Friday, October 30, 2015


Even though you think you have done everything right, the statute of limitations may not have started to toll if your Form 709, Gift (and Generation-Skipping Transfer) Tax Return, contains errors. Once a properly completed (how much can we stress the words PROPERLY COMPLETED?) Form 709 is filed, the Service must assess the amount of any gift tax within three years of the filing date. Under the Regs, a transfer is adequately disclosed when the return provides the following:

(i) A description of the transferred property and any consideration received by the transferor; [and]

(iv) A detailed description of the method used to determine the fair market value of property transferred, . . . including any financial data . . . utilized in determining the value of the interest. (more…)

Thursday, October 29, 2015

They’re here—the 2016 IRS plan limitations-but they’re not new. Because the change in the cost-of-living index doesn’t trigger an adjustment, the qualified plan limits identified here do not change in 2016. See the chart below to see the 2016 limits as well as a summary of the limits over the preceding three years. Note that certain other limitations do change for 2016 (e.g. certain IRA limits), but not the qualified plan limits reported here.

Type of Limitation 2016 2015 2014 2013
Elective Deferrals (401(k), 403(b), 457(b)(2) and 457(c)(1)) $18,000 $18,000 $17,500 $17,500
Section 414(v) Catch-Up Deferrals to 401(k), 403(b), 457(b), or SARSEP Plans (457(b)(3) and 402(g) provide separate catch-up rules to be considered as appropriate) $6,000 $6,000 $5,500 $5,500
SIMPLE 401(k) or regular SIMPLE plans, Catch-Up Deferrals $3,000 $3,000 $2,500 $2,500
415 limit for Defined Benefit Plans $210,000 $210,000 $210,000 $205,000
415 limit for Defined Contribution Plans $53,000 $53,000 $52,000 $51,000
Annual Compensation Limit $265,000 $265,000 $260,000 $255,000
Annual Compensation Limit for Grandfathered Participants in Governmental Plans Which Followed 401(a)(17) Limits (With Indexing) on July 1, 1993 $395,000 $395,000 $385,000 $380,000
Highly Compensated Employee 414(q)(1)(B) $120,000 $120,000 $115,000 $115,000
Key employee in top heavy plan (officer) $170,000 $170,000 $170,000 $165,000
SIMPLE Salary Deferral $12,500 $12,500 $12,000 $12,000
Tax Credit ESOP Maximum balance $1,070,000 $1,070,000 $1,050,000 $1,035,000
Amount for Lengthening of 5-Year ESOP Period $210,000 $210,000 $210,000 $205,000
Taxable Wage Base $118,500 $118,500 $117,000 $113,700
FICA Tax for employees and employers 7.65% 7.65% 7.65% 7.65%
Social Security Tax for employees 6.2% 6.2% 6.2% 6.2%
Social Security Tax for employers 6.2% 6.2% 6.2% 6.2%
Medicare Tax for employers and employees 1.45% 1.45% 1.45% 1.45%
Additional Medicare Tax* .9% of comp
.9% of comp > $200,000 .9% of comp > $200,000 0.9% of comp > $200,000

*For taxable years beginning after 12/31/12, an employer must withhold Additional Medicare Tax on wages or compensation paid to an employee in excess of $200,000 in a calendar year for single/head of household filing status ($250,000 for married filing jointly).


Tuesday, October 27, 2015


In Lubin v. AT&T Ret. Sav. Plan (2015 WL 4397703), an adoption was not given effect in determining who would receive the life insurance benefits at issue.

In this case, Austin Hardy participated in a Retirement Savings Plan (“Plan”), which included a life insurance benefit. At his death, he was survived by his sisters, Pauline Lubin and Frances Koryn (Plaintiffs), and his biological daughter, Jennifer Krokey. Although Krokey was Hardy’s biological child, she had been subsequently adopted by a step-father. Under Florida law, a child who is adopted is the child of the adopting parent and ceases to be a child of the biological parent for all purposes. (more…)

Friday, October 23, 2015


In a recent bankruptcy case, Richard Lewiston unsuccessfully attempted to shelter his assets in the Lois and Richard Lewiston Living Trust (the “Trust”) from inclusion in his bankruptcy estate based on the Trust’s spendthrift provision. Here, the bankruptcy court looked to Michigan state law in applying the provisions of the Bankruptcy Code and concluded the Trust property was part of Lewiston’s bankruptcy estate. (more…)

Friday, October 23, 2015

The 7520 rate for November has remained the same at 2.0%.

The November 2015 Applicable Federal Interest Rates can be found here.

Monday, October 19, 2015

With drafting assistance from our Washington University School of Law extern, Alexander Fersa.

ThinkstockPhotos-488003222PLR 201536002 is a reminder that the Treasury Regs (specifically Treas. Reg. § 301.9100-3) offer relief to correct certain failures to make regulatory elections. Here, the decedent’s trust created Trust A and Trust B. Trust B provided for all income to be paid to the surviving spouse, so that Trust B otherwise qualified for the qualified terminable interest property (QTIP) election (if you need a refresher on what type of trusts qualify for the gift and estate tax marital deduction, click here). However, the attorney who prepared and timely filed the estate tax return failed to make the QTIP election for Trust B.

A QTIP election is to be made on the estate tax return and once made, the election is irrevocable. The regulations state the election is to be made on the last return filed prior to the due date of the return, including extensions, or on the first return filed after the due date of the return. (more…)

Wednesday, October 14, 2015

With drafting assistance from our Washington University School of Law extern, Alexander Fersa.

It seems the California Supreme Court agrees with Cole Porter that “times have changed.”

Abrogating 50 years of binding case law, in In re estate of Duke, the California Supreme Court elected to treat wills the same as trusts are treated under the Uniform Trust Code by allowing courts to look to extrinsic evidence when determining the intent of the testator. The Court concluded that an unambiguous will may be reformed if clear and convincing evidence establishes (1) that the will contains a mistake in the expression of the testator’s intent at the time the will was drafted and (2) the testator’s actual specific intent at the time the will was drafted.

The Court determined that there is no justification for a categorical bar on reformation of unambiguous wills so long as the reformation is supported by clear and convincing evidence, which would provide adequate protection against evidentiary concerns that originally led to the bar on reformations of unambiguous wills.

In this case, Duke wrote a holographic (i.e. hand-written, unwitnessed) will in 1984, providing that all of his property was to be given to his wife, but if he and his wife died in a common disaster, his property was to go to named charities. Duke’s wife died in 1997, but Duke never revised his will after her death. (more…)

Wednesday, October 7, 2015

Because powers of attorney are often used as an elder care planning tool, they are also often used by the attorney-in-fact to manage the estate planning and finances of the principal.  The creation of a trust can be an important estate planning tool, so, if the principal wants to authorize his or her agent to create a trust, that authorization should be specifically granted in the power of attorney.  Not surprisingly, there is increasing litigation over the scope of powerconveyed to an agent through a power of attorney, including litigation regarding the agent’s authority to create a trust for the principal.  In Dishman v. Dougherty, Kentucky was one of the latest states to have an appellate court weigh in.

Setting aside a very complex factual and procedural history that are recounted in detail in the opinion, one of the take-aways from the opinion was that this paragraph in a power of attorney did not authorize the attorney-in-fact to create a trust (particularly when considered in conjunction with the terms of an antenuptial agreement between the husband/principal and the wife/co-trustee/attorney-in-fact):

[Granting the power to] [c]onvey any real or personal property to the Trustee of any trust agreement between me and said Trustee and entered into either before or after the date of this instrument . . .

The appellate court held that “in order for an attorney-in-fact to create a trust pursuant to a POA, this authority must be expressly provided for in the instrument if it contains a specific provision related to trusts.”  Here, the power of attorney only permitted the attorney-in-fact toconvey property into a trust rather than permitting the power to create a trust.  As a result, a trust purportedly created by the attorney-in-fact was void ab initio.

Estate planners and prospective principals should consider discussing the power to create a trust as one of the specific powers granted to an attorney-in-fact.  In addition, trustees accepting a trust purportedly created using a power of attorney should consider, as part of their due diligence in accepting the relationship, a thorough analysis of whether the the power of attorney actually permitted the creation of the trust.

Monday, October 5, 2015


Uniform Transfers to Minors Act

Florida’s Uniform Transfers to Minors Act (“UTMA”), found under Florida Statutes Chapter 710, provides a mechanism for the creation of custodial accounts for gifts, bequests or other transfers to minors, without requiring the presence of an appointed guardian for the minor. Previously, under Florida’s UTMA, minors were defined as persons under the age of 21.
The new UTMA statute, effective July 1, 2015, permits custodianships to last until the age of 25. A custodianship under Florida law can be created if the transferor, the custodian or the minor resides in Florida or if the custodial property is situated in Florida.

Health Care Surrogates

A designation of a Health Care Surrogate is a written document appointing someone to make health care decisions for an individual (the “Principal”) or receive health information on such person’s behalf in the event he or she is unable to do so. Florida’s new health care surrogacy act, found under Florida Statutes Section 765.201 through Section 765.205, allows for more flexibility in appointments of surrogates and more flexibility in drafting of such documents.

The new act, effective October 1, 2015, allows the continuation of presently-exercisable designations of health care surrogates, also known as “durable” health care surrogates. A durable health care surrogate is one who can make health care decisions even if the Principal is not determined to be incapacitated. However, if the Principal has capacity, the statute indicates that the Principal’s decisions are controlling. Nonetheless, a Principal still may create an old-fashioned health care surrogate document that only takes effective upon a finding of incapacity.

The new act also allows parents and guardians to name health care surrogates for their minor children. This is extremely effective for parents who travel often or are unable to provide informed consent themselves. These changes do not invalidate existing Florida designations of health care surrogate documents.