October 9/16, 2017: Volume 32, Issue 9
By Roman Basi
In my previous column, “Estate Planning: Leave it to the pros,” (FCNews, Sept. 11/18), I explained—citing several recent real estate tax cases—how unqualified advisors can potentially cause a host of problems for their clients. Despite having expertise in other areas, some attorneys, accountants and other professionals that do not specialize in estate planning can do more harm than good. In this installment, I will cover some of the financial repercussions of poor estate planning.
Choosing an unqualified person or firm to handle your estate planning can result in unforeseen financial consequences. The IRS has recently stated that for all 2017 cases attorney’s fees awards will remain at $200 per hour. This may or may not seem like a significant amount to some; however, the ramification is that if someone brings an action against a professional, that person may be subject to paying the attorney’s fees of the claimant at a higher rate than what they were paid to have the work completed in the first place.
And yet, while we caution everyone on proper planning, it does appear that our current system works well for encouraging charitable contributions. A report recently stated that over 2,600 estates with a net worth of approximately $61 billion made charitable contributions in their estates. This amount was a tax deduction for the estates and the government did not receive taxes in the range of $27.4 billion. It appears the estate tax law does in fact provide a substantial means by which charitable organizations can be funded. This is one key reason why charitable organizations do not want the estate tax to go away. If the estate tax did not exist, it appears that the donations to these organizations would decrease substantially as there would be no incentive to give as estate taxes would not be lowered.
Estate planning is very important to all of us as long as the estate tax law is in existence in the U.S. As a matter of fact, the IRS has recently released information about how important the estate tax is to the U.S. Over 11,917 estate tax returns were filed in a recent year. Of the taxable estates, 13.5% did not owe taxes, but the remainder owed estate taxes such that the total amount produced income to the U.S. Treasury of $17.09 billion. (And this is only for one year.) An interesting breakdown of the assets on the tax returns showed that traded stock, state and local bonds, cash and closely held stock and real estate—other than a personal residence—amounted to a total value of $60.12 billion.
Bottom line: Don’t put off creating an estate plan. And once you have created one, be sure to keep it current as your situation changes and as laws pertaining to estate taxes change. More importantly, use qualified professionals who specialize in estate planning. Remember, the Center has specialists that stay current with the tax laws and specialize in estate planning.
Be sure to attend my presentation on Tuesday, Jan. 30 at TISE, where I will discuss different ways to reduce your taxes and protect your assets. Following my session, I will be available for free, 30-minute consultations.
Roman Basi is an attorney and CPA with the firm Basi, Basi & Associates at the Center for Financial, Legal & Tax Planning. He writes frequently on issues facing business owners. For more information, please visit taxplanning.com.