Raleigh Estate Planning and Corporate Law Attorneys

Home | Blog

IRS Announces Over 100k Accounts Compromised

By

On May 26, 2015, the IRS released the following statement:
IRS Statement
The IRS announced today that criminals used taxpayer-specific data acquired from non-IRS sources to gain unauthorized access to information on approximately 100,000 tax accounts through IRS’ “Get Transcript” application. This data included Social Security information, date of birth and street address.

These third parties gained sufficient information from an outside source before trying to access the IRS site, which allowed them to clear a multi-step authentication process, including several personal verification questions that typically are only known by the taxpayer. The matter is under review by the Treasury Inspector General for Tax Administration as well as the IRS’ Criminal Investigation unit, and the “Get Transcript” application has been shut down temporarily. The IRS will provide free credit monitoring services for the approximately 100,000 taxpayers whose accounts were accessed. In total, the IRS has identified 200,000 total attempts to access data and will be notifying all of these taxpayers about the incident.

As always, the IRS takes the security of taxpayer data extremely seriously, and we are working aggressively to protect affected taxpayers and continue to strengthen our protocols.

Additional information
The IRS announced today it will be notifying taxpayers after third parties gained unauthorized access to information on about 100,000 accounts through the “Get Transcript” online application.
The IRS determined late last week that unusual activity had taken place on the application, which indicates that unauthorized third parties had access to some accounts on the transcript application. Following an initial review, it appears that access was gained to more than 100,000 accounts through the Get Transcript application.

In this sophisticated effort, third parties succeeded in clearing a multi-step authentication process that required prior personal knowledge about the taxpayer, including Social Security information, date of birth, tax filing status and street address before accessing IRS systems. The multi-layer process also requires an additional step, where applicants must correctly answer several personal identity verification questions that typically are only known by the taxpayer.

The IRS temporarily shut down the Get Transcript application last week after an initial assessment identified questionable attempts were detected on the system in mid-May. The online application will remain disabled until the IRS makes modifications and further strengthens security for it.

The matter is under continuing review by the Treasury Inspector General for Tax Administration and IRS offices, including Criminal Investigation.

The IRS notes this issue does not involve its main computer system that handles tax filing submission; that system remains secure.

On the Get Transcript application, a further review by the IRS identified that these attempts were quite complex in nature and appear to have started in February and ran through mid-May. In all, about 200,000 attempts were made from questionable email domains, with more than 100,000 of those attempts successfully clearing authentication hurdles. During this filing season, taxpayers successfully and safely downloaded a total of approximately 23 million transcripts.

In addition, to disabling the Get Transcript application, the IRS has taken a number of immediate steps to protect taxpayers, including:

*Sending a letter to all of the approximately 200,000 taxpayers whose accounts had attempted unauthorized accesses, notifying them that third parties appear to have had access to taxpayer Social Security numbers and additional personal financial information from a non-IRS source before attempting to access the IRS transcript application. Although half of this group did not actually have their transcript account accessed because the third parties failed the authentication tests, the IRS is still taking an additional protective step to alert taxpayers. That’s because malicious actors acquired sensitive financial information from a source outside the IRS about these households that led to the attempts to access the transcript application.

*Offering free credit monitoring for the approximately 100,000 taxpayers whose Get Transcript accounts were accessed to ensure this information isn’t being used through other financial avenues.

Taxpayers will receive specific instructions so they can sign up for the credit monitoring. The IRS emphasizes these outreach letters will not request any personal identification information from taxpayers. In addition, the IRS is marking the underlying taxpayer accounts on our core processing system to flag for potential identity theft to protect taxpayers going forward – both right now and in 2016.

These letters will be mailed out starting later this week and will include additional details for taxpayers about the credit monitoring and other steps. At this time, no action is needed by taxpayers outside these affected groups.

The IRS is continuing to conduct further reviews on those instances where the transcript application was accessed, including how many of these households filed taxes in 2015. It’s possible that some of these transcript accesses were made with an eye toward using them for identity theft for next year’s tax season.

The IRS emphasizes this incident involves one application involving transcripts – it does not involve other IRS systems, such as our core taxpayer accounts or other applications, such as Where’s My Refund.

The IRS will be working aggressively to protect affected taxpayers and strengthen our protocols even further going forward.

Estate Litigation

By

However unpleasant, a person’s death may result in controversy as to the validity of a last will and testament or the distribution of assets.  When this happens, families may ultimately decide to resolve such controversies in court.

In North Carolina, a party that is arguing that a will is not valid may decide to bring a caveat proceeding.  “The purpose of a caveat is to determine whether the paperwriting purporting to be a will is in fact the last will and testament of the person for whom it is propounded.” In re Spinks, 7 N.C. App. 417, 423, 173 S.E.2d 1, 5 (1970).

We provide counsel to parties who either seek to contest a will (the “Caveators”), or are forced to defend a will being contested (“the Propounders”), as well as issues which may relate to this process.  In North Carolina, the two primary reasons a will may be contested are due to:

  • Lack of Capacity

When a party feels that the testator lacked the mental capacity to make a last will and testament, or “testamentary capacity,” that party may decide contest the will.  Medical evidence tends to be very important in these types of contests and/or

  • Undue Influence

“Undue influence” is when a person in power psychologically manipulates and persuades the testator to sign a will, eliminating the free will and judgment of the testator. In North Carolina, undue influence has been defined as “something operating upon the mind of the person whose act is called into judgment, of sufficient controlling effect to destroy free agency and to render the instrument, brought in question, not properly an expression of the wishes of the maker, but rather the expression of the will of another.” In Re Will of Jones, 362 N.C. 569, 575, 669 S.E.2d 572, 578 (2008).

Wilson Ratledge counsels parties in will caveat proceedings and other estate litigation actions.  Our attorneys represent anyone whose interests under a will or trust are in dispute, or anyone who is concerned about the way in which a vulnerable or incompetent relative’s estate is being managed.  We deal with business and partnership issues that need to be resolved in the estate administration process, as well as familial disputes with respect to a testator’s will.

We handle disputes involving estates of all sizes.  Please contact an attorney at Wilson Ratledge to discuss an estate litigation issue today.

Recent North Carolina Workers’ Compensation Case Summaries

By

The attorneys at Wilson and Ratledge stay up to date with the latest North Carolina Workers’ Compensation cases in order to provide you the best possible outcome. Below you will find the some of the most recent North Carolina Court of Appeals and North Carolina Supreme Court decisions.

April 27, 2015

Fields v. H&E Equipment Services, LLC. (Futility of seeking employment)

The plaintiff was 65 years old with 10th grade education.  He was a mechanic and his work history was physical labor.  A physician testified that the plaintiff’s pre-existing degenerative disc disease was aggravated by his work at the defendant-employer.  At hearing, the plaintiff did not present any evidence of an attempt to find work, or evidence that he was so incapacitated that he is incapable of work in any capacity.  However, the Industrial Commission found disability through the futility prong of Russell v. Lowes.  There was no testimony from a vocational expert that it was futile for the plaintiff to look for work.  There were no statistics presented that his pre-existing condition made him incapable of returning to the labor market.  The plaintiff’s medical provider only said that Plaintiff should not continue work in his current role, and did not provide testimony that it was impossible for the plaintiff to return to work.  The North Carolina Court of Appeals found that, since the plaintiff did not present any expert testimony that his prior job with defendant was the only job obtainable, or any evidence showing that someone of the same age, education, experience, and physical capabilities as the plaintiff was currently not working anywhere, the plaintiff did not meet his burden of proving disability under the futility prong of Russell. The North Carolina Court of Appeals reversed the Industrial Commission’s ruling.

 

May 4, 2015

Birckhead v. North Carolina Dept. of Public Safety  (Short-term disability credit)

A defendant adjuster provided testimony at a hearing that it was her belief that the defendant-employer’s short-term disability plan was funded 100% by defendant-employer.  The North Carolina Court of Appeals found that the adjuster’s testimony was sufficient evidence to support the Industrial Commission’s finding that the employer fully funded the short-term disability policy.  The North Carolina Court of Appeals affirmed the Industrial Commission’s ruling that defendants were entitled to a credit for the short-term disability payments.

 

Haileab v. John Q. Hammons Hotels  (Causal connection within medical records)

The North Carolina Court of Appeals held that since the defendants stipulated to medical records for the hearing that provided a causal link between the plaintiff’s compensable foot injury and her subsequent left knee injury, even though those records came from a physician that had not been deposed or qualified as an expert, the medical records were sufficient to support the Industrial Commission’s finding of a causal connection between the compensable injury and subsequent left knee injury.

 

Chenette v. Metokote Corp.  (Average weekly wage)

The plaintiff suffered a compensable injury to his back in 2007, and then again in 2010.  The plaintiff began experiencing back pain again, and the Industrial Commission found that the plaintiff’s current back pain was related to his 2010 injury, and not the 2007 injury.  The evidence showed that the plaintiff earned less in the year preceding his 2010 injury, than he did in the year preceding his 2007 injury.  Even though the defendants filed Form 60s for both injuries, the Form 60s did not create a presumption of ongoing disability and the plaintiff had to prove that his current condition was related to his 2007 injury.  However, the Commission found that since his current complaints were related to his 2010 injury, the plaintiff’s wages for the 52 weeks preceding his 2010 injury were used to calculate his TTD award.

 

Collins v. Seaton Corp.  (Credible testimony)

The Industrial Commission rejected a physician’s testimony, where that physician testified using information provided by the plaintiff regarding the details of his injury, and where the Industrial Commission found the plaintiff’s story of the events was not credible.  The North Carolina Court of Appeals upheld the Commission’s decision to reject the physician’s testimony.

Duties Of A Personal Representative In An Estate Administration

By

The death of a loved one is a very difficult time in anyone’s life.  In addition to all of the responsibilities that family members of the deceased are faced with, a person who is named as a Personal Representative (often called Executor) in a Will, and is willing to serve in that role, must also accept the responsibilities required to properly administer the estate.  The following is a short summary of some of those responsibilities:

COMMENCING A PROBATE ADMINISTRATION. A probate administration is necessary to transfer all assets held in a deceased person’s (“the decedent”) individual name. The process begins with filing the Application for Probate and Letters and the original Will (if one exists) with Estates Division of the Clerk of Superior Court in the county where the decedent was domiciled. The petition requests both the appointment of the Personal Representative and admission of the Will to probate. Upon the filing of the application, the Clerk will issue “Letters Testamentary” certifying the appointment as Personal Representative, who is now authorized to deal with all the facets of the estate, including paying creditors’ claims, managing real property, transferring bank accounts, and any other duties that become necessary to wind up the financial affairs of the decedent.

NOTICE TO INTERESTED PERSONS. After filing the petition, a notice is published in the local newspaper regarding probate of the Will. This puts creditors on notice that they have three months from the date of the first publication to file claims against the estate for payment of their accounts.

ASSET VALUATION. An inventory of the estate assets must be filed within 90 days of the appointment as Personal Representative. For tax purposes, the Personal Representative must also identify and value all non-probate assets owned by the decedent. These assets include any jointly owned assets, life insurance, annuities and retirement accounts.

FINAL PERSONAL INCOME TAX RETURN. The Personal Representative is responsible for preparing the final state and federal income tax returns for the decedent, which are due on or before April 15 the following year.

FEDERAL ESTATE TAX RETURNS. If, in year 2015, the decedent’s total assets (including life insurance and other death benefits) are over $5.43 million, a federal estate tax return may need to be filed. Such estate tax return is due nine months from the decedent’s death absent a request for an extension of time to file. Any tax due must be paid on the nine-month due date.  A Personal Representative must also determine whether a surviving spouse may use a deceased spouse’s unused estate tax exclusion, a concept known as “portability.”

FIDUCIARY INCOME TAX RETURNS. The estate is a separate taxpayer and it is generally necessary to file income tax returns for the estate, reporting income received after the date of the decedent’s death and prior to distribution.

DISTRIBUTION OF ESTATE. Once the creditors claim period referred to above expires, and all tax matters are resolved, the Personal Representative will distribute the estate. As part of that process, the Personal Representative must file a detailed accounting reporting all the property in the estate presently on hand, and all income received and disbursements made during the probate process.

CLOSING THE ESTATE. Once distribution is completed, the Personal Representative files the Final Account with the Clerk to discharge the Personal Representative and close the estate.

PERSONAL REPRESENTATIVE’S COMMISSION AND ATTORNEY’S FEES. The Personal Representative is statutorily entitled to a commission for services rendered on behalf of the estate. North Carolina  law authorizes payment from the estate of reasonable attorney fees for assistance in the administration of the estate. Attorney fees are paid after court approval and often at the time the estate is ready for distribution.

Please contact the attorneys at Wilson Ratledge should you have any questions about estate administration.

Special Needs Planning

By

Families who have a family member with a disability must plan for the future very carefully. How assets are left after your death can have a tremendous impact on the quality of life for that person. In the past, a Will may have been enough, but times have changed. To protect a person with special needs, a well-defined estate plan is vital.

A Special Needs (or “Supplemental Needs”) Trust allows a parent, grandparent, guardian, or other person to provide funds for a disabled child without disrupting the child’s eligibility for government aid. Important points to remember while investigating the use of this estate planning tool are:

  • -Decide on an appropriate guardian for your child
  • -Determine who would be a suitable Trustee(s) to manage the Trust’s assets and supervise your child’s finances
  • -Outline instructions for your child’s education, housing, personal and emotional needs

Wilson Ratledge helps families address the financial, legal and social aspects of a person’s life to develop an effective plan for the future. Our goal is to ensure that their needs are met and that they have the opportunity to expand their horizons and follow their dreams. Some important aspects of Special Needs Trusts are listed below.

WHAT IS A SPECIAL NEEDS TRUST?

A Special Needs Trust is a discretionary, spendthrift trust created for a person who is elderly or disabled as a way to supplement the person’s public benefits. Those public benefits may include SSI, Medicaid, Section 8 Housing and other federally or state-sponsored assistance programs.

WHAT ARE THE ADVANTAGES OF A SPECIAL NEEDS TRUST?

A Special Needs Trust may:

  • Help maintain an individual’s potential eligibility for a group home.
  • Purchase a home for the individual.
  • Pay for services that Medicaid does not cover, including home care and such items as wheelchairs, handicap accessible vans and mechanical beds.
  • Pay for a personal attendant, should that be required.
  • Pay for recreational and cultural experiences.
  • Help enrich the beneficiary’s life

WHAT REQUIREMENTS MUST BE MET WHEN ESTABLISHING A SPECIAL NEEDS TRUST?

There are two key requirements:

  • The trustee must be given absolute control over the distribution of the funds.
  • The person with special needs cannot have the authority to revoke the trust.

SELECTION OF TRUSTEE

Selecting a trustee for a Special Needs Trust is one of the most important steps in the planning process, because the trustee will be empowered to manage the life of the child with special needs.

A special needs trustee should have these characteristics:

  • A long-term commitment.
  • A special sensitivity to the individual’s disabilities.
  • Active involvement in monitoring the client’s services.
  • The ability to be an advocate for medical and financial entitlements.
  • The ability to be a prudent investor and distributor of trust funds.

 

While family members often want to serve as trustee, they typically don’t possess all of the necessary qualifications. For that reason, it is strongly recommended that families retain a professional trustee to oversee the Special Needs Trust, with a family member named as co-trustee.

 

If a family selects a professional trustee from a bank, they should be sure that the bank has a trust department with an excellent track record for managing money. If a family chooses an attorney to serve as the professional trustee, they should be certain that he or she has a good track record in managing trust money, or that he or she will arrange to hire a professional money manager to oversee trust investments.

 

WHAT IS THE ROLE OF A CARE MANAGER?

 

A Special Needs Trust can direct the trustee to hire a care manager. That individual specializes in making the necessary arrangements to provide the special needs individual with the level of care he or she requires. The care manager should have a social work background and related expertise and be knowledgeable about all social service programs available to assist the beneficiary.

 

A good care manager will:

 

  • Monitor the individual’s progress.
  • Ensure that the individual’s needs are met.
  • Coordinate nutrition and cleanliness programs.
  • Make sure that exercise and physical therapy programs are maintained.
  • Coordinate any socialization or psychological counseling.
  • Ensure that the special needs person has assistive devices, if needed.
  • Have a plan and a responsible advocate available to resolve problems in a quick and timely manner in the event of an emergency.

 

Contact Wilson Ratledge today to speak to speak to an attorney about any questions you may have regarding Special Needs Planning.

What Is A Dynasty Trust?

By

Overview

A Dynasty Trust is a trust that lasts for a long period of time, often multiple generations.  Briefly, a dynasty trust is a technique designed to allow its creator to pass wealth from generation to generation without the burden of transfer taxes, including estate and gift tax and the generation skipping transfer tax (GSTT). The technique passes wealth to successive generations of descendants with distributions and operation of the trust being controlled by the terms initially established by the grantor of the trust. The trust is irrevocable and, once funded, the grantor no longer has control of the assets and will not be able to reach the assets or amend the trust terms. Clients can achieve great economic benefits through the use of Dynasty Trusts. These benefits can include the accumulation of money inside the trust without the direct transfer of assets to any beneficiaries, excluding the assets from the clients’ taxable estate and potentially excluding the assets from the beneficiaries’ taxable estates.

Dynasty Trusts can also provide strong asset protection for future generations. Grantors have great flexibility with Dynasty Trusts in structuring long-term non-financial incentives to help beneficiaries learn more about handling and investing money before they have control of inherited assets, motivate beneficiaries to become involved with philanthropy, to encourage the beneficiaries to go to college or make a down payment on a home for a beneficiary.

 

How does a Dynasty Trust work?

To establish a Dynasty Trust, the client creates an irrevocable trust for the benefit of one or more beneficiaries such as children or grandchildren. The client can name the trustee(s). The trustee would be empowered to distribute income and/or principal for the beneficiaries’ reasonable support, medical care and/or best interests.  This is a very broad standard. The beneficiaries can be given the power during their lifetimes and/or by will to appoint some or all of the trust’s assets to any one or more the client’s descendants. At the beneficiaries’ death, the remaining assets, if any, would be distributed to further, similar dynasty trusts, for his or her descendants.

 

Gift and Estate Tax Considerations

The gift tax system applies to transfers to Dynasty Trusts. Therefore, when considering the lifetime funding of a Dynasty Trust, consider limiting lifetime transfers to the amounts covered under the lifetime credit against gift tax and the annual exclusion amount ($14,000 per participant, per year in 2015). Any gift taxes paid on the transfer of assets to a Dynasty Trust are deducted from the client’s estate, reducing the estate (and thus the taxes paid) at the client’s death. Also consider the generation-skipping transfer tax (“GSTT ”) when creating a Dynasty Trust. The GSTT is a tax on lifetime and testamentary transfers to persons more than one generation below the transferor, at the highest marginal estate tax rate. If a client applies his or her lifetime GSTT exemption to transfer assets to a Dynasty Trust, the income and principal that accumulate inside the trust may be distributed free of the GSTT for the duration of the trust.

 

State Considerations

An important issue when setting up a Dynasty Trust is the applicable state’s rule against perpetuities (“RAP”), which generally provides that an interest in trust is invalid if it can last longer than the lives of persons named in the trust plus 21 years. Although this rule has been abolished or significantly modified in many states (limiting the duration of trust to several generations), clients wishing to create a dynasty trust that could last perpetually should consider creating it in a jurisdiction that has no RAP.

 

To learn more about Dynasty Trusts or to speak with one of our experienced attorneys about estate planning, call us today at 919-787-7711 or contact us online.