North Carolina Estate Planning Blog : North Carolina Estate Planning Lawyer & Attorney : Trust Counsel, PA : Trust Administration : Serving Chapel Hill, Durham, Raleigh, Pittsboro, Orange County, Chatham County

The IRS is increasing its efforts to track  down American taxpayers who have undeclared foreign bank accounts  (including US citizens living abroad). The Department of Justice indicted a UBS  AG senior executive on November 12, alleging tax fraud.  The indictment expressly alleges that a number of the approximately 20,000  American taxpayers who allegedly profited from the alleged tax  fraud scheme are co-conspirators.

If you have any foreign bank  accounts, you need to make sure that you are in compliance. See the newly designed IRS Form TDF 90-22.1 (to be used after Dec 31, 2008). Disclosure of foreign bank accounts with an aggregate value of more than US $10,000  is mandatory. Civil and criminal penalties, including in certain circumstances a fine of up to $500,000 and imprisonment of up to five years, are provided for failure to file a report, supply information, or for filing a false or fraudulent report.

 

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The Internal Revenue Service has issued the 2009 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2009, the standard mileage rates for the use of a car (also vans, pickups, or panel trucks) will be:

• 55 cents per mile for business miles driven
• 24 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

Revenue Procedure 2008-72

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A recorded version of the National Academy of Elder Law Attorneys (NAELA)'s public webcast "Aging in America: How to Plan for it" is available for  through November 30 on the NAELA website. During the one-hour program, AARP and NAELA officials discuss talking with one's parents about aging, family issues in elder care, healthcare decision making, long term care insurance, reverse mortgages and more.

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Contrary to what many of my clients assume, legal fees for general estate planning are not deductible for income tax purposes.  Estate planning fees are only deductible to the extent that they represent income, gift, or estate tax planning or advice. Wong, Tax Court Memo 1989-683. 

For a relatively sophisticated plan involving credit-shelter and marital trusts, the deductible portion of the fee may be about 50% at most.  The deduction is a miscellaneous itemized deduction, meaning it is subject to the two percent (of adjusted gross income) floor.  IRC Section 67.

The effect of the 2% floor is that most people who pay for tax planning, who are generally high-income, do not get the benefit of the deduction.

Legal fees for business-related legal advice and services are deductible by the business. However, It is not proper to for a self-employed person to pay for their personal estate planning out of his or her business in order to get a deduction.

In any event, make sure you talk to your estate attorney and CPA to ensure that any deduction you take is lawful.

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The Housing and Economic Recovery Act of 2008 more than doubled the home value (now up to $417,000) to be used nationwide for establishing the size of loans available from the federal reverse mortgage program.  Loan origination fees were also lowered.

A reverse mortgage allows persons over age 62 to get lines of credit or cash payments based on the equity in their homes. Repayment is not required as long as borrowers remain in their homes.  Reasons for obtaining a reverse mortgage include paying off an existing mortgage, paying property taxes and getting cash to pay for daily living expenses.

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The National Academy of Elder Law Attorneys  (NAELA) has unveiled its new Senior Housing Locator powered by SNAPforSeniors®, an online navigational tool designed to help easily find senior housing anywhere in the country.

Users can search a database of more than 60,000 senior housing communities, including listings for all licensed senior housing in the U.S. Searches can be conducted by city, county, ZIP code, community name, etc., and can be refined by criteria such as desired care services, payment options, and lifestyle amenities.

According to SNAPforSeniors, there are 247 different senior housing license types across the country and new license types are emerging each year. The NAELA Senior Housing Locator offers definitions for each type.

The site also provides users with a simple way to check how nursing home and rehab communities compare in inspection reports. The listings of all Medicare Certified facilities include a link which takes users directly to each facility’s Nursing Home Compare Report page on medicare.gov, bypassing 7-10 clicks through other pages to find the page desired.

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A recent article on Obama's tax plan:  How Obama's Tax Plan Could Affect You

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Our top rate is now 7.75%, just slightly under Idaho's top rate of 7.8%.  Even New York has a lower top rate.  Before our top rate of 8.25% expired, we were tied for 9th place with Hawaii.

The top 10 States (including Washington D.C.):

1. CA - 10.3%
2. RI - 9.9%
3. VT - 9.5%
4. OR - 9.0%
5. IA - 8.98%
6. NJ - 8.97%
7. ME - 8.5%
8. DC - 8.5%
9. HI - 8.25%
10.  ID - 7.8%

As for our lowest rate of 6% - we are the highest in the United States!  That's right - number one.  No State has a higher lowest income tax rate than North Carolina.

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Here's a recent comprehensive report from the Urban-Brookings Tax Policy Center entitled Back from the Grave: Revenue and Distributional Effects of Reforming the Federal Estate Tax.  An outline of the presidential candidates' and other recent proposals for reform is contained in Table 11 on page 20.

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