At the Dana Law Firm, we strive to provide the best legal services possible to our clients and those related to the matters we are handling.  Recently, however, we made a mistake that resulted in an estate distribution being sent to an animal shelter with the same name as the intended beneficiary.  The check was supposed to have been sent to the Friends of Collinsville Animal Shelter in Collinsville, Illinois, but it was accidently sent to the Friends of Collinsville Animal Shelter located in Collinsville, Oklahoma.

As soon as we were made aware of the mistake, we contacted the shelter in Oklahoma and notified them of the error.  After confirming that they were not the intended beneficiary, the Oklahoma shelter stated that they would return the funds so that they could be delivered to the proper shelter.  While we understand how difficult it must have been for the shelter in Oklahoma to return the funds, our responsibility is to make sure that the money ends up in the right hands. 

We feel devastated to have disappointed an organization that does so much good for their community, and apologize to our friends in Oklahoma.  We are grateful to them for cooperating and doing the right thing in a very difficult situation.  As a sign of our appreciation and in recognition of the valuable services they provide, we have agreed to donate our legal fees in this case to the shelter in Oklahoma.

We also hope that the generosity of our client who left her estate to charity does not get overlooked in this situation.  We are privileged to work with clients that want to do good with whatever wealth they have accumulated during their lives.  We are committed to making sure that mistakes like this one do not happen again, and commit ourselves to delivering top-notch legal services to our clients.

The Justice Department announced a few days ago that it had obtained a “John Doe Summons” to serve on Wells Fargo Bank requiring Wells Fargo to disclose all customers who may have transferred money to or through the Canadian Imperial Bank of Commerce First Caribbean International Bank (FCIB) through the FCIB’s correspondent account with Wells Fargo. A correspondent account is a bank deposit account maintained by one bank for another bank, in this case FCIB. The summons allows the IRS to identify individuals who have accounts with the FCIB. As reported by the Wall Street Journal, the IRS learned of Wells Fargo’s involvement through the voluntary disclosures of taxpayers taking advantage of the IRS’ voluntary disclosure program (1). Since 2009, the IRS has netted $5.5 billion in additional revenue through its voluntary disclosure program(2). With each disclosure, the IRS learns more about where people are hiding their assets and how they are getting them there. If you have offshore bank accounts or other foreign assets that have not been disclosed to the IRS, contact the trusted tax attorneys of the Dana Law Firm to discuss your options, before the IRS finds you.

Written by: Shad Brown, Attorney at Dana Law Firm

¹ See http://online.wsj.com/article/SB10001424127887324482504578454913783585002.html

² See http://www.azcentral.com/news/politics/free/20130427tax-cheats-amnesty-program-irs-gao.html

On our weekly radio show this morning, Matt Dana, Rilus Dana, and I had a great discussion on what we’re calling our “Squeeze, Freeze, and Sneeze” Strategy.  You won’t actually find those terms laid out like that in the tax code, but it summarizes a combination of several techniques that we use when working with our clients in trying to minimize the death taxes that will be paid to the IRS when someone passes away.   Here’s a brief summary of the strategy, and to hear more, go to our “Archived Radio Show” page and listen to our discussion:

Squeeze – using a Family Limited Partnership (FLP) we are able to “squeeze” the value of an estate, reducing or eliminating the amount of death tax.  For example, if a client has a $10,000,000 estate, we can create a FLP and look the IRS directly in the eye and tell them that the estate is worth only $7,000,000.  This strategy alone could save the family $1,200,000 in death taxes.

Freeze – once the estate has been squeezed by the FLP, we “freeze” the value for death tax purposes, meaning that all of the appreciation and growth of the assets after we create the FLP is not subject to death tax.  This is accomplished by using techniques such as gifts to certain trusts and/or installment sales of FLP interests.

Sneeze – if the IRS doesn’t agree with the tax savings accomplished through the squeeze and freeze, we “sneeze” right in their face and remove any incentive for them to audit the estate tax return.  We do this by including a provision in the estate plan that says that any increase in the estate due to an IRS audit doesn’t result in additional taxes paid to the IRS, but instead results in a gift to charitable organization of the client’s choice.  Since the IRS has nothing to gain from an audit, they’ll likely not spend much time with our client’s estate tax return, and focus efforts on other issues that will result in increased tax revenues.

While we like the simplicity and silliness of “Squeeze, Freeze, and Sneeze,” the actual strategies are very technical and complicated, and should not be attempted without qualified legal representation.  To discuss these strategies in more detail, give us a call at 480-515-3716 and set up an appointment with one of our Tax Nerds.

Written by Attorney Trevor Whiting

A week ago, just as tax return preparers were finishing up tax returns for their clients and scrambling to get everything filed in time for the April 15 deadline, Pres. Obama released his 2014 budget proposals, which, as expected, included several tax increases related to the estate, gift, and generation-skipping transfer (GST) taxes.  Less than four months after signing the last-minute, fiscal-cliff saving, new tax laws, Pres. Obama is proposing drastic changes.  Remember, the American Taxpayer Relief Act of 2012 (“ATRA”), which was actually signed on January 1, 2013, made “permanent” changes to the transfer tax system because it removed any built-in “sunset” provisions for the new tax laws.  As we can see, though, Pres. Obama considers “one year” about as “permanent” as he likes for the estate, gift, and GST taxes.

The main proposal related to our area of practice is Pres. Obama’s desire to increase transfer taxes by reducing the estate, gift, and GST exemptions from the current $5.25 million (indexed for inflation) and increasing the tax rate on those transfers.  Pres. Obama wants the tax laws to revert to what they were in 2009 with an estate and GST exemption of $3.5 million, a lifetime gift exemption of $1 million, and a transfer tax rate of 45% (up from today’s “permanent” rate of 40%).  There would be no index for inflation, so those levels would become even more onerous as time goes on.

In addition to wanting to increase these taxes, Pres. Obama’s proposals would also curtail several of the strategies we currently use for many of our clients, such as grantor trusts, dynasty trusts, and grantor retained annuity trusts (GRATs).  His proposals would mostly come into effect only after new legislation has been passed, meaning that any planning done before his proposals are enacted would be “grandfathered” under the old rules.  So, if you want to discuss strategies to reduce potential estate tax liabilities for your family, it is better to act sooner, rather than later, because “permanent” might not last forever.  Give us a call at the Dana Law Firm at 480-515-3716 to schedule a free consultation with one of our attorneys.

Written by Attorney Trevor Whiting

It has come to our attention through several of our clients that there is a new scam going out to residents in Maricopa County. Here is what is happening: when clients refinance, transfer property to their Revocable Trust, or sale a property, these documents become public record. Some companies try to take advantage of these transaction by trying to make you think you need to order an additional “Grant Deed”. Click here to see the form that is being mailed out.

Please  be advised that any correspondence coming from our law firm, our attorneys, or our paralegals will be on Dana Law Firm letterhead. If you receive any paperwork that you are unsure of, especially if it has to do with your Revocable Trust, Last Will and Testament or any properties you own, please contact our office. We do not want you to fall victim to one of these scams and we especially do not want you to pay for any unnecessary documents.  For any questions please call our office at 480-515-3716.

My wife Nancy and I got to fly with the Phoenix Suns Team on their private plane to Los Angeles yesterday for their game versus the Clippers.  Although it was another tough loss for the Suns, Nancy and I enjoyed the trip tremendously.  It was a fantastic experience to see life inside of the NBA.  We got to know Robert and Penny Sarver much better.  They are much more personable in private than they are in public.  It was good to see his one on one contact with the players getting on and off of the plane, not to mention all of the poker games in flight.  Jared Dudley is still our favorite player.  He is so friendly and nice.  Tim Kempton was asking Nancy if she brought her caramels like she did last time.  Even the phoenix suns know and love Nancy’s caramels.