Unofficial only – check IRS sources before using in planning and implementation!
Thursday, November 27, 2014
Saturday, November 22, 2014
In the last week, I have received two messages on my answering machine at home purporting to be from the IRS, advising me that I owe taxes and if I don’t call them back I may be arrested. I’ve also gotten calls from other people about similar calls.
99% of these are scams. If the IRS has a problem with you, they will mail you notices – they will not call you first. If you want to be sure, don’t call back the number given. Instead, call the IRS at 1.800.829.1040 and they can tell you what, if anything, is going on with your tax account, including whether you owe any money.
For more on the ongoing telephone scams, see this IRS notice.
Friday, November 14, 2014
Summary: A recent Florida appellate decision finds that the joinder of a spouse on a deed of homestead property to a trust constitutes a valid waiver of homestead rights, even though the deed contains no waiver language.
FACTS: Jerome and Alma were married. In 2000, they executed a warranty deed conveying their homestead property to themselves as tenants in common. That same day, Jerome conveyed his one-half of the property to a 5 year qualified personal residence trust (QPRT). Alma joined on the deed. Jerome did not survive the 5 year term of the QPRT, so pursuant to the QPRT terms his half of the property reverted to his estate. Under his estate documents, the property was placed in trust for Alma when he died. The trust provided that at Alma’s subsequent death, the trust assets would pass to their daughter, Nancy. Ross, their other child, was excluded from receiving such trust assets. Ross sought to challenge the devise to Alma’s trust.
The appellate court determined that the transfer to the trust for Alma was a testamentary devise. Article X, section 4 of the Florida Constitution provides that a homestead cannot be devised if the owner is survived by a spouse, unless the devise is to the owner’s spouse if there are no minor children. Thus, the devise to the trust for Alma (with a remainder to Nancy) would not be valid in this case, unless Alma is treated as having waived her homestead rights when she signed the deed to the QPRT.
Fla.Stats. Section 732.702(1) provides a spouse’s homestead rights “may be waived, wholly or partly, before or after marriage, by a written contract, agreement, or waiver, signed by the waiving party in the presence of two subscribing witnesses.” The statute further provides that a waiver of “‘all rights,’ or equivalent language” may constitute a waiver of a spouse’s intestate rights in their spouse’s homestead.
The appellate court found that Alma’s signature on the deed constituted a waiver of her homestead rights based on the deed language that she “grants, bargains, sells, aliens, remises, releases, conveys, and confirms” the property “together with all the tenements, hereditaments, and appurtenances thereto belonging or in anywise appertaining.” Thus, the devise of the homestead to a trust for Alma (and later remainder to Nancy) was valid.
The appellate court was not concerned that Alma continued to assert homestead exemption from ad valorem taxation after the purported waiver. This is because “homestead” for ad valorem tax purposes is not subject to the same definition as for restrictions on testamentary devises.
COMMENTS: This is not the first time this issue has come up before a District Court of Appeal. A prior opinion in the Habeeb case reached a similar waiver conclusion, although that opinion was later withdrawn. Reasonable minds may differ whether signing a warranty deed that contains no explicit waiver language as to homestead rights should be properly interpreted as a waiver that meets the requirements of Fla.Stats. Section 732.702(1). Those who do not think so are on notice that one District Court of Appeal (and possibly two) disagrees with their position, and joint deeds should be entered into with a careful eye to homestead consequences.
This was a post-marriage waiver. Interestingly, the opinion made no mention of Fla.Stats. Section 732.702(2), which reads: “[e]ach spouse shall make a fair disclosure to the other of that spouse’s estate if the agreement, contract, or waiver is executed after marriage. No disclosure shall be required for an agreement, contract, or waiver executed before marriage.” Prudent practitioners generally accomplish post-nuptial waivers of homestead via a formal post-nuptial agreement that includes full financial disclosures. Perhaps there was some type of contemporaneous financial disclosure that made this a nonissue in this case. Perhaps the appellate court deemed the parties to have full financial knowledge of each other, but there is no indication of that in the opinion. Perhaps this was an oversight by the court or the parties in not addressing this requirement, or was a tactical decision not to raise the issue by the litigants that did not work out well for the losing party. In any case, the requirement for financial disclosure may be a saving grace for others that may be faced with a joint deed and an unintended waiver of homestead situation.
From a policy standpoint, there has already been some discussion among Florida attorneys about whether a statutory amendment is advisable to require that any waiver by deed of homestead rights have some requisite reference to homestead or at least require the use of the term “waive” or “waiver.” Having personally seen on more than one occasion such joint deeds sought to be applied against the homestead rights of a surviving spouse when the spouse did not realize that signing on the deed constituted a waiver, I would be in favor of it, particularly if the deed is to a revocable trust of the other spouse. In this case, it was not a big deal for the surviving spouse since she obtained a life interest in the residence through the trust that was established for her. But under the logic of the case, if the deed was to a revocable trust of the first spouse to die, and that trust did not (or was later changed to not) make a provision for the surviving spouse, the surviving spouse himself or herself could lose all economic rights and benefits in the homestead after the death of the first spouse.
While this case is a Florida case, it is likely of interest to many non-Florida practitioners who represent families with Florida family members or have clients contemplating or making a move to Florida.
Stone v. Stone, Florida 4th DCA, Case No. 4D11-4541, November 12, 2014