Lawyer fees

[oceanlovin'ea]

Are the fees paid to a lawyer to set up a trust for the purpose of managing investments a deductible expense?

Elderly client had lawyer set up grantor trust to handle her investments since she is no longer able to take care of this anymore. Can she deduct the fees she paid lawyer?

Linda F

[BOB W]

Linda....

.., A trust is not required to have a managed account. Probably in this case, the trust is nothing more than a glorified Will, to bypass probate. Sorry no deduction...

[Luis Mopeo]

Disagree

Page 4-26 of TTB under Investment Expenses. "Deductible investment expenses include amounts paid to produce, manage, or protect property held for earning income..."

Deductible.

[BOB W]

Luis....

.... She is talking about deducting "legal fees".............

[George Boutwell]

Purpose?

From your earlier post, my guess is that your client took two actions at the same time. She turned over management of her investments to a brokerage house (which was not appointed as trustee, otherwise they would be filing a 1041 and she would receive a real K-1) and she did some estate planning.

She could have set up the trust without buying the investment management services, and she could have bought the investment manager without setting up the trust. I would not try to find linkage where it does not really exist.

What this situation does point out, though, that for most of us the greatest concern should not be what happens to our assets and liabilities when we die -- which after all, is a brief one-time event -- but when we are incapacitated, which can last for a decade or more. Who manages the money, and pays the bills? Usually a power of attorney (or several) can handle that situation as well as or better than a trust, especially when the PoA authorizes the agent to establish a trust if needed at a later date. But corporate trustees (banks or other financial institutions) do not operate with just a Power of Attorney. They require a trust, and appointment as successor trustee.

Is it deductible, if I put my investments in a trust, so that at some later date a successor trustee (who could not provide the same services with just my power of attorney) can manage them when I move to the dementia unit of the local skilled nursing facility? Maybe. Depends on the facts and circumstances of the case, and any given auditor on any given day.

[jainen]

personal estate planning

>>set up grantor trust to handle her investments <<

If the trust is your client, it might be able to capitalize certain organizational costs. I don't see how the grantor could -- it's just personal estate planning.

[Jesse]

Here is a link that pretty much covers all! http://www.april15.com/article_deduct.html so hopefully it will help you to determine whether the fee is deductible and I will let you draw your own conclusions based on your t/p circumstances.

Sandy

I had a similar question earlier this year. Follow S T's link for some helpful info.

[oceanlovin'ea]

Ggood article

Thanks I read the article. It certainly did give more details and some examples which was nice.

This clients money has been managed by ML for a long time. She set them up so that they pay all her bills now and she doesn't have to worry about anything. They make sure she has plenty of money in her checking account for any expenses she incurs during the month.

So what she paid the lawyer for was to set up ML as trustees of her money.

I'm not going to deduct it.

Linda F