I control it, but its “not in my name”
“I have a lot of money, but it’s not in my name” may be a bad way to go.
I was reminded of this relatively common refrain (with some variations) when we got another reminder in the form of an opinion from the tax court that you cannot pretend to not completely own and control something when you actually do.
Some have come to believe they don’t need any serious planning since everything they have and control is in the names of others. If a person does not actually own much of anything, why must there be a need to plan?
The problem we get is the “IRS was not born yesterday rule.” The government tends to be able to figure out who really owns and controls stuff. Changes in ownership and control are great for estate planning, but could be a disaster if done wrong. People who have a plan of protecting their families by figuring they can outfox the government while doing nothing too meaningful are usually wrong. The problem is they won’t know they are wrong until they are dead. Their families will suffer as a result.
One thing that helps though is the fate of other families. Anyone who thinks they could use the “other name” strategy while controlling everything and not placing sufficient structures and formalities in place can turn to published court cases (including the recent case I mentioned) as well as a wealth of IRS opinions and code sections that prevent people from using this sort of “simple” gambit to avoid paying taxes.