IRS PENALTY FOR LATE FILING OF FORM 5471

While the penalty for failure to timely file IRS forms has been around for many years, effective 2009 the IRS will asses an automatic penalty on any corporation that does not file a Form 5471 on a timely basis. All U.S. citizens who have equity in, or a controlling interest in a Controlled Foreign Corporation ("CFC") must file a Form 5471, a somewhat common situation for U.S. cleints of certain offshore asset protection promoters. The IRS will now asses an automatic penalty of $10,000 for each missed CFC filing, and, separate penalties will apply to each entity for each year that has not been filed. (See, Offshore Press, Inc., Jan. 5, 2009 www.offshorepress.com)

PITFALLS OF MEDICAID PLANNING

Elderly individuals, and their children, often seek to protect their assets by transferring such assets to their children in an attempt to subsequently qualify for Medicaid benefits. With rare exception, such transfers do not work and can be very costly for the Medicaid applicant. For example:

A woman who transferred her house to her son before entering a nursing home, thereby incurring a Medicaid penalty period (i.e., disqaulification), violated the state's fraudulent conveyance statute and is financially liable to the nursing home. (ElderLaw Answers, Jan. 5, 2009).

A woman who signed a nursing home admissions agreement as a designated representative (in.e., attorney-in-fact) is not responsible for paying the resident's nursing home bills. However, the personal representative may still become responsible for the payment of the nursing home resident's bills because she used the power of attorney to dispose of the resident's property and failed to pay all of the sales proceeds to the nursing home. (ElderLaw Answers, Jan. 5, 2009).