Be careful if you are notified of an audit.  I have been dealing with a number of cases lately where the taxpayer is forced to spend time and money to appeal or otherwise challenge an audit that could have been avoided with better audit management.  Ultimately, you can get the IRS to make the correct decision but you can also spend some money to get them to that point.

IRS Audit Rates is a post from: The Law Offices of Ralph W. Flick, P.S.

The bizarre result was that there was no federal estate tax in 2010 (good news for George Steinbrenner’s family as well as the families of a few other billionaires) while Congressed ignored the problem.  Then, right before it looked like we were going to go back to a $1 million exemption for 2011, Congress did what they are so good at doing: they put in a two-year fix and kicked the can to 2012, a presidential election year.

Now, it seems like they are going to be forced to deal with the estate tax when they take up the issue of the Bush tax cuts.  Assuming no unexpected change in the make-up of Congress, the prognosticators are saying that we are going to keep the $5 million exemption for at least another year and, likely, for the long-term.  Let’s hope it happens because it will make estate planning much more predictable for most people.

Federal Estate Tax Update is a post from: The Law Offices of Ralph W. Flick, P.S.

All effective estate plans should include, at minimum, three important documents:

• A Durable Power of Attorney allows a trusted person to manage your property and make decisions on your behalf during your life and in case you are ever unable to take care of yourself.

• The Healthcare Directive is your opportunity to record your wishes for continuing or removing life sustaining treatment if you are ever suffering from a terminal and non-recoverable condition.

• Finally, a Last Will and Testament allows for the management and distribution of your property after death.

There are many other tools available depending on the size and complexity of financial and family affairs.  For example, many Americans also are using revocable (or “living”) trusts to avoid probate and to manage their estates both during their lives and after they have passed.

Like any other important product or service, your choice in planning advisors should be made with care.  Find someone who will listen to you, make you feel comfortable about discussing and making these choices and who will help you to achieve your objectives.

I offer an initial consultation and preliminary analysis at no charge that allows potential clients the opportunity to make an informed choice about their legal service advisor and estate plan strategy before committing financial resources.  Each plan, like every person, is unique and I pride myself on offering a custom and personal solution for all clients.

I would be happy to discuss your plan with you; however, whether you choose to contact me or not, I strongly urge everyone to make a plan.  And, if you have a plan already, it should be reviewed at least every 3-5 years for changes in the law and in your situation and circumstances.

Importance of Planning is a post from: The Law Offices of Ralph W. Flick, P.S.

A common example is the joint attorney-in-fact.  In order for this to make sense, a few definitions are in order.  A “Power of Attorney” is a document whereby the “Principal” appoints an “attorney-in-fact” to act in the place of the principal.  So, for example, if I were to execute a power of attorney and appoint my wife to make decisions for me, I would be the principal and she would be the attorney-in-fact.  (By the way, don’t let the terminology fool you; an “attorney-in-fact” need not actually be an attorney.)  Powers of attorney come in several flavors and I will discuss the differences in more detail in a later post.  For now, a “Durable Power of Attorney” is one that remains in effect after the principal becomes incapacitated whereas a power of attorney that is not durable terminates upon the principal’s incapacity.

Some principals choose to appoint more than one person to act as attorney-in-fact.  Multiple attorneys-in-fact can either be appointed to act independently (meaning that either attorney-in-fact can take all the power given in the power of attorney) or jointly (meaning that all the attorneys-in-fact must agree before any action can be taken).  Many clients think that appointing, for example, their children as joint attorneys-in-fact will require them to work together and avoid disputes.  However, setting aside the issue of disputes among children for a moment, the bigger problem will be with the financial institution.

Many financial institutions, especially the large, national banks, refuse to accept powers of attorney with joint attorneys-in-fact.  I recently dealt with one such institution that was not able to articular the particular risk that they were concerned with but it likely had something to do with the fact that they are not set up to require two signatures on checks and other instructions.  Remember, that in order for joint attorneys-in-fact to take action, they must act together and if a bank does not have a system to require two signatures on a check, the bank cannot police itself.

A power of attorney is only good if the third party to whom it is presented is willing to accept it.  If the third party accepts it and it later turns out to be invalid, the third party can be liable for losses.  In Washington, we have a safe harbor rule as well as a process to force a financial institution to accept a power of attorney.  I will post articles on these topics later.

The moral of the story, however, is that you cannot just look to the law for limitations on powers of attorney.  A power of attorney with a joint attorney-in-fact is perfectly legal in Washington but a bank may not be willing to accept it.

Banks and Powers of Attorney is a post from: The Law Offices of Ralph W. Flick, P.S.

Business continuity planning refers to the establishment and documentation of business systems designed to keep the business running and meeting the needs of its customers in response to some kind of event.  These events, usually unexpected, can range from natural disasters to terrorist attacks and even regular power outages.  What is your plan if any of these kinds of events were to affect your business?

Even if you operate a small business and do not have substantial, or even minimal, resources you should still at least be thinking about these issues (both for your business and your personal matters).  If nothing else, take a few minutes to read Safe Harbor’s very interesting blog posts on these topics.

Business Continuity Planning is a post from: The Law Offices of Ralph W. Flick, P.S.

Discounts are a common technique for making gifts.  The idea is that if you place property into an LLC and then distribute ownership units in that LLC, each unit will have a lower value than the whole because no one collection of units controls the LLC.  These minority interests are often discounted substantially.  In the case described in the article, the estate took at 51% discount but settled later with the IRS for a lower discount.

Valuations are common and generally accepted (although subject to constant attack by the IRS).  The issue in the case really involved the feature of the plan that automatically gifted to a charity any amount in excess of the $1 million gift tax exemption.  The IRS wanted, instead, to collect more gift tax but the court found in favor of the taxpayer.

The IRS can change its regulations, however, so this win might be short-lived.  If you have a large estate or significant assets that you would like to gift while alive, please call for a free consultation.

Valuation Discounts is a post from: The Law Offices of Ralph W. Flick, P.S.

Too many people, for whatever reason, do not plan ahead.  Whether it is the cost or the uncomfortable conversations that must take place, those issues pale in comparison to the responsibilities of a surviving spouse (at the worst possible time). Most of my clients express relief when they are done with their planning process so, despite the uncomfortable conversation, the end result is a stress reliever.  The cost, in most cases, is quite reasonable.

When compared to the sad and stressful days following the death of a spouse, the planning process is relatively easy and inexpensive!

If you are considering a will, trust or other documents, please call for an appointment.  Consultations are always free!

Money Issues of Surviving Spouses is a post from: The Law Offices of Ralph W. Flick, P.S.

There are a number of tools that we use to manage an IRS tax debt and many of those tools result in the tolling (or suspension) of the statute of limitations.  For example, the statute is tolled in each of the following cases:

• Offers in Compromise
• Collection Due Process Appeal
• Bankruptcy
• Installment Agreements
• Voluntary Waivers
• Lawsuits filed by the IRS
• Foreign Travel for Six Months
• Innocent Spouse and Taxpayer Assistance

If you do not know when your statute expires, the IRS calculates the date which is available as part of your account.  You can call the IRS or order a transcript to find out.

If you need help managing your IRS debt, please call anytime.  We are here to help and consultations are always free.

IRS Statute of Limitations is a post from: The Law Offices of Ralph W. Flick, P.S.

Industrial Insurance (Department of Labor & Industries)
Generally, employees of one or more employees must provide industrial insurance coverage.  There are some employees and owners who are exempt; however, unless there are available exemptions, a business either must purchase insurance from the Department of Labor & Industries or, if the business has at least $25 million in assets, self-insure.  The rules that govern industrial insurance can be complicated and the penalties for non-compliance are significant.  Please follow this link to the business information available for the Washington State Department of Labor & Industries.

Unemployment Benefits (Employment Security Department)
Every business with employees in Washington state must register with the Employment Security Department and file unemployment insurance taxes every quarter.

Business and Occupations Tax and Sales Tax (Department of Revenue)
The B&O Tax is a tax on gross receipts for the benefit of doing business in the State of Washington. We have no income tax in Washington, so the primary revenue source for the state is the sales tax and the B&O Tax on businesses. The B&O Tax is assessed against gross revenue. Generally, this means that the tax is assessed against all invoices regardless of what is actually collected (although there is a credit for bad debt) and regardless of profitability (i.e., expenses do not matter).  The B&O Tax can result in some unusual situations (for example, see my blog posting about staffing companies here).  Washington has an “economic nexus” law which means that you do not need to have a physical location in Washington or employees here in order to be considered to be doing business in Washington.  A business only needs to be conducting activities up to certain dollar limits (you can read about economic nexus here).

Registering Your Business in Washington
New businesses and existing businesses that expand to include employees that are subject to unemployment insurance must complete a Washington state business license application.  This will establish an account with the departments of Labor & Industries, Revenue and Employment Security.

If you are a business here in Washington or considering coming to Washington, please feel free to contact me if you need assistance setting up your business here.  I offer a wide range of business law services as well as assistance with the Department of Revenue or Internal Revenue Service for businesses and individuals.

Employees in Washington is a post from: The Law Offices of Ralph W. Flick, P.S.

Remembering 9/11 is a post from: The Law Offices of Ralph W. Flick, P.S.