For those practitioners who were not able to attend the legislative update seminar the following are a few changes effective July 1, 2009:

(1) Fla. Stat. §732.402 has been amended to (a) increase the exemption for household furniture, furnishings and appliances from $10,000 to $20,000, and (b) limit the exemption for automobiles to two motor vehicles which individually can not weigh more than 15,000 lbs and (c) include qualified tuition programs.

(2) Fla. Stat. §735.203 has been amended to provide that in a summary administration if each trustee of a trust is a beneficiary and is also a petitioner, then each qualified beneficiary of the trust shall be served by formal notice unless the qualified beneficiary joins in or consents to the petition.

(3) Probate filing fees have increased from in Pinellas County from $280.00 to $400.00 and summary administration filing fees have increased from $225.00 to $345.00.

(4) Fla. Stat. §739.201(4) has been added to provide that if a disclaimant disclaims property over which a disclaimant has the power to direct the beneficial enjoyment of the property, then such power is also disclaimed unless such power is limited by an ascertainable standard or unless the disclaimer otherwise provides. Remember that the changes in the law are effective now. Be sure your paralegals and assistants are informed.

As most of you know the Florida estate tax and the Florida intangible tax is eliminated. Nevertheless, Fla. Prob. R. 5.340(d) requires that the inventory be filed with the Florida Department of Revenue (“FDOR”). This author has received notices from the FDOR that the inventory does not have to be filed and there was some confusion that while filing of an inventory is required by the probate rules, it is not a requirement of the FDOR. Tae Bronner, the chair of the Florida probate section, contacted FDOR and they will stop sending the notices out. Continue mailing the inventory until the probate rule is changed.

Many of your clients have life insurance policies which may be held either in trust or their IRAs. These policies probably have not been reviewed for several years. Many clients believe that the payments of life insurance premiums and the internal earnings of the life insurance will take care of future premiums for many years. Unfortunately because of the stock market decline and other economic issues the life insurance may not be paid up and therefore your clients will have to pay for premiums to retain their life insurance policy. If additional premiums are required they will have to obtain these monies from other sources. Many clients only source for payments may be an IRA. Unfortunately the income payable from an IRA will be taxed and therefore IRA distributions may not be the best asset to pay premiums. However, consider that the income tax paid at a 35% or lower tax rate may be better than paying a 45% estate tax rate. Remind your clients to review their life insurance policies if necessary or retain someone to review those policies to see if they are necessary or if they are substantially paid for or if premiums need to be paid. Also consider life settlement alternatives or exchanges of such policies.

In Suzanne Pierre, (2009) 133 TC No. 2, the valuation for a gift was based on an interest in a single member limited liability company (“LLC”) not the underlying value of the assets contributed to the LLC. The LLC was a “disregarded entity” under the “check the box” Treasury regulations.

The Internal Revenue Service (the “Service”) argued that the gift transfer should be valued as transfers of proportionate shares of the underlying assets. The taxpayer argued that the taxpayer made a transfer of an interest in an LLC subject to valuation discounts for lack of marketability and control, NOT an interest in the underlying assets. The Service’s position was that the disregarded entity under the Treasury regulations applied to the valuation of the interests and therefore a gift was made of the assets and not the LLC interest.

The taxpayer argued that state law and not federal law determines the nature of the taxpayer’s interest in the transferred property. The tax court agreed with the taxpayer and concluded under New York law that the taxpayer did not have an interest in the underlying assets of the LLC which was recognized as a separate entity. The tax court also held that neither the “check the box” regulations nor case law supported an outcome that the existence of an entity validly formed under state law is ignored in determining how the transfer of the property interest under federal gift tax law. This is a favorable ruling for taxpayers who own LLCs in valuation cases. As attorneys can see the Service is not letting up on attacks to valuation cases. Thus, when making gifts of LLC or family limited partnership interests case law should be carefully reviewed to respect the formalities of such an arrangement.