Setting up the perfect estate plan does not just require a stellar estate plan or an experienced probate attorney. It also takes you – and your CPA ensuring that you do not have any outstanding liabilities.We have talked about in the past priority of how creditors will get paid, here I would like to talk about the biggest and baddest creditor of them all… The Internal Revenue Service, the IRS, the big guys. The short story: pay your taxes.
- You will be responsible even at death for any outstanding tax liens and it will be taken out of your estate, reducing the amounnt that goes to your heirs and beneficiaries.
- You should be going to a Certified Public Accountant not just a tax preparation service.
- failure to follow the IRS rules and regulations will result in tax penalties.
Here is a good example that may become more salient in the future:
- Bob is a wealthy guy living in Fort Lauderdale, he owns several pieces of property, and accounts with Chase , Deutschbank (a German bank) and a new style of digital money called “bitcoins”
- Bob knows that the IRS requires he disclose ALL foreign bank accounts with over ten thousand dollars ($10,000) so he discloses his Deutsch account and nothing else.
- Bob uses a discount accounting service and was not told about bitcoin being considered foreign accounts, and since Bob had over 10,000 dollars in his bitcoin account – he is in violation of IRS rules and will be charged a 10,000 penalty each year he was in violation.
- Keep in mind these penalties are also subject to interest and are tolled from when the violation occured not when YOU or the IRS learned about it!
- What happens if Bob is already dead? Nothing different. Except that now the money is being taken out of his estate and money his heirs expected will be sucked up by the IRS.
- Not even the best probate litigator is a tax guru – you need to consult experts.
- You cannot avoid these fees – the IRS Will learn when you die through probate and it will come for its dues.
- Bitcoin and some other types of digital accounts MAY be foreign. I know bitcoin is. I know paypal is not. I am not sure about “digital account proxies” such as Venmo, but if these effect you, learn more.