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Is It Time For An Estate Planning Checkup?
Even the most detailed and carefully crafted estate plan should be revisited periodically to make sure that it is in line with changing laws and life circumstances.
- Be sure that estate assets are held in such a way as to minimize estate taxes at death and to avoid overfunding or underfunding of post-death trust
- Review the powers of attorney for health care and property to confirm that they reflect current wishes
- Make adjustments to reflect the death or disability of a beneficiary, or a significant change in a beneficiary’s needs
- Update or prepare a living trust, which allows an estate plan to be carried out with minimal court involvement
- Retitle assets in your name as trustee of your living trust if you want to avoid probate upon disability or death
- Review how you hold title to assets (i.e., payable on death, joint tenancy, tenancy by the entirety, etc.)
- If you have not already done so, name appropriate guardians for minor children in your will
- If you have included a marital gift or a marital trust upon the death of one spouse, consider making the provisions more or less restrictive
- Examine the scope of “powers of appointment” that allow a survivor to redirect where assets will eventually pass
- Confirm that the timing as to when a beneficiary will receive or have the right to demand principal is compatible with current wishes
- Make any revisions suggested by changes in the family such as disabilities, births, deaths, or changed marital status
- Reassess how title to your home is held
- Consider the different options for designating beneficiaries for IRA accounts, pension plans, and other assets related to retirement
- Possibly make annual gifts to children and others free of estate and gift taxes (up to $11,000 per person per year in 2002)
- Consider setting up separate trusts or Section 529 education funding plans for children or grandchildren.
IRS Makes It Easier To Settle Tax Debts
The Internal Revenue Service has published new regulations that will make it easier for taxpayers to negotiate settlements of their tax debts. The regulations expand the “offer in compromise” program, under which settlements can be reached with taxpayers who cannot pay their entire tax debts. Under the old policies, the IRS could accept a taxpayer’s offer of settlement only if there was a doubt about whether the taxpayer was liable or the debt could ever be collected. These bases for compromise remain in effect, but the new regulations add flexibility, making the IRS decision to accept or reject a compromise offer dependent on the taxpayer’s particular circumstances. The bottom line is that a taxpayer is eligible for a compromise where collection of the entire tax debt would create economic hardship or where there are compelling public policy or equity considerations favoring a settlement. It may be evidence of hardship if a taxpayer cannot: (1) earn a living due to a long-term illness or disability, and it is foreseeable that resources will be exhausted; (2) pay basic living expenses if assets are liquidated to pay the tax debt; or (3) borrow against equity in assets, and seizure or sale could make it difficult for the IRS to collect the tax debt. Even with loosened-up rules, the IRS will only come so far to meet a taxpayer in a settlement. The new rules do not allow a compromise that “would undermine compliance with the tax laws.” The burden is on the taxpayer to make the case for compromise. Absent exceptional circumstances, the IRS will presume that an uncompromising application of the tax laws gives a fair and equitable result.
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