Florida Estate Planning and Probate Law Blog focused on recent case law and planning ideas.


The Internal Revenue Service (“IRS”) announced on October 19, 2017, the following dollar limits applicable to tax-qualified plans for 2018: • The limit on the maximum amount of elective contributions that a person may make to a §401(k) plan, a §403(b) tax-sheltered annuity, or a §457(b) eligible deferred compensation plan is increased from $18,000 to $18,500. • The limit on “catch-up contributions” to a §401(k) plan, a §403(b) tax-sheltered annuity, or a §457(b) eligible deferred compensation plan for persons age 50 and older remains unchanged at $6,000. • The dollar limit on the maximum permissible allocation under a defined contribution plan is increased from $54,000 to $55,000. • The maximum annual benefit under a defined benefit plan is increased from $215,000 to $220,000. • The maximum amount of annual compensation that may be taken into account on behalf of any participant under a qualified plan will go from $270,000 to $275,000. • The dollar amount used to identify “highly compensated employees” remains unchanged at $120,000.


Effective October 2, 2017, new rules go into effect for federally backed HECM (Home Equity Conversion Mortgage) reverse mortgages. The good news is that the new rules will only impact new borrowers. A reverse mortgage allows an individual over age 62 to borrow against the equity in their home without being required to pay back the loan until they either move, sell the property or die. For many seniors, a reverse mortgage provides them a means to generate funds in retirement. The new rules will increase the upfront cost of the reverse mortgage to 2.0% (it previously was 0.5% for those receiving less than 60% of their home equity and 2.5% for those borrowing more than 60%). The new rule will also decrease the annual premium from 1.25% to 0.5% of the outstanding mortgage balance. The amount that may be borrowed will remain linked to the age of the borrower and prevailing interest rate. At current interest rates, the average borrower is able to borrow approximately 58% of the value of the home, down from 64%. The new rules are necessitated by the continuing deficits in the federal reverse mortgage program.


For most, the release of the Consumer Price Index by the Department of Labor goes unnoticed. However, this information allows for the prediction of the 2018 estate, gift, and generation-skipping transfer tax amounts. Estate Tax Exemption – Under current federal tax law, a U.S. citizen may pass tax-free (by gift or at their death) the total sum of $5,490,000 to their heirs and beneficiaries (excluding their spouse). This amount is projected to increase to $5,600,000 in 2018. As a result, in 2018 a couple (U.S. citizens) will be able to collectively transfer $11,200,000.00 without incurring a federal estate or gift tax. This amount will also be applicable to gifts made to grandchildren and future generations (the generation-skipping transfer tax (GST)). Annual Gift Tax Exclusion –A U.S. citizen is entitled to gift a sum certain each year to an unlimited number of individuals (the “annual gift tax exclusion”) without any tax consequences. In 2018, the annual gift tax exclusion amount is projected to increase from $14,000 to $15,000 per individual recipient. The exclusion amount for gifts to a spouse who is not a U.S. citizen (the so-called “super-annual exclusion”) is also projected to increase from $149,000 to $152,000.


The devastation of Hurricane Harvey will be felt for years to come. While relief efforts are underway to assist victims of the storm the Internal Revenue Service has also established procedures, via announcement or news relief, to assist those adversely impacted. Retirement Plan Hardship Distributions: IRS Announcement 2017-11 (the “Announcement”) allows participants and beneficiaries of 401(k) plans or 403(b) plans, subject to restrictions, hardship access to or loans from their retirement funds until January 31, 2018. Eligibility requires you to have lived or worked in a county designated by FEMA to receive funds on account of Hurricane Harvey or have family (including parents, grandparents, children or grandchildren) or dependents with a principal residence in an affected county. The hardship distribution or loan must be made no later than January 31, 2018. The Announcement permits distributions without application of the safe harbor rules (medical expenses or expenses to repair a principal residence) and does not require plans to suspend employee contributions for six (6) months following the hardship distribution. Plans that do not provide for hardship relief can be amended by the end of the first plan year beginning after December 31, 2017. It is important to note that any hardship distribution will still be includible in gross income and subject to the 10% additional tax on early distributions for those under age 59-1/2. Extended Tax Return Deadlines: The IRS has announced in a news release that individuals and businesses impacted by Hurricane Harvey will receive, as needed, extended filing tax deadlines. Individuals, under valid extensions until September 15, will now have until January 31, 2018 to file their returns and pay their taxes. Any business, under a valid extension until October 16, will now have until January 31, 2018 to file their returns and pay their taxes. The tax relief only applies to taxpayers located in areas designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance and those outside the areas but have necessary records needed to meet deadlines located in a designated area. The extensions also apply to the September 15, 2017 and January 16, 2018 deadlines for making quarterly estimated tax payments and the October 31, 2017 deadline for quarterly payroll and excise tax returns. Employer Provided Tax-Free Disaster Relief: Internal Revenue Code section 139 permits employers to provide tax-free disaster relief to their employees. To qualify the amount paid must be to (i) reimburse or pay reasonable and necessary personal, family, living or funeral expenses incurred as a result of a qualified disaster; or (ii) reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of a rented or owned personal residence (or to repair, rehabilitate or replace its contents) damaged by a qualified disaster. The qualified disaster relief payments may not be income replacement payments, lost business income or unemployment benefits. An employer may only exclude such payments from the employee’s income to the extent that insurance does not otherwise compensate the employee.


The creation of a Health Care Surrogate is a vital part of every Florida estate plan. However, the individual appointed to serve in this capacity typically has no idea what the job may entail. The following is a brief synopsis of their expected responsibilities on your behalf: approving medical treatments, medications, diagnostic tests; requesting and approving the release of medical records; determining where medical treatment will be provided (hospital, rehab facility, nursing home, Hospice, etc.); obtaining a second medical opinion; handling insurance carriers and claims; and most importantly communicating with family members. To be an effective Health Care Surrogate the appointee should become familiar with your specific values (religious and spiritual), medical history, end-of-life desires and legal documents. This information will make for an easier transition when you can no longer make decisions for yourself.


The ability to transfer up to $100,000 each year from your IRA to charity tax-free, have it count as your Required Minimum Distribution (RMD) and have it not included in your adjusted gross income is now a permanent part of federal tax law. As a result it is important to understand how a Qualified Charitable Distribution should be reported to the IRS. The gift should be reported on IRS Form 1099-R, which you should receive from the IRA administrator. The gift should also be listed on line 15a of your Form 1040 as a gross distribution from your IRA. On line 15b, write $0 for the taxable amount (if you don’t have any taxable distributions from your IRAs for the year). Add “QCD,” for “qualified charitable distribution,” next to that line to show why the distribution is tax-free. If only part of your distribution was a QCD, put the taxable portion on line 15b and still add “QCD” to explain the difference between line 15a and 15b. It is recommended that you keep an acknowledgement of the gift from the charity in your tax files. If you do not receive one you’ll need to let the charity know to send you the receipt. Keep the 1099-R form and the acknowledgement of the gift from the charity in your tax files.


You have created a Revocable Trust (aka Revocable Living Trust) as a part of your estate plan and wonder what do you need to do next? The first, and most important thing, that you need to do is ensure that it is properly funded by transferring or assigning ownership of your assets and real property to the Trust. The benefit of properly funding your Trust is that you will not lose any control over or enjoyment of the assets. While you are handling the funding process it is important to recognize why you are doing it: Avoidance of Probate Proceedings. The most common reason individuals create a Revocable Trust is to avoid probate. Probate is the court-supervised transfer of assets from the estate of a deceased person to his or her beneficiaries. However, if all of the decedent’s assets are held in a Revocable Trust at his or her death, they are not subject to probate proceedings in either their state of domicile and any other in which they may own real property. The successor trustee can distribute the assets to each beneficiary without supervision by the court. Management During Incapacity and at Death. Should you become incapacitated the assets maintained in your Revocable Trust can be utilized by your successor trustee, without the necessity of guardianship court intervention, to handle your financial affairs. Similarly, upon your death, the assets can be seamlessly assumed by your successor Trustee, without the need to wait for probate proceedings, and distributed to your beneficiaries. Privacy and Confidentiality. Unlike a Last Will & Testament that will be filed with the probate court, a Revocable Trust is not a matter of public record. Information is reported privately to the beneficiaries and the public will have no access to this information. Every time a new asset is acquired or account opened by you it should be titled in the name of your Trust.


Is your child ready for college? While you may have purchased for them new clothing, linens, towels, etc. the question becomes whether they have executed an estate plan? Most families fail to recognize that once their child (young adult) reaches age 18 years they are considered an adult under most state laws and their parents can no longer make all financial and health care decisions for them or have access to their medical records. As a result, estate planning is not only for the old or the wealthy and every individual over age 18 should have, at a minimum, a Power of Attorney and Health Care Directive. A Durable Power of Attorney designates another individual to act for the young adult in legal and financial matters. It is mainly used in the event of an accident or incapacity rendering the young adult unable to effectively manage legal and financial matters. Having such a document in place would avoid the necessity of having a guardian or conservator appointed should an accident or incapacity happen. The Health Care Directive empowers another to make health care decisions in the event of incapacity, articulate their wishes and directions in the event health should deteriorate and designates another to act as “personal representative” for purposes of HIPAA to authorize the release of medical records if necessary to obtain medical treatment. Make sure they have these documents in place prior to dropping them off in college.


Effective January 1, 2018, Delaware residents will no longer be subject to a state estate tax. Delaware becomes one of the thirty-three (33) states that do not impose either estate or inheritance taxes or both. The repeal is the result of Democratic Governor John Carney Jr. signing a stand-alone estate tax repeal bill. One estate lawyer commented “[t]he very wealthy don’t have to move down to Florida.” The Governor and legislature recognized that that if wealthy folks stay in Delaware, instead of changing their residency to avoid the state estate tax, the state will generate more revenue from personal income tax than estate taxes (high of $16.2 million in 2011, and a low of $1.3 million in 2014).


Regardless of your state of residency it is important to have your estate planning documents in order. The following is a list of essential documents and how they will benefit you. Last Will & Testament: a legal document in which you express your wishes as to how your estate (assets, accounts, real estate, etc.) is to be distributed at your death, and nominates the individual(s) or entity to manage the estate until its final distribution. Without this document the state statutes will control who administers your estate and to whom does it pass. ​ Power of Attorney: a written document in which you give another individual (they can reside anywhere) the power to act in your place in managing your assets, pay bills, handle insurance claims, sell real estate, file a tax return, to make gifts, create revocable trusts, invest assets and do anything you can do with your assets personally. You may name one or more agents under a power of attorney, and direct that one may act alone without the other, or that they must act jointly. You can also appoint a successor agent to act in the event the first person(s) you’ve named cannot act. A “durable” power of attorney does not become inoperative upon your incapacity. However, upon your death it is no longer effective. Health Care Surrogate Directive:​ a written instrument in which you appoint someone or multiple individuals you trust to make decisions about your medical treatment in the event you are unable to give instructions at the time the decisions must be made (ex., you are in a coma). Living Will: a document in which you state your wishes regarding medical treatment if you are unable to give instructions at the time the decisions for medical treatment need to be made. The living will can include instructions about the termination of life support and artificial nutrition and hydration (i.e., food & water intravenously). Pre-Need Guardian Declaration: a document that specifically nominates the individual(s) to serve on your behalf if it is necessary to appoint a guardian for you. A Florida Court must consider the individual(s) nominated if he/she is capable of serving. ​Without a power of attorney and health care surrogate in place your family will have to commence guardianship proceedings (petition the court to step in on your behalf) to make these decisions on your behalf. Guardianship proceedings is a very public process and makes the world aware that your family thinks you can’t take care of your own finances or medical decisions.