Eleventh Circuit: Florida Estate Law Prevents Collection of Federal Estate Taxes | Balch & Bingham LLP

Under Florida statute § 95.231, certain wrongful acts are cured after the passage of five years. In Saccullo vs USANo. 17-14546 (11th Cir. Jan. 11, 2019), the Eleventh Circuit was tasked with defining the relationship between Florida law and the United States Supreme Court’s decision in States v. Summerlin, 310 U.S. 414 (1940). In summerlinthe Supreme Court held that “where the United States is entitled to a claim, acting in its capacity as a government and asserting its claim in that right, it cannot be deemed to have abdicated its governmental authority so as to become subject to a state law setting an execution deadline”. summerlin310 US to 417.

The claim in Saccullo came after a father performed a faulty act, attempting to transfer assets to a trust created for the benefit of his son. This faulty act was executed in 1998, setting the five-year cure period under Florida statute § 95.231 as effective in 2003. After the father’s death in 2005, the United States imposed a series of liens on property in an attempt to assess property taxes.

The issue before the Eleventh Circuit was whether the Florida law was a “time-limited state statute” such that it was prohibited by the summerlin principle, or, in the alternative, whether the defective act had in fact been corrected in 2003, preventing an inheritance tax levy in 2005, because the property would have been successfully transferred out of the father’s estate before his death. The Middle District of Florida, in response to the underlying action for silent title, argued that Florida law did not create a good title because the deficiency was not among the technical defects within the scope of the law, and that the law was essentially a statute of limitations. the applicability of which to the United States government has been prohibited by summerlin.

On appeal, the Eleventh Circuit reversed the district court’s decision, finding that Florida law was “not traditional prescription but . . . a curative act accompanied by a prescription clause. He first acknowledged that on appeal, both parties had acknowledged that the gap in the 1998 law was covered by the law. After concluding that Florida law applied to the act in question, she determined that the text of the statute had the effect of immediately remedying the faulty acts, requiring no formal ruling. Based on the Eleventh Circuit’s interpretation of the law, he concluded that the deed was automatically corrected in 2003, two years before the father’s death and the accrual of any estate taxes or subsequent claims by the federal government. Since the property was no longer part of the father’s estate at the time of his death, the U.S. government was never entitled to inheritance tax on the property, making the summerlin irrelevant principle since there was no valid request.

The holding of the Eleventh Circuit in Saccullo is informative for both estate planning attorneys and real estate attorneys practicing in Florida, as it clarifies the application of Florida statute § 95.231. Saccullo interprets the curative action as an immediate result at the end of the five-year period, notwithstanding the absence of any formal judicial or administrative decision.

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