March 14, 2013 – St. Patrick’s Day Edition

St. Patrick’s Day Edition

On St. Patrick’s Day, Kevin comes across a leprechaun. He pounces on the leprechaun and asks to be granted his wish.

“What might your wish be?” the leprechaun asks. Kevin pulls out a map of the world and points out a wide swath of North America. “That’s what I want,” he declares.

“That’s a rather tall order,” the leprechaun says. “And to be honest, I’m not all that experienced yet in granting wishes. Is there something else I can do for you instead?”

Kevin ponders this for a while. “I guess I’ll settle for the name of an inexpensive lawyer who does great work without delay.”

The leprechaun rolls his eyes. “Let me see that map again.”




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A Coverdell Education Savings Account (ESA) is essentially a Roth IRA targeted toward educational expenses rather than retirement savings. It allows anyone to establish an IRA to pay for a child’s future educational expenses or to make a donation into an existing IRA created for that purpose. The flexibility and feasibility of an ESA make it an attractive option, but grantors, contributors, beneficiaries, and parents should be aware of some potential problems associated with these.
A grantor or donor to an ESA does not have to be related to the child-beneficiary, and even corporations are permitted to make contributions or establish accounts. IRS Publication 970 (available by CLICKING HERE) explains that an ESA allows those with an adjusted gross income of less than $110,000 (or $220,000 for a joint return) and organizations/corporations (with no upper limit on their earnings) to contribute to a trust or account maintained by a bank (or financial institution approved by the IRS) at any time before the ESA beneficiary turns 18.

The beneficiary can also contribute to his or her own ESA. Thus, assuming that Little Jimmy’s lemonade stand doesn’t earn $110,000 in a year, nothing prevents him from funding his own ESA. If Auntie Vivian is an unqualified contributor (e.g. her adjusted income is $400,000), then Little Jimmy will be responsible for a 6% excise tax on her contributions, even though he likely had no idea that his Aunt made so much (especially when she seemed so undeserving).

The contribution must be made by the contributor’s tax-filing deadline, not counting extensions. Additionally, contributions must be made in cash. Each beneficiary may only receive up to $2,000 in cumulative contributions, even if multiple ESAs have been established for his or her benefit. This means that if Grandma, Aunt Sue, and Uncle Rich have all created ESAs for Little Jimmy, they need to coordinate their donations to ensure that they do not exceed the $2,000 maximum. If contributions exceed the $2,000 limit, Little Jimmy will have to pay a 6% excise tax on the excess even if he had no idea that his relatives established ESAs for his benefit or that their contributions were in excess of the annual limit. Therefore, it seems best to have only one ESA. To mitigate the possibility of problems with multiple ESAs, grantors and contributors should always tell the beneficiary’s parents when establishing an ESA or making a contribution.

One potential pitfall to an ESA is that once a contribution is made, contributors lose control of the money. Thus, if Little Jimmy’s friendly neighbors make a generous donation into his ESA, and Little Jimmy proceeds to burn down their house during his troubled adolescent years, the neighbors cannot reclaim their money.

Contributions can be made until the beneficiary turns 18. Funds in an ESA can then be put into any investment vehicle offered by the bank, and if all goes to plan, when Little Jimmy (probably by now rechristened as just Jimmy) departs for college, he will have accrued a nice sum to put toward his education. The money can be distributed tax-free to Jimmy as long as it is used for qualifying educational expenses at a qualifying institution. Eligible educational institutes include an accredited college, university, vocational school, or any elementary/secondary school as determined by state law. Thus, while most will save the money for undergraduate or graduate education, an ESA can help defray the expense of attending a private elementary or high school. As long as Little Jimmy’s school is accredited, the institution will qualify.

The funds can be put toward qualifying expenses, which are defined quite broadly to include tuition, required books and supplies, and room and board (beer is not mentioned in the regulations). Given the expense of attending college, finding enough costs for which to utilize Jimmy’s ESA funds will almost certainly not pose a problem. A caveat to the expansive definition of qualified expenses is that for higher education students, room and board may only be claimed as an expense by students enrolled at least “half-time,” which may be problematic for part-time students. An ESA can be used in tandem with other tax credits, including an American Opportunity or Lifelong Learning tax credit, so long as the same expenses are not used to both support the ESA and another tax credit. However, if Little Jimmy or his parents do claim an education-related tax credit, they must be aware that this will impact his qualified education expenses.

As long as Jimmy uses ESA funds for qualified expenses at a qualified institution, the ESA’s distribution will be tax free. But what if Jimmy drops out of college, moves away from home, is now struggling to pay rent, and suddenly remembers Grandma’s ESA? He is free to take a distribution, but it will not be considered as financing an educational expense (room/board) since he is not enrolled in college. Therefore, the distribution will be taxable.

Also, ESA funds must be used before a beneficiary turns 30, or the remaining balance will be paid out and incur tax liability. However, funds in an ESA can be transferred to another ESA as long as the receiving beneficiary is a family member of the original ESA’s beneficiary. Therefore, if Jimmy graduates college and has $5,000 remaining in his ESA, he can transfer the remaining balance to his younger sister’s ESA.

Overall, an ESA allows those wishing to invest in a child’s future an opportunity to have their money go farther than if they made an outright gift, which would almost certainly incur tax liability for the recipient. The broad definition of qualified educational expenses and the ability to use ESA funding with commonly-claimed tax credits provides significant flexibility for beneficiaries. The income limitations on contributors and the annual limits on contributions to a beneficiary are the most important limitations on ESA.


Attorney Roberta Casper Watson of the Trenam Kemker law firm in Tampa has provided us with an excellent article discussing the Accordable Care Act’s impact on employers. You can contact her at or (813) 227-7487.


As the Legislature decides whether Florida will implement certain provisions of the Affordable Care Act (ACA), businesses of all sizes are grappling with the impact of the law and the choices they must make. Employers in different industries or geographical areas, or of different sizes, will be affected differently. The ACA changes for 2014 will create options not previously available, and employers should be planning now for how they will respond.

Individual Mandate – What Will the Employer’s Employees Need?

Virtually all legal American residents will have to either be covered by a health plan providing at least “minimum essential benefits,” or pay a penalty “tax.” Federal cost sharing assistance and premium tax credits will be available to those with income below 400% of the federal poverty level, with the very poor being eligible for their coverage through an expansion of Medicaid.

Although some may pay the penalty, most individuals will likely enroll in coverage. Many will be accustomed to getting their health coverage through their employer, and each Florida employer should consider the impact its choices will have on its employees. Some employers may decide not to offer health coverage, even if that means terminating existing plans. Other employers will continue to offer it.

Exchanges – New Opportunities for Eligible Employees and Employers to Obtain Coverage

The legislature will have to decide whether to establish an Exchange. If it does not, the federal government will operate an Exchange for Florida residents.

An Exchange will provide a menu of policies from which eligible individuals may choose. An individual who has access to coverage from the employer is not eligible for the Exchange unless that employer coverage is not “affordable.” In general, coverage is not affordable if the premium the employer requires the employee to pay exceeds 9.5% of the employee’s pay.

Small employers will be able to purchase coverage for all their employees from the Exchange.

Employer Mandate and Employer Choice – To Maintain the Plan or Pay/Risk the Penalty

Small employers – those with fewer than 50 “full time employees” – are not required to provide coverage to any employees, and will not be subject to any penalty tax for not doing so. All employees in a “controlled group” are aggregated for purpose of this computation, so an owner of several businesses may exceed the aggregate 50-employee threshold even if no one business has that many employees. Also, all the hours of all the employer’s employees are aggregated to determine a full time equivalent number of employees. Thus, an employer with more than 50 individual employees, some of whom are part time, might still qualify as a small employer.

Freed from concern about a penalty tax, an employer with fewer than 50 employees may decide whether to provide coverage, and whether to do so through the Exchange.

Most “large employers” (those with 50 full time employees or more) will be required to offer coverage to “substantially all” their full time employees or pay the penalty tax. Under recent IRS guidance, substantially all means 95% or more.

This pay-or-play structure was designed to give employers a choice of whether to provide coverage as employers have done for decades, or to let their employees go to the Exchange or other resources for their coverage. Large employers who do not provide coverage will contribute to the federal government’s cost of doing so by paying the penalty tax.

The employer penalty tax is not deductible against the employer’s income tax, as the costs of providing the coverage would be, so there is a built-in incentive for employers subject to the penalty tax to provide the coverage instead of paying it. However, the penalty structure is designed to incentivize employers, not to punish them harshly, thus making a decision not to offer coverage a viable option for many employers.

In general, a full time employee works at least 30 hours per week on average. Employees expected to average 30 hours or more per week are considered full time employees immediately, and eligible for coverage after a waiting period no longer than 90 days. Those whose expected hours are uncertain or variable must begin to be covered once they actually work at least 30 hours per week on average over a measuring period. The IRS has provided a detailed (and somewhat complicated) safe harbor structure for determining when and if employees whose expected hours are uncertain must be offered coverage to avoid triggering the employer penalty tax.

Large employers that do not provide coverage to substantially all their full time employees will pay a penalty of $2,000 for each full time employee, whether they receive the cost sharing reductions and tax credits or not, but with no penalty on the first 30 employees. This penalty tax is only due if any of its full time employees receives a tax credit or cost reduction under an Exchange, but few employers will have a work force so highly paid that it could expect not to have some employee receive Exchange cost reductions or tax credits. Employers should carefully analyze their employee base in determining whether to provide the coverage or to pay the penalty.

An employer that offers coverage, but has employees who nevertheless qualify for a tax credit or cost sharing reductions under the Exchange, can be assessed a penalty of $3,000 per full time employee who receives such a reduction or tax credit. This could happen, for example, if the coverage is deemed unaffordable for certain employees (generally, more than 9.5% of the employee’s pay), or if the employer’s coverage fails to meet the minimum standards for coverage.

Because the requirements only apply to employees working 30 or more hours per week on average, some employers may consider limiting the penalties they pay by limiting the hours of more employees to less than 30 hours, so that those part time employees would not be covered (and not included in the penalty tax calculations). To work, such limits must be bona fide, and the employer must be careful to count all required hours (paid non-working hours are counted, for example). Employers should be cautioned against an aggressive search for loopholes.

Advantages of New Rules

All in all, it is hoped that the ACA will make coverage more affordable and more readily obtainable for employers and individuals. The Exchanges should create more competition among insurers, and the inclusion of most Americans in the overall market should spread the insurance risks, so that individuals are getting some form of coverage for their entire lives and do not have to worry about being unable to get coverage as they age or become ill.



Michael Markham, Esq. does not play the piano, but his brother, Mark Markham, is a world-renowned concert pianist.

Join Mike, his brother, and the Leadership Conservatory Foundation for an evening of classics and jazz, featuring Gershwin’s Rhapsody in Blue, performed by world-renowned pianist Mark Markham and the nationally recognized Tarpon Springs Leadership Conservatory for the Arts jazz and wind ensembles.

Mark Markham has given hundreds of performances in over 20 countries and has won many awards for his remarkable talent.

The event will be Saturday, April 20, 2013, at 7:00 p.m. at The Palladium Theatre, 253 5th Avenue in St. Petersburg. For more information, please click here. Tickets are available at and all proceeds support the Leadership Conservatory Foundation, which is working to send the Tarpon High School band to the annual Macy’s Thanksgiving Day Parade. We will be providing Kentucky Fried turkey!

Michael Markham, Esq. is the co-author of Gassman and Markham on Florida and Federal Asset Protection Law, which is being published this month on Amazon and for Kindle, Nook, and iPad. If you are interested in being a beta reader for a chapter of this book, please let us know.


To view a chart of 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 please click here.



THURSDAY, MAY 16, 2013
The Florida Bar Annual Wealth Protection Seminar: “How a Lawyer Can Protect a Client’s Wealth” Mark your calendars for this exciting event in Miami, Florida. Speakers include Jonathan Alper, Esq. on Where Does Florida Law Stand on Fraudulent Transfers” Mitchell Fuerst, Esq. on Introduction to Professional Privilege in Wealth Protection Cases – Civil v Criminal; Tax v Non-Tax; When to Claim the Fifth; How to Do it Right. Michael Markham, Esq. on Recent Asset Protection Case Decisions, Legislation, and Their Importance in Protection Planning Denis Kleinfeld, Esq. on Where to Situs a Trust – An Analysis of U.S. Asset Protection States and Alan Gassman, Esq. on Using Estate Planning Techniques to Optimize Family Wealth Preservation. For more information please email


THURSDAY, MARCH 28, 2013, 4:00 – 4:50 pm.
Please join us for the 444 Show – a monthly CLE webinar sponsored by the Clearwater Bar Association and moderated by Alan S. Gassman. This month’s topic is Divorce Law 101 for Lawyers and CPAs with Ky Koch, Mike Lewis and Judge Muscarella. To register for the webinar please visit or email

MONDAY, APRIL 1, 2013, 12:30 – 1:00 p.m.
On the first Monday of each month the Clearwater Bar Association presents Lunch Talk. A free monthly webinar series moderated by Alan S. Gassman. This month’s speaker is Linda Chamberlain speaking on How to Write a Contract to Preserve Family Relationships When One or More Family Members are Paid for Caring for Mom and Dad. To register for the webinar please visit or email

Alan S. Gassman, J.D., LL.M. is a practicing lawyer and author based in Clearwater, Florida. Mr. Gassman is the founder of the firm Gassman, Crotty & Denicolo, P.A., which focuses on the representation of physicians, high net worth individuals, and business owners in estate planning, taxation, and business and personal matters. He is the lead author on Bloomberg BNA’s Estate Tax Planning and 2011 and 2012, Creditor Protection for Florida Physicians, Gassman & Markham on Florida and Federal Asset Protection Law, A Practical Guide to Kickback and Self-Referral Laws for Florida Physicians, The Florida Physician Advertising Handbook and The Florida Guide to Prescription, Controlled Substance and Pain Medicine Laws, among others. Mr. Gassman is a frequent speaker for continuing education programs, publishes regularly for Bloomberg BNA Tax & Accounting, Estates and Trusts Magazine, Estate Planning Magazine and Leimberg Estate Planning Network (LISI). He holds a law degree and a Masters of Law degree (LL.M.) in Taxation from the University of Florida, and a business degree from Rollins College. Mr. Gassman is board certified by the Florida Bar Association in Estate Planning and Trust Law, and has the Accredited Estate Planner designation for the National Association of Estate Planners & Councils. Mr. Gassman’s email is

Thomas J. Ellwanger, J.D., is a lawyer practicing at the Clearwater, Florida firm of Gassman, Crotty & Denicolo, P.A. Mr. Ellwanger received his B.A. in 1970 from Northwestern University and his J.D. with honors in 1974 from the University of Florida College of Law. His practice areas include estate planning, trust and estate administration, personal tax planning and charitable tax planning. Mr. Ellwanger is a member of the American College of Trusts and Estates Counsel (ACTEC). His email address is

Christopher Denicolo, J.D., LL.M. is a partner at the Clearwater, Florida law firm of Gassman, Crotty & Denicolo, P.A., where he practices in the areas of estate tax and trust planning, taxation, physician representation, and corporate and business law. He has co-authored several handbooks that have been featured in Bloomberg BNA Tax & Accounting, Steve Leimberg’s Estate Planning and Asset Protection Planning Newsletters, and the Florida Bar Journal. He is also the author of the Federal Income Taxation of the Business Entity Chapter of the Florida Bar’s Florida Small Business Practice, Seventh Edition. Mr. Denicolo received his B.A. and B.S. degrees from Florida State University, his J.D. from Stetson University College of Law, and his LL.M. (Estate Planning) from the University of Miami. His email address is

Kenneth J. Crotty, J.D., LL.M., is a partner at the Clearwater, Florida law firm of Gassman, Crotty & Denicolo, P.A., where he practices in the areas of estate tax and trust planning, taxation, physician representation, and corporate and business law. Mr. Crotty has co-authored several handbooks that have been published in BNA Tax & Accounting, Estate Planning, Steve Leimberg’s Estate Planning and Asset Protection Planning Newsletters, Estate Planning magazine, and Practical Tax Strategies. Mr. Crotty is also the author of the Limited Liability Company Chapter of the Florida Bar’s Florida Small Business Practice, Seventh Edition. He, Alan Gassman and Christopher Denicolo are the co-authors of the BNA book Estate Tax Planning in 2011 & 2012. His email address is

Thank you to our law clerks that assisted us in preparing this report:

Kacie Hohnadell is a third-year law student at Stetson University College of Law and is considering pursuing an LL.M. in taxation upon graduation. Kacie is also the Executive Editor of Stetson Law Review and is actively involved in Stetson’s chapter of the Student Animal Legal Defense Fund. In 2010, she received her B.A. from the University of Central Florida in Advertising and Public Relations with a minor in Marketing, and moved to St. Petersburg shortly after graduation to pursue her Juris Doctor. Her email address is

Eric Moody graduated from Stetson University College of Law in December 2012 and is currently seeking admission to the Florida Bar. He is considering pursuing an LL.M. in estate planning. While at Stetson, Eric was an Articles and Symposia Editor for the Stetson Law Review. In 2009, Eric received a B.S. in Business Management from the University of South Florida. Eric’s email address is

Carly Ross is a third-year law student at Stetson University College of Law. She is the Notes and Comments Editor for Stetson Law Review, and a member of Stetson’s Jessup Moot Court Team. She graduated from the University of North Carolina at Chapel Hill in 2010 with majors in History and Political Science. Carly’s email is

Jonathan DeSantis is in his final year at Stetson University College of Law. Originally hailing from Philadelphia, Jonathan received a B.A., with honors, in Criminal Justice from Temple University. Jonathan serves as a Senior Associate on the Stetson Law Review and is the immediate past president of the American Constitution Society. His email address is