Editor: Please tell our readers about your practice in the Boca Raton office of Proskauer. What attracted you to this practice early on in your career?
Pratt: The Boca office of Proskauer is very much a mirror image of how our national offices are organized, particularly our main office in New York. Proskauer is a firm with expertise in the various disciplines within the law. In Boca we have lawyers who focus on trusts and estates work, as I do, labor, employment law, corporate, real estate, transactional, litigation and healthcare. We have the full range of legal service capabilities in Boca that are very similar to what you'll see at Proskauer throughout most of our offices. Early on, I became interested in tax and estate planning in law school and then did an LLM in taxation at NYU. It is, as one might understand, a big part of any significant practice in Florida for many reasons.
Editor: How many lawyers do you have in your Boca Raton office?
Pratt: At the present time we're just under 30 attorneys in this office.
Editor: How has this practice been affected in the recent economic downturn?
Pratt: Well, the economic downturn clearly has affected all law firms; however we have always been very well positioned in that we don't have all of our eggs in one basket. We have a very diverse practice, so while clearly our transactional practice has diminished over the last year or so because of the sluggishness in the economy, our litigation practice has grown and continued to evolve and we've been quite busy. In our office we have not had to go through layoffs as many other firms in South Florida have had to do. We have been busy as an office, our litigators are extremely busy, our trusts and estates practice is absolutely booming, so we feel we are quite fortunate.
Editor: Your own trusts and estates specialty seems to be recession proof. Time, as they say, marches on.
Pratt: Death and taxes continue to be things that you can't avoid. Many of our clients took significant hits in their wealth because of the market downturn, but we have been able to turn that to their advantage in terms of estate tax planning. We have been able to suggest techniques that work particularly well when values are low. In fact, I've been on a tour for the last year and a half giving speeches on estate planning during uncertain times. This is the best time to do estate planning when values are low, because the name of the game is transferring assets to the next generation at the lowest value possible, thereby allowing future growth to occur outside our clients' estates, as opposed to having it grow within and then having to deal with the implication of estate taxes. So this has been a very busy time for our practice.
Editor: In addition, there is the complicating uncertainty caused by the imminent expiration of the 2001 estate tax cuts.
Pratt: I think that we're all still surprised and shocked that we actually got to 2010 to find that we have no estate tax for deaths that occur this year. But most of my friends and colleagues and fellow commentators believe that the estate tax will come back. It might come back this year, and, if it does, it will either be retroactive or prospective. If the 2001 tax cuts do expire in 2011, we most likely will have the estate tax back, with the exemption limited to one million dollars and a top tax rate on the excess rising to 55 percent. Most of us in the practice believe that at some point it will probably come back to where it was in 2009, when there was an exemption of three and a half million dollars and a rate of 45 percent.
Editor: It's a moving target, isn't it?
Pratt: It is a moving target, but those moving targets create work for us. We tax lawyers sometimes refer to these bills as the tax lawyers' full employment act.
Editor: Exactly. Speak from your perspective, and from your office's perspective, about what you see on the horizon for Florida and the Southeast in general. Some people have been concerned about the outward migration from Florida that occurred for the first time in recent memory. How do you see the economic future of the area?
Pratt: I definitely have a different outlook. I don't believe that we will see any significant loss of population or outward movement in the coming years. I think that people tend to end up in comfortable environments where there are opportunities. We obviously know that the housing prices and values have gone down significantly after steadily going up year after year. They have come down pretty hard, so that will create some opportunities both for individuals and businesses. There are still a lot of businesses here, and they too have had a hard time this past year. But, after so many years of fast-paced growth, an occasional downturn is inevitable. And, from my firm's perspective, it's still a great place to do business, and especially for litigation. Moreover, it is the entryway to Latin America and the Caribbean, so I think that over the long term, the money will flow here and it will be a good place to do business.
Editor: Please talk about the tax climate in Florida from your perspective as an expert. What are the advantages that Florida offers?
Pratt: Well, there are multiple advantages from a tax perspective. Clearly, the first is the fact that Florida does not impose an income tax. For that matter the likelihood of an income tax being imposed is quite small, the reason being that it would take a constitutional amendment to do so, and I highly doubt that the people of the state are going to vote for an income tax. When you compare the zero income tax to the other states that have high income taxes, New York for example, where a lot of people come from, the lack of an income tax in Florida becomes very significant to somebody's bottom line. A person can move to Florida and eliminate income tax at the state and municipal levels at a time when other states and municipalities are forced to raise such taxes. That makes Florida much more appealing, plus there are the advantages with respect to estate taxes. At the present time Florida does not have an estate tax, but even when it did, Florida's estate tax was essentially equal to the credit that would be allowed against any federal estate taxes. So, even if we were to get back a federal estate tax, which we will, and Florida were to impose an estate tax, the net result would still make Florida an attractive tax domicile, both in which to live and to die. Those advantages make Florida a very wealthy state, as there are a lot of very wealthy people who end up moving here, not only for the weather and the varied amenities and cultural attractions, but for tax reasons.
Editor: How about business activity taxes. How does Florida rank?
Pratt: This is probably a little beyond the scope of my practice, but relatively speaking, Florida business taxes are small compared to other states. We have very favorable statutes with respect to entities such as limited liability companies and limited partnerships. We have a very progressive bar that is always updating and working on our statutes with our legislature and governor so that we can be a cutting-edge state, and that helps business owners as well. Editor: Can you just comment about whether there are other aspects of Florida's laws that are appealing?
Pratt: I would like to comment on something that I think is very appealing for Florida, and that is we have a favorable asset protection approach - various statutes that protect specific assets for those individuals who have asset protection issues. We have a very strong homestead law emanating from our constitution that protects the principal residence in the event of litigation or bankruptcy. We do a lot of asset protection planning, especially when there is always a threat of litigation or in dealing with the possibility of divorce. We live in a very litigious society, so we can certainly do a lot of planning for people who are in a defensive posture should they ultimately wind up getting sued.
Editor: I'd like to ask you an open-ended question to encourage you to talk a little bit more about your own specialty since Florida is the destination for so many people as the boomers reach their retirement years.
Pratt: Well, our practice is booming, we are seeing clients with very significant amounts of wealth, and there is a lot of opportunity to do estate planning in which we can recommend and implement structures to reduce estate tax exposure. We help our clients and their families transfer the wealth from generation to generation with the least amount of estate tax and the least amount of intrusion from other forces, such as predators and divorces. We have an underlying philosophy in our department among our lawyers that we want to keep the assets for our clients and their families so that they can go on from generation to generation. We want to maintain the wealth that the senior generation has developed, and we have the expertise here to do that in Florida wherever the client is located.
Editor: Does your practice also include litigation over inheritance issues?
Pratt: A very significant part of our practice consists of what we refer to as probate and trust litigation. And yes, people fight over money. We have people fighting with a stepmother or stepfather, we have siblings fighting, we have incapacity issues, we have undue influence issues and we have fraud issues, so we have a full team of probate litigators at our office, and we have a national fiduciary litigation practice that represents individuals and institutions in doing this type of planning and litigation work, so it is a huge part of our business.
Editor: I'm sure it's the sort of thing that may fluctuate a bit, but it's always in the background whenever you have estate planning issues.
Pratt: It is always there.
Published April 5, 2010.
