Numerous times, we have written blogs warning of the dangers of self-service estate planning, or for that matter, self-service in a variety of disciplines where an individual would be truly challenged to know the right decision. Every individual has a different expertise or basis of knowledge. For medical problems, you see a doctor. When an individual breaks their arm, they don’t go on the internet and research “casting” and then apply their own cast for healing. If this was the case, many individuals would not heal, or would heal improperly. I will repeat, there are reasons there are millions of jobs in thousands of disciplines. As a society, we call on each other to solve issues outside of our expertise.
This brings me to the Estate of Harvey Evenchik, another sad story of individuals trying to promote charity, make good estate planning decisions and in the end having it all fall apart due to bad decision-making. Many clients on many levels and for many reasons determine to donate property to charity. For some, the prospect of estate tax savings is paramount. For others, the idea of a significant income tax deduction carried forward over many years is reason enough to donate a variety of types of assets to charity. No matter the reason behind the gift, the bottom-line is that for such gift to be effective it must be done the right way. In the Evenchik case, the subject gift was a capital stock interest in a Corporation. Harvey and Deanna Evenchik sought to donate 15,534.67 shares of capital stock (or approximately a 72% interest in the corporation known as Chateau Apartments). The value of such donated property was estimated to be greater than $1,000,000. Thus, the IRS code is very clear in that a taxpayer must have a qualified appraisal done of the donated property in order to claim deductions of more than $5,000. (IRC Sec. 170). Instead of having an appraisal done of the 72% corporate interest, Mr. Evenchik had appraisals done of the two underlying properties and calculated the percentage value himself. At no time was the Corporate interest itself appraised.
At the end of the day, the Estate of Harvey Evenchik was denied all deductions taken from the donation. Accordingly, the Evenchik family lost the entire estate planning income tax benefit they sought to gain by donating the property. To obtain a proper qualified appraisal, as required, is not a complex concept and it is one that estate planning attorneys encounter on a weekly basis. If the Evenchiks would have consulted those knowledgeable in gifting, i.e. an estate planning attorney, this whole situation could have been avoided. Let this be yet another lesson as what not to do! Shortcuts never lead you to positive results. No matter what you encounter in life, always consult those who have knowledge of that issue. As I stated, every individual has a different expertise or basis of knowledge. Estate planning attorneys exist to help individuals accomplish their estate planning goals. The solution to this problem would be second nature to estate planning attorneys, much like the ability to fix an oil leak would be second nature to a good mechanic. Not everything requires individuals to take matters into their own hands. At the very least, consult a knowledgeable source about the issue at hand so that you do not end up an example of “what no to do”.
- Adam Abramowitz, Esq.