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


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.