What have we learned from this difficult year, and what should we do going forward?
A. Do you have the proper health care documents in place, in case you are ill?
The COVID pandemic has necessitated new terms to living wills and health care proxies, including:
(1) distinguishing between a ventilator to help a patient battle Coronavirus, versus life support, and
(2) authorization to communicate with medical professionals via Zoom, FaceTime, etc.
B. Have you updated your trust(s) and will?
Year-end is a good time to reflect upon your estate wishes, whether they are current and whether your survivors will be able to inherit efficiently and privately. To this end, we offer the following questions to guide you:
- Do you have a revocable living trust for your successor to quickly take over managing your assets without court intervention?
- Are your appointments (executors, trustees, guardians, etc.) up to date?
- Have there been any significant life changes, such as births, deaths, marriages, etc.?
- Have your assets/net worth changed significantly, for better or worse?
- Have you sold your business, taken on investors, reached a vesting event?
- Has there been a change in your marital status or the marital status of your child(ren) or other beneficiaries?
- Have you become involved in a new business venture, LLC, partnership or investment (which might also give rise to asset protection issues)?
- Have you addressed your survivors inheriting your retirement accounts, in light of the new rules applicable to beneficiaries who inherit retirement accounts?
- Have you moved to a new state?
- Because of the gap between the federal and state estate tax exemptions, it is important to revisit trust documents because funding trusts with a dollar amount greater than a state exemption amount (e.g., to the maximum federal exemption) could trigger additional state estate tax. We have assisted clients with this issue in light of recent tax law changes.
C. If you have received any PPP monies, are you compliant?
D. If you are a landlord or a tenant, have you looked into renegotiating your lease(s)?
E. Have you moved recently, or are you working from home?
The pandemic has resulted in many people leaving metropolitan areas and high-tax jurisdictions and no longer commuting to offices. Be prepared for a residency tax audit. High-tax jurisdictions are known to challenge claims that taxpayers have severed ties and are living and working in low-tax jurisdictions.
New York City and New York State are particularly aggressive in auditing the tax returns of people who claim to have moved to a different state. In an audit, it will be up to the taxpayer to prove that he or she no longer has a tax nexus to the former state. Simply buying property in a new state is not enough. There are many factors that are used to establish tax residency. In a 2018 lawsuit, a taxpayer was found to still have a New York residence even though the taxpayer spent more than 183 days at his condo in Florida.
We can assist you in implementing a plan to support your new residency and break from your high tax state. We can also defend you in an audit from the state that is challenging your new residency and seeks to continue to tax you.
Please contact us to discuss any of the above issues.