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


The Internal Revenue Service (“IRS”) has a new collection tool for taxpayers with serious delinquent tax deficiencies and it was created under § 7345 of the Internal Revenue Code. The tax section authorizes the IRS to certify to the State Department individuals who have serious delinquent tax debt. Receipt of the certification allows the State Department to deny or revoke the individual’s passport or limit it to permit only a return travel to the U.S. For purposes of enforcement, a “seriously delinquent tax debt” is defined as a tax liability (tax, penalty and interest) of an individual which meets all the following requirements: (i) the tax liability has been assessed; (ii) the liability is greater than $51,000; and (iii) a levy was issued or a notice of lien has been filed and the taxpayer has either exhausted its administrative rights or failed to timely exercise those rights. An individual will not be classified a seriously delinquent taxpayer if: (i) the taxpayer is paying the liability in installment payments approved by the IRS; (ii) the liability is being paid through an offer in compromise; or (iii) collection of the debt has been suspended under certain circumstances such as innocent spouse relief. In addition, in its discretion, the IRS may not certify an individual as a seriously delinquent taxpayer where: (i) the liability is uncollectible due to hardship; (ii) the liability results from identity theft; (iii) the taxpayer is in bankruptcy; or (iv) they are serving in a combat zone or participating in a contingency operation. The IRS may reverse a certification if: (i) all certified tax modules are fully paid; (ii) the tax becomes legally unenforceable; (iii) the tax debt falls under one of the statutory exclusions; or (iv) an adjustment reduces the tax debt below $51,000. To invoke the certification process the IRS must send a notice of certification to the taxpayer contemporaneous with sending the notice to the State Department. Upon receiving this notification, the taxpayer has a right to challenge the certification.


On October 18, 2018, over three (3) years after the Department of Veterans Affairs (“VA”) originally proposed them, new regulations to qualify for needs based benefits go into effect. The new regulations contain “net worth” limitations, look-back periods, penalties and definitions for those applying for benefits. The new regulations are a substantial change from current regulations which do not contain a prohibition on transferring assets prior to applying for benefits. Net Worth Limitations: An eligible applicant must have a net worth equal to or less than the prevailing maximum community spouse resource allowance (CSRA) for Medicaid ($123,600 in 2018). The term “net worth” amount includes both the applicant's assets and income and will increase annually at the same percentage as Social Security. The veteran's primary residence (even if the veteran lives in a nursing home) and the veteran's personal effects will not be considered assets under the new regulations. However, if the veteran's residence is sold, the proceeds will be considered assets unless a new residence is purchased within the same calendar year. Look-Back Period and Penalty: The regulations establish a thirty-six (36) month look-back period, beginning on the date on which the VA receives either an original or new pension claim after a period of non-entitlement, for the transfer of assets. The regulations include five (5) year penalty period for assets transferred at less than market value to qualify for a VA pension. There are exceptions for transfers made as the result of fraud, misrepresentation or to a trust for a child who is not able to support themselves. Deductible Medical Expense: The regulations define what the VA considers to be a deductible medical expense for all of its needs-based benefits. The definition includes: payments for items or services that are medically necessary; that improve a disabled individual's functioning; or that prevent, slow, or ease an individual's functional decline. This includes care by a health care provider, medications and medical equipment, adaptive equipment, transportation expenses, health insurance premiums, products to help quit smoking, and institutional forms of care.


CASE OF INTEREST FROM GEORGIA - Estate of Caldwell Jones, Jr. v. Live Well Financial (11th Cir., No. 17-14677, Sept. 5, 2018): A Federal Court of Appeal has ruled that federal law does not prevent an insurer from foreclosing on a reverse mortgage after the death of the borrower even though their widow still resides in the residence. In 2014, the decedent, who was married at the time, obtained a reverse mortgage on their Georgia home. The contract defined the "borrower" to be the decedent, a married man. After the borrower's death, the insurer asserted a right to immediate repayment of the mortgage. When the surviving spouse did not repay the loan, the insurer initiated foreclosure proceedings. The widow then filed a claim in federal court to prevent the foreclosure, arguing that federal law prohibited the insurer from foreclosing on the house while she lived in it. Under a provision in federal law, the federal government "may not insure" a reverse mortgage unless the "homeowner" does not have to repay the loan until the homeowner either dies or sells the mortgaged property and defines "homeowner" to include the borrower’s spouse. The district court granted the insurer's motion to dismiss and the matter was appealed. The U.S. Court of Appeals, Eleventh Circuit, affirmed and held that the federal law in question only covers what the federal government can insure and does not govern the insurer's right to foreclose. Learn more by contacting Marc J. Soss, Esquire.


On August 17, 2018, at the request of a 401(k) plan sponsor, the IRS issued a private letter ruling 201833012 (the “Ruling”). The Ruling was requested with the intent of assisting individuals, currently around forty-four (44) million Americans with student loan debt of more than $1.3 trillion dollars. The Ruling provides a method for employers, under certain circumstances, to provide a student loan repayment benefit as part of their 401(k) plans and link the amount of employer contributions made on an employee’s behalf to the amount of student loan repayments made by the employee outside the plan. The Ruling permits an employer to make a non-elective contribution to its 401(k) plan, where the amount of the non-elective contribution would be based on an employee’s total student loan repayments and would be contributed to the plan in lieu of the matching contributions that would otherwise be made to the plan had the employee made pre-tax, Roth 401(k) and/or after-tax contributions. Key features of the Ruling include: (i) voluntary participation in the student loan repayment benefit program and ability to opt out, subject to plan restrictions; (ii) the student loan repayment benefit will replace the employer matching contribution; (iii) the repayment benefit is subject to coverage and nondiscrimination testing; and (iv) is predicated on the plan sponsor not extending any student loans to employees that will be eligible for the program. The student loan repayment non-elective contributions will be subject to the same vesting schedule as regular employer matching contributions and subject to all applicable plan qualification requirements, including eligibility, vesting, and distribution rules, contribution limits, and coverage and nondiscrimination testing. However, the student loan repayment non-elective contribution will not be treated as a matching contribution for purposes of any testing.


On May 10, 2018, the IRS released Revenue Procedure 2018-30 which sets forth the dollar limitations for health savings accounts (HSAs) in 2019. HSAs are subject to annual aggregate contribution limits and participants age fifty-five (55) or older can contribute additional catch-up contributions. In 2019, the maximum contribution amount will increase to $3,500 for an individual and $7,000 for a family. The catch-up contribution limit remains at $1,000.


Under existing social security rules, men that have children later in life (it would be gender discrimination but biologically women can’t currently conceive a child after age 60) are eligible for an extra Social Security benefit. Under the rule, when a man files for his social security benefits, each of his children under the age of 18 years is entitled to one-half (1/2) of what he would receive at full retirement age (even if he collects social security benefits early). Eligibility for the child benefit requires them to be: (i) under the age of 18 years; (ii) 18-19 years old if a full-time student (not higher than grade 12). For example, if a 62-year old man with a 10-year old child began collecting social security benefits immediately, not waiting till age 70 years, he would also receive one-half (1/2) of the maximum amount he would have received had he waited to collect at age 70 years, until his child reached the age of 18 years. At present, Donald Trump is receiving an extra $15,000 per year since his son is under age 18.


Effective January 1, 2019, residents of the state of Maryland will see their state estate tax exemption increased from $4 million to $5 million. The law went into effect on April 5, 2018, and is not be indexed for inflation. The maximum Maryland estate tax rate of 16% remains unchanged and the inheritance tax is unaltered (dependent upon how closely related the decedent was to the people who inherit from him or her, not on the size of the estate). Legislation is pending in the District of Columbia, where the estate tax exemption currently matches the federal exemption amount of $11.18 million, to “decouple” from the federal exemption. The legislation proposes an exemption amount at $2,185,800, adjusted annually for inflation, for decedents dying on or after January 1, 2019.


The Fair Housing Act (FHA) states that housing providers may not “discriminate against any person in the terms, conditions, or privileges of . . . rental of a dwelling . . . because of a handicap of any person associated with that person.” 42 U.S.C. § 3604(f)(2)(C). Prohibited discrimination includes “a refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling.” Id. § 3604(f)(3)(B). “The reasonable accommodation inquiry is highly fact-specific, requiring case-by-case determination.” Janush v. Charities Hous. Dev. Corp., 169 F. Supp. 2d 1133, 1136 (N.D. Cal. 2000) (quotation omitted). If a landlord has a “no-pets policy,” a tenant will be provided a reasonable accommodation for an assistance animal if the tenant can demonstrate that he or she is disabled and that the tenant has a disability-related need for the assistance animal. However, a specific service animal denial may occur if: (i) the animal poses a direct threat to the health or safety of others that cannot be reduced or eliminated by another reasonable accommodation, or (2) the animal would cause substantial physical damage to the property of others that cannot be reduced or eliminated by another reasonable accommodation. However, the denial may not be based on a dog’s breed or size, mere speculation or fear that the animal may harm someone or damage property, or evidence of damage caused by other animals. The Federal Housing Administration (FHA) construes the law very favorably toward any individual that alleges a need for an emotional support animal. A medical professional attestation that the individual meets the FHA disability definition for having an emotional support animal, regardless of how they obtained the diagnosis, is sufficient: (i) physical or mental impairment (including emotional or mental illness) that substantially limits one or more major life activities; (ii) record of such impairment; or (iii) having such impairment. In the recent Vermont Supreme Court case of Gill Terrace Retirement Apartments, Inc. v. Johnson, (2017) VT 88 No. 2016-372, the Court addressed these specific type of situations. The Johnson case involved a tenant eviction for violation of a “no-smoking” and “no pets” policy. Despite the landlord’s approval of Johnson’s request for an assistance animal as a reasonable accommodation, it did not approve her specific animal because of the dog’s hostility, complaints from other residents, and tenant’s inability to restrain the dog. The Trial Court, in granting the eviction, concurred with the landlord and held that while an individual is entitled to an Emotional Support Animal, they are not entitled to any animal or bread that (i) exhibits aggressive behavior or tendencies; or (ii) scares other tenants or occupants (some “residents deliberately stayed indoors to avoid” the dog). Johnson ultimately appealed her eviction for violation of the pet policy all the way to the Vermont Supreme Court which upheld the Trial Court.


When the new tax law was signed by President Trump most experts viewed it as detrimental to future charitable donations and deductions. The significantly increased standard deduction meant fewer taxpayers needed to file an itemized income tax return and non-itemizers would not benefit from a charitable tax deduction. While the value of a charitable deduction may have decreased in value for individuals that reside in states without a state income tax it has increased in value for individuals that reside in states with a state income tax. Under the new tax law, the deduction for state income taxes is limited to $10,000. While a charitable gift may not result in any reduction in state income taxes it can provide a deduction for federal income tax purposes. Utilizing a charitable gift deduction, after maximizing the amount of your state income tax deduction, can decrease the amount of federal income tax due and owing for those who do not file an itemized income tax return. In addition, under the new tax law, the donation of appreciated stocks, bonds or other assets still avoided capital gains taxes regardless of whether or not the donor itemizes. Individuals age 70 ½ or older also retained the ability to make a charitable donate directly from their IRA.


The Budget Act of 2018, signed into law on February 9, 2018, provides individuals with 401K retirement plans relaxed hardship restrictions. The new relaxed restrictions include: (i) Rescission of the IRS rule that prohibits a participant from making an elective 401(k) deferral for six months after taking a hardship withdrawal; (ii) Allowing plan participants to take a hardship withdrawal from funds attributable to qualified non-elective contributions or qualified matching contributions made by employers under a safe harbor plan; and (iii) Allowing a hardship withdrawal to include not only the actual amount of elective 401(k) deferrals made but the earnings on those contributions. The changes are effective for plan years beginning after December 31, 2018.