Posts Tagged ‘Estate planning’

You mean you’re supposed to do the estate planning before the client dies?

Thursday, May 3rd, 2012 by Joe Kristan

I’ve often suspected this sort of thing happens, but I’ve never seen it caught.  A Cincinnati lawyer, Suzanne Land,  has pleaded guilty to charges arising from drafting estate planning documents with the benefit of hindsight.  From a Department of Justice Press Release:

Land, who until recently was a partner at a Cincinnati law firm, admitted in court documents that from January 2010 through July 2010 she actively obstructed and impeded the IRS during two separate civil audits her clients’ estate tax returns.    

According to the plea agreement and statements made in court, to conceal from the IRS the deficiencies in the documents that she drafted for her wealthy clients, Land forged the posthumous signatures of both her deceased clients and their living children on amendments to the documents.  

Like any good attorney, she apparently also tended to her billing responsibilities:

Land also misled an appraiser as to the value of the estates, created fake legal invoices that reflected work she never performed, and lied to the IRS about the circumstances surrounding the creation of the amendments.  

Fake work, fake invoice.  What’s the problem?  You wouldn’t want her to issue a real invoice for that, would you?

UPDATE, 5/4: a more sympathetic view from Jack Townsend.


IRS loses farm ‘special use valuation’ case (again)

Monday, March 26th, 2012 by Joe Kristan

Roger McEowen has the scoop.


It’s not just farmers that make these mistakes

Thursday, March 8th, 2012 by Joe Kristan

Paul Neiffer discusses “Top Estate Planning Mistakes Farmers Make,” but his points are hold for anybody with a small business or substantial assets. The biggest mistakes are things you fail to do, so get on it!


IRS extends deadline for ‘portability’ election for 2011 deaths

Monday, February 20th, 2012 by Joe Kristan

You can’t file joint estate tax returns, for reasons that are obvious on a moment’s reflection. Because each spouse gets a lifetime exemption from estate tax, couples with estates over the exemption amount have tried to make sure each spouse has enough assets to use their exemption.
The estate tax enacted for 2011-2012 makes life simpler for these couples by allowing estates to elect to carry any unused exemption to the surviving spouse. You make the election on the dead spouses estate tax return.
That’s great, but what if you don’t realize you need the exemption. It’s easy to imagine situations where a surviving spouse comes into a fortune and really wishes she had filed that Form 706. It’s just as easy imagining a lawsuit against the executor who had only the deceased’s double-wide to probate from the surviving spouse who wins the Powerball.
The trap is still there, but the IRS last week gave estates extra time to avoid it, even if they didn’t extend their estate tax return. From the TaxProf: IRS Extends Deadline to File Estate Tax Portability Election ?
Link: IR-2012-24


Estate Planning for 2012

Friday, January 6th, 2012 by Joe Kristan

Roger McEowen has some worthwhile thoughts.


Why you should file that unneeded estate tax return

Wednesday, November 30th, 2011 by Joe Kristan

It seems odd. With the estate tax exclusion at $5 million — higher than ever — why is the IRS bracing for a flood of estate tax returns? Roberton Williams explains at TaxVox:



Will they slash the gift tax exclusion next week?

Tuesday, November 15th, 2011 by Joe Kristan

Rumors are flying around that the “Supercommittee” will slash the lifetime gift tax exclusion from $5 million to $1 million effective November 23, as Paul Singleton notes. Should we panic?
I doubt the rumors are correct. Any tax package coming out of the SuperDuperCommittee will be part of a bigger deal, and that doesn’t seem close.
The lack of specifics about any other piece of the tax puzzle also makes me doubtful. These things don’t happen by themselves. The gift tax thing would almost have to be part of a larger deal involving the estate tax, and no rumors have emerged about that.
So there’s no reason to panic. Still, if you have a gift ready to go that would use some of the lifetime exclusion over $1 million, it sure wouldn’t hurt to get it completed by next Tuesday.


Getting the family partnership all wrong

Thursday, November 3rd, 2011 by Joe Kristan

Many wealthy families use family partnerships as part of their estate planning. A minority interest in a family partnership is worth less than the value of the underlying assets because a third-party buyer would not pay full value for assets controlled by somebody else. When the tax law respects this discount, it can reduce estate and gift taxes. But you have to do it right. If not, the tax law ignores the partnership and includes its assets in the contributing partner’s taxable estate.
Paul Liljestrand was born in Waterloo, Iowa in 1911. He didn’t linger. He went to China with his parents when he was four, and eventually settled in Hawaii after becoming a physician. He apparently had a successful enough career that he needed to do some estate planning. When well into his 80s he formed the Paul H. Liljestrand Partners Limited Partnership (PLP). But the execution went awry.
What went wrong? According to the Tax Court:
-Nobody told the tax preparer that there was a partnership at first, and so no partnership return was prepared for its first two years.
– Dr. Liljestrand contributed so much of his net worth to the partnership that he didn’t have enough other assets to live on. As a result, he used the partnership assets to pay his living expenses.
– There was only one meeting of the partners between its formation in 1997 and the taxpayer’s death in 2004.
– They didn’t treat the partnership in a businesslike way. Partners withdrew cash without executing loans and without formal action or documentation.
– The estate failed to convince the Tax Court that there was any non-tax reason for the partnership.
These are all bad facts. The judge decided that the partnership should be included in the taxpayer’s estate (my emphasis):

The record is devoid of any significant change in Dr. Liljestrand’s relationship with the assets before his death. Dr. Liljestrand received a disproportionate share of the partnership distributions, engineered a guaranteed payment equal to the partnership expected annual income, and benefited from the sale of partnership assets. The objective evidence points to the fact that Dr. Liljestrand continued to enjoy the economic benefits associated with the transferred property during his lifetime. With regards to Dr. Liljestrand’s motivation for forming PLP, Dr. Liljestrand was concerned with the disposition of his property after death. The estate claims he wanted to protect the property from partition and guarantee Robert’s management of the property after his death. These motives are primarily testamentary in nature. The objective and subjective evidence lead to a conclusion that the partnership was simply a vehicle for controlling Dr. Liljestrand’s property after his death.
In summary, we are satisfied that PLP was created principally as an alternate testamentary vehicle to the trust. Taking this feature in the light of all the factors discussed above, we conclude that Dr. Liljestrand retained enjoyment of the contributed property within the meaning of section 2036(a).

As a result, the Tax Court upheld a $2,573,171 assessment of additional estate tax.
The Moral? If you are going to use a family partnership for estate planning, you need to do it right. You want to have a non-tax use for it. You need to respect the formalities, including documentation of activity, maintaining a bank account, and following the partnership agreement. And you can’t use it for all of your assets. If you don’t leave enough assets outside the partnership to finance your lifestyle, you pretty much guarantee that your estate plan will fail.
Cite: Estate of Paul H. Liljestrand, T.C. Memo. 2011-259.


How much can you give away to your family without paying gift tax?

Wednesday, September 28th, 2011 by Joe Kristan

The limits now: $13,000 per year per donee, plus (through 2012) $5 million lifetime exclusion. Paul Neiffer has more at Farm CPA Today.


Gee, Dad, I really love you, but I could sure use your cash

Tuesday, September 6th, 2011 by Joe Kristan

Mom and Dad want to split their estate evenly among the kids, but one of the kids really needs the cash now, with Mom and Dad still inconveniently breathing. Joel Schoenmeyer discusses this problem at Death and Taxes.