March 27, 2017October 2, 2024

IRS Audit Strategy Targets the Wealthy

In 2017 it is expected that the IRS will focus its auditing efforts on the wealthy, in order to get the most that they can out of their limited enforcement budget.

It used to be that the IRS was actually more likely to target middle class taxpayers for an audit than wealthy people. It is more difficult to audit the wealthy because they can afford to hire expert lawyers and accountants to fight the auditors.

However, years of cuts to the IRS budget have led to a change in tactics.

The IRS now prefers to target the wealthy for audits, so the agency gets the most bang for its buck. There is simply more money that the IRS can get by auditing the wealthy than by making sure middle class Americans have filed all of their taxes correctly.

This trend is expected to continue in 2017, according to Private Wealth in “This Year’s Audits Are Bad News For The Rich.”

The IRS is expected to go after common ways the wealthy often lower their tax bills and challenge them to prove that they have done everything correctly.

For example, a charitable deduction over a certain limit might trigger the IRS to send a letter demanding proof of the donation. Reporting that money was put into a 529 education savings plan over a certain amount, could also trigger an automatic letter as could a whole lot of other common practices.

It is important that wealthy people get together with their estate planning attorneys and accountants to make sure they have done everything correctly to lower their tax bills, if they want to avoid problems with the IRS.

Reference: Private Wealth (Feb. 28, 2017) “This Year’s Audits Are Bad News For The Rich.”

December 21, 2016November 26, 2024

What You Might Have Wrong About Wills and Trusts

Although wills and trusts have been standard legal documents for a long time, many people still have misconceptions about them.

Estate planning can be complicated by the fact that many people have misconceptions about the basics of wills and trusts and what having either one of them means. This problem is compounded by the Internet as people who are wrong, often share their misconceptions with other people online. The result is more confusion.

Recently, TCPalm discussed common misconceptions in “Common misconceptions about wills and trusts,” including:

Having a will means that your estate does not have to go through probate. This is completely false. In most cases, wills have to be submitted to a probate court for administration in both Maryland and the District of Columbia.
If your estate is not large enough to pay the estate tax, then you do not need to have a will or trust. This is another falsehood since there are many other reasons to have a will or trust. The most important is that if you do not, then all of your property will be distributed according to statutory rules instead of how you might have preferred it to be distributed.
By putting your assets in a revocable trust, you lose the ability to have any control over the assets. This is not true. If you are the trustee of your trust and the trust is drafted properly, then you will still be able to do whatever you want with your assets during your lifetime.
You have to file a separate tax return for your revocable trust. This is also not true. As long as your trust is properly drafted, a revocable trust will not be considered a separate legal entity during your lifetime and you will not need to file a separate tax return for it.
Another misconception about revocable trusts is that they reduce your tax burden. They do not. Some irrevocable trusts do that. Call Profit Law Firm for a consultation and advice on using revocable trusts and irrevocable trusts.

Talk to a qualified estate planning attorney who will be more than happy to educate you on the realities of estate planning.

Reference: TCPalm (Dec. 2, 2016) “Common misconceptions about wills and trusts.”

December 16, 2016January 16, 2023

Why Homemade Wills Do Not Work

Drafting your own will or using a form that you purchased online to create a will, might seem like a good idea that will save you money. However, those wills often fail to do much more than create large legal bills in probate.

Wills often sound like simple legal documents. In a sense, they are. They are just a legal way to write down who gets your possessions after you pass away.

When it comes to estate planning generally, wills are among the simplest ways to express your parting wishes. However, the truth is that wills are only simple from an estate planning attorney’s perspective. They are not so simple that anyone can just write their own wills or purchase a form online to fill in and use as a will.

Those homemade wills do not always work very well for a variety of reasons, as the Huntsville Item explains in “A humorous look at the danger of homemade wills.”

Some homemade wills do not work for very simple reasons of formalities. In most states, executing a will requires that a specific number of people be present to witness the will being signed.

People who create their own wills often fail to either have the right number of people present or they do not leave any indication of how a court can contact the witnesses, if necessary.

Other homemade wills do not work for less technical reasons. The directions in these wills are often contradictory or impossible to carry out.

Getting a will does not have to be a complicated process but it should begin with hiring an estate planning attorney.

Reference: Huntsville Item (Nov. 27, 2016) “A humorous look at the danger of homemade wills.”

November 18, 2016December 4, 2023

You Are Not Done When You Get an Estate Plan

Getting a formal estate plan from an attorney is not the final step to prepare for your estate. Estate planning is a lifelong process.

If you have taken the important steps of going to an estate planning attorney, discussing your wishes for your estate, having the attorney craft your plans and executing those plans, congratulations. You have done what far too few Americans do and have planned for how your estate will be handled. You have taken the necessary steps to make sure that if anything happens to you, your loved ones will be taken care of according to your requests.

However, do not think you are done with everything forever.

It is extremely important that you update your estate plan when necessary as the Verde News discusses in “Updating Your Estate Plan: When You Should Review It.”

It is impossible to list all of the possible times your estate plan should be updated.

Plans need to be changed whenever there are significant changes in circumstances. That can include changes in your financial situation, death of an important person in your estate plan, changes in estate law and much more.

Estate planning attorneys suggest that you review and change your plans anytime you experience a substantial change in life circumstances. It is also suggested that you review your estate plan every few years and talk to your estate planning attorney to make sure no laws effecting your plan have changed.

If it has been awhile since you have updated your estate plan, then call and schedule an appointment to have your plan reviewed.

Reference: Verde News (Oct. 29, 2016) “Updating Your Estate Plan: When You Should Review It.”

November 17, 2016December 15, 2022

Steps to Get an Estate Plan

Getting an estate plan often seems more difficult than it is. If you follow a few basic rules and steps, then you can get a good estate plan with little hassle.

Many people have the mistaken idea that getting an estate plan is an overly complicated process. They let this idea stop them from doing their own planning and they just keep putting things off.

However, estate planning does not have to be complicated.

Recently Personal Liberty offered some tips to simplify things in “Nuts and Bolts of Estate Planning,” including:

· Organize all of your financial and asset documents so you know what you have and what you need to plan for.

· Make the important decisions about who you want to have your assets and how much everyone should get.

· Think about how your heirs might disagree and how any conflicts can be avoided.

· Your plan does not need to be perfect. You will not be able to create a plan that pleases everyone completely.

· Whenever possible keep your plans flexible so they are easy to change when circumstances change.

· Make sure you are choosing responsible people to act as your executor and trustees.

· Do not surprise your heirs with too much. If you are planning something unusual, it is a good idea to let them know.

An experienced estate planning attorney can help you avoid missteps.

Reference: Personal Liberty (Oct. 28, 2016) “Nuts and Bolts of Estate Planning.”

November 16, 2016October 25, 2023

When a Family Member Dies

If you have never had to deal with a close family member passing away, then you might not know that there are important things that you need to do to make sure everything goes smoothly.

Dealing with the death of a close family member can be a trying experience, especially if it is the first time you are the responsible adult in charge of making sure everything is done properly. You not only have to deal with your own grief, but you also must make sure the deceased’s affairs are in order.

This is tough for even the most meticulous people as the Cape May County Herald discusses in “What to Do When a Family Member or Loved One Dies.”

Some things you need to do are just common sense. For example, you must make sure everything is safe and secure at the home, that any pets are taken care of and that any perishable food items are cleaned out of the refrigerator and pantry.

You should also take some financial steps.

It is important that you log any expenses you have while dealing with the clean up so you can be reimbursed from the estate. You should also be certain to locate any credit cards or check books to make sure they are secure. It is illegal for you or anyone else to use the cards or checks, so destroy them.

The most important thing you need to do when a loved one passes away is to call an estate planning attorney. If you know the family member used a specific estate planning attorney, then call him or her to ask about important documents. Otherwise, call an estate attorney to learn about your legal obligations.

Reference: Cape May County Herald (Oct. 31, 2016) “What to Do When a Family Member or Loved One Dies.”

November 14, 2016July 3, 2023

Using a Pour Over Will to Fund a Trust

When you get a living trust from an estate planning attorney you will likely also get a pour over will that is designed to bequeath any assets you have when you pass away into your trust. It is important not to rely on that will as the sole means of funding your trust.

Getting a trust to avoid having your estate go through probate is only effective if you fund the trust. That means your assets need to be transferred into the trust. Any assets held in the trust when you pass away will then be used and distributed according to the terms of the trust instead of having to go through probate.

At the same time, you will also likely get a pour over will.

These are simple wills that dictate that any assets you had at the time of death that are not in the trust should be placed into it via probate.

Do not let that fool you into thinking you do not need to transfer assets to the trust now and just rely on your will as the Green Bay Press-Gazette points out in “Estate Planner: Importance of funding your trust.”

While the exact rules vary from state to state, it does not take a lot of assets to require an estate to go through probate.

If all of your assets remain outside of your trust, then your executor has to probate your pour over will. By relying on the will you would have essentially defeated the purpose of getting the living trust in the first place.

If you do not know how to transfer assets into your trust or need assistance doing so, then talk to your estate planning attorney to get more information about what you need to do. We help clients, who want Maryland living trust fund at Profit Law Firm.

Reference: Green Bay Press Gazette (Oct. 31, 2016) “Estate Planner: Importance of funding your trust.”

September 23, 2016November 26, 2024

Librarian Leaves Millions to University

Every once in a while a story comes out about a person who lived frugally and managed to amass a fortune. The latest example is a librarian from New Hampshire.

Robert Morin loved books. It is believed that with only a few exceptions he once read every book published in the U.S. between 1930 and 1940 in chronological order. Thus, it was probably fitting that when he graduated from the University of New Hampshire in 1963 he went to work in the school’s library.

Librarians do not normally make a lot of money, so it came as a surprise to everyone when Morin left the university his entire fortune when he passed away, which was approximately $4 million.

Apparently, Morin lived simply and invested well. He stipulated that $100,000 should go to the library where he worked, but the university can use the rest for other purposes.

My Central Oregon reported this story in “Librarian Quietly Saved $4 Million, Left it to School Where He Worked.”

Similar stories come up every few years. For example, grade school teachers have been known to save and leave millions to charity. In another recent case, a janitor left a small fortune to the school where he worked.

What this shows is that anyone who has the desire to do so can make a fortune by living simply and investing money well.

Of course, not everyone wants to live that way. Those who do, however, should not neglect to spend some of their money visiting with an estate planning attorney so they can makes sure the money goes where they want after they pass away. It does not make sense to save all the money only to have it go to someone you do not want to have it.

Reference: My Central Oregon (Sept. 4, 2016) “Librarian Quietly Saved $4 Million, Left it to School Where He Worked.”

September 16, 2016

The Role of an Estate Planning Attorney

There are several options for creating an estate plan on your own. That might lead you to wonder what role an estate planning attorney can play and whether you should hire one.

If you can do something by yourself without taking too much time to do it, you are probably hesitant to hire someone to do the job for you. For example, why bother to hire a handyman to fix a squeaky door when fixing it yourself takes no more than a few minutes and some lubricant?

With many downloadable estate planning forms available today, many people are starting to have the same thoughts about estate planning and wonder why they should hire an estate planning attorney when they can do it themselves.

As the Herald Times Reporter in “Estate planning attorneys are like a QB” suggests, estate planning attorneys still have a vital role to play.

Just like the quarterback of a football team, an estate planning attorney plays a key role in coordinating the plans and executing them. The attorney is the one with the expertise and ability to make sure everything goes according to plan. A Maryland estate planning attorney knows the details of Maryland Law and a DC estate planning attorney knows the details of DC law. You tell the estate planning attorney how you want things to go and the attorney creates a plan that does what you want and follows the law. If you are a resident of DC or Maryland, then Profit Law Firm can help you make a game plan for your estate.

The attorney can even call an audible just like a quarterback. If there are potential problems with what you want to do, then the attorney can advise you and help you come up with a different plan.

You can play football without a quarterback, but it is unadvisable. You can also create an estate plan without an attorney. That too is not advisable.

Reference: Green Bay Press-Gazette (Aug. 13, 2016) “Estate planning attorneys are like a QB”

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