People often try to get a little bit too cute in ways to avoid taxes. This is true whether they are paying taxes now or whether they are trying to avoid taxes on their estates after they die. Unfortunately, the IRS does not give bonus points for looks. Trying to be cute, will result in trouble. No one wants trouble with the IRS, so talk to your estate attorney about making sure you do things right.
One recent example of not doing things the right way is what happened to former Yankees pitcher Dave LaPoint. While he was pitching, LaPoint entered into a post-nuptial agreement that said he had to fund an account for his spouse every year that he was in Major League Baseball. It became part of his estate plan because the agreement stated that the benefit accrued to his spouse’s heirs and beneficiaries. Unfortunately for LaPoint when he tried to claim this as alimony on his taxes, the IRS disallowed the claim.
What should have LaPoint done differently? He should have talked to an estate planning attorney. A basic rule of tax law is that anything that can be assigned after the death of the payee, the spouse in this case, is not alimony for tax purposes. Make sure you talk to an experienced estate planning attorney to avoid these types of mistakes.
- Thought of the Day - June 7, 2023
- Thought of the Day - May 31, 2023
- Thought of the Day - May 24, 2023