Doctors and their advisors must be vigilant and well informed when making tax and legal planning choices to avoid being taken advantage of by amateurs selling fraud. Asset protection for doctors is a proactive science, but in this case it's also about what you don't do.
The need for due-diligence is especially true at this time of year, when high-pressure sales tactics capitalize on your fears of income tax exposure, politics, and the usual end of year time-based rush to planning. My last discussion provided details on two hot buzzwords used to push planning of various effectiveness and legality, mainly the status of "gifting" as an estate planning technique and context on the politicization of the so called "death tax". Unfortunately there are many other red flags you need to be aware of.
How Contentious Politics Leads to Bad Planning, Fraud
I've previously explained who is ultimately legally responsible for any tax planning you do (you are). I've also provided important details on how a variety of tax fraud promoters are taking advantage of political conservatives in particular and the general strong emotions and bundle of fears at play in our current pre-election climate.
In some cases, the bad promoters targeting you will simply be selling placebos; they'll do some planning at a palatable fee, the planning won't provide any real significant benefit, or at least not the benefit you were promised, but it won't do any additional harm either. Those are the lucky ones.
In other cases, doctors spend significant amounts of money on planning that both fails to provide the promised benefit and creates significant additional expense, legal and financial jeopardy, up to the level of criminal tax fraud. Among the wide variety of garbage planning being peddled this way are plans based on what the IRS refers to as "frivolous arguments." While by no means a complete list, these are some basic red flags to look out for that can put you in jeopardy:
- The U.S. government has no legal authority to tax you; FALSE
- You can opt out of the tax system by transferring your assets to our tax-free trust; FALSE
- The business and income producing assets you transferred are now owned by the trust and will no longer have to pay taxes; FALSE
- Any of the following phrases: pure trust, admiralty trust, sovereign trust, sovereign citizen;
- You work for the trust and also no longer have to pay income taxes; FALSE
• The Kennedys, Illuminati, Rothschilds, and similar families all have this kind of trust and this is what the "rich" do, it's a secret we are not supposed to know or share; FALSE
As stupid as these statements may sound in this context, they still manage to appeal to a wide variety of intelligent business people. This is because they are hidden in the details of the planning structure or because of the consumers reliance on the wrong so-called "expert." These legal time bombs are packaged many different ways, in some cases as tax and retirement planning, in others as estate planning and in some cases, as asset protection planning. One simple safeguard is to work with a licensed professional like a CPA or an attorney, but even that alone is not enough as they may be either implicitly or innocently part of a similar scheme if they lack significant experience (or ethics, or education) in doing things in a legally complaint way.
One recent example in California shows how important understanding who you are dealing with and their credentials can be. According to a detailed article in the Sacramento Bee, a "tax preparer" Teresa M. Marty and her company, Advanced Financial Services LLC allegedly filed hundreds of false or fraudulent tax returns seeking $60 million for individuals in 26 states before being busted by law enforcement and the IRS. The work they did was sold to clients at least partially through the use of official sounding credentials she claimed to have including "certified asset protection planner" and "certified wealth preservation planner," not to be confused with licensed professional credentials like CPA (certified public accountant) and CFP (certified financial planner) or J.D. for attorneys. Each of these designations have professional boards and licenses that can be verified, but there is no such officially recognized legal specialty in "asset protection", only attorneys that focus on this area with a great depth of experience.