Esposito Law Office

Esposito Law Office

Michael R. Esposito - Attorney & Counselor

834 Forest Avenue - River Forest, IL 60305

Phone: 708.771.6908 | Fax: 708.771.6908

My goal has always been to provide efficient, quality and affordable legal service for my clients. To me this means working personally with the client every step of the way. I find it is important to always be readily available and easy to reach or meet. I answer the phone and return message calls and emails as soon as possible. I try to maintain an open line of communication between this office and the client. The client needs to understand exactly what is occurring with the client's file and the cost involved and I, as the attorney, need to understand exactly what the client wants accomplished, at what cost and within what time frame.

Operating a service business is not easy, and creating an effective web site to convey a meaningful message can be a challenge. I hope you find this site informative and reason enough to send me an email or give me a call. There's never a charge for an initial inquiry. My legal service practice concentrates on the areas listed below in the left column.

Please visit my other web site www.espolaw.com for current news, notes and comments on issues relevant to my law practice.

TAX MATTERS

I have extensive experience in representing clients before the Internal Revenue Service and various state revenue departments. This representation has included the full range of disputes that arise under the tax laws, both civil and criminal, from audits to appeals to proceedings in the U.S Tax Court and the federal and state courts. I have represented clients before the various revenue agencies on income tax, estate tax, sales tax, withholding tax and unemployment tax matters, and have been called as a "tax expert" witness in several court trials.

My law practice has emphasized income tax return preparation, both federal and state, for numerous clients involved in many and wide varied occupations, professions and businesses. This law office invests in comprehensive and always up-to-date tax preparation software to serve clients residing in Illinois and many other states. Along with return preparation, I am always available, throughout the year, to answer tax questions, handle miscellaneous filings, anticipate problems and give my clients advice on tax saving strategies and compliance issues.

In addition to the annual preparation of income tax returns for individuals (Form 1040), partnerships (Form 1065), corporations (Form 1120), S corporations (Form 1120S) and trusts (Form 1041), this office, in conjunction with my Estate and Trust Administration practice, handles the preparation and filing of estate tax returns (Form 706) and gift tax returns (Form 709) whenever required.

Please call me at 708-771-6908 or to send an email if I can help in any tax situation -- including Offers In Compromise and other settlements.

Real Estate Transactions

For many years I have helped hundreds of clients with one of the most important events in their lives - buying or selling their home. This is a law practice area that is taken seriously by this office to parallel the financial and emotional stake that each client has, or will be investing, in a home. Unlike many lawyers that seemingly delegate these transactions to a secretary or clerk, or handle them with indifference because of the minimal fee charged, I am personally involved and available to my client, the realtors, the finance company, the title company and the other party to make sure the buying and/or selling process is efficiently accomplished and closed. Contracts and legal papers are prepared and/or reviewed quickly; phones calls are always answered or immediately returned; schedules, appointments and deadlines are kept; contact with the other party or attorney is maintained through regular correspondence and communication; title papers and transactional documents are analyzed and gone over prior to closing to avoid any last minute hassles and hang ups. I have found that the client and the process is much better served when the client relies on an experienced and knowledgeable attorney in this area.

I have also represented many clients and their businesses involved in the sale or purchase of investment or commercial properties, vacation or "2nd" homes, and lease or rental situations.

My clients find additional benefit in this area of my law practice because it comes with advice and counsel on all relevant tax and accounting issues. This could include such matters as sale of personal residence exemptions, tax-free exchanges, rental or business property depreciation, recapture and capital gain/loss on disposition.

Also, I am registered as a Title Insurance Agent for two major title insurance companies -- Attorneys' Title Guaranty Fund, Inc. and Chicago Title Insurance Company. Being certified as a title agent for these companies allows me to reduce the title fees and costs that clients selling property must incur.

ESTATE PLANNING

Estate and financial planning is really personal in nature and dependent upon each client's unique objectives and concerns. In this regard, I serve individuals with average assets and net worth - no one who would consider themselves very rich, just folks that have a desire or need for some important decision making along these lines. This means ordinary people with a house or two, moderate investments, insurance and retirement assets. Their main concerns involve family, some charitable giving, and minimizing income and estate taxes, costs and fees. Distribution delays and settlement disputes need to be avoided. Many folks have personal situations requiring special considerations, including minor children, remarriages, family members with disabilities or the "prodigal" child. Owners of small businesses and professionals require competent advice on tax and succession issues. For many clients, a significant portion of their wealth are "Retirement Assets" -- 401(k), profit-sharing, pension and/or individual retirement accounts. The ultimate bequest or distribution of these assets requires special consideration in order to minimize income and estate taxes which, combined, can be very severe.

Estate and financial planning often involves planning for the disposition of an individual's assets during life as well as upon death. To achieve a client's objectives along these lines the client needs to develop and adopt a plan of gift giving, either to family members or charitable organizations. These situations require a thorough understanding and analysis to accomplish the client's wishes while counseling about ownership and control issues. Tax saving can be an appropriate benefit to any gift giving plan and can usually be accomplished within the parameters of the client's personal goals. Appropriate documents may involve irrevocable trusts, charitable trusts, family limited partnerships agreements or a limited liability company.

ESTATE PLANNING QUESTIONS

PURPOSE

The are several and various purposes for creating an estate plan:

To conserve money and assets for the family's financial security.
To provide funds as they are needed.
To minimize court delays at death, as well as taxes and expenses.
To fulfill desired gift-giving to charities and favored causes.
To leave specific amounts and property to certain individuals.
To create trusts for minors, "not ready" children or those with special needs.
To pass on as much to the family as possible.

WHAT IS AN ESTATE

An estate consists of all that is owned. It is not necessary to be wealthy. Most people own cash, a home, a car, securities, life insurance and retirement plan assets.

WHEN SHOULD THE PLAN BE MADE

Now is the time whether the person is age 30 or 65 with perhaps just a will or life insurance arrangement. The plan may vary over his or her lifetime depending upon changes in the family or financial situation.

WHAT IS A WILL AND IS IT NEEDED

A will is a legal document stating the wishes of a person as to who will receive his or her property at death. If there is no will, the state will distribute according to the law of descent and distribution. A will names an executor, which is less expensive than an administrator in most cases, and can name a preferred guardian for minor children.

WHAT IS PROBATE COURT

Probate court determines the validity of wills. It settles claims against the estate, supervises the transfer of property to heirs and determines the guardianship of children. Probate court is not needed in every case. Jointly owned property passes to the survivor outside the probate court. There are other ways to avoid probate (such as the use of a living trust), however, many times it can be advantageous to have the estate probated.

WHAT IS TAXABLE

Everything owned by the deceased is taxable. However, in transfers to a spouse either during lifetime or at death, no Federal Estate Tax is imposed. Also, gifts to charity are fully deducted before arriving at the taxable amount of any estate.

The estate of each decedent has a base amount which is exempt from the Federal Estate Tax. For 2011 the Federal exemption is $5 million. For 2012 the Federal exemption has been set at an inflation adjusted $5,120,000. The Illinois Estate Tax Act provides for an exemption of $3.5 million for Illinois decedents dying in 2012, and $4 million for Illinois decedents dying in 2013.

NOTE - For 2010 the entire Federal Estate Tax was repealed but, with passage of the the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 in late December 2010, the estate tax was resurrected but with a $5 million exemption, top tax rate of 35%, and a portability feature for the exemption between married couples for 2011 and 2012. This Act also affected other personal and business tax items, rates and deductions, as well as other aspects of the estate-gift tax laws which are too numerous to mention here.

WHAT ARE THE EXPENSES IN SETTLING AN ESTATE

The expenses involved include the executor, lawyer, taxes and court costs. They can vary greatly depending upon the arrangement made.

WHAT ARE THE METHODS OF REDUCING TAXES AND PROBATE COSTS

Gift contributions, jointly held property (in some cases), the use of trusts, and the division of property are methods of reducing taxes and probate costs.

GIFTS

For calendar year 2012, the first $13,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts made during that year. Therefore, you may now give $13,000 to anyone ($26,000 if spouses elect to split gifts) in 2012 without the transfer being treated as a taxable gift. The provision allowing an unlimited tax exclusion for direct payment of another's tuition and medical care continues in force.

Gifts of more than this annual exclusion amount would require the filing of a Federal Gift Tax Return and would reduce the credit available at the time a Federal Estate Tax Return is filed. If you think you might need to file a gift tax return, you should see Form 709 and its instructions.

TRUSTS

Trusts involve the transfer of title to assets to a third party for benefit of another, such as life insurance trusts, or a trust under a will or a marital deduction trust. These can be used for a variety of reasons, i.e., to manage assets for the individuals not capable of managing their own affairs, such as minor children and the aged. An instrument often called a "Living Trust" (see article below) involves the transfer of someone's own assets to that person as a trustee for his or her own benefit. The subject of trusts should be explored with an attorney.

GENERAL OBSERVATION

An attorney must be used to draw wills, trusts etc. as these are legal documents requiring, even in simple situations, certain formalities. In complex situations, only an attorney is able to craft and implement the correct language for the documents.

LIVING TRUSTS

I have found that a REVOCABLE LIVING TRUST arrangement is usually the best estate planning tool and disposition device for my clients. A Revocable Living Trust, either for an individual or married couple, is a much more EFFICIENT and LESS EXPENSIVE way for the client to distribute assets to children, loved ones or other intended beneficiaries. A properly drafted trust document will provide for all available estate tax credits which could save the estate thousands of dollars. If there is REAL ESTATE PROPERTY OWNED IN STATES OTHER THAN WHERE THE CLIENT RESIDES, transferring (by recorded deed) that real estate into a Revocable Living Trust will keep the client's heirs from having to go through probate in every state where the real estate is located- this can be an expensive proposition. Along with healthcare and property directives (powers of attorney), a Revocable Living Trust will also provide for the management of the client's finances if the client becomes incapable of doing so, and for the client's physical care and well-being in the event of becoming disabled. More information about living trusts and how they differ from wills can be found below.

Some FAQs re WILL vs. LIVING TRUST

1. Can I use a will to keep my estate out of the court probate process? No. A will is the primary tool of the probate system. In fact, you could say that the will is a letter to the judge telling him how you want your property distributed. The judge then must make sure all your property is collected and appraised, and all your bills and taxes are paid, before he will allow distribution of your property to your heirs. The probate process can be avoided in Illinois, however, in certain small estate situations that have no real state and are worth less than $100,000.

2. Can a properly drawn will prevent quarrels over estate assets? Not necessarily. Wills are probably the most contested of all legal documents. Wills might actually encourage challenges over assets because once the court probate proceeding is open and notices are sent out, a contesting party can simply make his case known to the judge without so much as even filing a lawsuit.

3. Can property be distributed out of the estate according to the terms of the will in a short time? No. A probate proceeding can take anywhere from ten months to several years to complete. Probate costs and fees would be proportionate to the time and work involved.

4. Are living trusts only for large estates? No. Living trusts are for anyone who wants to avoid the costs and months-long process of probate. People with small estates can benefit from a living trust, especially if real estate is involved. People with larger estates and properties in different states will benefit even more. As referenced in #1 above, certain small estate situations might not warrant the extra cost of setting up a living trust.

5. Will a living trust become a public document? No. Your living trust can remain private because it does not have to be recorded or published in any way. The only people who will know about your trust are the people you choose to tell.

6. Can a living trust be changed? Definitely yes. You can change and even revoke your living trust any time you wish. The decision is entirely up to you.

7. Will I have to file a separate income tax return for a living trust? No. A revocable living trust does not need a tax return of its own. Your personal tax return is sufficient for the IRS. After your death, however, any continuing trust or trusts would have to obtain a tax number and file income tax returns but an estate going through probate would have to do the same.

8. When I set up a living trust, will I lose control of my assets? No. When you set up your living trust, you simply name yourself and/or your spouse as trust managers, called "trustees". In this way, you never give up control. The usual trust does, however, provide for a simple, non-court method, for someone of your choosing to take over "control" of your assets (as a successor trustee) if you should ever become incapacitated or unable to handle your affairs.

9. Is the only cost of an estate plan the cost of drawing up the documents? Not really. You should consider the total cost of your estate plan as being both the cost of drafting the documents and the cost of distributing the estate property to your heirs. A will might seem to be the cheapest to set up but it may end up expensive when your estate goes through probate. Initially, a trust might cost at bit more than a will, but a living trust completely avoids probate and simplifies the distribution process.

10. Are there any drawbacks to a living trust? Some people think so. Here are some that I have come across:

a) Initial cost. While the cost to set up your trust would be more than writing just a will, the cost to distribute property to your heirs through a trust is much less than going through probate. Documenting a typical estate plan involving a simple living trust usually costs around $1,250 (single person) to $2,000 (married couples).
b) Your property must be put into the trust. This shouldn't be a big worry and the attorney should help you follow through on this. The process of re-titling assets and changing the names on bank and brokerage accounts is easier than you may think. The attorney will prepare and can record the deeds to transfer title to real estate into the trust. But, in any case, this re-titling must be done or the whole trust plan could fail or become over complicated upon your death.
c) The potential for poor management. Your choices for successor trustee(s) should be family members or friends you can trust and depend on. You would have to make a similar choice for an executor under you will so this is really a caveat for both a trust and a will. Corporate trustees, such as banks, are also an option. I can recommend the ATG Trust Company for whom I am an attorney agent.
d) Refinancing property is inconvenient. I have run across situations where a mortgage company or lender bank requests that you take real estate out of your trust before it will refinance your property. We can usually show them that this is not necessary. But, if the lender won't change its mind and you have to take the property out of the trust to complete the loan, you can simply transfer the property back into your trust when the refinancing is complete.
e) Keeping a list of assets in your trust. When you want to add something to your trust, you simply title it in the name of the trust and add it to your list. Keeping track of such detail should not be that difficult and we provide instructions and inventory sheets to help you do this.

NOTE - The above information is only general in nature and is not meant to be legal advice. You should always consult an experienced estate planning attorney of your choice who can discuss your situation with you and provide his or her recommendations for an entire estate plan according to your specific needs and desires.

ORGANIZING A BUSINESS

The main reasons to incorporate are lawsuit protection for the individual client, creation of a professional identity, businesslike credibility, potential tax savings, deductible employee benefits and ownership anonymity. The corporation becomes a new and separate entity that must maintain its own books and records and file its own tax returns. The corporation is owned and controlled by its shareholder(s) and the corporate entity protects the shareholder(s) from any liabilities or debts arising out of the corporation's business. Many business related tax deductions - medical expenses, pension plans, automobile expenses, business travel and entertainment - are better suited (less chance for an IRS audit) for a corporate tax return than the "Schedule C" filing of a sole proprietor. Some clients find a disadvantage in incorporating because of the need to file papers with the State and pay state franchise fees, the formalities to be followed in documenting corporate meetings, minutes and transactions, and the extra income tax returns. "Double taxation" may also come into play -- the tax levied on the corporation plus the tax levied on dividends paid out to shareholders - unless the S corporation tax election is made.

A Partnership is a simpler structure that does not require many of the filings and fees that corporations do - but partnership arrangements do not have the limited liability feature of corporations. The individual partners can be personally responsible for the partnership's debts and liabilities, including those arising from the business conduct of other partners. A Limited Partnership arrangement might solve this problem, as would a Limited Liability Company. These entities are better suited for investment or development projects or family ownership situations and not necessarily for a typical business or trade enterprise.

Top Six Tips for Taxpayers Starting a New Business

Anyone starting a new business should be aware of their federal tax responsibilities. Here are the top six things the IRS wants you to know if you plan on opening a new business this year.

First, you must decide what type of business entity you are going to establish. The type your business takes will determine which tax form you have to file. The most common types of business are the sole proprietorship, partnership, corporation and S corporation.
The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
An Employer Identification Number is used to identify a business entity. Generally, businesses need an EIN. You can also apply for an EIN online - refer to my other article on this webpage to find out how.
Good records will help you ensure successful operation of your new business. You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.
Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used.
Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.

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Any legal information contained in this web site is intended to be general in nature and should never be relied on. If the reader has a legal question or concern, he or she is urged to contact and seek the advice and services of a legal professional of the reader's choosing who is experienced in such matters. Michael R. Esposito offers this web site as advertising material only. Nothing within these pages shall lead to a client relationship with the attorney absent actual contact and express written agreement between the parties. The creator and owner of this web site, Michael R. Esposito, is licensed to practice law only within the State of Illinois and does not offer opinion or advice on the laws of any other state. IRS Circular 230 Disclosure Any discussion of federal tax issues in this web site may constitute "written tax advice". Any such advice is limited to the issues specifically addressed, and the conclusions expressed may be affected by additional considerations not addressed herein. Any tax information or written tax advice contained herein is not intended to be, and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer. (This disclosure has been affixed pursuant to U.S. Treasury Regulations governing tax practice.)