American Bar Association Publishes Article Entitled "Tax Law” in the October/November 2006 issue of American Bar Association’s GPSOLO magazine

American Bar Association Publishes Local Tax Attorney’s Article
Tax attorney Parag P. Patel, Esq. published an article entitled "Tax Law” in the October/November 2006 issue of American Bar Association’s GPSOLO magazine. The GPSOLO magazine is nationally published and widely circulated by the American Bar Association’s ABA General Practice, Solo and Small Firm Division.

The article highlights various aspects of a tax law practice for future professionals.

Tax Law

As Ben Franklin once said “In this world nothing can be said to be certain, except death and taxes.” If that is true, then the practice of tax law is a niche practice area that may always have work.

Few law students, and even fewer attorneys, seem to like tax law. In fact, one tax attorney claims to say that when asked why he wanted to practice tax, he would reply, "because you don't want to."

Seriously, when a law student or new attorney asks me about what is the best area of law, I reply an area that is specialized in which fewer attorneys practice. For me, that area of practice has been tax law. I have been practicing tax law for the past 12 years since graduating from law school and have thoroughly enjoyed the practice area.

What is tax law?

While it may seem to be a narrow practice area, tax law is very broad with many varieties of practices. For instance, in terms of jurisdictions, there are state and local tax areas, federal tax, and international tax. Within each jurisdiction, there are many subspecialties.

Tax attorneys can be found in many employment settings, in both the public and private sectors, including large accounting firms. Clients can include individuals, government bodies, private and public businesses from a small family business to Fortune 500 corporations. Tax attorneys often work closely with attorneys in other practice areas, as well as other professionals, such as accountants and financial advisors.

Virtually everything an attorney does for a client will have a tax consequence, whether it is a marriage dissolution or drafting a last will and testament, or advising and executing complex commercial transactions. Whether the client is an individual or a huge corporation, the tax attorney's goal is to maximize the preservation of assets and the positive impact on the bottom line. This is accomplished through careful tax planning and counseling of clients, and advising clients on the tax aspects of financing such as public and private offerings, debt instruments, equity stakes and other tax-oriented investments.

Path to Tax Law

What initially attracted me to tax law was my business and accounting background. In law school, tax law courses were easier for me because there was a clear answer to the problem. Although very intricate, there are no wishy-washy answers like in other areas of the law. You looked to the tax code, regulations or maybe a case.

Many tax attorneys have undertaken special coursework or training to become familiar with the many substantive areas of tax law. A master of laws degree (LL.M) in taxation is common among tax lawyers and is considered a “must have” credential for many firms’ tax practice groups. In addition, an LL.M in tax law can allow student or new lawyer to become well versed in tax law quickly. There are over two dozen law schools throughout the United States that offer an LL.M in tax law program.

There are literally hundreds of treatises and resources available to tax attorneys. Since tax law is a rapidly changing practice area, there a dozens of tax journals and periodicals providing updates on the latest tax legislation and rulings. Most tax attorneys read or subscribe to at least one resource to keep up to date with tax developments.

The ABA Tax Section is an active section with dozens of subcommittees focusing on different areas of tax law. The ABA Tax Section publishes the Tax Lawyer, a scholarly law journal, as well as several newsletters. In addition, nearly every state and local bar association has a tax section or committee where tax attorneys can share resources and advice. Some bar association’s tax sections even have a mentorship program where new attorneys and law students can be mentored by an experienced tax attorney.

Evaluating the Special Needs Estate Planning Attorney

Consider the attorney’s:
Education, Certifications and Memberships e.g. Special Needs Alliance (SNA); National Academy of Elder Law Attorneys (NAELA); American College of Trust & Estate Counsel (ACTEC); American Bar Association (ABA); and State Bar Associations
Time/experience in trust, estate, and disability practice
Community Involvement
Articles written (commitment to educating the consumer evident?)
Presentations made (especially to peers)
Educational programs recently attended with respect to trust and estate law and disability issues.
Is the attorney experienced in drafting Special Needs Trusts? Has he/she made it an area of focus in his/her practice?

Can he/she provide references, other professionals who would recommend his/her expertise in Special Needs Estate Planning?

What is the attorney’s commitment to completing a comprehensive assessment of your family’s unique "special needs," concerns and goals for your loved one with a disability?

Is the attorney up to date on any state-specific special rules the SSA (Social Security Administration, Medicaid, or the Department of Mental Health might have for key aspects of Special Needs Trusts? (Distribution terms, required accounting, reports, notices, remainder beneficiary etc.)

In the initial consultation, do you get an overall sense of the attorney’s understanding of and empathy for the unique challenges families face in caring for a loved one who is disabled?

Does an attorney’s high ratings in the qualifications listed above guarantee you a high quality SNT guide? Not necessarily

Do your research - find the best attorney you can and remember you are your loved one's most committed advocate. Keep informed and active throughout the process.

Stretching Your IRA to the Next Generation

It's no secret that retirement accounts come in all shapes and sizes ... from the account that is strictly set aside to generate retirement income to an account earmarked for heirs. For those intending to bequeath their individual retirement account funds to survivors, a change in Internal Revenue Service regulations in January of 2001 (followed by an April 2002 revision) created a wealth-transfer strategy that actually allows for the tax benefits of an IRA to be "stretched" beyond the lifetime of the person who established the IRA.

In the past, IRS law had required non-spouse beneficiaries to completely withdraw IRA assets either within five years of the originator's death or heretofore remaining life expectancy. The stretch IRA allows for the IRA to be passed down several generations over the life expectancies of non-spousal beneficiaries like grandchildren, great-nieces, nephews and others.

The biggest advantage to establishing the stretch IRA is its earning power. The smaller required minimum distributions to younger, non-spouse beneficiaries and the extended time for the investments in IRAs to grow at a compounded, tax-deferred rate allow for the payouts to substantially increase. For example, at an 8 percent annual return, $100,000 inherited by a 20-year-old could translate into distributions totaling $2.9 million during the course of the beneficiary's life expectancy.

Financial institutions should be aware of the stretch IRA for customers for whom it is applicable. It has been around for a while but, surprisingly, it's not being utilized as much as it could be. To make it work, encourage clients to work with estate planning attorneys who have stayed current with these laws.

There are some rather tricky areas in terms of structuring the stretch IRA. For example it is imperative that the IRA remain in the name of the original holder for non-spouse beneficiaries to avoid tax consequences. They cannot simply roll it into their own IRA without tax implications.

"Look-through trust options" add additional flexibility and control for stretch IRAs. There are two effective trust dispositive provisions that "stretch" distributions. The "option" method allows the named beneficiary the option of choosing the amount and timing of the distribution of IRA assets over and above the annual required minimum distribution. The "trustee discretion" method allows for the trustee to distribute additional amounts if the trustee deems advisable in terms of health, education, support and welfare.

Stretch IRAs enhance the element of control a holder can exercise over the disposition of retirement assets. There is no down side for incorporating a stretch IRA into one's financial plan, and the upside can provide ongoing income for several generations.

Special Needs Planning

One of the best parts of my practice is when I have the opportunity to assist parents of a child with special needs. A concern of all parents, (but especially parents of special needs children) is what will happen to their child/children if something happens to them (parents become disabled or die) and they are unable to care for their child/children.

A typical scenario for parents considering their estate planning is how to leave their estates to their children. When the children are still minors it is best to do so in a trust for the benefit of the child. Then (if the parents so choose) the trust assets may be distributed directly to the child at a time when the parents feel the child is an adult and will be responsible with the money.

Parents of children with special needs must consider other factors. A major difference is that the need for care may continue for the special needs child's entire life and will often incorporate social and government programs and benefits. These programs and benefits may become negatively effected or lost if the child is given money or directly inherits any money from the parents or other individuals. Thus it is very important that parents, grandparents, siblings, and other family and friends find alternatives for leaving gifts or their estates to children with special needs.

One very popular and very effective solution is to use a special needs trust which is specifically designed to address these unique issues and concerns.