Webinar Transcript (9/10/2024): "Going to the Sunshine State: Things to know before you get burned. Considerations in Florida planning."
Host: Yeshiva University & ParkBridge Wealth Management
Moderator: Jonathan I. Shenkman, President & Chief Investment Officer of ParkBridge Wealth Management (Contact: jonathan@parkbridgewealth.com)
Presenter: Adina Lewis, Esq. and Lawrence Garbuz, Esq. at Lewis and Garbuz, P.C.
This session is entitled "Going to the Sunshine State: Things to know before you get burned. Considerations in Florida planning."
For this extremely important and timely topic, we're privileged to hear from Adina Lewis and Lawrence Garbuz. By way of background, Adina Lewis is a founding partner at Lewis and Garbuz, and has more than 20 years of experience working exclusively in the field of trusts and estates.
During that time she has worked on many complex and contested cases both in the United States and abroad. Adina also completed her law degree at the Yeshiva University Cardozo School of Law, where she served as managing editor of the Cardozo Women's Law Journal.
Lawrence Garbuz is also a founding partner at Lewis and Garbuz with more than 25 years of experience in the field of trusts and estates.
With experience serving individuals and institutional clients.
With personal estate planning, wealth preservation, and estate and tax issues. Lawrence is admitted to the practice of law both in New York and Florida. He also received his law degree from Yeshiva University's Cardozo School of Law, where he served as managing editor of the Cardozo Arts and Entertainment Law Journal.
With that introduction, I'll now turn the program over to Adina and Lawrence.
Good morning everybody!
So.
I would like to start by first thanking Jonathan, Park Bridge Wealth Management.
YU, particularly Alan Sacks, for putting this together and offering us to speak.
I also want to give a little shout out to Suzy Myers, who's head of development at YU. I've known her for many years, and she is a dear friend of my family. I have a long connection to YU. I went to high school there, I went to Cardozo.
My daughter is now in college at Stern, and my son was there.
And I'm a big believer, obviously in supporting it. But I want to note that even if you had no family connection to YU, I say, as modern orthodox Jews, it's up to all of us to support and facilitate our clients in supporting this great organization.
It does more than just educate students. It represents all of us in the modern orthodox world. So I just want to thank them for all they do for all of us.
Something a little bit off topic for a second, something that comes up in my practice very often, and something that I feel is important as a practitioner.
I often work with women, especially after they've been widowed, or somehow are alone and need assistance in handling financial affairs, as they've never been the ones to handle it before.
One would think that younger women have more involvement in their financial affairs. But in my experience it's often not so.
Even last night I ran a workshop on financial organization, and as I'm talking to the women, all far younger than me, they really say "my husband does the finances," and I say, that's fine.
But what happens if he's not there? And we need to think about that, and how to make people and women or anybody who can identify with this - actually in my house growing up it was my mother, not my father - try to make them feel comfortable in their own personal finances, they should own it as well.
Sort of on the same topic, but maybe just opposite of it is as baby boomers age, a lot of them are successful career women who have a lot of earnings in their own right and they are very capable of a lot of charitable giving, and they might consider how their trends and how they want to give charity might be very different than men's, and I think that as practitioners or wealth managers and accountants, we should think about that and how to approach it in a way that might be different than you have traditionally approached.
So those are just my thoughts, sort of food for thought on all of that.
A little bit off topic, but important to me, and I guess it's on topic, in that we're talking about Florida, which tends to be people who are on the older age retiring, though not necessarily as now we talk about taxes, and sometimes we have people moving to Florida for reasons other than just retirement.
Okay, so today we're going to cover things related to planning as opposed to New York planning or moving from New York to Florida.
We're going to talk about the rules of domicile and statutory residency, the unauthorized practice of law meaning, if you're a New York practitioner, how does that play out if your client just moved to Florida, and Florida estate planning considerations as opposed to New York and differences. And then homestead and asset protection related to obviously asset protection that is beneficial in Florida versus New York.
Okay, so let's get into it.
Factors to consider and to determine domicile and statutory residence.
So I think we all know anecdotally, it seems clear that many New Yorkers are leaving for Florida.
They may be going to retire, but they're also trying to avoid the high taxes of New York.
Especially since the 2019 Federal deductions have been limited.
New York's ability to deduct it on Federal taxes makes it even more beneficial to move to Florida, possibly.
So what are we actually seeing? What are the populations really changing? Well, the answer is, yes.
Where are the clients going?
So again, if you look at the slide.
Florida continues to grow. New York is losing population or staying stagnant. Okay? So the blue line is New York.
The orange line is Florida, and, as you see, it kind of stayed the same in New York, and it's rising significantly in Florida.
And, as you see, sort of 2022, the gap is widening.
So what are the most populous regions in Florida that people are going to? South Florida.
Counties like Miami-Dade, Palm Beach and Broward have 6.2 million residents.
The New York City Metropolitan area is presently 19 million.
In 2014 South Florida population stood at 5.9 million, a 10% increase, while New York Metropolitan area grew only by one percent.
Again. Top cities of New York. Only 4 newer show one of them, which is listed here to me.
And meanwhile 20 cities in Florida all have seen growth since the last census.
Again. 13% increase in Florida, South Florida, as opposed to 1% in New York.
So New York is losing its tax revenue because of so many people leaving.
So it's very much in New York State's interest to go after people who have high wealth, who are leaving New York and try to grab their taxes and get their income or their liability, have them pay their taxes. Okay.
So what are the chances of being audited by New York?
Very likely if you're a high wealth individual, somebody would say with certainty, you're going to be audited.
The tax department is sophisticated and aggressive on this.
I mean many auditors working on residency issues. So this is a real concern for somebody who's leaving New York to Florida to avoid taxes.
Now, these audits can be regarding residency or income allocation. I'm focusing on residency today.
So domicile versus residence. We kind of use those words interchangeably, but actually in statutes they actually have different meanings.
Domicile specifically means a place where someone intends to return whenever they have been absent. A person can only have one domicile.
Residence, however, is a place of abode, a place where they live, and they can have many residences.
Okay.
So just the statute reads, you must pay income tax in New York if a) domiciled in New York or b) not domiciled in New York, but 1. Maintain a permanent residence, or 2. Spend more than 183 days of the taxable year in New York.
Right now I'm going to talk about domicile in New York.
There are 2 tests. There's domicile and then there's the statutory residency test.
I'm going to talk about domicile first, and then I'm going to talk about residency. So let's go back.
Everyone thinks 183 days out of New York, you're in the clear. No New York taxes. Just not true. So again, there are 2 residency tests - domicile and statutory.
Either one.
If New York State finds that you are domiciliary or statutory resident, you're paying taxes. Basically, all trains lead to New York State, owing income or estate tax. We're talking about both income and estate tax.
And of course CTAs can be significant if you don't do proper New York State planning.
Okay. So now let's talk about domicile. So as we talked about the definition, it uses the word "intent", and so that's something very subjective.
And how do we show intent? It's in our head.
So New York State says, as an individual seeking to establish a change in domicile, it's the taxpayer's burden to prove a change in domicile by clear and convincing evidence, which is a high burden, and the burden is on a person asserting a change of domicile to show the necessary intention.
So in determining an individual's intention in this regard, declarations will be given due weight, but they will not be conclusive if they're contradicted by conduct. So again, how does New York measure intentions?
It presumes it by your deeds or your actions. So what they've done is, they put together 5 primary factors to consider to prove or disprove that you are domiciled.
Again. New York has to prevail on one of the 5, but the taxpayer has to disprove on all 5. So it's a high burden, and it's hard, and let's go about how to do it. So again we look at these actions. And how do you do that? According to New York State, generally, by records and documentation.
So auditors are looking for, quote unquote "a change of lifestyle."
The case law standard is basically the test of intent is whether the place of habitation is the permanent home of a person with the range of sentiment, feeling, and association with it.
So how do they do that? I just want to point out something about how it can work against you both ways.
So this is a well-known case. Lawrence Estate.
Mr. Lawrence was the head of the Kansas Company.
He believed his home, his intention was to return to, to always be in New Jersey. His church connections were there.
They had a residence there, voted there. He declared in his legal documents that was his domicile.
So he wanted to portray himself as a New Jersey resident.
However, over many years he had a larger estate in Pennsylvania. He lived in Pennsylvania, that's where his children were, he thought it was better for them to be educated there, socially it was better for them there.
And so in the end, upon his passing New Jersey, as he had declared he was domiciled there, levied an inheritance tax on him from New Jersey. But Pennsylvania also said he was more in Pennsylvania than New Jersey, and that he had all the markings, for lack of a better word, of being a Pennsylvania domiciliary or resident, and he was taxed by both states. That's something, of course, we would like to avoid.
So let's talk about these primary factors.
So there are 5 of them: home, active business involvement, time, items near and dear, and family. So let's go through each of them.
So let's start with home. So when we're talking about home. We're not talking about just physical residence. But we're talking about a change of community.
You view Florida now as your home. That's where your close friends are. That's where your close ties are.
So, but for starters. How do you accomplish this? It's best accomplished by selling your house in New York and buying a house in Florida.
Owning a New York home and renting in Florida might be problematic.
If a New York home has higher value than a lesser place or a small place in Florida that isn't as comfortable as your New York home, that also might be problematic for the taxpayer.
So auditors will ask, have you left your community? So how do we show that? So things like have you changed membership? Are you now nonresident status? Have you joined a shul?
How else have you integrated in your Florida community?
If you're president or a board member of your shul, that's probably good proof that you are integrated in Florida, Florida is your community. Where do you spend your holidays?
Just as an example of one that actually happened was New York was auditing somebody who was arguing domicile and he hadn't been a big golfer, and he'd gone to a Florida golf club.
And they pulled up his attendance record, proving his attendance records for his membership to suffice for New York to deem him not a domiciliary.
So regarding home, best practices - you must give up your New York State home. That's key. If you want to visit New York, get a place in New Jersey, get a place in Connecticut.
Or you're less likely to win on this. In fact, you probably won't win on this.
Another suggestion would be to rent or lease a place in New York for a limited time, so that they can't argue this is your full-time residence.
And you are limited, and you certainly can't be over any allowed days, because you physically are not allowed to be there, and of course that's easy to prove with actual recent rental documents.
Next, active business involvement.
So if you have your business in New York it's going to be an uphill battle, and you're unlikely to argue tax domicile if you have ongoing participation and decision making and frequent communication with a business. Even after official retirement.
New York may consider you a domiciliary. I'm not referring to a passive business interest, I'm talking about, let's say me as partner at my firm. I talk to my office every day, I look at documents, I respond to clients.
I'm actively involved. It's going to be a more uphill battle if my office is based in New York.
Next, time.
So time we refer to that 183 days in that residency test. But it also comes up here as well.
But a little differently.
So New York State starts with the use. And most of the time where you're quote unquote "home" is.
So the number of days is not completely dispositive.
It's not dispositive on the domicile test.
So it's looking more to focus on change of pattern of life, not just the days spent. So you'll need to prove day to day location for every day.
By keeping records, but they're looking at this change of pattern. The records you might consider using are things like your diaries, credit card statements, cell phone bills, EZPass bills and the like.
But I'm thinking we might also want to be careful if you're somebody who or if your client is somebody who their children use their credit card, use their EZPass, so their credit card statement shows them at Starbucks in New York but try to explain that to New York State. That wasn't you, that was really your kid. I don't know, something to think about.
So the next factor is really kind of interesting.
Very subjective, right. It's called "near and dear" - things that one holds near and dear to their heart, such as pets, artwork, your collections, your family heirlooms, so subjective.
So again, it's based on those personal items which enhance your quality of life.
Sometimes called the "Teddy bears" - the things you would never leave home without. So let's consider. Where are your candlesticks, especially the ones your grandmother gave you? Your Kiddush cup? Where is your pet?
It's actually come up. Even where is your pet buried to determine domicile.
So the decision if an item is near and dear is not exclusively based on monetary value. It's about nostalgic, possibly or family significance.
So consider, for example, the location of your family pictures.
Things that have very special significance to your family, things you would never want to have lost.
But one of the best evidentiary proofs of this factor might be your insurance rider.
Insurance riders are often used by auditors to attempt to verify the location of treasured items.
Where does your insurance say you have your valuables?
So do not store them in New York.
Use a safety deposit box in Florida and not New York.
So the last of these 5 primary factors is family.
So in theory this last factor is only to be considered after the auditor has not come to a conclusion on the four other primary factors.
But it is one of the primary factors to consider. Things like, where do your kids go to school?
This will be an important factor. It's hard to argue you're not a New York domiciliary when your minor kids go to school in New York.
If your kids go to boarding school, where do they go when they are off from school, where do they go for their holidays?
Usually this consideration relates only to your minor children and your spouse who's not legally separated from you.
But New York State could in theory expand that. For example, if you claim you see your grandchildren every chance you get. You never miss a baseball game of theirs. You never miss a school event of theirs.
That might come into play.
Some exceptions to this, even if you are deemed domiciliary. If you are really not in New York, you may be able to avoid New York taxes.
So there are 2 rules. First is the 30 day rule, and the second is the 548 day rule.
You're in New York under 30 days, and you have no permanent residence in New York.
So again, selling that New York residence is going to be important.
And having a permanent residence somewhere else.
You may be able to avoid New York tax liability.
Or let's say you're outside of the country for 548 consecutive days, for more than 450 of them, and your minor children are in New York for less than 90 days of those consecutive 548 days, you could avoid New York State taxes.
So, for example, if I follow my retirement dream of traveling most of the year, I can in theory not have to pay New York State income tax or estate taxes if I'm traveling more than I am in New York.
And if that is less than 548 days, it has to follow a similar ratio, which ultimately comes out to being in New York around less than 16% of the time, about 16.4% to be exact, over a consecutive period to avoid tax liability.
Some other factors to consider.
These are called "other factors" under the audit guidelines.
The auditor's guidelines - I'm not going to read each one of them. These, in theory, are only to be considered after the first primary factors are inconclusive.
So in theory, you shouldn't have to prove each and every one of these things, but a taxpayer should do them all because they are going to bolster their argument.
They are defensive in nature, but they're not going to be determinative. So you should do them.
Things like changing voter registration, your safety deposit box that we discussed before, car registration, etc.
I do want to highlight one factor that absolutely is not supposed to be considered by auditors or cannot be considered by auditors in determining domicile.
And that is, regarding charitable giving.
You can give money to a New York based charity. You can volunteer for a New York based charity and that is not allowed to be a consideration for your domicile.
So it's my view we should be mindful of that. I think about also in terms of time.
You know, if you have to come in exclusively to volunteer. How do you do that? When does that happen? I'm thinking in my mind of the analogy of going on a mission to Israel.
You know, you get off the plane, you go straight, you follow the itinerary of this 3 day, packed, full day of events.
Your mission. You go south, you go north, you go visit hospitals, you do that straight for 3 days in the mission, we have a closing ceremony.
Part of mission you get on the plane, you go home.
You are literally there, doing nothing else but that mission for charitable purposes.
And I think that's kind of like the scenario I think of where that works.
I'm not aware of missions to New York City or New York State. But the concept, I think you can understand.
Let's talk about the second test - Statutory Residency. So if you look at the top of the slide.
We just discussed A. Now we're going to talk about B - in New York and maintain a permanent residence, or spend more than 183 days in the taxable year.
So one, your permanent residence.
Like a permanent place of abode. PPA must be fixed, permanent and habitable, has a residential interest, and has a particular place.
And then we're going to talk about what the 183 days is. It's any day you visit New York, which is purposeful and voluntary, but any part of the day counts.
And then we're going to talk about some exceptions. Next.
So let's go back to PPA. What is fixed and permanent? So you come to live in New York for a specific purpose which is limited in nature.
For example, we have a trial in New York.
You have a consulting assignment in New York for a New York Corporation for a limited sole purpose, but likely that purpose needs to be under 3 years.
And it's done.
You've been assigned to run the New York branch of your law firm or you're a regional salesperson. It's a single assignment case or matter, but you stick to it.
Has to be a particular purpose, and that has to be the sole reason you are in New York.
Okay.
So what is a permanent place of abode under the New York rules? So one, it has to be one that's maintained. So what does that mean?
Is it suitable to living in year round? Is it habitable? Does it have heat? I'm thinking of a bungalow upstate, a bungalow which is not winterized, that is not all year round.
Is that suitable for all year?
Should not count.
Is it under construction? Are you doing it? Can't live there. That should not count.
Second.
That you have a residential interest, meaning it's maintained by the taxpayer, has a specific, and the taxpayer has a specific place in that abode where he or she resides, meaning it's his or her residence.
And in this instance, actually, ownership interest isn't relevant.
So I'm thinking. For example.
Your mom's co-op is in New York. You live in Florida, and you pay for maintenance.
But you don't have a dedicated room or space there, it's not yours.
So somebody else is primarily living in that space.
That is something you don't have a residential interest in.
As of 2022, New York policy is that you have to be, quote unquote, "substantially" there.
So often the rule is under 11 months, or sometimes called the 10 Month Rule.
So a good practice may be if somebody wants to be in New York, but doesn't want to trigger residency rules. They would lease or rent their place for a specific amount of time of the year.
Where you cannot live there for 2 months of the year. So that's easy to prove from the lease or rental. You're only there, but not July, August.
Next, let's talk about these days. What is the definition of a New York State day?
Any part of the day.
Is a day.
If you're in New York for 5 minutes today, unless it falls into one of the exceptions.
Okay, so.
And the burden is on the taxpayer, and you're going to require a lot of records to do that similar to what we discussed before.
By using cell phones, credit card statements, travel logs, your Outlook calendar, etc. So let's talk quickly about exceptions.
There are 2 major exceptions, medical days and travel days. But a medical day is a doctor's visit, it's an outpatient procedure, you are in a facility.
Travel days. That means you're not starting or ending in New York. You're driving through New Jersey to Connecticut. You're going over the GW Bridge from New Jersey to Connecticut, or Tappan Zee.
Something like that. You're not actually stopping or starting in New York.
You have no purposeful stops in New York.
Let me just reiterate one thing about this about the days. Is that if you're going from Connecticut, and you're going to JFK, because that had the best price. So there's no other airport nearby, and you're literally going from Connecticut, getting on your plane to somewhere else. That does not count as a day. That is an exclusion or exception.
Okay, so these are some considerations. We talked about all the reasons why it might be beneficial or how to pass muster from New York State on tax liability.
To avoid taxability in New York.
But there might be some reasons not to do it. Why?
For example, you have your primary residence in New York many, many years ago. You have a very low tax basis.
And if you were to sell that you would have very high capital gains tax. There are other tax advantages of having a primary residence. There are advantages in financing to have a requirement to have it as a primary residence.
That might be worth a lot of money to somebody, to a taxpayer, and they may not want to give that up.
Secondly, if somebody's looking to be Medicaid eligible.
Florida doesn't have as robust a program as New York, and if you're looking for Medicaid eligibility you might want to be a New Yorker. It might be worth it to you.
And lastly, as you see, as I discussed here, there are many pitfalls and many hurdles to actually not be deemed domiciliary or statutory resident in New York, and it includes a lot of time, effort, stress and record keeping.
You really want to stress about how many times you visit your grandchildren, or you want to come to New York, or you want to be in New York for a certain amount of time. Is it worth it?
So. And again, if on the estate tax issue is your concern, there are other ways to do tax planning to avoid it.
So those are things to consider and think about. And lastly, if you are deemed to be a domiciliary or statutory resident of New York. What happens?
You owe the tax, and there will be penalties, and they can be very steep.
Interest generally. Right now, it's about 7 and a half percent.
And you can be penalized for failure to file, failure to pay.
Or for substantial understatement of income, for negligence and worst case scenario for being deemed as perpetrating tax fraud.
So lastly, just.
If you were deemed a non-domiciliary you probably do not have to do a New York return.
But if you are a statutory resident, you will have to do this very difficult return, and it can be very cumbersome.
So I'm going to get this over to Jonathan now to give me a quote, and then Lawrence is going to take over in this presentation.
My screen is going to be the one shared. So we can continue to watch that.
Thank you.
Great. Thank you, Adina, right on cue. I was about to interject here for the accountants and attorneys who are taking this program for credit. Please write this down.
The code is E26. Again, E as in echo. The number 2, and the number 6.
One final time. E26. Okay. Back to Adina.
Hi! Good afternoon. Excuse me. Good morning, everyone. My name is Lawrence. I want to thank everybody. Jonathan. Shane, I want to thank YU as well. I'm a proud alum of Cardozo Law School. My children go there and I'm very happy to work collaboratively with the development team from time to time to help clients effectuate their charitable goals.
I got my start a long time ago, working at a large Jewish not-for-profit and the topic of planning and working collaboratively is always near and dear to my heart.
Well, let's start and talk about Florida for a couple of minutes. First of all, I want to acknowledge it's a little hard to present when you're the last speaker, and certainly after the verification code was just mentioned. But I really want to talk about the differences between New York and Florida, and I ask everybody to consider this example.
You have very good clients. You work with them for many years, and these are people that you like very much. You have a personal and professional relationship with them. You've done estate planning for them for many years. You have worked on the administration of their parents' estates. You have worked with them concerning their children's prenuptial agreements. You've done real estate work for them, corporate work. And these are the types of clients who you really want to work with, and then you get a phone call really out of the blue.
And your very good client is calling up, and they say "we're moving to Florida."
It doesn't really make a difference why, most clients say for taxes. They have decided to move to Florida. And the reason why I start with this particular series of slides is because I want to talk about the ethical and legal obligations of practitioners who are outside the State of Florida, not admitted to the Florida bar. And what can and can't they do.
Now the Florida bar actively and rigorously looks into cases of the unauthorized practice of law.
Florida actually has a statute that makes the unauthorized practice of law a felony, and it is something that we need to be mindful of. Not only do we have an ethical obligation, but we certainly don't want to walk into a trap where we are engaging in the unauthorized practice of law and creating problems for ourselves. Don't let the client's problem become our problem.
So what do you do? And let's sort of talk about who can and who cannot practice law in the State of Florida.
Well, you know the Florida Supreme Court has defined that practice includes trusts and estate planning documents. If you engage in any of those types of transactions, you are engaged in the unauthorized practice of law if you're not admitted to the Florida bar. You cannot practice, you cannot establish an office in Florida. You cannot engage in a particular practice, can't go to court. You simply cannot meet with clients on a regular basis in an office type environment. These are all items that you need to be mindful of.
But then the question is, who can advise clients who are in Florida? And I think that what's important to understand here is that there are a lot of conditions where somebody can advise clients. First of all, all the attorneys who are admitted to the Florida bar obviously are able to advise clients. I'm able to advise clients here in New York and working with our clients who are now down in Florida. You can physically be located in the State of Florida, and you can meet with old clients like in the hypothetical. You can meet with them. You could discuss their planning. You can even put them on the phone in Florida. You just cannot do it in an office. You obviously can't appear in court when you're in Florida, but you can, in fact, engage in discussions with your clients.
Here are my best practices that I'd recommend to everybody who's attending today. If a client does approach you regarding Florida work, and you're either not admitted to Florida, or this is not something that is your bread and butter, I recommend that you may want to retain your own counsel in order to review documents in order to make sure that you're not doing anything that would create a problem for your clients.
Advise your clients at the early part of the discussions that you're not admitted to the practice of law in Florida.
And put everything in writing.
Particularly in those situations where you have a good relationship with your clients. You want to make sure, and it is made clear at the very beginning of the planning process for Florida work, that your clients receive that in writing.
What you also may want to consider doing is retaining local counsel to work together with you regarding those clients.
Best practices for individuals to consider.
Now clients come to me with a certain amount of knowledge as it relates to Florida law, and they always cite homestead. How wonderful homestead is, and it is. Homestead is a wonderful, powerful tool, and we'll get to that in a little bit. But clients also approach me, and they say, "Well, wait a minute here. Why don't my New York documents that you prepared for me, and that we've gone over draft after draft, as it relates to those documents. Why don't they work in Florida?
Why do I have to now re-engage you to prepare new documents on my behalf?"
As Adina mentioned before, it is recommended if you're trying to relinquish your domicile in New York and say that you're now a Floridian, update your Florida - update your estate planning documents that say that you're a Floridian.
Use your Florida address. Estate planning documents that we prepare all the time for our clients - let it comport with Florida law.
It will certainly help you upon an audit claiming that you are, in fact, a Floridian and not a New Yorker. So here are a couple of these estate planning documents that I'm sort of going to review. But I'm really here just sort of to talk about the differences between New York and Florida. You know, people say that Florida is the only state that the further south you go, the further north you get, and we seem to be concentrated on 3 counties in South Florida - Miami-Dade, Broward, and Palm Beach counties, and assuming that represents the entire State of Florida. It doesn't. It's not even a majority of the population in Florida.
And we also seem to lose sight of the fact that Florida probably has more rules that are similar to the neighboring states than it does to New York.
We need to be able to represent our clients and understand what the Florida rules are, and not necessarily how New York may work in the State of Florida.
Let's start with powers of attorney. I recommend that all clients over the age of 18 must have a power of attorney. And let's talk about the differences between New York and Florida.
In New York, we're lucky. We have durable, springing, non-durable powers of attorney.
Limited powers of attorney, and Florida has that, too. But there's one significant difference. Florida does not have springing powers of attorney.
Any power of attorney that's signed after September 3, 2011 cannot be a springing power of attorney.
So that presents a problem for many individuals. Because they may trust their agent to be able to do what's right for them, but they may not trust the agent to do what's right for them now, when they are fully able to handle their own financial affairs. So what can we do?
Well, in Florida we have to rely on a durable power of attorney, but what most practitioners do is they have the attorney usually hold on to that durable power of attorney, the same way we would do with a will, and that durable power of attorney be held in escrow pursuant to an escrow agreement, where the attorney holds the document on behalf of the principal and can only release it to the agent.
Now escrow agreements obviously have to be in writing. It has to clearly identify who's the principal who's making the power of attorney, and who's the agent - who's the individual who's going to serve on behalf of the principal.
It has to clearly indicate the conditions for the release of the power of attorney. What are the triggering events? You also need to talk about your own professional practice, under what circumstances can you transfer the escrow agreement and the documents to a successor law firm?
Can you close a client's file, even if you're retaining documents such as a power of attorney in your file? Is a client's matter closed for example if you hold on to an original will?
You also need to talk about issues like indemnification and hold harmless. And all of this does, in fact, need to be in writing.
Now Florida permits photocopies just the same as New York except as otherwise provided in the power of attorney. But if you are reliant on a springing power of attorney, you have to use some escrow agreement in order to protect the client.
Now I like when I cannot use a power of attorney, let's see what other alternatives we can use. Well, the first thing is that you can transfer all the assets into a revocable trust and the successor trustee appointment will spring based upon certain conditions that may apply.
But that only works for the assets that are in the trust. Retirement accounts, for example, cannot be transferred into a trust, and what you may want to consider doing is using the proprietary powers of attorney given by the financial institution for those situations where the principal will appoint the agent so the agent has the ability to handle financial transactions for that particular account. Also in situations that may arise, you may want to have clients use IRS Form 2848, which is a power of attorney form, so that items can be attended to as it relates to tax matters.
I like clients to refresh their powers of attorney frequently, particularly if they're in Florida. I want to make sure that clients have as current a power of attorney as possible. I don't want in an emergency type situation, a client to present a 2020 power of attorney, and the person who's going to rely on that power of attorney to say, wait a minute here. This is an old document. Go ahead and get us a new document, and of course in that emergency situation you can't get them a new document, so I ask clients to refresh whenever possible.
Similar to the rules here in New York as it relates to powers of attorney, I just want to touch on a few additional items, but similar to New York, third parties have to accept powers of attorney, but nothing prevents the third party from accepting the power of attorney right away. It can, in fact, rely on an opinion from counsel and that will be borne exclusively by the principal.
Healthcare proxies. Everybody needs to have a healthcare proxy. Let's talk about that.
New York. We have our form, healthcare proxy. Florida has their form.
And there it's called designation of healthcare surrogate.
Now, Florida, like New York - everyone is presumed to have capacity, and when somebody lacks capacity, that's when the healthcare proxy in Florida sort of kicks in.
But Florida provides for 2 other situations, which is literally initially boxes on the Florida designation of healthcare surrogate form.
One is to permit the healthcare agent to have the ability to make decisions immediately.
And two would permit the agent to be able to make decisions immediately, but still give the principal - excuse me still give the maker of the healthcare proxy the ability to override what the agent may decide.
Again, if you're moving to Florida, have a statutory healthcare proxy.
Let's talk about wills.
In the area of wills, they are very different in Florida than they are in New York.
And one item that practitioners need to be aware of is the issue of eligibility to serve.
In order to serve as an executor or personal representative, you must either be family or if you're not family, you have to be a Florida resident.
So we develop relationships with clients for a long time, we may be appointed to serve as fiduciaries for their estate and Florida law would require, as it relates to wills - only Florida law would require - you need to use somebody else.
Family, or a resident.
Now those exact same provisions will apply for guardians for incapacitated persons, but the eligibility to serve restrictions do not apply when you're dealing with trusts or agents under advanced directives.
So what do we do?
Well, a lot of people want to avoid probate in Florida. Right or wrong, I don't know, but a lot of people rely on trusts, and what some clients may consider doing is, they may have a pour-over will, which is something that we use all the time, and that will pour over into a revocable trust.
The revocable trust will, of course, include some springing provisions, where perhaps the professional advisor is able to serve as the successor trustee, and make decisions on behalf of the beneficiary of the trust.
No-contest clauses. They don't work in Florida. We rely on them from time to time here in New York, but in Florida they are unenforceable.
What do we do? So we do a couple of things. First of all, if a client has multiple children, you could actually break down the estate planning into separate parts for the benefit of each child. But you can actually consider that the disgruntled beneficiary would have to bear all the costs, administrative expenses, and other costs in the event that he or she decides to challenge the estate planning.
The other thing that you could do is you can use a King Solomon or King Solomon clause in order to reapportion the benefits amongst children, for example, or in the alternative, if the Florida resident has real property in New York, the rules here in New York under the Estates, Powers and Trusts Law will allow the last will to be offered for probate in New York and New York law would, in fact, govern.
I don't like specifically identifying property under a will. I'd like to maintain privacy on behalf of my clients, so I generally rely on memorandums which we know are ethically binding, but are not legally binding on the executor, or the beneficiaries of the estate.
Florida does allow for incorporation by reference. But please keep in mind that, pursuant to the incorporation by reference, the property needs to be described with specificity.
And the beneficiary also needs to be clearly described. You can't just say "I give my ring." For example, please take one step further, say "I give this particular ring" - define the ring. If there are any stones that are attached, define those stones that are on the ring, so there is no ambiguity in terms of which property you're actually referring to.
Now commissions are treated a little bit differently in Florida than they are in New York. In New York, if you have a 1 million dollar estate in the probate estate, you'd be entitled to receive $34,000 worth of commissions.
In Florida the same size estate you would be entitled to receive $30,000. But the difference is that you would be entitled to receive commissions for extraordinary services.
That would be in addition to the executor commissions that you would otherwise be entitled to.
Will execution is not identical. There's witnesses and the notary notarizing the witnesses here in New York. Technically, all you need are 2 disinterested witnesses. We often use notaries for the affidavit of attesting witnesses, but that is New York. I recommend use of witnesses and a notary, but for Florida absolutely use a notary just the same. Otherwise we have an invalid will.
Revocable trusts. Many years ago it seemed like every Florida client, or anyone who intended to move to Florida wanted a trust, and principally the reason they gave us is they wanted to avoid probate in Florida.
And we talked about probate versus probate avoidance in Florida, and they concluded that revocable trusts were good to use in Florida. Not necessarily so in New York.
So practitioners have changed that thinking. Maybe they use revocable trusts for both states.
The execution requirements for revocable trusts are the exact same as it relates to a deed.
Now I like to use for a husband and wife to use 2 revocable trusts as opposed to combining the two into a single revocable trust.
But I want to talk about creditor protection, because a lot of clients come and they say, "Well, let's use a trust in order to avoid the rights of creditors," or they may talk about how they can use the trust for estate tax savings. Unfortunately, that's not the case. But Florida is somewhat unique in the fact that they do permit property that's held outside the trust to be held by tenancy by the entirety.
Husband and wife are able to hold property by tenancy by the entirety. We have that in New York.
Where real property can be held by husband and wife as tenants by the entirety, and the property is protected.
Florida goes one step further.
They have, of course, tenancy by the entirety as it relates to real property. But I think what's important to consider as relates to bank accounts, brokerage accounts - those accounts can actually be designated as being held by tenancy by the entirety.
You have to indicate "husband and wife as tenants by the entirety", and the accounts have to be established in Florida. Do not use a New York bank or financial advisor here in order to establish those accounts.
Be safe!
Now let's talk about the issue of rights of election.
We don't permit a first to die spouse to disinherit their spouse. We don't really have forced heirship in this country, but we do force a first to die spouse to leave a certain minimum amount to the surviving spouse and the way we do that is that the surviving spouse is given the right to elect against the predeceased spouse's estate. And estate could be broadly defined. It's not just probate or just non-probate. It also includes other property which is beyond the scope of our discussion today. In New York, the surviving spouse is entitled to a third of the elective estate. But that amount has to be given outright or in a trust for the benefit of the surviving spouse.
In Florida, the right of election gives the spouse 30% of the size of the estate.
Again, probate, non-probate, and there are, of course, property that is included and excluded in terms of the amount that could be elected against.
But Florida is different. If you decide to fund the right of election by means of a trust you could do so, but the amount that has to be given to the surviving spouse has to equal 37.5% of the elective estate.
Now we can go to a trust for the benefit of the spouse. But here are the conditions.
One. The surviving spouse has to receive the income.
Distributions from that trust have to be based upon an ascertainable standard of health, education, maintenance and support. HEMS standard. But here's where it's interesting.
The trustees of that trust - there is no restriction in terms of who can serve as trustee of that trust. So imagine the following situation.
Second spouse situation.
Husband, for example, passes away.
And the husband appoints his children from the first marriage as the trustees of that trust. And of course there's a conflict there. They can serve as trustees of that trust.
And of course it's going to create an acrimonious relationship if there isn't one already. But I think it's important to recognize as the surviving spouse, that you may find yourself as a beneficiary of a trust. But the proverbial water faucet could, in fact, be significantly restricted in restricting your rights to benefit from that trust.
If the right of election is not funded within 2 years, then statutory interest can be paid and similar to New York, the right of election is personal to the surviving spouse. I want to talk about Medicaid, because I think we're running out of time. Florida has Medicaid just the same as New York. I think New York's been very comprehensive. We get many more benefits here in New York than perhaps we get in the other states. But for a variety of reasons, people moved down to Florida, and they want to qualify for Medicaid in Florida. That's going to be their domicile.
But we have a paralegal here in the office who's a Medicaid specialist and in advance of today's discussion we were talking about Medicaid in Florida, and clients going either New York to Florida, or Florida to New York.
And in our combined experience of almost 30 years we can't remember a single instance where somebody on their own decided to move from New York to Florida. But we can remember many instances where somebody decided to move back to New York to be with their children, and to qualify for either community or nursing home Medicaid here in the State of New York.
Emergency Medicaid is permitted.
But it is otherwise a whole new application that needs to be submitted.
So homestead.
Everybody knows about homestead, and everyone knows that homestead will protect the home from certain creditors. The right to homestead is enshrined in the Florida State Constitution.
But there are some limitations as it relates to homestead, and there are some other benefits that clients just may not be aware of. Let's deal with the other benefits. Let's assume a client has a million dollar home in the State of Florida, and let's assume real estate taxes are 2%.
$20,000 a year.
The house is in a desirable neighborhood.
And in the following year, it's now appraised at $2 million. Your real estate taxes should be $40,000. Well, homestead protects the Floridian from the real estate taxes from increasing by more than 3% in any given year. It can increase by 3%. But you can't have this jump between 20 and 40. You actually have to file and register with the county clerk's office that you are claiming homestead. You have to own the property before December 31st of the given year, and you have to file by March 1st. And homestead is personal to individuals, and only as it relates to the principal residence, not to vacation homes, second homes, and the like.
Homestead does not work to defeat claims by the IRS, voluntary liens that may be such as mortgages and other financing, and homestead does not work for example for Medicaid.
I tried to review some of these differences between New York and Florida. I strongly recommend that practitioners in working with their clients, that they speak to local counsel, if necessary, in order to do what's right for their clients. There are a lot of traps for the unwary. I try to deal with some of those items that come up frequently, and before we conclude I'd like to turn over the program to Adina.
I again just want to thank everybody for coming, and I just want to give some quick takeaways and summaries of our discussion.
So again we started with talking of domicile and statutory residency, and I hope you learned that it is not just about 183 days.
It's much more arduous than that. And people and we should advise our clients that they should think long and hard about it, if it's really doable for them.
I want to just point out that we talked about unauthorized practice of law and how maybe using local counsel or running it by them might be advisable.
Again. We don't want to make our clients' problems our problems.
And lastly, well Florida estate considerations and how there are differences between estate planning in Florida and New York. We should be aware of them, and mindful of them when we are advising clients as they move from New York to Florida.
And obviously there are advantages, as we all know, of taxes in Florida versus New York. But again, these are all iterations everybody needs to take seriously, and we don't want to let tax considerations be the tail that wags the dog.
Thank you all again. Thank you for listening. I hope this was informative. If anybody has any questions about anything that we spoke about, feel free to reach out to us. Wishing you all a great day.
Great. Thank you so much, Adina and Lawrence. If anyone has any specific questions, new business opportunities or any other issues they'd like to discuss, please feel free to reach out directly to Adina, Lawrence or myself where appropriate, and I'll be sure to include their contact information in the follow up email to this program. Three more quick, important items before I conclude this program. First and most important, later today you'll receive an email from me with an evaluation form for the program. It will ask you to input the codes that I mentioned here today in order to receive your credit. That email will also go out to all attendees tomorrow morning as well.
After that is submitted, in the coming days you'll receive an email from Ace Seminars with your certificate. Again, please keep an eye out for an email from Ace Seminars. If you don't see that email in the next few days, be sure to check your spam folder. Again, the email with your certificate will not be from me or from Yeshiva University. It will come from Ace Seminars. Just a few more very quick items. I'd like to personally thank Yeshiva University for the great partnership and making this event a reality.
If you enjoyed this program and would like to see more of them, please support Yeshiva University so they can continue their great work. I'll be sure to include a link in the follow-up email to this program to help support their mission. If you'd like to find out more about Yeshiva University's role as the world's flagship Jewish University, please reach out directly to Alan Secter. He could not care more about the work, especially in today's anti-Semitic climate, as well as legacy opportunities for yourself and your clients. Alan can be reached at alan.secter@yu.edu. And finally, my firm Park Bridge Wealth Management runs approximately 20 webinars a year for accountants, attorneys and high net worth investors. You can follow my work and get notified of my upcoming events by following me on LinkedIn or on X, Instagram and YouTube at Jonathan on Money. I also host a weekly podcast also called Jonathan on Money that can be found on Apple, Spotify or wherever you get your podcasts. And finally, if you'd like to connect with me about this program or other matters, feel free to reach out via email at jonathan@parkbridge.com. And with that this concludes today's program. Please stay safe and healthy and have a wonderful day everybody.