by Linda Suzzanne
Griffin
In a
recent case, Gurfinkel vs. Marmor, 32 Fla. L. Weekly D 29310
(Third District), the court determined that the terms of a revocable
trust, which reserved the right to amend to the grantor and which
specifically prohibited any guardian of the grantor or other person
from exercising those rights during the grantor’s lifetime, did not
permit the grantor’s husband to amend the trust or delete assets
from the trust under a durable power of attorney.
On June
30, 1998, Ms. Goldie Marmor executed her revocable trust and
appointed her husband as trustee; the trust was funded primarily with
25 shares of stock in a closely held business and Goldie reserved to
herself the right to revoke, to amend or to withdraw the assets. At
the same time she also executed a durable power of attorney
appointing her husband, Martin, as her attorney-in-fact.
The
durable power of attorney included a power to “transfer and convey
to a trustee” and
“a
power to transfer assets into the names of any nominee or nominees as
the trustee shall direct.” On April 12, 2000, Martin, pursuant to
the durable power of attorney executed an amendment to the trust
which deleted references to the stock and he transferred the stock
elsewhere. The trust specifically stated that “[n]either the
conservator nor the guardian of the grantor nor any person other than
the grantor except as otherwise provided in this item, may exercise
any of the rights reserved to the grantor by the provisions of this
item.” The court determined that the language of the trust
controlled.
The court
determined that the prohibition “unambiguously provides that the
holder of a durable power of attorney cannot withdraw trust funds.”
The court also referred to Section 709.08(7)(b)(5) which provides
that an attorney-in-fact acting under a durable power of attorney
cannot create, amend, modify or revoke a document effective at the
principal’s death unless expressly authorized by the durable
power of attorney. The court determined that the durable power of
attorney, at most, authorized Martin to transfer into the
trust and not out of the trust and found no conflict,
ambiguity or inconsistency.
Advice:
Obviously
a power under a durable power of attorney to amend, revoke, create or
modify a trust needs to be discussed with your clients. If they do
not want such a power their intent should be expressly stated
in the trust document and such language should be omitted from the
durable power of attorney to avoid any ambiguity.
Sale
Exclusions
Section
121 of the Internal Revenue Code (the “Code”) provides that a
taxpayer can exclude up to $250,000 ($500,000 for joint returns) on
the gain from a sale or exchange of taxpayer’s principal residence.
The residence must be used 2 out of the 5 years before the sale and
the full exclusion is available only if the husband and wife file a
joint return for the year of the sale. Thus, if a spouse died in Year
1 and the surviving spouse sells the home in Year 2 the $500,000
exclusion would not be available because a joint return would no
longer be filed. The Mortgage Relief Act law, effective for sales and
exchanges after December 31, 2007, allows a surviving spouse to
qualify for the $500,000 exclusion if the sale occurs within
two years after the spouse’s death and the other requirements are
met.
Advice:
If a
surviving spouse anticipates selling the home, then the home should
be sold within the 2 year period.
Exclusion
of Gain from Sale Based On Child’s Unforeseen Problems
As
discussed in the prior paragraph a $500,000 exclusion from income is
allowed on the sale of the home if the requirements under the Code
are met. However, what happens if the sale of the home occurs due to
unforeseen circumstances and the homeowner did not use the home as a
personal residence for the two year period? In PLR 200820016 the
Internal Revenue Service (the “Service”) ruled that a taxpayer
who sold a residence could exclude a portion of the gain even though
she did not reside in the home for two years.
The
taxpayer purchased a residence for her two daughters and herself. The
daughters were subject to verbal abuse, unruly behavior and sexual
assault. The taxpayer sold the residence within the two year period.
Section 121(c) of the Code permits taxpayers to exclude a percentage
of the gain even if the taxpayer did not use the home as a personal
residence for the full 2 years, if the primary reason for sale is
based on a change in employment, health or unforeseen circumstance.
The Service ruled this was an unforeseen circumstance and excluded a
portion of the gain.
Advice:
Anytime
that you may be dealing with a sale of a home and the 2 year
requirement is not met, then this provision should be reviewed to see
if your client can use this exception to exclude a portion of the
gain realized.
All
Contents © Copyright Linda Suzzanne Griffin,
P.A.
