A new reference guide from the IRS has some guidelines for Reports of Foreign Bank and Financial Accounts (FBAR). There are several issues highlighted in the reference guide that give cause for concern (or for a call to your business planning and tax strategy specialist), but one to note is with regard to durable powers of attorney.
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Durable powers of attorney are a foundation in a great deal of estate planning, especially when it comes to business owners who either want to preserve their legacy or protect the business and/or a partner in the event of an incapacity. Most of these powers of attorney stipulate authority to sign on behalf of the principal for bank accounts belonging to that individual.
An evaluation of the new Reference Guide reveals that under the description of signature authority, individuals named in those powers of attorney may be at risk for penalties related to foreign accounts of the individual issuing the power and those individuals may inherit responsibility for FBAR filing.
It’s unclear whether a lack of knowledge argument will be applicable in such a scenario, so it’s in the best interest of named parties to be aware of their rights and responsibilities. Since that’s not always possible or reasonable, an estate planning specialist can discuss options directly with the individual creating the durable power of attorney.
To learn more about asset protection, business planning, and risk mitigation, contact us today by phone at 732-521-9455.