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    U.S. v. Balice: IRS Successfully Pierced Trust

    WealthManagement.com
    Sep 05, 2017

    Martin M. Shenkman 

    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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