FLORIDA ESTATE PLANNING AND PROBATE LAW BLOG

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

Showing posts with label florida tax lawyer. Show all posts
Showing posts with label florida tax lawyer. Show all posts

ESTATE PLANNING QUESTIONS FOR CONSIDERATION IN 2018

♠ Posted by Marc J. Soss in ,,,,,
The new tax law makes significant changes to federal tax law and has implications for your existing estate plan. The following is a list of issues to consider when determining whether to update your estate planning documents. 1. Will the new federal tax law change impact my estate plan? The new tax law increases the federal exemption amount from $5,600,000 in 2017 to $11,200,000 in 2018. As a result, there will no longer be any federal tax assessed on estates valued between $5.6 million and $11.2 million. Many estate plans created marital trusts to avoid having to pay any estate taxes on the first spouse’s death. The increase in the federal exemption amount makes those plans obsolete. You should review your existing estate planning documents to ensure your plan will properly operate under the new federal estate tax thresholds. 2. How will the new federal tax law affect my state estate tax? Only individuals living in one of the fifteen states (Minnesota, Iowa, Nebraska, Washington, Oregon, Kentucky, Tennessee, Pennsylvania, New Jersey, Massachusetts, Rhode Island, Connecticut, Delaware, Maryland and the District of Columbia) that still have some form of estate tax will be impacted. It is important to check whether your state of residence links its estate tax exemption limits with the federal limits to avoid an unnecessary tax at death. 3. Should I have my existing estate plan reviewed? Individuals that have not updated their existing estate plans in at least ten (10) years should absolutely have them reviewed to prevent unintended consequences. It is important that your estate plan change with your changing circumstances.
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2017 FEDERAL INCOME TAX FIGURES

♠ Posted by Marc J. Soss in ,,,,,,
Standard deduction - married filing jointly = $12,700 Standard deduction - single persons = $6,350 Standard deduction for a dependent = $1,050 Overall Limitation on itemized deductions (Section 68(b)) = $313,800 (Married person) Personal exemption = $4,050 Unified credit against estate tax and gift tax = $5,490,000 Gift tax annual exclusion = $14,000 (no change) Gift tax annual exclusion for gifts to noncitizen spouse = $149,000
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EXECUTORS MAY BE PERSONALLY LIABLE FOR A DECEDENT’S UNPAID TAXES

♠ Posted by Marc J. Soss in ,,,,,,
This is a reoccurring issue that Personal Representatives/Executors of a probate estate need to be educated on. The First Circuit recently ruled that the executor of an estate was personally liable for unpaid federal income tax when she knew, prior to distributing property from an insolvent estate, that there were outstanding tax deficiencies. The decedent owed $340,000 in unpaid federal income tax, which would have left his estate insolvent. The transfer took place right after the decedent's death and prior to their appointment as executor. The transfer was made despite IRC Section 3713(a)(1)(B) which provides that a claim of the U.S. government shall be paid first when an estate is insolvent (it has priority over any other claims). If the executors fail to honor that priority, they become personally liable for the deficiency under Section 3713(b) if three requirements are met: (1) they transfer assets before paying the government’s claim; (2) the estate is insolvent; and (3) they had knowledge of the liability. The executor's argument, against personal liability, was that the transfer occurred prior to her appointment as executor and a strict reading of the statute found it applied to “a representative of the person or an estate…” The court said that whether she had actually been appointed executor at the time was irrelevant because the assets were under her control at the time they were transferred.
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IRS DENIES RETROACTIVE STATE COURT REFORMATION OF RETIREMENT ACCOUNT BENEFICIARY

♠ Posted by Marc J. Soss in ,,,,,,,,
The Internal Revenue Service (IRS) can easily take away what any state court giveth. Under the case facts, the decedent maintained 2 IRAs prior to his death. The IRAs listed his revocable trust as the death beneficiary. The trust qualified as a "look through" trusts, and provided each beneficiary the ability to stretch the payout period for the IRAs over their respective life expectancies. However, prior to death, the decedent moved the IRAs to a new investment firm which incorrectly listed his estate as the death beneficiary of each IRA account. This precluded the beneficiaries from stretching the IRA payout over their life expectancies. To overcome this problem, the trustee petitioned the state court for a declaratory judgment changing the beneficiary designations back to the trust. The court ordered the modification, retroactive to the date the new beneficiary designation forms were signed. The trustee then sought a private letter ruling to give effect to the state court order. The IRS, in reliance on Estate of La Meres v. Comm., 98 TC 294 (T.C. 1992) denied the request and ruled that the state court order could NOT retroactively change the tax consequences of the decedent having died with his IRA beneficiaries being designated to be his estate. The Tax Court held such reformation ineffective for tax purposes, explaining that courts generally disregard the retroactive effect of state court decrees for Federal tax purposes. It is important to note that this is not the first time the IRS has ruled against giving tax effect for IRA stretch purposes to a retroactive reformation (PLRs 201021038, 200235038 and 200620026). Individuals should take note of this result and ensure that their retirement account beneficiary designations are accurate.
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FLORIDA LLC TAX ISSUES

♠ Posted by Marc J. Soss in ,,,,,,
Under the IRS “check the box” regulations, a Florida Limited Liability Company with two or more members is automatically taxed for income tax purposes as a partnership. As a result, all income that passes through a partnership to a partner is classified as self-employment income subject to payroll taxes. The entity may alternatively elect to be taxed as an S corporation for income tax purposes. The election can be made by filing Form 2553 with the IRS. The benefits of an LLC electing to be taxed as an S corporation, for income tax purposes, include treating a substantial portion of earnings as wages subject to payroll taxes, and the balance as dividends that are not subject to payroll taxes. To maintain this income tax status, the LLC is required to satisfy all of the qualifications for a “small business corporation.” If the LLC fails to meet all of the required qualifications, the S election will not be valid and the LLC will be taxed as a C corporation and subject to double taxation. Problems can also arise when drafting an LLC Operating Agreement. Standard partnership law concepts and verbiage (treasury regulations that govern partnerships, capital accounts and capital account maintenance, special and regulatory allocations of income and loss, and liquidating distributions in accordance with capital account balances) are included in most LLC Operating Agreements. These provisions should not be included in a qualifying “small business corporation” and their inclusion may disqualify the LLC from making an S election.
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