazing in terms of the usability, speed, and efficiency in this challenging area.

COMMENT:

Recent studies show that more than $20 trillion of assets are held under IRA and qualified retirement plans, making this the largest asset class held by Americans. More importantly, with the increase in the federal estate tax exemption, many Americans will no longer be subject to estate tax. Instead, their primary tax planning focus will shift to income tax, especially with respect to IRAs and qualified retirement plans, which will be subject to income tax when distributions are paid therefrom.

The complexity and income tax planning associated with IRAs and qualified plan distributions has become a significant planning area where advisors can make a big difference to save tax money, preserve inheritances, and facilitate appropriate trust planning for clients who have or will inherit large IRA and pension accounts, and there are a great many of these. It is therefore critically important to understand the extremely complicated and somewhat cumbersome rules applicable to IRAs and qualified plans.

We know from experience that it is impossible to navigate this complicated and often otherwise uncharted area without a thorough and complete guide to the primary rules and all of the nooks and crannies that can create traps for the unwary. Fortunately, Life and Death Planning has been the one and only bible in this area for the vast majority of conscientious estate planners for more than 19 years. This is why it has sold more than 50,000 copies, and this is why everyone who has bought a copy in the past needs to be up to date in this area in this very special way.

This essential “red book” was last reprinted in 2011 as the seventh edition, but now, the book is available for the first time as an electronic version that is fully searchable. The electronic version will also be automatically updated to account for changes in the applicable tax law that will undoubtedly occur. The fantastic electronic platform was designed in coordination with Interactive Legal Systems, with input by Natalie’s good friend and unprecedented fellow tax planning genius, Jonathan Blattmachr, and with the notable participation and assistance of Michael L. Graham, who is also a tax heavyweight and a tremendous contributor to the tax and estate professional community.

This latest version of Life and Death Planning contains two additional chapters that are not included in the current print version: Chapter 10 on the topic of “Minimum Distribution Rules for Defined Benefit Plans and Annuitized IRAs,” and Chapter 11 on the topic of “Insurance, Annuities, and Retirement Plans.” Further, Chapter 7 on the topic of “Charitable Giving” has been updated through March 31, 2015 and expanded to include Natalie’s special report on charitable giving with retirement benefits that was previously sold as a stand-alone document. The latest edition also contains updates to the IRA and qualified retirement plan tax law that have occurred since the last edition was published in 2011.

What is even more impressive is an innovative and easy-to-use electronic platform, which enables the user to not only search for terms, code and regulation sections, and strategy and case names, but also to navigate by link from the table of contents and chosen words to other sections of the book (and back) with just a click. This feature is logical, intuitive, and very efficient to boot.

The applicable Internal Revenue Code and Treasury Regulations sections employ certain nomenclature and terms and art that need to be understood by those of us who work with IRAs and qualified retirement plans. Having a word search feature available at your fingertips greatly streamlines the ability to access and understand the authority and discussion with respect to IRAs and qualified retirement plan issues. Specifically, the search function allows readers to search the book for certain buzzwords and key terms relating to their desired area of discussion or to search for certain authority (such as Code and Treasury Regulation sections). This feature undoubtedly saves readers much time in thumbing through pages and expedites access to THE treatise on IRAs and qualified retirement plans.

For an example of the above, suppose that you need to know if a conduit trust could pay certain expenses, without jeopardizing the trust’s status as a qualifying conduit trust. Once you put the words “conduit trust” and “expenses” into the system, the following immediately pops up and provides an excellent answer to the question presented:

Section 6.3.05 (D) Payment of Trust Expenses

“Payment of trust expenses out of the retirement plan assets does not adversely affect conduit trust status.”

This search took mere seconds and eliminated the often cumbersome process of looking through a table of contents or index to determine the applicable pages, following by thumbing through a hard copy book to get to the desired page.

Any estate planner or advisor assisting clients in any fashion with respect to IRAs or qualified plans should not go without the newest edition of Life and Death Planning, and they are advised to strengthen their practice by adding this book to their library. Readers will be amazed by the new heightened level of accessibility and efficiency made available through this electronic version and will be pleased by the breadth and depth of the discussion of the tax law applicable to IRAs and qualified retirement plans.

The electronic version of the book reinforces its place as one of the sources that every estate planner should have in his or her library and is a testament to the enormous contribution that Natalie Choate has made to the estate planning industry.

We wholeheartedly agree with other testimonials for this book, which have included the following:

Must Have for Estate Planners
by Steven L. Zakrocki
As an estate planning attorney, this book is always within reach. It is a must have for understanding issues related to retirement benefits. I’ve also heard several other attorneys highly recommend this book.

The Premier Book for IRA Planning
by Rick Fingerman, CFP, CDFA
Natalie Choate is one of the three top experts in this area. Well, she is probably THE top expert, but you get the idea. This is a very technical book, but if the answer isn’t in here, it probably doesn’t exist. I find this to be one of the best resource guides available.

One of the Best Resource Guides Available
by Anita Week
As an ERISA specialist, I find this to be one of the best resource guides available. It’s highly recommended.

Thanks again to Natalie and Jonathan for all that they have done for our industry, and now particularly, for those of us who engage in IRA and retirement planning. New doors are opened, and with an efficiency and finesse that can only be made available by industry leaders like Natalie and Jonathan.

TABLE OF CONTENTS:

Chapter 1: The Minimum Distribution Rules
Chapter 2: Income Tax Issues
Chapter 3: Marital Matters
Chapter 4: Inherited Benefits: Advising Executors and Beneficiaries
Chapter 5: Roth Retirement Plans
Chapter 6: Leaving Retirement Benefits in Trust
Chapter 7: Charitable Giving
Chapter 8: Investment Issues; Plan Types
Chapter 9: Distributions Before Age 59½
Chapter 10: RMD Rules for Annuitized Plans
Chapter 11: Insurance, Annuities, and Retirement Plans
Appendix A: Tables
Appendix B: Forms
Appendix C: Resources

HOW TO ORDER:

The new electronic version can be subscribed to at www.retirementbenefitsplanning.com. The 7th Edition is available for purchase in print at www.ataxplan.com. This is an essential guide, and the electronic version is a tremendous bargain at only $9 per month, which includes all updates and resources. Live long and prosper with the best of the best in this industry and perhaps any industry!

There is No Obligation to File an Annual Minutes Requirement Statement
by Mike O’Leary and Teresa Good

oleary-good

he following short article by Mike O’Leary and Teresa Good was featured in the Trenam Kemker Legal Update for March of 2015. You can see the article, which originally ran in the September 2014 Legal Update by clicking here.

If you would like to see more Trenam Kemker articles, please click here to sign up for their newsletters.

Many of our corporate clients have received a letter or email from Compliance Services, containing an Annual Minutes Requirement Statement. The letter or email requests that the Statement be completed and returned with a filing fee. Although the Statement and the request look very “official,” there is no obligation to complete or file such a Statement. Compliance Services is just one of several companies that attempt to get Florida corporations, partnerships, limited liability companies, and other entities to pay for services that are not required.

The communications from these companies are intentionally designed to look official, with the appearance that these companies are affiliated with the Florida Department of State. Don’t be fooled – they are not affiliated with the Florida Department of State, and, indeed, the Department of State has specifically advised against completing this form or paying this fee. The only document required to be filed annually for a business entity in Florida is an Annual Report, required to be filed with the Florida Department of State. If you receive a communication that appears official, don’t just fill it out and send it in the money.

Thanks to Trenam Kemker for passing this important message along! Mike O’Leary can be reached at 813-227-7454, and Teresa Good can be reached by calling 813-202-7827.

Richard Connolly’s World
Philanthropy and the Future

Insurance advisor Richard Connolly of Ward & Connolly in Columbus, Ohio often shares with us pertinent articles found in well-known publications such as The Wall Street Journal, Barron’s, and The New York Times. Each week, we will feature some of Richard’s recommendations with a link to the articles.

This week, the first article of interest is “Don’t Skip Charitable Planning for Wealthy Clients” by Paul Hechinger. This article was featured on OnWallStreet.com on May 10, 2015.

Richard’s description is as follows:

For the very rich, how they give away their money may be just as important as how they make it.

The role that philanthropy plays in the lives of wealthy individuals is so crucial that advisors who don’t properly understand it risk becoming irrelevant, according to wealth industry professionals.

Wealthy clients are eager to discuss philanthropy, according to Claire Costello, U.S. Trust’s National Practice Executive for Philanthropic Solutions. She points out that one-third of clients want the subject brought up in an initial meeting with an advisor, while 90% say the conversation has to take place within the first three meetings.

Please click here to read this article in its entirety.

The second article of interest this week is entitled “How Family Foundations Can Pass on the Philanthropy Flame to the Next Generation” by Veronica Dagher. This article was featured in The Wall Street Journal on April 12, 2015.

Richard’s description is as follows:

Many family foundations are set up to exist indefinitely. But “indefinitely” is going to come a lot sooner than expected if future generations have no interest in the family’s charitable work.

That’s a pressing issue these days as aging baby boomers look to their children and grandchildren to take the reins of the foundations they or their parents founded. Younger family members may be reluctant to step up, however, if they don’t feel a connection to the charities the foundation supports, are overshadowed by overbearing parents, or lack the time and skill needed to run a nonprofit organization.

This article features five things foundations can do to empower the next generation of leaders and ensure that the family’s philanthropic flame won’t burn out.

If you are helping clients set up their own foundations, or if you are advising clients with foundations, this article may be a good conversation starter.

Please click here to read this article in its entirety.

Amy Bhatt Graduates from St. Petersburg College!

Amy

Thursday Report contributor Amy Bhatt started working with our firm when she was just 15 years old. When she was in 10th grade, Amy took the highly demanding entrance test for the Early College Program and was one of the few students selected for the program from Pinellas County. Now, Amy has graduated from St. Petersburg College with an Associates of Arts degree – a degree she has earned before officially graduating from high school!

While in the Early College Program, Amy served as the President of the Honors College Student Consortium, the Lead Coordinator of the Honors College Research Conference, the Research Editor for the Interdisciplinary Journal (META), the Co-Chair of the Pre-Law Committee, and the Editor of the 6th Judicial Circuit Pro Bono Newsletter, which has been featured in the Thursday Report. She has also participated in the Teen Court Arbitration program since 2012.

During her first year at SPC, Amy received the Student of the Year Award in Honors Interdisciplinary Studies; she was one of the youngest students at SPC to ever receive this award. She has also won the All-Florida Academic Award conferred by the Commissioner of the Department of Education, the Dr. Theodore J. Mazzu Scholar of the Year Award, the Honors College Scholar of the Year Award, and the Early College Scholar of the Year Award.

Amy will be receiving the Presidential Scholarship Award in July, where she will be recognized as one of the most outstanding Pinellas County graduating high school seniors. She also won the prestigious Apollo Award from St. Petersburg College. The Apollo Award is the highest honor an Associate’s Degree graduate can receive, and it recognized Amy as the most outstanding student from all 10 SPC campuses in the areas of academics, service, and leadership.

Additionally, Amy conducted research on how the tactical victory of suffragettes resulted in the 19th Amendment women’s right to vote. She was invited to present this research at local, state, and regional research conferences. She has also been invited to present this research at the national level conference, which will be held in Chicago in November 2015.

Amy is continuing her studies at SPC, with a goal of earning a Bachelor’s Degree in Paralegal Studies by this time next year. She is also studying for the LSAT exam, with the hopes of attending a reputed law school next fall. Her ultimate dream is to serve as a Justice on the US Supreme Court.

Congratulations and good wishes can be sent to amy@gassmanpa.com.

Congratulations, Amy! We can’t wait to see what you accomplish next!

Humor! (or Lack Thereof!)

Sign Saying of the Week

Wizard of Sign

Cartoon - final

Upcoming Seminars and Webinars

LIVE UNIVERSITY OF FLORIDA PROFESSIONAL ACCELERATION WORKSHOP:

Alan Gassman will present a five hour workshop on legal practice and making the most of your legal practice to Professor Dennis Calfee’s summer workshop class and friends. Thank you very much to those successful professionals who have signed up to help lead discussions and enjoy the opportunity for reflection. Experienced professionals are also welcome to attend by making a small donation to the Lind Chair.

Date: Saturday, May 30, 2015 | 10:00 AM – 3:00 PM

Location: University of Florida | 2500 SW 2nd AE, Gainesville, FL 32611

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

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LIVE WEBINAR:

Rokahr

Alice Rokahr earned her Juris Doctor at The University of South Dakota School of Law. She was a partner at the firm of Kennedy, Rokahr, Pier & Knoff, LLP for 15 years and has also worked with Wells Fargo Bank and Bankers Trust Company of South Dakota. She currently serves as the President of Trident Trust Company (South Dakota) Inc.

Alice Rokahr and Alan S. Gassman will present a free, 30-minute webinar entitled WHAT IS SO SPECIAL ABOUT SOUTH DAKOTA – DOMESTIC ASSET PROTECTION TRUST LAW AND PRACTICES.

Date: Tuesday, June 9, 2015 | 12:30 pm

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com or click here to register for this webinar.

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LIVE BLOOMBERG BNA WEBINAR:

Professor Jerome Hesch, Alan Gassman, Ed Morrow, Christopher Denicolo, and Brandon Ketron will be presenting a 90-minute webinar for Bloomberg BNA Tax & Accounting on ESTATE AND TRUST PLANNING WITH IRA AND QUALIFIED PLAN BENEFITS: AN UNDERSTANDABLE SYSTEM WITH CHARTS AND EASY-TO-UNDERSTAND MATERIALS.

This presentation will include a 300 page E-book for each attendee.

For a 25% discount (and an autographed copy of the PowerPoint printed on yellow paper!) please click here and follow the instructions.

Date: Wednesday, June 10, 2015 | 2:00 PM

Location: Online webinar

Additional Information: To register for this webinar, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman will present a live, free, 30-minute webinar on the topic of THE NEW DOCTOR’S GUIDE TO WEALTH BUILDING, CREDITOR PROTECTION, TRUST PLANNING, AND WHAT THEY DIDN’T TELL YOU IN MEDICAL SCHOOL. There will be two opportunities to attend this presentation.

Date:   Wednesday, June 17, 2015 | 7:30 PM
Saturday, June 20, 2015 | 9:30 AM

Location: Online webinar

Additional Information: To register for the Wednesday/7:30 PM webinar, please click here. To register for the Saturday/9:30 AM webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman and noted trust and estate litigator, LL.M in estate planning, and blog master Juan Antunez, J.D., LL.M. will be presenting a free 30-minute webinar on ARBITRATING TRUST AND ESTATES DISPUTES. 

Don’t miss Juan’s wonderful blog site entitled Florida Probate & Trust Litigation Blog, which can be accessed by clicking here, and the many very useful articles thereon.

Date: Thursday, June 25, 2015 | 12:30 PM

Location: Online webinar

Additional Information: To register for this webinar, please click here.

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LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on FINANCIAL RELATIONSHIPS WITH PATIENTS, CO-PAYMENTS, GIFTS, AND GRAFT – HOW TO STAY OUT OF TROUBLE UNDER FLORIDA AND FEDERAL LAW.

This is an essential guide for medical practices and those who advise them. There will be two opportunities to attend this presentation.

Date: Tuesday, July 7, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FLORIDA INSTITUTE OF CPAs (FICPA) WEBINAR:

Alan Gassman will present a webinar on the topic of WHAT FLORIDA CPAS NEED TO KNOW ABOUT ASSET PROTECTION for the Florida Institute of CPAs.

More information about this webinar will be forthcoming. Please stay tuned!

Date: Thursday, July 9, 2015 | 9:30 AM – 10:30 AM

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com. To register, please contact Thelma Givens at givenst@ficpa.org.

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LIVE WEBINAR:

Alan Gassman will present a live, free, 30-minute webinar on the topic of CREDITOR PROTECTION PLANNING FOR PHYSICIANS AND MEDICAL PRACTICES. There will be two opportunities to attend this presentation.

Date: Wednesday, August 12, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email agassman@gassmanpa.com.

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LIVE BRADENTON, FLORIDA PRESENTATION:

Alan Gassman will speak at the Coastal Orthopedics Physician Education Seminar on the topics of CREDITOR PROTECTION AND THE 10 BIGGEST MISTAKES DOCTORS CAN MAKE: WHAT THEY DIDN’T TEACH YOU IN MEDICAL SCHOOL.

Coastal Orthopedics, Sports Medicine, and Pain Management is a comprehensive orthopedic practice which has been taking care of patients in Manatee and Sarasota Counties for 40 years. They have sub-specialized, fellowship-trained physicians as well as in-house diagnostics, therapy, and an outpatient surgery center to provide comprehensive, efficient orthopedic care.

Date: Thursday, August 13, 2015 | 6:00 PM

Location: Coastal Orthopedics and Sports Medicine | 6015 Pointe West Boulevard, Bradenton, FL, 34209

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

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LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on the topic of MEDICAL LAW UPDATE – FEDERAL AND FLORIDA DEVELOPMENTS THAT MEDICAL PRACTICES AND ADVISORS NEED TO BE AWARE OF. There will be two opportunities to attend this presentation.

Date: Tuesday, August 18, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Live webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE AVE MARIA SCHOOL OF LAW PROFESSIONAL ACCELERATION WORKSHOP:

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

Date: Saturday, August 22, 2015 | 9:00 AM – 5:00 PM

Location: Thomas Moore Commons, Ave Maria School of Law, 1025 Commons Circle, Naples, FL 34119

Additional Information: To download the official invitation to this event, please click here. To RSVP and for more information, please contact Donna Heiser at dheiser@avemarialaw.edu or via phone at 239-687-5405 or Alan Gassman at agassman@gassmanpa.com or via phone at 727-442-1200.

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LIVE SARASOTA PRESENTATION:

Alan Gassman will speak at the Southwest Florida Estate Planning Council meeting on September 8th on a topic to be determined. We are open to suggestions!

Date: Tuesday, September 8, 2015 | 3:30 PM – 5:30 PM with dinner to follow

Location: Sarasota, Florida

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

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of THE 10 BIGGEST MISTAKES THAT SUCCESSFUL PARENTS (AND GRANDPARENTS) MAKE WITH RESPECT TO COLLEGE AND RELATED DECISIONS FOR HIGH SCHOOL STUDENTS.

Date: Saturday, September 12, 2015 | 9:30 AM

Location: Online Webinar

Additional Information: To register for this webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FORT LAUDERDALE PRESENTATION:

Ken Crotty will be presenting a 1-hour talk on PLANNING FOR THE SALE OF A PROFESSIONAL PRACTICE – TAX, LIABILITY, NON-COMPETITION COVENANT, AND PRACTICAL PLANNING at the Florida Institute of CPAs Annual Accounting Show.

Date: Friday, September 18, 2015 | 3:30 PM – 4:20 PM

Location: Broward County Convention Center | 1950 Eisenhower Blvd, Fort Lauderdale, FL 33316

Additional Information: For additional information, please email Ken Crotty at ken@gassmanpa.com or CPE Conference Manager Diane K. Major at majord@ficpa.org.

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of FAILURE TO LAUNCH: 20-SOMETHINGS WITHOUT A SOLID CAREER PATH – WHAT PARENTS (AND OTHERS) NEED TO KNOW.

Date: Saturday, October 3, 2015 | 9:30 AM

Location: Online webinar

Additional Information: Please click here to register for this webinar. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE SARASOTA PRESENTATION:

2015 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: Friday, October 23rd and Saturday, October 24th, 2015

Location: To Be Determined

Additional Information: Please contact Alan Gassman at agassman@gassmanpa.com for more information.

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION 18TH ANNUAL ESTATE, TAX, LEGAL & FINANCIAL PLANNING SEMINAR

We are pleased to announce that Jonathan Blatttmachr, Howard Zaritsky, Lee-Ford Tritt, Lauren Detzel, Michael Markham, Alan Gassman, and others will be speaking at the 2016 All Children’s Hospital Estate, Tax, Legal & Financial Planning Seminar.

Lauren Detzel will be speaking on Family Law and Tax Planning for Divorce, while Michael Markham will be speaking on Bankruptcy and Creditor Protection/Fraudulent Transfer in Context with Estate Planning. Alan Gassman will speak on Florida Law Tricks and Traps for Estate Planners.

We thank Lydia Bailey and Lori Johnson for their incredible dedication (and patience with certain members of the Board of Advisors.) All Children’s Hospital is affiliated with Johns Hopkins, which is not affiliated with Anthony Hopkins.

Please provide us with your input for other topics for this year and next! Watch this space for more speaker and topic announcements.

Date: Wednesday, February 10, 2016

Location: Live Event at the All Children’s Hospital St. Petersburg Campus; Live webcasts in Tampa, Fort Myers, Belleair, New Port Richey, Lakeland, and Sarasota

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

Notable Seminars by Others
(These conferences are so good that we were not invited to speak!)
 

LIVE TAMPA PRESENTATION:

THE FLORIDA BAR TAX SECTION LUNCHEON

The Florida Bar Tax Section’s New Tax Lawyers Committee is holding a luncheon featuring The Honorable Juan F. Vasquez of The United States Tax Court as its guest speaker. The topic of the discussion will be CURRENT DEVELOPMENTS BEFORE THE TAX COURT.

There is no cost to attend the lunch, but an RSVP is required.

Date: Wednesday, June 3, 2015 | 11:45 AM – 1:15 PM

Location: The University Club of Tampa | 201 N. Franklin Street, Tampa, FL 33602 | 38th Floor

Additional Information: To RSVP, please email assistant@schmidtlawoffice.com if you would like to attend. A confirmation email will be sent a few days prior to the program.

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LIVE ORLANDO PRESENTATION:

50TH ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 11 – January 15, 2016

Location: To be announced

Additional Information: Information on the 50th Annual Heckerling Institute on Estate Planning will be available on August 1, 2015. To learn about past Heckerling programs, please visit http://www.law.miami.edu/heckerling/.

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.

Applicable Rates

The Thursday Report (TTR) – 5.21.15 – Happiness is a Warm Gun Trust (HIAWGT)

Posted on: May 21st, 2015

Drafting a Gun Trust (DGT) – Don’t Take a Shotgun Approach, Part II

Appeals Court Corrects Bankruptcy Error (ACCBE) in Castellano, Part I

Feedback from the Florida Bar Asset Protection Program (FFBAPP)

Richard Connolly’s World – Finances Before & After Marriage (Uh-oh!)

Thoughtful Corner – Nothing But Initials (TC-NBI)

Humor! (or Lack Thereof!) (HLT)

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

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

Drafting a Gun Trust – Don’t Take a Shotgun Approach, Part II
by Alan Gassman, Seaver Brown, and Travis Arango

The debate over gun control and gun rights has certainly become a contentious topic in the last few years. As a result, gun trusts have become a popular mechanism for individuals to properly manage automatic weapons, suppressors, and certain permitted explosives that are restricted by federal and state laws. In 1934, Congress enacted the National Firearms Act to regulate an individual’s ability to buy and sell machine guns, sawed-off shotguns, suppressors (silencers) and other items.[1] The Gun Control Act of 1968 and regulations promulgated by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“Bureau of Alcohol”) provide rules for the possession and transfer of specified firearms and other items.[2]

In light of these regulations, gun enthusiasts are presented with three options when it comes to buying and selling certain restricted firearms/items. One option allows them to apply as an individual, another as a corporation, such as a limited liability company (LLC), and the last is through a gun trust. Each option has certain requirements that must be met in order for an individual to lawfully own and possess these types of firearms. This article will examine the various laws affecting gun owners’ rights, as well as the different methods that may be used to lawfully possess, use, buy, and sell these weapons.

Part I of our article, which ran in last week’s issue of The Thursday Report, can be viewed by clicking here.

Part II is as follows:

A gun trust is typically created to address three major concerns about the possession and transfer of firearms regulated by federal and state governments. First, they operate as a legitimate estate planning tool to determine the treatment of firearms upon the death or incapacity of a settlor. Second, they allow multiple trustees to lawfully possess and use the firearms held by the trust, which is contrary to a federal law that states that only on individual may possess a Title II firearm. Finally, they provide a way to avoid the requirement of providing fingerprints and obtaining the chief law enforcement officer’s signature of approval.

The gun trust must meet the requirements of the state’s trust laws where the trust is created. Most gun trusts are created strictly to deal with the complexities of owning and transferring Title II firearms, as opposed to Title I firearms. Thus, upon the death or incapacity of a settlor, special consideration must be given to whether or not the beneficiaries or remaining trustees are permitted to possess such firearms. Unfortunately, answering this question is never a simple task. As we discussed above, state and federal laws operate concurrently in the context of these firearms. When drafting a typical revocable trust, the drafter tends only to address the specific state laws in which the trust is created because it does not matter where a co-trustee or beneficiary resides upon the death of a settlor. This is simply not the case with a gun trust. For example, if you create a gun trust in the State of Florida and name your son, a Massachusetts resident, as either a co-trustee or a beneficiary, then they must have a Firearms Identification Card from Massachusetts to be in lawful possession of any firearm you leave them. The important point here is that each state has their own specific rules on gun ownership, possession, and transferability.

You are required to submit 1 of 2 forms to the Bureau of Alcohol in order to get authorization to own a Title II item. If you are buying a Title II item, then you will have to submit Form 4. If you are making a Title II item (i.e. shortening the barrel on a firearm, etc.) then you will have to submit Form 1. Regardless of whether you use a corporation, trust, or personal ownership, you must submit the form and gain approval before taking possession of the Title II item. Generally, you will go to a store and purchase the Title II item, get the necessary information, such as the serial number of the item, fill out the required form, and then send it in. While the application process takes place, the dealer will hold the item for you until you have been approved by the Bureau of Alcohol to take possession of the item.

Transferring the Title II item to the gun trust depends on who owns the item at the time. If the item is owned by a Class II dealer (i.e. a gun store that is licensed to sell Title II items) then the trust will purchase the item, and the store will hold the item until the Bureau of Alcohol approves the Form 4. You will want to purchase the item with a money order or with a bank account set up by the trust to avoid any issues with purchasing the item under your name. On the Form 4, which you will fill out and send in to the Bureau of Alcohol, the owner of the item will be the gun trust and the section requiring fingerprints and the chief law enforcement officer signature will be skipped. Detailed instructions for filling out the form can be found here: https://www.guntrustlawyer.com/form4.

If you are already the owner of a Title II item (i.e. you have already gone through the necessary steps to get a tax stamp through the Bureau of Alcohol for that item) and want to transfer it to a gun trust, then you will have to pay the stamp tax again for each item you want to send to the trust and fill out the required Form 4. This is because a stamp tax is required for each transfer of a Title II item, and transferring ownership from yourself to the trust (even if it is your trust) constitutes a transfer.

Gun Trust Benefits:

  • All named trustees have the right to possess or use the National Firearms Act firearm or item. This protects you and anybody else that has access to the item from committing a felony.
  • When compared to a corporation or LLC, which are generally open to the public, a gun trust will keep your information private, such as what items the trust owns and who owns them. However, while National Firearms Act firearms must still be registered with the Bureau of Alcohol, there is no need to notify local law enforcement.
  • No fingerprints, photographs, or chief law enforcement officer signature required.
  • Bureau of Alcohol approval is usually must faster than individual applications.
  • Provides greater protection that National Firearms Act firearms are passed on responsibly when an owner dies or is deemed incapacitated. In also keeps them from falling into the wrong hands after divorce.
  • Gun trusts protect the would-be executor of your estate. Normally, executors gather all your assets, pay off your debts, and then distribute what is left. However, this may lead to unintended consequences when the executor is not familiar with the National Firearms Act rules and restrictions on ownership, possession, and transfers of National Firearms Act firearms. This may cause them to inadvertently transfer the firearm to someone without registering it or obtaining approval from the Bureau of Alcohol.
  • Firearms can remain in the trust after the grantor’s death, meaning there is no transfer of the item at the current owner’s death. This allows the beneficiary to avoid the $200 transfer fee as well as the application process discussed above.

Below is a chart that shows what is required of each type of Title II purchase:

Gun Trust Chart

Another important point to note is that since 1986, there have not been any newly manufactured, fully automatic weapons that can be held in private possession. This has led to a decrease in the current supply of pre-1986 automatic weapons as they succumb to damage and poor maintenance. Thus, these older weapons have grown in value[3], which in turn has led to an ever growing market of collectors. In this sense, a gun trust is almost necessary to properly handle the weapon after the collector’s death. Using a trust ensures its value remains in the estate. It also ensures that when the beneficiaries or trustee of the gun trust decide to sell it, they will not be subject to any criminal liability.

Conclusion:

Without a gun trust, individuals who wish to own a Title II firearm must satisfy several requirements set forth by the Bureau of Alcohol, Tobacco, Firearms, and Explosives. Those requirements include filling out a Form 1 or Form 4 for each item you want to register, paying a $200 tax stamp, submitting a photo and fingerprints, and allowing for a background check. They must also obtain a signature from the chief law enforcement officer in their area approving the application; however, most of this process can be bypassed by creating a gun trust.

If you are thinking about using a gun trust, make sure to use night vision goggles so you are not left in the dark. Stock gun trust forms and revocable trusts can be extremely dangerous when not properly drafted, even more so than the weapons they are intended to protect. Do not forget the safety either. Before you and your trustees decide to purchase or use any gun trust firearm, make sure that all trustees are required to take gun safety courses. Recommend they take physicals every year to ensure they are fit both mentally and physically. Be sure that they know to use protective eyewear and earplugs. Finally, ensure that the places they use these weapons allow for discharge of these types of weapons.

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[1] National Firearms Act of 1934, 26 U.S.C. §§ 5801 – 5872 (2006).
[2] Gun Control Act of 1968, 18 U.S.C. §§ 921 – 931 (2006).
[3] According to http://www.machinegunpriceguide.com/html/us_mg_4.html, as of December 2014, a pre-1986 fully automatic M16A1 rifle will cost on average $28,000, nearly a $13,000 increase from December of 2004.

Appeals Court Corrects Bankruptcy Error in Castellano, Part I
by Jonathan E. Gopman, Ryan J. Beadle, Michael A. Sneeringer, Evan R. Kaufman, and Alan S. Gassman

Faith Castellano died, and Linda Castellano was her daughter
Faith left her assets in a trust like she ought-er.
Del Alcazar was appointed Trustee
And noted that Castellano was filing for bankruptcy.
The spendthrift clause in the trust went beyond the norm
And specifically provided for an insolvent’s interest would be out torn
And would thus be applied in the sole discretion of the Trustee for education and support for life
With nothing there for the beneficiary’s husband or wife.
The bankruptcy judge took a look at it all
And for some reason decided that Castellano should take a fall.
The District Court on review, however, finally got it exactly right
So the drafter of the Trust and Castellano need no longer be uptight.
It would have been safer to have no outright distributions
And it is a shame they had to go to court and appeal to get the right solution.
Hats off to District Court Judge Manish Shah
And to Castellano and her lawyers for going this far.
The provision in this trust was the hero of the day
Put a stronger one in your trusts and some fortunes you may save.

The following is the initial executive summary and comment from a draft LISI newsletter presently in editing.

EXECUTIVE SUMMARY:

After much discussion in the LISI community[1], the result promulgated in In re Castellano[2] has been relegated to a footnote in history following the decision by the United States District Court for the Northern District of Illinois in Safanda v. Castellano.[3] While the decision may be considered on appeal, United States District Judge Manish S. Shah appears to have analyzed the pertinent issues properly to reach the correct result.  The bankruptcy judge’s conclusion that a debtor who notified the trustee of a spendthrift trust that she was not entitled to receive distributions due to her insolvency and the clear language of the trust, was somehow considered to have made a contribution to the trust that would be set aside, or would be impacted under the ten year look back period for self-settled trusts.

COMMENT:

The court in Safanda v. Castellano (“Castellano II”) relied on the facts of In re Castellano (“Castellano I”), which was previously reported to members in prior commentaries.[4] However, the court in Castellano II expounded on certain facts as such relate to Linda Castellano (“Linda”) and Bruno Castellano (“Bruno”) (collectively, the “Castellanos”). A brief summary of such facts is provided below.

CASTELLANO I and FACTS:

On February 18, 1997, Linda’s mother, Faith F. Campbell (“Faith”) settled the Faith F. Campbell Living Trust (the “Trust”) in South Carolina. Linda was a beneficiary of the Trust. Faith died on February 11, 2011. The Castellanos operated a moving company that closed in the summer of 2011 due to financial difficulties. On October 5, 2011, Linda’s attorney sent a letter (the “Insolvency Letter”)[5] to J. T. Del Alcazar (“Del Alcazar”), the trustee of the Trust. In November of 2011, the Castellanos filed for bankruptcy. The Trust provided that upon Faith’s death and “upon settlement of her estate, [the Trust] shall terminate.” The Insolvency Letter informed Del Alcazar that the Castellanos had closed their business, that the Castellanos were filing for bankruptcy protection, and that Linda’s insolvency required the trustee of the Trust to exercise the trustee’s authority under the Trust’s spendthrift provision to retain Linda’s interest in the trust.[6] Del Alcazar was the husband of Linda’s niece.

After Del Alcazar received the Insolvency Letter, he transferred approximately $400,000 from the Trust’s primary account at Merrill Lynch into a second Merrill Lynch account titled “Faith F. Campbell Spendthrift Trust f/b/o Linda Castellano” (the “Spendthrift Trust Account”). Although Del Alcazar opened the Spendthrift Trust Account, the court found no evidence suggesting that Del Alcazar created a new trust by simply transferring a portion of the Trust’s assets from one account at Merrill Lynch to another.

Three days after filing for bankruptcy, Linda signed a release (the “Release”), acknowledging that she received a trust accounting from Del Alcazar, that she approved Del Alcazar’s proposed distribution of the Trust’s assets in further trust, and that she released Del Alcazar from any claims she might have against Del Alcazar. Linda also agreed that (1) her interest in the Trust was terminated, (2) she had become a “life-time, limited beneficiary at the sole discretion of the trustee” of the Trust, (3) her insolvency required the trustee to retain her interest pursuant to the Trust’s “Spendthrift Provision,” and (4) she would receive no distribution from the Trust, but that the “Spendthrift Trust” (i.e., the second account at Merrill Lynch) would receive her “lifetime, limited beneficial interest … in full satisfaction of her rights and interests under the Trust, but reserving her beneficial interests pursuant to the Spendthrift Trust.”[7]

In December 2011, Del Alcazar made distributions from the Trust to Linda’s three siblings, however, no distributions were made to Linda. The bankruptcy trustee, Roy Safanda (“Safanda”) (Safanda, Linda, and Del Alcazar are hereinafter collectively referred to as the “Parties”), instituted an adversary proceeding against Linda and Del Alcazar. Safanda sought the avoidance of Del Alcazar’s transfer of the $400,000 to the Spendthrift Trust Account under § 548(e) of the Bankruptcy Code and the turnover of the $400,000 to Linda’s bankruptcy estate. In Castellano I, the bankruptcy court ruled in favor of Safanda, holding that Del Alcazar’s possession and retention of assets was avoidable somehow under § 548(e) of the Bankruptcy Code and that the funds should be turned over to the bankruptcy estate. Linda and Del Alcazar objected to the bankruptcy court’s findings.

CASTELLANO II and ANALYSIS

The district court reviewed the bankruptcy court’s proposed findings of fact and conclusions of law de novo.  The court (1) reviewed Safanda’s claims under § 541 and 548 of the Bankruptcy Code, (2) sustained Linda’s and Del Alcazar’s objections, (3) entered a judgment in Linda and Del Alcazar’s favor, and (4) terminated the civil case filed by Safanda.

Analysis Under Section 541(c)(2)

In Castellano II, the court dedicated a majority of the analysis in its opinion to § 541(c)(2) of the Bankruptcy Code. Section 541(c)(2) states that: “a restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title.” This section was not discussed in Castellano I, where the bankruptcy court’s analysis instead focused on § 548(e), which seemed inappropriate and flawed. When a debtor files bankruptcy, a bankruptcy estate is created and contains “all legal or equitable interests of the debtor in property as of the commencement of the case.”[8] However, property of a debtor in bankruptcy is not transferred to the bankruptcy estate if (1) such property consists of a beneficial interest in a trust, (2) the trust agreement contains language restricting the transfer of the interest, and (3) the transfer restriction is enforceable under applicable non-bankruptcy law.[9] If a debtor’s interest in a trust is excluded from the bankruptcy estate under § 541(c)(2) of the Bankruptcy Code, the bankruptcy trustee has no basis to set aside a transfer of such an excluded interest.[10]

The court explained that if § 541(c)(2) applied to exclude Linda’s interest in the Trust, Safanda could not pursue any transfer and turnover claims regarding such interest. While Linda did not claim an exemption of the Spendthrift Trust Account § 541(c)(2) in her bankruptcy petition, property interests under § 541(c)(2) need not be listed on Schedule C of a bankruptcy petition, as such property is entirely excluded from the bankruptcy estate, not merely exempted from the bankruptcy estate.[11]

To successfully argue that § 541(c)(2) did not apply to exclude Linda’s interest in the Trust from the bankruptcy estate, Safanda had to prove by a preponderance of the evidence that Linda did not have an interest in the Trust when Linda filed for bankruptcy, or, in the alternative, that the Trust did not restrict transfers of Linda’s interest in the Trust under applicable state law.[12]

Linda’s Interest was an Interest in Trust

The court dismissed Safanda’s claim that Linda had no interest in the Trust, and also foreclosed the bankruptcy court’s conclusion that the Trust somehow ended and was considered to have been distributed outright to the beneficiaries instantly upon Faith’s death. The terms of the Trust stated that “[u]pon the death of Faith F. Campbell and upon settlement of her “estate”, [the Trust] shall terminate.”

Safanda argued that because the Trust did not define the term “estate,” such term referred to Faith’s probate estate, and since a probate estate was never opened, Safanda argued that the Trust terminated immediately upon Faith’s death. Safanda’s interpretation of the Trust’s termination provisions would lead to the result that at the time Linda filed her bankruptcy petition, Linda did not have an interest in the Trust.[13]

The court noted that the purpose in interpreting a trust is to discover a settlor’s intent.[14] Section 4.10 of the Trust allowed the trustee to make loans from the “Trust Estate” to the executor or other representative of the “Trustor’s estate.” This provision indicated to the court that Faith intended her estate and the Trust’s assets to be separate entities. Numerous other provisions of the Trust instructed the trustee to accomplish certain tasks, before final distribution of the Trust’s assets to the remainder beneficiaries (including Linda). The court noted that Safanda’s interpretation of the Trust’s termination provisions was inconsistent with the remaining terms of the Trust, after reiterating that the Trust should be read to best reflect Faith’s overall intent.  Thus, the court ruled that on the date Linda filed for bankruptcy, (1) the Trust was still in effect and (2) Linda had a beneficial interest in the Trust.

The Trust had Spendthrift and Discretionary Provisions Which Restricted Transfers of Beneficiaries’ Interests

The court noted that the Parties and the bankruptcy court failed to identify that (1) the Trust contained a spendthrift provision (in the traditional sense), and (2) the Trust also contained a provision purporting to convert a beneficiary’s interest into a discretionary interest if such beneficiary was bankrupt or insolvent. The court interpreted the spendthrift provision and the discretionary holdback provision to mean that the Trust sought to restrict assignment of the beneficiaries’ interests twice.

The Trust Contained Valid Spendthrift and Discretionary Trust Provisions Under South Carolina Law, Illinois Law, and Wisconsin Law

The court had to decide if the relevant restrictions on the assignment of the beneficiaries’ interests in the Trust were valid under applicable state law such that the Spendthrift Trust Account would be excluded from the bankruptcy estate.[15] The court noted that the result would be the same under South Carolina law (the situs of the Trust), Illinois law (the state where the Castellanos filed bankruptcy), and Wisconsin law (the state where certain property owned by the Trust was located): at the time Linda filed for bankruptcy, the assignment of her interest in the Trust was validly restricted by the spendthrift and holdback discretionary trust provisions.

Next week, we will provide further commentary on this case.

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[1] Bove, “Castellano: The Wrong Result for the Right Reasons,” LISI Asset Protection Planning Newsletter #270, (Nov. 20, 2014) at http://www.leimbergservices.com; Vandenack & Wintz, “Drafting Considerations for Third-Party Spendthrift Trust after In re Castellano,” LISI Asset Protection Planning Newsletter #259, (Sept. 10, 2014); and Adkisson, Slenn & Martino “In re Castellano: A Wake-Up Call for Self-Settled Trusts and Spendthrift Provisions,” LISI Asset Protection Planning Newsletter #258, (Sept. 8, 2014) at http://www.leimbergservices.com
[2] 514 B.R. 555 (Bankr. N.D.  Ill. 2014).
[3] 2015 WL 1911130 (N.D. Ill. 2015).
[4] For the background facts of Safanda v. Castellano, see supra note 1.
[5] Id.
[6] For a more detailed analysis of the Castellano decision focusing on Linda’s attorney letter to Del Alcazar’s attorney, see Bove, supra note 1.
[7] Safanda, 2015 WL 1911130 at *3.
[8] 11 U.S.C. § 541(a)(1).
[9] 11 U.S.C. § 541(c)(2).
[10] See, e.g., In re Hill, 342 B.R. 183, 206 (Bankr. D.N.J. 2006) (“Even accepting the Trustee’s theory that Phyllis transferred a 17% interest in Daniel’s pension that should have been hers in equitable distribution, avoiding that transfer would not make any assets available for creditors.”); see also Matter of McClellan, 99 F.3d 1420, 1423 (7th Cir. 1996) (“Bankruptcy courts do not have subject matter jurisdiction and cannot administer property excluded from or outside the bankruptcy estate.”)
[11] See Safanda, 2015 WL 1911130 at fn 3. The court also explained that Linda’s misstatement of Illinois law on Schedule C did not preclude her from defending Safanda’s suit on the basis of § 541(c)(2) of the Bankruptcy Code, explaining:

On Schedule C of her petition, Castellano (or her attorney) cited 735 ILCS 5/12-1001(h)(3)-a wholly inapplicable Illinois law pertaining to payments made to a dependent under a life insurance policy. Safanda offers no authority for the rule, however, that such a mis-citation precludes Castellano from defending against this adversary proceeding on the basis of § 541 (c)(2) – especially when the statute was cited in the Joint Pretrial Statement and argued at trial. Moreover, “[a] voluntary petition, list, schedule, or statement may be amended by the debtor as a matter of course at any time before the case is closed.” Fed. R. Bankr. P. 1009(a). The bankruptcy case remains open here, so Castellano may revise the citation at any time.

Id.
[12] See Safanda, 2015 WL 1911130 at *2.
[13] Although Linda’s counter argument was that the term “estate” meant “Trust Estate,” the court rejected this interpretation. See Safanda 2015 WL 1911130 at *4.
[14] Harris Trust & Savings Bank v. Donovan, 145 Ill. 2d 166, 172 (1991).
[15] See 11 U.S.C. § 541 (c)(2).

Feedback from The Florida Bar Asset Protection Program

Earlier this month, on May 7th and May 8th, The Florida Bar Asset Protection Program, led by Alan Gassman and Dennis Kleinfeld, was held in Miami, Florida. Since the seminar, we have received the following responses about the experience (names have been withheld for anonymity):

“It was a tremendous professional delight and terrific learning experience to be able to attend the two-day Florida Bar Asset Protection Seminar in Miami earlier this month. After more than thirty years of practice, I must report that the seminar, with the hard-bound, accompanying exhaustive supporting reference materials, was the best legal education program I have ever attended. I also enjoyed the great dinner you and Dennis assembled and appreciate the personal time you so kindly shared with me. It was a delight to be able to be your student in Miami and to have dinner alongside you.”

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“Alan, thanks to you and the other speakers for sharing your knowledge with all of us at the Asset Protection seminar. That was definitely one of the most valuable CLEs I’ve attended.”

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“Alan, thanks to you and Dennis for putting on a great seminar. I’ve been attending these since 2010, and I have to say this has been the best one yet (and last year was pretty awesome with Jay Adkisson being there!) Two days is the way to go – asset protection is too complex for one day. The value provided far exceeded the extra sign-up fees for the second day, and all of the speakers were uniformly good. The drinks/dinner extravaganza was quite fun and much appreciated. My only regret is that we didn’t take a group photo. Thanks again for sharing your knowledge with us. I know I speak for a lot of our colleagues in saying that we really appreciate it. Well done!”

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In addition, we received the following comment from one of the conference’s speakers, Howard Fisher:

“Alan, Alex and I thank you very much for having invited us to speak at the Miami conference. We really enjoy the opportunity and the chance to see old friends. You asked why we stay for most of the program – it’s simple. The speakers are excellent, and we always learn something. That’s a real credit for the quality of the conference.”

A big thank you to everyone who attended the two-day Asset Protection seminar. We’ll see you all next year!

Richard Connolly’s World
Finances Before & After Marriage

Insurance advisor Richard Connolly of Ward & Connolly in Columbus, Ohio often shares with us pertinent articles found in well-known publications such as The Wall Street Journal, Barron’s, and The New York Times. Each week, we will feature some of Richard’s recommendations with a link to the articles.

This week, the first article of interest is “Divorce Funding Firms Help Spouses Expecting Big Payouts” by Paul Sullivan. This article was featured in The New York Times on February 27, 2015.

Richard’s description is as follows:

What these [divorce funding firms] are doing is offering high-interest money to people who have none and want to pursue a person they once loved for their share of what is always a lot of money. The firms all say their advances level the playing field against the moneyed spouse who can otherwise force the one without money to settle.

These companies generally lend around 20 to 25 percent of the value of an expected settlement and their minimum loans range from $100,000 to $250,000, meaning the settlements are $400,000 to $1,000,000 on the low end. The money doesn’t need to be paid back until months or years down the line when a settlement is reached. By design, divorce funding sharply reduces the value of the settlement, but there might not have been a settlement otherwise.

In turn, divorcees provide a hefty return for the companies in the industry, which are largely backed by private investors.

Please click here to read this article in its entirety.

The second article of interest this week is entitled “A New Way to Use a Prenup” by Matthias Rieker. This article was featured in The Wall Street Journal on March 12, 2015.

Richard’s description is as follows:

Prenuptial agreements have long been used to protect the assets of a far wealthier partner in a marriage.

Now they are also being used by couples who enter marriage as financial peers to help establish financial parameters, according to experts and advisers. In many cases, both parties already have successful careers and significant assets, as well as important commitments to children from prior marriages, they say.

These kinds of prenups typically address issues such as how the couple will pay for a new shared home; which investments they will mingle or keep separate; and who will inherit each partner’s assets – not how much of a family’s fortune might be shielded from the newcomer.

Please click here to read this article in its entirety.

Thoughtful Corner
Nothing But Initials (NBI)

In 1973, Howard Selby founded a new computer corporation called NBI. At the time, NBI stood for Necton Bylinnium, Inc. Two years later, Selby turned leadership of NBI over to Thomas S. Kavanagh from Storage Technology Corporation, an off-shoot of technology giant IBM. When asked what NBI stood for, after it had become a 60 million dollar per year company with a large percentage share of the computer industry, Kavanagh replied that it meant, “Nothing But Initials,” which gives credence to the proposition that initials can be important from a communications, labeling, and perception of meaning standpoint.

On the other hand, initials can be a grand pain in the behind when anyone reviewing a document doesn’t know or remember what they mean, so quite often, we find ourselves going into documents and even reference texts and replacing the initials with the words that they stand for.

Perhaps 65 percent of the population that reads your documents will not memorize the initials and will then have less understanding and even less meaning to continue with a document.

Don’t forget the NBI story – when your clients read your documents, are they seeing “nothing but initials” or are they understanding what every provision of the document means?

Footnotes can work in the same way. If you want the client to read what you are sending, why would you put it in 10 point print at the bottom of the page and require the mental and physical calisthenics of going up and down and up and down while reading?

We prefer the way that Bloomberg BNA footnotes, which is directly under each section, as opposed to being at the bottom of each page.

NBI went bankrupt in 1991, which may tell you something about the strategy of overusing initials.

DUMBAS (Don’t Use Multiple Binary Abbreviations Systematically!)

WHYFTTBH[1]

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[1] We hope you find this to be helpful.

Humor! (or Lack Thereof!)

Sign Saying of the Week (SSW)

Humor

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Cartoon

Upcoming Seminars and Webinars

LIVE UNIVERSITY OF FLORIDA PROFESSIONAL ACCELERATION WORKSHOP:

Alan Gassman will present a five hour workshop on legal practice and making the most of your legal practice to Professor Dennis Calfee’s summer workshop class and friends. Thank you very much to those successful professionals who have signed up to help lead discussions and enjoy the opportunity for reflection. Experienced professionals are also welcome to attend by making a small donation to the Lind Chair.

Date: Saturday, May 30, 2015 | 10:00 AM – 3:00 PM

Location: University of Florida | 2500 SW 2nd AE, Gainesville, FL 32611

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

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LIVE WEBINAR:

Alice Rokahr

Alice Rokahr earned her Juris Doctor at The University of South Dakota School of Law. She was a partner at the firm of Kennedy, Rokahr, Pier & Knoff, LLP for 15 years and has also worked with Wells Fargo Bank and Bankers Trust Company of South Dakota. She currently serves as the President of Trident Trust Company (South Dakota) Inc.

Alice Rokahr and Alan S. Gassman will present a free, 30-minute webinar entitled WHAT IS SO SPECIAL ABOUT SOUTH DAKOTA – DOMESTIC ASSET PROTECTION TRUST LAW AND PRACTICES.

Date: Tuesday, June 9, 2015 | 12:30 pm

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com or click here to register for this webinar.

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LIVE BLOOMBERG BNA WEBINAR:

Professor Jerome Hesch, Alan Gassman, Ed Morrow, Christopher Denicolo, and Brandon Ketron will be presenting a 90-minute webinar for Bloomberg BNA Tax & Accounting on ESTATE AND TRUST PLANNING WITH IRA AND QUALIFIED PLAN BENEFITS: AN UNDERSTANDABLE SYSTEM WITH CHARTS AND EASY-TO-UNDERSTAND MATERIALS.

This presentation will include a 300 page E-book for each attendee.

For a 25% discount (and an autographed copy of the PowerPoint printed on yellow paper!) please click here and follow the instructions.

Date: Wednesday, June 10, 2015 | 2:00 PM

Location: Online webinar

Additional Information: To register for this webinar, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman will present a live, free, 30-minute webinar on the topic of THE NEW DOCTOR’S GUIDE TO WEALTH BUILDING, CREDITOR PROTECTION, TRUST PLANNING, AND WHAT THEY DIDN’T TELL YOU IN MEDICAL SCHOOL. There will be two opportunities to attend this presentation.

Date:  Wednesday, June 17, 2015 | 7:30 PM
Saturday, June 20, 2015 | 9:30 AM

Location: Online webinar

Additional Information: To register for the Wednesday/7:30 PM webinar, please click here. To register for the Saturday/9:30 AM webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman and noted trust and estate litigator, LL.M in estate planning, and blog master Juan Antunez, J.D., LL.M. will be presenting a free 30-minute webinar on ARBITRATING TRUST AND ESTATES DISPUTES. 

Don’t miss Juan’s wonderful blog site entitled Florida Probate & Trust Litigation Blog, which can be accessed by clicking here, and the many very useful articles thereon.

Date: Thursday, June 25, 2015 | 12:30 PM

Location: Online webinar

Additional Information: To register for this webinar, please click here.

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LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on FINANCIAL RELATIONSHIPS WITH PATIENTS, CO-PAYMENTS, GIFTS, AND GRAFT – HOW TO STAY OUT OF TROUBLE UNDER FLORIDA AND FEDERAL LAW.

This is an essential guide for medical practices and those who advise them. There will be two opportunities to attend this presentation.

Date: Tuesday, July 7, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FLORIDA INSTITUTE OF CPAs (FICPA) WEBINAR:

Alan Gassman will present a webinar on the topic of WHAT FLORIDA CPAS NEED TO KNOW ABOUT ASSET PROTECTION for the Florida Institute of CPAs.

More information about this webinar will be forthcoming. Please stay tuned!

Date: Thursday, July 9, 2015 | 9:30 AM – 10:30 AM

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com. To register, please contact Thelma Givens at givenst@ficpa.org.

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LIVE WEBINAR:

Alan Gassman will present a live, free, 30-minute webinar on the topic of CREDITOR PROTECTION PLANNING FOR PHYSICIANS AND MEDICAL PRACTICES. There will be two opportunities to attend this presentation.

Date: Wednesday, August 12, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email agassman@gassmanpa.com.

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LIVE BRADENTON, FLORIDA PRESENTATION:

Alan Gassman will speak at the Coastal Orthopedics Physician Education Seminar on the topics of CREDITOR PROTECTION AND THE 10 BIGGEST MISTAKES DOCTORS CAN MAKE: WHAT THEY DIDN’T TEACH YOU IN MEDICAL SCHOOL.

Coastal Orthopedics, Sports Medicine, and Pain Management is a comprehensive orthopedic practice which has been taking care of patients in Manatee and Sarasota Counties for 40 years. They have sub-specialized, fellowship-trained physicians as well as in-house diagnostics, therapy, and an outpatient surgery center to provide comprehensive, efficient orthopedic care.

Date: Thursday, August 13, 2015 | 6:00 PM

Location: Coastal Orthopedics and Sports Medicine | 6015 Pointe West Boulevard, Bradenton, FL, 34209

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

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LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on the topic of MEDICAL LAW UPDATE – FEDERAL AND FLORIDA DEVELOPMENTS THAT MEDICAL PRACTICES AND ADVISORS NEED TO BE AWARE OF. There will be two opportunities to attend this presentation.

Date: Tuesday, August 18, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Live webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE AVE MARIA SCHOOL OF LAW PROFESSIONAL ACCELERATION WORKSHOP:

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

Date: Saturday, August 22, 2015 | 9:00 AM – 5:00 PM

Location: Thomas Moore Commons, Ave Maria School of Law, 1025 Commons Circle, Naples, FL 34119

Additional Information: To download the official invitation to this event, please click here. To RSVP and for more information, please contact Donna Heiser at dheiser@avemarialaw.edu or via phone at 239-687-5405 or Alan Gassman at agassman@gassmanpa.com or via phone at 727-442-1200.

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LIVE SARASOTA PRESENTATION:

Alan Gassman will speak at the Southwest Florida Estate Planning Council meeting on September 8th on a topic to be determined. We are open to suggestions!

Date: Tuesday, September 8, 2015 | 3:30 PM – 5:30 PM with dinner to follow

Location: Sarasota, Florida

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

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of THE 10 BIGGEST MISTAKES THAT SUCCESSFUL PARENTS (AND GRANDPARENTS) MAKE WITH RESPECT TO COLLEGE AND RELATED DECISIONS FOR HIGH SCHOOL STUDENTS.

Date: Saturday, September 12, 2015 | 9:30 AM

Location: Online Webinar

Additional Information: To register for this webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FORT LAUDERDALE PRESENTATION:

Ken Crotty will be presenting a 1-hour talk on PLANNING FOR THE SALE OF A PROFESSIONAL PRACTICE – TAX, LIABILITY, NON-COMPETITION COVENANT, AND PRACTICAL PLANNING at the Florida Institute of CPAs Annual Accounting Show.

Date: Friday, September 18, 2015 | 3:30 PM – 4:20 PM

Location: Broward County Convention Center | 1950 Eisenhower Blvd, Fort Lauderdale, FL 33316

Additional Information: For additional information, please email Ken Crotty at ken@gassmanpa.com or CPE Conference Manager Diane K. Major at majord@ficpa.org.

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of FAILURE TO LAUNCH: 20-SOMETHINGS WITHOUT A SOLID CAREER PATH – WHAT PARENTS (AND OTHERS) NEED TO KNOW.

Date: Saturday, October 3, 2015 | 9:30 AM

Location: Online webinar

Additional Information: Please click here to register for this webinar. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE SARASOTA PRESENTATION:

2015 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: Friday, October 23rd and Saturday, October 24th, 2015

Location: To Be Determined

Additional Information: Please contact Alan Gassman at agassman@gassmanpa.com for more information.

Notable Seminars by Others
(These conferences are so good that we were not invited to speak!)
 

LIVE TAMPA PRESENTATION:

THE FLORIDA BAR TAX SECTION LUNCHEON

The Florida Bar Tax Section’s New Tax Lawyers Committee is holding a luncheon featuring The Honorable Juan F. Vasquez of The United States Tax Court as its guest speaker. The topic of the discussion will be CURRENT DEVELOPMENTS BEFORE THE TAX COURT.

There is no cost to attend the lunch, but an RSVP is required.

Date: Wednesday, June 3, 2015 | 11:45 AM – 1:15 PM

Location: The University Club of Tampa | 201 N. Franklin Street, Tampa, FL 33602 | 38th Floor

Additional Information: To RSVP, please email assistant@schmidtlawoffice.com if you would like to attend. A confirmation email will be sent a few days prior to the program.

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LIVE ORLANDO PRESENTATION:

50TH ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 11 – January 15, 2016

Location: To be announced

Additional Information: Information on the 50th Annual Heckerling Institute on Estate Planning will be available on August 1, 2015. To learn about past Heckerling programs, please visit http://www.law.miami.edu/heckerling/.

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION 18TH ANNUAL ESTATE, TAX, LEGAL & FINANCIAL PLANNING SEMINAR

We are pleased to announce that Jonathan Blatttmachr, Howard Zaritsky, Lauren Detzel, Michael Markham, and others will be speaking at the 2016 All Children’s Hospital Estate, Tax, Legal & Financial Planning Seminar.

Lauren Detzel will be speaking on Recent Homestead Cases, while Michael Markham will be speaking on Bankruptcy and Creditor Protection/Fraudulent Transfer in Context with Estate Planning.

We thank Lydia Bailey and Lori Johnson for their incredible dedication (and patience with certain members of the Board of Advisors.) All Children’s Hospital is affiliated with Johns Hopkins, which is not affiliated with Anthony Hopkins.

Please provide us with your input for other topics for this year and next! Watch this space for more speaker and topic announcements.

Date: Wednesday, February 10, 2016

Location: Live Event at the All Children’s Hospital St. Petersburg Campus; Webcasts in Tampa, Fort Myers, Belleair, New Port Richey, Lakeland, and Sarasota

Additional Information: Please contact Lydia Bennett Bailey at lydia.bailey@allkids.org 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.

Applicable Rates

The Thursday Report – 5.14.15 – Have Gun, Will Thursday

Posted on: May 14th, 2015

Drafting a Gun Trust – Don’t Take a Shotgun Approach, Part I

Charitable Board Members Liability Alert on BP Claims

Gregory Gay’s Corner – Grandparent Visitation

Get 25% Off Your Next Bloomberg BNA Webinar!

Gassman Firm Featured in Tampa Bay Rants and Raves!

Seminar Spotlight – Ave Maria Professional Acceleration Workshop

Richard Connolly’s World – The Trouble with Trustees and Using Gun Trusts to Smooth Firearms Transfer

Colonel Sanders and the Shootout

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 Stephanie at stephanie@gassmanpa.com.

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

Have Gun, Will Thursday

Have Gun – Will Travel was an American Western television series that aired on CBS from 1957 through 1963. The show was consistently rated in the top 5 in the Nielsen ratings every year of its first four seasons, and it even spawned a successful radio series in 1958.

The story follows the exploits of a man who called himself “Paladin,” a gentleman gunfighter portrayed by Richard Boone on the television series and voiced by John Dehner on radio. Paladin’s primary weapon was a custom-made, first-generation, .45 caliber Colt Single Action Army Cavalry Model revolver with a 7½ inch barrel. This weapon was carried in a black leather holster with a platinum chess knight symbol.

The television show was nominated for three Primetime Emmy Awards and can be seen today on the Encore-Western television channel.

For a favorite song about guns by Kay Kyser, entitled “Praise the Lord and Pass the Ammunition,” please click here. This song was written by Frank Loesser and published in 1942 in response to the attack on Pearl Harbor that marked the official entrance of the United States into World War II.

Drafting a Gun Trust – Don’t Take a Shotgun Approach, Part I
by Alan Gassman, Seaver Brown, and Travis Arango

Executive Summary:

Gun Trusts are quickly becoming the new rage in estate planning, and for very good reason. Machine guns and suppressors are becoming more and more popular among collectors and enthusiasts, not to mention sawed-off shotguns and other collectibles. There have been no machine guns manufactured that can legally be sold since 1986, so resale prices are going to levels that many knowledgeable people believe may become a new bubble to take advantage of.[1]

The normal approach is to register the gun to a single individual owner, and then, by federal law and in most states, the owner must be the only one who can have access to the firearm/item, and the owner can be the only one who uses it. However, not everyone wants various agencies to have their name identified as the “owner” of these dangerous weapons. This is one advantage of the gun trust. The federal regulations permit multiple Trustees to have joint responsibility but separate possession and use rights over automatic weapons, suppressors, and certain permitted explosives.

Gun enthusiasts considering how to take title and facilitate use and readiness of such weapons have three basic choices, and each choice will be impacted by different laws that will provide different results. The choices are individual ownership, corporate ownership, and trust ownership. This article will explain the advantages and disadvantages of the use of a Gun Trust and provide the basic information and legal framework that advisors need to be aware of when attempting to navigate these complicated and potentially perilous rules.

Facts:

When it comes to buying and selling firearms, individuals must sift through complex federal regulations and state laws, which operate concurrently with one another. For example, when someone wishes to transfer a firearm from one state to a gun trust established in another state, they must pay particular attention to each state’s rules on transferring firearms. All of this must be done while maintaining compliance with the various federal regulations. In addition to any of the federal or state gun laws an individual may be subject to, some local jurisdictions impose additional restrictions on the right to possess firearms. In any event, the failure to comply with the applicable federal, state, or local gun laws will result in either felony charges or some other sort of penalty. Most notably, these can include prison sentences in excess of a year, substantial monetary fines, parole or probation, forfeiture and seizure of restricted firearms, and usually the complete loss of all gun ownership rights.

The National Firearms Act and the Gun Control Act were enacted to achieve different results, but their purpose still remains the same – restrict who may possess, buy, and sell certain restricted firearms and firearm accessories. The National Firearms Act was intended to operate as a taxing statute and, in fact, still does. It imposes a $200 statutory excise tax per item and requires the person to register all restricted firearms with the Bureau of Alcohol, Tobacco, Firearms and Explosives (“Bureau of Alcohol”). Once the Bureau of Alcohol approves an application, they issue a tax stamp, which allows someone to then purchase or manufacture the National Firearms Act items specifically applied for.

The Gun Control Act, on the other hand, was enacted to restrict the transfer of certain types of firearms between individuals. As a practical matter, it is important to distinguish the types of weapons that the federal government restricts with the National Firearms Act and the Gun Control Act. The Gun Control Act places all weapons into two separate titles: Title I firearms and Title II firearms. Title I firearms primarily include long rifles, shotguns, and handguns, which make up the vast majority of firearms owned in the United States. Title II firearms, however, are composed of a slightly less popular, albeit sometimes more lethal, category of weapons including automatic machine guns, short-barreled rifles, sawed-off shotguns, suppressors, and destructive devices such as grenades, bombs, explosive missiles, poison gas weapons, and more.

Every state is charged with regulating the firearms that residents may possess and whether or not they will even allow possession and use of Title II firearms. For example, Florida Statute Section 790.221 (1) makes it unlawful for a person to own, have custody of, or have control over a short-barreled rifle, a short-barreled shotgun, or a machine gun that may be readily operable. However, Florida Statute Section 790.221 (3) has an exception for antique firearms, and, also, it is not unlawful to own the above firearms when in compliance with the provisions of federal law.

Comment:

Together, the National Firearms Act and the Gun Control Act of 1968 impose various restrictions on the rights of gun owners to possess and transfer their weapons. In fact, they allow for three different ways in which someone may purchase and/or transfer these weapons to others. The first is as an individual, which is perhaps the most difficult and the most susceptible to high levels of risk. The other two options come in the form of corporations and trusts, which are slightly easier to satisfy but are much more complex.

In most of the states that permit Title II firearms, applying as an individual will usually produce unfavorable results. With this route, the individual must fill out and submit the appropriate Bureau of Alcohol Form, pay the $200 excise tax, provide photographs and fingerprints, consent to a background check, and obtain a signature from a chief law enforcement officer (CLEO), which is generally the sheriff. Depending on the individual, the first three requirements are fairly easy to satisfy. However, many chief law enforcement officers are reluctant, and often refuse, to sign for a civilian to own and use restricted Title II firearms.

In the event someone is able to obtain a signature from a chief law enforcement officer, they must take extraordinary care not to allow other individuals to have either actual or constructive control over the Title II firearms. Actual control means allowing them to hold the item and/or fire the item. Constructive possession is when the non-permitted person has the ability to gain access to the item. Constructive possession includes having the item in the same house as someone not authorized to own the restricted item, the non-authorized person knowing the code to the safe that the item is kept in, etc. Based on these restrictions, one could easily imagine a scenario where a Title II firearm, such as a short-barreled rifle or automatic machine gun, is legally obtained and then stored in a home gun safe. If everyone in the house has the combination to the gun safe so that in the event of an emergency they can access a handgun or any other Title I firearm, they will be deemed to have constructive possession over the Title II firearm. Under these circumstances, they would almost certainly be subject to criminal liability, even if they did not know about the Title II item being inside of the safe.

The next option available to an individual who wants to possess a Title II item is to do so through a corporation such as an LLC. This process eliminates the need to submit fingerprints and obtain a chief law enforcement officer’s signature of approval. However, the person submitting the paperwork must still pay the $200 excise tax and submit to a background check. The obvious downside to this process is that all of the formalities of forming a corporation must be met, including the annual corporate filing fee. Over time, this can become more expensive than a gun trust. More importantly, however, if the corporation or LLC fails to pay this annual fee within the required time, the Secretary of State will dissolve the corporation, and all National Firearms Act firearms that were once lawfully owned by the corporation will be in your possession illegally.

Furthermore, trusts are private and do not require a public filing. Whereas, LLCs and corporations are not private and information concerning the individuals associated with them is of public record. In addition to the privacy issues, you will have to update the Secretary of State with changes in the management of the company whenever you want to change who can possess/use the Title II item, which can cost money and take time to do.

The final and perhaps most popular option today is the use of a gun trust. When compared to the aforementioned application processes, gun trusts are usually seen as the preferred method of acquiring Title II firearms. Applicants must still complete the standard Bureau of Alcohol forms, submit to a background check, and pay the $200 tax stamp per item, but there is no need for chief law enforcement officer approval or fingerprints. The individual must be a resident of the same State as the dealer when receiving the firearm/item.

However, just because a gun trust makes it simpler to own Title II firearms, that does not mean they are free of complications. Gun trusts may need to last for multiple generations, there may be more than one trustee with the ability to control the firearms, and, most importantly, they must address and comply with both state and federal weapon laws.

For more on this subject, see the Richard Connolly’s World section below, where we have, this week, featured an article about gun trusts. The conclusion to our article will run in next week’s Thursday Report.

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[1] For a comprehensive discussion on bubbles, see A Failure of Capitalism (2011) by Richard A. Posner.

Charitable Board Members Liability Alert on BP Claims

Charity donation and grant reductions from the BP Oil Spill are compensable according to the 5th Circuit Court of Appeals. This decision shows that charitable organizations can consider donations and grants as “revenue” to determine eligibility and amounts for BP Class Settlement Action, meaning advisors now have a fiduciary duty to make claims for charitable organizations.

A great many charitable organizations suffered a reduction in donations and grants following the April 2010 oil spill tragedy. The class action suit that enables charitable organizations to make claims on or before June 8th of this year was thought by most of us to include revenues resulting from donations and grants, but it was no surprise to find that BP thought otherwise and did not assert this position until well after the vast majority of its “bad publicity” days were over.

The Fifth Circuit found that “BP has failed to show that non-profits that operate on donation and grant funding are not engaged in commercial activity…” and that BP failed “to show that the non-profit revenue interpretation violates the language of the agreement.”

The vast majority of large charities have hopefully filed their BP claims, and a great many of them are on track to receiving significant awards, leaving open the question as to whether smaller charitable organizations, or those that have been on the fence, will be filing claims. It is noteworthy that the officers and directors of not-for-profit organizations have a fiduciary duty to maximize revenues, and therefore, by our view, an affirmative obligation to make BP claims or to call their errors and omissions carriers to give them notification of any decision to not make a BP claim.

Those officers and directors on boards and executive committees that have decided not to make BP claims by matter of principle or otherwise will be well advised to send formal objecting correspondence and/or to consider resigning because of the high level of potential liability this may bring.

To see the complete decision by the Fifth Circuit Court of Appeals, please click here.

Gregory Gay’s Corner
Grandparent Visitation

2 - Gregory Gay

Gregory G. Gay, Esquire is an attorney from Tarpon Springs who specializes in meeting the special needs of senior citizens and the disabled. He is Board Certified in Wills, Trusts & Estates and in Elder Law by the Florida Bar. He has also been named a Certified Advanced Practitioner by the National Elder Law Foundation.

Mr. Gay is the author of the Florida Senior Legal Guide, the 8th edition of which can be purchased by clicking here. In the coming weeks, we will be profiling some of the best chapters from this excellent publication. Our deepest thanks to Mr. Gay for making this content available to Thursday Report readers!

This week Gregory Gay’s series continues with a brief look at Grandparent Visitation.

In 1984, the Florida Legislature passed a statute authorizing our courts to grant visitation rights to grandparents under certain limited circumstances. This court-ordered grandparent visitation was authorized for when the marriage of the parents of the child has been dissolved, a parent of the child has deserted the child, or the child was born out of wedlock and not later determined to be a child born within wedlock.

This statute required the court to first determine that such visitation would be in the best interest of the grandchild. In determining if this visitation was in the best interest of the grandchild, the Florida statute stated that the court was to consider the grandparent’s willingness to encourage a close parent-child relationship, the child’s preference, the child’s mental and physical health, and the grandparent’s mental and physical health.

While never finding this statute to be completely unconstitutional, the Florida Supreme Court has systematically ruled that various provisions of this grandparent visitation statute are unenforceable. This court has repeatedly held that the state should not permit grandparents to interfere with parental rights to custody and control of children except in cases where the health and welfare of a child is threatened. Even assuming that grandparent visitation promotes the health and welfare of the child, our courts have consistently held that the state may only impose a grandparent visitation over the parent’s objections on a showing that failing to do so would be harmful to the child. This right of a parent to be free from this form of governmental interference is based on protections afforded in the Fourteenth Amendment of the United States Constitution and the right of privacy provisions found in Article 1, Section 23 of our Florida Constitution.

All fifty states have statutes that provide for grandparent visitation in some form. In the year 2000, the United States Supreme Court confirmed in the case of Troxel v. Granville that the Fourteenth Amendment to the United States Constitution permits a state to interfere with a parent’s fundamental right to rear their children only when there is a showing of demonstrable harm to the child’s health or welfare. Thus, only where there is a showing of substantial harm to the child by denying a grandparent visitation is the state’s interest sufficiently compelling to warrant such governmental intrusion.

The harm to the grandchild often arises when a child loses a parent to illness or an accident and the surviving parent cuts off access to the deceased spouse’s family. Often, the deceased spouse’s parents have been a primary caretaker for the grandchild after school while the parents are still at work. In some cases, grandparent visitation is cut off when the spouse remarries. In these cases where the parents have allowed their child to closely bond with grandparents, a psychologist may find that the loss of that relationship can be equal to a child experiencing another death. This is especially true when a grandparent has been a regular caretaker and a psychological parent relationship has been formed between the child and grandparent.

If you would like to read the Florida Senior Legal Guide in its entirety, please visit http://www.seniorlawseries.com. Mr. Gay can be reached at gregg@willtrust.com.

Get 25% Off Your Next Bloomberg BNA Webinar!

Scott Harper, the Coordinator of Professional Learning with Bloomberg BNA, has provided us with a 25 percent discount promotional code to share with Thursday Report readers and their natural and adopted (but not in vitro!) descendants. This code will allow you to receive 25% off on any Bloomberg BNA Webinar.

To take advantage of this fantastic and generous offer, follow the steps below:

  1. Go to the Bloomberg BNA website and find the title of the webinar you wish to apply the discount code to.
  2. Select the title of your chosen webinar.
  3. Choose “webinar” from the drop-down menu and click on “Add to Cart.” At this point, you may be asked to sign in to bna.com.
  4. Navigate to the checkout screen.
  5. On the right hand side of the checkout screen, there is a box that says “Promotional Code.” In that box, please type (do NOT copy & paste!) the promo code FIRMDISC25 and hit Enter/Apply.
  6. The dollar amount will decrease by 25%. Click “Proceed to check out” to complete the purchase.

Once the purchase has been made, an automatically-generated email will arrive containing the connectivity information to be used the day of your chosen program.

Thanks, Scott Harper, for sharing this great offer with us! Scott can be contacted at sharper@bna.com.

Gassman Firm Featured in Tampa Bay Rants and Raves!

We received the following message from Bob Clark:

This appeared on the blog Tampa Bay Rants and Raves this week. Couldn’t agree more. Your signs always brighten the day!

The people behind Tampa Bay Rants & Raves had this to say about our sign:

Thanks to the Gassman Law Firm on Court Street in Clearwater for always bringing a smile to our face with their catchy marquee. It is truly a Sign of the Times.

Rants and Raves

Thanks to Tampa Bay Rants & Raves for their endorsement, and thanks to Bob Clark for bringing it to our attention! To see the full article, please click here.

Seminar Spotlight
Ave Maria Professional Acceleration Workshop

On August 22, 2015, Alan Gassman will present a full day workshop for third year law students, alumni, and professionals at Ave Maria School of Law. This program is designed for individuals who wish to enhance their practice and personal lives.

This interactive workshop is CLE approved and will completely engage all participants in personal goal setting, one-on-one conversations about how to handle practical challenges and obstacles, important strategies for business and personal relationships, and one-on-one client interaction guidelines and techniques used by the most successful professionals in law and other important industries.

The workshop will run from 9:00 AM to 5:00 PM in the Thomas Moore Commons at the Ave Maria School of Law. Lunch will be included. The address for the workshop venue is as follows:

Ave Maria School of Law
1025 Commons Circle
Naples, FL 34119

To download the official invitation to this event, which includes a more detailed look at what each hour of the workshop will include, please click here.

To RSVP and for more information, please contact Donna Heiser at dheiser@avemarialaw.edu or via phone at 239-687-5405 or Alan Gassman at agassman@gassmanpa.com or via phone at 727-442-1200.

See you there!

Richard Connolly’s World
The Trouble with Trustees and
Using Gun Trusts to Smooth Firearms Transfer

Insurance advisor Richard Connolly of Ward & Connolly in Columbus, Ohio often shares with us pertinent articles found in well-known publications such as The Wall Street Journal, Barron’s, and The New York Times. Each week, we will feature some of Richard’s recommendations with a link to the articles.

This week, the first article of interest is “The Trouble with Trustees” by Liz Moyer. This article was featured in The Wall Street Journal on November 21, 2014.

Richard’s description is as follows:

It’s a matter of trust.

Beneficiaries of family trusts stand to inherit stock portfolios, childhood homes, and treasured heirlooms. Yet those assets come with what can be a delicate relationship with the trustees who control the purse strings.

A trustee can be a valued partner and mentor. But if disagreements develop, the result can be costly problems and years of frustration.

This article talks about how to manage a delicate relationship with a trustee.

Please click here to read this article in its entirety.

The second article of interest this week is entitled “Planners Use Gun Trusts to Smooth Firearms Transfer” by Anna Prior. This article was featured in The Wall Street Journal on November 10, 2014.

Richard’s description is as follows:

Estate planning can get complicated when it involves transferring a collection of art, cars, or other such possessions. It gets trickier still for guns.

Some lawyers and advisors say these often can be solved through the use of a so-called gun trust.

Typically set up as a revocable living trust, a gun trust is crafted specifically to hold firearms, with the gun owner generally acting as the trustee.

They are most commonly used to hold certain federally-restricted items, such as silencers, because they can help cut down on some of the paperwork needed to possess, transfer, and own such possessions, but estate planners say they are increasingly being used to create a road map for families left to handle a deceased loved one’s collection.

Please click here to read this article in its entirety.

Colonel Sanders and the Shootout

One of the most commonly heard “fun facts” about Colonel Sanders is that he once killed a man in a shootout. This so-called fact, like many other so-called facts that can be found on the Internet, is not true. Colonel Sanders never killed a man, but he did shoot one.

Colonel Sanders was once involved in a shootout with a business rival. He shot the rival in self-defense, but that man did not die. The man who died in the shootout was Colonel Sanders’s business associate. Colonel Sanders was arrested after the shootout occurred.

To find out what happened upon Colonel Sanders’s arrest, or for the full story about how and when the shootout occurred, please click here for a fun and informative article by Matt Novak.

Humor! (or Lack Thereof!)

Sign Sayings of the Week

Sign

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Amy Cartoon

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In honor of our new article about Gun Trusts, we are featuring one of our favorite jokes from comedy writer Ron Ross, who provided us with this poem for our Christmas 2014 Edition of The Thursday Report.

‘Twas the Night Before Christmas aka The Story of Standra Claus
by Ron Ross

‘Twas the night before Christmas
And all through the house
Sirens were blaring
Because Dad is a louse

Santa lies on the floor
Inside a chalk outline
And Dad will get off
Without even a fine

He got Santa with a bullet
Right square in the jaw
But Dad is not worried
Because “Stand Your Ground” is the law!

Upcoming Seminars and Webinars

LIVE STUART, FLORIDA PRESENTATION:

Alan Gassman will be the featured headline speaker at the Martin County Estate Planning Council Annual Tax and Estate Planning Seminar. He will be doing a three-hour talk on the following:

  1. JOINT EXEMPT STEP-UP TRUSTS (JESTs)
  2. MATHEMATICS FOR ESTATE PLANNERS
  3. THE ESTATE PLANNER’S GUIDE TO PLANNING FOR IRA AND PENSION BENEFITS – YES, YOU CAN FINALLY UNDERSTAND THESE RULES!

Date: Friday, May 15, 2015 | 8:15 AM – 4:30 PM; Alan Gassman speaks from 9:00 AM to 12:00 PM

Location: Stuart Corinthian Yacht Club | 4725 SE Capstan Avenue, Stuart, FL 34997

Clasen

Additional Information: For more information, please email Alan Gassman at agassman@gassmanpa.com or Lisa Clasen at lclasen@kslattorneys.com.

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LIVE MIAMI LAKES WORKSHOP:

Alan Gassman will be speaking at the Miami Lakes Bar Association Luncheon on the topic of ACCELERATING YOUR LAW PRACTICE. This luncheon will qualify for 2 CLE credits.

Date: Thursday, May 21, 2015 | 11:45 am – 1:45 pm

Location: Italy Today | 6743 Main Street, Miami Lakes, FL 33014

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

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LIVE UNIVERSITY OF FLORIDA PROFESSIONAL ACCELERATION WORKSHOP:

Alan Gassman will present a five hour workshop on legal practice and making the most of your legal practice to Professor Dennis Calfee’s summer workshop class. Experienced professionals are also welcome to attend by making a small donation to the Lind Chair.

Date: Saturday, May 30, 2015 | 10:00 AM – 3:00 PM

Location: University of Florida | 2500 SW 2nd AE, Gainesville, FL 32611

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

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LIVE WEBINAR:

Alice Rokahr, President, Trident Trust Company (South Dakota) Inc., and Alan S. Gassman will present a free, 30-minute webinar entitled WHAT IS SO SPECIAL ABOUT SOUTH DAKOTA – DOMESTIC ASSET PROTECTION TRUST LAW AND PRACTICES.

Date: Tuesday, June 9, 2015 | 12:30 pm

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com or click here to register for this webinar.

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LIVE BLOOMBERG BNA WEBINAR:

Professor Jerome Hesch, Alan Gassman, Ed Morrow, Christopher Denicolo, and Brandon Ketron will be presenting a 90-minute webinar for Bloomberg BNA Tax & Accounting on ESTATE AND TRUST PLANNING WITH IRA AND QUALIFIED PLAN BENEFITS: AN UNDERSTANDABLE SYSTEM WITH CHARTS AND EASY-TO-UNDERSTAND MATERIALS.

This presentation will include a 300 page E-book for each attendee.

Date: Wednesday, June 10, 2015 | 2:00 PM

Location: Online webinar

Additional Information: To register for this webinar, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman will present a live, free, 30-minute webinar on the topic of THE NEW DOCTOR’S GUIDE TO WEALTH BUILDING, CREDITOR PROTECTION, TRUST PLANNING, AND WHAT THEY DIDN’T TELL YOU IN MEDICAL SCHOOL. There will be two opportunities to attend this presentation.

Date:   Wednesday, June 17, 2015 | 7:30 PM
Saturday, June 20, 2015 | 9:30 AM

Location: Online webinar

Additional Information: To register for the Wednesday/7:30 PM webinar, please click here. To register for the Saturday/9:30 AM webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE WEBINAR:

Alan Gassman and noted trust and estate litigator, LL.M in estate planning, and blog master Juan Antunez, J.D., LL.M. will be presenting a free 30-minute webinar on ARBITRATING TRUST AND ESTATES DISPUTES. 

Don’t miss Juan’s wonderful blog site entitled Florida Probate & Trust Litigation Blog, which can be accessed by clicking here, and the many very useful articles thereon.

Date: Thursday, June 25, 2015 | 12:30 PM

Location: Online webinar

Additional Information: To register for this webinar, please click here.

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LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on FINANCIAL RELATIONSHIPS WITH PATIENTS, CO-PAYMENTS, GIFTS, AND GRAFT – HOW TO STAY OUT OF TROUBLE UNDER FLORIDA AND FEDERAL LAW.

This is an essential guide for medical practices and those who advise them. There will be two opportunities to attend this presentation.

Date: Tuesday, July 7, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FLORIDA INSTITUTE OF CPAs (FICPA) WEBINAR:

Alan Gassman will present a webinar on the topic of WHAT FLORIDA CPAS NEED TO KNOW ABOUT ASSET PROTECTION for the Florida Institute of CPAs.

More information about this webinar will be forthcoming. Please stay tuned!

Date: Thursday, July 9, 2015 | 9:30 AM – 10:30 AM

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com. To register, please contact Thelma Givens at givenst@ficpa.org.

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LIVE WEBINAR:

Alan Gassman will present a live, free, 30-minute webinar on the topic of CREDITOR PROTECTION PLANNING FOR PHYSICIANS AND MEDICAL PRACTICES. There will be two opportunities to attend this presentation.

Date: Wednesday, August 12, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Online webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For additional information, please email agassman@gassmanpa.com.

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LIVE BRADENTON, FLORIDA PRESENTATION:

Alan Gassman will speak at the Coastal Orthopedics Physician Education Seminar on the topics of CREDITOR PROTECTION AND THE 10 BIGGEST MISTAKES DOCTORS CAN MAKE: WHAT THEY DIDN’T TEACH YOU IN MEDICAL SCHOOL.

Coastal Orthopedics, Sports Medicine, and Pain Management is a comprehensive orthopedic practice which has been taking care of patients in Manatee and Sarasota Counties for 40 years. They have sub-specialized, fellowship-trained physicians as well as in-house diagnostics, therapy, and an outpatient surgery center to provide comprehensive, efficient orthopedic care.

Date: Thursday, August 13, 2015 | 6:00 PM

Location: Coastal Orthopedics and Sports Medicine | 6015 Pointe West Boulevard, Bradenton, FL, 34209

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

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LIVE WEBINAR:

Alan Gassman and Lester Perling will present a live, free, 30-minute webinar on the topic of MEDICAL LAW UPDATE – FEDERAL AND FLORIDA DEVELOPMENTS THAT MEDICAL PRACTICES AND ADVISORS NEED TO BE AWARE OF. There will be two opportunities to attend this presentation.

Date: Tuesday, August 18, 2015 | 12:30 PM – 1:00 PM and 5:00 PM – 5:30 PM

Location: Live webinar

Additional Information: To register for the 12:30 webinar, please click here. To register for the 5:00 webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE AVE MARIA SCHOOL OF LAW PROFESSIONAL ACCELERATION WORKSHOP:

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

Date: Saturday, August 22, 2015 | 9:00 AM – 5:00 PM

Location: Thomas Moore Commons, Ave Maria School of Law, 1025 Commons Circle, Naples, FL 34119

Additional Information: To download the official invitation to this event, please click here. To RSVP and for more information, please contact Donna Heiser at dheiser@avemarialaw.edu or via phone at 239-687-5405 or Alan Gassman at agassman@gassmanpa.com or via phone at 727-442-1200.

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LIVE SARASOTA PRESENTATION:

Alan Gassman will speak at the Southwest Florida Estate Planning Council meeting on September 8th on a topic to be determined. We are open to suggestions!

Date: Tuesday, September 8, 2015 | 3:30 PM – 5:30 PM with dinner to follow

Location: Sarasota, Florida

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

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of THE 10 BIGGEST MISTAKES THAT SUCCESSFUL PARENTS (AND GRANDPARENTS) MAKE WITH RESPECT TO COLLEGE AND RELATED DECISIONS FOR HIGH SCHOOL STUDENTS.

Date: Saturday, September 12, 2015 | 9:30 AM

Location: Online Webinar

Additional Information: To register for this webinar, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE FORT LAUDERDALE PRESENTATION:

Ken Crotty will be presenting a 1-hour talk on PLANNING FOR THE SALE OF A PROFESSIONAL PRACTICE – TAX, LIABILITY, NON-COMPETITION COVENANT, AND PRACTICAL PLANNING at the Florida Institute of CPAs Annual Accounting Show.

Date: Friday, September 18, 2015 | 3:30 PM – 4:20 PM

Location: Broward County Convention Center | 1950 Eisenhower Blvd, Fort Lauderdale, FL 33316

Additional Information: For additional information, please email Ken Crotty at ken@gassmanpa.com or CPE Conference Manager Diane K. Major at majord@ficpa.org.

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LIVE WEBINAR:

Molly Carey Smith and Alan Gassman will present a free webinar on the topic of FAILURE TO LAUNCH: 20-SOMETHINGS WITHOUT A SOLID CAREER PATH – WHAT PARENTS (AND OTHERS) NEED TO KNOW.

Date: Saturday, October 3, 2015 | 9:30 AM

Location: Online webinar

Additional Information: Please click here to register for this webinar. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE SARASOTA PRESENTATION:

2015 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: Friday, October 23rd and Saturday, October 24th, 2015

Location: To Be Determined

Additional Information: Please contact Alan Gassman at agassman@gassmanpa.com for more information.

Notable Seminars by Others
(These conferences are so good that we were not invited to speak!)
 

LIVE ORLANDO PRESENTATION:

50TH ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 11 – January 15, 2016

Location: Hotel information to be announced

Additional Information: Information on the 50th Annual Heckerling Institute on Estate Planning will be available on August 1, 2015. To learn about past Heckerling programs, please visit http://www.law.miami.edu/heckerling/.

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION 18TH ANNUAL ESTATE, TAX, LEGAL & FINANCIAL PLANNING SEMINAR

We are pleased to announce that Jonathan Blatttmachr, Howard Zaritsky, Lauren Detzel, Michael Markham, and others will be speaking at the 2016 All Children’s Hospital Estate, Tax, Legal & Financial Planning Seminar.

Lauren Detzel will be speaking on Recent Homestead Cases, while Michael Markham will be speaking on Bankruptcy and Creditor Protection/Fraudulent Transfer in Context with Estate Planning.

We thank Lydia Bailey and Lori Johnson for their incredible dedication (and patience with certain members of the Board of Advisors.) All Children’s Hospital is affiliated with Johns Hopkins, which is not affiliated with Anthony Hopkins.

Please provide us with your input for other topics for this year and next! Watch this space for more speaker and topic announcements.

Date: Wednesday, February 10, 2016

Location: Live Event at the All Children’s Hospital St. Petersburg Campus; Webcasts in Tampa, Fort Myers, Belleair, New Port Richey, Lakeland, and Sarasota

Additional Information: Please contact Lydia Bennett Bailey at lydia.bailey@allkids.org 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. Applicable Rates

The Thursday Report – 5.7.15 – UF Law May 30th PAW Workshop & More!

Posted on: May 7th, 2015

University of Florida Professional Acceleration Workshop on May 30th, 2015 with Dennis Calfee

“The Affability of Affidavits in Domestic Asset Protection Trust Planning” Published

Voluntary Disclosure of Offshore Assets by Alan Gassman, Leslie Share, and Brandon Ketron, Part II

H.R. 2 Medicare Access and CHIP Reauthorization Act of 2015: The So-Called Medicare “Doc Fix”

Our EstateView Software Featured in the American Bar Association Probate & Property Magazine

Richard Connolly’s World – Estate Planning Before & After Divorce

Seminar Spotlight – Communicating for Positive Results Presentation

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 Stephanie at stephanie@gassmanpa.com.

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

University of Florida Professional Acceleration Workshop
on May 30th, 2015 with Dennis Calfee

Calfee with Gassman Shirt and Alligator

A Professional Acceleration Workshop, moderated by Alan S. Gassman and Professor Dennis Calfee, will be presented for law students and invited professionals at the University of Florida Levin College of Law on Saturday, May 30th, 2015. The presentation will begin at 10:00 AM and run until 3:00 PM. Lunch will be included.

Please join us for a 5-hour, CLE-approved, interactive workshop that will completely engage all participants in personal goal setting, one-on-one conversations about how to handle practical challenges and obstacles, important strategies for business and personal relationships, and one-on-one client interaction techniques that are commonly used by the most successful professionals.

The workshop will consist of five 55-minute sessions and is sponsored by Gassman, Crotty & Denicolo, P.A. Students and employees of the University of Florida may attend for free. Other attending professionals are requested to make a small donation to the Stephen Lind Chair at the University of Florida Tax Program.

A course notebook of over 300 pages of materials will be given to each participant at no extra charge.

For more information, please click here to download our program flyer.

To RSVP or for more information, please contact Alan Gassman at agassman@gassmanpa.com or via phone at 727-442-1200.

A splendid time is guaranteed for all!

If you can’t make this workshop, please consider the live Ave Maria School of Law Professional Acceleration Workshop on August 22, 2015 in beautiful Naples, Florida – maybe next year it can be in Naples, Italy!

“The Affability of Affidavits in Domestic Asset
Protection Trust Planning” Published

An article by Alan Gassman and Dena Daniels entitled “The Affability of Affidavits in Domestic Protection Trust Planning” was published on the Leimberg network on April 28, 2015 and Leimberg Newsletter Number 293.

You can view the newsletter by clicking here.

Quotes therein from Jonathan Blattmachr and Steve Oshins were as follows:

Jonathan Blattmachr, who was involved in the drafting of the Alaska DAPT laws, and has active involvement with The Alaska Trust Company, was kind enough to share his thoughts on Affidavits of Solvency:

From my perspective, there are three purposes of the solvency affidavit. First, the requirement shows that Alaska (and other states with Affidavit requirements) is not promoting fraudulent asset protection planning.  It is to permit individuals to set aside wealth for future unforeseen events and to allow them to do efficient estate tax planning without permanently parting with all benefits of certain assets.  Second, it protects the “honest” client from claims that he or she was trying to hinder, delay or defraud a creditor…signing a false affidavit is, of course, a crime.  Third, it protects the trustee and the attorneys.  They have verification of the situation.  As you know, there was a recent case in Iowa where a lawyer faced possible serious disciplinary action because he unknowingly assisted a client essentially in a fraudulent transfer.  The state supreme court let him go because he didn’t know (and perhaps had no real reason to know)–a very scary prospect.

Steve Oshins made the following point to the authors when asked to comment:

It’s a good idea for advisors who use any of the six states that require new Affidavits of Solvency for every new transfer to meet with their clients at least once a year to make sure the clients are complying with this requirement.  If they find that they aren’t, then the cure is to move the trust to a DAPT jurisdiction that doesn’t have this requirement.  For those clients who, like me personally, add cash or other assets to their DAPT every month, having to prepare a new Affidavit each time would be a huge burden.  So I think that those clients who expect to frequently add to their DAPTs are better off selecting a situs that doesn’t have the Affidavit requirement.  The clients who are making one big up-front transfer to their DAPT are certainly fine using any of the better DAPT jurisdictions.

We will run this article in its entirety in a future Thursday Report. Stay tuned!

Voluntary Disclosure of Offshore Assets, Part II
by Alan Gassman, Leslie Share, and Brandon Ketron

Share

Leslie A. Share received his J.D. from the University of Florida, where he was the Chief Tax and Research Editor of the University of Florida Law Review. He received his LL.M. in Taxation from New York University and is a member of the Florida Bar. Les has advised clients in numerous and diverse areas, including Broadway theatrical productions, real estate like-kind exchanges, and Internet matters. He speaks at various US and Caribbean seminars on subjects including Florida and offshore trust law, advanced asset protection techniques, and US tax treaties, among others.

We thank Les for his contribution to the following conclusion of our Voluntary Disclosure of Offshore Assets article and his support of The Thursday Report!

Last week, we discussed some of the most common filing requirements for offshore assets and the penalties incurred if the filing of these requirements does not happen or does not happen on time. You can view this report by clicking here. This week, we will discuss options available to correct a failure to file.

Options Available to Correct a Failure to File

A. “Quiet” Disclosure

The “quiet” disclosure option is very rarely recommended due to the significant risk that remains with the taxpayer even after the disclosure. Under this option, a taxpayer files amended tax returns and pays any related tax and possibly interest for previously unreported offshore income without otherwise notifying the IRS.

On May 7, 2009, the IRS had this to say about “quiet” disclosures:

Taxpayers are strongly encouraged to come forward under the Voluntary Disclosure Practice to make timely, accurate, and complete disclosures. Those taxpayers making “quiet” disclosures should be aware of the risk of being examined and potentially criminally prosecuted for all applicable years. The IRS has identified, and will continue to identify, amended tax returns reporting increases in income. The IRS will be closely reviewing these returns to determine whether enforcement action is appropriate.

Therefore, except in rare circumstances, it would generally be unwise to engage in a “quiet” disclosure due to the red flags the amended returns raise with the IRS. While the “quiet” disclosure should not result in penalties after three years of the filing, the taxpayers could be subject to the above penalties (including the 75% fraud penalty) if the “quiet” disclosure was discovered and challenged. The risk does not seem to outweigh the reward.

B. Delinquent International Information Return Submission Procedures

In order to be eligible for the Delinquent International Information Return Submission Procedures, the taxpayer must meet the following requirements:

  1. Failed to file one or more required international information returns.
  2. Reasonable cause for not timely filing the information returns.
  3. Not currently under civil or criminal investigation by the IRS.
  4. Not already contacted by the IRS about the delinquent information returns.

The biggest limitation on eligibility for the Delinquent International Return Submission Procedures is generally the reasonable cause for the failure to file. The IRS provides that the “longstanding authorities regarding what constitutes reasonable cause continue to apply.”[1]

In order to meet the reasonable cause standard, the taxpayer must exercise ordinary care and prudence in determining his tax obligations. [2] Where tax advisors have been involved, the taxpayer must show that they (1) made a full disclosure to the expert, (2) relied on the advice of the expert, and (3) did not otherwise know that a return was due.[3]

In the recent unpublished case of James v. United States[4], the taxpayer established an irrevocable trust in Nevis, West Indies. The taxpayer provided all the necessary information to his accountant, and the accountant did not file Form 3520. The IRS assessed penalties totaling over $570,000 for the failure to file the appropriate forms. In support for a motion to dismiss, the Government argued that the reliance on a CPA cannot constitute reasonable cause, however, the court denied the motion holding that there was a genuine issue of material fact with respect to whether James’s reliance on the advice of his CPA was reasonable cause.[5] The taxpayer’s victory was short-lived, as he lost in the subsequent jury trial.

If eligible, the taxpayer must follow the procedures set forth below:

  1. File amended returns, including delinquent returns, along with Form 3520/3520-A, according to the applicable instructions.
  2. Attach to each delinquent form a statement describing “all facts establishing reasonable cause for the failure to file” signed under penalties of perjury.

If the IRS accepts the reasonable cause explanation, then the taxpayer will not be liable for any penalties. However, acceptance is not automatic and penalties will be imposed if the explanation is not accepted.

C. Streamlined Filing Compliance Procedures

In order to be eligible for the streamlined filing procedures, the taxpayer must meet the following general eligibility requirements:

  1. Individual taxpayers only (including estates.)
  2. Certify under penalties of perjury that conduct was non-willful.
  3. No current civil exam or criminal investigation “for any taxable year.”
  4. Must have a valid TIN.

The procedures differ for foreign residents and domestic residents. If the taxpayer does not meet the foreign residency requirements, the taxpayer must meet the following additional tests:

  1. Timely filed a US tax return for each of the most recent three years.
  2. Failed to report income from a foreign financial asset and pay tax, or may have failed to file a FBAR.
  3. The failures resulted from non-willful conduct.

Non-willful conduct is defined as “conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.” Factors to consider include (1) willful blindness/recklessness, (2) whether accounts were disclosed to tax return preparer, (3) accounts in jurisdictions known for bank secrecy, (4) frequent movements of accounts or funds, (5) answers to Form 1040 Schedule B questions regarding foreign accounts, and (6) prior year compliant behavior.

Traditionally, the IRS has advised taxpayers to rely on the criminal definition of willfulness in determining willful or non-willful conduct, defining willfulness as “voluntary, intentional violation of a known legal duty.”[6] A recent case analyzing whether or not conduct was willful or non-willful in regards to the failure to file a FBAR presumably aids in interpreting willful conduct for other foreign informational filings.

In United States v. Williams, the court extended the definition to include “willful blindness.”[7] In this case, the taxpayer opened two accounts in Switzerland. The balance of these accounts totaled roughly $7,000,000. Mr. Williams failed to include the income earned on these accounts on his personal tax return and failed to file FBAR forms disclosing his foreign bank accounts. Mr. Williams’s CPA checked no on Form 1040 Line 7a, which asks: “At any time during the [tax year], did you have an interest in or a signature or other authority over a financial account in a foreign country, such as a bank account, securities account, or other financial account? See instructions for exceptions and filing requirements for [FBAR].”[8]

Mr. William’s defense was that he had never read Line 7a, or the instructions of the FBAR; therefore, he had no knowledge of his legal duty. The court declined to agree with Mr. Williams’s holding that he engaged in a conscious effort to avoid learning about the reporting requirements.[9] The court viewed this along with his previous admission in a criminal case that he was aware of the requirement as willful conduct.[10]

A second case, United States v. McBride, in an attempt to avoid tax in the United States, a taxpayer engaged in a risky scheme suggested by a financial management firm involving several offshore entities. Despite initial doubts, the taxpayer failed to seek a formal legal opinion on the proposed plan. The IRS assessed severe penalties on the taxpayer. In holding that the taxpayers conduct was willful, the court stated that willfulness includes recklessness and “willful blindness to the obvious known consequences on one’s actions.”[11] The court did not address if the result would have been the same had the taxpayer received a formal legal opinion.

The Internal Revenue Manual states that “the mere fact that a person checked the wrong box, or no box, on a Schedule B is not sufficient, by itself, to establish that the FBAR violation was attributable to willful blindness.”[12] Some commentators believe that the interpretation of willfulness is beginning to be pushed towards one of strict liability despite the language in the Internal Revenue Manual.[13]

If the taxpayer meets the above requirements, under the Streamlined Domestic Offshore Procedures, the taxpayer must follow the procedures set forth below:

  1. File amended tax returns, including all information forms (i.e. Form 3520, 3520-A, 8938) for each of the most recent three years.
  2. File delinquent or amended FBARs for each of the most recent six years.
  3. Include full payment of all tax and related interest.
  4. Include payment of a 5% penalty assessed on the highest aggregate balance of the taxpayer’s previously unreported foreign financial assets during the period or relating to such assets that were properly reported, but gross income in respect of the assets was not reported in that year.
  5. File Form 14654, Certification by US Person Residing in the United States for Streamlined Domestic Offshore Procedures statement, establishing eligibility for the procedure and that the failures were due to non-willful conduct.
  6. Provide supporting documentation of the 5% penalty calculation.

If the taxpayer follows these procedures, no additional penalties will be assessed. This means that the taxpayer will not be responsible for the failure to file penalties, failure to pay penalties, accuracy penalties, information return penalties, or FBAR penalties. Again, acceptance is not automatic, and the taxpayer could be liable for one or more of the mentioned penalties if the IRS determines that the taxpayer’s non-compliance was fraudulent and/or willful.

D. Offshore Voluntary Disclosure Program

In order to be eligible for the current version of the Offshore Voluntary Disclosure Program, the taxpayer must meet the following eligibility requirements:

  1. Taxpayer with legal source income invested in undisclosed offshore assets.
  2. Disclosure was initiated before IRS has received information from a third party regarding the taxpayer’s noncompliance and no civil or criminal investigation is pending against the taxpayer for any reason. In this regard, the IRS may, going forward, receive information from a third party when FATCA reporting has occurred.[14]
  3. Agree to cooperate with the IRS and DOJ offshore enforcement efforts.

Under the terms of the Offshore Voluntary Disclosure Program, the taxpayer must:

  1. Submit a letter and power of attorney to the IRS Criminal Investigation Lead Development Center by fax to request preclearance before making an offshore voluntary disclosure. Criminal Investigation will notify taxpayers or their representatives via fax whether or not they are so eligible. Preclearance does not guarantee a taxpayer acceptance into the program.
  2. Submit the Offshore Voluntary Disclosure Letter and attachment. Criminal Investigation will review the letter and notify taxpayers or representatives by mail or facsimile whether their offshore voluntary disclosures were primarily accepted as timely or declined.
  3. Submit the OVDP application package, which includes several special IRS OVDP-related statements.[15]
  4. Include eight years (where applicable) of original or amended federal income tax returns and copies of previously filed original (and, if applicable, previously filed amended) returns.
  5. Include eight years (where applicable) of FBARs and copies of previously-filed FBARs for each of the tax years in question.
  6. Include full payment of the tax and related interest.
  7. Pay a 20% accuracy related penalty.
  8. In lieu of payment of all other penalties on undisclosed foreign assets, including FBAR and offshore-related information return penalties, a payment of a 27.5% penalty (50% if any of the taxpayer’s undisclosed foreign financial accounts involved one of the “Foreign Financial Institutions or Facilitators” posted on the IRS website[16]) of the highest aggregate value of the offshore assets during the period covered (eight years).
  9. If applicable, the failure to file and failure to pay penalty for returns required under IRC 6651 (does not include filing of offshore information returns.)
  10. Include a waiver of the applicable Statute of Limitations.

COMMENT:

The most desirable option where eligible is generally disclosure through the Delinquent International Information Return Submission Procedures, but it can be difficult to establish reasonable cause. The next option would be filing the amended returns through the Streamlined Filing Compliance Procedures, which requires a showing that the failure to file was non-willful – arguably a lesser standard. The final option would be to enter into the Offshore Voluntary Disclosure Program.

A taxpayer is still eligible to enter into the Offshore Voluntary Disclosure Program, even if there was willful non-compliance. Disclosure through the Offshore Voluntary Disclosure Program provides protection from criminal prosecution, and may allow the taxpayer to pay significantly less in penalties than could be otherwise due. In order to begin the process, a taxpayer should submit a preclearance letter to the IRS, which is often fairly simple and can simply be faxed to hopefully “tag” the IRS before the IRS has “information from a third party” relating to the noncompliance.

It is also possible to file under the Offshore Voluntary Disclosure Program and then request removal by “opting-out” therefrom into a regular IRS examination, which should be based upon providing information demonstrating reasonable cause.[17]

The decision to opt out is irrevocable and also results in the forfeiture of criminal immunity offered under the Offshore Voluntary Disclosure Program.[18] Acceptance into one of the other programs is not automatic, and requires that the revenue agent handling the matter be convinced of reasonable cause for the failure to file. Therefore, the taxpayer should weigh the risk versus reward of opting out of the Offshore Voluntary Disclosure Program.

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[1] See, for example, Treas. Reg. § 1.6038-2(k)(3), Treas. Reg. § 1.6038 A-4(b), and Treas. Reg. § 301.6679-1(a)(3)
[2] I.R.M. 20.1.1.3.2 (11-25-2011)
[3] Estate of La Meres v. Comm’r 98 T.C. 294, 316-317 (1992)
[4] 2012 WL 3522610 (M.D. Fla. Aug. 14, 2012)
[5] James at *3
[6] Cheek v. United States 498 US 192, 200 (1991)
[7] U.S. v. Williams, 489 Fed. Appx. 655, 659 (4th Cir. 2012) (unpublished)
[8] I.R.M. 4.26.16.1
[9] Williams, at 658
[10] Id, at 660
[11] U.S. v. McBride, 908 F. Supp. 2d 1186, 1213 (D. Utah 2012)
[12] I.R.M. 4.26.16.4.5.3
[13] Government Wins Second Willful FBAR Penalty Case: What McBride Really Means for Taxpayers, 118 JTAX 187, 199; The FBAR Penalty: What Constitutes Willfulness? 46-Jun Md. B.J. 38.
[14] For a list of jurisdictions that have agreed to comply with the FATCA reporting requirements, see: http://www.treasury.gov/resource-center/tax-policy/treaties/pages/fatca-archive.aspx
[15] See, Offshore Voluntary Disclosure Program Frequently Asked Questions and Answers #25
[16] See, Offshore Voluntary Disclosure Program Frequently Asked Questions and Answers #7.2
[17] See, Offshore Voluntary Disclosure Program Frequently Asked Questions and Answers #51
[18] Id.

H.R. 2 Medicare Access and CHIP Reauthorization Act of 2015:
The So-Called Medicare “Doc Fix”

Yes, it’s true! On April 16, 2015, President Obama signed into law the bipartisan bill H.R. 2, the Medicare Access and CHIP Reauthorization Act of 2015, which is also called the Medicare “doc-fix.” We will no longer need to hear about upcoming physician compensation reductions by Medicare. This bill permanently repeals the Sustained Growth rate formula and replaces it with a stable Medicare payment system offering financial incentives to doctors for providing high-quality and value health care and to bill Medicare patients for their overall care, not individual office visits. This new law was signed just in time to head off a 21% cut in doctors’ pay that was due to take effect this month.

It is good to see the political parties working together for an appropriate common cause – physicians! No component of our professional services industry has sacrificed more, given more, or achieved more than the members of the medical profession. The best and the brightest from all over the world aspire nothing short of being practicing physicians here. We are so thankful that they are a part of our country, not to mention being our friends and our protectors.

The “doc fix” bill fixes a 1997 law that aimed to slow down Medicare’s growth through limiting reimbursements to doctors. The formula in the law linked Medicare doctor pay to economic growth while the new formula focuses on quality of care and requires means testing of Medicare beneficiaries. This is so higher income people will pay higher premiums. The old formula used to paying the Medicare doctors has been a long-time problem because health care costs have outpaced economic growth. Congress has fixed this problem in the past by overriding the reductions 17 times, but they were never able to establish a permanent solution. If they had not overridden the reduction, then the formula would have resulted in reduced pay rates.

The new formula will have positive rate increases for the next 4.5 years and incentivizes physicians to participate in Alternative Payment Models.

The deadline for action was actually April 1, 2015, but since Medicare doctors’ claims usually take at least two weeks to be paid by the government, the pay cuts were not expected to be implemented before April 15. The law will take place immediately in order to address payment rates to physicians for their services provided on April 1, 2015. In a written letter from the Centers for Medicare and Medicaid Services, the agency said that “only a small volume of claims” will be processed under the lower levels, but those payments will be reprocessed so that providers get the full amount of fees due.

According to the Congressional Budget Office, H.R. 2 will cost $141 billion over the next 10 years.

For a more detailed summary of what the law contains as well as a breakdown of key provisions of the law, please click here to view an article from Annemarie Wouters from Manatt, Phelps, and Phillips, LLP.

To view the complete H.R. 2 bill, please click here.

Our EstateView Software Featured in the American Bar Association
Probate & Property Magazine

The EstateView Software developed by our firm along with Jerome Hesch, J.D., and David Archer, MBA, was one of only three estate tax illustration and planning software programs chosen for review in the January/February 2015 edition of the American Bar Association’s Probate & Property Magazine. EstateView was highlighted in the Technology Probate section, which provides information on current technology and microcomputer software of interest in the probate and estate planning areas.

Here is what they had to say about EstateView:

EstateView Planning Software is a new entrant into the estate planning and calculation software field. EstateView’s most striking feature is its elegant user interface. The software uses a multi-window design that incorporates a modern feel and strikes the right balance between user-friendliness and advanced customization options. Beginning users can jump right in and start using the software right out of the box. More advanced users have a wide range of customization options, including the ability to undock, hide, or reposition displays to match their personal preferences.

The user experience is further enhanced by simultaneous data updates across multiple screens. As the user enters information and tries out various scenarios, the relevant displays are instantly updated to show the results of the changing assumptions. This makes it easy for the user to make the necessary adjustments to achieve the desired results.

EstateView has preset scenarios to help design and illustrate the most common estate planning options. Baseline scenarios for a married couple include:

  • No planning (which can be configured with or without portability),
  • Use of a credit shelter trust
  • Use of a credit shelter trust with annual gifting
  • Use of a credit shelter trust with discounted annual gifting,
  • Combination of a credit shelter trust, discounted annual gifting, and one or more irrevocable life insurance trusts, and
  • Installment sale to a defective grantor trust using a conventional or self-canceling installment note (with the ability to toggle grantor trust status in a given year).

These scenarios allow the user to illustrate most-often-used estate planning strategies with ease. Changing any of these scenarios will change the current illustration, which remains open throughout the entire process. This provides instant feedback without having to toggle between different screens.

EstateView makes it easy to generate a customized client letter to explain estate planning scenarios to clients. Once all information is entered, the user can generate a client explanation letter that uses color illustrations to explain the estate planning techniques involved. This letter can be saved as a Microsoft Word document and modified as necessary before presentation to the client. If the estate planning assumptions are changed at a later time, a new letter can be easily produced to illustrate the new scenario.

EstateView is still in the beta testing phase and is currently free for use by interested planners. Interested professionals can email estateview@gassmanpa.com and receive a link to download a free 180-day trial version of the software.

To see the complete story from Probate & Property, please click here.

To download the software, you may also email agassman@gassmanpa.com or janine@gassmanpa.com for the link.

Once you download the software, be sure to check out our EstateView tutorial webinar by clicking here. The best thing to do would be to use two screens – have the software open on one screen, and watch the webinar on the second. Do this, and you’ll be good to go!

Thanks to the ABA and Technology – Probate editor Jason E. Havens for featuring EstateView!

Richard Connolly’s World
Estate Planning Before and After Divorce

Insurance advisor Richard Connolly of Ward & Connolly in Columbus, Ohio often shares with us pertinent articles found in well-known publications such as The Wall Street Journal, Barron’s, and The New York Times. Each week, we will feature some of Richard’s recommendations with a link to the articles.

This week, the first article of interest is “How to Keep Your Inheritance in a Divorce” by Neil Parmar. This article was featured in The Wall Street Journal on November 9, 2014.

Richard’s description is as follows:

For the happily wed, marriage is often about sharing everything – including generous gifts bestowed by parents or grandparents.

But when a relationship ends in divorce, that perspective can change dramatically. At that point, however, it may be too late to keep inherited assets such as vacation homes, rare collections, and other gifts away from a former partner, even if those assets were never intended to go to that person.

What is considered separate versus marital property can vary, depending on the state in which a couple lives.

While the financial outcome of a divorce may boil down to where you live, there are things you can do to help sway the outcome, especially when it comes to inheritances, experts say. This article looks at a few strategies, including negotiating a pre-nup, saving documentation, maintaining separate accounts, relying in trusts, and keeping titles in one name only.

Please click here to read this article in its entirety.

The second article of interest this week is entitled “After Divorce, Separate Your Estate Plans, Too” by Liz Moyer. This article was also featured in The Wall Street Journal on February 20, 2015.

Richard’s description is as follows:

If you have just gotten divorced, you may be focused on getting on with your life, but make sure you also have updated the financial arrangements that kick in at your death.

Failure to do so – or failure to alert all relevant parties to the changes – could result in certain assets and benefits unintentionally going to your former spouse or his or her family upon your death.

Lawyers point to a current court case in New York as an example of how things can go wrong. The family of Robyn Lewis, who died five years ago at the age of 43, is battling her former in-laws, who stand to inherit a $200,000 home in Clayton, NY, even though she and her husband divorced in 2007.

Ms. Lewis executed a will in 1996 that named her then-husband to receive her property after her death. That included the house, which had been in her family for generations. She named her then-father-in-law as the secondary beneficiary.

While under New York law, the divorce automatically cut her ex-husband out of her will, it didn’t automatically cut out her father-in-law, who presented a copy of the 1996 will to the court.

Please click here to read this article in its entirety.

Seminar Spotlight
Communicating for Positive Results Presentation

The Clearwater Bar Association’s Solo & Small Firm Section will be sponsoring the following talk to be presented on May 12, 2015.

Bob Feckner will be presenting Communicating for Positive Results at the Clarion Inn & Suites at 20967 US Highway 19 N in Clearwater. The presentation will take place from 5:30 PM to 7:00 PM.

Bob Feckner is a fantastic teacher and always an inspiration to work with and hear from. He is with the Dale Carnegie program, and we can’t say enough good things about Dale Carnegie or Bob. He is a Senior Performance Consultant and Senior Instructor with Dale Carnegie Training Tampa Bay where he helps individuals and businesses improve performance in terms of Leadership, Communications, Employee Engagement, Sales, Sales Leadership, Customer Service, Teamwork, Human Relations, Productivity, and Presentations.

Join with solo practitioners and lawyers from small firms for networking to build your practice and improve practice management skills. This presentation is given at no charge to members of the Clearwater Bar Association.

To learn more about the type of training you could receive at this presentation, please visit http://tampabay.dalecarnegie.com/

Click here to register for this talk.

Humor! (or Lack Thereof!)

Our Favorite Memorial Day Invitation

We received the following invitation to a Memorial Day party. Names and addresses have been changed or removed to protect the innocent.

Fire in the Grill
(also known as Grills Gone Wild!!!)

Frequently Asked Questions*

  1. Q: Who Can We Bring?
    A: You and your significant other. Kids are okay, but you gotta keep an eye on them yourselves ~ and not the whole Cub Scout troop.
  2. Q: What Can We Bring?
    A: About twice as much as you think you’ll drink. Maybe three times ~ you be the judge. A side dish as well since it’s a potluck thing. Please coordinate that with The Mistress of Ceremonies.
  3. Q: Do We Need to Let You Know if We’re Coming?
    A: Yeah, that would be super nice. Please let Jane know. If you tell John, he may not remember to tell Jane.
  4. Q: Will the Party Go On Until the Wee Hours?
    A: Yes! Probably until 9:30 or 10:00 PM. Then get the hell out.
  5. Q: Will There be Vegan Options?
    A: Yes, of course! You always have the option to go hungry (you’re probably used to that) or bring your own tofu and kale.

(*) I was dreaming when I wrote this; forgive me if it goes astray.

Upcoming Seminars and Webinars

**Please note our Bradenton presentation has been moved from May 12th, 2015 to August 13, 2015 so that they could build a new wing to accommodate all of the people who RSVP’d for this important presentation.**

LIVE BLOOMBERG BNA WEBINAR:

Professor Jerome Hesch, Alan Gassman, and Barry Flagg will be presenting a 90-minute webinar for Bloomberg BNA Tax & Accounting on THE TAX ADVISORS GUIDE TO PERMANENT LIFE INSURANCE AND STRUCTURING TOOLS AND TECHNIQUES.

Date: Tuesday, May 12, 2015 | 2:00 PM

Location: Online webinar

Additional Information: To register for this webinar, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE STUART, FLORIDA PRESENTATION

Alan Gassman will be the featured headline speaker at the Martin County Estate Planning Council Annual Tax and Estate Planning Seminar. He will be doing a three-hour talk on the following:

  1. JOINT EXEMPT STEP-UP TRUSTS (JESTs)
  2. MATHEMATICS FOR ESTATE PLANNERS
  3. THE ESTATE PLANNER’S GUIDE TO PLANNING FOR IRA AND PENSION BENEFITS – YES, YOU CAN FINALLY UNDERSTAND THESE RULES!

Date: May 15, 2015 | 8:15 AM – 4:30 PM; Alan Gassman speaks from 9:00 AM to 12:00 PM

Location: Stuart Corinthian Yacht Club | 4725 SE Capstan Avenue, Stuart, FL 34997

Clasen

Additional Information: For more information, please email Alan Gassman at agassman@gassmanpa.com or Lisa Clasen at lclasen@kslattorneys.com.

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LIVE WEBINAR:

Alan Gassman and noted trust and estate litigator, LL.M in estate planning, and blog master Juan Antunez, J.D., LL.M. will be presenting a free 30-minute webinar on ARBITRATING TRUST AND ESTATES DISPUTES. 

Don’t miss Juan’s wonderful blog site entitled Florida Probate & Trust Litigation Blog, which can be accessed by clicking here, and the many very useful articles thereon.

Date: Tuesday, May 19, 2015 | 12:30 PM

Location: Online webinar

Additional Information: To register for this webinar, please click here.

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LIVE FLORIDA INSTITUTE OF CPAs (FICPA) WEBINAR

Alan Gassman, Ken Crotty, and Chris Denicolo will present a webinar on A PRACTICAL TRUST PLANNING CHECKLIST AND PRACTITIONER COMPLIANCE GUIDE FOR FLORIDA CPAs for the Florida Institute of CPAs.

Review a practical planning checklist and practitioner tax compliance guide to facilitate implementing a comprehensive overview of practical planning matters and tax compliance issues in your practice. This presentation will cover over 20 common errors and missed planning opportunities that accountants need to understand and counsel their clients on.

This course is designed for practitioners who wish to assure that trust planning structures and compliance are both aligned with client objectives and that common catastrophic errors and misconceptions can be corrected.

Past attendees have indicated that this is an interesting and practical presentation that offers a great deal of practical information for both compliance and planning functions, based upon an easy to follow checklist approach.  Includes valuable materials.

Date: May 21, 2015 | 10:00 AM

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com or Thelma Givens at givenst@ficpa.org. To register, please click here.

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LIVE MIAMI LAKES WORKSHOP:

Alan Gassman will be speaking at the Miami Lakes Bar Association Luncheon on the topic of ACCELERATING YOUR LAW PRACTICE. This luncheon will qualify for 2 CLE credits.

Date: Thursday, May 21, 2015 | 11:45 am – 1:45 pm

Location: Italy Today | 6743 Main Street, Miami Lakes, FL 33014

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

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LIVE UNIVERSITY OF FLORIDA PROFESSIONAL ACCELERATION WORKSHOP:

Alan Gassman will present a five hour workshop on legal practice and making the most of your legal practice to Professor Dennis Calfee’s summer workshop class. Experienced professionals are also welcome to attend by making a small donation to the Lind Chair.

Date: Saturday, May 30, 2015 | 10:00 AM – 3:00 PM

Location: University of Florida | 2500 SW 2nd AE, Gainesville, FL 32611

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

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LIVE WEBINAR:

Alice Rokahr, President, Trident Trust Company (South Dakota) Inc., and Alan S. Gassman will present a free, 30-minute webinar entitled WHAT IS SO SPECIAL ABOUT SOUTH DAKOTA – DOMESTIC ASSET PROTECTION TRUST LAW AND PRACTICES.

Date: June 9, 2015 | 12:30 pm

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com or click here to register for this webinar.

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LIVE BLOOMBERG BNA WEBINAR:

Professor Jerome Hesch, Alan Gassman, Ed Morrow, Christopher Denicolo, and Brandon Ketron will be presenting a 90-minute webinar for Bloomberg BNA Tax & Accounting on ESTATE AND TRUST PLANNING WITH IRA AND QUALIFIED PLAN BENEFITS: AN UNDERSTANDABLE SYSTEM WITH CHARTS AND EASY-TO-UNDERSTAND MATERIALS.

This presentation will include a 300 page E-book for each attendee.

Date: Wednesday, June 10, 2015 | 2:00 PM

Location: Online webinar

Additional Information: To register for this webinar, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE BRADENTON, FLORIDA PRESENTATION

Alan Gassman will speak at the Coastal Orthopedics Physician Education Seminar on the topics of CREDITOR PROTECTION AND THE 10 BIGGEST MISTAKES DOCTORS CAN MAKE: WHAT THEY DIDN’T TEACH YOU IN MEDICAL SCHOOL.

Coastal Orthopedics, Sports Medicine, and Pain Management is a comprehensive orthopedic practice which has been taking care of patients in Manatee and Sarasota Counties for 40 years. They have sub-specialized, fellowship-trained physicians as well as in-house diagnostics, therapy, and an outpatient surgery center to provide comprehensive, efficient orthopedic care.

Date: Thursday, August 13, 2015 | 6:00 PM

Location: Coastal Orthopedics and Sports Medicine | 6015 Pointe West Boulevard, Bradenton, FL, 34209

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

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LIVE AVE MARIA SCHOOL OF LAW PROFESSIONAL ACCELERATION WORKSHOP

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

Date: August 22, 2015 | 9:00 AM – 5:00 PM

Location: Thomas Moore Commons, Ave Maria School of Law, 1025 Commons Circle, Naples, FL 34119

Additional Information: To download the official invitation to this event, please click here. To RSVP and for more information, please contact Donna Heiser at dheiser@avemarialaw.edu or via phone at 239-687-5405 or Alan Gassman at agassman@gassmanpa.com or via phone at 727-442-1200.

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LIVE FORT LAUDERDALE PRESENTATION:

Ken Crotty will be presenting a 1-hour talk on PLANNING FOR THE SALE OF A PROFESSIONAL PRACTICE – TAX, LIABILITY, NON-COMPETITION COVENANT, AND PRACTICAL PLANNING at the Florida Institute of CPAs Annual Accounting Show.

Date: September 18, 2015 | 3:30 PM – 4:20 PM

Location: Broward County Convention Center | 1950 Eisenhower Blvd, Fort Lauderdale, FL 33316

Additional Information: For additional information, please email Ken Crotty at ken@gassmanpa.com or CPE Conference Manager Diane K. Major at majord@ficpa.org.

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LIVE SARASOTA PRESENTATION:

2015 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: Friday, October 23rd and Saturday, October 24th, 2015

Location: To Be Determined

Additional Information: Please contact Alan Gassman at agassman@gassmanpa.com for more information.

Notable Seminars by Others
(These conferences are so good that we were not invited to speak!) 

LIVE ORLANDO PRESENTATION:

50TH ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 11 – January 15, 2016

Location: Hotel information to be announced

Additional Information: Information on the 50th Annual Heckerling Institute on Estate Planning will be available on August 1, 2015. To learn about past Heckerling programs, please visit http://www.law.miami.edu/heckerling/.

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LIVE ST. PETERSBURG PRESENTATION:

ALL CHILDREN’S HOSPITAL FOUNDATION 18TH ANNUAL ESTATE, TAX, LEGAL & FINANCIAL PLANNING SEMINAR

We are pleased to announce that Jonathan Blatttmachr, Howard Zaritsky, Lauren Detzel, Michael Markham, and others will be speaking at the 2016 All Children’s Hospital Estate, Tax, Legal & Financial Planning Seminar.

Lauren Detzel will be speaking on Recent Homestead Cases, while Michael Markham will be speaking on Bankruptcy and Creditor Protection/Fraudulent Transfer in Context with Estate Planning.

We thank Lydia Bailey and Lori Johnson for their incredible dedication (and patience with certain members of the Board of Advisors.) All Children’s Hospital is affiliated with Johns Hopkins, which is not affiliated with Anthony Hopkins.

Please provide us with your input for other topics for this year and next! Watch this space for more speaker and topic announcements.

Date: February 10, 2016

Location: Live Event at the All Children’s Hospital St. Petersburg Campus; Webcasts in Tampa, Fort Myers, Belleair, New Port Richey, Lakeland, and Sarasota

Additional Information: Please contact Lydia Bennett Bailey at lydia.bailey@allkids.org 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.

Applicable Rates

The Thursday Report – 4.30.15 – April Showers Give the Thursday Report Special Powers

Posted on: April 30th, 2015

Voluntary Disclosure of Offshore Assets by Alan Gassman, Leslie Share, and Brandon Ketron, Part I

Seminar Spotlight – The Florida Bar 2-Day Asset Protection Program in Miami Next Week

Teaser Points for Richard Oshins’s Ave Maria Presentation: Conventional Wisdom Knocked on its Ear

Greek Tax Amnesty Opportunity Ends May 12th

Planning for Ownership and Inheritance of Pension and IRA Accounts and Benefits – Review Questions

Richard Connolly’s World – Bar Exam Under Fire & New Rules on Reporting Law School Graduates’ Success

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 Stephanie at stephanie@gassmanpa.com.

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

Voluntary Disclosure of Offshore Assets, Part I
by Alan Gassman, Leslie Share, and Brandon Ketron

“While many of us thought that late offshore trust and investment amnesty and other filing programs would not be seen or heard about because virtually all US taxpayers with these issues came forth under the 2009 and 2011 Offshore Voluntary Disclosure Program (known lovingly by those who have used it as OVDP,) time has shown that a certain small but definite percentage of the population will not come forward unless or until there are family dynamics, required reporting by foreign trust companies or individuals, death, or other circumstances.”

Executive Summary:

Clients have a difficult time understanding the myriad of complicated rules associated with disclosure of offshore assets. We have summarized the current potential vehicles a client in this situation may use to come into compliance with the law. It is also a good refresher on what sort of penalties clients could face if the correct paperwork is not filed.

Generally, there are four options available for a taxpayer who neglected to properly file the required forms to disclose offshore assets. The options are:

  1. “Quiet” Disclosure
  2. Delinquent International Information Return Submission Procedures
  3. Streamlined Filing Compliance Procedures
  4. Offshore Voluntary Disclosure Program

To be eligible for the IRS Delinquent International Information Return Submission Procedures and the Streamlined Filing Compliance Procedures, the taxpayer must show that the failure to disclose was due to “reasonable cause” or “non-willful” conduct. Acceptance into one of the programs is not automatic. Prior to forgoing the criminal immunity and formal closing agreement offered under the Offshore Voluntary Disclosure Program, the taxpayer should consider the likelihood of an unsuccessful outcome under the other programs and the risk associated with that outcome.

Facts:

What is required to be filed?

Some of the most common filing requirements for offshore assets are: (1) Form 3520 – Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, (2) Form 3520-A – Annual Information Return of Foreign Trust with US Owner, (3) Form 8938 – Statement of Specified Foreign Financial Assets, (4) Report of Foreign Bank and Financial Accounts (FBAR), (5) Form 5471 – Information Return of US Persons with Respect to Certain Foreign Corporations, and (6) Form 8865 – Return of US Persons with Respect to Certain Foreign Partnerships.

A Form 3520 is required to be filed when a US person (1) creates or transfers money or property to a foreign trust; (2) receives (directly or indirectly) any distributions from a foreign trust or; (3) receives certain gifts or bequests from foreign persons, estates or other entities.

A Form 3520-A is an annual informational return required to be filed by any US person who is treated as an owner of any portion of a foreign trust under the grantor trust rules.

A FBAR is required to be filed if a US person has (1) financial interest or signature authority over one or more foreign financial accounts, and (2) the aggregate value of such accounts exceeded $10,000 at any time during the calendar year.

A Form 8938 is required to be filed by a US person having interests in certain specified foreign financial assets exceeding $50,000 on the last day of the tax year, or $75,000 at any time during the year ($100,000 and $150,000 respectively for taxpayer Married Filing Jointly).

Generally, a Form 5471 is required to be filed by US persons who are officers, directors, or shareholders in certain foreign corporations.[1]

A Form 8865 is required to be filed to report information regarding foreign partnerships controlled by a US person; transfers from a US person to a foreign partnership; or to report acquisitions, dispositions or changes in foreign partnership interests by a US person.

These requirements apply regardless of whether the assets were disclosed on another Form disclosing foreign assets. However, if assets were listed on Form 3520, the instructions for Form 8938 state, “If you reported a specified foreign financial asset on the [Form 3520, Form 5471, Form 8865, or another informational return] for the same tax year, you may not have to report it on Form 8938. However, you must identify the form where you reported the asset by indicating how many forms you filed.”

Penalties Applicable for the Failure to File

The penalties for the failure to file the required informational returns to report foreign assets can be severe. Below is a summary of the possible penalties, but see Options Available to Taxpayer to Correct Failure to File for information on how some or all of these penalties can be avoided.

A. Failure to file FBAR

The failure to file a FBAR can result in a penalty if the IRS determines the failure was not due to reasonable cause. The penalty is $10,000 per violation if the failure to file was non-willful. If the failure to file was willful, then the penalty can be as high as the greater of $100,000 or 50% of the account balance per year.

B. Failure to file Form 8938

The failure to file Form 8938 may carry a penalty of $10,000, with an additional $10,000 added for each month the failure to file continues after the taxpayer is notified of the delinquency up to a maximum of $50,000 per return.

C. Failure to file Form 3520

The failure to file Form 3520 with respect to foreign trusts may result in a penalty the greater of $10,000 or 35% of the gross reportable amount. If the return was required to be filed to report gifts, then the penalty can be 5% of the gift per month up to a maximum penalty of 25% of the gift.

D. Failure to file Form 3520-A

The failure to file Form 3520-A may result in a penalty of the greater of $10,000 or 5% of the gross value of trust assets determined to be owned by a US person.

E. Failure to file Form 5471

The failure to file Form 5471 may result in a penalty of $10,000. An additional $10,000 is added each month the failure continues beginning 90 days after the taxpayer is notified of the failure, up to a maximum of $50,000.

F. Failure to file Form 8865

The failure to file Form 8865 may result in a penalty of $10,000, with an additional $10,000 added each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000. A reduction in the otherwise available foreign tax credit could also be imposed. Additionally, the taxpayer is subject to a penalty of 10% of the value of any unreported transferred property, subject to a $100,000 limit.

G. Fraud Penalty

If the underpayment and non-disclosure is determined to be the result of fraud, the taxpayer is liable for a penalty that is generally equal to 75% of the unpaid tax.

H. Accuracy-Related Penalty

Depending on which component of the accuracy-related penalty is applicable, a taxpayer may be liable for either a 20% penalty or a 40% penalty. This statute reads as follows:

If this section applies to any portion of an underpayment of tax required to be shown on a return, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which this section applies.[2]

In the case of any portion of an underpayment, which is attributable to any undisclosed foreign financial asset understatement, subsection (a) shall be applied with respect to such portion by substituting “40 percent” for “20 percent.”[3]

For example, if a US citizen underpays his or her tax by $20,000, and that underpayment is directly attributable to an undisclosed foreign asset, a penalty of 40% may be assessed in addition to the tax owed. This could bring the total payment to $28,000 ($20,000 + (20,000 x 40%)).

I. Criminal Charges

In addition to owning the tax along with the above mentioned penalties, the taxpayer could be charged with tax evasion, filing a false return, and willfully failing to file a FBAR or filing a false FBAR. These charges could result in jail time and additional monetary fines.

Stay tuned for next week’s Thursday Report where we will discuss options available to correct failure to file.

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[1] See, IRS Instructions for Form 5471 for more detail on who must file Form 5471
[2] 26 USC § 6662 (a)
[3] 26 USC § 6662 (j)(3)

Seminar Spotlight
The Florida Bar 2-Day Asset Protection Program

The Florida Bar Continuing Legal Education Committee and Tax Section will present a 2-day Asset Protection Program on May 7th and May 8th, 2015.

This is a first-time two-day program, and attendees can choose to attend one or both days. Day One is a comprehensive Fundamentals Day designed to provide a well-balanced introduction/refresher, and Day Two will be an Advanced Day, well-suited for experienced practitioners and/or anyone who attended the first Fundamentals day.

Every attendee will receive a free course book onsite.

The schedule for Day One of this program is as follows:

DAY 1
ASSET PROTECTION FUNDAMENTALS

Day 1 Part 1

Day 1 Part 2

The Asset Protection Fundamentals course will qualify for 9.5 hours of CLE credit, including 0.5 hours of Ethics credit. It will also qualify for 9.5 hours of Tax Certification Credit and/or 9.5 hours of Wills & Trust Estates Certification Credit.

The schedule for Day Two of this program is as follows:

DAY TWO
ADVANCED ASSET PROTECTION

Day 2

The Advanced Asset Protection course will qualify for 9.5 hours of CLE credit, including 2 hours of Ethics credit. It will also qualify for 9.5 hours of Tax Certification Credit and/or 9.5 hours of Wills & Trust Estates Certification Credit.

The program will take place at the Hyatt Regency Hotel in Miami, Florida. Information for the hotel is as follows:

Hyatt Regency Downtown
400 South East Second Avenue
Miami, FL 33131
1-305-358-1234
www.miamiregency.hyatt.com

To register for this program, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

Teaser Points for Richard Oshins’s Ave Maria Presentation:
Conventional Wisdom Knocked on its Ear

The 2nd Annual Ave Maria School of Law Estate Planning Conference will take place TOMORROW at the Ave Maria School of Law in Naples, Florida.

One of the many great presentations to be featured at the conference is Richard Oshins on Oshins 11 – 11 Innovative Planning Techniques for the Tax and Estate Planning Professional. Richard Oshins is one of the most well-respected and creative estate tax planning authorities.

We asked Richard for some presentation highlights that we might share to promote both his presentation and the conference in general. He provided us with the following:

Here are a few of the highlights:

  • Life insurance is often a substantial component of many estate plans. There are some very powerful planning strategies that enable the planner to transfer the life insurance from and to clients with substantial tax benefits;
  • Trusts are the most flexible and powerful vehicle that exist in estate and wealth planning. Some new strategies will be discussed that can and should be used to enhance the benefits of trusts. Grantor trusts are especially beneficial, and strategies to use them on a multi-generational basis will be discussed;
  • There is a common belief among estate planners that a GRAT is an extremely safe strategy as the rules have been codified. However, there are some meaningful operational risks associated with GRATs that are not given adequate attention by planners and clients;
  • There is a common belief that the change in the estate tax exemption from $1 million to $5 million adjusted has substantially eroded the estate planning opportunities for advisors. There are still many estate planning opportunities available, only they are different than they previously were. There is a substantial array of opportunities that the skilled planner should be discussing with their clients that can exploit loopholes and tax reduction techniques that still exist to exploit the internal revenue code to the advantage of clients.

Richard’s Oshins 11 presentation will run from 8:30 AM to 9:30 AM at the 2nd Annual Ave Maria School of Law Estate Planning Conference.

Richard will also be speaking later in the day with Alan Gassman and Jerome Hesch on The Mathematics of Estate Planning. Don’t miss it!

To register for the conference, please click here http://estateplanning.avemarialaw.edu/.

Greek Tax Amnesty Opportunity Ends May 12th

Many of us have clients who have family in Greece, and the Greek economic crisis and lack of historical enforcement of the tax law has fostered a great deal of tax evasion or mistakes about whether to report US based income on tax returns for Greek citizens and residents.

Greece has an amnesty program that waives interest and penalties on unreported income, which ends on May 12th, 2015.

Greece also has a law which will enable the revenue agency to require that all Greek citizens disclose their worldwide assets, but this has not yet been implemented. It is unknown whether Greek citizens who gift assets now to special trusts for their families will have to report these assets if and when the asset reporting rules are released and implemented.

If you do not mind advertising that you actually open The Thursday Report, you could forward this to these clients or others, and they are welcome to subscribe at no charge.

Further information will be provided in subsequent Thursday Reports.

Planning for Ownership and Inheritance of Pension and IRA Accounts and Benefits – Review Questions
by Christopher J. Denicolo, Alan S. Gassman, and Brandon Ketron

The rules applicable to retirement plan and IRA distributions, contributions, rollovers, and otherwise can be difficult to understand and complex to implement.  The applicable Internal Revenue Code Sections and Treasury Regulations are somewhat complicated and convoluted, and use many technical “terms of art.”  This makes dealing with qualified plans cumbersome and difficult for laypersons and planners who are not experienced in this area.

We have attempted to simplify the applicable rules into a digestible format with concise explanations of the applicable rules.  We have also prepared charts and explanations to illustrate the key concepts and mechanics of important definitions, rules, and planning strategies.

To see previous editions of this presentation, please click below:

Chapter 1, Chapter 2, Chapter 3, Chapter 4, Chapter 5, Chapter 6Chapter 7

This week, we are featuring some questions to help you review the materials we’ve discussed in Chapters 1 through 7 of this series.

Answer each of the following questions with TRUE or FALSE, then check your answers below.

  1. Roth IRAs are not subject to the Required Minimum Distribution rules until the owner of the Roth IRA dies.
  2. A Traditional IRA cannot roll over tax free to a Roth IRA.
  3. If a person other than the Plan Participant’s spouse is a beneficiary of the IRA, the Recalculation of Life Expectancy principle will still apply.
  4. A Conduit Trust must pay all distributions received directly from the IRA/Plan to a Designed Beneficiary upon receipt by the trustee.
  5. A Plan Participant who has not reached aged 59½ will pay a 10% excise tax on taxable distributions in addition to the normal income tax.
  6. Required Minimum Distributions (RMDs) are the amounts that must be paid out in a given year under the Applicable Payment Mode, based upon the life expectancy of the Plan Participant or the Designated Beneficiary.
  7. The date on which lifetime distributions to the Plan Participant must begin is April 1 of the calendar year preceding the calendar year in which the Plan Participant attains the age of 70½.
  8. A Plan Participant cannot withhold federal income tax from Required Minimum Distributions.
  9. There is no requirement that Required Minimum Distributions be paid in cash.
  10. A conversion from a traditional IRA into a Roth IRA for someone under the age of 59½ does not trigger the 10% penalty fee on early withdrawals.
  11. IRA to HSA Account transfers are always extremely beneficial.
  12. A taxpayer cannot deduct a loss on the sale of securities if a substantially identical security is repurchased within 30 days after the loss-generating sale.
  13. The Designated Beneficiary is the person whose life expectancy is used for the purpose of determining the applicable payment mode of the required minimum distributions that will apply to an IRA/Plan.
  14. The designation date is September 30 of the calendar year following the year of death of the Plan Participant.
  15. The Designated Beneficiary of an Accumulation Trust, for the purposes of the Required Minimum Distribution rules, is the youngest individual beneficiary of the trust.
  16. A Conduit Trust can have beneficiaries older than the Designated Beneficiary, Non-Persons as beneficiaries and unlimited power of appointment powers, so long as all distributions from the IRA/Plan to the trust are required to be paid to the Designated Beneficiary upon receipt from the IRA/Plan during his or her lifetime by trust during his or her lifetime.
  17. Q-TIP Trusts qualify as a Conduit Trust.
  18. Regarding Q-TIP Trusts, if a surviving spouse’s right to withdraw from the IRA/Plan is restricted, the spouse will not be allowed to rollover the IRA/Plan into his or her own.

For the answers to these questions, please click here.

For an explanation to these questions and more, please review Chapters 1 through 7 using the links provided above.

Richard Connolly’s World
Bar Exam Under Fire & New Rules on
Reporting Law School Graduates’ Success

Insurance advisor Richard Connolly of Ward & Connolly in Columbus, Ohio often shares with us pertinent articles found in well-known publications such as The Wall Street Journal, Barron’s, and The New York Times. Each week, we will feature some of Richard’s recommendations with a link to the articles.

This week, the first article of interest is “Bar Exam, the Standard to Become a Lawyer, Comes Under Fire” by Elizabeth Olson. This article was featured in The New York Times on March 19, 2015.

Richard’s description is as follows:

For decades, law school graduates have endured a stressful rite of passage, spending the first 10 weeks after classes end taking cram courses in the arcane details of the law before sitting down for the grueling, days-long bar exam. Those who do not pass cannot practice law, at least in nearly all the states and the District of Columbia that consider the exam the professional standard.

But that standard, so long unquestioned, is facing a new round of scrutiny – not just from the test takers, but from law school deans and some state legal establishments. Some states, including Arizona, Iowa, and New Hampshire, are exploring or have adopted other options, questioning the wisdom of relying on a single written test as the gateway to legal practice.

Please click here to read this article in its entirety.

The second article of interest this week is “Law Schools Face New Rules on Reporting Graduates’ Success” by Jacob Gershman. This article was featured in The Wall Street Journal on March 17, 2015.

Richard’s description is as follows:

US law schools face renewed scrutiny over claims about their ability to find work for their graduates, a crucial selling point amid one of the legal industry’s work-ever job markets.

Some of the schools have been creating temporary jobs for grads by paying nonprofits and others to employ them, a move that, in some cases, has boosted the school’s standings in the much-followed US News & World Report rankings.

Last year, George Washington University Law School reported that 469 out of its 603 graduates in the Class of 2013 had jobs by nine months after graduation. The school sponsored 88 of these jobs, or 19 percent.

A new rule adopted in March by the accrediting arm of the American Bar Association will tighten such claims, giving law schools less credit for jobs that they subsidize.

Please click here to read this article in its entirety.

Humor! (or Lack Thereof!)
by Sigmund Ross

Psychologist

According to Dr. Freud, there is no such thing as an accident. It follows, then, that there is no such thing as an accident attorney. If you think you see an accident attorney, that is just a manifestation of your childish desire for a parental type who will blame someone else for your problems.

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IN LEGAL NEWS:

Lawyers

Top law firms fight each other over the opportunity to argue the right to gay marriage in front of the Supreme Court. Opposing side represented by an empty space next to a ten foot pole.

Upcoming Seminars and Webinars

LIVE OLDSMAR PRESENTATION: 

FICPA SUNCOAST SCRAMBLE GOLF TOURNAMENT 

Kenneth J. Crotty and Christopher J. Denicolo will speak at the FICPA Suncoast Scramble Golf Tournament on the topic of MATHEMATICS FOR ESTATE PLANNERS INCLUDING 10 ESTATE PLANNING STRATEGIES NOT TO MISS. 

Date: Friday, May 1, 2015 | CPE Presentations from 9:00 AM – 11:30 AM 

Location: East Lake Woodlands Country Club | 1055 E Lake Woodlands Parkway, Oldsmar, FL 34677 

Additional Information: For more information about registration, sponsorship, or this event, please click here or click here to download the Tournament brochure.

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LIVE NAPLES PRESENTATION: 

2nd ANNUAL AVE MARIA SCHOOL OF LAW ESTATE PLANNING CONFERENCE 

Alan Gassman, Jerry Hesch, and Richard Oshins 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 Richard Oshins on 11 Outstanding Planning Ideas, Jonathan Gopman on Asset Protection, 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.

Date:  Friday, May 1, 2015

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

Additional Information:  For more information, please click here http://estateplanning.avemarialaw.edu/ or email Alan Gassman at agassman@gassmanpa.com.

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LIVE MIAMI PRESENTATION: 

FLORIDA BAR ASSET PROTECTION PROGRAM

Denis Kleinfeld and Alan Gassman have released the schedule and topics for FUNDAMENTALS OF ASSET PROTECTION AND ADVANCED STRATEGIES. This seminar will be presented on May 7th and May 8th, 2015, and is sponsored by the Tax Section of the Florida Bar.  Attendees can select one day or the other, or to attend both days.

Day One will be for fundamentals and will be an excellent review or an introduction to the basic rules and practice aspects of creditor protection planning for both new and experienced practitioners.

Day Two will be an advanced treatment of creditor protection and associated planning, which will be of great use to both new and experienced practitioners.

Date: May 7 – 8, 2015

Location: Hyatt Regency Miami | 400 SE 2nd Avenue, Miami, FL 33131

Additional Information: To register for this conference, please click here. For more information, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE BLOOMBERG BNA WEBINAR:

Professor Jerome Hesch, Alan Gassman, and Barry Flagg will be presenting a 90-minute webinar for Bloomberg BNA Tax & Accounting on THE TAX ADVISORS GUIDE TO PERMANENT LIFE INSURANCE AND STRUCTURING TOOLS AND TECHNIQUES.

Date: Tuesday, May 12, 2015 | 2:00 PM

Location: Online webinar

Additional Information: To register for this webinar, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE BRADENTON, FLORIDA PRESENTATION

Alan Gassman will speak at the Coastal Orthopedics Physician Education Seminar on the topics of CREDITOR PROTECTION AND THE 10 BIGGEST MISTAKES DOCTORS CAN MAKE: WHAT THEY DIDN’T TEACH YOU IN MEDICAL SCHOOL.

Coastal Orthopedics, Sports Medicine, and Pain Management is a comprehensive orthopedic practice which has been taking care of patients in Manatee and Sarasota Counties for 40 years. They have sub-specialized, fellowship-trained physicians as well as in-house diagnostics, therapy, and an outpatient surgery center to provide comprehensive, efficient orthopedic care.

Date: Tuesday, May 12, 2015 | Time TBA

Location: Coastal Orthopedics and Sports Medicine | 6015 Pointe West Boulevard, Bradenton, FL, 34209

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

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LIVE STUART, FLORIDA PRESENTATION

Alan Gassman will be the featured “headline” speaker the Martin County Estate Planning Council Annual Tax and Estate Planning Seminar. He will be doing a three-hour talk on the topics of JESTs, MATHEMATICS FOR ESTATE PLANNERS, AND THE ESTATE PLANNER’S GUIDE TO PLANNING FOR IRA AND PENSION BENEFITS – YES, YOU CAN FINALLY UNDERSTAND THESE RULES!

Date: May 15, 2015 | 8:15 AM – 4:30 PM; Alan Gassman speaks from 9:00 AM to 12:00 PM

Location: Stuart Corinthian Yacht Club | 4725 SE Capstan Avenue, Stuart, FL 34997

Additional Information: For more information, please email Alan Gassman at agassman@gassmanpa.com or Lisa Clasen at lclasen@kslattorneys.com.

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LIVE WEBINAR:

Alan Gassman and noted trust and estate litigator, LL.M in estate planning, and blog master Juan Antunez, J.D., LL.M. will be presenting a free 30-minute webinar on ARBITRATING TRUST AND ESTATES DISPUTES. 

Don’t miss Juan’s wonderful blog site entitled Florida Probate & Trust Litigation Blog, which can be accessed by clicking here, and the many very useful articles thereon.

Date: Tuesday, May 19, 2015 | 12:30 PM

Location: Online webinar

Additional Information: To register for this webinar, please click here.

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LIVE FLORIDA INSTITUTE OF CPAs (FICPA) WEBINAR

Alan Gassman, Ken Crotty, and Chris Denicolo will present a webinar on A PRACTICAL TRUST PLANNING CHECKLIST AND PRACTITIONER COMPLIANCE GUIDE FOR FLORIDA CPAs for the Florida Institute of CPAs.

Review a practical planning checklist and practitioner tax compliance guide to facilitate implementing a comprehensive overview of practical planning matters and tax compliance issues in your practice. This presentation will cover over 20 common errors and missed planning opportunities that accountants need to understand and counsel their clients on.

This course is designed for practitioners who wish to assure that trust planning structures and compliance are both aligned with client objectives and that common catastrophic errors and misconceptions can be corrected.

Past attendees have indicated that this is an interesting and practical presentation that offers a great deal of practical information for both compliance and planning functions, based upon an easy to follow checklist approach.  Includes valuable materials.

Date: May 21, 2015 | 10:00 AM

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com or Thelma Givens at givenst@ficpa.org. To register, please click here.

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LIVE MIAMI LAKES WORKSHOP:

Alan Gassman will be speaking at the Miami Lakes Bar Association Luncheon on the topic of ACCELERATING YOUR LAW PRACTICE. This luncheon will qualify for 2 CLE credits.

Date: Thursday, May 21, 2015 | 11:45 am – 1:45 pm

Location: Italy Today | 6743 Main Street, Miami Lakes, FL 33014

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

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LIVE UNIVERSITY OF FLORIDA PROFESSIONAL ACCELERATION WORKSHOP:

Alan Gassman will present a five hour workshop on legal practice and making the most of your legal practice to Professor Dennis Calfee’s summer workshop class. Experienced professionals are also welcome to attend by making a $150 donation to the Lind Chair.

Date: To Be Determined

Location: University of Florida | 2500 SW 2nd AE, Gainesville, FL 32611

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

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LIVE WEBINAR:

Alice Rokahr, President, Trident Trust Company (South Dakota) Inc., and Alan S. Gassman will present a free, 30-minute webinar entitled WHAT IS SO SPECIAL ABOUT SOUTH DAKOTA – DOMESTIC ASSET PROTECTION TRUST LAW AND PRACTICES.

Date: June 9, 2015 | 12:30 pm

Location: Online webinar

Additional Information: For more information, please contact Alan Gassman at agassman@gassmanpa.com or click here to register for this webinar.

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LIVE BLOOMBERG BNA WEBINAR:

Professor Jerome Hesch, Alan Gassman, Ed Morrow, Christopher Denicolo, and Brandon Ketron will be presenting a 90-minute webinar for Bloomberg BNA Tax & Accounting on ESTATE AND TRUST PLANNING WITH IRA AND QUALIFIED PLAN BENEFITS: AN UNDERSTANDABLE SYSTEM WITH CHARTS AND EASY-TO-UNDERSTAND MATERIALS.

This presentation will include a 300 page E-book for each attendee.

Date: Wednesday, June 10, 2015 | 2:00 PM

Location: Online webinar

Additional Information: To register for this webinar, please email Alan Gassman at agassman@gassmanpa.com.

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LIVE AVE MARIA SCHOOL OF LAW PROFESSIONAL ACCELERATION WORKSHOP

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

Date: August 22, 2015 | 9:00 AM – 5:00 PM

Location: Thomas Moore Commons, Ave Maria School of Law, 1025 Commons Circle, Naples, FL 34119

Additional Information: To download the official invitation to this event, please click here. To RSVP and for more information, please contact Donna Heiser at dheiser@avemarialaw.edu or via phone at 239-687-5405 or Alan Gassman at agassman@gassmanpa.com or via phone at 727-442-1200.

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LIVE FORT LAUDERDALE PRESENTATION:

Ken Crotty will be presenting a 1-hour talk on PLANNING FOR THE SALE OF A PROFESSIONAL PRACTICE – TAX, LIABILITY, NON-COMPETITION COVENANT, AND PRACTICAL PLANNING at the Florida Institute of CPAs Annual Accounting Show.

Date: September 18, 2015 | 3:30 PM – 4:20 PM

Location: Broward County Convention Center | 1950 Eisenhower Blvd, Fort Lauderdale, FL 33316

Additional Information: For additional information, please email Ken Crotty at ken@gassmanpa.com or CPE Conference Manager Diane K. Major at majord@ficpa.org.

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LIVE SARASOTA PRESENTATION:

2015 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: Friday, October 23rd and Saturday, October 24th, 2015

Location: To Be Determined

Additional Information: Please contact Alan Gassman at agassman@gassmanpa.com for more information.

Notable Seminars by Others
(These conferences are so good that we were not invited to speak!)
 

LIVE ORLANDO PRESENTATION:

50TH ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 11 – January 15, 2016

Location: Hotel information to be announced

Additional Information: Information on the 50th Annual Heckerling Institute on Estate Planning will be available on August 1, 2015. To learn about past Heckerling programs, please visit http://www.law.miami.edu/heckerling/.

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.

April Applicable Rates

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