Tax Tips




In a recent Massachusetts case, Pfannenstiehl v. Pfannenstiehl, (Mass. App. Ct., Nos. 13-P-906, 13-P-686 & 13-P-1385, August 27, 2015), the court determined that an ex-wife did have access to a trust created by the husband’s father (the “Father”) for purposes of dividing assets in a divorce. Similar to a Florida case, Berlinger v. Cassleberry, 133 So.3d 961 (2d Dist. Ct. App. Fl 2014), where the ex-spouse was also successful in accessing funds in a discretionary trust, Pfannenstiehl points out other factors to consider.

In Pfannenstiehl, Father created a trust for the benefit of his son (the “Husband”) and son’s siblings. The trust contained a spendthrift provision which stated that “[n]either the principal nor income of any trust created hereunder shall be subject to alienation, …by the person for whom the same is intended, nor to … garnishment or other seizure under any legal, equitable or other process.”

The trust provided that the trustee had discretion over the distributions to the beneficiaries to provide for the “comfortable support, health, maintenance, welfare and education of each or all members…” During the years Husband and wife were married, Husband received trust distributions of approximately $800,000. After the filing for the divorce, the trustee did not pay Husband any distributions.

Husband argued that the spendthrift provision prevented the trust principal and income from being part of the property considered in the divorce proceedings. The trial court and the appellate court determined that “the mere statement of a spendthrift provision in a trust does not render distributions from a trust… immune to inclusion in the marital estate…” (emphasis added).

The court also determined that the distribution standard, discretionary distributions for “comfortable support, health, maintenance, welfare and education” gave Husband a right to trust distributions. Thus, Husband’s interest in the trust was subject to equitable distribution.


Under Florida law, based on the Berlinger case, a court would likely permit access to the trust under the same facts as Pfannenstiehl. Until Florida legislation clarifies the access to a purely discretionary trust for a spouse, if you want to protect your assets to the maximum extent possible, have independent trustees, include a spendthrift provision which applies to not only creditors but also to spouses and make the trust purely discretionary (not the standard of “health, education, maintenance and support”).


In Jones v. Golden, (No. SC13-2536), the Florida Supreme Court settled the circuit court split regarding when a reasonably ascertainable creditor is barred if the creditor was never served a Notice to Creditors.

Harry Jones’s estate was opened in 2007 and a Notice to Creditors was properly published. The Personal Representative (“PR”) never noticed Harry’s ex-wife, Katherine, nor her guardian. In 2009 Katherine’s guardian filed a claim against the estate for monies owed to Katherine from a marital settlement agreement. Katherine died in 2010 and Katherine’s estate (“Appellant”) continued the claim. In 2012, Appellant filed a Petition for Order Declaring Statement of Claim Timely Filed and/or for Enlargement of Time to File Statement of Claim alleging the guardianship was a known or reasonably ascertainable creditor of Harry’s estate.

The PR responded stating Katherine was not a reasonably ascertainable creditor and the claim was time-barred under Sections 733.702 and 733.710, Florida Statutes. The trial court agreed holding that the statement of claim was untimely. The Fourth District Court reversed and remanded the case to the probate court to determine if Appellant was “ascertainable.”

The Florida Supreme Court upheld the Fourth District Court holding. The Court held that a reasonably ascertainable creditor was not bound by the three month statutory period in Section 733.702(1), Florida Statutes, if the creditor was reasonably ascertainable and not served notice. The Court reasoned that a “reasonably ascertainable creditor need not rely publication for notice of the pending administration…Section 733.2121(3(3) requires a personal representative to “promptly serve a copy of the notice” on those creditors who are known or reasonable ascertainable after a diligent search.” Therefore, if an ascertainable creditor is never served, the applicable time frame never begins to run and it can file a timely claim within two years of a decedent’s death.


When in doubt, serve all potential creditors to reduce their time frame to file a claim against an estate.


And now the updated 2016 inflation adjustments numbers:

  1. Exclusion amount for gifts and estates of decedents dying in 2016: $5,450,000
  2. Generation Skipping Transfer Tax exemption: $5,450,000
  3. Annual exclusion for gift tax: $14,000
  4. Annual exclusion for gifts to non-citizen spouses: $148,000
  5. Special use valuation reduction: $1,110,000.


As the estate tax exemption continues to rise, the estate tax will have less affect on most taxpayers. Now is the time to consult with your clients on “fixing” those complicated estate plans you may have created in the past.



A trust can be “decanted” from one trust to another trust which may be helpful to take advantage of different administration provisions, different beneficiary needs, etc. Florida has passed statutes regarding decanting (§ 736.04117). And a Florida case, Harrell v. Badger, Trustee, 2015 WL 3631369, interpreted this decanting statute in the context of a purported decanting from one trust to a “special needs trust” to qualify for Medicaid planning. The facts are convoluted so here is a timeline:

Rita Wilson died with a trust which benefited her son, David Wilson (“Wilson”), for his life and, at David’s death, the remaining principal would be distributed to his sisters, Joann Harrell (“Harrell”) and Barbara Dake (“Dake”).

Trust appointed Rita’s sisters as co-trustees, both of whom immediately resign as trustees and Harrell is appointed as trustee.

August 16, 2006-Harrell is removed as trustee and Charles Badger (“Badger”), is appointed as trustee. Badger fails to secure the court required bond.

February 16, 2007-Badger files a motion seeking reimbursement of personal expenses and approval from the trial court to employ his wife as the realtor for the sale of Rita’s house. Despite a hearing, the trial court never enters an order.

Badger approaches attorneys, Ross & Linda Littlefield, with the intent of transferring all trust assets into a special needs trust to qualify Wilson for government benefits.

September 12, 2007-Badger finally obtains a bond, only provides one accounting to the beneficiaries, and employs his wife as a realtor to sell Rita’s house.

October, 2007-Wilson signs an agreement to create a sub-account of the Florida Foundation for Special Needs Trust (“FFSNT”), a pooled trust administered by the Littlefields. Mr. Littlefield was the trustee of FFSNT and Wilson was the beneficiary of the sub-account. At Wilson’s death any remaining funds in the sub-account would be held in FFSNT and used for the beneficiaries of the pooled trust. Harrell and Dake were neither listed anywhere nor noticed of any of these proceedings.

October, 2007-Badger, Badger’s wife and Wilson sign a care agreement, whereby Badger’s wife will take care of Wilson and she would receive compensation.

January, 2008-Badger’s wife sells Rita’s house, receiving a 5% commission. The net proceeds are wired to FFSNT.

The Littlefields transfer all funds from FFSNT to their own trust and are later arrested, convicted and sentenced to prison for the misappropriation of funds.

September 21, 2011-Badger files a motion to terminate the trust. This is Harrell and Dake’s first notice of the FFSNT, sale of the homestead, transfer of trust funds and the payment of the real estate commissions to his wife.

Harrell and Dake sue Badger for breach of fiduciary duty and attorney fees. The lower court held Badger could invade the trust for any reason in the best interest of Wilson and, because Badger relied on his attorney, did not breach any fiduciary duty to the trust. The court also awards $85,005.50 in attorney fees to Badger!

Harrell and Dake appeal and the appellate court overturns the decision. The appellate court found that decanting the trust into the FFSNT did not meet the requirements of the Florida statute and awarding attorney fees to Badger was an abuse of discretion.

In Florida, beneficiaries of the second trust can only include the beneficiaries of the first trust. FFSNT was never a beneficiary under Rita’s trust. Further, decanting requires notification to all qualified beneficiaries of the first trust, in writing, at least 60 days prior to the date of the trustee’s exercise of discretion to invade the principal.


The decanting statute should be carefully reviewed prior to attempting to decant any trust. Usually, decanting is not necessarily to omit or change beneficiaries but for administrative provisions or to move the trust to a more favorable situs.


In Bartsch v. Costello, 2015 WL 3759702, James Bartsch died in 2002 and was survived by a spouse and two children, one of which was from a prior marriage (“Daughter”). Bartsch’s death certificate incorrectly listed him as divorced and his wife, Agnes, did not have the death certificate corrected. Approximately eight years later, Daughter was contacted by Thomas Costello’s company (an unclaimed property search company) stating Bartsch had $33,766.41 in unclaimed property held by the state. Costello and Daughter entered into an agreement and, with his assistance, Daughter began a summary administration, listing the unclaimed property and that she was the sole heir. Summary Administration was granted and Daughter recovered all of the money.

Six months later, Agnes moved to vacate the Summary Administration order on the grounds of fraud and the court ordered all funds to be deposited into the court registry, including Costello’s commission. The monies were then redistributed 50% to Agnes and 25% to each child.

Agnes then filed a civil action against Costello for negligence regarding their research and that the Florida Disposition of Unclaimed Property Act (“Act”) imposes “a duty of care on those who assist others to receive unclaimed property…and strict liability for unclaimed property improperly appropriated.” The court held that Costello was not negligent because he based his research on Bartsch’s death certificate, which Agnes chose to not correct, and on Bartsch’s family members who confirmed the divorce. Further, the court held that the Act did not create strict liability, or a private cause of action, because its purpose is to provide recovery for the state, not a private person. The appellate court upheld the lower court’s ruling and also noted that due to Agnes’s failure to probate Bartsch’s estate and correct the death certificate, she failed to protect her own interests.


(1) Always make sure the information on the death certificate is accurate and (2) add unclaimed property searches ( and public records searches to the beginning of your probate checklists!



In December of 2014, President Obama signed the EXPIRE Act which extended many tax benefits that expired at the end of 2013. Some items that may be applicable to your clients for their 2014 individual income tax returns are as follows:

  1. Normally, “forgiveness of indebtedness” by a bank on a mortgage is income to the person whose debt has been forgiven. This income tax bill is a great detriment to the homeowner who already could not pay their mortgage. The EXPIRE Act extends the exclusion of such forgiveness of indebtedness on a principal residence up to $2,000,000. Thus, a homeowner does not have to include such forgiveness of indebtedness interest on their 2014 income tax return.
  2. An above the line deduction for certain educational expenses of $250.00.
  3. Deduction of sales taxes.
  4. The EXPIRE Act continued the law that an IRA distribution (limited to $100,000) by a person 70 1/2 or older which is distributed directly to a charity would not be taxable income to such person and does not have to be reported on such person’s tax return (unfortunately, this contribution had to be completed by December 31, 2014).


Carefully review the signed extender bill and see if your clients can use these extenders to help them for their 2014 individual income tax return.


Under Section 63.172 and Section 732.108 of the Florida statutes, if a biological child is adopted away from a biological father, and the child’s biological father dies without a will (intestate), then the child will not inherit because the child is considered a child of the adoptive parents. But what happens if the adoption takes place in another state?

In a recent case, Kemp & Associates, Inc. v. Lisa Chisholm, 2015 WL 477856, argued and won on appeal by Pinellas County and Clearwater’s own Richard Pearse, Esquire, the court addressed this question.

In 1960, J.K.T. and Mr. Shablowski (“Father”) had a romance. J.K.T. found out she was pregnant after she and Father broke up and never told Father about the pregnancy. J.K.T. moved to Texas and entered into a mission home for unwed mothers with the intention to place her baby for adoption. The mission home assisted J.K.T. with the adoption of the baby to the Chisholm family who named the baby Lisa Lou Chisholm. Although J.K.T. gave the mission home Father’s name and information to locate him, the mission home never provided notice of Lisa’s birth or subsequent adoption. At the time, Texas law only required the signature of the mother to consent to an adoption if the child was born out of wedlock.

The Florida Legislature amended Section 736.1106(2) of the Florida Statutes to make the trust code consistent with the probate code and eliminates any confusion between the probate process and a trust administration. It also eliminates the trustee’s burden of tracking down descendants who were never intended by the testator/grantor to receive the distribution thereby allowing devises to be administered closer to the testator’s/grantor’s intent. This amendment is effective for all trusts that become irrevocable after June 30, 2014.

As Lisa grew older she searched for her father and found him in 1997. Lisa and Father pursued a father-daughter relationship and Father acknowledged Lisa as his biological daughter. Father died in 2010 in Florida with no will and was survived by his biological daughter, but no siblings, spouse or parents. Kemp & Associates, an heir search firm, found Father’s long lost cousins. The cousins argued they were the only intestate heirs of Father because, under Florida law, Lisa was adopted away from Father and Lisa could not inherit from him. Lisa argued that Father was denied due process because he never received notice of the adoption and therefore the adoption in Texas was invalid. The lower court agreed with Lisa and determined that she would inherit from Father. Kemp & Associates then appealed.

The appellate court determined that, under Texas law in 1961, Father was never required to receive notice because J.K.T. consented to the adoption. Additionally, under Florida law, a putative father must take statutorily mandated steps to protect his parental rights. The mere existence of a biological link will not automatically grant full constitutional protection.

Lisa argued that it was impossible for Father to assume parental responsibilities due to his lack of notice or knowledge of her birth. The court reasoned that the State has a compelling interest in promoting the finality and permanence of adoptions. By not granting full faith and credit to a valid adoption that took place over fifty years ago would create “increased litigation and disruptions to many families, both adoptive and biological…as the adoption decrees that have been entered without the consent of the natural father must be in the millions.” To promote stability in adoption proceedings, the appellate court determined that the Texas adoption was valid, and consequently, Lisa was not entitled to a share of Father’s estate.


Moral of the story… If Father and Lisa resumed a father-daughter relationship and Father wanted Lisa to inherit (and assuming Father was competent), Father could have easily prepared a will which would have avoided this litigation. If there is an intestate estate, make sure that all the intestate heirs are determined and, if necessary, hire a search firm to make sure that all intestate heirs are found.




Many personal representatives (“PR”) do not understand the importance of the IRS Form 56, Notice Concerning Fiduciary Relationship, which notifies the IRS of the name and address of the person handling a decedent’s affairs. If one is not filed and the IRS sends a Notice of Deficiency (“NOD”) to the last known address (which could be the decedent’s home which may have been sold), the NOD, and corresponding time limitations to object, is valid even though the PR may not have actually received the NOD. Therefore, it is important to promptly file Form 56 with the IRS. Until a few of years ago, the IRS had a second Form 56 terminating the relationship, but that form has since been deleted from the IRS website. So how does one notify the IRS that the fiduciary relationship has been terminated?

Treasury Regulations § 301.6903-1(a) and (b) state that “….a fiduciary is required to give notice in writing to the IRS that he or she is acting as a fiduciary for the decedent and notice must be mailed where the decedent is required to file tax returns.” IRS Form 56 satisfies this requirement. A best practice is to either mail the originally executed Form certified mail or mail with a cover letter and a copy of the executed Form and in the cover letter request that the IRS agent date stamp and mail back to you the copy to ensure receipt (just don’t forget to give them a prepaid envelope!).

Once the estate or trust administration is coming to a close and the PR or trustee has filed all necessary tax returns, the fiduciary relationship needs to be terminated. I.R.C. § 6903(a) states “….a fiduciary shall assume the powers, rights, duties and privileges…until notice is given that the fiduciary relationship capacity has terminated.” (emphasis added). Thus, without notice of termination, the PR may not be relieved of any further duties or fiduciary liability.

But now that the termination form no longer exists, does that mean notice is no longer required? If an IRS agent tells you that nothing else needs to be done, is that verbal communication sufficient to protect the PR? The prudent PR will want to do more. The best practice for terminating the relationship is when the fiduciary relationship is over, mail to the IRS a copy of the original Form and write “TERMINATION NOTICE” at the top and write either “PERSONAL REPRESENTATIVE HAS BEEN DISCHARGED BY COURT” OR “TRUST IS TERMINATED” and mail as stated above.


If you do not regularly file a Form 56…you are not alone but start now! Also, add IRS Form 56 to the beginning and end of your probate and trust administration checklists to protect your client and to ensure proper communications with the IRS.


In West v. Chrisman, 2014 WL 4683182, a Florida District Court affirmed the Bankruptcy Court’s Order finding that West, as Co-Trustee and attorney for the trust administration, owed a non-dischargeable debt to the trust in the amount of $212,478.00, because his fee agreement was missing essential terms to form a valid contract.

Following the death of E. Boyer Chrisman (“Decedent”), Aleta Chrisman and Decedent’s attorney, John West, became Co-Trustees of Decedent’s Trust worth approximately $23 million dollars. On May 19, 2014, West and Aleta held a meeting to determine how the trust would be administered. At this meeting, Aleta testified there was no discussion of attorneys’ fees and she was merely handed an unsigned copy of a fee agreement. On June 2nd, West and Aleta signed the fee agreement which proposed fees to be calculated “pursuant to the provisions of Florida Statutes § 733.6171 and § 737.2041” but failed to include a calculation of the fees. Not until July 17th did West provide Aleta with an attachment to the Fee Agreement of a calculation of the fees to be paid. West told Aleta his $355,887 fee (paid in 3 installments) was set by Florida Statute and law and that Decedent allegedly agreed to the fee schedule.

In late July, a disagreement arose on how trust assets should be invested. After months of opposition, West resigned as Co-Trustee but remained the attorney for the Trust and Aleta paid West 2 out of the 3 installments for his fees. In November, Aleta fired West and brought suit against him seeking return of the fees already paid. While this case was pending, West petitioned for bankruptcy.

During the bankruptcy proceedings, the Bankruptcy Court held that Aleta could not have understood the fee agreement until the fee schedule was provided. The amount of the fee was the “most important material provision.” Thus, due to this fraudulent representation (that the fee was set by Florida law and decedent had known about it) and lack of information (the fee schedule was not provided until after she signed) the Bankruptcy Court held that West owed Aleta the fees already paid to him and this debt would not be dischargeable in West’s bankruptcy proceedings. West appealed and the District Court affirmed.

The District Court held that “Amount of Fee” is an essential term to the contract, and if an essential term is absent, ambiguous or open for negotiation, the contract is unenforceable. West’s provision stating the fee is based on “value of inventory and assets held in trust” did not resolve the ambiguity. Further, § 733.6171 and § 737.2041 do not set forth a “definite proposition” to fees and the fee schedule is “presumed to be reasonable.” West’s calculations were not reasonable and a more definitive amount should have been discussed with Aleta.


Take a moment to review your fee agreement and ensure your terms and conditions are carefully explained, especially when discussing how your fees will be paid. Also, have your legal assistant or paralegal read it to make sure a non-lawyer would understand its terms and conditions.



Generally, families are in agreement over the disposition of cremated remains but in a recent 4th District Case, Wilson v. Wilson, 138 So. 3d 1176 (Fla. Dist. Ct. App. 2014), the District Court upheld a longstanding legal principle that a decedent’s cremated remains are not “property” subject to partition after a twenty-three year old Florida man tragically died in an automobile accident and a dispute arose about where his cremated remains should be buried.

As most young adults, the decedent did not have will or preplanned funeral arrangements. The decedent’s divorced parents agreed the body should be cremated but could not agree as to the burial location. The father wanted the ashes to be buried in Georgia and the mother wanted the ashes buried in Florida. For religious reasons the mother opposed the funeral home dividing the ashes so the father petitioned the probate court to deem the ashes “property” and judicially partition the ashes.

The father relied on case law from other states that allow ashes to be deemed “property.” The mother argued ashes should not be deemed property and next of kin should only have a limited possessory right to remains solely for disposition purposes. The trial court agreed with the mother and the district court affirmed. The District Court refused to forge a new legal precedent and stated “such a sensitive subject is best left for the legislature.”


Speak to your young clients and clients who have young adult children about implementing basic estate planning documents. Please never think “this will not happen to me.”


Section 732.603 of the Florida Statutes (the “antilapse statute”) is a probate default rule of construction that allow certain devises under a last will and testament to pass to the devisee’s descendants instead of the devise “lapsing” to the residuary or passing by intestacy laws. To trigger the antilapse statute, such devises do not have survivorship language and only applies to the testator’s grandparent or descendants of a grandparent.

For example, Harold’s will states “all my residue to be distributed to my daughter, Suzie.” If Suzie predeceases Harold, because there is no language indicating what happens if Suzie predeceases Harold, the antilapse statute provides that Suzie’s interest would be distributed to her children. The statute only applies to distribute to the descendants of Harold’s grandparents.

Until recently, Chapter 736 (the “trust code”) afforded this antilapse coverage for all devises in a trust instrument. Therefore, all devises in a trust, regardless of the familial relationship to the testator/grantor, passed to a devisee’s descendants if they predeceased the testator/grantor and survivorship language was not utilized. Thus, if Harold left $10,000 to his personal trainer, Sally, and Sally predeceases Harold, then the antilapse statute would provide that the devise would be distributed to Sally’s children which is probably not what Harold intended.

The Florida Legislature amended Section 736.1106(2) of the Florida Statutes to make the trust code consistent with the probate code and eliminates any confusion between the probate process and a trust administration. It also eliminates the trustee’s burden of tracking down descendants who were never intended by the testator/grantor to receive the distribution thereby allowing devises to be administered closer to the testator’s/grantor’s intent. This amendment is effective for all trusts that become irrevocable after June 30, 2014.


Antilapse statutes are only default rules so it is important to talk to your clients about contingent recipients for all devises in a Will or Trust. While adding “per stirpes” after a devise can be a simple solution, it is always prudent to plan for the unexpected and eliminate devises ending up in the wrong hands.


Siblings tend to be reasonable when it comes to dividing their parents’ estate, especially when divided in equal shares between the siblings. However, it is nearly impossible to equalize the tangible personal property (TPP) i.e., the furniture, the artwork, the car, the family Bible, the sterling silver, the pets, etc. Many items of TPP reflect siblings’ feelings of growing up and whether their parents’ loved one of the siblings more than the other.

So how does this get resolved? Under Section 732.515 of the Florida Statutes, an individual can prepare a “separate writing” in which they can list specific items of TPP and to whom the TPP are to be distributed. This separate writing merely needs to be referred to in the will and only has to be signed and dated by the individual. The statute specifically excludes property used in a trade of business, cash and real property. I remind my clients to complete the separate writing when they execute their Will and if they buy more items of TPP or get rid of items of TPP, it is easy to prepare a new separate writing. Upon death, the most recently dated separate writing is the controlling instrument.

So what happens if a separate writing is never prepared or does not cover all of the decedent’s TPP? What are some alternatives that could be included in the will?

  1. Direct the personal representative to make the decision on how to distribute.
  2. Direct the personal representative to sell all TPP and distribute the proceeds.
  3. The children make up a list of what they want and an independent person or personal representative coordinates the lists of what each child wants.
  4. Draw straws such that the longest straw is the first to pick and continue until all TPP is distributed.
  5. Bidding at an auction with “play” money for the TPP.


Advise your clients to plan for how they want their TPP to be distributed or sold and make the process clear in their documents. Advise your clients to prepare a separate writing and update that separate writing on an annual basis.



Last month in Clark v. Rameker, 573 U.S. ___ (2014), the United States Supreme Court (the “Court”) held that inherited IRAs will not be afforded the same protection as traditional and Roth IRAs in bankruptcy proceedings.

In 2001 Heidi Heffron-Clark (“Appellant”) inherited an IRA from her mother worth approximately $450,000. When filing for bankruptcy in 2010, Appellant identified the IRA as exempt in the bankruptcy proceedings. The bankruptcy trustee objected arguing the IRA was not Appellant’s “retirement funds” and the bankruptcy court agreed.

The Court granted certiorari to resolve conflicting lower court decisions and upheld the lower court’s holding. The Court applied the plain meaning of the words “retirement” and “funds” and concluded to be exempt under bankruptcy law “retirement funds” are “monies set aside for the day an individual stops working.” The Court outlined three characteristics of an inherited IRA that do not allow it to be classified as a traditional or Roth IRA. The holder: (1) may never invest additional funds into the account; (2) is required to withdraw funds years before their retirement without being subjected to a 10% penalty for premature withdrawals; and (3) may withdraw the entire balance of the account at any time and for any purpose.


Inform clients of the differences of traditional and Roth IRA verse inherited IRAs in relation to bankruptcy proceedings. Florida Statute § 221.21 allows for exemption of inherited IRAs in non-bankruptcy proceedings. Further, since Florida uses state exemptions our bankruptcy court should recognize such exemptions. Before filing bankruptcy, consult a bankruptcy attorney and consider alternatives, such as trusts, to protect inherited IRAs.


At the end of a lawyer’s email there is a lot of language that no one reads, no one pays attention to and no one cares about. So why do we put it there? A few years ago Treasury issued proposed regulations (known as Circular 230) which provided complicated guidelines by which a client can and cannot depend on an attorney tax opinion to avoid penalties. To avoid such guidelines, an attorney could put language at the end of any tax communication that the client could not rely on the communication and it could not be used for the avoidance of tax penalties. Every attorney and CPA started putting it on the end of all emails.

Treasury realized that the disclaimer at the end of all emails did not solve the problem and it was confusing for clients, attorneys and CPAs:

“Many individuals currently use a Circular 230 disclaimer at the conclusion of every e-mail…to remove the communication from the covered opinion rules…these disclaimers are inserted without regard to whether the disclaimer is necessary or appropriate…disclaimers are routinely inserted in any written transmission, including writings that do not contain any tax advice. The removal of former §10.35 eliminates the detailed provisions concerning covered opinions and disclosures in written opinions. Because amended §10.37 does not include the disclosure provisions…Treasury and the IRS expect that these amendments will eliminate the use of a Circular 230 disclaimer in e-mail and other writings.”


Review the new final regulations and make your correspondences shorter by removing the Circular 230 disclaimer from your email signature block and any written correspondences.


Many of our clients created LLCs to protect their assets inside the LLC from lawsuits by creditors against our clients individually. Prior to 2010 it was generally understood that a creditor was limited to a charging order only and not to the assets inside the LLC.

Unfortunately in 2010 a Florida Supreme Court decision questioned that protection, Olmstead v. The Federal Trade Commission, 44 So. 3d 76 (Fla. 2010). The Olmstead court determined that a creditor was not limited to a charging order but that the debtor had to surrender all “right, title and interest” in their single member LLCs. Although applied to single member LLCs, other language had attorneys concerned that the exclusive remedy of the charging order would not apply to multi member LLCs.

The Legislature, in 2011, passed a “we really mean it” statute (Fla. Stat. § 608.433) which clarifies that the “charging order is the sole and exclusive remedy” by which a creditor of a member may satisfy a judgment. Exceptions for single member LLCs are clarified.

The court in Young v. Leslie Couture Levy and Wear It’s At, LLC, 2014 WL 2741060, considered this statute in a garnishment action against Young’s distributions in the LLC. Young and Levy were owners in the LLC and later parted ways. Levy sued Young for attorney fees and the trial court entered an order issuing a writ of garnishment against Young’s membership interest in the LLC for such attorney fees.

Young asserted that the plain language of the Florida Statute § 608.433 prohibited garnishment and the appellate court agreed. “When a statute is clear, this Court need not look behind the statute’s plain language for legislative intent or resort to rules of statutory construction to ascertain intent.”

The Court got it right and the “we really mean it” statute worked!


This is a wonderful case to show your clients as to how the charging order protection works. This case puts the LLC on par with the limited partnership charging order protection. Any time asset protection is an issue (and when isn’t it!) these entities should be considered. Also carefully review this statute to review the limitations on creditor protection as to single member LLCs.



Christensen v. Bowen, No. SC12-2078, held that an ex-husband, Robert, listed as a co-owner with his ex-wife on her vehicle’s title, made him vicariously liable for her actions for negligently killing Mr. Bowen.

During a dissolution of marriage, Robert purchased a vehicle for Mary and signed the title listing them jointly as “owner” and “co-owner.”Mary became the sole driver of the vehicle and Robert had nothing further to do with the car.

Mr. Bowen’s personal representative sued both Mary and Robert.Robert argued that he never intended to be an owner of the vehicle.The jury found that Robert did not have a “beneficial interest” in the car (he never intended to “drive or own it”) and he was not liable.The Fifth District reversed and held that Robert was liable.The certified question to the Florida Supreme Court was “May a person whose name is on the certificate of title of a vehicle as co-owner avoid vicarious liability under an exception to the dangerous instrumentality doctrine by asserting that he never intended to be the owner of the vehicle and further claiming that he relinquished control to a co-owner of the vehicle?”The Florida Supreme Court answered NO.

The Court’s ruling outlined a long line of Florida cases that stated the “beneficial ownership” exception to the dangerous instrumentality doctrine is only applied in very narrow circumstances where one party only has “bare legal title” and cannot exert dominion and control over the vehicle (an example would be a dealership who sells a car and is waiting for paperwork to be processed).Since Robert was listed as a co-owner he had a legal interest in the vehicle and therefore could assert dominion and control over it.Furthermore, the Florida Supreme Court stated that his “subjective intent” to not be a co-owner does not divest himself of his ownership interest as a matter of law and therefore is vicarious liable for his ex-wife’s actions.


The title of a vehicle objectively notifies people of who owns a vehicle.Carefully review the titles of your cars and remember that if the title is in both spouses’ names a creditor can reach accounts held as tenants by the entireties which would otherwise be exempt from one spouse’s creditors.


The Fifth District Court of Appeal of Florida recently held that beneficiaries of annuity contracts are exempt from garnishment pursuant to Florida Statute §222.14.In Connor v. Seaside Nat’l Bank, 2014 WL 1255340, a settlement in a dissolution of marriage distributed a substantial part of the ex-husband’s annuities to his ex-wife, Rebecca.Subsequently, Seaside National Bank obtained a judgment against Rebecca and issued writs of garnishment on Rebecca’s two annuity policies.

The Bank argued that Rebecca was not a “beneficiary” under §222.14 because she was not the named annuitant.The lower court agreed and Rebecca appealed.The District Court reversed and held that while §222.14 provides exemption from garnishment for annuity proceeds in favor of a beneficiary, the statute does not define the term “beneficiary.”In construing the term in its plain and ordinary meaning, Black’s Law Dictionary defines “beneficiary” as “a party who will benefit from a transfer of property or other arrangement.”While the Bank argued that only a named annuitant under the annuity contract can be the “beneficiary,” the District Court held that all of Rebecca’s ex-husband’s contractual rights transferred to Rebecca thereby making her an owner of her a “beneficiary” as required by §222.14.


This case was distinguished by In re Pizzi, 153 B.R. 357 (Bankr.S.D.Fla. 1993) in where a “nominee” under a lottery annuity was not a beneficiary.In that case, the state received and made use of the proceeds and the nominee had no right to assert a claim against the annuity.


The Florida Supreme Court held in Aldrich v. Basile, 2014 WL 1240073, that, absent a residuary clause or proper devise of an asset, any after acquired property of a decedent shall pass according to Florida’s intestacy laws.

Ms. Aldrich drafted her will using an “E-Z Legal Form” and devised her home, car and various accounts to her sister, if she survived Ms. Aldrich, and, if not, then to her brother.Ms. Aldrich’s sister predeceased her and devised her assets to Ms. Aldrich.Ms. Aldrich died a few years later never adding language to her will regarding the newly acquired assets.

At trial, Ms. Aldrich’s brother was the sole beneficiary and Personal Representative (“PR”) under her will.Her nieces from a deceased brother argued that because the will neither had a residuary clause nor a devise of the after acquired property, the property should pass intestate.The PR argued that the intent of Ms. Aldrich was to die testate and Florida Statute §732.6005(2) provides that “…a will shall be construed to pass all property owned at death, including property acquired after the will is executed.”The trial court granted summary judgment for the PR.The First District Court reversed and held that §732.6005(2) was inapplicable and §732.6005(1) which states “…intent of the testator as expressed in the will controls the legal effect of the testator’s dispositions” was applicable.

The Florida Supreme Court affirmed the First District Court’s ruling and provided that “Ms. Aldrich had several years to deal with the after acquired assets yet chose not to do so.The Court further emphasized that intent is gleaned from the four corners of the will unless ambiguous or contradictory language was used.Because Ms. Aldrich’s will was concise, the Court refused to speculate into Ms. Aldrich’s intentions to not include this after acquired property in her will.


Saving money on using preprinted legal forms winds up costing your clients more in probate litigation costs and fees.



The estate tax exclusion amount is now “portable” between husband and wife and until recently, no explicit guidance was available to determine when and how to successfully file a late return to elect such portability. In the recent Revenue Procedure 2014-18 the IRS has provided a simplified method for certain taxpayers to make such a “portability” election and gives professionals relief with these late filed returns.

This Revenue Procedure only applies if the taxpayer is the personal representative (“PR”) of the estate of the decedent who (1) has a surviving spouse; (2) died after December 31, 2010 and on or before December 31, 2013; and (3) was a citizen or resident of the United States on the date of death. Additionally, this Revenue Procedure only applies if the PR was not otherwise required to file an estate tax return or did not timely file a Form 706 to elect portability. The new Form 706 must be prepared according to Treasury Regulations, filed on or before December 31, 2014, and the PR must write on top of the application “FILED PURSUANT TO REV. PROC. 2014-18 TO ELECT PORTABILITY UNDER §2010(c)(5)(A).” The PR is considered to have filed a timely Form 706 to elect portability if the Revenue Procedure requirements are satisfied, it is demonstrated that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the government.


Portability is a relatively new election. Thus, many clients may not have received proper advice and this Revenue Procedure may help them. Be sure to put this election on your checklist!


In January 2014 the 4th DCA in Florida reversed a lower court decision that an eight month delay in compelling arbitration constituted a waiver of arbitration. In Green v. Green, 2014 WL 51640, a dispute arose between a successor trustee and the PR of a deceased beneficiary. The PR filed a Petition for a Construction of Trust and, pursuant to a clause in the trust, a Motion to Compel Arbitration was filed by the trustee and was granted. Eight months later, the PR had neither filed a request for arbitration, submitted a list of potential arbitrators, nor attempted to schedule an arbitration. The trustee argued that this delay was unreasonable and prevented the trustee from disbursing trust assets, filing tax returns, and winding up the trust administration. The PR filed for arbitration just prior to the hearing and argued that the delay did not constitute a waiver of arbitration, the timeliness issue was a matter for the arbitrator, and that she was well within the 5 year statute of limitations under Florida Statute Section 95.11(2)(b).

The trial court, without articulating its reasoning, dismissed the PR’s claim with prejudice. The 4th DCA reversed the lower court’s ruling on two grounds: first, courts favor arbitration as an alternative to litigation and delay does not waive arbitration; second, the Court stated “timeliness of a demand for arbitration is a fact question reserved for an arbitrator, not a judge.” Because the trust only required the arbitrator to be an experienced practicing lawyer and did not give a reference of time, once the Motion to Compel Arbitration was granted, issues of timeliness belonged to the arbitrator.


If you have arbitration clauses in your trust, carefully review them with your clients to determine whether mediation or arbitration clauses are invoked if a party files a lawsuit.


Tax-exempt organizations under IRC §501(c)(3) are required to file an annual tax return and tax-exempt status can be automatically revoked if an organization fails to file the required annual return for 3 consecutive years. For many small 501(c)(3) organizations, this requirement is often an overlooked detail.

The IRS recently issued Revenue Procedure 2014-11 outlining procedures for retroactively reinstating tax-exempt status for organizations whose status was automatically revoked. This “Streamlined Retroactive Reinstatement Process” provides 3 alternatives to reinstate tax-exempt status and each alternative requires the applicant to write “Revenue Procedure 2014-11, Streamlined Retroactive Reinstatement ” on the top of the application.

(1) Applications filed less than 15 months after the date of revocation: Applicants file Form 990-EZ or 990-N and if approved, reinstatement will relate back to the date its status was revoked.

(2) Applications filed within or beyond 15 months from the date of revocation: The applicant must establish a “reasonable cause” for its failure to file an annual return for at least 1 of the 3 years. If approved, reinstatement will relate back to the date its status was revoked.

(3) Organizations not eligible for streamline retroactive reinstatement: The organization may still file for retroactive reinstatement within 15 months of revocation, but this requires the appropriate new application. Two key differences for this category is (1) the organization must establish “reasonable cause” for all three years of failing to file an annual return, and (2) it’s retroactive date will only relay back to the date the application was submitted, not the date of revocation.


If you have clients whose tax-exempt status has been revoked this Revenue Procedure is very helpful. Be sure to review the entire Revenue Procedure for more information.



If the beneficiary of an IRA is a trust then complicated rules apply to determine whether you can defer the payments of the IRA over the life expectancy of a designated beneficiary (“DB”). If your trust “fail safe” clause provides that, if all named beneficiaries are deceased then the trust proceeds would be paid to intestate heirs or a charity, then the issue is whether these “fail safe” beneficiaries would be counted in determining the life expectancy of a DB. If the “fail safe” beneficiaries are counted then IRA payments may be required to be paid over an accelerated time period which would shorten the tax free deferral and accelerate income tax. For example if a long lost uncle was the “fail safe” beneficiary, the payout out may have to be made over the life expectancy of someone 85 instead of a grandchild who is 15.

In Private Letter Ruling 201320021 (“PLR”), issued on February of 2013, an IRA owner was survived by her mother, her brother, and one child who was a minor. The decedent left her IRA to her child in trust and did not list a contingent beneficiary. If the child died without issue, then to whom would the balance of the trust be distributed? The IRS stated that because the child was the named beneficiary of the trust, the child’s life expectancy would be used to calculate the required distributions EVEN THOUGH the “fail safe” beneficiaries could have been the decedent’s mother or brother.


The PLR is a helpful IRS result. Unfortunately, because the PLR is only binding on the person requesting the PLR you have no guaranty that this PLR will work in your client’s situation.


In Cessac v. Stevens, 2013 WL6097315, Sally died having an interest in 3 different trusts. Sally devised the residue of her estate to Joanne. Sally’s will did contain a reference to the trusts but did not reference the POA held by Sally. All trusts included a provision authorizing Sally to direct who would receive the trust assets upon her death by “making specific reference to the powers herein granted.” If the POA was not exercised, then the trust assets would be distributed to Sally’s children.

The magistrate determined that Sally had not validly exercised her POA, and therefore, the assets were not included in her estate and thus, not distributed to Joanne. Joanne, however, argued to the trial court that (1) Sally’s intent was to exercise her POA in favor of Joanne; (2) Section 732.607 of the Florida Statutes allows for intent to be a basis of exercising a POA; and (3) an equitable construction standard should be applied by adopting a “substantive compliance” requirement instead of the stricter “specific reference” standard. The trial court denied all three of Joanne’s claims and upheld the magistrate’s ruling.

First, the trial court agreed that intent is irrelevant if the will fails to comply with the specific reference requirement in the trust. Second, the trial and appellate court stated that Section 732.607 of the Florida Statutes was not applicable because the trust document had a specific requirement so the use of extrinsic evidence and Section 732.607 became inapplicable. Finally, the appellate court acknowledged the harsh result but determined that he donor had the right to place specific requirements on the decedent. The decedent could have adhered to this requirement by simply referring to the POA in her will.


To properly exercise a POA granted in a document, READ the document and comply with any specific requirements.


The Second Circuit recently decided Berlinger v. Casselberry, 2013 WL6212023, the first case under the new trust code determining whether a fully discretionary trust could be subject to alimony claims. The court allowed a continuing writ of garnishment against distributions made to or for the benefit of the beneficiary, Mr. Berlinger. Berlinger and Casselberry divorced in 2007 after thirty years of marriage and Berlinger was to pay $16,000 a month in alimony. In 2011 he stopped paying alimony but he and his new wife continued to live off of the trust by the trustee making indirect payments to support their lifestyle.

The trial and appellate court approved the continuing writ of garnishment on payments made directly or indirectly for the benefit of Berlinger. Similar to Bacardi v. White, 463 So.2d 218 (Fla. 1985), the spendthrift provisions in Berlinger’s trust were unenforceable and the writ was issued only as a last resort (Berlinger hid assets, lied in depositions, and did not comply with discovery requests when trying to resolve the alimony issue in 2011).


If protection from alimony obligations is important to your client, then there are other states which have statutes which specifically prohibit invasion of the trust or a garnishment of distributions from the trust for alimony obligations.