The Florida Estate Planning and Probate Law Blog is focused on recent federal and state case law and planning ideas.


The IRS has issued Notice 2017-15 which provides same-sex spouses with federal estate, gift and generation-skipping transfer (GST) tax relief. The Notice allows same-sex spouses to recalculate taxes that were incurred or paid prior to the repeal of the Defense of Marriage Act (DOMA). Prior to the repeal of DOMA, for purposes of federal law the terms “marriage” and “spouse” were defined to exclude same-sex couples. This resulted in same-sex marriages not being treated as a legal marriage under Federal law. This precluded same-sex couples from being able to claim a marital deduction for gifts or bequests made to each other and required them to allocate limited exclusion amounts to (or pay gift or estate taxes on) gifts and bequests to each other. That all changed in 2013 with the U.S. Supreme Court’s ruling in Windsor and subsequently IRS Rev. Ruling 2013-17 (which only applied prospectively). Notice 2017-15 provides administrative procedures to allow taxpayers in same-sex marriages (or, if the taxpayer is deceased, the executor of his or her estate) to recalculate the transfer tax treatment of prior gifts or bequests (before 2013) made to each other. When filing for the relief, the taxpayer should include a statement at the top of the form stating “FILED PURSUANT TO NOTICE 2017-15” and attach a statement supporting the recalculation of the taxpayer’s remaining applicable exclusion amount for purposes of federal estate and gift taxes and/or the taxpayer’s remaining GST exemption for purposes of federal GST taxes.


On December 5, 2016, the State of Michigan joined the ranks as one of seventeen states (including Alaska, Delaware, Nevada, Utah and South Dakota) that permit the use of irrevocable self-settled asset protection trusts for purposes of creditor protection planning. The law becomes effective on February 5, 2017. A Michigan domestic asset protection trust ("DAPT") will enable an individual to shelter assets from future third party creditors. A DAPT is an irrevocable self-settled trust which, when established and funded properly, allows the grantor (the individual establishing the trust) to protect his or her property from the claims of future third party creditors and still maintain a beneficial interest in the trust property. The majority of DAPTs are administered by an independent Trustee (usually a corporate Trustee), friend or family member who is domiciled or has a business presence in the jurisdiction in which the DAPT is established. The Trustee will have the absolute discretion to make distributions to a class of beneficiaries, which may include the grantor. A DAPT can be a highly effective creditor protection tool.


The benefits and negatives associated with establishing transfer on death (TOD) and pay on death (POD) accounts has been debated for a long-time. The main benefit of an account of this nature is that the account assets will pass directly to the beneficiary(s) named on the account without probate or being subject to the decedent’s creditor claims. This is a simple way to transfer assets at death to an individual not involved in any dispute or litigation (divorce, bankruptcy, judgment creditor, etc.). In contrast, if the individual is involved in a dispute or litigation the assets passing outright to them could be at risk to the dispute or litigants claims. Consideration must also be taken if the individual named as the account beneficiary is a “special needs” individual, as direct receipt of the account funds could result in them loosing eligibility for the government benefits they are receiving. In addition, a POD or TOD could alter the end result of the decedent's intended estate plan.


For years, probate practitioners relied upon a Federal Estate Tax Closing Letter (Closing Letter) as evidence that the IRS has accepted a Federal Estate Tax Return (Form 706) as filed and that the federal tax liabilities of the estate were satisfied. Upon receipt, the Closing Letter provided the estate administrator (Personal Representative, Executor, etc..) with an assurance to proceed with closing out the estate administration process. In many situations, a Closing Letter was required to satisfy state law probate proceedings. Except in extreme circumstances, such as fraud, substantial error by the Internal Revenue Service (IRS) or when a failure to reopen would be a serious administrative omission, the IRS will not reopen or reexamine an estate tax return when a closing letter has been issued. Effective on June 1, 2015, the IRS changed its policy and ceased issuing a Closing Letter to the taxpayer’s representative. Instead, the taxpayer’s representative will receive a closing letter only upon affirmative request. To avoid the confusion created by this policy change, the IRS recently issued Notice 2017-12, as guidance on methods to confirm that the IRS has closed its examination of an estate tax return. Notice 2017-12 officially confirms an account transcript issued by the IRS is a valid substitute for an estate tax closing letter, so long as the transcript bears the transaction code of 421 (that Form 706 has been accepted as filed and an examination has been concluded). An account transcript can be obtained online through the IRS’s Transcript Delivery Service or by fax or mail through filing Form 4506-T. Account transcripts will only be issued to an estate representative when a properly executed Form 2848 Power of Attorney or Form 8821 Tax Information Authorization is already on file. Alternatively, a Closing Letter can be obtained by calling (866) 699-4083 and providing the IRS the following information: (i) the name of the decedent; (ii) the decedent’s social security number; and (iii) the date of death. The closing letter will then be issued to the estate administrator at the address of record.


Understanding social security can result in a happier retirement. January 1, 2017 brought in significant changes and the new age of 66 years and 2 months (it had been 65 years) for full retirement benefits (for those born between 01/02/1955 through 01/01/1956). It is expected to increase to age 67 for individuals born in the 1960’s. Individuals may receive permanently reduced retirement benefits when they turn 62 in 2017. As the full retirement age continues to increase, there are greater reductions in benefits for individuals who claim the benefits before they reach full retirement age. For example, if you apply for benefits in 2017 at age 62, your monthly benefit amount will be reduced nearly twenty-six (26%) percent. Your spouse’s benefits, if any, will also be significantly reduced if you claim benefits before reaching full retirement age. There are both advantages and disadvantages to receiving your social security benefit before full retirement age. An advantage is that you will collect benefits for a longer time period. In contrast, the amount you receive will be reduced based upon how early you elect to begin receiving them.


For years it has been discussed that for estate tax purposes it was better to die a resident of certain states than others. The following is an updated list, as of January 1, 2017, of the states which impose a "death or inheritance tax" on its residents and those who follow the Federal Estate Tax Exemption amount. Good States in Which to Die a Resident: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho, Indiana, Louisiana, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin, and Wyoming. Bad States in Which to Die a Resident: Connecticut ($2,000,000), Delaware ($5,490,000), District of Columbia ($2,000,000), Hawaii ($5,490,000), Illinois ($4,000,000), Iowa (inheritance tax on transfers to others than lineal ascendants and descendants), Kentucky (separate inheritance tax), Maine (estate tax and no portability), Maryland ($3,000,000), Massachusetts ($1,000,000), Minnesota ($1,800,000), Nebraska (County Inheritance Tax), New Jersey ($2,000,000), New York ($4,187,500 for April 1, 2016 through March 31, 2017 and then $5,250,000 for April 1, 2017 through December 31, 2018), Oregon ($1,000,000), Pennsylvania (Inheritance Tax), Rhode Island ($1,500,000), Vermont ($2,750,000), and Washington ($2,129,000).


Student loan debt is not dischargeable in bankruptcy. As a result, the baby boomer’s generation enters retirement with student loan debt (approximately seven million Americans age 50 and older owed about $205 billion in federal student debt in 2016), either borrowed for their own educations or to pay for their children’s, with approximately 33% in default. Those in default will be shocked to learn that their Social Security checks can be reduced (known as an “Offset”) to repay their student loan debt. The Offset can be as large as 15% of a social security recipient’s benefit payment. This has left some Social Security recipients at or below the poverty level. Government statistics show that older borrowers had a monthly Offset of approximately $140, and almost half of them were subject to the maximum possible reduction. In 2015, the Department of Education collected about $4.5 billion on defaulted student loan debt. A total of $171 million, almost 10%, was collected through an Offset.


Medicaid is both a federal and state level program through which health care assistance is offered it’s to members. Each state administers their program differently than the next. Your Home in Florida: A Florida residents can own a personal residence (home) and still qualify for Medicaid. Medicare Covers Long-Term Nursing Care: The Florida Medicare program covers skilled nursing care, but only for a limited period of time following a three-day hospital stay. Medicare is only meant to help a person with activities of daily living, such as bathing, eating, and using the bathroom, and can’t be used to cover long-term health care expenses. Transfers Made Within five years of Applying Will Make You Ineligible: Medicaid will consider any uncompensated or below-market transfer (“transfers”) when the office reviews an application. Only certain transfers will be considered when determining whether a penalty period will apply. Medicaid benefits are not available during a penalty period. You Must Spend of All of Your Assets to Qualify: Florida does place a cap on the amount of gross income and assets a person can own and qualify for Medicaid. A person with too many assets or income is ineligible to receive Medicaid benefits. A single person applying for Medicaid benefits may only have $2,000 of countable assets. The other spouse may possess up to $120,900 of countable assets. There are also many exempt assets or noncountable assets that a person or couple may own, including a home. Florida’s Medicaid Rules are the Same as the Rules in Other States: Each state participates in Medicaid funding, it is a federal program, and has its rules on how these funds are administered. A person that lives in another state may not have to meet Florida’s requirements for Medicaid. Further, the rules can change on an annual basis.