Can you pass the "Asset Protection Planning Stress Test?"

Let's Talk About...... Passing the Asset Protection Planning Stress Test
By: Alan Orlowksy

Can you pass the Asset Protection Planning Stress Test? 

As an Attorney with over 30 years experience practicing law, on a regular basis I am still challenged by the same common legal mistakes and omissions well educated, fore-warned and intelligent individuals just like you make because they fail to plan for business failures, law suits, illness and, inevitably, death! Of course, there are always new wrinkles to the challenges I face, but the theme never really changes ~ people just fail to plan and often with devastating financial and personal consequences. I advise my clients that it is better to pay a little now than to wait and pay and, perhaps, a successful adversarial party, a whole heck of a lot more when things head south and explode in their faces!

Fortunately for my clients, whether that client is a business or an individual, I am on a mission to protect them (as well as the general public) from the consequences of failing to engage an attorney in order to plan for the future. Consequently, I have created a short, one minute "Asset Protection Planning Stress Test" to help save and protect them from the vagaries of an uncertain world. Accordingly, following below are 10 questions that if read and answered properly will help you to determine if you have the legal firewalls, belts and suspenders needed to protect your business, your personal wealth and family from the unintended consequences of poor or no planning. 


If you can to score 100% on the questions below that pertain to your situation to YOU PASS THE TEST! This may seem unfair, but frankly, it is the standard I am judged upon and the only standard that insures that my clients will be protected if and when things head south. After all, you hire a consultant to give you the correct answer 100% of the time ~ 90% just doesn´t cut it in the real world! To take the test, please continue reading the questions below and remember to answer honestly. This is your future.

Asset Protection Planning Stress Test

1. If you own a corporation, does your corporate record book include by-laws, shareholder and board of director minutes, stock certificates, ownership ledgers, recorded articles of incorporation and annual minutes?

2. If you have an LLC do you have an LLC minute book which includes an operating agreement, up to date member resolutions, articles of formation and membership certificates?

3. If you have employees does your business have an employee handbook?

4. If you have a business partner or partners, do you have a buy/sell agreement funded by life insurance?

5. Do you have a business succession plan or exit strategy if something should happen to you or if you want to retire?

6. Have you had a recent audit of your business and/or personal insurance needs and requirements completed by an outside expert to insure that all your insurance needs are taken care of and that you are paying the lowest prices offered in the marketplace?

7. If you are married, does your spouse own at least one-half of your personal assets?

8. Do you have a personal umbrella policy?

9. If you have a business failure do you have a plan to save your residence and other personal assets?

10. Do you have an up to date estate plan with a current will, revocable trust, health care power of attorney, durable power of attorney and life insurance trust?

What was your score?

If you did not pass the test, contact Orlowsky & Wilson so we can assist you in setting up your future the way it should be.
www.orlowskywilson.com 


If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559.

Avoid Probate with a Good Estate Plan

Let's Talk about Avoiding Probate with a Good Estate Plan
By Alan Orlowsky

It is important to go about proper estate planning in order to avoid potential probate issues. Probate is a legal document. Receipt of probate is the first step in the legal process of administering the estate of a deceased person, resolving all claims and distributing the deceased person's property under a will. Probate is required to make sure that descendant estates are in accordance with inheritance laws. The simplest way to avoid probate it to consult with an experienced estate planning attorney.

Avoiding probate can save money, time and can help avoid family disputes caused by a will. The essential things that everyone should do regarding establishing a proper estate plan are:

• Creation of a Last Will and Testament
• Creation of a Living Will
• Appointing a Power of Attorney to a reliable individual
• Consult a experienced Estate Planning Attorney

Power of Attorney allows another person to act on your behalf if you are unable to make decisions regarding your health care. The person you designate with Power of Attorney can make decisions in your best interests for such things as life support, organ donation, and resuscitation orders. This person can also pay your bills, transfer titles property and other legal issues regarding your estate. Choosing the right person is key factor in avoiding probate.

Creating a Last Will & Testament and a living will allows you to designate a estate administrator. The duties of this individual depend on the state of matters including estate value, inheritance, property and family disputes. If a will is contested and estate settlement can be drastically prolonged and may substantial legal fees and can eventually bankrupt the estate, leaving nothing for the heirs to inherit. Having these in place and current is an easy way to avoid probate.

Finally, choosing an experienced attorney can assist you in the entire estate planning process. The right attorney makes all the difference and setting up your estate before its too late is the best way to avoid any additional hassles and costs. Should you have any questions regarding setting up an estate plan or re-examining your current estate feel free to contact Orlowsky & Wilson.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559.

Avoiding Family Disputes Over Personal Property

Let's talk about.....Avoiding Family Disputes over Personal Property

By Alan Orlowsky

It is quite often the personal property that causes the most heartache and disruption in families after a death. Money doesn't usually have any sentimental attachment, but personal property can have a perceived value far beyond its actual monetary worth. For example, there may be souvenirs from family vacations, various collectibles, or other items of sentimental value that are impossible to divide or duplicate, and can be left out of a will entirely. It’s helpful to discuss these things ahead of time, so you have a clear understanding of who wants what, and can anticipate and avoid problems after you’re gone.

Generally speaking, personal property is distributed under the laws of the state in which the decedent was a resident on their date of death. Real property (real estate), on the other hand, is subject to the laws of the state in which it is located. If you have significant personal property located outside of your official state of residence, distribution can be confusing. For example, if you own a Steinway piano that is located in your vacation home, the vacation home and the Steinway piano will be treated differently.

Personal property such as jewelry, antiques, artwork, family heirlooms, and household effects can be passed on to your beneficiaries through a specific bequest: “I leave my Ming Vase to my sister Betty.” But for most people, it would be overwhelming to try to inventory and choose a beneficiary for every last item you own. Instead, it is common to use a separate “Personal Property Memorandum” that is attached to, and incorporated by reference into your trust.

The memo is generally a handwritten or typed list of your bequests to family or charities, which is signed and dated by you. They could cover each personal item that you own, but typically include only those items of financial value or of strong sentimental value – the types of things that could lead to disagreements among the heirs.

The benefit of a memo is that it can be easily changed if you sell something, give it away during life, or change your mind about who should receive it after you’re gone. You simply throw the old memo away and replace it with a new one. Each personal property memorandum should be dated, and the trust should contain instructions that if more than one memo is discovered after your death, the one with the most recent date is binding.

Of course, you should also provide for personal property that is not specifically listed on the personal property memorandum. Over the years, parents have come up with interesting ways to distribute personal property items that aren't the subject of specific bequests. They might instruct the executor or trustee to divide Monopoly money among the children, and let them “bid” on the remaining items. Or they might say that each child can choose one object, starting with the oldest and moving to the youngest (or vice versa), until all items are accounted for. Anything that is not selected can be given to Goodwill or the Salvation Army, or be included in an estate sale.

Most trusts will state that the trustee can dispose of personal property equitably to the beneficiaries, and if they can’t agree on the disposition, the trustee can sell the items and split the proceeds of the sale according to the trust distribution plan.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559.

Are Attorney Fee's Tax Deductible?

Let's Talk About.....Are Attorney Fee's Tax Deductible?
By Alan Orlowsky

If you haven't been there yet, and without jinxing your luck, the odds are good you're going to need legal advice some day. Maybe you're thinking about a divorce, or you need help writing a will or setting up an estate trust. Regardless of why you need an attorney, you're going to have to pay for the lawyer's legal services. Can you take a tax deduction for those attorney's fees? Usually not, but there are some exceptions.

General Rules

The general rule is simple enough: You can deduct attorney's fees you pay for:

• ·     Trying to produce or collect taxable income
• ·     To help in determining, collecting or getting a refund of any tax

In simple terms, you can take a deduction if you need an attorney's help to make money you have to pay taxes on, or if an attorney helped you with a tax matter, like representing you in an IRS audit. If the legal fees are somehow connected to taxes or taxable income, you can take a deduction.

Is There a Deduction?

There are all kinds of situations that qualify for the tax deduction, such as fees you may pay for:

1. ·     Tax advice you may get during a divorce case, such as how you and your ex-spouse will take deductions for home mortgage interest or child care, or whether alimony is tax deductible by the payor spouse or taxable income to the recipient spouse
2. ·    Trying to get your ex-spouse to pay past-due alimony
3. ·    Defending a lawsuit filed against you on work-related matter, such as an unlawful discrimination claim filed by a former employee that you fired
4. ·     Receiving your share of a class action settlement in a lawsuit against your employer or former employer. For example, your former employer settles a class action claiming that it didn't pay overtime wages. You get a $1,500 check for your share of the settlement, but $2,000 is reported to the IRS as income because you're charged $500 as your share of attorney's fees. Because the income is work-related, you can take a tax deduction for the $500 in fees

Generally, you can't deduct fees paid for advice or help on personal matters or for things that don't produce taxable income. For example, you can't deduct fees for:

• ·    Filing and winning a personal injury lawsuit or wrongful death action - the money you win isn't included in your gross income and so it's not taxable
• ·     Settling a will or probate matter between your family members
• ·     Help in closing the purchase of your home
• ·     Defending you in a civil lawsuit or criminal case that's not work-related, such as defending you on a drunk driving charge or against a neighbor's claim that your dog bit and injured her child

How and How Much?

Generally, you deduct attorney's fees as an itemized miscellaneous deduction on Schedule A of your Form 1040 tax return. You may not be able to deduct all of your fees, though. Miscellaneous deductions are limited by the two percent rule: You can deduct only the amount of your miscellaneous deductions that's more than two percent of your adjusted gross income (AGI) - the amount you entered on line 38 of your 1040.

Have a Business?

As a business owner, you can take a deduction for the same things discussed above. If you pay an attorney to prepare your taxes or to help the business make money, you can deduct the fees. For example, you can deduct fees paid for:

• ·    Collecting money that's owed to you by a customer
• ·     Defending you or an employee in a lawsuit over a work-related claim, such as a discrimination lawsuit filed by a former employee
• ·     Negotiating or drafting contracts for the sale of your goods or services to customers

Also, you can usually deduct attorney fees you paid in connection with starting up your business or buying an existing business. Generally, you deduct these business-related expenses the same way you deduct other ordinary and necessary business expenses. You need to file Schedule C with your 1040 tax return.

Check with Your Lawyer

If you're concerned about whether you'll be able to deduct attorney's fees, you can always ask your attorney - before they do any work for you - and if any of the fees they charge are tax deductible.

Also, ask your attorney to prepare a billing a statement that shows clearly what part of her fees is deductible. So, for example, if you're involved in a divorce, your lawyer's billing statement should show how much time she spent working on how the divorce will impact your taxes. It should be separate from the other non tax divorce issues, like the time spent drafting the divorce papers.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559 or visit our website at http://www.orlowskywilson.com

Going to Tax Court

Let's Talk About.........Going to Tax Court
By Alan Orlowsky

Did you receive a nasty tax bill after your IRS audit? Have you been served with an IRS notice of deficiency? You may not agree with the bill. You may also not be able to afford the payment. What should you do? Going to the US Tax Court is always an option.

US Tax Court

The US Tax Court is a special federal court. It only decides tax cases between taxpayers and the IRS. The judges travel around the country to hear cases. They're experts in tax law.

Is the IRS claiming you owe $50,000 or less in any particular tax year? You can file an appeal of your audit results with the Small Cases Division of the US Tax Court. It's similar to a small claims court. It doesn't matter if the entire tax amount is over $50,000. The case can be heard as long as it's not more than $50,000 in a single year.

Did you lose your appeal in the Small Cases Division? You can't appeal any further. You're stuck with the amount the court says you owe. However, most tax court cases are settled without even having to go to a trial. Many taxpayers walk away with substantial reductions in the amount of taxes, interest and penalties owed.

Filing an Appeal

The best place to find instructions and forms for filing an appeal are found on the US Tax Court web site. There's a $60 filing fee. It must be sent in at the same time as the filing paperwork.

You must file the appeal paperwork with the US Tax Court within 90 days of the date the IRS sent the Notice of Deficiency to you. You'll get to choose the IRS court where you'd like the trial to take place. There's at least one US Tax Court in every state.

It's a good idea to be as specific as possible in your paperwork. Explain in detail about why you disagree with the IRS's claim that you owe money.

You'll have the opportunity to try to settle your case ahead of time. There are many more cases filed than the IRS has legal staff to take to trial. It's best to approach any settlement talks with an eye toward specific issues. This method is better than trying to negotiate an overall reduction in the amount owed.

Trial Procedures

The hearings in the US Tax Court usually don't last very long. You'll have the chance to tell a judge your side of the story. The burden of proof is on you to prove that the determination of the IRS is incorrect. You can bring financial paperwork to back up your position. You can also call witnesses.

You'll receive the opinion in the mail. You may appeal the decision in a regular tax case to one of the US Courts of Appeal. You must file a notice of appeal within 90 days of the decision.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559 or visit our website http://www.orlowskywilson.com

Whistle blowers May Hit the IRS JackPot

Let's Talk about.......Whistle blowers whom May Hit the IRS Jack Pot
By Alan Orlowsky

Cheating on income taxes is probably as old as income taxes themselves. The IRS encourages people to report tax fraud, making whistle blowers eligible for cash pay outs if the IRS is able to collect from the dead-beat taxpayers.

Blowing the Whistle

The IRS has two programs you may use to report various types of tax fraud, such as non-payment of income, payroll, corporate and other taxes; under-reporting income or revenue; using illegal tax shelters, etc. Although the programs started in 2006-2007, it wasn't until late 2011 when they finally started showing the type of results the IRS was looking for. 

Filing Reports or "Claims" You use the same form (PDF) for each program, but which program you use depends on the amount of money involved.

Large Dollar Amounts What the IRS calls the Whistle blower Rules apply in cases where taxpayers:

• ·    Owe more than $2 million in taxes, penalties and interest
• ·    Are individuals and have an annual gross incomes over $200,000

The IRS will pay you between 15 and 30 percent of the money it collects from the taxpayer if it uses the information you provided.

IRS Collects & Pays Millions. There's no limit or "cap" on the amount of your award in this program. The IRS determines how much you're paid depending on the value of the information you provided and other factors.

As of late 2011 (PDF), the IRS hasn't released final numbers for this program, but 431 taxpayers filed whistle blower claims on over 5,000 taxpayers. In April 2010, the IRS awarded one whistle blower $4.2 million - an accountant who reported his employer.

Right To Appeal. You can file an appeal with the US Tax Court if you don't agree with the amount the IRS awarded to you. The court may leave the award as is, or it may increase it. It all depends on the evidence and reasoning you use to show why the IRS was wrong, as well as on how the IRS explains why it was right.

Smaller Dollar Amounts

The Informant Claims Program is for claims that don't meet the $2 million/$200,000 requirements of the Whistle blower Rules. Again, whether you get an award depends on the quality of information you provide and whether it leads to collection from a taxpayer. There are differences between the two programs, though:

• ·    The IRS doesn't have to give you an award, even if it uses your information and collects from a taxpayer
• ·     Your award may be up to 15 percent of the amount recovered by the IRS
• ·    Your award can't be more than $10 million
• ·    You can't file an appeal with the Tax Court if you disagree with the IRS about your award

IRS Collects & Pays Millions. The IRS has released many more details about this program. In 2010(PDF):

• ·         The IRS received over 7,500 reports or claims from informants
• ·         The IRS collected nearly $500 million from of taxpayers reported 
• ·         About $19 million in awards was paid to informants

Important Details To Remember

No matter which program you use, there are several things you should keep in mind when blowing the whistle on a taxpayer:

1. No Whistle blower Protection. Unlike other federal whistle blower laws, the IRS programs don't protect you from retaliation if you blow the whistle on your employer. In other words, you may be demoted or even fired.

The  laws in your state, however, may give you some whistle blower protection.

2. Your Identity May Not Be Secret. The IRS takes every possible step to keep your name confidential, but it's not always possible. For example, if the IRS needs you to testify at a hearing or some other legal proceeding against the taxpayer you reported, the taxpayer and even the general public may discover your identity. You can report tax fraud and remain anonymous by filing a special form (PDF), but you won't be eligible for an award.

3. Crime Doesn't Pay. The IRS may reduce your award or maybe even deny it completely if you had anything to do with creating the tax problems you reported. This may happen, for example, when you report your employer and you had a hand at preparing the employer's taxes or keeping financial or other records.

4. Awards Are Taxable. You have to pay taxes on any award you get from the IRS, just like any other prize or award. The taxes can be hefty, too. For example, after the IRS deducted federal income taxes on the accountant's $4.2 million award, he actually received $3.24 million. He paid 28 percent in taxes.

In many states, you'll have to pay state income taxes on the award, too.

5. It's A Slow Process. It may take five to seven years, maybe longer, before the IRS pays an award. The IRS investigations take time, and the taxpayers often fight the IRS in court.

When it comes to reporting tax fraud, doing the "right thing" may bring you more than a sense of pride and satisfaction. It could very well lead to a big payday for you. Be careful to follow the rules when filing your report and be wary of the potential pitfalls, and your efforts may payoff.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559, or visit our website: http://www.orlowskywilson.com

The Many Benefits of Life Insurance in Estate Planning

Lets Talk About.........The Many Benefits of Life Insurance in Your Estate Planning

By Alan Orlowsky

Life insurance is a contract between an insured (insurance policy holder)and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. The policy holder typically pays a premium, either regularly or as a lump sum. Other expenses (such as funeral expenses) are also sometimes included in the benefits. Source: http://en.wikipedia.org/wiki/Life_insurance

 Many of my clients are in the process of building wealth but it may be years before they realize the fruits of their investments or labors. If such a client dies prematurely, life insurance can be used to create wealth immediately for heirs and loved ones. Here are 10 ways to accomplish the creation of wealth, using this unique asset of Life Insurance within your estate plan.

Life Insurance can be used to accomplish any of the following:

1. The creation of an estate where circumstances have kept the estate owner from accumulating sufficient assets to care for his loved ones in the event of a premature death.

2. To protect a business value due to the loss of key employees.

3. For debt reduction. Personal and business loans can be paid off with life insurance proceeds.

4. To equalize inheritance. Most estates are made up of various illiquid assets and the liquidity nature of death benefit proceeds allows for equalization among children.

5. Accelerated death benefit. Terminally ill individuals can receive a portion of their death benefit prior to death on an income tax free basis to pay for medical bills, and other expenses and/or to prevent dying destitute.

6. To pay for death taxes and/or estate settlement costs. These costs can exceed 50% of the fair market value of an estate.

7. Pay off a home mortgage.

8. Fund a business transfer. Many businesses have multiple stockholders. Life insurance proceeds upon the death of one stockholder provide ready cash to finance the transaction.

9. To replace charitable gifts. If large assets are gifted to charity there are fewer dollars that can pass as an inheritance. Life insurance can replace that lost inheritance.

10. To supplement retirement funding. Certain life insurance products can supplement retirement funding by accumulating additional funds for retirement years.


Of course the amount of the inheritance can be tailored to the needs and wants of a particular person. Where one person might feel comfortable leaving a sum of $100,000, another might want to leave an inheritance in the millions. Generally speaking, either goal can be achieved.

Many taxable estates do not have sufficient liquidity (cash) to pay estate taxes within nine months after death. Clearly, estate assets could be sold to the detriment of the beneficiaries, and if the market for those assets is strong, this might be a satisfactory solution. On the other hand, if the market is down or if the people charged with selling the assets do not appreciate their true value, a sale could result in devastation of the estate value.

Therefore, life insurance (if structured properly) can provide the estate with immediate liquidity to buy time and flexibility for the executor and heirs to determine the best course of action. Life insurance proceeds guarantee that the assets can be sold in an orderly manner, including holding the assets to a later date if the market is in a slump.

The amount of life insurance needed will depend on a variety of factors including:

• How the insurance is to be used
• Whether or not you own a business and your plans for its succession
• Whether or not you have a taxable estate
• The liquidity of your assets
• Your age and current earning capacity
• And many more.

Your advisory team, using detailed financial modeling and reasonable assumptions, can help you quantify the amounts needed for these various coverage needs. Your life insurance agent or financial planner may have software that helps with these calculations as well.

Should you have questions regarding more benefits to of Life Insurance in Estate Planning contact Alan Orlowsky by calling 847-325-5559 or visit our website: http://www.orlowskywilson.com

Why do I need a living Will?

Let's Talk About.....Why You Need a Living Will
By Alan Orlowsky

Most of us have had the same nightmare. We are slowly dying in a hospital bed, tubes going in and out, being kept alive by beeping machines. Worse yet, we are unable to communicate our wishes to our caregivers and the loved ones gathered around. No one knows what we want.

The way to prevent this nightmare from becoming reality is a living will. A living will is completely different from a conventional will or living trust used to leave property at the time of your death. A living will applies only to healthcare.

What Is a Living Will?

A living will is a document in which you describe the kind of healthcare you want to receive if you are incapacitated and cannot speak for yourself, due to illness, injury or advanced age. It is sometimes called a healthcare declaration, a directive to physicians, a healthcare directive or a medical directive.

 A living will is a gift not only to yourself, but also to your family. It can be gut-wrenching for family members to have to make end-of-life decisions on your behalf when they don’t know what you’d want.

In a living will, you can include any wishes you have for medical care. You can ask that certain types of care always be given, or instruct that certain types of care never be given – or anything in between. Take some time to carefully define the circumstances that make you comfortable. You can revoke a living will at any time by simply destroying the document.

Do You Want to Keep Living, Regardless?

Living will documents will ask if you want to receive treatments that will prolong your life, but will not make you better. Such procedures usually include transfusions of blood and blood products, cardiopulmonary resuscitation (CPA), diagnostic tests, dialysis, administration of drugs (other than for pain), use of a respirator and surgery.

Do You Want To Be Fed by Tube?

A living will should address the administration of fluids and nutrients via intravenous feeding or tubes. People who are comatose or near death cannot feed themselves. With artificial hydration and feeding, a permanently comatose person can live for years. A terminally ill person can take much longer to die.

What If You Are in Pain?

A living will should address palliative care. Palliative care keeps a patient comfortable and free from pain until life ends naturally. It is especially important when a patient has rejected life-prolonging treatments, fluids and nutrition. Palliative care does not try to cure an illness or condition, or to prolong life. Palliative care can be administered at home, in a hospice facility or at a hospital.

How Do I Make a Living Will?

Living will templates are readily available. After you complete your written document, you must sign it and have it witnessed or notarized, or both, depending on the law in the state where you live. Give copies to family members, your healthcare agent, your doctors and your hospital or care facility.

A living will is often paired with a power of attorney for healthcare, in which you name an agent to make healthcare decisions on your behalf. Some states combine these two kinds of documents into one, called an advanced healthcare directive.

Call Orlowsky & Wilson today to discuss your options.

The law surrounding appropriate use of a living will can be complicated. Plus, the laws in each state and the facts in each case are unique. This article provides a brief, general introduction to the topic. It is not legal advice. For more detailed information about your specific situation, call us today.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559 or visit our website http://www.orlowskywilson.com