Creating an estate plan is one of the most important gifts you can give your family. It helps provide them stability and comfort, as well as helping you save money. While you may be tempted to “do it yourself” (DIY), estate planning is not an area where DIY is typically successful.
There are many pitfalls in estate planning that can get you into trouble. For example, many DIY estate planners fail to file a gift tax return with the Internal Revenue Service (IRS). The IRS uses a gift tax compliance initiative allowing the agency to use land records from both state and local governments to locate individuals for gift tax audits. In other words, the IRS conducts searches for real estate transactions that involve little or no money exchanged, which commonly occurs in DIY estate planning.
A common mistake occurs when an individual attempts to save money by transferring real property to their family members by adding their name to the deed instead of creating an estate plan. While this strategy can effectively transfer ownership of the property, it creates serious tax consequences for the person transferring the property. Transferring real estate can constitute a gift and the IRS requires the transferor to file a gift tax return and possibly pay a gift tax.
It is important to note that even if you would not owe a gift tax, your failure to file a gift tax return could result in criminal penalties. In fact, a conviction for failing to file a gift tax return can result in a penalty of up to $25,000 and up to a year in prison.
The IRS has been increasing its enforcement of gift taxes. If you are considering creating an estate plan, let us help. Don’t get yourself into trouble or put your estate in jeopardy. Whatever amount you pay a lawyer to help you will be less expensive than a DIY disaster
The Astill Law Office has provided high quality legal services for over 30 years. We specialize in wills, trusts, estate planning, and asset protection. If you have any questions about creating a Trust, Will, or estate planning in general, contact The Astill Law Office at 801-438-8698.