Planning Potpourri

■ Deteriorating Competency: Standard planning is set up and fully fund a
revocable trust to manage assets. Consider also setting up a small balance
checking account, with an attached credit/debit card, in your own name and
outside the trust. If checks are inappropriately written, or the card is lost
or stolen, trust assets can’t be reached.
This can preserve independence while protecting almost all assets.

■ Annual Meetings versus Consents: Closely held businesses commonly sign
unanimous consents in lieu of formal meetings. Consider instead an in-person
annual meeting and signed minutes as taxing authorities can be hyper-sensitive
about formalities for businesses owned by related parties. A meeting may be
viewed as more formal even though annual written consents clearly indicate
action by the various entities and are signed by their shareholders/directors.

■ Disability Income Replacement
Insurance versus Disability Buyout Insurance:  Many
lay people are aware of the latter and some–as well as some lawyers– may
confuse it with the former. Disability income insurance replaces your earnings
if lost due to disability. Disability buyout insurance can be used to fund the
repurchase of your equity in a closely held business if you’re disabled. Many
closely held businesses purchase life insurance to fund death buyouts, but far
fewer address disability insurance to fund a buyout if an equity owner is
disabled. Proper planning requires addressing both needs. Thanks Stuart L. Pachman,
Esq.  of Brach Eichler, Roseland, NJ.

■ Gift tax returns don’t get enough
respect. Evaluate
whether you should file to elect out of 2009 GST automatic allocation rules.
Also, consider filing every year and reporting and disclosing Crummey (annual
demand notices). Few CPAs encourage this but it is a great way to run the statute
of limitations on Crummey powers. Although nearly ubiquitous in trust planning
(most insurance trusts have them) their common usage should not mask the
complexity and audit risk they create. To meet the adequate disclosure rules
the trust will have to be disclosed to the IRS, crummy powers attached, and
perhaps more. Check with your CPA.

■ Lost Wallet. A prior Potpourri snippet
suggested
that if your wallet is lost or stolen you should report it to the IRS. The
reader called the appropriate IRS office and they required a form to be filled
out for someone who is a victim of identity theft.  For the next 3 years your returns are flagged
and your 1040 will be delayed as a human has to look at your taxes rather than
a computer. The reader felt this was a bit much to endure. As with all
planning, you have to weigh the pros and cons.