tag:blogger.com,1999:blog-155172942024-03-13T19:45:12.598-05:00RUBIN ON TAXAN EASY WAY TO KEEP CURRENT ON TAX AND LEGAL ISSUES RELATED TO FEDERAL AND FLORIDA TAX, ESTATE PLANNING, PROBATE & BUSINESS MATTERSCharles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.comBlogger1527125tag:blogger.com,1999:blog-15517294.post-12744648218919941442023-05-18T17:00:00.007-05:002023-05-18T17:12:49.950-05:00Key Questions & Answers Regarding Florida's New Law Restricting Real Estate Ownership by Persons of Foreign Countries of Concern<p style="text-align: justify;"> </p><p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">To What Does the New Act Apply?<u5:p></u5:p></span></u><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="color: black; font-size: 14pt; line-height: 105%;">Generally, it applies to acquisitions of
defined Florida real property interests by certain described owners. There are
three general categories of prohibited transfer and ownership. To apply the new
provisions, one needs to focus on two separate issues regarding each of the
three categories of prohibition described in the law. The first is to determine
what Florida real property is subject to prohibition under the category and
then what owners are prohibited under the category. For there to be a violation
of a category, the type of real property that is prohibited must be involved,
as well as the defined class of prohibited owner for the category.<u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">The three categories of prohibition are referred to herein
as the "agricultural category," the "protected facilities
category,” and the "PRC category."<u5:p></u5:p></span><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;"><br /></span></p>
<p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Which Real Property Interests Are Covered Under
Each Category?<u5:p></u5:p></span></u><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">For the agricultural category, the applicable Florida real
property is <u>agricultural land.</u><u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">For the protected facilities category, the applicable
Florida real property is <u>real property within 10 miles of a military
installation or critical infrastructure facility in Florida</u>. <u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">For the PRC category, all applicable Florida real property
is <u>all Florida real property</u>.<u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Real property means land, buildings, fixtures, and all
other improvements to land.<u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">OBSERVATION: The prohibitions generally apply to direct and
indirect interests in real property. By use of the word "indirect"
and making exceptions for certain interests in publicly traded corporations
owning the subject Florida real property, the statute is strongly suggestive
that interests in entities (domestic or foreign) not excluded as “de minimus
indirect interests” (which are discussed below) are interests in real property
for this purpose, thus subjecting transfers and ownership of those interests to
the new law in addition to direct interests in real property. Admittedly, the
statute is not a paragon of clarity on this important issue, but if this
broader reading is determined to apply then the scope of the new law is
significantly expanded beyond what many may expect.<u5:p></u5:p></span><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;"><br /></span></p>
<p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Which Owners Are Covered?<u5:p></u5:p></span></u><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Persons prohibited from owning or acquiring prohibited real
property in the agricultural category and the protected facilities category are
the following persons, governmental units, organizations and other entities:</span></p><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><p class="MsoNormal" style="text-align: justify;"><span style="font-size: 14pt; text-indent: -0.25in;">governments,
government officials, political parties, and political party members of a
foreign country of concern;</span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-size: 14pt; text-indent: -0.25in;">various
entities including partnerships, associations, corporations, organizations and
other combinations of persons organized in a foreign country of concern or
having its principal place of business therein and subsidiaries of such
entities;</span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-size: 14pt; text-indent: -0.25in;">any
person domiciled in a foreign country of concern who is not a U.S. citizen or
lawful permanent resident; and</span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-size: 14pt; text-indent: -0.25in;">the
preceding types of persons and entities so described that have a controlling
interest in an entity formed to own Florida real property.</span></p></blockquote><p class="MsoListParagraph" style="text-align: justify; text-indent: -0.25in;"><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">The PRC category covers the same general prohibited owners
but only for such persons and entities of the People's Republic of China. <u5:p></u5:p></span><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;"><br /></span></p>
<p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">What are the "Foreign Countries of
Concern?"<u5:p></u5:p></span></u><o:p></o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: 0in; text-align: justify;"><span face=""Arial",sans-serif" style="color: black; font-size: 14pt;">The
foreign countries of concern are the People's Republic of China, the Russian
Federation, the Islamic Republic of Iran, the Democratic People's Republic of
Korea, the Republic of Cuba, the Venezuelan regime of Nicolás Maduro, and the
Syrian Arab Republic, including any agency of or any other entity of
significant control of such foreign country of concern. <u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: 0in; text-align: justify;"><span face=""Arial",sans-serif" style="color: black; font-size: 14pt;"> <u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: 0in; text-align: justify;"><u><span face=""Arial",sans-serif" style="color: black; font-size: 14pt;">Can You Give Me a Short-Form Summary of the Prohibited Ownership
Categories?<u5:p></u5:p></span></u><o:p></o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: 0in; text-align: justify;"><span face=""Arial",sans-serif" style="color: black; font-size: 14pt;">A</span><span face=""Arial",sans-serif" style="color: black; font-size: 14pt; text-indent: -0.25in;">gricultural:
prohibition on ownership of Florida agricultural land interest by persons,
governmental units, organizations, and entities of any foreign country of
concern.</span></p><p class="MsoListParagraph" style="line-height: normal; margin-bottom: 0in; text-align: justify; text-indent: -0.25in;"><o:p></o:p></p>
<p class="MsoListParagraph" style="line-height: normal; margin-bottom: 0in; text-align: justify; text-indent: -0.25in;"><span face=""Arial",sans-serif" style="color: black; font-size: 14pt;">2.</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 7pt;"> </span><span face=""Arial",sans-serif" style="color: black; font-size: 14pt;">Protected
facilities: prohibition on ownership of any Florida real property interest
located within 10 miles of a military installation or critical infrastructure
facility by persons, governmental units, organizations, and entities of any
foreign country of concern.<u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoListParagraph" style="line-height: normal; margin-bottom: 0in; text-align: justify; text-indent: -0.25in;"><span face=""Arial",sans-serif" style="color: black; font-size: 14pt;">3.</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 7pt;"> </span><span face=""Arial",sans-serif" style="color: black; font-size: 14pt;">PRS:
prohibition on ownership of any real property interest by persons, governmental
units, organizations, and entities of the PRC.<u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: 0in; text-align: justify;"><span style="font-size: 14pt;">There
may be circumstances simultaneously subject to more than one of these
categories. Whether all the provisions of the applicable categories apply in
that circumstance remains to be seen.</span></p><p class="MsoNormal" style="line-height: normal; margin-bottom: 0in; text-align: justify;"><o:p></o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: 0in; text-align: justify;"><span face=""Arial",sans-serif" style="color: black; font-size: 14pt;"> <u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">What Are the Principal Exceptions?<u5:p></u5:p></span></u><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">The categories have various exceptions. These exceptions
include the following:</span></p><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 18.6667px; line-height: 105%;">For de minimis indirect interests in publicly traded entities that own the subject land if a 5% ownership threshold is not violated or it is a non-controlling interest in a domestic entity registered with the SEC as an investment advisor;</span></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 18.6667px; line-height: 105%;">For the protected facilities category and the PRS category, for one residential real property of the owner up to 2 acres in size if various other requirements are met; and </span></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 18.6667px; line-height: 105%;">Property acquired by devise, descent, enforcement of security interests, or collection of debts if the land is divested within three years of the violative acquisition.</span></p></blockquote>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Real property acquired <span style="color: black;">for a
diplomatic purpose that is recognized, acknowledged, or allowed by the Federal
Government is excluded from the law.<u5:p></u5:p></span></span><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;"><span style="color: black;"><br /></span></span></p>
<p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Are Transfers by Gift, Devise, or Descent Subject
to the Law?<u5:p></u5:p></span></u><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Yes!<u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">COMMENT: This greatly expands the persons that have to
address the law to avoid penalty and/or forfeiture. Essentially, any lifetime
or testamentary transfer of prohibited property to a prohibited person violates
the law (subject to the allowed 3 year divestment period). In the case of a
testamentary transfer, presumably, the violation does not occur until the later
date of transfer. What should personal representatives and trustees do when
faced with a mandated prohibited transfer? Does the divestment period remove
them from having any responsibility in these matters when the facts allow for
it? As far as criminal penalties are concerned, as discussed below, these
penalties are likely imposed only on sellers (on the transferor side), so
absent a sale, there should be no exposure to the transferors in gratuitous
transfers, but forfeiture by the transferee remains absent timely divestiture.
If the property is encumbered by debt, does the transfer convert it to a
"sale" for these purposes and subject a knowledgeable transferor to
criminal liability?<u5:p></u5:p></span><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;"><br /></span></p>
<p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">How Does a Transferor Comply With the Law?<u5:p></u5:p></span></u><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">In a purchase and sale transaction, the purchaser must
provide to the seller an affidavit prepared under penalties of perjury that the
purchaser is not a prohibited person (or in the case of the protected
facilities category or the PRC category is otherwise permitted to own the
property under the law) and is in compliance with the provisions of this law.
It would appear (although the statute does not explicitly provide) that a
seller avoids violating the law when the seller receives such an affidavit.
This affidavit is akin to a FIRPTA affidavit that is ubiquitous in real
property transactions, and this affidavit will likely find its way into most
closing procedures. <u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">COMMENT: It does not appear that the affidavit is required
in a gratuitous transfer situation (at least of unencumbered property), since
the statute imposes the obligation on a “buyer.”<u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Alternatively, as to the agricultural category and the protected
facilities category, it appears that the transferor can confirm for itself that
the subject property does not come within the prohibited category when that is
the case. <u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Transferors and closing agents in sales transactions, to
avoid potential penalties where there is no affidavit given, may need to do
their due diligence to confirm as to these two categories that the real
property does not fall into them if they want to proceed to closing. I would
expect title companies and/or other entrepreneurs to develop databases to
assist transferors in making these determinations. This method of compliance
does not apply to the PRC category since it applies to all Florida real
property. Trust settlors, donors, and testators will need to conduct a similar
analysis as to transfers of assets that may constitute Florida real property to
assure the recipient is not a prohibited person or the real property interest
is not of a prohibited type so as to avoid forfeiture risks in the hands of a
prohibited owner-recipient.<u5:p></u5:p></span><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;"><br /></span></p>
<p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">What Is Required as to Applicable Real Property
that a Covered Owner Owns Before July 1, 2023?<u5:p></u5:p></span></u><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Real estate owned in a manner prohibited under the new law
that was held that way on July 1, 2023 does not violate the law and is
grandfathered in, but registration with specified Florida Departments
(depending on what category is involved) must be made by the beginning of 2024.
Failure to file results in a $1,000/day penalty.<u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">COMMENT: So in addition to advising clients in regard to
Florida real property interest transfers, advisors should also assist their
clients who own prohibited real property in meeting the registration
requirements.<u5:p></u5:p></span><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;"><br /></span></p>
<p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Persons Who May be Surprised that the Law
Affects Them</span></u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">.<u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">As noted, non-sale transfers by donors, settlors of trusts,
and testators should not result in criminal liability exposure to the
transferor, but a violative transfer may defeat transferor expectations by
subjecting the property to forfeiture to the state if the property is not
timely divested by the new owner.<u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">The statute includes as prohibited owners a subsidiary of
an entity organized in or principally operating out of a foreign country of
concern. However, the statute does not limit those subsidiaries to subsidiaries
organized in or principally operating out of the foreign country of concern.
Thus, the transfer of Florida real property to any entity may result in
prohibited ownership. Where the transferee is an entity not formed in or not
principally operating out of a foreign country of concern, interested persons
may be surprised that the new law may apply to their transaction. <u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">OBSERVATION: As noted above, the statute is unclear as to
whether a transfer of an interest in an entity that owns a real property
interest subject to ownership prohibition to a prohibited owner is a transfer
subject to the statute – that is, the transfer of an entity interest, and not
just a direct interest in real property, may be prohibited transfer and subject
a knowledgeable transferor to criminal liability. If such indirect transfers
are ultimately determined to be subject to the statute, it dramatically
increases the scope of the law to transfers of interests of entities if such
entities own Florida real property themselves or through subsidiaries. It is
interesting to note that in the area of FIRPTA tax and withholding (Internal
Revenue Code Sections 897 and 1445) relating to dispositions of real property
interests by non-U.S. persons, there is much ink and complexity in the tax
statute and regulations regarding when and how to look through entities that by
analogy should have similar complexity here if this new law covers mere
transfers of interests in entities. Assuming this is what the legislature
intended, one may wonder if it realized the burden it imposes on daily business
and estate planning transactions involving entity interests in Florida that do
not involve the direct transfer of Florida real property.<u5:p></u5:p></span><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;"><br /></span></p>
<p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Who Can Be Penalized</span></u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">?<u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Either or both of the recipient foreign owner and the
transferor is subject to criminal liability. There is also language in the
statute that closing agents may have liability if they have actual knowledge of
a violation of the law, but the statute is not clear on this. There is also
language in the statute that appears to limit criminal liability of transferors
to only those engaged in sale transactions and not gratuitous transfers.<u5:p></u5:p></span><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;"><br /></span></p>
<p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">What Are the Criminal Penalties for
Noncompliance?<u5:p></u5:p></span></u><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">A foreign owner is guilty of a second-degree misdemeanor
(or third-degree felony as to the PRC category). <u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">A seller who knowingly violates the law commits a
second-degree misdemeanor (or first-degree misdemeanor as to the PRC
category). <u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">OBSERVATION: As noted above, by use of the terminology
"seller" in the statute, other transferors, such as donors, trust
settlors, and testators, not engaged in a sale transaction should not be
committing a crime even if they knowingly violate this law.<u5:p></u5:p></span><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;"><br /></span></p>
<p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">What Are Some Other Consequences of
Noncompliance with the Law</span></u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">?<u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Subject to the rights of bona fide lienholders, the subject
property may be forfeited to the State of Florida via a civil action for
forfeiture.<u5:p></u5:p></span><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;"><br /></span></p>
<p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Can Forfeiture Apply if the Real Property is
Homestead Property of the Owner</span></u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">?<u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Perhaps not under Florida’s constitutional protections of
homestead. It is unlikely that prohibited property will constitute homestead
property given the types of owners that are subject to the statute, but there
are some possible circumstances where it may be homestead property of the owner.<u5:p></u5:p></span><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;"><br /></span></p>
<p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Where Should One Look for Further Guidance?<u5:p></u5:p></span></u><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">The law gives direction for the issuance of rules to assist
in the interpretation and application of the new law. In addition, a statutory
direction to create forms of affidavits is also given.<u5:p></u5:p></span><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;"><br /></span></p>
<p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">What is the Effective Date of the New Law?<u5:p></u5:p></span></u><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">July 1, 2023.<u5:p></u5:p></span><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;"><br /></span></p>
<p class="MsoNormal" style="text-align: justify;"><u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">Does the Above Tell Me Everything I Need to
Know</span></u><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">?<u5:p></u5:p></span><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><span face=""Arial",sans-serif" style="font-size: 14pt; line-height: 105%;">No, it is an introductory summary only. This summary is a
preliminary read of a somewhat complex statute, even though it may not appear
so on an initial read-through. The law has a fair amount of detail and should
be consulted to precisely determine when and how it applies. Some of the
descriptions above are based on interpretations by the writer based on
extrapolations from some of the statutory language, which may not be found to
be appropriate or correct by the State of Florida or courts dealing with these
issues. Rules will also be promulgated that are likely to provide more detail
and possibly additional related compliance requirements. Accordingly,
interested persons are encouraged to consult the statute to confirm any of the
preceding statements and for other details of its operation.<u5:p></u5:p></span><o:p></o:p></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-13699088319548077402023-04-16T11:01:00.005-05:002023-04-16T11:59:52.442-05:00New Decision Is a Welcome Clarification of Florida Waiver of Homestead by Deed Issues [Florida]<p style="text-align: justify;">Fla. Stats. Section 732.7025 provides that if a spouse transfers their interest in property that is or will be homestead property of their spouse by using specific language in the deed, then the transferring spouse waives all homestead rights in such property. Thus, for example, their spouse can convey the subject property at death without the limitations on devise that would otherwise apply when there is a surviving spouse.</p><p style="text-align: justify;">That statutory provision is a safe harbor that avoids any question when a waiver will occur. Nonetheless, a waiver by deed can occur outside of that statute. Until now, there has been a fair amount of ambiguity about when a deed will constitute a waiver of homestead rights by a transferring spouse.</p><p style="text-align: justify;">In <u>Stone v. Stone</u>, 157 So.3d 295 (4th DCA 2014), a husband and wife jointly owned homestead property. They then deeded the property to each other as tenants in common, preliminary to subsequently deeding it into separate qualified personal residence trusts. The trial court and the appellate court concluded this was a waiver by the wife of her rights in husband's share of the homestead, per language in the deed that the transferring spouse "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, it would appear that a deed conveying a spouse's entire interest in the subject property can, at least in certain circumstances, constitute a valid waiver. </p><p style="text-align: justify;">What are those circumstances? Note the use of the terms “hereditaments” and “releases” in the <u>Stone</u> deed. In <u>Habeeb v. Linder</u>, 2011 WL 613392, 36 FLW D300 (3rd DCA 2011), <i>withdrawn by</i> 64 So.3d 1275, a husband and wife owned homestead property as tenants by the entireties. During the marriage, title was transferred by husband and wife via a warranty deed to the husband. The deed did not have any language of waiver or homestead. The wife died first, and the issue arose whether the husband had homestead rights to the homestead. The trial court found the deed to constitute a valid waiver of homestead rights by the husband, and Florida's 3rd District Court of Appeal affirmed, noting the use of the term “hereditaments” in the deed involved in that case. The court noted that hereditaments means inheritance rights, and thus by signing a deed with that term in it, the wife waived all of her inheritance rights including her homestead rights. However, the 3rd DCA eventually withdrew its opinion. As such, the case has no precedential value. While <u>Stone</u> also had the hereditaments language, the appellate decision did not provide that it was the reason for its finding of waiver (although the language was included in an excerpt from the subject deed). Thus, uncertainty remained after <u>Stone</u> as to what particular circumstances allowed for a waiver by deed. In 2023, much of this uncertainty was resolved. </p><p style="text-align: justify;">In <u>Thayer and Jefferson v. Hawthorn</u>, No. 4D22-244, 2023 WL 2903993 (4th DCA) Apr. 12, 2023), the 4th DCA, which had decided <u>Stone</u>, has now taken another bite at the apple. In <u>Thayer</u>, the subject deed signed by the transferring spouse did not have language of transfer of hereditaments nor language of release. In the search for language of waiver, the appellate court compared the deed in <u>Thayer</u> and the deed in <u>Stone</u>, and found the lack of hereditament and release language significant enough that the waiver found in <u>Stone</u> should not extend to the deed in <u>Thayer</u>. The appellate court also noted that the acknowledgement in the deed that the transferee trustees had “full power and authority to protect, conserve, sell, lease, encumber or otherwise to manage and dispose of the real property described herein” was not equivalent to a transfer of “all rights” under Fla.Stats. §732.702(1) that would give rise to a homestead waiver. Further, the court noted the burden on a party asserting waiver to sustain their position since “language waiving a constitutional right must be able to be clearly understood as waiving the right.” That <u>Stone</u> and <u>Thayer</u> were both promulgated by the 4th DCA effectively requires them to be read together and that <u>Thayer</u> acts as a clarification and modification of <u>Stone</u> with precedential authority. There is language in the opinion that suggests that if called upon to rule again on <u>Stone</u> that the court might not have found a waiver there when it said “[w]hile one may question whether the language in <u>Stone</u> was sufficiently specific to waive homestead, it is still more specific than the deed's language in this case.” Having concluded that the deed in <u>Thayer</u> was not a waiver, the court also concluded that the deed could not be corrected to treat it as a waiver based on external evidence of the parties’ intent, such as testimony of the estate planning attorney who was involved in the transfer by deed. </p><p style="text-align: justify;">Reading the case law together, it is a fair conclusion that specific language of release, waiver, or at least reference to transfer of hereditaments is now required in a deed for the deed to constitute a waiver by deed (except as waivers under Fla.Stats. §732.7025). Thayer is a welcome clarification on this issue. </p><p style="text-align: justify;">Interestingly, neither <u>Thayer</u> nor <u>Stone</u> discussed the fair disclosure requirements of Fla.Stats. §732.702(2). Perhaps the court presumed that the only item requiring disclosure was the subject property which was already described on the deed, the issue was not brought to the court’s attention, or full disclosure occurred but was not mentioned in the court’s opinions.</p><p style="text-align: justify;">In preparing a deed of property that will remain homestead property of the transferor’s spouse, if a waiver of homestead rights is not desired, care should be taken to avoid language of waiver, release, ‘all rights,’ and assignment of hereditaments (and similar language). </p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-77837688779592339862022-08-28T18:08:00.001-05:002022-08-29T22:03:02.056-05:00Landmark Florida Supreme Court Decision on Homestead Protections Has Been Written Out of the Law by Two Appellate Courts, and No One Appears to Have Noticed<p style="text-align: justify;"> SUMMARY: In <u>Havoco of America, Ltd. v. Hill</u>, the Florida Supreme Court ruled that the Florida constitutional protections of homestead property against creditor claims trump Florida's fraudulent transfer laws. Thus, homestead protections include nonexempt assets that are added to or invested in a homestead, even if added with the intent to delay, hinder or defraud creditors. However, in a recent appellate opinion, this recognition was effectively ignored and, in practice, vitiates the holding of <u>Havoco</u>. And this is the second time an appellate court has done so in recent years.</p><p style="text-align: justify;">FACTS: Article X, section 4(a) of the Florida Constitution exempts from forced sale the homestead of a natural person, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement, or repair thereof, or obligations contracted for house, field or other labor performed on the realty. Aside from these explicit three exceptions to homestead protection, over time, Florida case law has developed some additional exceptions, principally relating to equitable liens for bad acts of the owner. In <u>Havoco</u>, the Florida Supreme Court limited the scope of this equitable lien exception for protection, holding that a transfer of assets into a homestead with the intent to delay, hinder or defraud creditors is not enough, by itself, to give rise to an equitable lien that defeats the homestead protection. It further provided Florida's Uniform Fraudulent Transfer Act (FUFTA) has no effect on the constitutional protection. However, the court did allow that an equitable lien could arise when the funds invested were obtained through theft, fraud, or egregious conduct – something akin to a source of funds exception.</p><p style="text-align: justify;"><u>Havoco </u>specifically provided: </p><p style="text-align: justify;">The federal courts which have addressed the applicability of section 726.105 [Florida's Uniform Fraudulent Transfer Act] to homestead claims have concluded that it has no effect on the constitutionally created homestead exemption … We agree.</p><p style="text-align: justify;">So unless the funds invested in the homestead were obtained through theft, fraud, or egregious conduct, the homestead remains protected per <u>Havoco</u>. One conceptual way to summarize this is that a fraudulent transfer is not the fraud, theft, or egregious conduct that vitiates constitutional protection. Such fraud must be something beyond the incidents of a fraudulent transfer, such as common law fraud (generally requiring a misrepresentation or intentionally false statement or concealment) or similar egregious action.</p><p style="text-align: justify;">In <u>Renda v. Price</u>, a recent Florida appellate decision, a $10 million judgment was obtained against a corporation relating to an automobile accident. Arrangements were made for corporate assets to reach the wife of the corporation's owner, after which the wife sold the assets and invested them in homestead property. The judgment holder sought to reach the homestead assets. The trial court allowed the equitable lien, predicated on the defendant's conduct constituting "badges of fraud" as enumerated by FUFTA, but would not allow the judgment creditor to foreclose on it. Florida's Fourth District Court of Appeals upheld the lien and also allowed foreclosure to proceed. The appellate court noted that under <u>Havoco</u>, an equitable lien on homestead property could attach and be foreclosed when the property was acquired with funds generated by fraudulent or egregious activity. It effectively found that the homestead was purchased with funds obtained by fraud and thus could be reached by the creditor. The appellate court did not indicate what the fraud was, other than indirectly, by reference to the trial court's finding of fraud via the existence of badges of fraud under FUFTA. So, while <u>Havoco </u>specifically provided that a fraudulent transfer is not the fraud that vitiates constitutional protection, the trial and appellate courts found the "fraud" that <u>Havoco</u> allowed to allow an equitable lien was the indicia (badges of fraud) that are used to establish a fraudulent transfer. </p><p style="text-align: justify;">COMMENT: <u>Havoco</u> says the application of FUFTA, even with the intent to defraud, does not override the constitutional protection – the subject assets must have been obtained by fraud or other egregious behavior. That is, the subject assets must be obtained by fraud or egregious behavior beyond the behavior that gives rise to a fraudulent transfer under FUFTA. If the only bad behavior is the behavior described in FUFTA (which appears to be the case in <u>Renda</u>), then the holding in <u>Havoco</u> is written out of the law when the only "fraudulent behavior" are badges of fraud indicia under FUFTA. That is, the <u>Renda</u> courts are saying that the "fraud" exception to <u>Havoco</u> is met by a mere finding of a fraudulent transfer under FUFTA by reason of badges of fraud thereunder that are used to prove requisite intent. With that logic, the Florida Supreme Court's holding that a mere fraudulent transfer under FUFTA is not enough to void the constitutional protection is vitiated since only elements of FUFTA are being used to demonstrate fraud outside of FUFTA. While <u>Havoco</u> also allows an equitable lien when the subject proceeds are obtained by egregious behavior, the defendant's conduct, whether called egregious or not, is not bad behavior beyond the badges of fraud provided in the fraudulent transfer statute, so the egregious label should not weaken the continued constitutional protection. There is no suggestion in the opinion that the subject assets were obtained via "theft."</p><p style="text-align: justify;">This is not the only appellate court to make a similar argument. In 2014, in the bankruptcy case of <u>In re Bifani</u>, a debtor in bankruptcy fraudulently transferred property to his cohabitating girlfriend. The girlfriend sold the property and invested $669,233 of the proceeds to purchase a home in Sarasota, Florida. The debtor and the girlfriend then resided together at the home, which qualified as homestead property of the debtor's girlfriend. The bankruptcy trustee went after the girlfriend and persuaded the Bankruptcy Court to impose an equitable lien on the homestead. The Bankruptcy Court imposed the lien and did this based on general equitable principles, noting "the court may impose an equitable lien if the general considerations of right and justice dictate that one party has a special right to a particular property and there is an absence of an available lien or no adequate remedy at law." Interestingly, there is no reference to or consideration of the above-quoted language of <u>Havoco</u> declaring that the specific intent to defraud creditors does not void the homestead protection from creditors.</p><p style="text-align: justify;">The Bankruptcy Court opinion was appealed to the U.S. District Court for the Middle District of Florida. Here, that court picks up on the limitations that <u>Havoco</u> imposed and reverses the Bankruptcy Court. The analysis is instructive: </p><p style="text-align: justify;">Florida's appellate courts have interpreted <u>Havoco</u> to limit equitable liens on homesteads to cases "in which the homesteads were purchased with the fruits of fraudulent activity." Willis v. Red Reef, Inc., 921 So. 2d 681, 684 (Fla. 4th DCA 2006). Those cases do not include situations where the homestead owner converted otherwise reachable funds into an exempt homestead, even if this is done through a fraudulent transfer made with the intent to hinder, delay, or defraud creditors. Id.; See Dowling, 2007 WL 1839555, at *4 ("[T]he homestead exemption does not contain an express exception for real property that is acquired in Florida for the sole purpose of defeating the claims of out-of-state creditors."); Conseco Servs., LLC v. Cuneo, 904 So. 2d 438, 440 (Fla. 3d DCA 2005) ("It is not enough that the Cuneos transferred their nonexempt funds to an exempt asset to keep those funds from creditors. If a debtor acquires homestead property with the 'specific intent to hinder, delay, or defraud creditor,' the property still enjoys Florida's constitutional homestead protection.”). <u>Havoco</u> and its progeny instruct that the fraudulent transfer of assets into a homestead does not provide a basis for the imposition of an equitable lien. The Bankruptcy Court, therefore, abused its discretion by imposing an equitable lien on LaMarca's homestead, as the lien infringes on the homestead exemption granted in article X, section 4 of the Florida Constitution.</p><p style="text-align: justify;">All is well that ends well? Not quite. On appeal, the 11th Circuit Court of Appeals reversed the U.S. District Court and allowed the equitable lien to attach to the girlfriend's homestead property. The court noted that while <u>Havoco</u> allows homestead creditor protection to continue for funds put into a homestead, that is not the case where funds obtained through fraud or egregious conduct were used to invest in, purchase, or improve the homestead. The court went on to find "fraud" that allowed the equitable lien due to various badges of fraud under the fraudulent conveyance statute – exactly what also occurred in <u>Renda</u> in the first case discussed above – and with the same effective overwrite of the holding of <u>Havoco</u>.</p><p style="text-align: justify;">It is the author's opinion that these appellate courts have confused the typical legal definition of "fraud" with "fraudulent transfer" and concluded that a fraudulent transfer constitutes fraud. They would not be the first courts to conclude that a "fraudulent transfer" constitutes fraud under law. Indeed, more modern fraudulent transfer statutes such as the Uniform Voidable Transfer Act intentionally eschew the terms "fraud" and "fraudulent" to avoid unintended characterizations. An article on the subject provides:</p><p style="text-align: justify;">The driving force behind the change is the concept of "constructive fraud," which permits the avoidance of transfers made or of obligations incurred by an insolvent debtor in exchange for less than reasonably equivalent value. Although denominated as "fraud," a constructively fraudulent transfer involves neither fraud nor improper intent, creating confusion among some courts that have issued rulings improperly limiting the scope of the avoidance remedy. To address these concerns, the word "fraud" has been supplanted by the term "voidable" in nearly every portion of the UVTA and the Commission's official comments. Moreover, the UVTA adopts the more aggressive view that even "actually fraudulent" transfers do not require fraud. In lieu of the traditional standard applied to transfers made with the intent to "hinder, delay or defraud" creditors, the comments to the UVTA shift the inquiry to "hinder or delay" and substitute the idea of "unacceptably contraven[ing] norms of creditors' rights" as the measure for when efforts to hinder or delay render a transaction voidable. Uniform Voidable Transactions Act Approved by Uniform Law Commission to Replace UFTA, Jones Day Publications, September/October 2014.</p><p style="text-align: justify;">Presently, a motion for rehearing, for rehearing en banc, and/or certification of the issue to the Florida Supreme Court is pending in <u>Renda</u>. One can only hope that the issue is revisited, and the improper overwriting of the holding in <u>Havoco</u> is recognized and reversed. Or barring that, that an appeal is taken to and accepted by the Florida Supreme Court to protect its holding in <u>Havoco</u>.</p><p style="text-align: justify;">CITES: Fla. Const. Article X, section 4(a); Florida Statutes Chapter 726; <u>Havoco of America, Ltd. v. Hill</u>, 790 So.2d 1018 (Fla. 2001), <u>Renda v. Price</u>, No. 4D21-534, 2022 WL 2962564 (Fla. Dist. Ct. App. July 27, 2022); <u>In re Bifani</u>, 493 B.R. 866 (Bankr. M.D. Fla. 2013); <u>Uniform Voidable Transactions Act Approved by Uniform Law Commission to Replace UFTA</u>, Jones Day Publications, September/October 2014.</p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-35681115580508493102022-07-31T12:32:00.002-05:002022-07-31T12:32:44.182-05:00IRS COLLECTION ACTIVITIES AGAINST OVERSEAS ASSETS<p style="text-align: justify;">The IRS Chief Counsel's Office has issued a Program Manager Technical Advice regarding questions about IRS activity to collect tax delinquencies from assets located outside of the U.S. While some of the Advice is fairly technical, it does provide some interesting information on what the IRS can and cannot do in this arena and some of the approaches they will take.</p><p style="text-align: justify;">Some of the collection avenues the IRS may take include:</p><p></p><ul style="text-align: left;"><li style="text-align: justify;">The input of a Treasury Enforcement Communications System (TECS) Lookout Indicator. This is a mechanism to help locate a taxpayer's location.</li><li style="text-align: justify;">Initiation of an outbound Mutual Collection Assistance Request (MCAR) to a treaty partner.</li><li style="text-align: justify;">Levy on a domestic branch of a foreign bank </li><li style="text-align: justify;">Bringing a lawsuit to repatriate assets.</li><li style="text-align: justify;">Issuance of Letter 6152, Notice of Intent to Request U.S. Department of State to Revoke Your Passport.</li><li style="text-align: justify;">Referral to U.S. Dept. of State (DOS) for passport revocation after Letter 6152 issuance.</li></ul><div style="text-align: justify;">The IRS can proceed along multiple lines at the same time, except the final item above can commence only after Letter 6152 is sent. The Advice notes that if lien or levy action has already occurred to collect a seriously delinquent tax debt under the passport revocation procedures, the IRS does not have to undertake further collection action after issuing a Letter 6152 before referring the matter to the DOS for passport revocation.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The IRS may use FATCA data from taxpayer filings to assist in locating foreign assets, but with some limitations on FATCA data obtained under a treaty.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The Advice also discusses the ability of a taxpayer to obtain information on these collection processes in discovery in a federal lawsuit or in a Freedom of Information Act (FOIA) request, and what objections to disclosure can be made by the IRS to such disclosure attempts.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>Program Manager Technical Advice 2022-006</i></div><p></p><p style="text-align: justify;"> </p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-23743287875770280402022-07-21T18:47:00.000-05:002022-07-21T18:47:07.149-05:00New Retirement Plan Distribution Rules Likely on the Way<p style="text-align: justify;">Several years ago, the SECURE Act was passed, which had major changes to the tax rules relating to retirement plan distributions. Another act on that subject is working through Congress - the Enhancing American Retirement Now (EARN) Act. A version has passed the House of Representatives, with the Senate working on its own version. Given the almost unanimous passage by the House, there is a very good chance that the Act will make its way into law.</p><p style="text-align: justify;">We cannot tell what all the provisions will be, but here is a list of items that are in one or both of the House and Senate bills and thus have a reasonably good chance of being in the final version:</p><p></p><ul style="text-align: left;"><li style="text-align: justify;">extending the date on which the required beginning date is based, from the year in which the employee or IRA owner reaches age 72 to the year in which he or she reaches age 75, effective after 2031</li><li style="text-align: justify;">allowing up to $2,000 per year of 401(k) assets to be used for long-term care insurance</li><li style="text-align: justify;">reducing the Code Sec. 4974 50% excise tax on the failure to take a required minimum distribution to 25% and reducing it to 10% for an individual who, during a correction window, corrects the shortfall and submits a return reflecting the tax</li><li style="text-align: justify;">indexing for inflation the $100,000 limitation on qualified charitable distributions from an IRA and permitting a one-time election to treat up to $50,000 in distributions (also indexed for inflation) from an IRA to a charitable remainder trust or charitable gift annuity as if they were made directly to a qualifying charity</li><li style="text-align: justify;">excluding from the additional 10% tax on early distributions under Code Sec. 72(t), distributions made to a terminally ill individual; </li><li style="text-align: justify;">excluding from the additional 10% tax on early distributions under Code Sec. 72(t), distributions of up to $1,000 per year to meet expenses relating to personal or family emergencies</li><li style="text-align: justify;">excluding from the 10% additional tax on early distributions under Code Sec. 72(t), eligible distributions of up to $10,000 (or, if less, 50% of the account balance) for distributions to domestic abuse victims</li></ul><p></p><p><br /></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-40101149054910356972022-07-10T16:39:00.001-05:002022-07-10T16:39:12.118-05:00Time Period to File Estate Tax Return to Make Portability Election Extended to 5 Years<p style="text-align: justify;">If a spouse dies and his/her estate does not fully use the decedent's remaining unified credit, the surviving spouse can use the unused credit if certain conditions are met. One of the conditions is that an estate tax return is filed for the decedent that makes a portability election, even if no estate tax return is otherwise needed.</p><p style="text-align: justify;">An estate tax return is due 9 months after death, with an automatic extension granted for 6 months if timely requested. When no return is required, a return being made solely to make a portability election can be filed late, up to two years after death of the first spouse, if the extension procedures of Rev.Proc. 2017-34 are followed (generally, filing a return within that time period while adding a specified legend to the top of the return). </p><p style="text-align: justify;">This two year period has now been extended to 5 years. This was principally due to the IRS receiving too many Form 9100 requests (requiring a private letter ruling) after the two year period but often within 5 years. To save IRS resources, the extension period is now 5 years.</p><p style="text-align: justify;">Note that if it turns out that an estate tax return was otherwise required, the extension is null and void.</p><p style="text-align: justify;"><a href="https://www.irs.gov/pub/irs-drop/rp-22-32.pdf" target="_blank">Rev.Proc. 2022-32</a></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-61599421454770047792022-05-15T13:00:00.001-05:002022-05-15T13:00:11.917-05:00HUSBAND USES TENANCY BY ENTIRETIES PROPERTY TO MAKE A GIFT TO GIRLFRIEND - WHAT'S THE REMEDY?<p style="text-align: justify;">In Florida, tenancy by entireties (TBE) property of two spouses provides various benefits. These include protection of the assets against creditors of only one spouse, avoidance of probate, and protection of one spouse from unauthorized disposition of TBE property by the other.</p><p style="text-align: justify;">Regarding this last point, it is well settled in Florida that an estate by the entireties is vested in the husband and wife as one person, and neither spouse can sell, forfeit, or encumber any part of the estate without the consent of the other, nor can one spouse alone lease it or contract for its disposition without such consent. </p><p style="text-align: justify;">What happens if this is violated? If this rule is violated, can the injured spouse recover the assets from a third party recipient, or is the remedy of the injured spouse only a judgment against the wrongful spouse and collection from the assets of that spouse? Where the wrongful spouse has insufficient assets to make the injured spouse whole, the ability to collect against the transferred assets could be critical to the injured spouse.</p><p style="text-align: justify;">A recent Florida case summarizes and applies the law in Florida on this issue. In the case, the husband diverted millions of dollars of TBE property to the husband's girlfriend. While a matter of dispute, the trial court believed this was done without the wife's consent.</p><p style="text-align: justify;">The court allowed a constructive trust to be applied to the assets in the hands of the girlfriend. Interestingly, and importantly, the court noted that such a constructive trust can be imposed even if the recipient did not engage in any wrongful conduct. Thus, the case confirms that an injured spouse can go against the recipient of property to collect back any property transferred without the injured spouse's consent.</p><p style="text-align: justify;"><i>Wallace v. Torres-Rodriguez, 3rd DCA 5/11/22</i></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-64061275254856044252022-04-01T18:10:00.001-05:002022-04-01T18:10:04.808-05:00WHAT DOMESTIC ESTATE PLANNERS SHOULD KNOW ABOUT BRUSSELS IV<p style="text-align: justify;"> Ask many estate planners in the U.S. about Brussels IV, and you are apt to get the response “Brussels for what?” While in effect since 2015, it is more unknown than known. In most circumstances, Brussels IV will not impact estate planning in the U.S. But if a U.S. citizen owns assets situated in the European Union (“EU”), Brussels IV can provide substantial benefits and should always be considered by the estate planner.</p><p style="text-align: justify;">Brussels IV is the common name used to refer to Regulation (EU) No. 650/2012 of the European Parliament and the Council of the European Union. It is an extensive provision enacted in 2012 that is intended to address the substantial differences in laws of succession that apply among various EU member states. For instance, the different members of the EU have different forced heirship provisions. A decedent residing in one state with property in another may find forced heirship applying to the property in one country even though that concept is not applied, or is applied with different rules and property divisions, in his or her country of residence. A key aspect is that it provides a default mechanism for determining which laws will apply to the succession of a decedent’s assets in the EU and to allow one EU nation’s laws to apply to the succession of all of a decedent’s EU property. The default provision under Brussels IV is that the law applicable to the succession of a decedent’s property as a whole will be the country in which the deceased has his or her habitual residence at the time of death.</p><p style="text-align: justify;">So what does this have to do with U.S. citizens? U.S. citizens with property in an EU country (especially real property and other physical property, but not necessarily limited to that) may find that such property is subject to forced heirship that defeats the intent of the owner and may create U.S. transfer tax issues. For example, if the owner desires to leave all assets to a surviving spouse, or to have a standard A/B trust division between a marital gift and a family trust to use unified credit, the assets in the EU country may have to pass to in part to children under a forced heirship regime. This can defeat both the desired disposition and result in estate taxes that could have been avoided through a larger marital deduction gift. </p><p style="text-align: justify;">What Brussels IV allows is that a national of any country, even one outside of the EU, can elect to apply the succession law of his own nationality to property situated in the EU. Thus a U.S. citizen can elect to apply the law of a U.S. state to the succession of his or her property in the EU, even if the EU country in which the property is located has forced heirship laws that would force dispositions of some or all property to spouses and/or other family members in fixed shares. Therefore, estate planners with clients holding EU assets should give serious consideration to electing to apply U.S. state law to avoid EU forced heirship laws, and also avoid uncertainties about which country’s succession laws apply to which properties.</p><p style="text-align: justify;">The election to apply U.S. state law goes beyond mere forced heirship planning. It can smooth the entire estate administration process, since the election of law of the national will result in having that law apply to all of these succession issues: (a) the causes, time and place of the opening of the succession; (b) the determination of the beneficiaries, of their respective shares and of the obligations which may be imposed on them by the deceased, and the determination of other succession rights, including the succession rights of the surviving spouse or partner; (c) the capacity to inherit; (d) disinheritance and disqualification by conduct; (e) the transfer to the heirs and, as the case may be, to the legatees of the assets, rights and obligations forming part of the estate, including the conditions and effects of the acceptance or waiver of the succession or of a legacy; (f) the powers of the heirs, the executors of the wills and other administrators of the estate, in particular as regards the sale of property and the payment of creditors; (g) liability for the debts under the succession; (h) the disposable part of the estate, the reserved shares and other restrictions on the disposal of property upon death as well as claims which persons close to the deceased may have against the estate or the heirs; (i) any obligation to restore or account for gifts, advancements or legacies when determining the shares of the different beneficiaries; and (j) the sharing-out of the estate. </p><p style="text-align: justify;">The election is made via putting a provision to that effect in a testamentary document (usually a Last Will), although the election can be implied. There are provisions that deal with which state’s law (within the U.S.) can be elected, which is generally resolved by U.S. conflict of law provisions.</p><p style="text-align: justify;">There are some provisos. First, there are a few EU member states that have elected out of Brussels IV. Therefore, a review and determination are needed in planning that the EU member state that holds the property has not elected out. Second, presently France has enacted domestic legislation that under some circumstances may override Brussels IV and allow its domestic succession law to nonetheless apply. Whether that law will be allowed to override Brussels IV will likely be an issue litigated in the EU at some point. Third, Brussels IV does not affect the taxing jurisdiction of the EU member states. Lastly, there is some uncertainty about how this interfaces with marital law. Therefore, a planner should consider consulting with local counsel to confirm Brussels IV will apply, and what local tax and other consequences and issues may arise.</p><p style="text-align: justify;">Planners may also want to consider a boilerplate provision in their estate planning documents making the election to apply U.S. succession law (after discussion with their clients) as most U.S. nationals would likely want to apply the U.S. succession law in lieu of the EU member state law. Having such a provision will also cover the situation of the acquisition of EU property after the estate planning documents have been prepared.</p><p style="text-align: justify;"><a href="https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A32012R0650"><i>Regulation No. 650/2012</i></a> </p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-50647068404699289962021-12-14T17:57:00.002-05:002021-12-14T17:57:19.253-05:00FBAR Case Reversed - Nonwillful Filing Penalties Based on Number of Accounts Not Reported<p style="text-align: justify;">Back in 2000, I wrote <a href="http://rubinontax.floridatax.com/2020/07/fbar-non-willful-penalty-not-calculated.html">here</a> about a case where a taxpayer did not report multiple foreign accounts on an FBAR. The question for the court was whether the $10,000 penalty for a nonwillful failure to file meant $10,000 per return not filed, or $10,000 per account not reported on the return. For a multi-year failure to file, if there are a lot of accounts this could dramatically impact how large the penalties are. The court held the penalty is based on a per return not filed basis.</p><p>The 5th Circuit Court of Appeals has reversed the trial court and allowed the penalty be imposed on a per account basis, and thus vastly increased the penalties for the taxpayer.</p><p><a href="https://www.ca5.uscourts.gov/opinions/pub/20/20-40597-CV0.pdf"><i>U.S. v. Bittner</i>, Case No. 20-40597 (5th Cir. Nov. 30, 2021)</a> </p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-27915324990827504452021-12-05T20:31:00.003-05:002021-12-05T20:31:36.099-05:00Broad Reading of Six Year Statute of Limitations for Subpart F Omission<p style="text-align: justify;">Code Sec. 6501(e)(1)(C) extends the normal three-year statute of limitations on assessment to six years as to omissions of Subpart F income. In a Chief Counsel Advice, the extended six-year period was determined to apply to the entire tax liability of the corporation for that year, not just to the specific subpart F items constituting the gross income omission.</p><p><i>Chief Counsel Advise 202142009</i></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-17199222484517378142021-11-22T18:39:00.005-05:002021-11-22T18:40:20.190-05:00Of Spousal Gifts and the Substance Over Form Doctrine<div style="text-align: justify;"><br /></div><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">U.S. spouses each have a unified credit that allows for substantial gifting to third parties without requiring the payment of gift tax. What happens if one spouse has assets to be gifted away, but that spouse does not have sufficient remaining unified credit exemption to cover the gift and wants to use the exemption of the other spouse?</span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: left;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">At times, the spouses can agree to split the gift for gift tax purposes, which treats 1/2 the gift as coming from each spouse. This allows the unified credit of the spouse not making the gift to be used to avoid gift tax on the 1/2 that such spouse is treated as making. However, it can be an imperfect solution if the spouse with the assets does not have enough unified credit to offset his or her 1/2 of the gift.</span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Oftentimes, the parties may contemplate having the party with the assets transfer them by gift to the other spouse (a tax-free gift under the gift tax marital deduction), and then the receiving spouse makes a gift to the third party applying his or her own unified credit. The question in these circumstances is whether the IRS will respect the transaction and allow the receiving spouse's unified credit to be applied to the gift to the third party, or whether it would seek to apply the "substance over form" doctrine to treat the gift as coming from the spouse who transferred the assets to the other spouse and does not have enough unified credit to fully cover the gift.</span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">This is not a black and white issue. On one end of the spectrum, ideally, you have a transfer between the spouses occurring many months or years before the subsequent gift to the third party, with no intent to make a gift to a third party before the transfer between spouses, and the receiving spouse has no restrictions on the use of the received property and takes full and complete ownership over it. It is safe to say that the IRS would have an extremely difficult time imposing the substance over form transaction in this circumstance.</span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">On the other end of the spectrum, there is an almost simultaneous transfer from one spouse to the other and then the gift to the third party, the recipient spouse is not treated as owning the asset for income tax purposes, and the recipient spouse effectively has no legal ownership or control of the asset or the ability not to make the transfer to the third party. In other words, you would have the facts of </span><u style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Smaldino v. Commissioner</span></u><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">, a recent Tax Court case. In this case, the husband made a gift of an asset to his wife a day before she made the gift to a third party. The Tax Court applied the substance over form doctrine and treated the husband as the one that made the gift to the third party - thus, the unified credit of the wife could not be applied to the gift to reduce or eliminate gift taxes.</span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">There were a number of particular facts that made it easier to sustain the substance over form argument. A review of those facts will help taxpayers avoid the application of the doctrine by avoiding as many of those facts as much as possible:</span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> a. The transfer to the spouse occurred the day before the transfer to the third party. Clearly, the more time between the transfers, the better.</span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> b. The recipient spouse did not receive real ownership of the transferred property so that she could have disposed of it other than by a subsequent gift. The court found that since the amount transferred was not even determined, pursuant to a valuation clause, until four months after the transfer, by that time the property had already been transferred by the wife. So the wife never had control of the property. Getting the recipient spouse true and effective ownership of the asset should be done.</span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: left;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> c. The transferred property was an LLC interest, but the tax return of the LLC never reflected even the one day of ownership of the wife. Her ownership was never reflected in an operating agreement, either. Thus, the income tax and gift tax reporting was inconsistent.</span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> d. Husband and wife had a prearranged plan for her to gift the received property, which the wife admitted.</span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent none repeat scroll 0% 0%; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> e. The gift tax appraisals did not separately value the interest passing from one spouse to the other and onto the recipient from a separate transfer that the husband made directly to the recipient. That is, the wife's ownership and transfer to the recipient was disregarded.</span></p><p style="text-align: left;"><i>Smaldino v. Commissioner, U.S. Tax Court (November 10, 2021)</i><br /></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-44815485738614277772021-11-18T19:47:00.006-05:002021-11-18T19:47:52.003-05:00Increases in Estate and Gift Tax Exemption Amounts Announced by IRS<p style="text-align: justify;">We have gone from scrambling to deal with a decrease in the unified credit under proposed legislation, to now enjoying the 2022 inflation adjustments. Enjoy!</p><p style="text-align: justify;"><u>2022 Annual Gift Tax Exclusion</u> - increased to $16,000 from $15,000. Good news, but makes it a little harder to do the math for mutliple gifts in your head.</p><p style="text-align: justify;"><u>2022 Estate/Gift/GST Exemption</u> - increased to $12.06 million from $11.7 million.</p><p style="text-align: justify;"><u>2022 Annual Exclusion Gift to non-U.S. Citizen Spouse</u> - increased to $164,000.</p><p style="text-align: justify;">Let's not forget my favorite annual amount announcement - for calendar year 2022, the tax imposed under§ 4161(b)(2)(A) on the first sale by the manufacturer, producer, or importer of any shaft of a type used in the manufacture of certain arrows is $0.55 per shaft.</p><p style="text-align: justify;"><i><a href="https://www.irs.gov/pub/irs-drop/rp-21-45.pdf" target="_blank">Rev.Proc. 2021-45</a></i></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-51825360347702910492021-11-18T19:33:00.001-05:002021-11-18T19:33:23.482-05:00Clock is Ticking to Request Older Copies of Forms 706 and 709 from the IRS<p style="text-align: justify;"> The IRS presently has a 75-year retention period for estate tax returns and related gift tax returns. It is going to reduce that period to 40 years. They are advising taxpayers who want copies of returns older than 40 years to request now (more precisely, by Feburary 11, 2022) or forever hold your peace. To obtain a copy, use Form 4506 to make the request. For more on this change of policy, visit the IRS website <a href="https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax" target="_blank">at https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax</a>.</p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-44557706148818338722021-09-15T18:12:00.000-05:002021-09-15T18:12:34.088-05:00Indirect Loans Between a Private Foundation and a Disqualified Person Are on the IRS' Radar<p style="text-align: justify;">Code Section 4941(d)(1)(B) treats lending transactions between a private foundation and disqualified person as an act of self-dealing (although an interest-free loan by the disqualified person to the private foundation is not self-dealing) subject to an excise tax. What happens if the private foundation owns an interest in an entity, and that entity holds a promissory note of a disqualified person? Does this avoid self-dealing?</p><p style="text-align: justify;">In Rev. Proc. 2021-40, the IRS advises that it will no longer issue private letter rulings regarding the applicability of the self-dealing rules under this fact pattern. Taxpayers should take this as a warning that the IRS may seek to treat such arrangements as self-dealing.</p><p></p><p><i>Rev Proc 2021-40, 2021-38 IRB</i><br /></p><p><br /></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-30431522227897036182021-08-15T17:09:00.000-05:002021-08-15T17:09:08.257-05:00Foreign Grantor Trust Making a Distribution to Owner/Beneficiary - One or Two Penalties for Nonreporting?<p style="text-align: justify;"> <span style="font-family: Calibri; font-size: 11pt;">A U.S. grantor of a
foreign trust that is a grantor trust that receives a distribution from the
trust as a beneficiary has two U.S. filing requirements attributable to the
foreign trust status:</span></p>
<p style="font-family: Calibri; font-size: 11pt; margin: 0in; text-align: justify;"> </p>
<ol style="direction: ltr; font-family: Calibri; font-size: 11pt; margin-bottom: 0in; margin-top: 0in; unicode-bidi: embed;" type="a">
<li style="margin-bottom: 0px; margin-top: 0px; text-align: justify; vertical-align: middle;" value="1"><span style="font-size: 11pt;">Code Section 6048(b) requires
U.S. owners of any portion of a foreign trust to ensure that the trust files a return for the tax year. A 5% penalty applies for noncompliance
under Code Section 6677(b).</span></li>
<li style="margin-bottom: 0px; margin-top: 0px; text-align: justify; vertical-align: middle;"><span style="font-size: 11pt;">Code section 6048(c) requires
U.S. beneficiaries of a foreign trust that receive a distribution from the trust to report the distributions. A 35% penalty applies for noncompliance
under Code Section 6677(a).</span></li>
</ol>
<p style="font-family: Calibri; font-size: 11pt; margin: 0in; text-align: justify;"> </p>
<p style="font-family: Calibri; font-size: 11pt; margin: 0in; text-align: justify;">Forms 3520 and
3520-A are used for these reportings.</p>
<p style="font-family: Calibri; font-size: 11pt; margin: 0in; text-align: justify;"> </p>
<p style="font-family: Calibri; font-size: 11pt; margin: 0in; text-align: justify;">Before his death,
Joseph A. Wilson received a $9.2 million distribution from a foreign grantor trust of
which he was 100% owner. No filings were made under the above two provisions. The IRS imposed a 35% penalty of $3,221,183.</p>
<p style="font-family: Calibri; font-size: 11pt; margin: 0in; text-align: justify;"> </p>
<p style="font-family: Calibri; font-size: 11pt; margin: 0in; text-align: justify;">Wilson (and after
his death) his estate claimed that when he was the owner of the trust, then
only the 5% penalty should apply. The District Court ruled in favor of the
estate.</p>
<p style="font-family: Calibri; font-size: 11pt; margin: 0in; text-align: justify;"> </p>
<p style="font-family: Calibri; font-size: 11pt; margin: 0in; text-align: justify;">On appeal, the 2nd
Circuit Court of Appeals reversed and held that both penalties could apply (although
technically the 5% penalty did not apply because that penalty is measured
against the assets remaining in the trust at the end of the year and that
amount was $0).</p>
<p style="font-family: Calibri; font-size: 11pt; margin: 0in; text-align: justify;"> </p>
<p style="font-family: Calibri; font-size: 11pt; margin: 0in; text-align: justify;">The taxpayer made
numerous technical arguments based on various arguments that parsed the
language of the various provisions. But in the end, the appellate court
determined that the two reporting requirements were separate reporting
requirements and the penalty provisions were also separate, with each applicable to its one particular reporting requirement to which it
relates. No language in the statute supported an argument that
only one of these penalties could be assessed when there are reporting failures
under the two separate reporting requirements.</p>
<p style="font-family: Calibri; font-size: 11pt; margin: 0in; text-align: justify;"> </p>
<p style="font-family: Calibri; font-size: 11pt; margin: 0in; text-align: justify;"><span style="text-decoration-line: underline;">Estate of Wilson v. U.S.</span>, 2nd CA, Case
No. 20-603 (July 28, 2021)</p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-91048510755063960592021-08-05T19:42:00.001-05:002021-08-05T19:42:14.959-05:00New Homestead Laws in Florida<p style="text-align: justify;">In its most recent legislative session, the Florida legislature enacted a number of additions and modifications to Florida statutory law relating to Florida's homestead exemption. These provisions can be summarized as enhancing or clarifying the exemption. The following is a summary of the new provisions, along with some excerpts.</p><p class="MsoNormal" style="text-align: center;">==============<o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p><u>736.0201(7): A proceeding
to determine the homestead status of real property owned by a trust may be
filed in the probate proceeding for the settlor’s estate if the settlor was
treated as the owner of the interest held in the trust under s. 732.4015. The proceeding
shall be governed by the Florida Probate Rules.</u></p><p class="MsoNormal"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">This provision provides
jurisdiction to the probate court in a probate proceeding of a revocable trust
settlor to determine the homestead status of real property owned by a trust.
This should only apply to revocable trusts defined under Fla.Stats. §
733.707(3) and not other trusts, per the reference to Fla.Stats. § 732.4015.
Fla.Stats. § 732.4015 references Fla.Stats. § 733.707(3). Generally, a revocable
trust described in Fla.Stats. § 733.707(3) is one which the grantor has a right
of revocation at death. Fla.Stats. § 733.707(3)(e) defines a “right of
revocation” for this purpose as the power to amend or revoke the trust and
revest the principal of the trust in the decedent, or withdraw or appoint the
principal of the trust to or for the decedent’s benefit.</p><p class="MsoNormal"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">This provision was added due to
a perceived lack of apparent authority for the probate court to otherwise make
that homestead determination in these circumstances. <u>Bill Analysis and
Fiscal Impact Statement</u>, to CS/CS/SB 1070 dated April 15, 2021, Page 5.</p><p class="MsoNormal"><o:p></o:p></p><p class="MsoNormal" style="text-align: center;"><o:p> </o:p><span style="text-align: center;">==============</span></p><p class="MsoNormal" style="mso-pagination: none; text-align: center;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p><u>736.1109 (1): If a devise of
homestead under a trust violates the limitations on the devise of homestead in
s. 4(c), Art. X of the State Constitution, title shall pass as provided in s.
732.401 at the moment of death.</u></p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">The constitutional restrictions
on the devise of homestead are not defeated via ownership of the homestead of a
decedent in a trust, subject to statutory carve-outs. This provision clarifies
that if there is an improper testamentary devise in the trust, the property
will pass to the same recipients who would receive it as if the decedent died
owning the property directly and had attempted an invalid testamentary devise -
that is Fla.Stats. § 732.401 of the Probate Code would apply, and the title
passage occurs at the moment of death even though titled in the trust.</p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">The provision applies only to
revocable trusts and testamentary trusts. </p><p class="MsoNormal" style="text-align: center;">==============<o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p><u>736.1109 (2) A power of sale
or general direction to pay debts, expenses and claims within the trust
instrument does not subject an interest in the protected homestead to the
claims of decedent’s creditors, expenses of administration, and obligations of
the decedent’s estate as provided in 736.05053.</u></p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">If a trust holds an interest in
a decedent’s protected homestead at death, this provision codifies a parallel
probate result which applies to directly owned homesteads, such that a general
power of sale or direction to pay debts, expenses, and claims of the decedent in
the trust instrument does not in and of itself make the homestead subject to
claims of the decedent’s creditors, expenses of administration, and obligations
of the decedent’s estate.</p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">The provision applies only to
revocable trusts and testamentary trusts. </p><p class="MsoNormal" style="text-align: center;">==============<o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p><u>736.1109(3) If a trust
directs the sale of property that would otherwise qualify as protected
homestead, and the property is not subject to the constitutional limitations on
the devise of homestead under the State Constitution, title shall remain vested
in the trustee and subject to the provisions of the trust.</u></p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">Homestead property owned by a
decedent that is protected homestead (i.e., it is directed to pass to an heir)
and that is devisable, passes automatically at death to the recipient heir(s) and
is not part of the probate estate. However, that is not the case if the
decedent’s last will requires that property be sold and the proceeds to be
divided among the heirs of the decedent or applied to estate obligations.</p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">This provision extends this principle
to when a trust owning the property has the direction for sale - in that
circumstance, the trustee retains title to the property, and it does not pass
automatically to the designated heir(s). </p><p class="MsoNormal" style="text-align: center;">==============<o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p><u>736.151 Homestead property.—</u></p><p class="MsoNormal" style="text-align: justify;"><u>(1) Property that is
transferred to or acquired subject to a community property trust may continue
to qualify or may initially qualify as the settlor spouses’ homestead within
the meaning of s. 4(a)(1), Art. X of the State Constitution and for all
purposes of general law, provided that the property would qualify as the
settlor spouses’ homestead if title was held in one or both of the settlor
spouses’ individual names.</u></p><p class="MsoNormal" style="text-align: justify;"><u>(2) The settlor spouses shall
be deemed to have beneficial title in equity to the homestead property held
subject to a community property trust for all purposes, including for purposes
of s. 196.031.</u></p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">This provision is part of the
new community property trust provisions of the Florida Trust Code. They seek to
allow homestead protections to homestead property held in a community property
trust. </p><p class="MsoNormal" style="text-align: center;">==============<o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p><u>736.1104. Person Killer not
entitled to receive property or other benefits by reason of victim's death --</u></p><p class="MsoNormal" style="text-align: justify;"><u>(3) A beneficiary of a trust
who was convicted in any state or foreign jurisdiction of abuse, neglect,
exploitation, or aggravated manslaughter of an elderly person or a disabled
adult, as those terms are defined in s. 825.101, for conduct against a settlor
or another person on whose death such beneficiary's interest depends is not
entitled to any trust interest, including a homestead dependent on the victim's
death, and such interest shall devolve as though the abuser, neglector,
exploiter, or killer had predeceased the victim.</u></p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">This provision will void
transfers of homestead interests in trusts where the recipient is convicted of
neglect, exploitation, or aggravated manslaughter. What happens if the surviving
spouse is the person so convicted? Does the spouse lose the interest if it was
devised to the spouse under the trust? It would appear that the trust transfer
is void, but would the Florida Constitution limits on devise when there is a
surviving spouse restore the transfer to the trust? Interestingly, the
Constitution does not directly provide that the spouse succeeds to the interest
- this incurs under Florida statutory law. That being the case, does this mean
that this provision can be interpreted as also overriding the statutorily
required transfer to the surviving spouse in the event of a prohibited devise,
and/or does the Florida Consitution nonetheless still require passage to the
surviving spouse since it is the spouse that the constiutional interest seeks
to protect (in addition to the protection of minor children)?</p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">Note that a surviving spouse is
entitled to the decedent’s homestead under the Florida Constitution (wholly, or
in part, if there are surviving minor children), such that presumably this
statutory provision does not void that spouse’s interest if they are the person
so convicted. </p><p class="MsoNormal" style="text-align: center;">==============<o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p><u>Changes to Fla.Stats. Section
196.075.</u></p><p class="MsoNormal" style="text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">This statute is modified to
avoid the need for representations of income beyond the first year of exemption
in regard to the additional homestead ad valorem exemption to persons 65 or
older at lower income levels. </p><p class="MsoNormal" style="text-align: center;">==============<o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p><u>Changes to Ad Valorem
Valuation of Homesteads.</u> </p><p class="MsoNormal" style="text-align: justify;">Chapter 2021-31 (H.B. No. 7061)
made several changes to Florida Statutes regarding the ad valorem value of
homestead interests, principally:<o:p></o:p></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p>1. Adding new exceptions to the rule that ad valorem
values are adjusted upon a change of ownership when the change or transfer is
the removal from the title of a co-tenant holding title by joint tenancy with right
of survivorship when the other co-tenants remain on the title. Such removal may
be by instrument or the death of the co-tenant. </p><p class="MsoNormal" style="text-align: justify;">2. Relating to adjustments in
value of damaged property. </p><p class="MsoNormal" style="text-align: justify;">3. Relating to adjustments in
value of voluntarily elevated property. </p><p class="MsoNormal" style="text-align: center;">==============<span style="text-align: justify;"> </span></p><p class="MsoNormal" style="text-align: justify;"><o:p> </o:p><u>Change to Fla.Stats. Section
719.103(25).</u></p><p class="MsoNormal" style="text-align: justify;">A change to this statute provides that a unit in a co-op is an interest in real property. </p><p class="MsoNormal" style="text-align: justify;">The effect of this change is that such units can now qualify as homestead property for all purposes under Article X, s.4 of the Florida Constitution. This resolves disparate results among courts and different provisions of Article X, s. 4 as to whether a co-op unit can qualify as homestead property.</p><p class="MsoNormal" style="text-align: justify;"><br /></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-76108137013249132372021-07-04T12:53:00.000-05:002021-07-04T12:53:13.418-05:00Maltese Pension Plan in the Sights of the IRS<p>The Maltese pension plan is a planning device for U.S. taxpayers to use the U.S. - Malta tax treaty to obtain tax deferral and tax avoidance benefits similar to a Roth IRA, but without many of the limitations of a Roth IRA. For more about it, search "Maltese pension plan" and you will find many sites touting its benefits.</p><p>For any of those involved with such plans or contemplating entering into one, they should take note that the IRS has added the arrangement to its 2021 "Dirty Dozen" scams list - at least as to transfers of appreciated property to the plan. Such planning generally treats the contribution of such appreciated property to the plan as a transfer to a "grantor trust," thus avoiding gain generation. However, gain from such disposition is purportedly then not taxed immediately to the participant.</p><p>This is what the IRS has to say:</p><p></p><blockquote>"Some U.S. citizens and residents are relying on an interpretation of the U.S.-Malta Income Tax Treaty (Treaty) to take the position that they may contribute appreciated property tax free to certain Maltese pension plans and that there are also no tax consequences when the plan sells the assets and distributes proceeds to the U.S. taxpayer. Ordinarily gain would be recognized upon disposition of the plan's assets and distributions of the proceeds. The IRS is evaluating the issue to determine the validity of these arrangements and whether Treaty benefits should be available in such instances and may challenge the associated tax treatment."</blockquote><p></p><p>This is not an outright determination that such arrangements are abusive, but are a warning that the IRS will be looking more closely at that them and has serious concerns about the claimed tax benefits.</p><p><i><a href="https://www.irs.gov/newsroom/irs-wraps-up-its-2021-dirty-dozen-scams-list-with-warning-about-promoted-abusive-arrangements" target="_blank">IR-2021-144, July 1, 2021</a></i></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-58803518557905407522021-05-17T11:53:00.005-05:002021-05-17T11:53:55.178-05:00Q&A on Florida's New Directed Trust Act<p style="text-align: justify;"> Below is a copy of article to be published this evening on Leimberg Information Services:</p><p style="text-align: justify;"><br /></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><span style="font-family: Arial, sans-serif; font-size: 14pt;">Florida’s version of
the Uniform Directed Trust Act (the “FUDTA”) has passed both houses of the
Florida legislature and is expected to be signed into law by Governor DeSantis.
Charles (Chuck) Rubin chaired the Florida Bar subcommittee that reviewed and adapted
the Uniform Directed Trust Act, and Jenna Rubin also served on the
subcommittee. They provide a review of the key provisions that practitioners
should be aware of.</span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><b><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">QUESTIONS AND ANSWERS</span></b></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">Who does the FUDTA
principally affect</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">?
Trust directors (persons with authority under a trust instrument to give directions
to be followed) and directed trustees (the trustees who are supposed to follow
the directions).<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">Can I avoid the
application of the FUDTA by not calling the person with the power to direct a
protector or trust director</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">? No. The label given is irrelevant. If a person has the
power to direct, then they are a trust director.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">Can a trustee be a
trust director</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">?
No, only persons who have a power to direct but are <i>not</i> trustees are
trust directors.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">So, any non-trustee with
a power to direct is a trust director</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">? Mostly, but there are a few powers one can
hold that alone will not make you a trust director, such as the power to remove
or appoint a trustee, a power of appointment, and a power of a settlor over a
revocable trust.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">Why should I care
whether a power holder is a trust director</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">? Well, there are a lot of rules and
benefits that apply under the FUDTA, but probably the biggest implication is
that the trust director is subject to fiduciary duty in the exercise of the power
of direction in the same manner as a trustee. Note that some states do not
impose fiduciary duties on persons with roles similar to a trust director, or
allow the trust instrument to remove such duties entirely.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">Wow, that’s pretty
harsh for a player with a small role. How are settlors supposed to get someone
to take on the role if they have such a duty and the liability that comes along
with it?</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">
Helpfully, like most provisions in the Trust Code, the trust provisions can be
drafted to reduce (or increase) the level of duty.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">So I can relieve the
trust director of all duty and liability</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">? No, the FUDTA will not let you go that far.
Just like a trust instrument cannot entirely relieve a trustee of fiduciary
duty (the duty to act in good faith and in accordance with the terms of the
trust must always remain), a trust director is also subject to the good faith
minimum duty no matter what the trust instrument says.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">A trust director can
only exercise the powers granted to it in the trust instrument, correct</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">? Mostly, but in addition
to the express powers, the trust director also has further powers appropriate
to the the exercise or nonexercise of the expressly granted power of direction.
Draftpersons can breathe easier knowing they do not have to think of and
include every explicit power that a trust director may need in order to
exercise the desired power of direction.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">How can a trust
director protect itself from liability</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">? Not serve! But short of that, the Trust Code
provisions that shorten the applicable limitations period for breach of trust to
six months via the delivery of a trust disclosure document applies equally to
trustees and trust directors.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">Does the directed
trustee have to follow the directions of the trust director, even if the directed
trustee disagrees with the appropriateness of the directions</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">? Yes. The only
exceptions are if the trust director is acting outside the scope of the power
of direction, or if following the directions would result in willful misconduct
by the directed trustee.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">What if the direction is
a breach of trust by the trust director – does that make it outside the scope
of the power of direction and thus the directed trustee does not have to follow
it</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">?
No, that is not the case. The policy is that if the trust director commits a
breach of trust in making the direction, that trust director is liable. This encourages
the directed trustee to act in accordance with directions, and since the
beneficiaries can sue the trust director they have a remedy and do not have to also
be able to sue the trustee.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">How can the directed
trustee protect itself as to questionable instructions</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">? The trustee can go to
court and seek instructions as to its obligations to follow the directions, and
can charge the trust for fees and costs incurred in doing so.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">Can a trust director
demand relevant information from the directed trustee</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">? Yes as to information
needed to do its job, and the directed trustee can similarly demand needed
information from the trust director.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">Does the trust director
have to keep an eye on the trustee or give advice or notifications to
beneficiaries or other interested persons</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">? No, in the absence of trust provisions
requiring it. And the same applies to the directed trustee in regard to
monitoring the trust director.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">A trust director situation
seems similar to a trust that gives power to one trustee to direct a co-trustee.
Are the duties and obligations of the affected fiduciaries similar under the
Florida Trust Code</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">?
Yes, the FUDTA coordinates the duties and liabilities in those two situations so
that they are pretty much the same.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">Are the rules for suing
a trust director for breach of trust similar to suing a trustee</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">? Yes. Such actions are
subject to the same statute of limitations and defenses.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">A trustee and a trust
director both exercise powers over a trust. Do all the Florida Trust Code
provisions applicable to trustees apply to trust directors</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">? No, they do not.
However, there is an extensive list of Florida Trust Code provisions included
in the FUDTA that were determined to be appropriate to apply to trust directors,
and those listed provisions do apply.<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; text-align: left;"><u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">Does the FUDTA apply
only to trusts created after the July 1, 2021 effective date</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt;">? No, it applies also
to trusts created before then, but only as to decisions or actions occurring
after that date.<o:p></o:p></span></p><p style="text-align: justify;">
<u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">How closely does the FUDTA track the Uniform Directed
Trust Act (the “UDTA”)</span></u><span style="font-family: "Arial",sans-serif; font-size: 14.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">? The FUDTA closely
follows the UDTA so decisions from UDTA states will likely be useful in
interpreting the FUDTA (and vice-vers_, but care should be exercised since the
FUDTA does have some modifications and additions.</span></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-57189481107781122992021-03-21T11:20:00.000-05:002021-03-21T11:20:18.999-05:00No "All Going to Charity" Exception for Chenoweth/Ahmanson Funding Issue<p style="text-align: justify;">Taxpayers and planners love to use valuation reductions for partial interests in entities as a method for reducing transfer taxes. Such reductions and discounts can be a two-edged sword, however.</p><p style="text-align: justify;">The <u>Ahmanson</u> and <u>Chenoweth</u> cases point out that when a majority interest in an entity is included in a taxpayer's gross estate, the valuation discounts will typically be substantially less than will apply to a noncontrolling or minority interest, and that this can have undesirable consequences when a portion of the entity is transferred to a charity or a marital deduction trust. For example, assume that a 100% interest owned by a decedent as his sole asset in an operating corporation is valued at $10 million, with little or no discounts taken.</p><p style="text-align: justify;">Then assume that 60% of the corporation will pass to a bypass trust, with the remaining 40% passing to a charity. One might think that there should be no estate tax, because the 60% is covered by the decedent's unified credit exemption, and the 40% is covered by the charitable deduction. However, the case law advises that the value passing to the charity for which the charitable deduction is allowed is not 40% of the company's reported value. Instead, the 40% interest must be valued on its own, and as a minority interest, larger valuation discounts will apply. Thus, if we assume a 25% combined marketability and lack of control discount on the 40% interest, if it has a gross value of $4 million, the charitable deduction is limited to $3 million in the example. This leaves $1 million exposed to estate tax.</p><p style="text-align: justify;">In a recent Tax Court memorandum decision, controlling interests in several real estate holding LLCs owned by a decedent were given 75% to one charity and 25% to a different charity. The IRS argued that the 25% piece going to one charity would need to be heavily discounted (citing <u>Ahmanson</u>), thus reducing the charitable deduction for that piece and having the same issue as noted in the previous paragraph.</p><p style="text-align: justify;">The taxpayer tried to rebuff the discount's application by claiming that since 100% of the business interests were going to charity (albeit two separate charities), then no discount should be taken for purposes of the charitable deduction. The Tax Court rejected the argument, noting that there were two separate transfers to two separate charities, and standard valuation principles should apply to each gift on its own.</p><p style="text-align: justify;">Note that while this decision involved the charitable deduction, the concept similarly applies to the marital deduction. In planning where marital deduction gifts or charitable gifts are likely and closely held business interests are involved, efforts should always be undertaken to anticipate these issues in the planning stage to avoid the division of a majority interest in a business into minority interests that are used to fund these deductible transfers.</p><p style="text-align: justify;"><i>Estate of Warne v. Comm., T.C. Memo 2021-17</i></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-64121691642697405372021-03-16T17:17:00.002-05:002021-03-16T17:25:01.350-05:00Cryptocurrency and the IRS - Some Important Updates<p style="text-align: justify;"> Cryptocurrency is treated like any other investment asset for federal income tax purposes and not "money." Therefore, taxpayers that sell cryptocurrency for a gain incur taxable capital gains for income tax purposes.</p><p style="text-align: justify;">It is likely that a fair amount of cryptocurrency has been sold for gain by U.S. taxpayers without that being reported - either out of ignorance or intentional tax avoidance. Importantly, cryptocurrency transactions are not invisible but are available for review on the blockchain. Some sleuthing may be required to tie a particular transaction to a taxpayer, but this is often not that difficult. Further, cryptocurrency exchanges may be able to identify crypto transactions and tie them to specific persons.</p><p style="text-align: justify;">Taxpayers with gains in the past or present years should note Operation Hidden Treasure, which was recently revealed by IRS personnel. This is an IRS program focused on taxpayers who omit cryptocurrency income from their tax returns, and is comprised of agents trained in crypto and virtual currency tracking. Civil and criminal enforcement elements of the IRS are involved.</p><p style="text-align: justify;">The IRS also updated its Frequently Asked Questions on Virtual Currency Transactions on March 2. This can be accessed at <a href="https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions">https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions</a>. </p><p style="text-align: justify;">One interesting change in the FAQ relates to whether the mere purchase of virtual currency must be reported on a taxpayer's Form 1040 pursuant to the new question that asked whether the taxpayer was involved in any virtual currency transaction during the year. The question itself strongly suggests that the answer is 'yes.' However, the FAQ says 'no.' Here is the question and answer:</p><p></p><div class="separator" style="clear: both; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPtiFyXmX1YCS9Ik7GE1JXNdrogR296VUw3DAgmdovCQHG9Mp7ef5pBA9SshPC34tH1TVtKFzxyqyuQ9w6Zzy3GpwfKquKv2_DE9_hNNbTkZxXPDCW2Fbr204b8jPrXvmPcyqQ/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="180" data-original-width="810" height="121" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPtiFyXmX1YCS9Ik7GE1JXNdrogR296VUw3DAgmdovCQHG9Mp7ef5pBA9SshPC34tH1TVtKFzxyqyuQ9w6Zzy3GpwfKquKv2_DE9_hNNbTkZxXPDCW2Fbr204b8jPrXvmPcyqQ/w544-h121/image.png" width="544" /></a></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I don't know about you, but buying virtual currency sure seems like "acquir[ing an] interest in any virtual currency." A FAQ issues by the IRS does not have the force or effect of law. While one is probably okay with relying on a FAQ to answer 'no' to the question, the more conservative answer would be to answer 'yes' to this question.</div><p></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-13943265764615225592021-03-14T13:10:00.001-05:002021-03-14T13:10:25.185-05:00Applicable Federal Rates - March 2021<p> For the applicable federal rates for the above month, preceding months, and a data table that visually shows trends, click <a href="http://bit.ly/2Q25uOy" target="_blank">here</a>! </p><p>Direction of rates: moving up</p><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><p></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-80335222377416670852021-02-06T19:35:00.000-05:002021-02-06T19:35:14.333-05:00Beware the Last Minute Signing of a Prenuptial Agreement [Florida]<p> </p><p class="MsoNormal" style="text-align: justify;">Marital attorneys know that upon divorce,
spouses who signed a prenuptial agreement will often raise arguments of
coercion and duress to void the agreement. Factually, such allegations and
arguments may or may not be true, and in either case may be hard to prove or
disprove many years after the fact. A good story and sympathetic court can
spell doom for the agreement. Therefore, practitioners seeking to enhance the
likelihood of an enforceable agreement should manage the objective and
verifiable facts that mitigate against coercion and duress so as build defenses
against future attack. One of those objective facts that can usually be managed
is when the prenuptial agreement is signed – signings the day before or the day
of the wedding should be avoided.<o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;">A recent Florida case presented
various facts that both supported and weakened the agreement. The end result
was the voiding of the prenuptial agreement. One of the facts was that the
agreement was signed the day before the agreement. We can wonder whether if the
agreement had been signed well before that whether the court would have voided
the result.<o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;">The case also provides a lengthy analysis
of the meaning of the terms coercion and duress in context of voiding a
prenuptial agreement. It also has an interesting set of facts.<o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;">The key facts of the case were:</p><p class="MsoNormal" style="margin-left: .25in; text-align: justify;"></p><ul><li>Husband was a
divorced 41 year old. Wife turned 18 three days prior to meeting Husband. She
had never married and was a virgin when she met him. She was living in
Columbia, and was looking for a wealthy American man to marry and to bring her
to the U.S. They met on May 29, 2001 through a matchmaking website.</li><li>The Husband did
not speak Spanish and the Wife spoke little English.</li><li>In June 2001,
the parties had sex and became engaged on the same day. </li><li>The Wife became
pregnant and there was an abortion in mid-August.</li><li>According to Wife,
Husband told her the prenuptial agreement was a requirement for her to
immigrate to the U.S. However, Wife admitted she would have signed anything because
she loved and wanted to marry Husband and because she wanted to immigrate to
the U.S.</li><li>Husband
obtained a form prenuptial agreement and modified it to his satisfaction. The
parties did not discuss the agreement or negotiate its terms.</li><li>Wife took the
agreement to a Colombian attorney. The attorney provided Wife with a Spanish
translation on August 29, 2001. The attorney signed a certification that she
was knowledgeable in Florida law and had advised Wife about her rights. She now
admits she did not know Florida law and did nothing more than translate the
agreement. The Wife claimed that she was in severe pain and distress relating
to the abortion on August 29 and August 30. Wife also feared exposure of the
premarital sex and abortion to her strict Catholic family.</li><li>On August 30,
2001, the parties executed English and Spanish versions of the agreement before
a notary public. Wife did not read it.</li><li>The parties
married on August 31, 2001.</li><li>Several days
later, the parties went to a previously scheduled appointment at the Colombian
embassy to start the Wife's immigration process.</li><li>Several months
later the parties moved to Florida, where Husband resided and owned businesses.
They had five children together.</li><li>In May 2017,
Wife filed for divorce.</li></ul><o:p></o:p><p></p><p class="MsoNormal" style="margin-left: .25in; text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="margin-left: .25in; text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="margin-left: .25in; text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="margin-left: .25in; text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="margin-left: .25in; text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="margin-left: .25in; text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="margin-left: .25in; text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="margin-left: .25in; text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="margin-left: .25in; text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="margin-left: .25in; text-align: justify;"><o:p></o:p></p><p class="MsoNormal" style="text-align: justify;">
</p><p class="MsoNormal" style="margin-left: .25in; text-align: justify;"><o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;">The trial court invalidated the
agreement since it "was the product of duress and coercion."<o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;">The court found "duress"
relating to the unequal bargaining positions, the pregnancy and abortion, and
the risk of exposure of those things to her family.<o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;">The court found that Husband's threat
of no wedding and no immigration on the day before the signing was "coercion."
The court concluded that the Husband exploited the time pressure aspects of the
courtship and Wife's "vulnerable<span style="mso-spacerun: yes;">
</span>emotional position" to his pecuniary advantage.<o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;">The appellate court noted two
grounds for invalidating a prenup. The first is where the defending spouse has
engaged in "fraud, deceit, duress, coercion, misrepresentation, or overreaching."
<o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;">The second is when the agreement
makes an unfair or unreasonable provision for the challenging spouse, given the
parties' relative circumstances. The second ground was inapplicable since this
was not what the trial court relied on. <o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;">As an aside, this second ground will
not apply if there is full and fair disclosure of assets, so it is not an
automatic circumstance of voiding a prenuptial agreement. Disclosure is
generally not relevant to the first ground – thus, the presence of duress or
coercion can void the agreement even with disclosure of financial information.
Disclosure was not an issue in the case.<o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;">The appellate court noted that
duress exists if the signing was effected involuntarily and was thus not an
exercise of free will, AND this condition of mind was caused by some improper
and coercive conduct of the other side – <i>i.e.</i>, the other spouse must bring
external pressure bring to bear.<o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;">The appellate court noted that
coercion is not the same as duress, but there is no Florida case law providing
a definition for coercion for these purposes. To distinguish the two and
provide a definition, the court borrowed from an Ohio Supreme Court case that
held that duress means actual physical force or the threat of same to one's
person, property or reputation, with coercion being more broadly defined to
include undue influence and other lesser forms of compulsion such as moral or
economic force sufficient to overcome the recipient's free will.<o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;">The appellate court overruled the
trial court and found there was no duress. This was because there was no
evidence that the Husband threatened to tell the Wife's family about their
circumstances if she did not sign the prenuptial agreement.<o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;">The court did sustain the finding
of coercion, however. The mere threat of not proceeding with the marriage is
not enough for coercion, based on case law cited by the court. Indeed, if that was
the case, many more prenuptial agreements would be subject to successful
challenge. However, additional acts did raise the level of compulsion into the
realm of coercion. These acts included Husband’s representations that the
prenuptial agreement was a prerequisite to immigration into the U.S. This,
combined with the time pressure aspects and the Wife's vulnerable condition was
enough to support a finding of coercion. The court's citation of problematic
prenups in the case law where presentation and/or signing occurred shortly
before the wedding indicates that this was a key component in its holdings.<o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;">Husband does not appear to have
had the assistance of counsel in the preparation or signing of the agreement.
Knowledgeable counsel can go a long way towards minimizing both actual and the
appearance of coercion and duress. As noted, objective actions such as not
signing the agreement on the eve of the wedding, and the representation of the
other spouse by a Florida attorney with the proper expertise would have gone a
long way to defuse the allegations of duress and coercion. <o:p></o:p></p>
<p class="MsoNormal" style="text-align: justify;"><i>Bates v. Bates, 46 Fla. L.
Weekly D287c (3<sup>rd</sup> DCA, February 3, 2021)<o:p></o:p></i></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-33920356803660683522021-02-02T17:47:00.003-05:002021-02-02T17:49:10.324-05:00New Rules Coming on Brokers and Other Financial Representatives Being Named as a Fiduciary or a Beneficiary<p style="text-align: justify;"> Securities brokers and other registered representatives often develop close relationships with their clients. Those clients may make provision for them to become a fiduciary or beneficiary in trusts and wills due to these relationships.</p><p style="text-align: justify;">For those representatives who are subject to FINRA, new FINRA Rule 3241 becomes effective on February 15, 2021 that generally requires review and approval of such circumstances by member firms so as to avoid conflicts of interest. The new rules can be reviewed <a href="https://www.finra.org/rules-guidance/rulebooks/finra-rules/3241" target="_blank">here</a>.</p><p style="text-align: justify;">Exceptions apply to representatives that are family members of the appointing client. In addition to direct appointments, the rules treat similarly circumstances where the representative directs the appointment of other persons in these roles such as family members of the representative.</p><p style="text-align: justify;">Draftspersons should be familiar with these limitations, to assist their clients where they desire to make such appointments.</p><p style="text-align: justify;"><i>FINRA Rule 3241. Registered Person Being Named a Customer’s Beneficiary or Holding a Position of Trust for a Customer</i></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-81401981680224862882021-01-28T15:08:00.005-05:002021-01-28T15:08:24.134-05:00FBAR Reporting to Be Expanded to Include Foreign Accounts Holding Virtual Currency<p style="text-align: justify;">Presently, for U.S. persons a foreign account holding virtual currency is not a reportable account for purposes of having to file an FBAR.</p><p style="text-align: justify;">In a recent announcement FinCEN has advised that it intends to amend the FBAR regulations to include those accounts.</p><p style="text-align: justify;">In today's environment, this is about as surprising as the sun coming up this morning.</p><p style="text-align: justify;"><i>FinCEN Notice 2020-2</i></p><p style="text-align: justify;"><br /></p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0tag:blogger.com,1999:blog-15517294.post-76956668559270136272021-01-26T18:18:00.003-05:002021-01-26T18:18:56.254-05:00Applicable Federal Rates - February 2021<p>For the applicable federal rates for the above month, preceding months, and a data table that visually shows trends, click <a href="https://bit.ly/3rsWAI7" target="_blank">here</a>! </p><p>Direction of rates: moving up </p><div class="blogger-post-footer"><a href="https://twitter.com/crubincrubin" class="twitter-follow-button" data-show-count="false">Follow @crubincrubin</a>
<script>!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");</script></div>Charles (Chuck) Rubinhttp://www.blogger.com/profile/07227879267908481649noreply@blogger.com0