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Marc Soss
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SARASOTA FLORIDA WILLS, TRUSTS, PROBATE & BUSINESS ATTORNEY AND LAWYER
SARASOTA FLORIDA WILLS, TRUSTS, PROBATE & BUSINESS ATTORNEY AND LAWYER

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Tax reform dating back to 2014 has resulted in an increase in the District of Columbia's 2017 estate tax exemption amount to $2 million. In 2018 the exemption amount is anticipated to be equal to the 2017 federal exemption amount of $5.49 million. Currently, eighteen (18) states and the District of Columbia impose an estate or inheritance tax—separate from the federal estate tax. However, neighboring states have been repeal their estate and inheritance tax by raising the exemption amount to the federal level. For example, Maryland increased its 2018 exemption to $4 million in 2018, and the federal exemption amount in 2019. The Commonwealth of Virginia does not impose an estate tax on decedent estates. 
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Maintaining an offshore bank account is not illegal, however, failing to report income and interest earned is tax evasion. Effective January 1, 2017, IRS Revenue Procedure 2017-31 added Belgium, Columbia and Portugal to the list of countries that participate in the automatic exchange of information on bank interest paid to nonresident alien individuals. This addition means there are now 43 countries participating in the automatic exchange program. The IRS only shares information with countries that have entered into this mutual information exchange agreement. The IRS is statutorily barred from sharing information with another country without such an agreement in place. All U.S. information exchange agreements require that the information exchanged under the agreement be treated and protected as secret by the foreign government. This is one of the most effective tools the U.S. Government has to combat tax evasion.
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FLORIDA HOMESTEAD INCREASE ON THE 2018 BALLOT
In 2018, Florida voters will have the opportunity to vote on a constitutional amendment to raise the Florida homestead exemption from $50,000 to $75,000, on homes worth $100,000 or more. If 60% of voters approve, the new rate will take effect January 1, 2019. The Florida homestead exemption reduces the value of a Florida residents home for property tax assessment purposes. The proposed amendment would save Florida state residents about $644 million with the average homeowner receiving an annual savings of $170. Florida municipalities and counties are concerned about the decreased revenues impact...

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NEW FINRA RULE TO PROTECT EXPLOITATION OF THE ELDERLY

In an effort to help protect the elderly U.S. population the Financial Industry Regulatory Authority (FINRA) has announced that the Securities and Exchange Commission (SEC) has approved a new rule and an amendment that are specific to customers who are elders. Regulatory Notice 17-11 explains the new rule and amendment: (1) the adoption of new FINRA Rule 2165 (Financial Exploitation of Specified Adults) to permit members to place temporary holds on disbursements of funds or securities from the accounts of specified customers where there is a reasonable belief of financial exploitation of these customers; and (2) amendments to FINRA Rule 4512 (Customer Account Information) to require members to make reasonable efforts to obtain the name of and contact information for a trusted contact person for a customer’s account. Both New Rule 2165 and the amendments to Rule 4512 become effective February 5, 2018. The new rule and amendment are designed to enable financial specialists to be able to more quickly and effectively address suspected financial exploitation of seniors and other specified adults.

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DEDUCTING THE COST OF LIFE IN AN ASSISTED LIVING FACILITY

Many individuals in our aging population are transitioning from home ownership to life in an assisted living facility (“ALF”). Many ALF’s require a onetime entry fee and ongoing monthly charges for housing and services (meal plans, housekeeping, transportation, and social and recreational activities). The benefit of an ALF is that when a resident’s health and personal care needs become more acute, they are not forced to move to a new facility, as their level of service can be increased to include long-term care and skilled nursing care. Although the costs of an ALF can be substantial, a percentage or all of the costs can be deducted as a medical expense income tax deduction either by the individual or third party if they are providing more than half of the resident’s support.

Section 213(a) of the Internal Revenue Code (IRC) allows as a deduction any expenses that are paid during the taxable year for the medical care of the taxpayer, his or her spouse, and dependents who are not compensated by insurance or otherwise. Estate of Smith v. Commissioner, 79 T.C. 313, 318 (1982). The deduction is allowed only to the extent the amount exceeds seven and one-half (7.5%) percent of adjusted gross income. Sec. 213(a); sec. 1.213-1(a)(3), Income Tax Regs. For purposes of Sec. 213 the term “medical care” includes amounts paid “for the diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure or function of the body.”

The entire ALF cost, including room and board, can be fully deducted on a federal income tax return as a medical expense if the individual’s health problems are classified as being “chronically ill” and if the appropriate services are “provided pursuant to a plan of care prescribed by a licensed health care practitioner” (physician, registered professional nurse or licensed social worker). An individual will qualify as “chronically ill” if a licensed health care practitioner certifies that the individual: (i) is unable to perform at least two (2) basic activities of daily living (including eating, toileting, transferring, bathing, dressing) without assistance from another individual due to loss of functional capacity for at least ninety (90) days; or (ii) requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.

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FEDERAL MEDICAID LAW PREEMPTS FLORIDA'S REIMBURSEMENT STATUTE

In Gallardo v. Dudek (N.D. Fla., No. 4:16-cv-116-MW/CAS, April 18, 2017), a federal district court ruled that federal law prohibits the state of Florida from seeking reimbursement for Medicaid payments it made on a recipient’s behalf from portions of the recipient’s personal injury settlement that were allocated to future medical expenses. Florida’s reimbursement statute uses a uniform formula in which the recipient’s gross settlement is first reduced by 25 percent to account for attorney fees, the remainder is divided in half, and AHCA is then entitled to recover the lesser of its total medical payments or one half. Gianinna’s parents filed suit against the agency in federal court seeking an injunction and a declaration that Florida’s reimbursement statute violates federal law inasmuch as it allows the state to recover from the portion of her settlement beyond that allocable to past medical expenses. AHCA countered that it was entitled to satisfy its lien from the portion of the settlement representing compensation for both past and future medical expenses. The U.S. District Court, N.D. Florida, granted the Gallardos’ motion for summary judgment and denied AHCA’s motion. The court found the AHCA is entitled to recover for past medical payments it made on Gianinna’s behalf only from that portion of the settlement allocated to past medical expenses. The court ruled that when the state reimbursement law explicitly allows for recovery from the portion of the settlement attributable to future medical care, that portion of the state law violates, and is preempted by federal Medicaid law.


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We live in an ever-changing federal income and estate tax environment. On January 1, 2017, the federal estate tax exemption increased to $5.49 million per individual. That amount excludes over ninety-five (95%) percent of all decedent estates from payment of any federal estate tax. In addition, thirty (30) U.S. states have no estate or inheritance taxes while twenty (20) states and the District of Columbia currently impose an estate (14 states) or inheritance (6 states) tax, or both. As a result, your estate could be exempt from the federal estate tax but subject to a large state estate tax.
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THE FLORIDA SLAYER STATUTE DEFEATED BY A CLAIM OF SELF-DEFENSE

Section 732.802 of the Florida Statutes is known as the “Florida Slayer Statute.” Subsection (3) provides “that a named beneficiary of a life insurance policy “who unlawfully and intentionally kills … the person upon whose life the policy is issued is not entitled to any benefit …” Moreover, subsection (5) provides that a final judgment of conviction of murder of any degree is conclusive, but in the absence of such a conviction, “the court may determine by the greater weight of the evidence whether the killing was unlawful and intentional for purposes of this section.”

In The Prudential Ins. Co. of Am. v. Harding, 2016 WL 6568085 (M.D. Fla. Nov. 4, 2016), a court found the claim of self-defense to be enough to avoid application of the Florida Slayer Statute in a domestic partners death. A physical altercation in February 2015, resulted in the death of one of the partners (the owner of a life insurance policy with a beneficial value of $466,000). The alleged criminal perpetrator was the sole beneficiary of that life insurance policy. The decedent’s sister argued that the surviving partner was ineligible to collect the life insurance benefits under Florida’s Slayer Statute. However, the State Attorney didn’t pursue charges against the surviving partner as it did not believe there was enough evidence to obtain a conviction.

The Circuit Court applied the greater weight of the evidence standard and found that it wasn’t more likely than not that surviving partner acted unlawfully in his actions; and it was just as possible that he acted in self-defense. Accordingly, the court found that Florida’s Slayer Statute didn’t apply and ordered the distribution of the life insurance benefits to the surviving partner.


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TIPS TO AVOID A CHALLENGE TO YOUR ESTATE PLAN AT DEATH

Although a challenge to a Last Will and Testament (“Will”) or Revocable Trust (“Trust”) are a sad reality there is no guarantee that even with proper planning a contest may be avoided. Will and Trust contests are typically the result of a disgruntled family member or friend challenging the validity of the documents. The have a higher probability of occurring in in blended families, when a child is disinherited or when the children are not treated equally. The following are some proactive steps that can be taken:

• Create your estate plan early in life and update it regularly. Many inheritance disputes result from estate planning documents being signed shortly before the death of the testator.
• Keep copies of your old estate planning documents. Your old estate planning documents may be reinstated or serve as evidence of your intent if a newer document is successfully challenged after your death. It makes it difficult for Nephew John to challenge your estate planning documents when all your prior documents also excluded him as a beneficiary.
• Explain a disinheritance or inequity in distributions. Make sure your estate planning documents include specific language as to why an individual who might be expecting an inheritance is not receiving one, or why your estate will not be equally divided between your children (prior gifts to one child).
• Establish your competence with regular medical visits and notes. Have disinterested individuals witness the executed of your estate planning documents to diminish the ability of a challenge of undue influence.
• Discussing the general contents of your estate plan with your family. If nephew John knows years in advance that he will not be a beneficiary, it may decrease his motivation to challenge your estate plan.

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