Tuesday, December 27, 2016

Foreign Financial Assets

Section §6038D(a) of the Internal Revenue Code requires any individual who during a taxable year, holds any interest in a Specified Foreign Financial Asset (“SFFA”) to attach Form 8938 to his or her tax return, if the aggregate value of such assets exceed $50,000 at the end of the year, or exceeded $75,000 at any point during the year.
   
SFFA’s are defined as a financial account maintained by a foreign financial institution (above the monetary threshold). Additionally, SFFA’s include any stock or security issued by a non-US person; any financial instrument or contract held for investment that has an issuer or counterparty other than a US person; and an interest in a foreign entity.

In early 2016, the Treasury Department issued final regulations applying the rules regarding SFFA’s to domestic entities. Currently, there is a two-step threshold to determine whether an entity must file Form 8938. First, it must be determined if the entity owns any SFFA’s. Second, it must be determined if the entity is one that is subject to these reporting rules.

A domestic entity will be subject to filing Form 8938 if it is a domestic corporation, partnership or trust formed or availed for the purpose of holding SFFA’s (directly or indirectly). A trust will be deemed formed or availed for purposes of holding SFFA’s if it has one or more specified persons as a current beneficiary who at any time during the taxable year is entitled to income or principal from the trust. However, the regulations do provide that a domestic trust can be exempt from such reporting if: 1) the trustee has supervisory authority over SFFA obligations; 2) the trustee timely files all required returns; and 3) the trustee is a bank overseen by a national regulatory agency, a financial institution registered with the SEC, or a domestic corporation whose stock is regularly traded on an established market.

A domestic corporation or partnership will be deemed to have been formed for the purpose of holding SFFA’s if:
a) it is closely held by a US Taxpayer (at least 80% of voting stake), and at least 50% of the entity’s gross income for the taxable year is passive income; or
b) at least 50% of the assets held for the taxable year are assets that produce passive income.

It is extremely important for taxpayer’s to be aware of the rules regarding SFFA’s as it may lead to significant financial penalties. If you have, or think you have, an interest in SFFA’s we encourage you to contact your CPA or attorney prior to filing of your personal tax return.  

Tuesday, December 20, 2016

Capital Gains and the 2016 Election

In our recent post titled “Estate Planning and the 2016 Election (December 6, 2016),” we discussed possible estate tax alternatives which have been discussed by the incoming Trump administration. Similarly, it appears very likely that the Trump administration will adopt significant income tax reform.

Although it may be mere speculation, at this time it appears that the income tax system under a Trump administration would contain three brackets; specifically 33%, 25% and 12%. Additionally, there has been speculation of a reduction in the maximum tax rate on long-term capital gains from 20% to approximately 16.5%.

Such potential change in the capital gains tax rate is significant especially since we are very close to the end of the year. With the expected reduction in the maximum tax rate on long-term capital gains, it would be advisable to hold on to such assets and not dispose of them prior to the end of 2016. The logic behind this is simple; it is better to wait until 2017 to sell assets with built-in long-term capital gains in order to utilize the lower tax rate that expected for 2017.

Additionally, the opposite would be true if you are in a position in which your portfolio contains unrealized long-term capital losses. In that case, it may be advisable to sell such assets with built-in losses, since long-term capital losses can be used to offset long-term capital gains already realized during 2016. By selling assets with built-in losses to offset realized gains for 2016, you will have effectively lowered the burden of the higher 20% tax rate currently in effect.  

If you are an individual with a portfolio containing capital property, it is extremely important to understand the importance of timing with regard to the sale of such assets. Likewise, we strongly encourage all investors to seek the necessary advice from their tax advisors. 

Tuesday, December 13, 2016

IRA Relief

The IRS is a heavily criticized organization for many reasons. Therefore, it is often ignored when the IRS provides taxpayer relief. In August 2016, the IRS provided such relief in Revenue Procedure 2016-47, with regard to IRA rollovers.

As a general rule, the IRS permits a 60 day window for assets to be transferred from one qualified retirement account to another without triggering tax consequences or withdrawal penalties. These are common transfers that occur upon retirement or switching jobs.

However, if the 60 day transfer window is missed, significant tax consequences and penalties can be triggered. Prior to 2016, the only way to avoid the penalties was to request relief through a Private Letter Ruling (PLR), which carries a hefty fee of $10,000 (not including the legal fees inherent in its preparation). 

In August 2016, the IRS provided relief by removing the requirement of a PLR in the event an individual misses 60 day transfer window. Instead the IRS will grant relief at no cost, through a self-certification process. In order to qualify for this no cost relief, a taxpayer must provide the following in writing: 1) That the rollover occurred as soon as practicable; 2) a certification letter to the receiving institution; and 3) a valid excuse.

The IRS has provided guidance with a list of 11 excuses that include: institutional errors; misplaced rollover checks; mistaken distribution to non-qualified accounts; damage to your personal residence; illness/death in the family; incarceration; postal errors; foreign restrictions and IRS levies.  
      
Since IRA’s are extremely common retirement planning tools, it is important that taxpayer’s are aware of such relief. It would be unfortunate for an individual to lose the tax benefits of a qualified retirement account due to a missed transfer window.  

Tuesday, December 6, 2016

Estate Planning and The 2016 Election

A hot topic resulting from the 2016 election is the potential repeal of the estate tax. Donald Trump spoke of such repeal numerous times throughout his campaign and with a Republican Congress by his side; it may be included in an expected tax change package early in his presidency.
    
This may lead to confusion since individuals will be unsure how it impacts their planning. Individuals with existing estate plans should not rush to make changes assuming the repeal of the estate tax until more information is known. However, due to potential changes in Chapter 14 of the IRS Code that was introduced this quarter, individuals contemplating GRATs or transfer transactions may wish to move ahead to lock in discounts that may be terminated. 

For individuals who have yet to set up an estate plan, it is advisable to establish an estate plan as soon as possible, for many reasons some of which are discussed below. 
 
It is important to understand that repeal of the estate tax does not automatically mean that individuals will die without paying tax. It is possible that the estate tax will be replaced by a different tax. There has been speculation that such other measures could include one or more of the following: a similar estate tax system with an increased exemption; a capital gains tax on death; or the beneficiary receiving a carryover basis in inherited property instead of a step-up basis.

In addition to tax planning, an effective estate plan also provides asset protection. Even without an estate tax in place, it is still important for assets to be held in trust for asset protection purposes. By having such assets in trust for a beneficiary, it protects such individuals from everyday creditors and from divorcing spouses. Additionally, it is the most effective way to ensure that your assets are passed on to the intended beneficiaries. 

Finally, it is entirely possible that an administration in the future will return to the current estate tax system. As more details emerge of the new administration’s plan, we recommend that you contact our office to ensure that your current plan is still effective and meets your goals. 

Tuesday, November 29, 2016

Proposed 2704(b) Regulations - Update

As the end of the year approaches, we are moving closer to the time in which the proposed 2704(b) regulations may take effect. Such regulations, if finalized, will essentially eliminate the traditional discounts available for family controlled entities (See Wealth Preservationist post August 15, 2016).

One of the biggest concerns of the proposed regulations is the creation of “disregarded restrictions.” These are common restrictions that will no longer be considered in the discounting of the value of family controlled entities.

Disregarded restrictions include restrictions that:
1) Limit the ability of the holder of the interest to liquidate such interest;
2) Limit the liquidation proceeds to an amount that is less than minimum value;
3) Defers the payment of the liquidation proceeds for more than 6 months; and
4) Permits the payment of the liquidation proceeds in any manner other than in cash or other property.

These new restrictions will effectively eliminate any restriction on liquidation, thus removing an otherwise legitimate valuation discount that has been available due to lack of liquidation rights.

Although there have been quotes from attorneys within the Treasury Department to the contrary, it does not appear that any significant changes will be made to the proposed regulations. Thus it is extremely important to reach out to your estate planning attorney in order to make any such transfers of family controlled entities as soon as possible.  

Tuesday, November 22, 2016

Lost Will

Occasionally the question arises in the estate planning field, what happens if a person has a Will, but the original document cannot be found. This scenario is extremely troubling and frustrating as it is typically not realized until after the testator has already died.

The general rule in Florida is that if an original Will cannot be located, it is presumed to be destroyed, as though the testator intended to revoke it. It would appear initially that the decedent’s estate will now be administered pursuant to Florida’s laws as he or she had died intestate (i.e. without a will).

However, a few things can be done in the event that an original Will cannot be found. Florida Statute Section 733.207 permits any interested person (i.e. an individual who would have been a beneficiary under the lost Will) to establish the full and precise terms of a lost or destroyed Will and offer the Will for probate. The statute further states that the specific content of the Will must be proven by the testimony of two disinterested witnesses; or if a correct copy of the missing Will is provided, it may be proven by only one disinterested witness.

The interested person must bring forth sufficient evidence to rebut the presumption that the decedent intended to revoke the missing Will. Examples of such evidence are; that the decedent did not have the capacity to revoke the Will; that the original Will had been seen after the decedent’s death; or that the original Will had been destroyed accidentally. 

Unfortunately, if the interested person cannot bring forth sufficient evidence in rebuttal of the presumption that the decedent intended to revoke the missing Will, the decedent will be deemed to have died intestate. This holds true even if the interested person has an actual copy of the missing original Will but lacks a witness to prove it. Therefore, it is extremely important that one’s Will is kept in a safe place, and that other people close to you have knowledge of where it is located and how to access it should the need arise. 

Tuesday, November 15, 2016

Charitable Giving - Public Charities

Charitable giving is an extremely important component of our society. However,  many people don’t realize that from a tax perspective, not all charities are the same, and thus not all contributions have the same tax benefits. This applies whether you desire to form a charitable organization or simply make a contribution to an existing organization. 

The charitable organization that we will focus on is the public charity. An organization will be deemed a public charity if it falls within one of the following four categories:
1) The organization is one of the following six types of entities: churches; educational organizations; hospitals/medical research organizations; state colleges and universities; governmental units; and agricultural research organizations.
2) The organization receives one-third of its support in each taxable year from any combination of: gifts, grants, contributions, membership fees, gross receipts from admissions/merchandise, performance of services, or furnishing of facilities, in an activity which is not an unrelated trade or business.
3) The organization supports or benefits public charities set out in categories 1 and 2 above.
4) The organization is organized and operated exclusively for testing for public safety.

The above designation as a public charity is extremely important since it will directly affect the level of tax deductibility that a donor can achieve. Specifically, contributions to such entities that qualify as public charitable organizations, can be deductible up to 50% of the donor’s adjusted gross income (AGI) for a given year. Additionally, if such contributions exceed 50% of your AGI for a year, you may be able to deduct the excess in each of the next 5 years until it is used up. However, your total charitable deduction for a year to which you carry your contributions forward cannot exceed 50% of your AGI for that year.

Alternatively, a charitable contribution made to an organization that does not qualify as a public charity will likely only be deductible up to 30% of the donor’s AGI for a given year. Therefore, when researching specific charities to which you wish to contribute, it is extremely important to ask the nature of the charity (at a base level, whether it is a public or private charity), as it will have tax-related ramifications.   

Thursday, September 15, 2016

Florida Homestead

As we have discussed in previous Wealth Preservationist posts, Florida is a state that provides significant asset protection mechanisms as a matter of state law. This post will briefly discuss perhaps the most significant of all Florida asset protection measures, the Homestead protection, as provided in Article X Section 4 of the Florida Constitution.

Florida’s Homestead Protection provides that your “homestead” property is exempt from levy and execution by judgment creditors. Simply stated, a creditor (other than the 3 types of creditors listed below) cannot force the sale of your homestead to satisfy a judgment.

Your homestead is defined as your primary place of residence (assuming you are a permanent resident of Florida). Furthermore, homestead is limited to up to one-half acre within a municipality and up to 160 contiguous acres outside a municipality. If you have more than 1 home in Florida, you can only declare 1 of the properties as your Homestead property.

Although this seems like a very strong protection, there are three scenarios in which the Homestead Protection will not prevail: IRS tax liens, mechanic’s liens associated with maintenance or construction of the specific homestead property, and liens related to mortgages and Home Owners Association dues. These classes of creditors can attack your Homestead property and force a sale to satisfy a judgement.  

In addition to the protections that Homestead provides for a homeowner, it also protects the homeowner’s surviving spouse and minor children in the event of the homeowner’s death. Specifically, if a homeowner is survived by a minor child, he or she cannot transfer the homestead property to anyone other than their spouse or for the benefit of the minor child. If the homeowner is survived by a spouse but no minor children, the homestead property can only be devised to the surviving spouse.  

Florida’s Homestead Protection is an extremely valuable measure that should not be overlooked. This is why many people who are looking to avoid creditors will move to Florida, buy an expensive home and use the Homestead statutory protections as a means of sheltering assets against their creditors. Moreover, this is essentially a free measure for many people to protect what is likely their most valuable asset, their home. If you are a permanent resident of Florida it is wise to ensure that you are protected.   

Monday, August 15, 2016

IRS SEEKS TO ELIMINATE GIFT AND ESTATE TAX DISCOUNTS ON ENTITIES, ACT BEFORE IT’S TOO LATE

On August 2, 2016, the Treasury Department issued proposed regulations under the authorization contained in Section 2704(b) of the Code, with a hearing scheduled on December 1, 2016.  The proposed regulations will essentially take away all valuation discounts for interfamily transfers of entities controlled by the transferor and his or her family.

It is likely that the proposed regulations will not take effect until sometime next year, making it necessary to complete any discount-related planning throughout the next several months. Some of the major changes that will be adopted in the proposed regulations are discussed below.

The proposed regulations give a broad definition of control. Specifically, control is holding 50% of equity in an entity (corporation, partnership or LLC). For a limited partnership, control is equivalent to having an interest in the general partner.

Under 2704(a) the lapse of a voting right or liquidation right in a family owned entity is treated as a transfer by the individual holding the right immediately before it lapses. The current regulations exempt such a transfer if the rights with respect to the transferred interest are not restricted or eliminated. The proposed regulations would deny such exemption for transfers occurring within three years of death if the entity is controlled by the transferor and members or his or her family immediately before and after the lapse.

The proposed regulations will significantly change valuations for transfer tax purposes of interests in family owned entities that are subject to restrictions on redemptions or liquidations. Specifically, such restrictions will be disregarded in valuing such an interest for gift/estate tax purposes when the interest in transferred by a family member. The reasoning for this is the fact that after the transfer the restriction will lapse or can be removed by the transferor or a member of his or her family.

The proposed regulations remove nearly all discounts by disregarding the interests held by non-family members as well. Interests held by non-family members that may otherwise give such non-family member the power to prevent the removal of a restriction will be disregarded unless those interests have been held for at least three years; make up at least 10% of the entity; the total combined non-family interests is more than 20% of all interests; or they hold a put interest in the entity to receive a minimum value.

The proposed regulations issued under Section 2704 would, if adopted in final form, have a significant impact on the wealth transfer tax valuation of interests in family controlled entities.  Essentially, almost no minority discounts would be allowed. 

It is essential for anyone interested in reducing their estate taxes by gifting interests in entities, whether operating businesses or investment entities, contact our office immediately as these may disappear before the end of 2016.

Thursday, August 11, 2016

Disclaimers

A qualified disclaimer is an estate planning technique in which an individual refuses to accept a gift, transfer, bequest or devise.

In order to be a qualified disclaimer, it must satisfy all of the following: 1) it must be irrevocable and unqualified; 2) it must be in writing and signed by the recipient; 3) it must be delivered to the transferor or his or her representative; and 4) it must be made within 9 months of the date that the property interest was created (unless the recipient is under 21 years old, in which case he or she has until 9 months after his or her 21st birthday to disclaim). It is also important to note that you cannot disclaim an interest in property once you have already accepted it.

The main question that arises from this is “WHY?” Why would anyone refuse a valuable gift/bequest? The answer depends on the financial state of the recipient. In conjunction with their financial situation, the gift amount needs to be analyzed in light of the individual’s remaining  unified credit (estate and gift tax) exemption amount ($5,450,000 in 2016). The reason being it would be unwise for a recipient to accept a large financial gift or bequest (especially if it is not needed for financial well-being), only to ultimately pay estate tax on the value of the disclaimed asset at the time of his or her death.

For example, a widow dies leaving all of her property to her son. The will also provides that if her son does not survive, her estate is to be divided equally to her son’s children. Furthermore, let’s assume in this example that the son does not need the money and has used up his entire $5,450,000 exemption amount through gifts during his lifetime. If the son makes a qualified disclaimer, the property will pass directly to his children and he will not be deemed to have made a taxable gift to his children.         

Although it may seem illogical to decline a significant gift, a disclaimer is an important estate planning technique that provides flexibility with the ever-changing unified credit exemption amount and the desire to reduce one’s taxable estate.  

Monday, July 18, 2016

Generational Planning Solution (GPS) Program at Morris Law Group

You’ve finally made it to an estate planning/wealth preservation attorney. You’ve spent countless hours going over who you want as your fiduciaries, how your assets are to be distributed upon death and in what manner. The documents are signed, sealed and delivered. Your estate plan is finally in place.

Now what?!

The most common question asked is, “how often do my documents need to be reviewed?” Life changing events trigger the need to review one’s current estate plan. Our lives are continuously changing. From marriages to divorces, births to deaths, all these moments affect one’s wealth preservation plan. Additionally, income, gift and estate tax laws are constantly in flux. With the combination of the changes in our lives, coupled with the changes in the tax laws, it is vital that your estate plan receives constant review and revision to ensure that it continues to meet your goals and objectives.

While the above seems obvious, history and experience tells us that while our clients’ lives have changed, they have not been proactive in making the appropriate modifications to their estate plan.  

At Morris Law Group we have created the Generational Planning Solution (“GPS”) program. Initially, we will assist the client with the task of making sure that their current assets are aligned with their estate plan. With the client's assistance we prepare a thorough spreadsheet with all of the client's assets and liabilities and how they are currently titled. We then advise and assist the client with aligning their assets with their current plan. Most importantly, we will verify that all the assets have been titled in the manner in which we have recommended.  At that point the GPS takes hold.

Each GPS plan is tailored to the client as each client’s plan involves different levels of complexity and oversight. With the GPS program there is a continuous annual review of the client’s life, assets and goals. We will meet with the client and their trusted advisors to have everyone in line with the estate plan strategy. We also hold special events and continuing education for those clients who are enrolled in our GPS program. There are add-on services to the GPS program depending on the complexity of the client’s plan (i.e. we provide an Entity Compliance Audit of each of the client’s entities and an Irrevocable Trust Compliance Examination for those irrevocable trusts that require formalities to be met for their validity to be upheld.)

The GPS program allows for continuous alignment of the client’s assets, advising them of tax efficient strategies and gives them and their loved ones peace of mind that their legacy will last for generations. Please contact Morris Law Group for more information.

Friday, July 8, 2016

The Panama Papers

A very popular question has arisen throughout the last few months and that is: what exactly are the “Panama Papers?” It has been widely reported in the media, yet few people are familiar with the story. In addition, many people who are familiar with the story are confused as to why it is relevant, as it took place in another country.

Earlier this year, an anonymous insider leaked 11.5 million documents that were in the possession of the Panama-based law firm, Mossack Fonseca. The leak, now widely known as the “Panama Papers,” is the largest leak of confidential data in history.  

The leaked documents contained proof of over 200,000 shell companies created by the firm for which their sole purpose appears to be alleged large-scale tax evasion. The initial numbers appear to implicate individuals in dozens of countries all over the world, dating back to the 1970’s.

As a result of this leak and other similar cases, there is significant pressure from the public to take further measures to combat tax evasion. This public pressure will most likely lead to heightened scrutiny by governments globally over individuals who have assets outside of their home country (offshore).

Although the above facts are extremely serious, it is important to note that simply owning assets or entities offshore is not illegal. The illegality in these types of situations arises from the lack of reporting such offshore assets in your country of tax residence, which also results in the failure to pay required taxes on the offshore assets.

If you are a citizen of the United States and own assets offshore, we recommend meeting with an attorney to ensure that you are compliant with all rules and regulations related to owning such assets. Additionally, the United States also has certain disclosure programs which permit non-compliant owners of offshore assets to “come clean” and pay all back taxes (plus penalties) in order to avoid significant criminal penalties.  

Monday, June 27, 2016

Benefits of Florida Residency


In addition to the weather, there are many financially compelling benefits that Florida provides to its residents. First, and perhaps the most widely known, is the income tax benefit. Florida does not assess a state income tax on its residents (unlike many of the states in the northeast). This relief is one of the driving factors for the southern migration.     

Furthermore, just like Florida does not have a separate state income tax, Florida does not assess a separate state estate tax on its residents. In contrast, many states do impose such an estate tax with exemption thresholds far lower than the federal estate tax exemption amount of $5,450,000 (in 2016 and indexed for inflation). Although, it is important to note that if you own property in another state, that state may assess an estate tax on said property. With proper planning said state estate tax may be able to be avoided.

As a caveat to the above mentioned income and estate tax benefits, a Florida resident must be sure to actually spend the majority of his or her days of a year in Florida (typically 183). Otherwise, your former state may assess income and/or estate taxes upon you. There are certain actions that one can take to validate their Florida residency status. Some of the ways to prove residency include, but are not limited to, filing a declaration of homestead, obtaining a Florida driver’s license, registering to vote, and revising estate planning documents to state that you are a Florida resident. 

Aside from being tax friendly, Florida is also a great state for asset protection. Florida’s most significant form of asset protection is through its homestead laws. Homestead protection, for those who elect it, protects Florida residents from losing their “homestead” or primary residence to a creditor. However, this does not protect a homeowner from IRS tax liens or liens related to the financing of the homestead property.  Florida also offers additional asset protection on all forms of property held as tenants-by-the-entirety (see blog post May 3, 2016), life insurance and annuity contracts, IRA’s and 529 college savings accounts (see blog post June 9, 2016). 

In summary, establishing Florida residency is not only a lifestyle change (throw away those snow shovels) but also an opportunity to alleviate significant and unnecessary financial stress for the remainder of your life. 

Thursday, June 9, 2016

529 Plans

While contemplating future planning, a major concern for a great number of people is how to pay the enormous cost of their children’s higher education.
One such planning technique is the 529 college savings plan (for purposes of this post, 529 plan refers to an individual investment plan and not a state sponsored plan). The 529 plan is a tax-advantaged qualified tuition plan designed to encourage saving for future college costs. The plan is not complicated and does not require a significant amount of money up front. Rather, it is simply an investment account to which funds can be added at any time and in any amount.
529 plans are tax-advantaged because the earnings growth on the contributions within the account appreciate free of income tax. Additionally, withdrawals taken to pay for qualified higher education expenses are also tax-free, with such expenses being broadly defined to include tuition, room, board, books and computers. 529 plans also offer flexibility as they are not child specific. That is, if one child receives a full scholarship to attend college, the funds set aside in that child’s 529 plan may be used for other children.
Another major advantage of this plan is the asset protection it offers. The Florida Statutes protect 529 plans from the claims of creditors, including creditors of the account owner and creditors of the beneficiary.
While such plans are beneficial, it is important to note that just like any other investment product; performance is subject to market risk. Additionally, a 10% penalty may be imposed if assets are removed from the account for purposes other than a qualified education expenses.
Although the market risk argument can be made, it is undeniable that 529 college savings plans offer an exceptional planning mechanism for college savings, while also keeping a large share of your assets protected from creditors. 

Monday, May 23, 2016

Personal Property Memorandum

Estate planning is an extremely broad concept that not only affects your financial matters, but your personal life as well. One aspect in which people often overlook in their estate planning is what happens to the smaller, more personal items. 
Wills often state a provision such as “My Personal Representative (or Executor) shall distribute my tangible personal property equally among my children.” Although the Testator has the right intent, such a provision may lead to conflicts within a family, as certain tangible personal items have different sentimental and sometimes monetary values to each child.  
While it is certainly possible that all the beneficiaries amicably divide a parent’s personal items equally, it is not realistic to rely on them to divide the items without any disagreement. 
Florida is a state which allows for people to plan for this by using a Personal Property Memorandum (PPM). A PPM is a separate writing in which you can itemize and dispose of personal property as you desire, even after the creation of your will. In order for a PPM to be valid the following requirements must be satisfied: 1) Your Will must specifically reference the fact that you are disposing of tangible personal items by a separate list; 2) You must sign and date the PPM (it does not need to be witnessed); and 3) You must clearly describe the personal property and beneficiary for each item you wish to distribute in the PPM.   It is recommended that you also attach pictures to avoid confusion.

A PPM is an imperative estate planning tool because it can be extremely effective in ensuring that your dispositive intentions are in alignment with the actual distributions of your personal property upon your death. Additionally, it can avoid confrontation over personal items between family members during a highly emotional time period.   

Tuesday, May 3, 2016

Tenancy-by-the-Entirety

In today’s society, creditors have become a part of everyday life. They can arise from lawsuits, medical expenses, bills and a multitude of other scenarios. It is for this reason that protection of one’s assets is essential. Although the concept is broad, at a base level, asset protection is the enactment of a plan that is intended to legally protect your assets from the claims of creditors.

Although many forms of asset protection can be complicated and expensive to implement, there are options available which are more affordable and less complex. One such method available in Florida is joint ownership of an asset with a spouse as tenancy-by-the-entirety (TBE).      


TBE is a type of co-ownership that is only available to married couples. In order for an asset to qualify for being titled as TBE, all of the following requirements must be met: 1) each spouse must have the same level of control and interest in the property, 2) they must have acquired control at the same time under the same instrument, 3) there must be a right of survivorship in the property, and 4) they must be married at the time the property became titled in their joint names, as TBE.

Once property is held as TBE, each spouse is deemed to be the owner of the entire interest of the property, and the property may not be transferred or alienated without the consent of both spouses. Since the property is not divisible without the consent of both spouses, a creditor of one spouse cannot attach property owned jointly by both spouses as TBE unless the claim arises against both spouses. Additionally, it is not an expensive or complicated process since it only requires the proper titling of assets and compliance with the above stated requirements.    

For example, husband and wife own property as TBE. Husband is later involved in a car accident, and is being sued. The person suing husband cannot attach a claim to the property owned as TBE, because the claim only arose against husband, and not wife.  

Although it provides a heightened level of protection, TBE is reliant on marriage. Thus, if the spouses get divorced, they will lose the protection that they receive from TBE, and the property will then be held as joint tenants with rights of survivorship or tenants in common. It is also important to note that TBE creditor protection will be lost if a spouse passes away.  

As described above, TBE is an extremely cost-effective, legally sound way that you can protect your assets from claims of creditors. It is therefore important to take a look at how your assets are titled, and strongly consider retitling property as TBE if the circumstances permit.     

Monday, April 4, 2016

Changes to Health Care Surrogacy in Florida


A health care advance directive/surrogacy document is an extremely important planning technique that appoints a representative to make medical decisions in the event you are unable. This person will be permitted to make decisions, and give your consent for medical treatment and the administration of medication.

Historically, a health care surrogate had authority to act on an individual’s behalf only if that individual was deemed incapacitated. For many years, Florida followed this rule, and Florida statutes (Chapter 765) specifically stated that an individual is presumed to be capable of making health care decisions for his or her self unless he or she is determined to be incapacitated by a physician.

Although individuals have the ability to designate a health care decision-maker for one’s incapacity, many individuals also require assistance with health care decisions while they are still competent. Furthermore, many health care surrogates are not equipped with the proper knowledge of the individual’s complete condition and medical history prior to the individual’s incapacity. This in turn hinders the surrogate’s ability to make proper health-related decisions.

 In October 2015, Florida’s Health Care Advance Directives statute was amended, resulting in a change from the historical rule. A provision was added to Chapter 765 providing that a health care surrogate is permitted to make health care decisions on an individual’s behalf while that individual still has capacity. Although a surrogate now has this ability, the statute provides a safeguard stating that where an individual has capacity and his or her decision conflicts with that of a surrogate, the decision of the individual will control.

This Amendment will be most effective when used in conjunction with the Health Insurance Portability and Accountability Act (HIPAA). HIPAA permits health care providers to disclose protected medical information to persons designated by an individual in a written waiver. Thus, when designating a health care surrogate, it is also important to include the surrogate as an authorized recipient in a HIPAA waiver.      
 
This change will ultimately enable a health care surrogate to engage in more effective care of an individual should his or her health decline. Therefore, when designating a health care surrogate it is important to choose someone who you not only trust, but someone who you feel has the ability to effectively communicate medical treatment options not only for you, but also with you.