Sep 05, 2017
The Internal Revenue Service successfully pierced the trust created by a taxpayer to
satisfy a tax lien on the basis that the trust was a mere nominee for the taxpayer and
could be disregarded. In all planning, consider the risk that a court might disregard
and pierce a trust as being a mere nominee for the settlor. This issue should be part
of the discussion with clients as to why proper formation, funding and formalities of
operating are vital for a plan to succeed. The lessons of Balice, acknowledging that
it’s yet another very bad fact case, might still provide some insight to practitioners
and clients structuring trusts for asset-protection planning, divorce planning, as well
as estate-tax planning. Poor planning and execution can undermine a trust plan.
The court determined that a trust to which the taxpayer transferred his residence
was a mere nominee and permitted the IRS to foreclose on the property to satisfy a
federal tax lien. A nominee is a person or entity who “holds bare legal title to
property for the benefit of another.”
Read his commentary here.
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