Archive for the ‘Uncategorized’ Category

2012 in review

Posted: January 4, 2013 in Uncategorized

The WordPress.com stats helper monkeys prepared a 2012 annual report for this blog.

Here’s an excerpt:

600 people reached the top of Mt. Everest in 2012. This blog got about 2,300 views in 2012. If every person who reached the top of Mt. Everest viewed this blog, it would have taken 4 years to get that many views.

Click here to see the complete report.

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Mr. Devane’s gold commercial doesn’t tell you everything!

Gold_Digger_-_William_Devane

Actor William Devane is back “in character” on television ads in his most recent gold commercial. 

Here is why it is so dangerous to poor Grandma and Grandma:

First, the ad shows the US Debt clock reminding us of the current financial crisis we are in. (That part is real) Then a quick fade to rioting in the street to let us see what’s coming next. Or not. 

Next, the ad shows money being printed like there is no tomorrow. (Trust me, there is always going to be a tomorrow) Next up — we get induced by a cozy fireplace scene while Billy drops those gold pieces one by one from his hand. We hear the clanking as we get told “I even like the feel of gold”…  whatever.

It is the last part I find fault with. We are told “You can also put your gold in a retirement IRA” as the camera next shows him placing his stack of gold coins in  a wall safe and covering it back up with a fake picture front. You can’t miss the gold bars too in the safe, alluding to how safe it is storing your gold at home is! 

Are you kidding me? 

People I know bought large quantities of gold coins or bullion and were so worried after delivery that someone was going to steal it – they had to go put it in bank deposit boxes! Recently, one of those brand name banks just hit the “D” grade by Weiss Bank ratings…  What do you do next with it – bury it?

The cunning William shuts the wall safe door while stealing a popular credit card slogan as he says “What’s in your safe?”  Hopefully not much if YOU told anyone how excited you were to take delivery of physical gold at home…

The devilish side of this TV actor parts way with truth, at least regarding my two points. First, storing valuable assets at home will help you give you an ulcer quickly. Second, you can’t put your IRA into precious metals holdings and keep the metals at home. The IRS forbids it!

As Grandpa and Grandma most likely are pushing the remote control volume up to hear every word, remember that Grandpa got fooled before and now – they both may get fooled again, since they want their former lifestyle back! (Seems Grandpa lost about 1/2 of his IRA account in 2008 and Grandma forced him to put what was left in the local bank at a measly 1% a year return)

The commercial doesn’t disclose this stuff I am bringing up. And they should. No, I’m not saying that some IRA money shouldn’t be invested this way. But, I am saying that disclosure is missing in these ads no matter who is hawking gold or silver coins or bullion bars in these slick commercials!

Make no mistake — Grandma and Grandpa will never get to touch those coins if they agree to put their IRA money into a gold IRA. No clanking coin sounds. No   shiny metal coins to appreciate how they feel in the hands.

And, if bought online, they can’t verify the products hawked by these gold digger salesman are even real! They can only find true value of the merchandise when they later decide to sell.  My own father got fooled paying about $2,000 more than market value for two gold buffalo coins a few years ago. Thank goodness he didn’t sell the farm and put it all in overpriced numismatic coins that often fall down to values related to “gold content” when all hell breaks loose. Buy close to “melt” value or tell them no!

Now, perhaps you are that Grandma or Grandpa getting “bug eyed” over theseGrandpa_and_Grandma_Staying_Home_A_Lot  ads wanting you to invest in gold with your current IRA. Or the kids of parents who may be getting overly influenced by ads that bait and switch. Even the free gifts offered are that final “straw” that can make a senior break down and call the toll-free number. After calling, you can pretty well count on a transaction taking place soon after since professional phone salesman forsake Dodd-Frank U.S. law regarding “knowing your client” and shoot you a deal that sounds impossible to say no to. And urge you to “buy” today to get the deal that will be gone tomorrow.

I sold gold funds in the mid 80’s as a financial planner. I put 10-20% into these alternative type investments for clients and watched the money go nowhere for about a decade! And, another decade passed before we saw a “lift” in gold and other precious metal pricing.

Please, get another opinion if this describes you. And, if this describes your parents, call them and ask them to run it by you before they do something drastic with their remaining retirement savings accounts.

Do I have a plan for clients that makes more sense? Yes! Stay tuned and you will find out where most of the retirement money is going as it exits the doors of banks and brokerage firms still teetering on financial conditions that are just about as bankrupt as possible — if all “worthless” assets had to suddenly be accounted for in their balance sheets! 

You are about to discover credible IRA investment options not commonly known or promoted by the investment advisors. Safety is the key, while still investing for growth potential. Never forget — Mr. Devane is just a paid “ACTOR” and so are all the other Hollywood “B” actors who hawk products on television! Pay them their fee, and they will say just about anything to convince you to buy something that may be the last thing on earth you really need. Keep the salt shaker handy next time you hear a TV or radio ad that sounds too good to be true.

M.D. Anderson, President, AZCLDP, Accountant

Financial Strategies, Inc., Chandler, AZ

&

IRA Director, Realtor

RE/MAX DIAMOND, Mesa, AZ

Toll Free: 1-800-782-2806

Now that you have called Grandma & Grandpa to tell them not to “Get Fooled Again”, sit back and enjoy this Re-mastered full length Version of the song.

 


Bob Marley reminds us that “Everything is going to be all right.” “Don’t worry about a thing.” 

If you like, listen to THREE LITTLE BIRDS as you read this blog post.

As I prepare for my 25th year (a whole quarter century) of tax preparation and consulting, it is easy to look back and see that not much has changed over the years. You can pretty much deduct the same items on Schedule A as you could in 1988 when I started. And, tax freedom day is and remains sometime in May each year for most higher income tax clients of our firm.

Flat tax proposals… well, they fell flat to date and most likely the flat tax talk you hear right now is just a ploy to try to get nominated or elected. I do agree, simplification would be nice. But, so would a private firm in charge of collecting taxes away from the slothfulness we find in a government-owned and run operation. 

ersPerhaps letting a company like Fed EX or UPS run the I.R.S. (changing of course the acronym to E.R.S. – External Revenue Service).  In fact, we are used to seeing a brown truck roll up to our home. An E.R.S. version would roll up and collect your weekly “tax” money and give the employers a break!

Far fetched or crazy?  Yes, it is. But, so is the current system. However, changing it drastically would spell disaster in this country. Especially if charitable donations were no longer deductible. All those good, well-heeled clients I see that give a lot of both money and goods (used stuff) to charities keep this country going and helps so much the people who depend on agencies, churches and other non-profit companies for welfare to help them “exist” during these tough times.

Of course, charitable education gifts including help with college costs is another massive charitable effort that must not be hampered by overly aggressive legislators trying to put additional feathers in their caps!

All I’m saying is let a private “for profit” firm run the I.R…I mean E.R.S. – and efficiency would improve. And with efficiency, we could get down to simplification.

But, this blog entry isn’t meant to talk about actual taxes you pay or don’t pay, how well the IRS is run, etc.  It is meant to talk about how satisfied you are now with your current method of tax preparation?

Just in time for tax season this year, Market Tools Blog conducted a new survey in the United States that gauged satisfaction levels among individuals who filed their 2010 federal income taxes as of April 1st, 2011.

The main question only dealt with satisfaction of HOW the survey participants  were with the experience. The highest percent of the filers used an unpaid individual preparer (friend or family member) and 77% reported being “extremely satisfied”.  Now, I want to discuss that just a little.

This first survey result says if you want to be happiest, you’re going to have to take your shoe box of expense receipts and income slips to your Uncle “Bob” or your buddies you snow ski with and force them to learn everything they can on taxes, so you  can be the happiest! (Tongue in cheek here)

Well, don’t despair if you don’t have a relative or friend who is super sharp on taxes and likes to work for free. (My kids are so lucky I do their returns for a penny each year!) The next category down for “Satisfaction” level will cost you a tax preparation fee, but you will be almost as happy as you would be in this first category. Few are lucky to have someone “slave” over their tax situation this year for free, and remarkably –be able to get it right. After all, you don’t want the I.R.S. audit boys showing up at your door in a couple of years to “enforce” wrongful deductions ol’ Uncle Bob shouldn’t have taken!

According to the survey, you only drop 2% in your satisfaction level by MD_Anderson_Looks_For_Every_Deductionusing someone like me. Professionals like me will scour over your tax papers to find every legitimate deduction and come up with a  strategy for the future, so you can pay less tax and keep more of your own hard-earned money. The survey reports that 75% of filers who worked with a paid individual preparer such as an accountant or CPA were “extremely satisfied” with the experience. I guess giving up the tax preparation fee to the professional tax preparer is mostly offset again by knowing that the return was done right and the filer was treated with respect. (not waiting in a crowded office with sweaty people all around you, eating smelly fast food burgers and fries)

Next up in satisfaction levels, was the DIY’s out there in tax land. You are younger and just doing your returns by yourself online or by downloading free (or cheap) software to get the deed done each year. This means (I hope) you have a good handle on tax law and rules – not just a good handle on how to run a computer. If this describes you, congrats!  However, DIY mistakes are becoming legendary.

Take for example, using a scroll mouse. You can be entering W-2 info and sneeze and if you don’t go back and look, your scroll mouse might have entered a wrong code. You might sneeze and tell the I.R.S. you are “dead” now. Worse, you could make a number mistake that could enter you into the system (we only know that DIY mistakes in multiple tax years could get you audited), and the I.R.S. might just pull your file for a closer look later. Two years later is the norm, enough time to be sure  that the penalty and interest on wrongful refunds earns a good rate of return for the government! 

A_Bad_DIY_Tax_DayBut, that isn’t the main reason to consider letting a paid tax professional prepare your 2011 tax returns. The main reason may be the actual survey results!  DIY’s using tax software were just 69% “extremely satisfied” followed by DIY’s preparing their returns online, who reported an even lower 66% satisfaction rate. Maybe, that “doubt’ feeling a DIY has doing their own taxes is the reason. They just don’t know for sure if they can trust themselves, the software they used, or the “guided” instructions that tried to tell them how to do it. And, like any do-it-yourself project you may attempt, something can always go wrong! 

The lowest level in the survey respondents was from those poor souls who visited a tax preparation chain last year to get their 2010 taxes prepared. Only 64% reported being “extremely satisfied” with their experience. And, had full disclosure handouts been provided to them at the door to read before they started, I don’t think that percentage would be anywhere near that high.

For example, H&R Block, obviously the largest tax preparation chain, has some skeletons in the closet you won’t be apprised of if you used them last year. Probably, nobody in their tax office told you:

1. Their broker/dealer (H&R Block Financial Advisors, Inc.) was charged with bond fraud by the N.A.S.D. (now FINRA) over their sales of Enron Corporation bonds just weeks before the company did the Humpty Dumpty. Some of the brokers had claimed they were “safe” right up until the end.

2. The N.A.S.D. also fined them $500,000 for enabling a hedge fund customer  to use deception in market timing of mutual funds. Multiple employees of the firm were involved in the scheme.

3. They announced in August 2005 that they had overstated their earnings for 2003 and 2004 by $91.1 million dollars. They claimed “insufficient resources” to identify and report complex transactions in its corporate tax accounting.

4. In 2006, they admitted in a quarterly result, that they miscalculated their 2005 and 2004 state income taxes, stating they owed $32 million in back taxes. (Their stock price immediately fell 8.5% in one day over that goof!)

5. California sued them in 2006 over their refund anticipation business. The suit by the California Attorney General claimed that H&R Block(head?) charged annualized rates on RAL’s exceeding 500%, after including their fees! The AG said the company falsely portrays the nature of the loans, advertising “cash, cold, green, in your hand, out the door.”

6. New York sued them in 2006 in connection with the sales of the H&R Block Express IRA. The allegations by then AG, Eliot Spitzer (I know, he had a bad habit or too of his own) stated in the allegations that the IRA product earned less interest than the fees paid by the customers to obtain one! The complaint accused them of fraudulent business practices, deceptive acts and practices, fraud and breach of fiduciary duty.

Want more? Well, when they entered the mortgage business, you can only imagine how that one turned out. Just read the 2009 annual report. Pay special attention to pages 12-15, listing the “problems” the company board faced by the time the annual report issued in 2010. Without embellishing the “truth” of the kind of characters that run H&R Block companies – IT WILL BEND YOUR EAR!!!

Even their chairman, Richard Breeden had enough and stepped down last April 18th…

Though the fancy commercials running on television right now would have you think they are the best choice this year – one must seriously stop and ask this question: DO I WANT TO ASSOCIATE WITH A COMPANY LIKE THIS? If you want a higher level of satisfaction, I suggest you don’t…even if you were to use their “Premium” office accountants that are supposed to be the cream of the crop. One visit to THIS SITE may kill that idea!

The second largest chain, Jackson Hewitt would have been treating the customers with more respect last year if they had disclosed the following facts by April 1, 2011:                                                             

We are heading for bankruptcy. (filed 5/24/11)  Though we can tell you how to get the biggest refund – we can’t run our own business on the current business model and went broke! And, we also want to tell you that we will be pushing refund anticipation loans on you again this year, in spite of the fact that we face a class action lawsuit claiming we “bilked” consumers with short-term, high-interest refund anticipation loans. ($1.1 million was later set aside to settle the claims)

And, fresh out of bankruptcy and in 2800 Wal-Mart’s for the 2012 season, one would hope that Jackson Hewitt would tone down the marketing of “big refunds” and “big loans”.  That isn’t happening at all. According to Reuters last December, the last bank (Republic Bancorp) that will still do business with them to fund the loans is backing them one last time this season. It is their last year allowed since they agreed with the Federal Deposit Insurance Corp to stop funding them by 2013. Believe it or not, that was agreed to in order to settle a lawsuit filed against the bank also by the F.D.I.C.

Do you want all your personal identification information left with people like this?

Again, though the fancy commercials running on television right now would have you think they are the best choice this year – one must seriously stop and ask this question: DO I WANT TO ASSOCIATE WITH A COMPANY LIKE THIS? If you want a higher level of satisfaction, I suggest you don’t…

The third largest tax preparation chain, Liberty Tax Service, is a spin-off of Jackson Hewitt. Being fairly new, they haven’t had a chance to get in as much trouble as the two BIG DOGS! And to be fair, west coast reviews I read are favorable so far.

READ MORE ABOUT THE TOP THREE TAX PREP CHAINS — HERE

The final survey results reported that about 1/2 of you reading this (and are employed) are unhappy with your job and thinking of looking around. Yet, the survey also reported that only about a quarter of employers have any system in place to gauge employee satisfaction levels and hopefully, improve them so they don’t go through bodies needlessly.

Lastly, I would like to say that for the last 24 years, I have had to compete with the big dogs. But, when clients leave them and come to me, they become loyal, long-term clients. My online testimonials show I know how to stay out of trouble, do a good job for the client year after year, and grow old with my tax clients! I’m 99% satisfied with the broad income tax clientele I have maintained all these years. And, I would bet my loyal clients would rate their level of “extreme satisfaction” higher than any of these survey results.

We are taking new Arizona as well as national clients this year to grow our practice. We need you to take a step in faith to experience a REAL TAX MAN who will never forget who he serves.

It’s tax time, but don’t

worry about a thing.*

Just call me at:

1-800-782-2806

if you have any questions or would like immediate tax service.

(Such as to get those W-2’s or 1099’s out the door before the deadline)

M.D. Anderson, Accountant, AZCLDP

* Unless you are going back to those “Big Dog” chains who will never tell you how much trouble they get into. Or where you may be heading by using their services. (SEE BELOW)

!cid_5338BFCF18484EE6A65D9701DE64FB39@g41me7200


The WordPress.com stats helper monkeys prepared a 2011 annual report for this blog.

Here’s an excerpt:

A San Francisco cable car holds 60 people. This blog was viewed about 1,100 times in 2011. If it were a cable car, it would take about 18 trips to carry that many people.

Click here to see the complete report.


Roll Over BeethovenThere are old pilots and bold pilots. But, there are few old, bold pilots. The idea of finding fault with any particular profession, let alone the legal profession, may put my plane in the ground just for daring to be bold. I hope not. This article is written with hope, that things get better. I really care, and that is why I am going to tell on some advisors who should know better.

I can’t just say I am dismayed with a few lawyers. It doesn’t stop there. Some CPA’s, registered reps, RIA’s, insurance agents, bankers and Certified Financial Planners — are also in my sights this time. This blog entry may indeed “Roll Over Beethoven” and ”Tell Tchaikovsky the news” as the song lyrics go.

Enjoy the song as you read!!!

 

You see, in 1998, I entered a new emerging consulting arena for “Inherited IRA’s” that didn’t exist prior to that time. Fewer people had large IRA accounts since the “norm” before was that most employees had company sponsored pension plans with survivor benefits. Yes, people did have IRA’s since 1974, but contribution limits were extremely small and so were the accounts for the most part. But, the extreme success that individual 401-k plans had with employers and employees alike, fueled a huge increase of money piling into the stock market. Mandatory withdrawal tax law for those reaching 70 1/2 in age were put into effect in the 1980’s and have only been suspended once by Congress in tax year 2009. These “RMD’s” allow accounts to grow even when mandatory payments commence.

In case you didn’t realize it, the stock market is much like a fire in your fireplace. Supply and demand is what I am talking about. With unrestricted airflow and plenty of wood, a fire will blaze. So it goes with the stock market. When peopleFAT_CAT_2 are piling in “new” money in equity type investments, there is a natural tendency to see a nice “lift’ in the long term charts. Some investors become “fat cats”, but most forget the fire eventually will die down again.

And when that same money pulls back or is taken out of the equity markets, the opposite is true of course. Sadly, many get in too late, just as the fire peaks and then starts to die down. Then, they often get scared and pull out before more money (new wood) is again put back into the market. Timing is everything, especially now.

The Inherited IRA consulting I have done for for thirteen years has made me kind of an expert on the subject. My website, www.InheritedIRAHell.com is very popular in search engines. This is because my firm gives away timely and important information with no obligation.

Thousands come each year to read the Inherited IRA web content, which is always kept up to date with law changes. Many contact me each month and some hire me to assist them in trying to stay out of this “Inherited IRA Hell” the site is named after.

And, that isn’t an easy task even with my help and expertise on board. Sometimes (actually most of the time), I still have to deal with less than spectacular advisors on the other end. Though lawyers, CPA’s, investment advisors and insurance agents now come to my site to resource and learn the basics of Inherited IRA advisory, (as well as many executors, trustees and heirs), the norm in America is still at or near “incompetency” on all fronts. When it comes to getting solid Inherited IRA facts that you can take to  the bank, the old carpenters’ tip measure twice and saw once” was never more true.

The problem isn’t that most of these advisors are Cracked_Brain_from_IRA_Talka quart low in brains. Not at all. Some very intelligent advisors and clients of mine over the years have proven it all comes down to  desire. The desire to learn and the ability to understand the more complicated tax and legal issues surrounding inherited type funds to most people is like watching paint dry. Popular IRA advisor Ed Slott, CPA has penned it this way — “the most difficult area of the tax code”. He is right! That is why even the lawyers and accountants shy away from this field of practice.

Some heirs and advisors have the ability to resource on my site and other great sources available to them. They can make good decisions because they can grasp the concepts, rules, and instructions necessary to keep the funds from immediately becoming taxed. (That is the hell we reference on the site) But, most financial advisors consistently get a low score and most heirs need professional guidance and help. THE BIGGEST PROBLEM IS THAT THE HEIRS LOOK TO THE ADVISORS OF THE DECEASED LOVED ONE – AND THEY AREN’T QUALIFIED!

My team of advisors is ready for any case, big or small, in trust, or out. And the circumstances never duplicate in an estate IRA situation case. Therefore, all known factors must be reviewed so that good decisions can be made by the surviving parties that contact me. (Usually the estate manager or administrator) Yet, after all these years, I find the education in this area of practice is not a whole lot better than when just a few of us pioneered the area of practice from scratch, way back in 1998.

Ed Slott, CPA does a fantastic job of writing books, giving free tweets, providing online resource, as well as sponsoring seminars and training classes for professional financial advisors. He is an expert IRA advisor! But, he can’t reach everyone. In fact, he can only put a dent in the problem that attorney Natalie Choate in New York (she is our master Inherited IRA expert in the country hands down), has stated is an emerging area for malpractice for lawyers to look into.

Dumb_as_JethroOne problem though on that. Many of the estate plans I have a chance to peruse after the death, show gross negligence, high malpractice and most commonly – failure to understand why leaving IRA money to the client’s living trust is in many cases, a bad idea. Sadly, some estate advisors are just plain stupid, like Jethro! I guess Ms. Choate desires the good lawyers sue the bad lawyers in IRA cases so she won’t have to work so hard. After writing and updating the Bible on IRA’s, we count on her expertise in paperback form, on EVERY case we review.

What I am saying is that Natalie is right about the malpractice she notes in her Estate_Planurebook, because I see it too. Every week on every case I work on, something is messed up. Someone who couldn’t spell the words – “Estate Planner” is to blame.

After death, post mortem advisory looks a lot different when the rose colored glasses come off. After the death, seldom does the plan for Inherited IRA funds work out like it was planned prior to the death. Gross negligence, gross malpractice, fraud, coercion, tax mistakes, cover ups – all are common on the files I have worked on over the years. And, it seems like it is getting worse, not better. Estate planners with 1/2 brains would correctly describe my current files on my desk! 

Let me prove my point by discussing in general, a few examples from actual clients, giving permission to publish details without of course, revealing personal information:

A. AMERICA’S WORST LAWYER?

The Personal Representative & Successor Trustee, our client’s sister, and her chosen Estate & Trust Attorney & Trust Administrator and Estate/Trust CPA (BFF of Estate/Trust Attorney who also made the referral) refused to provide direct notice, refused to provide direct communication, refused to disclose estate and trust assets, and refused inspection of all trust properties, trusts books of records, and trust accounts.

This was contrary to the Trust agreement and statutes but was done because they did not want my client to know what was there. It was necessary for her to hire a very expensive southern lawyer, just to try to obtain communication with the sister in charge and her chosen estate lawyer. His best work for the most part, was in printing his billings…

huhBut, the estate lawyer the sister hired has been found to be, more or less, A LAWYER FROM HELL! (Referred to as L.F.H. hereafter) She first assisted my client’s mother in updating her living trust early in the year of death. At that time, no one knew that a medical condition would take her life late that same year. Sadly, the original professional trust prepared by a name brand law firm in the Midwest was replaced. The trustmaker got a thin, poorly written 10 page “jobbie” instead. Of course, it claimed the trustmaker was now a resident of the southern state where she lived part of the year in her boyfriend’s condo.

The client’s mother resided the rest of the time in her boyfriend’s Midwest home, the same Midwest town where instructions were left for burial. The client’s mother did own a rental condo property titled to her trust in the southern state. That didn’t stop the L.F.H. from listing the property as a probate asset on the Probate Inventory filed in the court of this southern state!

The female CPA who had been doing the income taxes prior to the death was also using the free state tax approach for the client and a drivers license was also issued there, giving reasonable proof the trustmaker had the outer appearance as a real resident, at least for IRS purposes. Perhaps the southern state was her resident state irrespective of the fact the IRS is fully aware of winter visitors doing the exact same thing to avoid state tax on some or all of their retirement income. (And the home state tax agencies as well) The problem the client and I discovered after the death was that the consecutive months rule wasn’t really met for residency testing per the state statutes.  Oh well, no one’s perfect.

But, the test for her residence state in the Midwest was also ignored for probate reasons, irrespective that most of the decedent’s large money accounts were opened there and the statements went to the Midwest home address, not the southern state residence that was being claimed by the CPA for IRS tax purposes.

Our examination as an estate accounting/tax preparation and Inherited IRA tax consulting firm found the amended trust drafted by the L.F.H. was clueless on how to draft proper estate legal documents. Since our firm is certified by the Supreme Court of Arizona to prepare estate legal documents, with 36 years of estate legal document work either on our own, or by working with estate planning legal firms – we can tell a “stinker” from afar.

We also found out the L.F.H. was clueless on why trust funding is necessary BEFORE death. Proper funding was ignored by all estate and tax advisors prior to death as well as the sister in charge. This, even though three months prior to death, written statements by physicians declared the mother (now a patient) incapacitated mentally and physically. The sister had full powers as GPOA and Successor Trustee, but chose to ignore the need to fully fund the living trust, prior to death.

The L.F.H. stated, word for word: ” FINALLY, (CLIENT) ASKED A QUESTION IN A RECENT FAX TO ME WHICH I AM ANSWERING FOR THE BENEFIT OF ALL OF YOU HERE. IT IS NOT MY PRACTICE, NOR COMMON PRACTICE HERE, TO PREPARE A “DECLARATION OF TRUST OWNERSHIP OF PERSONAL ARTICLES” OR ANY OTHER SIMILAR DOCUMENT WHICH WOULD TRANSFER PERSONAL PROPERTY TO THE TRUST, AND IT WAS NOT DONE IN THIS CASE.”

It is a nice admission of malpractice since professional estate planners in this southern state commonly use such assignments on a regular basis. This caused probate on assets that helped run up her fees no doubt! We documented our file with numerous lawyer websites in the same state, describing the assignment of tangible items to the trust as common practice in trust estate planning. (Common nationwide as well)

Worst of all, this L.F.H. was not able to properly list the actual sibling beneficiary sisters as the trust beneficiaries. Instead, the trust beneficiaries were identified only by state default statutes to identify just who gets the money. Especially when you have almost a million dollar IRA, separate from other large estate assets and investment accounts, that is high malpractice! It cost a lot of money to perfect what was penned by me initially as the “world’s worst trust”  I had ever read. Not a legal opinion of course. But a fact! There was also no Inherited IRA management legal language, no conduit trust provision, nothing at all to make her trust eligible for such a big IRA payoff upon death.

The southern lawyer my client was forced to hire in order to communicate, came on board even though he had zero knowledge with large trust owned IRA accounts and eventually admitted it. He was mostly a grapevine between the parties, whose connections discovered after his dismissal now bring up questions of conflict about disclosure items that should have been told up front to my client.

Also, legal and tax help was brought in by me to work for the client to perfect complications of the mother having a bad IRA custodian that did not allow splitting IRA shares inside a trust which was then changed to another bad custodian by the sister for one reason. The investment advisors in charge that got the large IRA account were down south! And friends or fellow yacht club members with the L.F.H. and her CPA associate! The other sibling sisters benefited from this work my client had to pay for, basically getting a free ride for this advisory work we all did for our client, the only sister caring to do things in a professional manner. 

This female L.F.H. with direct connections to all the other “players” in the southern estate game that was played out (and is still going on as I write this), charged like a Manhattan lawyer while producing results similar to letting Hannibal Lecture give you a haircut! She sent my client a hokey looking copy of her employment agreement with the sister in charge, a whited out IRA beneficiary form copy that looked like more redacted than a pilot’s UFO sighting report — all adding up to imperfect production of documents. Only a few of requested documents ever came in.

Which brings up the question my client and I can not dismiss:

Was it all intentional, just to milk the estate for all the fee money the lawyer from Hell and her associated southern advisors could get? 

We have come to a definitive conclusion that she is not the sharpest knife in the drawer of lawyers. But, perhaps she is intelligent in knowing how to make a trust fail so that a large amount of non–trust assets were forced into probate. But, then, she listed trust assets in the initial probate inventory which only a fool would do. Or, someone milking the estate for all the pesos possible. (This southern state has a liberal policy on how a lawyer can grab a percentage of trust assets, much more liberal than my home state of Arizona)

Money Down the ToiletThis L.F.H. does just one thing very well. Billing. Well, maybe that should be changed to “charging” since my client has never seen an actual billing from her, even though 1/3 of the payments came from her inheritance money. The truth is, flat fees were agreed upon up front, (the factor % included trust assets needing little work) then “extra-ordinary” fees were of course also manufactured by the lawyers on this estate, and by the sister in charge, claiming in mediation the detailed extra-ordinary billings existed but now claiming they don’t. Can you spell highway robbery? 

Total legal and accounting fees to date on this estate paid out by all parties to date exceeds $300,000! Most of that money went down the toilet directly because the L.F.H. drafted imperfect legal documents and ignored proper trust funding. This in turn, caused probate, delays, fights, and mistakes in rapid fire. Though I too participated in the fees paid out, my work helped perfect an imperfect Inherited IRA account. It was necessary. Most of the fees were not. Truly, some of the advisors of this estate have taken their own “share” as if they were listed heirs. That is shameful, since now, they refuse to provide billings to justify the large extra-ordinary fees taken against the estate (and my client’s share). It also is against the law.

Today,the sister is still too busy to do any substantive work on her own (she claims it is short term memory loss). I wonder if she tells the adults she cares for as a doctor she can’t remember anything? The allowed fee for her full PR and Successor Trustee services weren’t discounted again in the “extra-ordinary” free for all payments that were paid out after mediation completed. This, even though a whole team of lawyers had been on staff at times doing most of the work. (in the most sloppy, careless way possible) The fact that the CPA recently granted the PR/Successor Trustee carte blanche on when she claims her second half of the pre-agreed fiduciary income payment is laughable if the IRS finds out. Especially since it was deducted on the 706 two years before! Broken statues and laws have run off these people’s back like water to date.

Between the estate lawyer and CPA handiwork, multiple amended inventories of probate assets were filed again and again and again with the Southern state’s Court and copied to the Southern State’s Department of Revenue (they still have a tax department for Corporate and Estates), because the L.F.H. listed Trust asset(s) as Probate assets on Inventories and failed to list all probate assets. To this day, even though Probate has been “closed” via ex parte communications in a Probate Judge’s Chambers attesting under oath that estate was fully administered), the estate remains not fully administered. The 2011 plan is to hold remaining estate money in accounts that pay no interest so they don’t have to file form 1041 another year. I guess any bank account can pretty well guarantee that. But, it isn’t professional, nor is it the manner in which a professional Trustee would (or could) act, since it violates the trust. The trust also remains violated because the terms dictated “distribute” upon the mother’s death. Year four is coming up next week in violation of that trust term… 

The IRS Form 706 Death Tax Return, also showed a goof of over $70,000 in death taxes overpaid! Even today, the inventory is flawed, the “corrected” death certificate is flawed, and the list of mistakes fills a couple pages. The estate is now sealed with the IRS on the 706 and the southern state county probate proceedings. Sealed unless someone wants to go back and lift the rock up that is still hiding the mistakes and misdeeds that this lawyer helped the PR and Successor Trustee perpetrate against my client.

Revenge Spotlight

Which brings up the second situation that has fueled the fire on this case. Simply stated, it is JEALOUSY & REVENGE. “We Are Going To Get You!”  was spoken from the sister in control of the purse strings — to my client, as the mother lay dying in her hospital room. 

Jurisdiction was declared down south for the revised trust, GPOA, and Last Will. That begat the introduction to the bank sponsored securities brokers who took delivery of a majority of the estate money which was “ordered” south as well, from it’s Midwestern roots. The sister allowed migration of jurisdictional control and estate money, even though she was and remains a resident Successor Trustee back in the Midwest.

We also had stale IRA — RMD withdrawals, claiming life insurance proceeds with an imperfect death certificate, failure to manage the IRA properly, failure to protect the securities accounts from large losses, and improper taking of bank deposit box contents owned by my client, improper art valuations and accounting. All this mal–performance and malfeasance adds up to a nightmare estate situation caused on the most part, by bad advisors and a sister who doesn’t really seem to care how much money the bad advisors cost or how many mistakes are being made. The high priced souther state CPA started this mess by referring the deceased mother and her estate administrators to just about everybody who is an advisor and also “friend” on her Facebook account page!

The death took place almost 3 years ago, yet today the estate is still not fully settled! Money is still being held hostage because my client won’t sign a forgiveness waiver that I quote, “Covers from the beginning of time to the current time”. Of course, everybody but the Butler is included in the waiver parties now wanting exemption from liability before the final cash payment can be made to my client from the estate. 

The once large estate has dwindled down because of market risk (crash of 2008), and very expensive advisory fees (still with no billings being provided to my client for ordinary or extra-ordinary fees charged against her share). Then, you have two investment advisors on the money pulled down to the southern state — both who I found just sitting on their thumbs with the sister in charge, until we had to intervene and cry foul over a year ago. (They had made no trades from inception) By that time, additional stock market losses took even more money away from the estate beneficiaries.

Add in a whopping payment to the IRS for the estate tax due because no one advised doing annual “gifting”. Even higher Form 1041 Estate/Trust federal taxes resulted simply because the CPA and lawyer failed to coordinate DNI in the same tax year on the fiduciary return, as the year of death. That kissed 20k away alone.

But, we still aren’t done! The expensive legal battles over the large IRA cost plenty, but above all, market loss cost the most because the sister never understood her right to go to cash to protect the estate from market loss was part of her job, not to maintain her deceased mother’s investment positions for months (or years) after her death.The wasted money, energy and time to get the IRA issues straightened out was huge by all parties involved.

Even to this day, the sister serving as Successor Trustee and her lawyer doesn’t seem to understand the money manager (RIA) is not the custodian of the former failed IRA account. Or that the terms of the mediation agreement my client was forced to sign under duress have not been complied with. At least one brokerage account that was supposed to have been zeroed out and closed still had money in it 8 months after the agreement was signed! Inventories and bookkeeping entries to date, remain incorrect and inaccurate.

Lastly, my observation on this case was that the estate became a “feeding trough” forlegal malpractice add the southern advisors hired by the sister in charge, far from the clients regular home. One thing is certain — the revengeful sister in charge has the mental capacity to do better than she has. She is rated “brilliant” in IQ tests. (the whole family were/are lawyers or doctors with high IQ’s) But, as a busy medical doctor she has trusted an incompetent southern lawyer and CPA to advice and do most of the work instead. Bad work. The fiduciary duty of PR &  Successor Trustee (sister), Estate CPA, Investment Advisors and Estate lawyer, as well as my client’s former southern lawyer, has all but been forsaken in this case. Only the sister, doesn’t reside in this little STEPFORD community with their tight little group most likely looking and hoping for another large estate to feed off when they get done on this one!

Thanks to Facebook and online searches, we now know just how well connected everyone is with each other in this case. Since there is no statute of limitations for fraud, the revengeful sister with America’s worst attorney (the Lawyer from Hell/L.F.H.) at her side, doing her bidding – may yet find out that using an estate to get even, is not smart. Not smart at all…

Dunce_at_Insurance_CompanyB. DUMB INSURANCE COMPANY: “We will make an exception in your case”.

This case was settled recently. The CPA client was chief financial officer for a company and was not up on the current laws and rules regarding her mother’s inherited IRA account left to her and her four siblings. Initially, our firm was hired to help review paperwork sent to her by the insurance company.

Upon examination, it was obvious the insurance company serving as custodian of the decedent’s IRA account had sent out paperwork to my client and her siblings that would immediately tax the proceeds once the death benefit was paid out! But, it was too late for three of the siblings. They had already signed and executed the paperwork sent which meant they now get the privilege of instant taxation in tax year (2011). Perhaps if they had compared and seen the projections of how long a stretch IRA will provide income to them and their heirs, they would have made different choices. The problem was, the insurance company initially didn’t offer anything but a lump sum settlement, making if 100% taxable in the year taken.

Our firm was able to save the client and one remaining sister sibling from instant taxation by requesting alternate paperwork that set up an inherited IRA account for the benefit of the daughter (our client). Some work was necessary because the initial response was “we don’t do that here”. This was quite shocking since I am a licensed agent of this insurance company, one of the best rated and lowest cost term insurance providers in the nation! But, they are not high on the list of qualified IRA custodians. Only New York life gets mentioned by Inherited IRA expert, Natalie Choate, as a valid carrier to handle your loved ones IRA.

I found it embarrassing as a licensed agent to have to fight the company in order to obtain an exception for her. When the letter from their top legal staff stated “we will make an exception in your case”, our green light was on for executing the alternate paperwork I ordered for her (her sister I think will duplicate what we did) and it was sent in. It also included copies of paperwork “porting” the funds away from this insurance company to what Natalie Choate refers to as a “more sophisticated custodian”. 

The final result is the funds were never first placed into an insurance company product as an inherited IRA account. But, were transferred by direct rollover to a brokerage firm known as the best qualified to manage an inherited type account. We could not stop the insurance company paying the death claim on the IRA, from the moves they made. Even still, the new custodian felt everything was in order, but it left that small element of doubt for both me and the client, who as a CPA, knows the truth will be revealed when the 1099-R is issued next January.

Because of that, I had her request and she received confirmation from legal staff of this insurance company, re-assurance that the original “taxable” reporting from the first set of paperwork would be replaced in their systems with a “tax free” direct rollover coding on the 1099-R. Yet, fingers are crossed since the incompetence of the claims staff was ever present while dealing with them.

Legal recourse would be available if a taxable reporting took place on this case, because solid letters in writing were obtained by the firm on “status” prior to the transfer out and away from them ever took place. (In the Inherited IRA advisory field, this is called the “handshake”) If you would like to know the name of this company, just call me at 1-800-782-2806 and I will tell you.

The Future

This blog entry will be continued as “Roll over Beethoven – Pt. 2” in the near Real_Moron_Dilemmafuture. Some recent cases will provide more titillating stories of tax and legal malpractice. They are being published here hoping people “test” their advisors BEFORE they die with 3 million dollar estates (give or take a million describes many of my cases) to see if they really are qualified as experts.

I think my practice of Inherited IRA consulting and assisting as accountant, and constant settlement of estates in and out of trust will keep ol’ Ludwig spinning for quite some time into the future. Bad advisors, creating bad plans and bad faith, creating broken promises while purporting to be experts is the reason.

I find it really sad, the clients can’t find out while still alive, the truth about those who practice below the belt as advisors. If you don’t know, just say so! Instead, they let their client die, and then expect the heirs to still want to do business with them, even after they discover all the mistakes they made. By then, it is often too late to fend off all of the damage they caused. If your current IRA financial advisor can’t readily tell you what the words – RMD* stand for, RUN!!!!!

* RMD is the common term for “Required Minimum Distributions” that must start for any inherited or beneficiary IRA, no later than the end of the year following the year of death.

I tell clients I meet for the first time, they will never know just how good I am when they die with my Arizona professional Trust Estate Plan. But, their heirs have found out my best work is performed after losing a client. SEE MY TESTIMONIALS.

My company record for Arizona trust estate clients to date, as far as I know, is no probates, lawsuits, or prolonged squabbles resulted by using my professional legal documents! After about seventy five trust estate settlements for Arizona clients, my record allows me to print this “money where my mouth is” blog entry, hoping other advisors get a little more educated about estate planning and inherited IRA’s BEFORE they perform services for their clients. I won’t be holding my breath…

M.D. Anderson, President

Financial Strategies, Inc.

Toll free: 1-800-782-2806

Screwed Up Advisors

I-see-dumb-people


dodgeball-imageI normally always write about business related subjects on this financial services “business” blog. But today, I want to turn to a subject much more related to real life and how it affects us both personally and business wise. No, I’m not going to talk about the Anderson family cat that cries (it’s hilarious) in the middle of the night when it becomes lonesome. Nor will I give specific “internet tips” on the fix I found and performed on my wife’s BMW when the steering wheel suddenly locked up while running — just last week. (a 3/8th drill bit and precise drilling unlocked it) Those types of subjects are all good content for personal blogs and maybe someday, I will realize the need to expose my personal life to the entire population of the world…

Today, I am going to talk about Dodge Ball. Dodge Ball in junior high school taught me everything I ever needed to know about life. Playing it was not optional in my junior high school. It was like being at Custer’s last stand. Except, it was also like the “Groundhog Day” movie – it was replayed every week! Same gym class, same P.E. classmates, same red ball, same result. The sides would be chosen by the P.E. teacher and you only could hope that Jeff Swanson was on your side. I know they mixed it up for us. Sometimes it was one side versus the other. Other times, it was one on one, last “boy” standing. (Yes, I am too old to have been integrated with the girls P.E. class’s as they do today)

So, here is what I learned very early in life, from A to Z:

Adrenaline Rush: I think the first time I got one was when I saw the dodge ball coming in slow motion directly into my face. SPLAT! There was an adrenaline rush but it was too late. My old plastic gull winged glasses would go flying off and slide into the path of other scared children who often stepped on them before I cold retrieve them.

Begging: Sometimes, you would be in the gun sights of an opponent and like a deer in the headlights, you knew you were about to get hit. This is where I first learned how to beg for mercy.

Covering Up: You had to cover up when time allowed and prepare to get hit. You knew it was coming, but sometimes, you had the grace of the red rubber ball Gods to be able toDodge8 protect yourself from the blow. Covering up always seemed to help just a little with the pain that always follows getting walloped with a fast thrown dodge ball.

Diversion: Learning how to divert your wild legs pumping like a crazy person as you ran around the court trying to avoid a hit. I learned serpentine moves that most likely could still help me today, should some attacker try to hit me with a paint ball blast, or worse, a real gun.

Empathy: You always had the same kids and you learned how to feel sorry for them. But sympathy alone wasn’t the only lesson I learned. I sometimes would try to help them get away and tried to help them stay in the game longer. But sometimes, by helping, I would get hit because my attention was taken off of where the ball was.

Friends that Turn On You: When we played last man (boy) standing, yes, even your friends had to turn on you to win. They would normally leave you alone until the end, just as I would, but eventually, I learned what it was like to have your friends turn on you. The betrayal was mandated by the school leaders and P.E. teacher, so I never took it as a serious infraction.

Guarding: I’m talking about another kids’ body here! I learned I could shield from the wrath of the red ball by positioning behind slower kids that you knew would get blasted because they just couldn’t move very fast. People do the same thing when speeding on a long trip down the freeway. You get behind a car speeding hoping if any radar goes off, the guy ahead of you will get the ticket instead of you.

Hiding: An old grade school court didn’t have any place to hide. Just walls. But, lighting was varied at times when the window light would darken when clouds blocked the sunlight. I wasn’t the one hiding usually, but plenty of kids would try this approach to try and stay in the game longer. Of course, like guarding, they would hide behind each other too to shield the direct hits of the ball as long as possible.

Intimidation: I learned this technique (not really a good thing) while being forced to play Dodge Ball. There was a lot of taunting during a game and some daring as well. A ball holder would intimidate you to take off and run and then see if he could hit you. As I became a pretty good player, yes, I too would taunt and intimidate classmates. I’m not proud of being a little too cocky at times during those games…

Jiggling: Jiggling, juggling, whatever you call it, means you will be observing your physical body do things that will amaze you. You could take off south but still have parts heading north during the transition. Spastic kids really didn’t do well trying to jiggle. They would hit the floor, not from the ball, but from trying to move too fast and not having proper co-ordination to handle the moves they attempted.

Killer Instinct:  Yes, you learned the killer instinct. When the ball was in your hand and the target was directly in sight, the desire to shoot the ball as hard and as fast as you can at your target came over you. And, after a few direct hits, you started to enjoy the feeling of taking out a classmate. Sick! Sick! Sick!

Lamenting:  Yes, my cries of sorrow and grief started each time a dodge ball hit my face and bent or broke my glasses! Lamenting took place in the boy’s bathroom trying fix or tape those old gull wing glasses so they would stay on my face the rest of the day. Then, when I went home with taped up glasses, the parents lamented too because they knew a trip to the eye doctor and another bill was imminent.

Misery: I suppose there is misery in a blow or shot that kills you. Playing Dodge Ball, nobody died that I know of while playing the game in my home town junior high school. But, the direct hit to your face (and a few other body parts) felt like death for a few minutes and the word M I S E R Y was fully understood during those minutes of declining pain before you eventually became well enough to regain your composure and act like your normal bratty junior high self in front of your classmates. For the direct face shots, you could also easily pick out others that got the face shot as they walked down the halls with a big red blotch on their faces!

Navigation: Forget GPS guidance, those white Converse All Star tennis shoes were my guidance system!

Offense: Having a ball in your hands was a wonderful thing. You knew that you had power and were in charge, but you still had to be defensive the way we played, since another classmate enjoying that same feeling of power when you are in defense – could easily whack you with his ball while you are temporarily enjoying your power moment. Sadly, some kids never got to go on offense as they were too busy running around like spastic disabled kids.

Pity: At first, I learned pity for myself only. Recovering from the physical blow was equally related from having to recover from the embarrassment of being a pretty good school athlete but never being able to win a game of Dodge Ball when we went one on one. Jeff Swanson, the star athlete and one of my best friends during my school years took those honors. But, by the time I hit 9th grade, I pitied the kids who couldn’t defend or ever get the ball. Some were the smartest kids in class, but their bodies just didn’t do so well on that Dodge Ball court. I am sure they hated it worse than I… (and refused to let their kids buy any red balls ever since)

Questioning: When you are running around in defense, trying to save your life in a Dodge Ball game, you don’t have time to think much or question. But, after a couple years of forced “war” by the school system, I started to question a lot of activities we were forced to do in junior high. I questioned having to eat all your lunch, especially when it came out of great big cans and tasted like World War II rations. I questioned having to wrestle, a sport I was no good at and didn’t like at all. I questioned having to climb the thick rope up to the top of the gym roof, being scared of heights like I was from being forced to climb up the outside of a farm silo at home. I questioned the big pipes with unraveled insulation because we would hit them with our hands as we ran in and out of the boy’s gym. (not knowing the wrapping and slap exposed us to asbestos) I do believe the start of my inquisitive mind began the first time I had to play Dodge Ball.  And, that quality has served me well as an adult businessman.

Running: As a sprinter, I ran a fast 220 yard and quarter mile, making the first team in track in junior high and high school. (and getting some medals to prove it) But, it started in Dodge Ball during P.E.  In my business practice, I often will tell someone to “run” figuratively in my financial consulting. Run from shoddy salesman,  offers too good to be true, free things that aren’t really free, etc.  But, I guess I must acknowledge the physical running in multi years of forced Dodge Ball games helped build the physical skills and muscles that later aided me as an athlete. 

Stress Management: When you are in a war, stress management is automatic. But, before and after a game of Dodge Ball, you have to manage the stress of what is coming and then, what has happened to you after a game. Questions abounded and I had to learn to manage the stress. Will I break my glasses and have to explain to the parents it wasn’t my fault?  Will Jeff Swanson turn on me at the end and take his good friend out to win? Or, can I beat him this time?  It all was quite stressful, and management of the stress came early to me, thanks to Dodge Ball.

Timing: There is a time to run and a time to stand firm. A time to throw and a time to hold back. A time to cry when hit and a time to suck it in. A time to feel sorry for spastic body classmates and a time to have no sympathy on them and their useless, pathetic bodies that could not move to avoid the wrath of the red ball.  O.K., you get the hint. Timing matters and as adults, some get it right, others don’t.

Uselessness: Man’s best laid plans can end up in failure and cause disgust. Going out early in Dodge Ball (or worse – being first to go out) can cause a lowered state of self image, and cause you to question your abilities and even your future. You can end up in a “uselessness” state if you let yourself slide down the slippery slope of self pity. Feeling sorry for yourself normally =’s uselessness. Dodge Ball taught me to pick myself up off the floor of defeat and temporary uselessness, and remember. I remembered I got another chance the very next week, to do better and try harder!

Venting: Zig Ziglar used to talk a lot about the loser’s limp. Sabatoging your success by doing things that will cause your failure. I never understood it better than while playing Dodge Ball. Some days, I just didn’t want to be victorious and let the red ball of death hit me early on in a game. But that wasn’t venting. Venting can go positive or negative, but it is necessary. Locker room venting from victorious players was laced with bragging and laughing at certain “hits” that caused a bad day for some of the players. And, sometimes those same boys were standing there naked in the showers having to listen to the verbal abuse that came after their “gladiator” experience they had to endure out in the Dodge Ball arena. But, sometimes, you would hear the defeated and hurting players venting too and it was good. When you get blasted in the face with a 800 mph red rubber ball, you can feel sorry for yourself or you can laugh it off and let it go. Proper venting helps you show up in the next class with no big mental problem, even if you are wearing the scarlet mark of the red ball for the rest of the school day. It would be undeniably displayed by all the broken blood vessels the ball caused!

Workmanship: When we played team against team, they tried to make it fair so you didn’t have an extraordinary number of lame players who couldn’t run, dodge, or throw the ball.Dodge4 So, you learned to work with your team no matter what. You protected the less fortunate when you could. You gave them the ball sometimes so they could experience the thrill of being the “Hunter” and not just the “Hunted”. Workmanship was learned while running around like a crazy person with multiple red balls flying by your body like guided missiles. It was a good lesson to learn how to stick together and block. We tried V formations, line formations, multi formations. War is something you learn fast in how to play the game!

Xanthic Skin: After a few good hits, I still remember the yellow skin bruises that always came later after getting whacked hard by that red ball!

Yelling: My vocal chords never developed to the point of being able to carry a tune. But yelling was magnified on the Dodge Ball court from my earlier lessons from certain Anderson family members who seemed to like to yell a lot. And of course, while I was doing my chores on the family farm at a very young age, there was yelling at the farm animals when they didn’t do what you wanted them to do. And sometimes, amongst siblings and parents. But, the yelling that takes place on a junior high Dodge Ball court gives you a degree in perfecting your vocal chords. Who knows, you might slide off a tall bridge in a winter storm and be stuck in your car below. Being a former Dodge Ball player just might save your life!

Zero In: All the other lessons learned playing Dodge Ball as a youngster are important for the most part, to my adult life that followed. But, when you have the ball in your hand and you learn to zero in on your target to anticipate a direct hit, while still protecting your flanks and rear from someone else perhaps zeroing in on you to take you out, you reach that point of harmony and strength, that special place, where you know this is “As good as it gets!”  And that is when you take the shot. Hit or miss, you take the shot.  Zeroing in and not delaying taking the shot in business has served me well. I don’t always hit the mark. But when I do, it is because I focused and wasn’t afraid to try.

Dodge Ball, I guess playing the game was a necessary part of learning and I thank you for what you taught me.

  

M.D. Anderson, AZCLDP

 
 
 
 
 
 
 
 
 
 
 

Dodge6Dodge2
 
 
 
 
 
 
 
 
 
 
 

 


Dont Trust the Ball HolderIn other words, the old law from 2001 still kicks in again in 2013 with a $1,000,000 estate exemption limit per spouse, and that is based on having the proper legal documents that actually properly use the double exemption of both spouse’s to exempt the first $2,000,000, starting January 1st, 2013!  Just as the one year exemption is a “play” that most likely won’t be used from the government play book any time soon. (2010 estate owners that died, now have their choice to elect “unlimited” status regarding estate tax, but restrictions on tax “basis” on appreciated assets, or $5,000,000 estate tax exemptions with better tax treatment of appreciated assets) This two-year special “deal” everyone is frothing about as a great law, will pass by too very quickly. And with all the stuff that is due to hit the fan in the next two years, most likely is on the back burner again in Washington, and the burner is on “off”.  Hopefully, all of you reading this will still be here in two years. But surviving the next two years means the party is also over for big exemption amounts. That is without a needed amendment to make the temporary provisions regarding the estate tax – permanent. And, with cuts everywhere from national down to city governments — just how willing will Congress be willing to extend big breaks to the “rich” in a few years?

The law that alters previous laws by amendment, and  in a last-minute  political “band-aid” session last December, was meant to avoid the fact that we need more to count on as estate planners trying to do the best job for our clients. Even the official authenticated entry of H.R. 4853 in the GPO: Begun and held at the City of Washington on Tuesday, the fifth of January, two thousand tenmay be the Omen to warn us – temporary law can’t be taken serious. The bill was first introduced in the House March 16th, 2010. I know it’s easy to write the wrong year early in January. But, the official registrar can’t get the year right?  

I’m not the only one that feels the way I do about our temporary estate laws. Howard M. Zaritsky, a Rapidan, Va. estate planning expert who advises other lawyers in the field, says he’s telling practitioners not to base estate plans on portability until it become permanent. I quote his quote from Forbes magazine: “Congress has shown propensity for surprising us with both bad decisions and good ones, and you just cannot plan on Congress doing the expected or the right thing.”

This time around, the sunset clause comes back and is identical to the one  we thought would hit us in 2011. The only difference is that they moved the chains two years in advance, and raised the prior exempt estate limit of $3,500,000 (that applied only to 2009 deaths) to a temporary $ 5,000,000 exempt limit for 2011 and 2012 deaths only.

If you can plan on certain death, (I’m sorry to hear that), the only positive in your situation is that your terminal medical condition will allow the majority if not all of your estate to pass to your heirs tax-free now. That is unless you have more money than Howard Hughes did. The tax rate was lowered in this temporary amended law, to a flat 35% for the assets over $ 5,000,000. In 2013, the chains revert back to the $1,000,000 yard line, a huge penalty! 

And as I have said in a prior 2010 blog entry, the risk of having your children “help” you use the temporary law (obviously only a child demented) by the deadline will also come back December, 2012. Forget about predictions of the end of the world (it won’t happen) in December 2012. If you are still here and have really greedy dastardly heirs (or that demented child aforementioned), then be careful where they take you or of being isolated too much that last month when these higher limits apply and then suddenly run out at midnight. Seriously! One must wonder with these sudden “drops” in taxable estate assets programmed into the estate tax laws — is Stephen King secretly consulting with Congress?

Now, if you are married, the same marital exemption applies to your spouse in the amount of $5,000,000. That gives up to 10 million exempt assets if you can check out of life’s hotel, together before the midnight deadline I have already quoted.(I hope you understand I am not serious on this point) 

 The second most important portion of the 2010 law, at first glance, would appear to be a great new law provision. But, it won’t be around long enough, without further legislation, to help most families. Unlike any past estate tax law in this country, it gives a new “portability” feature we never had before.

Starting this year and through 2012, any unused portion of your $ 5,000,000 valued estate exemption on the first death you don’t use, will now carry forward to your spouse who dies last, as long as he or she also dies by December 31st, 11:59:59 PM. In other words, the odds are against you — to orchestrate joint deaths in such a tight time sequence, to ever trust these new provisions will be of much help for you. (Joint accidental deaths would be most likely)

You could compare it to the spousal rollover rules that apply to IRA accounts between married couples. The taxation of the funds is delayed until the second death if “rolled over” into the surviving spouses’ name at death – but never is the tax eliminated.

Though the portability clause is forward thinking, nothing guarantees in the current law you will ever get to use it even if something happened to you in the next two years. Your spouse too has to use it or lose it!  And, if your lawyer tells you to count on it, please give me a call as I have some ocean front property here in Arizona I would like to sell too!  Any financial advisor telling you to ditch your bypass trust setup needs to be recorded and documented for later use, just in case I am right. (Lucy pulls the football) 

Also, if your trusted legal advisor also is “sure” the portability clause in this patched up new law will be around as long as you are, kindly ask for a signed and notarized statement with proof of bond or errors and omissions insurance in force, as no one can make that guarantee!

The bottom line: Do you see Lucy pretty well itching to pull the football on you when you really do die?  I am afraid Lucy is the government and do you really trust Congress to do everything in the future, in your best interests? 

Thank goodness, the new law did permanently fix a problem with last years’ stepped up tax basis valuation rules. New provisions now reverse the damage from last year’s alternative capital asset valuation law that would have failed to allow full stepped up basis on appreciated capital assets over certain limits.  (when the federal estate tax was on a one year hiatus and a one year alternative law applied to taxation of appreciated capital estate assets)  So, there was some good from the previous bad law, that did came out of last month’s session. 

I am sure CPA’s and other estate accountants will enjoy all the fees the alternative capital appreciation tax laws caused in trying to properly value estate assets for future deaths of surviving spouses, when they lost their spouse last year. Some heir’s were facing eventual capital gains taxation on any assets over $1,300,000, until the change was made.

Also, assuming I convince some to keep their estate splitting strategies (kind of automatic in community property states), and also keep the bypass trusts in force, the improper use of A/B or A/B/C funding is a constant problem with the wrong formulas and wording.  

I have noticed this year after year, from the many wills and trusts I have read through when clients hire my certified legal document services. Trust and will provisions can quickly became out of date with lame solutions coming out of Washington lately. And, if you can’t guarantee your use of these short two-year provisions, (meaning your death/s are not imminent), then you better review and find out what your legal documents really say. 

The use of wording such as “the maximum current exempt assets”  that will pass federal estate tax-free, in your current estate plan documents could render your original plan to split the estate at the first death (if married), useless. No bypass funding will take place if you don’t write a concise funding formula, if one of you passes away in the next two years. Then, you could expose the kids or heirs to the tax rates and low limits that applied a decade ago! 

Lucy could slip that ball out on you at the last minute, when you kick the bucket (football) and you could fall down hard with a screwed up estate plan mess, and a big tax bill! Anything valued then over $1,000,000 and a starting 41% tax rate will give your kids a great appreciation of wishing they had written an estate plan that though complicated, covered the contingencies so many legal advisors gloss over. (failed trusts are great income generation vehicles for law firms)

As soon as January 1, 2013, there could be hell to pay for not listening to the experts now calling for “caution” in over-reliance on these new provisions. It takes cerebral work, to get it right for the future. (which is now less than two years away I must remind you of).  A custom convertible trust option should be created that allows any estate to properly be funded with as many tax saving or deferral sub-trusts (that is those A or A/B or A/B/C letters you may now have in your current trust), so that the law at the time of your death is applied and the solution necessary then to avoid or pay the lowest estate tax then, is properly applied and used.

It is not work for simple trust writers or simple thinkers. But, it is obtainable if you find a smart lawyer or estate document service with extreme knowledge and experience in these matters. With intelligent thinking and design, your outdated trust provisions can be fixed and corrected to allow the best chance to win the estate planning game.

Lastly, there are some opportunities in the new law, such as the ability to use your lifetime credits (gift and estate) to just give away a major portion of your estate direct to your kids or your other heirs. In other words, if you have $5,000,000 each, just liquidate and write out checks over the next two years to your beneficiaries. This way, you can be completely entertained in watching them spend your hard-earned money while you are still alive!

Seriously, bypass trusts protect heirs from themselves, bad marriages, lawsuits, and that Uncle you have and don’t trust… I think his name is SamNow is the time to look at the playbook again, and dig out your documents for a review. If you need some help here in Arizona, please give me a call, or send me an e-mail, if you want the proper wording in your amended (or new) revocable living trust. 

Lucy (Washington) still holds the estate tax football that will be used for your final game in life. Be aware and plan accordingly, for a sudden “pull” of the ball, at the last minute. It’s almost a sure fact! Smart moves can be made now, to anticipate Lucy and any future “bad” law coming next. The whistle is blowing….Let’s Play ball!

M.D. Anderson, AZCLDP 

Read More About It: Planning For A Disappearing Estate Tax Break by Deborah L. Jacobs / Forbes. com

Now, enjoy Lucy tricking Charlie Brown one more time…