Thursday, August 29, 2024

8 Law Clerks, 11 Weeks, Over 3,520 Hours and 4,000 Bad Jokes

Read All About It

Summer School is in Session

 Issue #346

Summer’s Legal Symphony

By: Brock Exline

When summer’s sun begins to shine,

And Florida’s skies are clear,

Our firm becomes a lively scene,

With eager law clerks here.

From Stetson they arrive in droves,

Jim, Chance, and Jacob too,

Nick, Kurtis, Vince, and Victor,

Henry joined the crew.

They bring fresh minds, a thirst to learn,

In law’s vast, sprawling sea,

Yet what they find within our halls

Is quite the jubilee.

Our lawyers don their teaching hats,

In scholar’s robes they bask,

While clerks dive deep in hefty books,

Completing every task.

Books are born, reports are penned,

In summer’s scholarly spree,

The “Thursday Report” bursts with wit,

And legal oddity.

Our offices, abuzz with talk,

Of cases, rules, and lore,

Become a summer school of sorts,

Where knowledge is the core.

So here’s to summer’s bright brigade,

Who join us in our quest,

To blend the law with fun and charm,

And always do our best!

Let’s welcome them with open arms,

And share our quirky sport,

For in the heat of summer’s day,

They bring their fresh support.

With pens in hand and minds engaged,

We’ll laugh and learn and thrive,

In this sunny season’s glow,

Our firm comes more alive.

Coming from the Law Offices of Gassman, Crotty & Denicolo, P.A. in Clearwater, FL.

Edited By: Brock Exline

Please Note: Gassman, Crotty, & Denicolo, P.A. will be sending the Thursday Report out during the first week of every month.

Article 1

IRS Announces Second Employee Rentention Credit Voluntary Disclosure Program

Written By:  Brandon Ketron

Article 2

Summer School Sizzler: Unpacking Florida’s New Marital Property Law (No Sunburns Guaranteed!)

Written By: Jacob Gordon, Chance Cook and Brock Exline

Article 3

Summer Session Shake-Up – Florida Bill Bonanza: How Florida’s Laws Just Got Tweaked

Written By: Jacob Gordon & Brock Exline

Article 4

 Florida’s New Laws on Elder Financial Abuse

Written By: Alan Gassman, Jacob Gordon, Chance Cook and Brock Exline

Article 5

QPRTs: A Strategic Tool for Estate Tax Savings During Summer School

Written By: Joey Kleiner

For Finkel’s Followers

5 Ways to Tell If A Potential Business Partner Is The One

Written By: David Finkel

Upcoming Webinar

Estate Tax Planning from M – Z

Presented By: Alan Gassman 

More Upcoming Events

YouTube Library

Humor

Article 1

IRS Announces Second Employee Rentention Credit Voluntary Disclosure Program

Written by: Brandon Ketron

On August 15, 2024, the Internal Revenue Service announced a second round of the Employee Retention Credit Voluntary Disclosure Program, whereby ineligible businesses can return ERC funds received to avoid future audits, penalties, and interest.

    The IRS had previously implemented a Voluntary Disclosure Program, which ended on March 22, 2024, that allowed ineligible businesses to return 80% of the ERC funds received to avoid potential penalties and interest if later audited.  Now under the second ERC Voluntary Disclosure Program, ineligible businesses are required to return 85% of the funds received.

    In short summary, the second ERC Voluntary Disclosure Program is open through November 22, 2024, and only applies with respect to ERC funds received for the 2021 tax periods.  It is noteworthy that the Voluntary Disclosure Program is not available for ERC funds received in the 2020 tax period and if businesses were ineligible for funds received in the 2020 tax period they would be required to return 100% of the funds received and may not receive amnesty from potential penalties that may apply.  The second ERC Voluntary Disclosure Program requires you to complete and send an application package for the second ERC Voluntary Disclosure Program (Form 15434),  voluntarily pay back the ERC funds received minus 15%, cooperate with any requests from the IRS for more information, and sign a closing agreement with the IRS.

    This is a very taxpayer friendly program and offers several benefits to those who voluntarily refund erroneously received ERC funds. In the recent IRS announcement, the Service made mention of the following benefits offered to taxpayers under the second Voluntary Disclosure Program:

    •    You need to repay only 85% of the ERC you received as a credit on your return or as a refund.
    •    You don’t need to repay any interest you received on your ERC refund.
    •    You don’t have to amend income tax returns to reduce wage expense.
    •    The 15% reduction is not taxable as income.
    •    The IRS will not charge penalties or interest on the claimed ERC amount if you pay it in full (claimed ERC minus 15%) by the time you return your signed closing agreement to IRS.
    •    The IRS won’t examine (audit) ERC on your employment tax return for tax period(s) resolved within the terms of the second ERC-VDP.

    IRS Announcement 2024-30 provides the following with respect to whether or not a business is eligible for the second Voluntary Disclosure Program:

                (1)    The participant is not under criminal investigation and they have not been notified that the IRS intends to commence a criminal investigation; 

                (2)    The IRS has not received information from a third party alerting the IRS to the participant’s noncompliance, nor has the IRS acquired information directly related to the noncompliance from an enforcement action; 

                (3)    The participant is not under an employment tax examination by the IRS for any tax period(s) for which the taxpayer is applying for this second ERC Voluntary Disclosure Program; 

                (4)    The participant has not been notified by the IRS that the ERC they received is being recaptured for any tax period(s) for which the taxpayer is applying for this second ERC Voluntary Disclosure Program; and 

                (5)    The participant has not previously received notice and demand for repayment of all or part of the claimed ERC.

    IRS.gov has several helpful information pages discussing the second ERC Voluntary Disclosure Program which are linked below:
    IRS provides details of second Employee Retention Credit Voluntary Disclosure Program; program for improper claims open through Nov. 22 | Internal Revenue Service

Employee Retention Credit – Voluntary disclosure program | Internal Revenue Service (irs.gov)

Frequently asked questions about the second Employee Retention Credit Voluntary Disclosure Program | Internal Revenue Service (irs.gov)

IRS shares more warning signs of incorrect claims for the Employee Retention Credit; urges businesses to proactively resolve erroneous claims to avoid penalties, interest, audit | Internal Revenue Service

    While the announcement provides that a business is not eligible for the Voluntary Disclosure Program if they are under investigation with respect to a claimed ERC credit, this only applies for the applicable Quarter in which the investigation applies. This means that other Quarters can be voluntarily returned if the employer has not yet received an audit notice or demand for repayment with respect to the ERC claim for that Quarter.  For example, if an employer received a Notice of Audit with respect to its Q1 of 2021 filings, and have also claimed Q2 and Q3 ERC funds but have not yet received any Notice of Audit with respect to Q2 and Q3, the business would not be eligible for the Voluntary Disclosure Program with respect to Q1 of 2021, but would be eligible with respect to Q2 and Q3 of 2021.

    Many employers used outside promoters that had a financial incentive to encourage businesses to apply even though they may not be eligible, and often times misconstrued the requirements for eligibility for the ERC.  This taxpayer friendly offer by the IRS provides those employers a second opportunity to come into compliance without the risk of unnecessary litigation, penalties and potential interest.

    If you believe that there may be a chance that your business is ineligible for ERC funds received then please reach out to us or your tax advisor for further advice and information as to how to proceed with returning the funds through the second ERC Voluntary Disclosure Program.

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Article 2

Summer School Sizzler: Unpacking Florida’s New Marital Property Law (No Sunburns Guaranteed!)

Written By: Jacob Gordon, Chance Cook and Brock Exline

Introduction

In a significant legislative move, Florida Legislature has passed House Bill 521, which amends Section 61.075 of the Florida Statutes.  This bill fundamentally alters the framework for equitable distribution of marital assets and liabilities.  The Bill introduced several significant changes designed to offer clearer guidelines and more equitable outcomes in divorce proceedings. It is essential for lawyers, from family law practitioners to estate planners, to comprehend these changes in order to effectively navigate this new legal landscape.

Legislative History

On November 17^th, 2023, current District 66 Representative Traci Koster, a Tampa marital and family law attorney, filed House Bill 521.

Traci Koster earned her bachelor’s degree in Legal Studies from the University of Central Florida and is an alumna of Stetson University College of Law. Koster was hand selected by Republican leaders in Pinellas and Hillsborough Counties to succeed Representative James “Jamie” Grant upon his resignation in 2020.  Since then, Koster has been an active member of the Florida Legislature.

There was little debate on her bill.  Koster’s counterpart, Democratic Rep. Christopher Benjamin asked the only question during debate.  Benjamin was quoted as asking, “What’s the Family Law Section of the Florida Bar’s position on this, or have they made a position?”

Koster easily informed Representative Benjamin that the Family Law Section was “integral in drafting this bill.”

With little debate, the measure passed unanimously with 117 votes in the House on February 22^nd, 2024 and 38 votes in the Senate on February 28^th, 2024.  Governor DeSantis signed the bill into law on June 17^th, 2024, and amended the statute which became effective on July 1, 2024.

Revised Definition of “Good Cause” for Interim Partial Distributions

The bill revises the definition of “good cause” to require extraordinary circumstances for interim partial distributions during dissolution actions.  According to the bill, “good cause” now means “extraordinary circumstances that justify an interim partial distribution.” An interim partial distribution occurs when the divorce court orders the sale of marital property before the divorce is officially finalized.

Prior to this change, Section 61.075(5)(d) of the Florida Statutes read:

“As used in this subsection, the term “good cause” means extraordinary circumstances that require an interim partial distribution.”

            On July 1, 2025, Section 61.075(5)(d) of the Florida Statutes will change to:

“As used in this subsection, the term “good cause” means extraordinary circumstances that justify an interim partial distribution.”

The change from “require” to “justify” removes obligatory language in favor of permissive language, allowing the court more discretion in determining whether extraordinary circumstances exist for interim partial distributions.

The bill also adds four distinct factors that courts must now consider when analyzing a partial interim distribution. Section 61.075(5)(d) continues, “In determining if extraordinary circumstances exist for the purposes of this subsection, the court must consider the following…” factors:

1. “Whether there is a need for funds in order to avoid or prevent the loss of an asset through repossession or foreclosure, the loss of housing, the default by either party of a marital debt, or the levy of a tax lien.”

2. “Whether there is a need for funds to pay an expense for a dependent child if nonpayment of the expense would be detrimental to the child.”

3. “Whether one or both parties have a need to access funds in order to pay a reasonable amount of the attorney fees, court costs, or other suit money for maintaining or defending a proceeding under this chapter.”

4. “Any other circumstances that justify the entry of an order granting an interim partial equitable distribution.”

The addition of these four specific factors aims to provide a comprehensive framework for courts to assess the necessity and justification for interim partial distributions.  By explicitly considering the potential loss of assets, the well-being of dependent children, the financial burden of legal costs, and any other extraordinary circumstances, the legislation ensures that interim distributions are granted based on a thorough evaluation of the parties’ immediate needs.  

This structured approach is designed to prevent unjust financial hardships during the dissolution process. This will help protect the interests of dependent children, and ensure that both parties have the necessary resources to engage in legal proceedings fairly.  By delineating these factors, the bill promotes equitable outcomes and judicial consistency in making interim distribution decisions.

Rule Changes to Interspousal Gifts of Real Estate

The bill stipulates that interspousal gifts of real property require a written instrument complying with Section 689.01 of the Florida Statutes.

Specifically, it states: “An interspousal gift of real property may not be made in the absence of a writing that complies with the requirements of s. 689.01.”  Furthermore, “The joinder of a spouse in the execution of a deed with the sole purpose of the conveyance of homestead real property to any person or entity other than the other spouse or both spouses jointly does not change the character of the real property being conveyed, or any proceeds from the sale thereof, to marital property.”

Clarifications on Marital Assets and Liabilities

Marital assets now explicitly include business interests in “closely held businesses”. 

The bill defines the standard of value for these interests: “The standard of value of a closely held business is fair market value.  For purposes of this sub-subparagraph, the term ‘fair market value’ means the price at which property would change hands between a willing and able buyer and a willing and able seller, with neither party under compulsion to buy or sell, and when both parties have reasonable knowledge of the relevant facts.”

Regarding goodwill in closely held businesses, the bill specifies: “If there is goodwill separate and distinct from the continued presence and reputation of the owner spouse, it is considered enterprise goodwill, which is a marital asset that must be valued by the court.”

The bill maintains that all real property held as tenants by the entireties is presumed to be marital: “All real property held by the parties as tenants by the entireties, whether acquired prior to or during the marriage, shall be presumed to be a marital asset.”

Similarly, personal property titled jointly as tenants by the entireties is presumed to be marital: “All personal property titled jointly by the parties as tenants by the entireties, whether acquired prior to or during the marriage, shall be presumed to be a marital asset.”

Clarifications of Nonmarital Assets and Liabilities

The bill clarifies that nonmarital assets will include: “Assets acquired separately by either party by noninterspousal gift, bequest, devise, or descent, and assets acquired in exchange for such assets.”

The bill also clarifies the treatment of income from nonmarital assets: “All income derived from nonmarital assets during the marriage unless the income was treated, used, or relied upon by the parties as a marital asset.” Thus, all income derived from nonmarital assets, such as dividends from an investment account before the marriage, will remain nonmarital property outside the grasp of the divorce court.

Liabilities incurred by forgery or unauthorized signature are also addressed: “Any liability incurred by forgery or unauthorized signature of one spouse signing the name of the other spouse. Any such liability shall be a nonmarital liability only of the party having committed the forgery or having affixed the unauthorized signature.”

Burden of Proof for Claims

The burden of proof to overcome the presumption of a marital asset lies with the party asserting that an asset is nonmarital. The bill clarifies: “The burden of proof to overcome the gift presumption shall be by clear and convincing evidence.”

The clear and convincing evidence standard is the middle standard of proof in Florida. The lowest standard is a preponderance of the evidence which means that the evidence tips the scales slightly in the favor of one party even by just a small margin. Clear and convincing evidence means the evidence is highly persuasive and leaves no serious or substantial doubt about the issue in question. The highest standard of proof, beyond a reasonable doubt, is used exclusively in criminal cases and means that there is virtually no doubt about the truth of the claim.

The bill inserted the clear and convincing standard to leave no room for argument during litigation over marital assets. Thus, the bill makes an attempt at streamlining the litigation process and removing ambiguity.

Conclusion

House Bill 521 introduces several significant amendments to the equitable distribution of marital assets and liabilities within Florida. The bill’s revisions provide clearer guidelines and aim for more equitable outcomes in divorce proceedings.

Key changes include a revised definition of “good cause” for interim partial distributions, emphasizing judicial discretion and consideration of specific factors such as the potential loss of assets, dependent child expenses, legal costs, and other extraordinary circumstances.

Furthermore, the bill mandates that interspousal gifts of real property require a written instrument, ensuring proper documentation and maintaining the character of such property. The inclusion of business interests in closely held businesses as marital assets, with a defined standard of value, brings clarity and consistency to the valuation process.

The bill also provides clear distinctions between marital and nonmarital assets and liabilities, including the treatment of income derived from nonmarital assets incurred by forgery or unauthorized signatures. Additionally, it places the burden of proof on the party asserting that an asset is nonmarital, requiring clear and convincing evidence to overcome the presumption of a marital asset.

Legal professionals, especially those in family law and estate planning, must familiarize themselves with these updates to effectively navigate the new legal landscape.

____________________________________________________________

[1] https://www.flsenate.gov/Session/Bill/2024/521/?Tab=BillHistory

[2] https://www.floridabar.org/the-florida-bar-news/legislature-approves-family-law-section-backed-bill-to-standardize-divorce-proceedings/

[3] https://www.tampabay.com/news/florida-politics/elections/2020/11/03/traci-koster-narrowly-leads-in-florida-house-district-64-race/

[4] https://www.tallahassee.com/story/opinion/2024/06/20/florida-bar-applauds-desantis-in-putting-florida-families-first/74140611007/

Article 3

Summer Session Shake-Up – Florida Bill Bonanza: How Florida’s Laws Just Got Tweaked

Written By: Jacob Gordon and Brock Exline

Introduction.

In the last few weeks, Governor Ron DeSantis has been busy wielding his pen, signing off on a smorgasbord of bills that are set to reshape various aspects of Floridian life.  From tax tweaks to fraud fines and campaign finance reforms, here is a rundown of what is new and what has changed for the fine folks of Florida.

Tax Collections and Sales: The Taxman Giveth (HB 113)

Starting on July 1, 2024, Floridians dealing with partial tax payments can breathe a little easier.  HB 113 has nixed the pesky $10 processing fee that was previously mandatory for partial payments.  For those under the $30 tax bill mark or embroiled in federal bankruptcy, there is more good news: you might be eligible for a tax credit.  This is a win for transparency and taxpayers alike!

Debt Relief Services: A Lifeline for Telemarketers (HB 1031)

Telemarketers in the debt relief sector just got a significant reprieve.  Under HB 1031, if you are following the federal Telemarketing and Consumer Fraud and Abuse Prevention Act and the Telemarketing Sales Rule, you are no longer in the crosshairs for larceny prosecution in Florida. Before, the line between helping and harming was too thin, leading to heavy-handed repercussions.  Now, genuine debt relief efforts can proceed without the fear of unintended legal consequences.

The need for HB 1031 was established because Florida law did not define “debt relief services” or regulate those kinds of services. However, the federal Telemarketing Act defines “debt relief services” and regulates that activity. Thus, Florida borrowed from the language of federal law to reinforce the state’s telemarketing regulation.

Schemes to Defraud: Fraudsters Beware (HB 1171)

Fraudsters, particularly those preying on the elderly, beware!  HB 1171 has ramped up the penalties for scams involving endorsements from nonconsenting parties.  Do you have a niece, grandmother or aunt who “totally said you could withdraw that cash”?  Think again.  Committing fraud against vulnerable groups, including minors, the disabled, or seniors, just got a lot riskier.  A misdemeanor?  Now a third-degree felony.  A third-degree felony?  Now a second-degree felony, and so on.  It is a stern message: Florida is cracking down on fraudulent schemes, especially those targeting the most vulnerable.

Now that all punishments have been upgraded from misdemeanors to felonies, the prison sentences are greatly increased. A third-degree felony carries a sentence of up to five years in prison and a $5,000 fine, a second-degree felony carries a sentence of up to 15 years in prison and a $10,000 fine and first-degree felony carries a sentence of up to 30 years in prison and a $10,000 fine. Before this change to the laws, the lowest level of convicted fraudsters preying on the elderly would be sentenced to between 60 days and one year in jail.

Exemption from Regulation for Bona Fide Nonprofit Organizations: Mortgage Helpers (HB 1569)

Bona fide nonprofits dedicated to promoting affordable housing and homeownership education just got a regulatory break.  HB 1569 exempts these organizations from certain state regulations, provided they operate under specific criteria.  With the aim of ensuring these nonprofits act in the best interest of their clients rather than chasing profits, the bill defines what it means to provide favorable mortgage loans.  Think of it as a friendly nudge to keep housing help genuinely helpful.

To qualify for regulatory breaks, the organization must promote homeownership education, conduct its activities for charitable and public purposes, charge fees that do not incentivize employees to act in their own interest or provide borrowers with loan terms that are favorable to them rather than the organization.

Guardians of the Golden Years: Financial Fortresses for the Vulnerable (SB 556)

In a shining act of legislative heroism, Senate Bill 556 swoops in to provide much-needed financial protection for Florida’s seniors and vulnerable adults.  This bill allows financial institutions to delay disbursements or transactions if there is a reasonable belief of financial exploitation.  If Aunt Mabel’s sudden request to withdraw her life savings seems suspicious, the bank can hit the brakes and notify all authorized account holders and trusted contacts within three business days.  They also have to inform the Office of Financial Regulation and start an internal review.  Delays can last up to 15 business days, extendable by an additional 30 days, ensuring thorough protection without rushing.  This measure provides a crucial safeguard for those most at risk of financial abuse.

Campaign Finance: The Big Repeal (SB 1116)

In a bold move, SB 1116 has axed the Florida Election Campaign Financing Act and terminated the State Treasury’s Election Campaign Financing Trust Fund.  Effective immediately, this repeal shakes up how campaign finance operates in the state.  The days of state-funded campaign coffers are over, pushing political hopefuls to new funding strategies.  Whether this fosters more grassroots campaigns or emboldens big money politics remains to be seen.

Conclusion

Governor DeSantis’ recent legislative spree covers a wide array of issues, from financial tweaks to fraud deterrence and campaign finance overhauls.  As these bills come into effect, Floridians will undoubtedly start to feel the impacts, for better or worse.  Keep an eye on your tax bills, stay vigilant against scams, and watch how the political landscape adjusts to these changes.

_______________________________________________________

[1] https://www.clickorlando.com/news/politics/2024/04/27/florida-gov-ron-desantis-signs-28-more-bills-into-law-heres-what-they-do-and-when-they-take-effect/

[2] https://www.clickorlando.com/news/florida/2024/05/17/florida-gov-ron-desantis-signs-11-more-bills-into-law-heres-what-theyre-about/

[3] https://www.clickorlando.com/news/florida/2024/05/29/florida-gov-ron-desantis-sign-9-more-bills-into-law-heres-what-each-does/

[4] https://www.flsenate.gov/Session/Bill/2024/113

[5] https://www.flsenate.gov/Session/Bill/2024/1031/

[6] https://www.flsenate.gov/Session/Bill/2024/1171

[7] https://www.flsenate.gov/Session/Bill/2024/1569

[8] https://www.flsenate.gov/Session/Bill/2024/556

[9] https://www.flsenate.gov/Session/Bill/2024/1116

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Article 4

Summer School Shenanigans: Florida’s New Laws on Elder Financial Security

Written By: Jacob Gordon and Vince Duong

Introduction

            As the state with the highest percentage of people aged 65 or older, Florida stands as a prime target for scammers attempting to defraud the elderly out of their hard-earned money. In fact, Florida had the second-highest number of seniors scammed, according to FBI data. In 2023, more than 8,100 Floridians over the age of 60 lost more than $294,000,000, collectively. These scams can take many shapes and forms, such as gift card purchases, digital transfers (Zelle), or established Ponzi schemes.  

            Gift card scams are some of the newest tactics used in the fraud sphere. Scammers may send an email or text message that appears to be from a co-worker, boss, or other senior figure, asking the recipient to buy gift cards and send photos of the backs. Scammers may use random email accounts and change the display name.

            Unsophisticated individuals who utilize digital platforms may also be at an increased risk. For example, you may receive a call out of the blue flagging a fraudulent Zelle transaction from your bank account.  The caller purports to be from your bank and even offers evidence such as a seemingly legitimate caller ID. They then walk you through an elaborate, fake Zelle refund process. You inadvertently end up paying the scammer to reclaim funds you never lost in the first place.

            One of the largest and most recent Ponzi schemes to hit Florida since Bernie Madoff was the $1.2 billion Woodbridge Securities situation run by Robert H. Shapiro. More than 8,400 victims, many elderly, were roped into a faux construction company used to benefit Shapiro and his family. Woodbridge used high-pressure sales tactics, deception, and manipulation through telephone conversations with their victims. Without the knowledge of the investors, Shapiro routed the money through a vast network of 270 LLCs to grow his fraud network.

            Scammers will use many forms, but the elderly population in Florida must be aware of advanced tactics and the changing laws. This article will explain some of the most common and pressing scams employed today before highlighting a pair of laws meant to protect the elderly population in Florida set to take effect later this year.

Fiduciary Duty

            In a contractual capacity, a fiduciary is entrusted with the management and care of another’s assets. They accept legal responsibility for duties of care, loyalty, good faith, prudence, and confidentiality with respect to serving the best interests of a beneficiary. However, not all trustees act according to these principles. In many cases, a fiduciary duty is breached when the trustee intentionally acts contrary to the aforementioned responsibilities to the detriment of the beneficiary. The immediate and tangible harm of a breach of fiduciary duty is, of course, financial losses as a result of poor investment decisions or misappropriation of funds.

Under the surface, these breaches present intangible harm as well. Fiduciary relationships are built upon a foundation of trust and confidence. When a fiduciary breaches their duty, it undermines the beneficiary’s trust, not only in the fiduciary but also in the system as a whole. This presents as particularly damaging in situations where ongoing financial management is necessary, such as in trusts or estates. The following cases help illustrate how a fiduciary relationship forms and how it can be breached.

Estate of Bogue v. Adams

            In this case, the plaintiffs, representing the estate of the decedent Bogue, alleged that the defendants, licensed investment professionals, breached their fiduciary duty by providing negligent advice regarding the management of Bogue’s assets. Prior to his death, Bogue enlisted the services of the defendants to provide financial planning and investment advice.

The defendants recommended several strategies and products, which the plaintiffs claim were against Bogue’s best interests. Then, the defendants solicited Bogue’s trust and sought to have him invest his retirement fund (IRA) into the defendants’ Pooled Investment Vehicle (PIV), which was filled with high-risk investments. The plaintiffs alleged that the defendants “took advantage of Bogue’s lack of financial sophistication” and exercised their discretionary authority over Bogue’s funds to move hundreds of thousands of dollars into these high-risk investments.

 According to the plaintiffs, the defendants knew that they were placing a considerable amount of Bogue’s assets into high-risk investments. The plaintiffs stressed that the defendants, by abusing their discretionary authority, failed to act in good faith in regards to Bogue’s best interests.

The court determined that a fiduciary relationship existed between the defendants and Bogue. Furthermore, the court held that breaches of this relationship included the failure to disclose conflicts of interest, paying and failing to disclose excessive compensation and other ongoing wrongful conduct in managing Bogue’s investments.

The court based its decision on several key factors to establish a fiduciary relationship: 1) Bogue’s reliance on the defendant’s expertise and advice, 2) the degree of control or discretion the defendant’s had over Bogue’s assets, and 3) any representations made by the defendant’s regarding their fiduciary role. According to the court, these considerations were sufficiently demonstrated by the defendant to warrant a fiduciary relationship. Ultimately, the defendant’s misconduct during this relationship resulted in a breach.

In re Pentecost

The case of Berry v. Pentecost involved a dispute between a client and her longtime financial advisor, Claude Daniel Pentecost, Jr. The client, Wanda G. Berry, brought an adversary action against Pentecost, alleging that he committed fraud and defalcation in his capacity as a fiduciary, directing almost $100,000 of her funds to himself or to entities he controlled.

The court found in favor of Berry, declaring her claims non-dischargeable under 11 U.S.C. §§ 523(a)(4) and (a)(19) due to Pentecost’s fraudulent actions and breach of fiduciary duty. The court also found that equitable tolling of Berry’s complaint was appropriate given the extraordinary circumstances of the case, as Pentecost had deceived and manipulated Berry in various ways to prevent her from challenging his intent to discharge his liability to her.

Oklahoma regulations that apply to investment advisers describe behaviors that are deemed to be “dishonest” and “unethical,” which violate an advisor’s fiduciary duties of honesty, loyalty, and care.

 The court noted several key facts that led to their determination. Firstly, the fiduciary relationship between Pentecost and Berry arose when Berry entrusted her investment funds to Pentecost to manage and invest for her sole benefit. Secondly, Berry relied exclusively on Pentecost to select investments that were safe and appropriate for her age, risk tolerance, and financial needs. Thirdly, Pentecost admitted that as an investment adviser, he owes fiduciary duties to his client to act in good faith and provide full and fair disclosures of material fact, as well as manage her funds for her sole benefit. Lastly, Pentecost actively deceived and manipulated Berry into delaying her complaint and frustrating her attempts to exercise rightful legal processes.

In sum, because Pentecost actively acted against Berry’s interests for his own benefit. The court held that Pentecost was in breach of his fiduciary duties.

Current Laws

            One major statute already protects elderly individuals in Florida. Florida Statute 825.103, “Exploitation of an elderly person or disabled adult; penalties,” defines exploitation and situations commonly engaged in by fraudsters.

            The statute defines “exploitation of an elderly person or disabled adult” broadly, covering various scenarios where someone knowingly obtains or uses the funds, assets, or property of an elderly person or disabled adult for their benefit or for the benefit of others. This includes situations where the person stands in a position of trust with the elderly person or disabled adult, or where there is a business relationship. The statute also covers breaches of fiduciary duty, misappropriation of funds, and failure to use income and assets for the person’s support and maintenance.

            Additionally, the statute creates a permissive presumption that the transfer was the result of financial exploitation for certain transfers of money or property valued over $10,000 by a person age 65 or older to a nonrelative whom the transferor knew for fewer than 2 years. This presumption applies regardless of whether the transfer is denoted as a gift or loan, except for valid loans with definite repayment dates. The statute imposes penalties based on the value of the funds, assets, or property involved in the exploitation, ranging from a first-degree felony for amounts over $50,000 to a third-degree felony for amounts under $10,000.

These penalties may be heightened by any future bills that the Florida Legislature may enact.

Furthermore, if property belonging to a victim is seized from the defendant pursuant to a search warrant, the court is required to hold an evidentiary hearing to determine if the defendant unlawfully obtained the victim’s property. If so, the court may order the property returned to the victim for restitution purposes before trial, but this determination is inadmissible at trial and does not imply guilt.

New Laws

The Florida Legislature, believing correctly that heightened protections were needed, sent two major laws to Governor DeSantis’s desk, which he promptly signed into law.

Bill 1171

House Bill 1171, “Schemes to Defraud,” was enacted with the purpose of heightening penalties against individuals who engaged in schemes to defraud and were successful in obtaining property. The bill defined a scheme to defraud as a “systematic, ongoing course of conduct with intent to defraud one or more persons, or with intent to obtain property from one or more persons by false or fraudulent pretenses, representations, endorsements of nonconsenting parties, or promises or willful misrepresentations of a future act.”

The major change to the scheme to defraud definition was the inclusion of the endorsements of nonconsenting parties. As explained in the introduction, newer scams involving gift cards and digital payment systems are generally accompanied by text messages or phone calls from individuals who attempt to appear as known parties to the victim. The added language ensures that those messages which may include a false endorsement from a boss or family member are included in the definition of a scheme to defraud.

The bill heightens the penalties for those guilty of committing a scheme to defraud minors, mentally or physically disabled persons, or those over age 65. The penalty for committing a violation against one of those parties shifts a misdemeanor of the first degree to a felony of the third degree, a felony of the third degree to a felony of the second degree, a felony of the second degree to a felony of the first degree, and a felony of the first degree to a life felony.

Bill 556

Senate Bill 556 is a revolutionary step towards protecting elderly folk against financial exploitation. This bill creates a new section within the Florida Statutes that empowers financial institutions to stop suspicious transfers from at-risk adults.

The bill defines “financial exploitation” broadly to include any unauthorized taking, withholding, appropriation, or use of money, assets, or property of a specified adult, as well as acts of deception, intimidation, or undue influence to control or divert the specified adult’s resources. The legislation recognizes the vulnerability of specified adults to financial exploitation due to their accumulated assets and aims to prevent such exploitation while safeguarding their rights to manage their finances.

Financial institutions play a crucial role in the implementation of this bill. They are encouraged to take action if they have a reasonable belief that a specified adult has been or is the subject of financial exploitation, including placing narrow, time-limited restrictions on the specified adult’s ability to withdraw funds to protect them from further harm. To facilitate this, financial institutions are required to develop training programs for employees, conduct regular trainings, and maintain written procedures for reviewing suspected financial exploitation internally.

The bill also provides immunity to financial institutions that act in good faith and exercise reasonable care in complying with its provisions. It emphasizes the importance of balancing the rights of specified adults to manage their finances with the need to protect them from abuse, neglect, or financial exploitation. Overall, this bill seeks to prevent financial exploitation of elderly individuals and ensure that financial institutions are equipped to respond effectively to suspected cases of exploitation.

Floridians should remember that these bills were signed by DeSantis and go into effect on October 1, 2024, and January 1, 2025, respectively.

Conclusion

The new laws passed by the Florida Legislature represent a significant step forward in protecting the state’s elderly population from financial exploitation. By increasing penalties for those who engage in schemes to defraud and empowering financial institutions to act against suspicious activities, Florida is fortifying its defenses against the ever-evolving tactics of scammers. These measures not only aim to protect the financial assets of the elderly but also restore trust in fiduciary relationships and the broader financial system. As these laws take effect, it is crucial for seniors, caregivers, and financial professionals to stay informed and vigilant, ensuring that Florida’s elderly residents can enjoy their golden years with greater peace of mind.

________________________________________________________

[1] https://www.towncaredental.com/where-do-seniors-live-united-states

[2]https://www.news4jax.com/news/local/2024/05/29/how-a-new-florida-law-is-protecting-older-citizens-from-scams/#:~:text=Florida%20had%20the%20second%2Dhighest,lost%20close%20to%20%24294%20million

[3]https://www.aura.com/learn/zelle-scams#:~:text=The%20caller%20purports%20to%20be,lost%20in%20the%20first%20place.

[4]https://www.justice.gov/usao-sdfl/pr/two-remaining-defendants-13-billion-investment-fraud-ponzi-scheme-one-largest-ever

[5] Estate of Bogue v. Adams, 405 F. Supp. 3d 929 (D. Colo. 2019)

[6] Berry v. Pentecost (In re Pentecost), Nos. 20-10651-R, 20-1039-R, 2021 Bankr. LEXIS 3557 (Bankr. N.D. Okla. Dec. 30, 2021)

[7] Fla. Stat. § 825.103

[8] https://www.flsenate.gov/Session/Bill/2024/1171

[9] https://www.flsenate.gov/Session/Bill/2024/556

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Article 5

QPRTs: A Strategic Tool for Estate Tax Savings During Summer School

Written By: Joey Kleiner

A significant portion of your clients’ wealth might be tied up in their primary residence. Qualified Personal Residence Trusts (QPRTs) offer a powerful strategy to minimize estate taxes by removing this appreciating asset from your clients’ taxable estate. When considering strategies to lower projected estate tax liability, most planners and individuals are familiar with annual gifting, Credit Shelter Trusts and SLATs among other planning techniques. This article highlights the key considerations for the underutilized strategy of QPRTs, including term selection, lifetime exemption usage and potential tax basis implications resulting from 26 CFR § 25.2702-5 – “Personal residence trusts.”

               First, a QPRT allows the Grantor to place their house in trust for their beloved beneficiaries while retaining the right to live in the property for a number of years, the term of the QPRT. Selecting the term of a QPRT is important for two reasons: (1) if the Grantor does not survive the term then the Trust will fail; and (2) after the term the Grantor must either move out of the home or pay rent to the Trust to continue living in the house.

               Because the Grantor is gifting the home to the Trust, the Grantor uses a portion of their Lifetime Estate and Gift Tax exemption upon inception by making a taxable gift of the value of the remainder interest in the house. However, because the Grantor retains the right to live in the home for a certain number of years, retaining a present interest in the home, the value of the gift can NOT be reduced by the annual exclusion ($18,000 in 2024). If the Grantor fails to survive through the set term, the house is pulled back into their taxable estate and the gift from the year the Trust was established is added back to their lifetime exemption.

               On the other hand, once the term is over then the QPRT is the owner of the house and the Grantor must pay rent at fair market value for the remainder of the time they use the home. This can help wealthier individuals remove more taxable assets from their estate as the QPRT receives annual or monthly rental payments that can be reinvested and grow outside the Grantor’s taxable estate for the rest of the Grantor’s life. Be sure the Grantor will have enough left to make these rental payments!

               It is important to note that most commentators believe there is a loss of your step-up in tax basis for income tax purposes if the property sells after the retained interest term. Upon the house’s eventual sale, the income tax basis of the property will retain its value from the Grantor because the Grantor gifted the property to the Trust in life. This could mean significant capital gains tax on the sale of the residence despite the fact that the disregarded status of the QPRT allows the Grantor to exclude capital gains of up to $250,000, or $500,000 for a married couple, provided that the home is sold while qualifying as a “primary residence.”

               Others believe there is a way to save the income tax basis step-up, namely by providing a Power of Appointment of the Trust assets to an individual likely to die before the Grantor. This Power of Appointment must allow the designated individual to pay creditors of their estate with trust assets upon their death. Assuming the Powerholder has no creditor claims to pay, the trust assets will remain in the QPRT upon his or her passing and take the fair market value of the date of death of such individual.

               It can be complicated to calculate the savings from a QPRT due to the above interwoven factors and are often overlooked due to these complexities. EstateView software provides planners and individuals the ability to run the numbers on QPRTs (among many other planning techniques) to see how much the reportable year 1 gift value will be, the percent chance of the Grantor surviving the term, the amount of rent paid over the Grantor’s projected lifetime, and the estate tax savings (inclusive of the potentially higher capital gains for sale of the house in a given year after the possessory term.

               EstateView will show the QPRT both as part of a comprehensive plan in the “Single Client” or “Married Clients” modules and also individually in the QPRT standalone calculator. The standalone QPRT calculator even allows for side-by-side comparison to fine tune the Trust options and immediately determine the optimized scenario based on the Grantor’s objectives and preferences.

               For more information about EstateView, visit our website at estateview.info.

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For Finkel’s Followers

5 Ways to Tell If A Potential Business Partner Is The One

Written By: David Finkel; Author, CEO, and Business Coach

When it comes to taking on a business partner that is a lot to consider. And over the last twenty five years of business coaching I have seen some really amazing partnerships and some that were doomed to fail before they even got started. So today, I wanted to share with you three ways that you can tell if a business partner is a good fit for you and your business idea.

Speed Dating

When it comes down to it, a lot of the questions you are going to ask yourself about a new business partner are ones that you would ask yourself if you were dating with an intent for marriage. And much like marriage, the stakes are just as high. So whether it is a long term partnership or a one-off, it’s important that you vet each other fully before moving forward. And above all else, it’s important to get the specifics of your relationship down on paper, along with a solid out clause should you need it down the road.

Here are the questions that I think every business partnership should cover:

1. You share the same values.

Are we both moving in the same direction and want the same things out of this business relationship? If one of you wants to be in and out of the business within twenty four months and you want to grow an empire and pass it down to future generations you are going to hit a wall really quick when it comes to strategic planning and goal settings. So first and foremost, you want to make sure that you both want the same things for your business.

2. You have complimentary conflict resolution styles.

Just like any relationship, there are going to be good times and bad and how you handle the conflict in your relationship says a lot about your partnership and its growth potential. Do you have similar conflict resolution styles? When your partner is stressed do they stay the course or cut and run? Do they have a history of such behavior? Learning about their style before going into business with someone will go a long way to helping ensure that your partnership withstands the test of time.

3. You have similar work ethics.

This is one I see a lot in business partnerships. One partner works eighty plus hours a week and is very goal and growth focused, while the other partner rarely shows up for work and when they do make an appearance they spend their time on low value tasks that don’t propel the business forward. Neither partner knew what to expect when they entered the partnership and it ended in a lot of conflict. Before starting a partnership, discuss your goals, your work styles and create a plan for how to achieve those goals. Varied work styles can still work, but clear communication and a focus on high value tasks is a must.

Even if you share the above three elements, there is always going to be an element of risk when entering into a partnership. But if you spend the time talking through different scenarios and getting to know each other in these areas, you will have a much easier time down the road dealing with issues and conflict that arises.

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Upcoming Webinar

Estate Tax Planning from M – Z

Date: Saturday, August 31, 2024

Time: 11:00 AM to 12:00 PM EST (60 minutes)

Presented by: Alan Gassman, J.D., LL.M. (Taxation), AEP (Distinguished) 

REGISTER HERE FOR CONTINUING EDUCATION

Course Description

This second segment will cover the “other half” of the primary estate tax planning techniques commonly used to enable affluent families to avoid or eliminate federal state tax. The techniques to be covered in this segment will include the installment sale to a grantor trust, Self-Canceling Installment Notes, Private Annuities, and Qualified Personal Residence Trusts. This will be an overview of these techniques in preparation for a deeper dive to occur in later segments. The educational process will be enhanced by live computerized images that respond to toggles and dials, enabling attendees to instantly see the results of the applicable techniques and their variations.

• Highlight the importance of advanced techniques in comprehensive estate tax planning.
• Explain the concept of installment sales to grantor trusts as a strategy for transferring assets out of an estate while retaining certain benefits.
• Define SCINs and their role in estate planning as a method for transferring assets with a built-in mechanism for cancellation upon the death of the seller.
• Discuss the tax implications and planning considerations involved in structuring private annuities effectively.

Live Credits offered:

• 1 CPE Credit of Taxes for Certified Public Accountants (CPA-US)
• 1 General Credit of Taxes for Accountant/Bookkeeper/Tax Professionals
• 1 CE Credit of Taxes for Enrolled Agents (EA) (Approval No. GEHNZ-T-02098-24-O)
• 1 CE Credit of Taxes for Annual Filing Season Program (AFSP) (Approval No. GEHNZ-T-02098-24-O)
• 1 CE Credit of Taxes for California Registered Tax Preparers (CRTP) (Approval No. 6273-CE-1687)
• 1 CPD Credit of Taxes for Personal Financial Specialist (PFS)
• 1 PL Credit of Taxes for Chartered Financial Analyst (CFA)
• 1 CE Credit of Taxes for Chartered Financial Consultant (ChFC)
• 1 CE Credit of Taxes for Maryland Tax Preparer (MRTP) (Approval No. GEHNZ-T-02098-24-O)
• 1 CE Credit of Taxes for Oregon Registered Tax Preparers (ORTP) (Approval No. GEHNZ-T-02098-24-O)
• 1 CPD Credit for Trust and Estate Practitioners (TEP)
• 1 CE Credit of Taxes for Certified Wealth Strategist (CWS)
• 1 CE Credit of Taxes for Retirement Income Certified Professional (RICP)
• 1 CE Credit of Taxes for Certified Fiduciary and Investment Risk Specialist (CFIRS)
• 1 CE Credit of Taxes for LTC (Approval No. GEHNZ-T-02098-24-O)
• 1 CE Credit of Taxes for Financial Services Certified Professional (FSCP)
• 1 CE Credit for CPFA
• 1 CE Credit of Taxes for Wealth Management Certified Professional (WMCP)
• 1 CE Credit of Taxes for Chartered Advisor in Senior Living (CASL)
• 1 CPE Credit of Taxes for Iowa Licensed Public Accountant (IA-LPA)
• 1 PL Credit of Taxes for CIPM
• 1 CE Credit of Taxes for Chartered Special Needs Consultant (ChSNC)
• 1 CPE Credit of Taxes for Maine Licensed Public Accountant (ME-LPA)
• 1 CPE Credit of Taxes for Delaware Licensed Public Accountant (DE-LPA)

ALL UPCOMING EVENTS

Click this link to be auto-registered for all upcoming free webinars from our firm (Non-CPE Credit only).

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YouTube Library

Visit Alan Gassman’s YouTube Channel for complimentary webinars and more!

The PowerPoint materials can be found in the description box located at the bottom of the YouTube recording.

Click here or on the image of the playlists below to go to Alan Gassman’s YouTube Library.

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HUMOR

How do you know a law clerk’s assignment is up to par?

An “irrevocable trust” in their abilities!

What is a law clerk’s favorite part of estate planning in summer school?

The “power of appointment” to take breaks.

What is a law clerk’s motto in summer school?

“To have and to hold, until the bar exam do us part.”

Why was the law clerk always smiling in summer school?

They had a “life interest” in estate planning.

How did the law clerk describe their summer school experience?

“It’s been a real testament to my future.”

Why did the law clerk love learning about Grantor Retained Annuity Trusts in summer school?

Because it was a “GRAT” way to transfer wealth.

What did the law clerk say after learning about the annual exclusion?

“That was a ‘gift’ of knowledge!”

Gassman, Crotty & Denicolo, P.A.

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Clearwater, FL 33756

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