California Property of Deceased Overseas Owner Affected by Probate Code of Foreign Country

As a melting-pot state with many ties to Asia and Latin America, it is a fairly common for property in California to be owned by a foreign company or individual.

If a deceased citizen of another country owned property in the United States at the time of death, the probate codes of the deceased’s native country apply to that person’s estate, in addition to California Probate Code being applicable – even if the surviving spouse and children are American citizens who live stateside.

We recently encountered a situation in which a Taiwanese resident, who recently passed away, had purchased property in California for a daughter who was attending school in the state. The Taiwanese parent in this case did not have a will, which meant the house in California was part of the parent’s intestate estate.

As we discussed on a recent edition of our weekly radio and web broadcast on KDOW 1220 AMWealth Management and You with Connie Yi, we were instructed by the court to research and understand the probate laws of the foreign country with jurisdiction, in this case Taiwan, to ensure the distribution of the assets in the estate is correct according to that country’s laws.

Avoid Probate and Affects of Foreign Laws with Living Trust

In similar cases that might involve the surviving spouse of a foreign resident and the couple’s community property in California, we would probably consider the option of filing a  spousal petition, as way of avoiding probate, but the petition would need to adhere to the laws of the deceased’s homeland.

A way to avoid dealing with foreign inheritance laws is to put real estate and other assets into a living trust. If the property has been properly placed in the trust, then its distribution will be according to California laws.

In many cases we encounter, proper estate planning was avoided, because parents don’t like to talk about this subject. Unfortunately, their children are left to deal with the time, expense, and hassle of settling the estate when the inevitable occurs.

The specific details of a will override default inheritance laws. If you do not want local and/or foreign probate codes to eventually dictate the division of your estate, you merely need to create a valid will that clearly indicates your intent.

Probate Codes in California and Abroad

During this broadcast we also discussed the rights of a surviving spouse and other family members, in California, as well as in a few other countries.

In California, a community property state, the probate code indicates that by default, a surviving spouse with children retains his or her 50% share of all community property, plus he or she, as a legal partner, inherits 50% of the remaining community property.

In this type of default situation, the surviving spouse receives 75% of the deceased’s estate. Children frequently will turn over their 25% interest to the remaining parent, so that the title of the property lists just the surviving spouse.

Probate Code in France

In France, the number of children from a marriage is taken into account when the estate is divided among the family members. The surviving spouse receives only 25% of the community property by default, with the remaining 75% evenly divided among the children.

However, the surviving spouse also receives statutory “life estate” rights to live in the house or to temporarily lease it, but cannot force the children to sell their 75% interest in the property.

Probate Code in Italy

In Italy, the deceased’s “immediate family” members are entitled to a share of the estate, with the number of children from the marriage affecting the share of the estate some beneficiaries receive.

If there is only one child, the surviving spouse receives one-third of the estate and the child receives one-third. The remaining 33% of the community property is divided among the other members of the immediate family, which could include the parents and siblings of the deceased.

If the marriage produced multiple children, the surviving spouse receives 25% of the estate, the children collectively receive and equally divide 50% of the estate, and the immediate family members receive the remaining 25%.

Probate Code in Singapore & Taiwan

In Singapore, the country to which Facebook co-founder Eduardo Saverin recently moved after he denounced his U.S. citizenship, to avoid capital gains taxes on his IPO windfall, the surviving spouse splits the community property 50/50 with the children.

Singapore’s Intestate Succession Act, which governs the distribution of the estates of those who die without a valid will, does not apply to Muslims.

In Taiwan, the surviving spouse receives a share of the estate that is equal to each child’s share. However, the children also inherit the parent’s debt, unless they go through the legal process to formally disinherit the debt.

Probate Code in India & Indiana

In India, where the fundamental rights are different for Hindus and Muslims, each family’s estate is governed by the rules of their sect, which is a similar situation as in Singapore.

In the state of Indiana, where we studied and are also licensed to practice law, when no will is left by the deceased, the percentage of the estate received by a surviving spouse is adjusted according to several factors.

The intestate succession factors in Indiana include whether or not there are any children with the surviving spouse, whether there are children from a previous marriage, and whether or not either or both of the deceased’s parents are alive at the time of death.

Tragically, Timing is Everything in Family Accidents

In tragic situations where both spouses in a marriage die as a result of the same accident – or worse, parent(s) and child(ren) are fatally involved – the time of the legal declaration of death can play a significant role in determining the succession of property and the division of the estates, especially if wills do not exist for all of the deceased.

Foreign Probate Codes Affect Californians

Another example of how foreign probate codes affect us in California, we recently received a phone call from a widow in the Bay area, an American who had married an Italian, because her late husband’s sister in Italy was inquiring about a share of the brother’s estate.

Go to Radio Show Podcast ArchiveThe sister’s inquiry was based on Italian law and the long-standing customs of her family, so even though the request seemed unusual to the widow, it was normal behavior to Italian family members.

If you have questions or concerns about any of the topics mentioned above and would like a free consultation with Connie Yi, a California estate planning attorney, please contact us. We have four conveniently located offices around the Bay area: San Francisco, San Mateo, San Jose, and Pleasanton.

Posted in Estate Planning, Overseas Assets, Probate, Trusts & Estates | Tagged , , , , , , , , , , , , , , , , , , | Leave a comment

Should a CPA be an Estate Trustee for a Client?

We recently encountered a situation in which a successful businessman, who had accumulated significant wealth during his career, felt he was a danger to himself, because he was an alcoholic and he had a couple of car crashes while driving drunk. He was afraid he would eventually hurt someone and lose his wealth in a lawsuit, so to protect his estate he wanted to move his assets into an irrevocable trust and sign away his power of attorney.

The businessman also wanted his long-time trusted Certified Public Accountant to oversee implementation of the process, which would ultimately prevent him from writing checks from his own bank account or making decisions about his wealth management.

The CPA volunteered to become the trustee of his client’s irrevocable trust. Is that a good idea? We discussed this on a recent edition of our  weekly radio and web broadcast on KDOW 1220 AM, Wealth Management and You with Connie Yi.

Our concern about a family’s CPA becoming a trustee for the client is about whether or not the accountant should take on another important role for the family and deal even more closely with the family members on two sides of their financial equation.

Will the CPA be able to properly meet the responsibilities of both positions, without becoming involved in a conflict of interest?

In some cases, a child becomes the trustee of a parent’s estate, while also being a beneficiary of the estate with siblings or other family members. This is another situation where a conflict of interest can arise, so careful consideration should be given before a beneficiary assumes dual roles of that nature.

Duties of an Estate Trustee

The legal responsibilities of a trustee, for which an appropriate fee can be charged, include:

  • Administer the Trust – legal filings, estate inventory, communications with beneficiaries of intentions and actions regarding asset management
  • Loyalty to Beneficiaries – manage the trust as a CEO would manage a corporation to maximize profits; failure to do so is a breach of fiduciary duty and responsibility
  • Impartiality – remain fair to all beneficiaries regardless of an interest in the trust, a relationship to the deceased, or personal feelings toward an individual beneficiary
  • Avoid Conflicts of Interest – remain objective and impartial, especially if the trustee is also a beneficiary or has other business interests or personal relationships with beneficiaries

Trustee is Like a Corporate CEO

The major responsibility of a trustee is to maintain the estate and not lose any of the principle amount of wealth in the trust.

Go to Radio Show Podcast ArchiveA trustee in California must invest within the established legal guidelines for a  prudent investor and can be liable for losses if investments fall outside of the guidelines.

If you have questions or concerns about any of the topics mentioned above and would like a free consultation with Connie Yi, a California estate planning attorney, please contact us. We have four conveniently located offices around the Bay area: San Francisco, San Mateo, San Jose, and Pleasanton.

Posted in Asset Protection, California Trust Law, Estate Planning, Trust Administration, Trusts & Estates | Tagged , , , , , , , , , , , , | Leave a comment

Real Estate Property Transfers In California: Reasons, Methods and Issues

Even though the number of home sales has diminished in recent years, many people are still transferring real estate property for a variety of reasons. The most common type of property transfer is for a parent who transfers the title of a house to one or more children.

We recently discussed the ins and outs of real estate property transfers during our weekly radio and web broadcast on KDOW 1220 AMWealth Management and You with Connie Yi.

Reasons to Transfer Ownership of Property

Many reasons exist to transfer property. When refinancing a home, lenders sometimes require that a specific person either be included or removed from the property title.

Other reasons people transfer property include wealth management, to reduce taxes, and asset protection, to eliminate other types of liabilities, such as investors who can only finance a maximum of 10 homes through Fannie Mae, despite the current attractiveness of low-priced property as an investment.

Ownership by married couples allows for financing more properties, but future circumstance, such as divorce, may complicate matters later on, because in community property states like California a spouse has rights to property regardless of whose name is on the title.

When Unmarried Couples Share Ownership of Property

Unmarried couples also frequently buy a house together and then transfer the title to just one of the partners when the personal relationship ends.

In some cases like this, one partner wants to remain in the house and buy out the other partner, but the property is underwater, like so many other homes across the nation. In this type of case, the best option might be to sell the property for whatever is possible and both people split the loss.

Go to Radio Show Podcast ArchiveNaturally, in personal relationships, promises and agreements are often made about the future between partners, including to sell a share of a property to the other in a worst-case scenario. However, unless a property agreement is written and signed, it is not enforceable.

In short, verbal agreements do not hold-up in court, so a commitment about real estate property has to be in writing for it to be legal.

Placing a property in a living trust helps to avoid the complications of transferring it to a co-owner upon death.

Transferring Property from Parents to Children

As mentioned above, parents frequently transfer ownership of their house to their children for a variety of reasons, including to help obtain refinancing, if they are retired and cannot show sufficient income to justify the loan.

To avoid a large gift tax, children are sometimes added to a real estate title, but if the parents paid a low price for the property long ago, the issue of capital gains tax may need to be considered.

A potential property tax increase should also be considered, if you are transferring property to family members. When you consider and calculate all of the underlying facts and figures, what appears on the surface to be the best method to transfer property to a family member may not actually be the most sound long-term financial strategy.

During our radio show broadcast, we discussed several issues associated with transferring property from parents to children, including:

  • Placing property in a trust
  • Recovering medical benefits of a parent who dies before using all of them
  • Property tax assessments and step-ups related to original purchase price versus current fair market value
  • The differences in probate court between community property with the right-of-survivorship, a joint tenancy title, and a tenancy-in-common title
  • Spousal petitions

For more about these sub-topics, you can listen to a podcast of this show by streaming or downloading the MP3 audio file in our podcast archive.

Avoid Probate Court Whenever Possible

We always try to avoid probate court at all costs. Recent budgets cuts for municipal services in many cities have slashed the hours of operation for non-essential courtrooms, so it can take longer than ever to process an estate through probate, which is another good reason to create an estate plan.

If you have questions or concerns about any of the topics mentioned above and would like a free consultation with Connie Yi, a California estate planning attorney, please contact us. We have four conveniently located offices around the Bay area: San Francisco, San Mateo, San Jose, and Pleasanton.

Posted in California Real Estate Law, Estate Tax, Gift Tax, Residential Real Estate, Tax Law, Uncategorized | Tagged , , , , , , , , , , , , , , , , , , , , | Leave a comment

Professional Tax Advisers and Acceptable Opinions; Underwater Homes and Mortgage Relief

Advice is worth the price you for it. Free advice can sometimes actually be very valuable, depending on the source, but doing sufficient authoritative research to verify the facts is always worth the time and effort required.

We recently had an off-air phone conversation, about cashing out a Roth IRA account, with a listener of our weekly radio and web broadcast on KDOW 1220 AMWealth Management and You with Connie Yi.

The caller insisted that she did not need to report the transaction to the IRS, because she heard Suze Orman say on TV that you do not need to pay taxes when you cash out that type of retirement account.

Every Financial Situation Is Different

Not being a certified financial planner or an expert on Roth IRA accounts, we did not dispute the point. However, we do know that sometimes people only hear what they want to hear and they do not always obtain or understand all of the facts related to their own financial transactions.

As far as we know, taxes must be paid on all earnings at some point. The only legal variable is the tax rate that applies when the liability becomes due.

Earning declarations delayed until retirement via IRA accounts are usually taxed at a lower rate, because your income is much less at that stage of life than during your prime earning years.

Each of the various types of IRAs have very specific requirements associated with them, (and different penalties for violating those rules), so naturally it is important to know the IRS facts about Roth accounts and the other types of retirement arrangements – before you open an account and commit to a specific long-term financial investment program.

Every person’s financial situation is different, so no piece of financial advice can apply in every instance, regardless of the qualifications or success of the adviser. Tax laws are applied uniformly, but each person’s annual tax liability is determined by the calculation of their unique financial factors and withholding status for that year.

Advice is only good if you follow all of it and you support it with your own research to verify it – and maybe learn even more that will help you make better decisions.

Get It In Writing

One piece of advice we are willing to give is that when you base your decisions on how much tax to pay on the advice of a professional, you should obtain it in writing, so you can submit the written advice as evidence of your intent, if you are audited by the IRS later on.

If the IRS determines during an audit that you owe additional taxes for a previous year, you will have to pay that amount. However, if you relied on a written professional tax opinion to calculate your taxes and it caused you to underpay, the responsibility for that advice is on the adviser, who will then be liable for any penalty assessed on top of the back taxes owed.

The IRS will only accept a written and signed opinion of a qualified tax professional as evidence of your motives, so get it in writing. Never assume. Always check. Do the homework.

The IRS has published the regulatory changes that have affected retirement plans on a year-by-year basis.

Do-It-Yourself Legal Documents Available On The Internet

Similarities exist between being an attorney and being a doctor, but to fully know proper medical care requires much hands-on training and experience. Knowing the law is just a matter of reading books.

Therefore, with enough reading and understanding of the specific area of law, anyone should be able to create their own will or set up their own trust fund, especially with the help of do-it-yourself legal forms and software available on the Internet.

One of the problems with that line of reasoning is that it does not take into consideration the accumulated knowledge and experience of a professional. Another problem is that a do-it-yourself kit takes a one-size-fits-all approach that may not consider your individual life circumstances or your personal intentions and goals.

If you do decide to use legal form templates, you should carefully consider the language you include in your documents, because every written term means something specific.

It is important to research and fully understand the true legal meaning of each term you use, so you do not include conflicting terminology that might dramatically change the legal interpretation of your intentions.

Underwater Homes Do’s & Don’ts

Another topic we discussed during this hour-long show was the do’s and don’ts of dealing with an underwater home.

Obviously, the home mortgage and lending environment has dramatically changed in the past few years. We have recently read several articles about the astonishingly high percentage of homes in the U.S. that are underwater (currently valued at less than the amount still owed on its mortgage).

The numbers range from 29% to 39% in different parts of the country, and they differ in the various articles we’ve read, but it seems safe to believe that about one-third of all home in the country are now underwater, to varying degrees.

If you drive around residential neighborhoods here in the San Francisco Bay area and see all of the empty houses and For Sale signs, you should have no problem believing the reports that indicate California is near the top of the state list for underwater real estate.

Some professional financial advisers suggest you should walk away from an underwater home if it has become devalued by more than 10% to 20%. That seems like a broad statement and a wide range of real estate valuation upon which to make a critical decision.

“It Depends”

Our usual response to broad advice is, “It depends.”

This reply is taught in law school as a useful initial default answer to any legal question, because it allows for further consideration, to determine in advance how individual circumstances might affect the outcome of a specific situation.

In a situation where someone is considering the option of abandoning an underwater mortgage from which they apparently can find no other relief, we would want to consider the answers to several questions before we could agree that is the best solution, such as:

  • Is the mortgage at a fixed or adjustable rate?
  • Have you considered and exhausted every other less-drastic option?
  • How important is your credit rating in the near-term and long-term?
  • Are you near retirement? Do you or will you soon live on a fixed income?
  • Do you have the ability to earn more money?
  • If you are a business owner or partner, will the negative impact to your credit score hurt your ability to stay in business?
  • Can you still obtain and afford the business liability insurance required to operate?

The results of your actions may not be the same as for someone else who does what appears to be the exact same thing you did. The underlying set of circumstances of your life ultimately determines your results.

Go to Radio Show Podcast ArchiveEven if you follow all of the rules, some circumstances in today’s real estate and financial markets are completely out of your control and your results are a matter of luck – good or bad – as we have written about concerning loan modification as an option for an underwater house.

Our free advice in this and all stressful legal situations is that you should not make emotional or rushed decisions, but to instead carefully consider all of the facts, related laws, and options available for your specific set of circumstances and goals.

Cancellation of Debt for Short Sale or Foreclosure 

During this edition of our broadcast, we also discussed a few issues related to the Mortgage Debt Forgiveness Relief Act, which expires at the end of this year, including:

  • Form 1099C, Cancellation of Debt (for short sale or foreclosure)
  • Acquisition debt
  • 3 types of mortgage forgiveness
  • Possible extension of the law beyond 2012
  • Solvency versus insolvency
  • The advantage of disputing debt

For more about these sub-topics, you can listen to a podcast of this show by streaming or downloading the MP3 audio file in our podcast archive.

If you have questions or concerns about any of the topics mentioned above and would like a free consultation with Connie Yi, a California estate planning attorney, please contact us. We have four conveniently located offices around the Bay area: San Francisco, San Mateo, San Jose, and Pleasanton.

Posted in Distressed Property, Estate Tax, Filing Your Tax Return, Income Tax, Loan Modification, Tax Return Preparation | Tagged , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Trust Administration: Gifts and Personal Possessions, Internal Family Litigation, Elder Abuse

Family dynamics can be difficult to manage in the best of times. When the assets of an inherited estate are at stake, they can be even more problematic, especially when a complex family structure that includes children from multiple marriages is thrown into the mix.

If you are administrator of a trust for a blended family with a complex structure, you may end up involved in internal family litigation to resolve the conflicts, because the deep life-long emotions of the family members prevent a negotiated compromise.

Sometimes, litigation arises because beneficiaries have legitimate concerns about another family member whose destructive patterns of behavior they know all too well.

Division of Property Can Cause Family Friction

Unfortunately, when parents dies, family members frequently fight over valuable possessions, such as jewelry, art collections, automobiles, and houses, as well as the deceased’s personal property, like clothing, furniture, and consumer electronics.

It is the trustee’s duty to provide beneficiaries with a detailed account of all of the deceased’s property. This can be difficult when some items mysteriously disappear prior to being inventoried.

If known valuable possessions cannot be accounted for, the trustee must file an insurance claim for the missing items on behalf of the estate.

To help avoid family in-fighting, we recommend you inform your beneficiaries about who is to receive specific items when you pass on. You should document and safely store a list of which specific items are to be inherited by which specific beneficiaries.

We also recommend you involve your entire family in the process of creating your estate plan, which can reveal causes for later friction, so they can be resolved before they become hurtful situations that require court intervention. The process may be uncomfortable for some family members, but uncomfortable estate planning conversations now are much better than litigation between family members later.

Easily available technology, such as photo and video cameras, make it easy to document difficult-to-describe items or to ensure there is no confusion over exactly who inherits which specific items.

Fair Distribution of Cash Assets for Family Members

The distribution of a deceased family member’s cash assets can also become a point of contention among surviving children. Parents frequently help their kids with cash gifts or down-payments on a house, but if one child receives such help and others don’t, the other siblings might feel slighted and still due their fair share of the amount distributed, which would have otherwise been part of the estate.

Part of the problem in a situation like this is that the cash that was exchanged was never formally declared as a a gift or a loan or an advance on their inheritance, which leaves the situation open to interpretation when the parents die.

A written document that states your specific intent about cash given to a child will help avoid future controversy, though it may not help soothe the hurt feelings of the other siblings.

For that reason, we recommend you involve your entire family in the process of creating your estate plan, which can reveal causes for later friction, so they can be resolved before they become hurtful situations that require court intervention.

If, for example, money provided by a parent was intended as a gift to a child, the parent can document a cash transaction to clarify the nature of the exchange.

In some cases, if the cash is used as a down-payment on a home mortgage, the lending financial institution may require the parents to sign a Gift Lender letter to document the source of legitimate source of the funds.

If you are beneficiary trying to locate documentation of a cash gift from a parent to a child, you can contact that parent’s accountant, because the may have a tax organizer document, which could indicate that a gift was in fact given and reported to the IRS.

We recommend that you have a family accountant, so one person or accounting firm can maintain a history of the family’s financial transactions and tax filings. The experience and familiarity developed during a long-term professional relationship, should naturally help an accountant provide better financial advice.

You can create an addendum to an existing estate plan to document lifetime gifts to family members and other beneficiaries.

Choose Your Trustee(s) Wisely

When you choose a trustee for your estate, you should try to designate someone who both honest and capable of making impartial and reasonable decisions, to meet the legally-obligated fiduciary responsibilities to the beneficiaries.

A complex or blended family makes it that much more difficult and important to designate an appropriate and capable trustee. In some cases, such as in a blended family, if you assign co-trustees – one from each side of the family – that can help maintain a balanced control of the estate.

Of course, no matter how much you try to prevent family discord after you are gone, your efforts may be in vain, because you have no way of knowing how a chosen trustee may behave once given control of the estate.

Trust Administration Can Be Complicated

We have encountered a situation, as an example, where a widow was both the trustee of  her late husband’s estate, as well as a beneficiary of that estate, along with the couple’s four children.

After the father died, one daughter lived rent-free with her mother, who was elderly, and helped take care of her. The mother also gave the daughter signatory power of her checking account, so the daughter could manage her day-to-day finances. The daughter also withdrew cash from the bank, with her mother’s knowledge and permission, to cover her own living expenses.

The other three children felt the free rent and unfettered living expenses were well beyond what would be considered reasonable compensation for their sister’s efforts. They also felt a conflict of interest existed, as a result of the mother being both the trustee and a beneficiary of the estate, which certainly complicated matters from a legal perspective.

A Possible Case of Elder Abuse

The other children also felt their sister might be taking advantage of their mother, to an extent that it might be considered elder abuse. They petitioned the court to determine their mother’s mental capacity and ability to make fiduciary decisions for the estate.

Notice: if you seriously suspect elder abuse and you do not have an attorney acting on behalf, you can contact your local adult protection service agency, so they can properly investigate the situation.

If the court rules, based on a psychological evaluation, that the mother is no longer capable of managing her own affairs, the judge can appoint a conservator to manage her finances, as well as require a new trustee to replace her.

Go to Radio Show Podcast ArchiveThese steps might be offensive to the mother and daughter, but the other children felt this was their only option, to prevent their sister from completely depleting the estate of its assets.

Should the siblings be forced to evict their sister from the family house and her share of the inheritance is held up by the legal process or the time it takes to sell the house, she may be able to receive a loan from a company that specializes in providing living expenses to beneficiaries who are caught in that type of rock-and-a-hard-place circumstance.

This is an example of why is it is best to prepare an estate plan in advance for children who may not be able to provide for or take of themselves when their parents are gone. This is especially important for parents of a child with special needs.

A beneficiary can also petition the court for confirmation of the deceased intent, if specific instructions were not documented in advance and a trustee’s estate management activities (or lack of) are questionable.

If you have questions or concerns about any of the topics mentioned above and would like a free consultation with Connie Yi, a California estate planning attorney, please contact us. We have four conveniently located offices around the Bay area: San Francisco, San Mateo, San Jose, and Pleasanton.

Posted in Estate Planning, Family Law, Trust Administration, Trusts & Estates | Tagged , , , , , , , , , , , , , , , , , , | Leave a comment

Do You Need a Tax Attorney When You are Audited by IRS or When You Start a New Business?

Now that the season to file tax returns has ended, many people may become concerned about whether some aspect of their return might draw the attention of the Internal Revenue Service (IRS) and lead to an audit.

This leads to the question: Should you hire an attorney if you are being audited by the IRS?

Let’s take a quick look at whether or not you should obtain the services of a lawyer when being audited by the IRS, as well as a somewhat related topic for professionals: Should you hire an attorney if you are starting a new business?

We discussed these topics during a recent edition of our weekly radio and web broadcast on KDOW 1220 AMWealth Management and You with Connie Yi.

First, let’s get the issue of taxes out of the way. If the IRS determines it wants to audit your return, you will receive an “examination” letter from the agency.

The IRS can exam your returns for fraud for any or all of the past six years. There are two types of basic audits:

  1. Field Audit: a comprehensive examination of all of your tax return records for a specific year (or years). An IRS agent will perform the exam where you keep your records, either at your home or office.
  2. Office Audit: an review of your tax return that takes place at a local branch of the IRS, in which the agency is focused on a specific aspect of your declarations, such as a discrepancy on Schedule C.

In many cases, the first time the IRS audits your tax return, the agency is trying to teach you a lesson and it may be fairly lenient if you have made an honest mistake.

If you hired an IRS-certified professional to prepare your tax return and you are certain you made every attempt to declare all of your income and/or business revenue, and only took allowable deductions, you may just need to have the person who prepared your tax return accompany you to the examination.

If you prepared your tax return by yourself, perhaps by using TurboTax or other software program to guide you through the process, you may want to consider having an experienced tax attorney present at your audit, to help you fully understand and properly respond during the examination process.

Obviously, if you know you tried to “push the envelope” when declaring your income and/or deductions on your tax return, you probably already know you need to hire a very good lawyer, perhaps one with criminal trial experience, to assist you during the audit.

If you suspect or know your problems with IRS stem from having received bad advice from the person who prepared your tax return, you should hire a tax attorney. If you can prove your tax preparer is at fault, the IRS may waive its penalty and merely collect back taxes owed.

The second “hire an attorney or not” circumstance we discussed during our broadcast was for starting a new business.

Our basic rule of thumb is that you should consider retaining a business lawyer as the risks and liabilities associated with your products or services increase. More risk needs more protection.

Consultants who provide advice or services without great risk associated, probably do not need an attorney to help them set up a new business. If you conduct research to determine the proper way to establish your consulting business, you may feel confident you have covered all of your bases.

If you can afford to have an attorney manage or assist with the process of legally establishing your business, the additional confidence of knowing the process was performed properly, by someone with experience, may help you sleep better at night.

Medical and other health care professionals or licensed services professionals, such as an engineer or an architect, would certainly want to consult with an attorney, because those professions deal with high risk and potentially severe liabilities for mistakes.

If you are starting a partnership, you should seek the advice of a non-partisan business attorney, to ensure your partnership agreement has sufficient terms to cover the partners’ working relationships and the possible dissolution of the company.

Go to Radio Show Podcast ArchiveIf you are starting a company with one or more members of your family, we highly recommend you hire a non-partisan attorney to create a written agreement that covers the many complex issues of a family business. An attorney will guide you through the exercise of addressing the potential legal issues and their impact on family dynamics and personal relationships.

If your business generates a large amount of revenue, your company will probably need the services of an attorney, as well as an accountant.

If you are planning for significant growth of your new business, consulting with experienced legal and tax professionals will help you perform the necessary cost/benefit analysis of running your business, to determine the proper corporate structure that will provide the most profit and protection.

If you missed the original broadcast of this show, you can listen to a podcast by directly streaming or downloading the MP3 file in our Radio Show Archive.

If you have questions or concerns about any of the topics mentioned above and would like a free consultation with Connie Yi, a California estate planning attorney, please contact us. We have four conveniently located offices around the Bay area: San Francisco, San Mateo, San Jose, and Pleasanton.

Posted in Business Law, Corporate Taxes, Family Law, Filing Your Tax Return, Partnerships, Personal Attorney, Radio Show: Wealth Preservation and You, Starting a New Business, Tax Law | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment