Fort Myers residents, self-dealing and estate administration

A recent revenue ruling issued by the Internal Revenue Service (IRS) has caught the attention of many estate planners in the Fort Myers’ area. The ruling concerned an individual who had sold an interest in his company to a trust for a note. Under his will, the man then conveyed the note to several beneficiaries, including a personal foundation. Generally, the IRS views such transactions as “self-dealing,” which may trigger an excise tax.

Fortunately, there is an estate administration exception to the IRS’ web of regulations. Satisfying this safe harbor, of course, is no sure thing. In this case, for instance, the IRS determined, after a lengthy review, that the executor’s power to contribute assets from the estate and the note to the company, the receipt of consideration by the estate of membership interest in the company and the distribution of assets to the foundation met the exception’s requirements.

The complexity of the transaction and resulting ruling, while good for this particular individual, provides little assurances to others seeking to follow in his footsteps. Each determination involves specific facts and circumstances, which may push the IRS in one direction or another.

To be sure, your estate plan can manage these legal issues, counsel from an experienced attorney is a must. The number of probate issues which will inevitably crop up during the administration of and estate can be mind-boggling. These issues, including issues involving the IRS, can be avoided or limited by careful planning. Those interested in learning more about tax implications and transactions involving an estate are encouraged to contact their local Lee County estate attorney.

Source: Wealth Management, “Avoid Violating Self-Dealing Rules,” Julie Chu, Dec. 1, 2014