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

S Corporation owners who are service providers often take a low salary so that they can receive most of the firm's profits as a dividend, avoiding payroll taxes.  When the salary is unreasonably low, or there are no other fee generating employees of the firm, doing so is particularly questionable.  In the December 2010 Watson case, a CPA, whom you think would know better, was busted by the IRS for this practice.  Mr. Watson took a salary of just $24,000 in a year in which his share of the profits was over $200,000.  The U.S. District Court for the Southern District of Iowa ruled for the IRS and held that the compensation was unreasonably low and the dividends were properly reclassified as salary and subjected to payroll taxes.

To be safe, make sure you set a salary comparable to what someone in a comparable position would get, and if you you have no employees who are also bringing in fees, take virtually all of your net income as a salary.  This will help keep in the IRS away, and let you contribute more to your retirement account, as your earned income will be much higher.

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I have previously blogged about IRA Trusts, which are one of my favorite estate planning tools.  This afternoon I presented a 90 minute national continuing legal education teleconference and webinar on the topic.  It was my fourth presentation this week!  I'm thinking about becoming a professional speaker and giving up actually practicing law.  (That's not really true, but I have really come to enjoy helping to educate others).

For those who want an analysis of why and when IRA trusts make sense, an overview of the IRA Required Minimum Distribution rules, and an explanation of the tax issues involved, I offer the manuscript here for the benefit of my readers.

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It's Friday the 13th, and I've been at the University of Miami School of Law's Heckerling Institute on Estate Planning all week.  This morning there was some discussion on the future for estate planning attorneys.  While online documents may have some limited utility, some  feel that online software can take care of all their estate planning related legal needs.  I beg to differ.  Here are 13 reasons why a flesh and blood lawyer beats a computer program any day - a lawyer can:

1. Listen to your goals and desires and incorporate them into your plan.
2. Offer advice, not just words on paper.
3. Help with referrals to other trusted professionals.
4. Make sure that the documents are properly executed.
5. Make sure that any trusts are properly funded.
6. Make sure that beneficiary designations are properly completed.
7. Make sure that accounts and real estate are  properly titled.
8. Help with managing assets of incapacitated family members.
9. Help with probate and trust administration.
10. Help with income, gift and estate tax matters.
11. Help ensure governmental benefits for disabled or incapacitated family members.
12. Serve as an advocate in dealing with financial institution and governmental bodies.
13. Care about you and your family!

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Effective January 1, 2012, North Carolina has added a couple of new court costs in estate matters:

1. Will Caveats (will contests) - a $200 filing fee.
2. Reopened Estates - a filing fee of 40 cents per $100 of property in the reopened estate.  The maximum cumulative fee for estates is $6,000.

These are on top of increased filing fees for estates that took effect last year.  As fees to continue to rise, avoiding probate with living trusts and other planning will save even more money.

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