Monthly Archives: May 2013

Undue Influence?

Posted on by under Business Succession Planning, Business Transitions, Elder Law, Estate Planning, Estate Tax, Family Business, Financial Powers of Attorney, Gift Tax, Gifts to Minors, Illiquid Assets, Kansas, Living Wills, Medical Powers of Attorney, Missouri, Probate, Small Business, Trusts, Wills

This NY Times article discusses how a hospital manipulated a long term patient (net worth > $100 million) to obtain gifts, pledges, and other favors from her. Undue influence is a common probate or trust litigation issue. Wills in Kansas and Missouri are only valid if executed without undue influence. Most attorneys hear undue influence and think of a child or other prospective heir trying to persuade a family member to favor them over other relatives or heirs. But what about organizations, hospitals, and others looking for a piece of an individual’s or family’s inheritance? Food for thought.

If my law firm, Johnson Law KC LLC, can help you or your family with your estate planning needs, call (913-707-9220) or email me (steve@johnsonlawkc.com) to schedule a free, convenient consultation.

(c) 2013, Stephen M. Johnson, Esq.

Is New York “Offshore?”

Posted on by under Business Succession Planning, Business Transitions, Dynasty Trusts, Estate Planning, Estate Tax, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Generation Skipping Tax, Illiquid Assets, Income Tax, Kansas, LLCs, Missouri, Small Business, Trusts, Wills

The NY Times has this fascinating article about the recent corporate tax controversy of large global companies parking money in international holding companies that have domestic bank accounts or investments. But poof (now you see it; now you don’t) – by tax accounting magic, the money’s held internationally. America has the highest corporate tax rate in the developed world –  35%. Some other countries, like Ireland, have much lower tax rates, so having the money held by an Irish subsidiary in a New York bank account yields a substantially lower (say 13%) tax rate.

While offshore bank accounts (for individuals or corporations) are often discussed in political terms, they’re a bipartisan issue. While companies some might view as conservative do it (like oil and gas companies), so do seemingly more moderate or even liberal giants like Microsoft, Google, and Apple. (A few months back, Apple passed ExxonMobil as the biggest company by market cap – all those iPhones, iPads, and iPods everybody loves fueled its rise to the coolest big business on the planet.) And wealthy folks of all political stripes like Mitt Romney, Al Gore, Terry McAuliffe, and Penny Pritzer have offshore accounts or investments. Why? Lower tax bills. Whether you think offshore holdings are great or terrible, the math tells the story.

The unfortunate moral of the story is the obscene complexity of America’s tax law – call it the lawyers’ and accountants’ full employment act. Most Americans, whether conservative or liberal, favor a less complex IRS Code. Meanwhile, if my law firm, Johnson Law KC LLC, can help you or your family with your personal estate planning or small business needs, give me a call (913-707-9220) or email me (steve@johnsonlawkc.com) for a free consultation.

(c) 2013, Stephen M. Johnson, Esq.

Talking to Family about Inheritances

Posted on by under Business Succession Planning, Business Transitions, Dynasty Trusts, Estate Planning, Estate Tax, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Gift Tax, Illiquid Assets, IRA, Kansas, Living Wills, Medical Powers of Attorney, Missouri, Probate, Small Business, Trusts, Wills

CNBC has this article about a recent US Trust study about when parents should talk to their children (and grandchildren) about inheritances. As the article points out, many children of wealthy families realize they’re wealthy based on the lifestyle they enjoy. But there’s a big difference between knowing “My family’s wealthy and takes exotic vacations” and knowing “Mom & Dad have XYZ income each year, a house held in ABC trust, a controlling interest in Family Co LLC, a vacation home also held in trust, and a net worth of $_______.” When to tell family members specifics is an important question to consider in careful consultation with your family’s accountant, attorney, and other professional advisors. As the article suggests, maturity levels, financial acumen, and other factors come into play. But as the article rightly concludes, “even if parents don’t give their kids “the number” for their wealth, they should at least give them the skills and the values to manage it well.”

Beyond the tax and legal details of structuring entities that attorneys and other wealth advisors do, imparting skills and values to manage a legacy is vital. Without the skills and values, a child or grandchild may not know how a family member became wealthy, why a family member managed their lifestyle as they did, or what legacy the wealth should have. I encourage clients to be open and honest with their families when the time comes to discuss inheritance and legacy. But don’t just give your family the numbers, give them the context and share your values and passion and legacy with them.

If my law firm, Johnson Law KC LLC, can help you or your family with estate planning or asset protection needs, or give you ideas for spurring these important conversations with your family, please call (913-707-9220) or email me (steve@johnsonlawkc.com) for  a convenient free consultation.

(c) 2013, Stephen M. Johnson, Esq.

IRS Audits

Posted on by under Estate Planning, Estate Tax, Family Business, Financial Powers of Attorney, Gift Tax, Income Tax, Kansas, Missouri, Small Business, Trusts, Wills

News is coming out that the IRS may have been improperly scrutinizing political ideas of some nonprofits applying for tax exempt status for a couple of years, especially in the run up to the 2012 presidential election. If the IRS was denying nonprofit applications based on political ideas (e.g. favoring conservatives or favoring liberals), we can all agree that would be inappropriate and likely illegal, because nonprofits are about serving the common good, not political gains (or losses). While we watch the investigation unfold and the political theater and finger pointing in Washington D.C., another group of people, affluent taxpayers, are seeing a rise in audits.

As this CNBC article explains, more audits of wealthy taxpayers isn’t necessarily bad and may actually be a positive check or balance in the tax system. There are 2 reasons why the IRS might audit wealthy taxpayers more than middle class folks: (1) wealthy taxpayers often have very complex tax returns (individual, investments, corporate, trusts) to file each April 15 because of the diversified nature of their holdings and income and (2) the IRS is more likely to pursue an audit that will yield a better result (e.g. they’re more likely to pursue a few million in disputed income from a hedge fund billionaire than a few bucks in tips the local Starbucks barista forgot to report). Both of these reasons are perfectly legal and appropriate.

Audits are a pain in the neck and take lots of time for families and business owners, but they’re nothing to fear. Follow good accounting practices, keep track of receipts, track income and expenses, and keep old copies of tax returns you’ve filed. The IRS isn’t out to get any of us, they’re just double checking that we did the math right. If my law firm, Johnson Law KC LLC, can help your family or small business with an audit, give me a call (913-707-9220) or send me an email (steve@johnsonlawkc.com). We’re here to serve you and help you be ready for life’s surprises.

(c) 2013, Stephen M. Johnson, Esq.

Tax Like its 1972?

Posted on by under Business Succession Planning, Business Transitions, Dynasty Trusts, Estate Planning, Estate Tax, Family Business, Financial Powers of Attorney, Gift Tax, Gifts to Minors, Illiquid Assets, Kansas, Living Wills, LLCs, Missouri, Probate, Small Business, Trusts, Wills

Bloomberg provides this interesting article on Summer Redstone’s appeal of the IRS arguing his 1972 transaction was a gift. Some might think that 41 years is a bit late (!) to be challenging a transaction (or collecting tax on it), and many of the lawyers quoted were surprised by the IRS’ claims. It will be fascinating to watch how this case plays out. If the IRS’ argument turns out to be merited (albeit 41 years late), this has ripple potential in the estate planning and tax communities, as attorneys, accountants, and advisors grapple with how to insulate clients (and themselves) from liability decades after the fact.

Stay tuned for updates from the recent 2013 KC Estate Planning Symposium, which I attended last week (25-26 April 2013). This year’s program featured a host of top speakers on topics ranging from grantor trust tax, FLP and other case law updates to special needs trusts, IRAs, asset protection, and Social Security planning.

If my office, Johnson Law KC LLC, can help you or your family with gift tax or other estate planning issues, give me a call (913-707-9220) or email me (steve@johnsonlawkc.com) for a convenient free consultation.

(c) 2013, Stephen M. Johnson, Esq.