Trust creation expenses

Discussion in 'Tax' started by MG, Dec 31, 2010.

  1. MG

    MG Guest

    The attorney that set up my Trust papers gave me a receipt and said it was
    tax deductible.
    Does this type of deduction fall under the 2% limitation rule?
    Is there a particular place on the forms where must be entered?

    Thanks

    MG

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    MG, Dec 31, 2010
    #1
    1. Advertisements

  2. "MG" <> wrote:

    > The attorney that set up my Trust papers gave me a receipt and
    > said it was tax deductible.
    > Does this type of deduction fall under the 2% limitation rule?
    > Is there a particular place on the forms where must be entered?


    Actually your attorney is only partly right. To the extent what he
    did for you was tax planning, it is deductible. The portion dealing
    with estate planning (other than tax planning) is not.

    --
    Stu
    http://downtoearthlawyer.com

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Stuart A. Bronstein, Dec 31, 2010
    #2
    1. Advertisements

  3. MG

    Mark Bole Guest

    On 2010/12/31 10:54, MG wrote:
    > The attorney that set up my Trust papers gave me a receipt and said it was
    > tax deductible.
    > Does this type of deduction fall under the 2% limitation rule?
    > Is there a particular place on the forms where must be entered?



    Personal legal expenses, such as creating a will or "living" trust, are
    not deductible.

    Here's what is deductible, according to Pub 529:

    "You can usually deduct legal expenses that you incur in
    attempting to produce or collect taxable income or that you
    pay in connection with the determination, collection, or
    refund of any tax."

    So if the creation of your trust was for the purpose of generating
    current taxable income, then some of the expense might be deductible, as
    long as it is stated separately from any other legal expenses of the
    trust. In that case, the expense would go on the trust income tax
    return, Form 1041.

    -Mark Bole

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Mark Bole, Dec 31, 2010
    #3
  4. MG

    Pico Rico Guest

    "Stuart A. Bronstein" <> wrote in message
    news:Xns9E5F750ADA26Dspamtraplexregiacom@130.133.4.11...
    > "MG" <> wrote:
    >
    >> The attorney that set up my Trust papers gave me a receipt and
    >> said it was tax deductible.
    >> Does this type of deduction fall under the 2% limitation rule?
    >> Is there a particular place on the forms where must be entered?

    >
    > Actually your attorney is only partly right. To the extent what he
    > did for you was tax planning, it is deductible. The portion dealing
    > with estate planning (other than tax planning) is not.



    I know this is true, but where do you draw the line between tax planning and
    estate planning? For example, if it weren't for death taxes, I would not
    do any estate planning, just write a will or a do it yourself trust to avoid
    probate. But the real estate planning I will need is due to the existence
    (now and then) of death taxes.

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Pico Rico, Dec 31, 2010
    #4
  5. MG

    Mark Bole Guest

    On 2010/12/31 11:30, Stuart A. Bronstein wrote:
    > "MG"<> wrote:
    >
    >> The attorney that set up my Trust papers gave me a receipt and
    >> said it was tax deductible.
    >> Does this type of deduction fall under the 2% limitation rule?
    >> Is there a particular place on the forms where must be entered?

    >
    > Actually your attorney is only partly right. To the extent what he
    > did for you was tax planning, it is deductible. The portion dealing
    > with estate planning (other than tax planning) is not.
    >


    Upon reading Stu's reply, I found the following document which
    elaborates some of the conditions for deductibility:

    http://www.epcchattanooga.org/Chatt...Wills & Trusts -- When are Fees Deductibl.doc

    (if the above link doesn't work, go to www.epcchattanooga.org and search
    the document library under "Wills & Trusts").

    The key in all cases is to accurately break out the tax-planning related
    costs from other personal costs. For a revocable trust ("living
    trust"), such expenses will end up decreasing your taxable income if you
    itemize on Schedule A and then only to extent the expenses exceed 2% of
    your AGI.


    -Mark Bole

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Mark Bole, Dec 31, 2010
    #5
  6. In article <iflbg3$m9r$-september.org>,
    Pico Rico <> wrote:
    >
    >"Stuart A. Bronstein" <> wrote in message
    >news:Xns9E5F750ADA26Dspamtraplexregiacom@130.133.4.11...
    >> "MG" <> wrote:
    >>
    >>> The attorney that set up my Trust papers gave me a receipt and
    >>> said it was tax deductible.
    >>> Does this type of deduction fall under the 2% limitation rule?
    >>> Is there a particular place on the forms where must be entered?

    >>
    >> Actually your attorney is only partly right. To the extent what he
    >> did for you was tax planning, it is deductible. The portion dealing
    >> with estate planning (other than tax planning) is not.

    >
    >
    >I know this is true, but where do you draw the line between tax planning and
    >estate planning? For example, if it weren't for death taxes, I would not
    >do any estate planning, just write a will or a do it yourself trust to avoid
    >probate. But the real estate planning I will need is due to the existence
    >(now and then) of death taxes.



    It's really not your decision to allocate how much the att'y charged
    for each service.


    The att'y's invoice should do that.
    --

    ArtKamlet at a o l dot c o m Columbus OH K2PZH

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Arthur Kamlet, Dec 31, 2010
    #6
  7. "Pico Rico" <> wrote:

    >> Actually your attorney is only partly right. To the extent
    >> what he did for you was tax planning, it is deductible. The
    >> portion dealing with estate planning (other than tax planning)
    >> is not.

    >
    > I know this is true, but where do you draw the line between tax
    > planning and estate planning? For example, if it weren't for
    > death taxes, I would not do any estate planning, just write a
    > will or a do it yourself trust to avoid probate. But the real
    > estate planning I will need is due to the existence (now and
    > then) of death taxes.


    Personally, I determine what I would have charged for planning that
    included no tax issues at all, compared with the cost with tax
    planning. It's generally between a third and a half, seems to me.

    --
    Stu
    http://downtoearthlawyer.com

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Stuart A. Bronstein, Dec 31, 2010
    #7
  8. MG

    dpb Guest

    Arthur Kamlet wrote:
    ....

    > It's really not your decision to allocate how much the att'y charged
    > for each service.
    >
    > The att'y's invoice should do that.


    Only invoice(s) I ever got were hrsXrate=invoiced total for the overall
    work.

    --

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    dpb, Dec 31, 2010
    #8
  9. MG

    Pico Rico Guest

    "Stuart A. Bronstein" <> wrote in message
    news:Xns9E5F7E0B23709spamtraplexregiacom@130.133.4.11...
    > "Pico Rico" <> wrote:
    >
    >>> Actually your attorney is only partly right. To the extent
    >>> what he did for you was tax planning, it is deductible. The
    >>> portion dealing with estate planning (other than tax planning)
    >>> is not.

    >>
    >> I know this is true, but where do you draw the line between tax
    >> planning and estate planning? For example, if it weren't for
    >> death taxes, I would not do any estate planning, just write a
    >> will or a do it yourself trust to avoid probate. But the real
    >> estate planning I will need is due to the existence (now and
    >> then) of death taxes.

    >
    > Personally, I determine what I would have charged for planning that
    > included no tax issues at all, compared with the cost with tax
    > planning. It's generally between a third and a half, seems to me.



    My point is but for the tax planning effort, I could do the will or simple
    trust myself at no cost.

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Pico Rico, Dec 31, 2010
    #9
  10. dpb <> wrote:
    > Arthur Kamlet wrote:
    > ...
    >
    >> It's really not your decision to allocate how much the att'y
    >> charged for each service.
    >>
    >> The att'y's invoice should do that.

    >
    > Only invoice(s) I ever got were hrsXrate=invoiced total for the
    > overall work.


    Then none of it's deductible.

    --
    Stu
    http://downtoearthlawyer.com

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Stuart A. Bronstein, Dec 31, 2010
    #10
  11. "Pico Rico" <> wrote:

    >> Personally, I determine what I would have charged for planning
    >> that included no tax issues at all, compared with the cost with
    >> tax planning. It's generally between a third and a half, seems
    >> to me.

    >
    > My point is but for the tax planning effort, I could do the will
    > or simple trust myself at no cost.


    Trusts do a whole lot more than avoid taxes. They avoid probate,
    they allow for keeping control over gifts in a way that wills just
    can't. None of those are tax or income producing issues.

    If you could get a motorcycle to get around, but decide on a car
    because you don't want to get rained on, is the excess cost
    deductible? Sorry, but no.

    --
    Stu
    http://downtoearthlawyer.com

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Stuart A. Bronstein, Dec 31, 2010
    #11
  12. MG

    Mark Bole Guest

    On 2010/12/31 14:37, Pico Rico wrote:

    >>> I know this is true, but where do you draw the line between tax
    >>> planning and estate planning? For example, if it weren't for
    >>> death taxes, I would not do any estate planning, just write a
    >>> will or a do it yourself trust to avoid probate. But the real
    >>> estate planning I will need is due to the existence (now and
    >>> then) of death taxes.

    >>
    >> Personally, I determine what I would have charged for planning that
    >> included no tax issues at all, compared with the cost with tax
    >> planning. It's generally between a third and a half, seems to me.

    >
    >
    > My point is but for the tax planning effort, I could do the will or simple
    > trust myself at no cost.
    >


    You have a valid point, AFAIC. Along those lines, here is an article
    from earlier this year by a Texas law school professor which proposes
    "No Deductions for Tax Planning And Controversy Costs".

    http://www.utexas.edu/law/faculty/calvinjohnson/TaxPlanning.pdf

    This is part of the Shelf Project (http://www.taxshelf.org/wiki/Main_Page).

    From the abstract:

    "The law gives a negative tax or subsidy to tax
    planning and controversy work, because the costs of
    that work are generally deductible. But the return
    from the investment, in the form of less tax to be
    paid, is not taxed."

    -Mark Bole

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Mark Bole, Dec 31, 2010
    #12
  13. MG

    Pico Rico Guest

    "Stuart A. Bronstein" <> wrote in message
    news:Xns9E5F9A509D556spamtraplexregiacom@130.133.4.11...
    > "Pico Rico" <> wrote:
    >
    >>> Personally, I determine what I would have charged for planning
    >>> that included no tax issues at all, compared with the cost with
    >>> tax planning. It's generally between a third and a half, seems
    >>> to me.

    >>
    >> My point is but for the tax planning effort, I could do the will
    >> or simple trust myself at no cost.

    >
    > Trusts do a whole lot more than avoid taxes. They avoid probate,
    > they allow for keeping control over gifts in a way that wills just
    > can't. None of those are tax or income producing issues.
    >
    > If you could get a motorcycle to get around, but decide on a car
    > because you don't want to get rained on, is the excess cost
    > deductible? Sorry, but no.



    Either you miss my point, or I am confused by what you have said.

    I KNOW that trusts do a number of things. I can create a trust to avoid
    probate, control assets, determine where the assets go (eventually), etc.
    But to the extent I wish more clever tax guidance, that is why I might hire
    you. That being the case, isn't all that I hire you for, i.e. more clever
    tax guidance, deductible?

    And, I think it may have been lost in the thread earlier, but is such
    deductibility subject to the 2% AGI threshold?

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Pico Rico, Dec 31, 2010
    #13
  14. "Pico Rico" <> wrote:
    > "Stuart A. Bronstein" <> wrote
    >> "Pico Rico" <> wrote:
    >>>
    >>> My point is but for the tax planning effort, I could do the
    >>> will or simple trust myself at no cost.

    >>
    >> If you could get a motorcycle to get around, but decide on a
    >> car because you don't want to get rained on, is the excess cost
    >> deductible? Sorry, but no.

    >
    > Either you miss my point, or I am confused by what you have
    > said.


    My point was that only the tax planning part is deductible. Just
    because you have to pay more than you might to get the tax planning
    part among other features, that doesn't make the non-tax-planning
    part deductible.

    > I KNOW that trusts do a number of things. I can create a trust
    > to avoid probate, control assets, determine where the assets go
    > (eventually), etc. But to the extent I wish more clever tax
    > guidance, that is why I might hire you. That being the case,
    > isn't all that I hire you for, i.e. more clever tax guidance,
    > deductible?


    If all you want to do is avoid what might be called the marital
    penalty in the estate tax, you don't need a lawyer or a trust for
    that. Just write your own will and leave your half of the marital
    estate to your kids and bypass your wife. That doesn't cost
    anything.

    When you get a trust to do the same thing, it also has non-tax
    benefits that you can't get without a trust - e.g. having the
    spouse able to control and get income and principal from the trust.
    You can't deduct for the non-tax benefits even though the tax
    issues may be the primary ones on your mind.

    > And, I think it may have been lost in the thread earlier, but is
    > such deductibility subject to the 2% AGI threshold?


    According to the article Mark linked to, it is subject to the
    threshold. I don't do returns, so I don't have specific knowledge
    on this issue.

    --
    Stu
    http://downtoearthlawyer.com

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Stuart A. Bronstein, Dec 31, 2010
    #14
  15. MG

    dpb Guest

    Stuart A. Bronstein wrote:
    > dpb <> wrote:
    >> Arthur Kamlet wrote:
    >> ...
    >>
    >>> It's really not your decision to allocate how much the att'y
    >>> charged for each service.
    >>>
    >>> The att'y's invoice should do that.

    >> Only invoice(s) I ever got were hrsXrate=invoiced total for the
    >> overall work.

    >
    > Then none of it's deductible.


    They'll have to come and get it then... :)

    --

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    dpb, Dec 31, 2010
    #15
    1. Advertisements

Want to reply to this thread or ask your own question?

It takes just 2 minutes to sign up (and it's free!). Just click the sign up button to choose a username and then you can ask your own questions on the forum.
Similar Threads
  1. Raymond
    Replies:
    4
    Views:
    776
    Dan Evans
    Jan 28, 2004
  2. CBres77376

    Living Trust:trust return

    CBres77376, Apr 7, 2004, in forum: Tax
    Replies:
    2
    Views:
    433
    Dan Evans
    Apr 8, 2004
  3. Replies:
    1
    Views:
    1,525
    wsullvan
    Mar 23, 2012
  4. jba
    Replies:
    23
    Views:
    3,567
  5. eric

    VEMMA----Creation health, creation wealth

    eric, Feb 19, 2010, in forum: Microsoft Money UK
    Replies:
    0
    Views:
    926
Loading...

Share This Page