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Every Fourth of July, we celebrate a simple but powerful idea: that people have the right to determine their own destiny. We celebrate the courage of individuals who rejected someone else’s rules and insisted on making their own. And then, statistically speaking, most of us go home and allow our state legislature to make some of the most important decisions of our lives.

I have written before about the horrors of intestacy and what happens when someone dies without a Will or Trust in place and state statutes determine who gets what. If you missed that piece, the short version is this: it is not pretty. The state does not know your family. It does not know that you were estranged from your brother, that your eldest child has struggled with addiction, that your closest friend was more like a sister to you than your actual sister, or that you wanted your vintage record collection to go to the neighbor who actually appreciates it. The state has a formula, and it applies that formula whether it fits your life or not. There are no deviations or considerations based upon your circumstances, just the formula.

In many cases, intestacy can also increase the time, expense, and court involvement required to settle an estate, creating additional burdens for the family members left behind. This Independence Day, I want to make a simple but serious case: declaring your independence from intestacy is one of the most meaningful things you can do for the people you love.

What Intestacy Actually Means

Intestacy is the legal term for dying without a valid Estate Plan. Every state has intestacy laws, a predetermined hierarchy that dictates who inherits your assets when you have not left instructions of your own. In most states, that hierarchy looks something like this: surviving spouse first, then children, then parents, then siblings, and so on down the family tree. Sounds reasonable enough, until you consider the complications that real life introduces.

What if you are unmarried but have been with your partner for fifteen years? Intestacy laws in most states will give that partner nothing. What if you have children from a prior relationship and a current spouse? The intestacy formula may divide your estate in ways that leave your spouse unable to stay in the family home. What if your closest living relative is someone you have not spoken to in a decade? Under intestacy, they may inherit everything. Intestacy does not account for the texture of your actual life. It accounts only for legal relationships, and even then, only in the order the legislature decided upon rather than the order that you would choose.

The Freedoms a Proper Estate Plan Gives You

Just as the Declaration of Independence was not merely a rejection of British rule but an affirmative statement of rights and values, a proper Estate Plan does more than reject intestacy. It serves as an affirmative declaration of your own wishes and values.

With a comprehensive Estate Plan, you have the freedom to:

Leave your assets to whomever you choose. You can leave assets to your college roommate, your church, your favorite charity, your grandchildren, or a mix of all of them. You can determine the proportions they receive and whatever timeline and conditions make sense for your family.

Name a guardian for your minor children. For many parents, this is the single most important decision in their Estate Plan. If you do not make that choice, a judge may ultimately be asked to determine who will raise your children.

Choose who administers your estate. The person who settles your affairs after your death should be organized, trustworthy, and capable of handling the task with care. Intestacy does not give you that choice. A Will or Trust does.

Protect a surviving spouse or partner. A properly drafted Trust can ensure that your spouse has access to income and assets during their lifetime while also protecting the remainder for children or other beneficiaries. Intestacy cannot achieve this balance.

Plan for incapacity as well as death. A comprehensive Estate Plan includes a Durable Power of Attorney and an Healthcare Power of Attorney.  These documents give trusted individuals the legal authority to make financial and medical decisions on your behalf if you are unable to do so yourself. Intestacy addresses only what happens after death. It offers no guidance at all if you are alive but unable to manage your own affairs.

The Most Common Reason People Put Estate Planning Off

People delay creating an Estate Plan for a myriad of reasons. Sometimes it’s the perceived cost, other times it’s the anticipated complexity.  For some, a belief that they do not need an Estate Plan yet, that only older individuals, wealthy individuals, or settled individuals need an Estate Plan.

The Declaration of Independence was not signed by people whose lives were settled. It was signed by people who understood that uncertainty is precisely the reason to act, not a reason to wait. You do not need to be wealthy to need an Estate Plan. You need only have people in your life about whom you care. You need to have opinions about what should happen to your belongings. You need to have a preference about who makes decisions for you if you cannot make them yourself. If any of those things are true, then you need an Estate Plan.

A Declaration Worth Making

The Founders did not leave the future of the nation to default rules and crossed fingers. They wrote it down. They were specific. They argued about the language, revised it repeatedly, and ultimately put their intentions in writing. Your Estate Plan does not require that level of drama. But it does require a decision: the decision to declare, clearly and legally, what you want to happen to your assets, your dependents, and your legacy when you are no longer here to speak for yourself.

This Fourth of July, between the potato salad and the fireworks, consider making that declaration. I can help you create a plan that reflects your actual life, your actual family, and your actual wishes, not the state’s best guess at what those might be. The question is not whether someone will make these decisions. The question is whether it will be you or the state. Freedom, as it turns out, requires a little paperwork.

 Shannen Doherty faced her illness with the same determination she brought to everything else. She died on July 13, 2024, at the age of 53, leaving behind legions of fans and, as it turns out, a cautionary estate planning tale worth telling.

What happened after Shannen’s death has less to do with her Estate Plan and more to do with the behavior of those left behind to honor it. As any experienced Trusts and Estates practitioner will tell you, the best-drafted plan in the world can still end up in litigation if the wrong people are involved. Shannen’s story proves that.

Shannen filed for divorce from her husband of eleven years, photographer Kurt Iswarienko, in 2023. By her own account, the marriage ended when she discovered that Iswarienko had been carrying on an affair for two years.  She made this discovery just before undergoing brain surgery. “I went in after I found out that my marriage was essentially over,” she shared on her podcast. “At the end of the day, I just felt so incredibly unloved by someone I was with for 14 years, by someone I loved with all my heart.”

Shannen pushed through the divorce proceedings even as her health declined. She signed the divorce settlement on July 12, 2024, the day before she died. Iswarienko signed on July 13, the day of her death. The divorce was finalized just after she died.

The timing matters enormously from an estate planning perspective. Had Shannen died before signing that settlement agreement, the divorce proceedings would have terminated, potentially leaving Iswarienko with rights to a spousal share of her estate. By signing when she did, Shannen protected her estate and ensured that the settlement she negotiated would govern the division of their assets. It was, in every sense of the word, a final act of advocacy for herself and the people she loved.

Shannen had no children. Upon her death, the assets of her estate, including her beloved Malibu home, flow to her mother, Rosa. Those close to Shannen described that home as her personal sanctuary.  She purchased it in 2004 for $2.56 million and renovated it after it was damaged in the 2018 Woolsey fire.  The home was listed for sale in 2025 for $9.5 million and has since been reduced to $8.7 million.

Christopher Cortazzo, a real estate agent and longtime friend who first met Shannen in the 1990s when she came to view one of his properties, manages that listing and serves as Trustee of the Shannen Doherty Family Trust.  Cortazzo has been fighting to enforce the terms of Shannen’s divorce settlement on behalf of her estate. “When you’re a notable figure, your home becomes your sanctuary,” Cortazzo told the Wall Street Journal. His devotion to carrying out Shannen’s wishes speaks to one of the most important lessons her story offers.

The divorce settlement contained several specific provisions designed to equitably divide the couple’s assets. Among them:

Iswarienko was to sell the couple’s $1.5 million home in Dripping Springs, Texas, and divide the net proceeds with Shannen’s estate equally. Instead, he appears to be living in the home and has refused to list it for sale.

He was required to return Shannen’s personal property to her estate. He has refused.

He was required to produce an inventory of his photographs of Shannen and provide copies of all such photographs no later than September 1, 2024. As of the November 2025 petition, he has failed to do that.

He was required to buy out Shannen’s share of a Mooney M-20 airplane for $100,000 and pay that sum to her estate within five business days of the sale. He made the sale in August 2024 but withheld over $50,000, leaving the estate fifteen months without the funds owed.

On November 24, 2025, Cortazzo, in his capacity as Trustee of the Shannen Doherty Family Trust, filed a petition accusing Iswarienko of failing to fulfill these monetary and other obligations. Notably, Iswarienko’s own attorney withdrew from the case in September 2025, listing the very Texas home that Iswarienko was supposed to sell as his last known address.

Shannen’s situation offers several important takeaways for anyone creating or updating an Estate Plan.

First, update your plan when your circumstances change. Divorce is one of the most significant life events that should trigger an immediate review of your Estate Plan. Many people fail to update their beneficiary designations, trustee appointments, and documents when a marriage ends or begins to unravel. While the full contents of Shannen’s Estate Plan are not public, she did have the foresight to establish the Shannen Doherty Family Trust – a vehicle that has given her estate both the legal standing and the mechanism to pursue enforcement of her rights after her death.

Second, name someone you truly trust as your Trustee. The choice of who serves as Trustee drives an Estate Plan more than just about anything else. Shannen named a decades-long friend – someone who loved her, knew her wishes, and has proven himself willing to fight for them. A qualified Trustee doesn’t just sign documents; they protect the integrity of your plan when you can no longer do it yourself. If you have named a family member or friend who may not be up to that task, or whose loyalty might be divided, now is the time to reconsider that choice.

Third, be precise in your legal documents. The divorce settlement in this case contained specific deadlines, specific dollar amounts, and specific obligations. That level of detail is exactly what has allowed Shannen’s estate to identify each instance of non-compliance and bring a petition to enforce the settlement. Vague agreements produce vague results. Whether in a Trust, a Will, or a settlement agreement, precision protects the people you love.

Fourth, plan for the people who will actually receive your estate.  Like many individuals, Shannen had no children and constructed her Estate Plan accordingly. Too often, people assume that if they are unmarried or do not have children, they do not need an Estate Plan. Often, attorneys create plans designed around spouses and children without considering what happens if those individuals predecease them. A comprehensive Estate Plan accounts for your actual circumstances, not your assumed ones. If you are single, divorced, or childless, your plan requires just as much care and attention, arguably more, than anyone else’s.

Shannen Doherty spent the last years of her life fighting for her health, her dignity and for the settlement that would protect her estate and the mother she left behind. She fought to the very end. It is a shame that the fight continues. If Shannen’s story resonates with you, whether because you are navigating a divorce, facing a health challenge, or simply realizing that your Estate Plan needs attention, now is the time to act. I can help you create or update a plan that reflects your actual life, names the right people to carry it out, and gives those you love the best possible chance of honoring your wishes. Don’t wait for the documents to sign themselves.

I often have meetings that stick in my mind. Not because the meetings are unusual, but because of how easy they were to misunderstand and how much trouble that misunderstanding can create downstream.

One meeting involved working through a plan for a blended family. The goal, as it so often is in these situations, was to “treat everyone equally.” It sounds simple and well-intentioned, but it can produce disastrous consequences. Clients tend to hold onto that idea with remarkable firmness, even when the proposed plan will almost certainly not produce the result they intend.

The other meeting involved me reviewing an estate plan that another attorney prepared and that client had done something I always hope clients will do: read the documents carefully. Afterward, the client returned with a genuinely smart question about the trust language. If the trust becomes “irrevocable” at the first spouse’s death, how can the surviving spouse still amend or revoke it later? The client was not being difficult. The client was paying attention.

Read in isolation, the language looked contradictory

These were two very different questions, but both pointed to the same underlying issue: estate planning documents sometimes say one thing while meaning something far more nuanced. When clients, or even attorneys, take the language at face value without understanding the larger structure, the plan can begin to unravel in unanticipated ways.

Let me take each one in turn.

Equal Does Not Always Mean Equal

“Equal” sounds fair. It sounds right. In a blended family context, it often feels like the only answer that keeps the peace. Yet in practice, the word can obscure a wide range of outcomes that nobody would describe as fair after the fact.

Here is what I see happen more often than not. After the first spouse dies, everything stays in one pot, even when the documents contemplated something different. The surviving spouse continues living life. The spouse may remarry. Relationships with children may strengthen or weaken over time. With the best of intentions, the surviving spouse may make decisions about assets that gradually shift the balance. Then, years later, the children of the first spouse discover that “equal” produced something that looks nothing like equal at all. In some cases, it produced nothing.

The issue is not always poor drafting. Often, the problem is that the plan relied on the concept of equal treatment without fully accounting for how life unfolds after the first death. The documents did exactly what they were written to do. The plan simply failed to account for human behavior, and that is often the hardest variable to predict. Intentional Estate Planners build structure into the plan from the beginning.

That often means creating a Credit Shelter Trust (also called a Bypass Trust, B Trust, or Family Trust) at the first death, which I always include in every Family trust that I prepare. The Credit Shelter Trust holds a portion of the assets for the benefit of the surviving spouse while protecting the remainder for the children of the first marriage. The trust can distribute income to the surviving spouse and, depending on the drafting, may also distribute principal for health, education, maintenance and support. But the core of the trust remains intact and ultimately passes to the intended beneficiaries at the second death, regardless of what happens in the meantime.

This is not about distrust. It is about protecting everyone, including the surviving spouse, from the very real pressures and complications that often arise in blended family situations. Equal results require intentional structure. They do not happen automatically just because a document says “equally.”

When “Irrevocable” Does Not Mean What It Sounds Like

Now let’s look at the trust language question, because it is genuinely an excellent one, and I suspect it confuses more clients than we realize.

A revocable living trust typically allows the grantor, or in a joint trust situation, both spouses, to amend or revoke the trust at any time during life. That flexibility is one of the defining features of a revocable trust. Then the first spouse dies, and the trust contains language stating that the trust, or a portion of it, becomes irrevocable. The client reads that language and asks: if the trust is irrevocable, why does the next section say the surviving spouse can still amend or revoke it?

The answer lies in understanding that, after the first death, the trust no longer operates as one undivided entity. Most well-drafted joint revocable trusts split into separate sub-trusts at the first death. You may see them labeled as the Survivor’s Trust, the Bypass Trust, or Credit Shelter Trust, and sometimes a Marital Trust or QTIP Trust (Qualified Terminable Interest Property Trust). Each sub-trust operates under its own rules.

The Bypass Trust typically becomes irrevocable at the first death. It is funded with assets up to the applicable exclusion amount (the federal Applicable Exclusion Amount, which for 2026 is $15 million per person). Once that trust becomes irrevocable, it stays that way. The surviving spouse may benefit from it, but cannot change its terms or redirect where those assets pass at the second death.

The Survivor’s Trust operates differently. It generally holds the surviving spouse’s own share of the marital or community assets. Because those assets belong to the surviving spouse, that portion usually remains amendable and revocable. That is not a contradiction. That is the plan functioning exactly as designed.

What initially looks inconsistent is actually two separate trust portions operating under two different sets of rules. The irrevocability applies to a specific sub-trust, serving a specific purpose, during a specific phase of administration. It is not a blanket statement about the entire trust structure moving forward. This is precisely why the conversation with clients cannot stop at document signing.

Clients need to understand, at least conceptually, what happens when the first spouse dies, what becomes fixed, and what remains flexible. The surviving spouse also needs to understand who controls what, why the plan was structured that way, and what responsibilities come with administering it properly.

The Common Thread

Both of these meetings, the blended family discussion and the irrevocability question, point to something I think about often when it comes to Estate Planning. Estate Planning does not end upon execution of the documents. It continues through administration, through the decisions a surviving spouse makes, and through the way a family interprets and implements the plan over time. The documents create the framework. The success or failure of the plan depends largely on how well the people involved understand that framework.

That means more than just draft carefully. The trust must be explained carefully. Clients need to understand not only what the documents say, but how those documents will function when the time comes: what triggers what, what protects whom, and why language that sounds confusing on the surface often serves an intentional purpose. Clients who understand their plan are far more likely to pause and call before making a decision that could unravel it.

Clients who feel like they merely signed a stack of papers they do not understand are far more likely to unintentionally undermine the plan. They add the surviving spouse as joint owner on everything “to keep it simple,” or they leave the Credit Shelter Trust unfunded because nobody explained that administration required action after the first death.

Two very different conversations led me to the same conclusion. I can put words on paper, that’s easy. Experienced in these matters create plans that actually function in the real world. I try to anticipate how families behave, explain how the structure works, and build provisions designed to carry out the client’s intent long after the ink has dried.

People know that they need to design an Estate Plan, but often look for shortcuts. Those shortcuts come in various forms, from “do-it-yourself” Wills purchased at an office supply store or online, to adding beneficiaries to accounts or deeds. Without consulting a qualified Estate Planning attorney, an individual has no way of knowing the myriad of problems he or she invites by undertaking such matters. For purposes of this article, I will focus on “adding a child to a deed,” although many of the issues apply equally when adding a child or any non-spouse beneficiary to an account. Recently, someone asked me for a synopsis of the issues that arise when an individual “puts a child on the deed.” Several reasons popped into my head immediately; others came a bit later. As the list developed, it occurred to me that this would make a great blog because it’s a question that many Trusts and Estates practitioners address, and many clients wonder. Note that this article focuses on children, but the issues raised apply in any situation in which a non-spouse beneficiary is added to a deed.  Let’s explore the reasons why putting any non-spouse beneficiary on the deed without consulting an experienced Estate Planning attorney leads to more trouble than anything else.

I am often surprised by the client’s nonchalant manner in making the admission. The client framed it as a proactive, cost-saving move, likely the result of some resource indicating that adding a child to the deed avoids probate. It was usually an afterthought and often phrased as something that would help me. Imagine the client’s surprise when I began discussing all the ways in which this well-intentioned move was going to cost the client more money because we needed to undo it. This well-intentioned decision has a way of creating a web of legal, tax, and practical issues that require more damage control than simple Estate Planning.

It Wasn’t Just “Adding a Name” — It Was a Gift

First, this transfer amounts to more than an administrative change of title. It’s a gift as contemplated in the Internal Revenue Code (“Code”) and thus, potentially, subject to gift tax under section 2501. Interestingly, no provision of the Code defines the term “gift,” but the Supreme Court has defined it as “all gratuitous transfers.” Irvine v. United States, 511 U.S. at 232. The Code refines the concept as any transfer for “less than full and adequate consideration in money or money’s worth.” The question then becomes whether a United States Gift (and Generation-Skipping Transfer) Tax Return Form 709 (“Gift Tax Return”) was filed. Often, it was not.

Many taxpayers assume that if the transfer does not result in a tax liability, then the law does not require them to file a return.  Simply put, that’s not accurate; tax-free transfers may require filing a Gift Tax Return. Further, until the taxpayer files the return, the statute of limitations remains open, meaning that the IRS can assess tax, file a substitute return, and initiate collections for that year indefinitely. Leaving this loop open can raise issues at inopportune times, for example, a sale, an audit, or an estate administration. The fix requires filing a late return at the very least and, depending on the circumstances, may result in taxes and penalties.

Basis Considerations

One of the most commonly overlooked issues when implementing this “strategy” is the impact on income taxes, specifically, the property’s basis. When property passes to a beneficiary at death, it generally receives a step-up in basis, eliminating built-in capital gains. However, when a donor transfers a portion of property to a beneficiary during life, that portion may carry over the donor’s basis, potentially creating significant capital gains tax upon the sale of the property.

That said, the analysis is not always straightforward. In many cases, parents who add children to a deed continue to live in and use the property without paying rent. Depending on the facts, this may result in the entire property being included in the parents’ estate at death, which would restore a full step-up in basis. The outcome requires deep analysis and knowledge of the Code and depends upon the facts and circumstances at the time of the gift and at death. Small differences in the arrangement’s structure and actual use of the property can lead to very different tax results. Thus, what clients believe to be a simple strategy can introduce uncertainty and, in some cases, unintended tax consequences.

New Risks: Creditors, Lawsuits, and Divorce

Once a beneficiary becomes an owner of record, their financial life becomes directly relevant to the property. That means the beneficiary’s creditors, lawsuits, bankruptcy proceedings, and even divorce claims may now reach the home directly. Even if the risk seems remote, it is no longer theoretical. The child’s ownership interest is a real, attachable asset, and a judgment creditor or divorcing spouse may have grounds to pursue it.

This is often one of the more sobering points for clients, particularly those who were trying to protect the home, not inadvertently place it at risk. The home that a parent worked decades to own and pay off can suddenly become entangled in a child’s financial misfortune through no fault of the parent. Experienced Estate Planning attorneys have seen this scenario play out and know the difficulty and expense involved in unraveling this mess.

Control Is No Longer Solely in the Donor’s Hands

Adding children to the title has another consequence that clients consistently underestimate: the parents no longer have unilateral authority over the property. Depending on how the title is held, a sale may require all owners to sign, refinancing may require consent and cooperation from every owner on the deed, and in extreme cases, a child could force a partition action, essentially compelling a sale over the parents’ objection.

Even in functional families, this can create friction. In strained relationships, it can create real obstacles. In situations in which a parent needs to sell or refinance quickly, cooperation may not be forthcoming. What began as a simple gesture of inclusion can become a barrier to the parents’ own financial flexibility.

Medicaid Planning Can Be Impacted

For older clients or those concerned about long-term care, this strategy creates yet another layer of complexity. Adding a child to a deed generally constitutes a transfer for less than fair market value, which can trigger a penalty period under Medicaid’s five-year lookback rules. During that penalty period, Medicaid may deny benefits to cover nursing home or long-term care costs,  precisely when they need those benefits the most.

Even if Medicaid planning is not the immediate focus, this is the kind of issue that becomes critically important later, and no one can easily undo it after the fact. The parent who added a child to the deed five years ago “just to be safe” may find that the move has created an unexpected disqualification at the time of greatest need.

The “Fix” Isn’t Quite as Simple as It Sounds

By the time clients arrive in my office with this arrangement already in place, the conversation often turns to unwinding it. A common solution is to deed the property back to the parents.  It’s important to recognize that the “undo” constitutes yet another transfer, one that requires cooperation from the children. Again, there may be gift tax considerations. The parties must document and report the transaction properly. In other words, even the fix requires careful handling and, yes, attorney fees. The shortcut that was supposed to save money has now cost considerably more than a well-drafted Estate Plan would have in the first place.

No Harm Done” Isn’t the Right Lens

One of the most common and frustrating reactions, especially when no sale, refinance, or Medicaid planning is pending, is: “Well, nothing bad has happened yet.” And that’s often true. But the absence of immediate harm doesn’t mean the absence of risk. Many of these issues are latent. They don’t surface until a triggering event: a sale, a death, a lawsuit, a divorce, or a need for long-term care. By then, the available planning opportunities shrink, and the consequences become harder to avoid. When a client arrives confident they have already “taken care of things,” the conversation that follows is rarely brief, and almost never ends with the conclusion that everything is fine. A well-intentioned decision made years earlier now requires careful attention, explanation, and often correction.

A Better Path Forward

Clients are not wrong to want simplicity or to avoid probate. Those are entirely valid goals. But adding children to a deed is rarely the right tool to achieve them. A well-structured Estate Plan, whether through a Revocable Trust, properly coordinated beneficiary designations, or other techniques, can preserve control during the parent’s lifetime, protect against unnecessary risk, maximize tax efficiency, and ensure the property passes according to the client’s intent. All without the unintended consequences we have explored here.

A comprehensive Estate Plan typically consists of a Revocable Trust, a pour-over Will, a Property Power of Attorney, a Healthcare Power of Attorney, a Living Will, and a Health Insurance Portability and Accountability Act (“HIPAA”) Authorization. These documents work together to provide instructions for what happens both during life and at death, without the risks and complications that informal title transfers create.

What clients often view as a shortcut is, in reality, a detour — one that introduces complexity rather than reducing it. The family home is often the most significant asset a person owns. It deserves the same careful planning that one would apply to any other piece of the Estate Plan. When it comes to something as significant as the family home, the “easy fix” is rarely the right one. Reach out to me to discuss how a proper plan can accomplish your goals without the unintended consequences of simply “putting a child on the deed.”

Each year, the Internal Revenue Service (“IRS”) publishes its “Dirty Dozen” list of the most notorious tax scams from the prior year. The Security Summit, a partnership among the IRS, state tax agencies, and the nation’s tax industry, has enacted a broader campaign under which the Dirty Dozen falls. For the nerds reading this blog, March 5, 2026, was “National Slam the Scam Day” and the IRS released the Dirty Dozen on that day to help raise awareness. The list alerts both taxpayers and tax professionals alike of the most common tax cons during the last year. The scams run the gamut from impersonating IRS officials to creating fake charities. Let’s break the Dirty Dozen down.

Perhaps unsurprisingly, six of the twelve scams making their way onto the Dirty Dozen focus on technology and personal information grabs. The first comes in the form of emails, direct messages, and texts that appear to be from the IRS. These communications frequently contain alarming language and QR codes directing taxpayers to fake websites to verify accounts, enter personal information, or claim refunds. Communications arrive in the form of a text, called “smishing” or an email called “phishing” and ask the taxpayer to provide personal information, allowing the scammer to steal the taxpayer’s identity. The IRS always initiates contact through mail, not email, text or direct message and warns taxpayers against clicking links or opening attachments in unexpected messages.

Tax professionals and businesses need to worry about the eleventh of the Dirty Dozen: “spearphishing” which is a phishing attempt targeted at a specific organization or individual. Tax professionals and businesses receive “new client” and “document request” emails that contain malicious links or attachments. A successful spearfishing attempt gives the scammer client data allowing the thief to file fraudulent tax returns, among other things, or gain access to the taxpayer’s or organization’s systems. The IRS warns everyone to exercise caution when responding to email requests, especially those requesting sensitive information, coming from mismatched or unfamiliar sender addresses, urgent payment demands, or links to non-IRS.gov websites, all of which likely indicate a scam. If a scammer accesses a hacked email account, they can then locate a genuine email from a prior victim’s account sent to their tax professional.

AI-enabled IRS impersonators using telephone robocalls, mimicking voices, and spoofing caller IDs nab the number two spot on the Dirty Dozen list. Unfortunately, as AI becomes smarter, these scams will proliferate and continue to evolve. The IRS reminds everyone that it usually contacts taxpayers via mail first and its agents do not leave urgent, threatening, or pre-recorded messages demanding immediate payment or threaten arrest. Further, the IRS reminds taxpayers that they should not rely only on AI-generated responses to tax questions and to verify information, calculations, or advice provided by AI.

The fifth scam involves scammers who steal personal information and use it to gain unauthorized access to the taxpayer’s IRS online account. These scammers may also pose as helpers during the account setup process and collect information then. The online account gives access to valuable tax information about the taxpayer and requires no assistance for creation. The IRS encourages each individual taxpayer to establish their own account. Anyone with access to the account could misuse the information found in the account. Taxpayers can create these accounts on their own directly through the IRS website and should not enlist the help of an unsolicited third party.

“Ghost preparers” take the number eight spot on the list. While many wonderful preparers exist, watch out for anyone who refuses to sign on the dotted line, who charges a fee based upon the amount of the refund, or who neglects to provide their IRS Preparer Tax Identification Number (“PTIN”). Any of those behaviors could signal a ghost preparer and taxpayers should stay away from them. Taxpayers should only sign a completed return and remember that regardless of preparation of the return, the taxpayers remain responsible for the information submitted. The IRS urges taxpayers to use trusted tax professionals for help and to avoid signing incomplete or blank returns.

Any list of fraudulent schemes would be incomplete without mentioning social media, which is the sixth and final of the technology-related and information-grabbing scams. The IRS notes that social media platforms often circulate inaccurate and misleading information, often using the term “tax hacks.” These hacks encourage taxpayers to file incorrect returns or claim credits for which they do not qualify. This leads to delays, audits, and civil or criminal penalties. Remember the old saying, if something sounds too good to be true, it usually is.

Two separate tax credits make the Dirty Dozen list. First, the IRS notes an increase in abuse of Form 2439 – Notice to Shareholder of Undistributed Long-Term Capital Gains. This form allows certain shareholders to claim a refundable credit for taxes paid on undistributed capital gains. Scammers overstate those gains or fabricate them altogether, either using organizations that don’t qualify or using real organizations without having an appropriate interest in the organization. The bogus “self-employment tax credit” and second of the two tax credits takes the number seven spot on the list. Scammers mislead taxpayers about this credit and encourage inaccurate filings that generate improper refunds. The IRS warns taxpayers to use trusted professionals rather than social media to determine their eligibility for tax credits.

Bogus charities pose a tremendous problem, especially after a natural disaster or crisis strikes. Number three on the list relates to scammers who set up fake organizations to receive contributions from unsuspecting taxpayers. These scams are particularly egregious in nature because they take advantage of tragedy and people’s generosity. The individuals running the fake charities collect personal information and exploit the taxpayers further. Remember that charitable deductions count only if given to qualified tax-exempt entities recognized by the IRS when accompanied by contemporaneous written acknowledgment. You can find information regarding charitable organizations through resources such as Charity Navigator. Number nine on the list also involves charities. Promoters of this scam promise to eliminate or substantially reduce tax liability. They achieve this by inflating the value of non-cash items donated using syndicated conservation easements or artwork. The IRS exhorts taxpayers to file accurate returns with certified appraisals and substantiation.

Overstated withholding schemes take the number ten spot on the list. This strategy uses any one of several Forms: Forms W-2 and W-2G, Forms 1099R, 1099-NEC, 1099-DIV, 1099-OID, and 1099-B, as well as the Alaska Permanent Fund Dividend, Schedule K-1 with Withholding Reported, and Unspecified Source of Withholding Credit Claimed and encourages taxpayers to inflate withholding amounts (often described as “other withholding”). Participating in this scheme leads to delays, penalties, and enforcement actions.

Fraudulent “Offer in Compromise” (“OIC”) mills sit at number twelve on the list. The IRS offers OIC to people unable to pay their tax liabilities as a way to settle their debt. These programs play an important role in our tax system and require that the taxpayers desiring to avail themselves of such settlement meet certain qualifications. Mills promoting the OIC mislead taxpayers into thinking that they have a valid OIC with the IRS when they do not, which often costs the taxpayers thousands of dollars. Here’s a link to an online tool that allows taxpayers to check their eligibility: Offer in Compromise Pre-Qualifier tool.

The IRS encourages taxpayers to be wary, avoid sharing data, and to report fraudsters who promote these schemes, as well as those who prepare improper returns. Taxpayers need to protect their sensitive information and exercise caution and common sense both during tax time and throughout the year. Tax professionals can help by notifying their clients of the Dirty Dozen and discussing any issues that worry the client or seem outside the norm. Some of the scams listed in this article have been around for years, while others are new to the list this year. The Dirty Dozen serves as a good reminder to protect confidential information and to stay safe out there.

As I was checking a sports app on an entirely unrelated matter, I stumbled across an article that strayed well outside traditional sports reporting and landed squarely in the world of Estate Planning for family-owned businesses. The headline immediately caught my attention: “How Buss Family Infighting Drove the $10B Sale of the Lakers.” Naturally, I clicked. What followed was a story filled with intrigue, family conflict, and—at its core—an Estate Plan that failed to function as intended.

To understand how we got here, we need to rewind to 1979, when Dr. Gerald Hatten Buss (“Jerry”) paid $67.5 million to Jack Kent Cooke to purchase the Los Angeles Lakers, the Los Angeles Kings, the Forum arena, and a 13,000-acre California ranch. This is the same Lakers franchise that drafted Magic Johnson and won an NBA Championship in his rookie season. Jerry made it clear from the outset that selling the Lakers was never the goal. He famously said that if he had unlimited funds, he would buy the team all over again. That conviction never wavered even during periods of financial strain, in the face of lucrative purchase offers, and as he confronted his own mortality. According to his children, Jerry viewed both them and the Lakers as his legacy. Unfortunately, his intense focus on keeping the team in the family without fully accounting for governance, control, and human dynamics proved fatal to that vision. Just twelve years after his death, the Buss family no longer holds a majority controlling interest in the Lakers. By any reasonable Estate Planning standard, the legacy failed.

Jerry died on February 18, 2013, at age 80, survived by six children: Johnny (60), Jim (57), Jeanie (55), and Janie (53) from his former wife, Joanna, and Joey (32) and Jesse (29) from his longtime partner, Karen Demel. Through a series of family trusts holding Jerry’s 66% ownership interest, each child effectively inherited an 11% interest in the Lakers. Jerry spent significant time crafting an Estate Plan designed to preserve family ownership. The Trust included standard buy-sell provisions, required the acting Trustees, Johnny, Jim, and Jeanie, to support Jeanie as the controlling owner, and operated as a pooled investment vehicle. This meant that upon a sibling’s death, the interest held by that sibling was redistributed among the survivors in a “last-individual-standing” structure. To his credit, Jerry protected his grandchildren by requiring payment of the value of the deceased sibling’s interest in the team to their children, preserving generational wealth. On paper, the plan was sophisticated. In practice, it was unworkable.

Shortly after Jerry’s death, the siblings met to discuss a possible sale. Although he was serving as Executive Vice-President of Operations and controlled the on-court operations for the Lakers, Jim, joined by Johnny were open to selling. Jeanie, named successor controlling owner and President of the Lakers, was not. Because a sale required four of six votes, the proposal stalled. For several years, all six siblings remained involved in the organization. That fragile truce collapsed in February 2017, when Jeanie fired Jim. Jim responded by joining forces with Johnny in an attempt to remove Jeanie from the Board of Directors by calling an annual shareholder meeting. What they failed, or refused, to acknowledge was that the Trust required them, as Trustees, to support Jeanie’s role as controlling owner. Removing her would have violated both the Trust and the Lakers’ bylaws. Jeanie sought and obtained a Temporary Restraining Order. At that point, the structural flaws in Jerry’s Estate Plan were undeniable.

Eight years later, the end came when Jeanie sold all but 17% of the family’s interest in the Lakers. In the interim, tensions festered, relationships deteriorated, and the team struggled. The Trust’s “last-man-standing” provisions only intensified the conflict, as eventual control would pass to the youngest siblings, fueling the older siblings’ desire to sell. Although ownership percentages were equal, control was not. Jeanie held the reins, while the others remained bound by a Trust that limited their influence and options. That’s a recipe for disaster.

This case offers several critical Estate Planning lessons. First, just because a plan achieves the client’s goal doesn’t mean that plan works. Placing one sibling in control of another almost always invites resentment, litigation, or both. I regularly warn clients against this structure. No matter how close a family appears, putting one child in charge of another’s inheritance is a recipe for conflict. Second, Estate Planning demands honest discussion of worst-case scenarios. I have lost count of how often I heard, “That would never happen,” or “My children get along.” I suspect Jerry believed the same. Family, money, and legacy create a volatile combination, especially when that conflict involves a valuable, closely-held business that employs most of the family. Finally, business succession planning requires a clear-eyed assessment of who truly has the temperament and ability to lead. Estate Planning means relinquishing control and trusting others to execute that vision. Failing to plan for friction guarantees instability.

Jerry Buss made several classic Estate Planning mistakes. He failed to prioritize either business success or family harmony. He underestimated the strengths and weaknesses of his children. Finally, he underestimated the impact of his absence. Together, these missteps unraveled the legacy he worked so hard to protect.

Don’t let this happen to your business or your family. Thoughtful, realistic Estate Planning can make the difference between preserving a legacy and watching it unravel.

As an experienced trusts and estates practitioner, I advise that selecting the right Trustee has the potential to make or break a plan. I advise clients regarding the practical impact of the duties of a Trustee:  how they affect relationships with beneficiaries, interactions with family members, and the potential for conflict. These realities often do not become clear until long after the Grantor (individual creating the Trust) has died, at which point changing the Trustee can be difficult or expensive. A Trustee is not merely a name in a document; rather, the Grantor entrusts the implementation and realization of their legacy to the Trustee. If the Trustee lacks proper preparation, temperament, or discipline, the consequences can ripple for years and ultimately lead to failure of the plan. Let’s explore why Trustee selection matters so much and how to make this decision with confidence and foresight.

The Trustee’s role encompasses more than mere administration. The Trustee makes many day-to-day decisions, yet many think of the Trustee as someone who “moves the assets around” or “signs the checks.” That perception ignores a significant part of the role.   Trustees must balance competing beneficiary interests, respond to market fluctuations, handle tax matters and distributions, communicate clearly with beneficiaries—including difficult ones—and know when to bring in professional advisors and how to evaluate them. Trustees operate at the intersection of finance, psychology, and law. Few individuals thrive in all three areas. Discussing this with clients helps them make informed decisions regarding Trustee selection.

Personality and conflict avoidance matter. In practice, the worst conflicts arise not from a lack of legal authority but from human dynamics. Consider common issues that result in litigation, a Trustee who resents the beneficiaries, a Trustee who has a beneficial interest under the Trust and struggles with impartiality, a family Trustee lacking financial literacy, or co-Trustees who cannot agree on anything. Most Grantors name a spouse, adult child (often the eldest), or close friends as the Trustee because those individuals occupy a position of love and trust in their life.   Unfortunately, the Grantor often fails to consider whether that individual communicates well, says no when necessary, handles confrontation without escalation, or even wants the job once they understand the accompanying obligations.  Encouraging the Grantor to consider personality alongside fiduciary duties and responsibilities helps guide them in choosing the right Trustee and avoiding problems later.

Sometimes, the Grantor wants to appoint two (or more) individuals to serve as co-Trustees. During my years in private practice, I routinely advised against appointing co-Trustees without including a mechanism for resolving disputes. Fortunately, many viable options exist, whether through an internal tie-breaking mechanism in the Trust instrument or appointment of a neutral third party. The Trust should include language addressing how disagreements will be handled when they inevitably arise. Proper preparation avoids ending up at the courthouse.

In other cases, the Grantor prefers to name a professional fiduciary. While some clients recoil at the idea of a corporate or professional Trustee due to concerns about fees or impersonal service, that option is preferable to an unprepared or conflicted friend or family Trustee. The latter can cost far more in terms of stress, animosity, and litigation risk. Professional Trustees typically bring institutional experience, impartiality in family disputes, neutral decision-making, and established reporting and compliance processes. Here, the attorney adds significant value by helping the client select the right professional, balancing cost against complexity, asset size, and family structure.

No one creates an Estate Plan hoping it becomes a courtroom battleground, yet unaddressed Trustee issues are among the most common triggers when plans go sideways. When advising clients on Trustee selection, experienced Estate Planning attorneys guide clients by discussing the role of Trustee along with the duties and obligations that accompany the office. Further, they evaluate whether the proposed Trustee can manage conflict respectfully and impartially, has the time, temperament, and acumen necessary to fulfill the office. Finally, the client and I consider whether the individual wants to serve. Addressing these issues prior to executing the plan helps ensure that the client’s legacy will thrive long after their death.

If estate planning is about protecting a legacy, Trustee selection is about ensuring that protection endures. As you work with clients or as you consider your own plan, remember that the language of the Trust is only as powerful as the person entrusted to interpret and implement it. Choose well. Communicate clearly. This will give your client’s legacy the best chance to thrive.

I believe in the magic that exists at this time of the year. But to me, that means spending some time thinking about tax planning as 2025 draws to a close and the New Year dawns. Some years Congress tweaks the laws more than other years, and 2025 was certainly one of those years that resulted in major changes to the tax laws. On July 4, 2025, sweeping tax legislation dubbed the “One Big Beautiful Bill Act” (“OBBBA”) was signed into law, and its passage reverberated through the Estate Planning world. No doubt, this massive bill changed the landscape of tax planning both now and in the future. In large part, OBBBA extended or made permanent many of the provisions of the Tax Cuts and Jobs Act of 2017 that were set to expire at the end of 2025. While a complete examination of the impact of OBBBA exceeds the scope of this article, I’d like to highlight some of the salient changes for Trusts and Estate practitioners and their clients as we leave 2025 and head into 2026. Of note, most of the impactful changes in OBBBA are income tax provisions, rather than estate or gift tax provisions.

Estate Tax Planning

• Applicable Exclusion rises from $13.99 million in 2025 to $15 million in 2026
• GST Exemption rises from $13.99 million in 2025 to $15 million in 2026
• Annual Exclusion for present interest gifts holds steady at $19,000 in 2026
• Annual Exclusion for gifts to a Noncitizen Spouse rises to $194,000 in 2026

Not long ago, we thought that at the end of 2025, the Applicable Exclusion and the GST Exemption would revert to $5 million, adjusted for inflation from the 2011 base year. With the passage of OBBBA, that sunset disappeared and was replaced by a new, higher base amount of $15 million, which will be adjusted annually for inflation. As has been the case for a few years, this isn’t relevant for most Americans. However, if you have over this amount, the next few years present a great opportunity to undertake some high-end Estate Planning.

Income Tax Planning

• Standard deduction amount:
• Married, filing jointly, increases from $31,500 in 2025 to $32,200 in 2026
• Single, increases from $15,750 in 2025 to $16,100 in 2026
• Head of household, increases from $23,625 in 2025 to $24,150 in 2026
• Note that OBBBA increased the expected standard deduction for 2025 taxpayers
• State and Local Tax (SALT) deduction cap rose to $40,000 with phaseouts for those with Modified Gross Income over $500,000

Additionally, OBBBA

• Permanently eliminates miscellaneous itemized deductions, except for expansion of itemized deductions for educator expenses
• Simplifies overall limitation on itemized deductions for high earners
• Permits an above-the-line charitable deduction of $1,000 ($2,000 for married taxpayers)
• Imposes a new “floor” for charitable deductions – for those who itemize, the charitable deduction is limited to the extent they exceed .5% of Adjusted Gross Income
• Permanently eliminates personal exemptions
• Temporarily allows a $6,000 “senior deduction” for qualified individuals over the age of 65 with phaseouts beginning at $75,000 AGI ($150,000) for joint filers)
• Allows for an automobile loan deduction of up to $10,000 if the car is assembled in the United States
• Expands tax-free savings accounts for minors, called Trump accounts

As you plan for 2026, it’s important to reassess deduction strategies in light of the higher standard deduction and limitations on itemized deductions. For example, the additional .5% limitation that starts in 2026 makes the idea of bunching charitable contributions more attractive because it allows the taxpayer to surpass the floor and maximize their deduction. This strategy works well when used with a Donor-Advised Fund (“DAF”). If the donor makes a large deductible contribution to the DAF in that year, it allows for an immediate income tax deduction. The funds in the DAF need not be distributed and instead can be invested and grow tax-free. The donor then makes recommendations for grants to their favorite charities in later years and thereby maintains their typical pattern of giving.

For example, if you typically give $20,000 annually, you are better off taking the standard deduction. If, instead, you bunch five (5) years of donations together and give $100,000 to a DAF, you have a large deduction in that year, but through the DAF can continue your pattern of giving $20,000 per year.

Here’s hoping that everyone has a happy, healthy, and prosperous 2026!

As we gather with our family, friends, and loved ones to celebrate the holidays, let’s take a moment to savor the food and our time together. This time of the year offers a special opportunity to show our loved ones just how much we care. We can do this in any number of ways, including gifting.

Let’s make this year the year we give gifts that benefit both the recipient and the donor. Annual exclusion gifts provide a benefit not only to the recipient but also to the donor. Annual per donee exclusion gifts allow the donor to make gifts to multiple individuals without incurring any transfer tax consequences, provided that the total gifts to an individual are present interests and do not exceed the threshold amount. Internal Revenue Code (“Code”) Section 2503(b) sets the amount that an individual taxpayer can gift to any other person at $19,000 for 2025 and 2026. Giving now allows individuals to reduce the value of their taxable estate without impacting the lifetime exclusion amount of $13.99 million in 2025 ($15 million in 2026). In addition to allowing the donor to avoid use of any applicable exclusion amount, annual per donee gifts remove future appreciation on the assets gifted from the donor’s estate as well.

The Code imposes no limit on the number of annual per donee exclusion gifts per taxpayer, meaning that an individual taxpayer may gift up to that $19,000 amount to an unlimited number of individuals without ever worrying about estate or gift tax consequences. Gifting the funds or assets removes them from the donor’s taxable estate without ever impacting the lifetime exclusion amount. It’s one of the few totally “free” estate planning techniques. Because annual gifts reduce the size of the taxable estate, they also reduce the potential tax liability. For married couples, the benefit doubles because each spouse can gift the annual per donee exclusion amount to the same individual, and if the recipient has a spouse, then the donors can double the impact of their gifting again. Let’s review an example that demonstrates effective use of the annual per donee exclusion amount.

Assume that Mike and Carol recently met with their attorney, who suggested that they start reducing the value of their taxable estate. Mike and Carol were preoccupied with the pending nuptials of their daughter, Cindy. They realized that they better act quickly to utilize their 2025 annual per donee exclusion amounts. They decided to give each of their six now-married children, Greg, Marcia, Peter, Jan, Bobby, and Cindy, an envelope containing $76,000 ($38,000 from each of Mike and Carol to each child, plus an additional $38,000 for each spouse of each child) at Cindy’s wedding on New Year’s Eve 2025. After the clock strikes midnight, the family rings in 2026, and Mike and Carol hand out another set of envelopes, this time, with $76,000 ($38,000 from each of Mike and Carol to each child, plus an additional $38,000 for the spouse of each child) in each envelope.

In the example above, in just a few hours, Mike and Carol gave away over $900,000 without incurring any estate or gift tax consequences. Mike and Carol each gave $19,000 to each of their six children and their spouses, totaling $456,000 in 2025, and Mike and Carol each gave $19,000 to each of their six children and their spouses, totaling $456,000 in 2026, for a total of $912,000. In fact, Mike and Carol could each also gift $19,000 to a grandchild in 2025 and again to that same grandchild in 2026. The foregoing example demonstrates how quickly these gifts can add up and make a huge impact on an estate. In addition to using the annual exclusion gifts, the Code gives taxpayers a tax-free pass when they pay the medical bills of another individual or pay the tuition bills of a student. The Code imposes no limit on the amount of these medical and tuition gifts, as long as the amounts are paid directly to the provider. The Code also allows contributions to charitable exempt organizations. The Code imposes no limit on the amount of these contributions for gift tax purposes, which provides another easy option for those who want to do some easy estate planning. Such charitable contributions may also qualify for a charitable income tax deduction, up to certain percentages of the taxpayer’s adjusted gross income.

The upcoming holiday season presents the perfect time to consider these and other estate planning issues. Options may exist for the use of annual exclusion gifts in conjunction with trusts and a long-term Estate Plan. Giving now, rather than waiting until death provides several estate planning opportunities in the form of tax-free distributions, reduction of the gross estate, and appreciation outside of the taxable estate, not to mention the benefit to the recipient that the donor will witness while alive.

For many years, I have been interested in a tax strategy designed to defer the payment of capital gains taxes, to preserve wealth, to create reliable, predictable streams of income and to aid in effective intergenerational wealth transfer. This strategy is known as the Deferred Sales Trust™ or “DST” (not to be confused with the Delaware Statutory Trust per IRC §1031, also known as a “DST”). By this point in my journey with the DST, I have acted as the attorney for sellers curious about this strategy but uncertain as to whether or not it is a bona fide transaction (the “tax risk”), whether or not they can trust the various parties who take the seller through the process (the “defalcation risk”) and/or whether or not the proceeds of the sale will be invested properly and the principal preserved for ultimate recognition (the “market risk”). I have guided many such sellers through the process and every single seller whom I have advised has been thrilled with the outcome. This article will describe the transaction in the most general terms, address the three risks just noted and will identify the myriad of prospective users and professionals for whom this strategy holds tremendous value and utility.

In a DST, the seller is someone (an individual, a couple, a family, a partnership, a corporation or other entity, with a highly-appreciated asset (a business, a real estate holding (commercial or residential, investment or personal), artwork or other collectible) that the seller wishes to sell. However, in doing so, the seller is subject to federal capital gains taxes, state capital gains taxes (where applicable), the ACA tax, likely depreciation recapture and other burdens that may leave the seller with only half of the sale proceeds after all taxes and related obligations have been paid to the government. This is especially frustrating to the seller because he or she or the entity has been paying taxes on the business or the real estate holding year in and year out for many, many years in most cases. At the time of sale, this amounts to multiple levels of taxation. In other words, the seller is unable to recognize the full value of the sale after nurturing the asset along over time and paying taxes annually on the income derived from the asset in the hope that, at the time the seller is ready to sell, he or she will be able to enjoy the fruits of his or her labor. I call this “the reluctant seller.”

In the case of the DST, the seller identifies a prospective buyer for the asset but does not travel down the road too far toward consummating the transaction. The seller contacts an advisor who is licensed to employ the DST strategy and the seller negotiates how and when he wants his principal returned, how she wants her money invested, what type of return he desires and numerous other essential and ancillary terms. Once there is an agreement, a contract is formed and the trustee contacts the ultimate purchaser of the asset and agrees on the purchase price. The trustee then purchases the asset from the seller and simultaneously conveys the asset to the end buyer, taking possession of the sale proceeds. The trustee then works with the seller’s investment advisor to ensure that the proceeds are invested in accordance with the terms of the trust and in accordance with the seller’s risk tolerance and preference for certain types of managed accounts, securities, alternative investments, insurance products, etc. The trustee then delivers to the seller a note. The seller is now the “note-holder” and enjoys all of the legal rights and privileges, including the right to call the note, that anyone holding a note possesses.

At the end of the transaction, the note-holder has the note. The buyer has the asset. The trustee, acting on behalf of the note-holder, oversees all investment decisions made by the note-holder’s financial advisor. No capital has been received by the note-holder. No taxes are due. 100% of the sale proceeds are invested in accordance with the note-holder’s wishes by the note-holder’s trusted advisor(s) and the note-holder may take principal (and pay pro-rata capital gains taxes on same) pursuant to a predefined schedule. The note-holder will receive annual income at the predefined rate of return. This ordinary income (from the investments) will be subject to taxation at the note-holder’s applicable income tax rate. Ultimately, when the principal is delivered to the note-holder, in periodic payments or in a balloon payment at the conclusion of the trust (such that the note-holder can maximize the annual return during the course of the trust), the capital gains taxes are paid accordingly. It is a winning situation for the seller / note-holder, a winning situation for the buyer and even a winning situation for the government (state and federal), as the taxes are ultimately paid (unlike when there is a step-up in basis at death in a like-kind exchange). However, the taxes are paid on the taxpayer’s schedule, not the government’s, and at a time when it is most advantageous for the taxpayer. Thus, the reluctant seller is not so reluctant anymore (making real estate brokers’, business brokers’, financial advisors’ and other investment professionals’ lives a bit less stressful in the process).

To return, as promised, to the three main concerns on the part of prospective DST users, I will address them in order. The first concern is tax risk, the risk that the IRS will not recognize the transaction. This is a bona fide installment sale per Section 453 of the Internal Revenue Code. If the seller engages the DST professionals in a timely manner and adheres to their advice, the transaction will be fully respected by the IRS. Furthermore, counsel for the trust will handle any audit they may arise in relation to the sale and use of the DST free of charge and will pay any penalties assessed against the taxpayer (somewhat in theory, as this has never happened after billions of dollars of DST transactions). The IRS actually favors the DST and IRC § 453 transactions more generally, as the government actually receives the capital gains taxes on the appreciated property at some point in time, unlike other transactions with a step-up in basis where the government may never see any tax revenue.

In terms of defalcation risk (that is attorney language which means the risk that the DST professionals will run away with the seller’s proceeds). There are multiple documents that make each and every move that is undertaken with respect to the corpus of the trust and the investments made therefrom subject to multiple signatures by unrelated parties at multiple financial institutions, each with a fiduciary relationship to the trust and the beneficiary of the trust – the seller / note-holder. Moreover, all of the parties involved in these transactions have undergone substantive background checks and all have been found to be committed professionals with impressive pedigrees who are beyond reproach. Finally, the seller / note-holder is able to monitor his or her investments, undertaken by the trust, and the performance of these investments in real time from a computer, a tablet, a phone or other mobile device. In other words, the seller / note-holder always knows where the sale proceeds are and how the investments are performing.

Finally, in terms of market risk, the seller must distinguish a specified risk tolerance after completing a risk tolerance questionnaire prior to the transaction. This provides for the formation of the investment statement of the trust. The trust must adhere to the investment statement at all times. Under no circumstances can the sale proceeds be invested into any instrument that is purely speculative in nature, no matter the appetite for risk. That said, within the conservative boundaries of what is permissible, some degree of risk will produce a higher return. In all cases, a fully diversified portfolio of non-correlated investments is created in order to provide some degree of protection against normal market fluctuations. Ultimately, there is less risk in a DST portfolio than in a single mutual fund, precisely because of the diversification (and the likely inclusion of annuities and other insurance products that carry minimal to nonexistent risk).

This strategy works best for (1) the reluctant seller concerned about the onerous capital gains obligations at disposition; (2) sellers desiring the benefits of a Section 1031 exchange but are not qualified in terms of the like-kind provisions; (3) a backstop for a failed Section 1031 exchange in which the qualified intermediary is instructed to direct the sale proceeds to the DST instead of the taxpayer should the like-kind exchange fail, thereby avoiding a major taxable event; (4) sellers of going concern businesses with ample goodwill which cannot be part of a like-kind exchange; and (5) all others who seek to sell a concentrated highly-appreciated asset and reinvest the proceeds of the sale in a diversified, tailor-made basket of stocks, bonds, mutual funds, alternatives and other investments in a tax-deferred manner wherein 100% of the sale proceeds are deployed to produce income at a set annual rate over a predefined period of time.

For the reasons described above, adding the DST strategy is beneficial for real estate brokers, business brokers, financial advisors, insurance professionals, qualified intermediaries,  accountants and a host of other professionals who seek to retain and “wow” their high-net-worth clients and customers. Both as a tax and estate planning attorney who has guided numerous parties through the DST process and as a DST trustee, engaged in buying and selling highly-appreciated assets, I am happy to assist you whether you are a prospective user of the DST or whether you fall into one of the categories listed above as a trusted advisor having clients with highly-appreciated assets.