Submitted By: Bob
Answered: October 7, 2014 8:30 am

Are conservatorship fees deductible?

When a person cannot handle his or her financial affairs because of physical or mental impairment and did not make arrangements (e.g., a durable power of attorney or trust) prior to impairment, a court may appoint a guardian or conservator. The guardian or conservator may have control over the person’s finances and/or personal affairs (depending on state law and the extent of impairment). For tax purposes, these fees can be deductible only to the extent they can relate to deductible activities (there are no cases or IRS rulings on point).

  • If the guardian is handling the person’s financial affairs and collects income on the person’s behalf, some tax professionals suggest that the portion of fees related to this activity can be characterized as a deductible expense under Code Sec. 212.
  • In limited situations, a guardian or conservator’s fees can be treated as a deductible medical expense. For example, if a guardian needs to go to court to have the impaired person committed to a medical facility, the extent of fees related to this activity may arguably be characterized as a medical expense deductible by the impaired person who pays them.
Tax Glossary

Private letter ruling

A written determination issued to a taxpayer by the IRS that interprets and applies the tax laws to the taxpayer’s specific set of facts. A letter ruling advises the taxpayer regarding the tax treatment that can be expected from the IRS in the circumstances specified by the ruling. It may not be used or cited as precedent by another taxpayer.

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