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Entries in wills (9)

Tuesday
Oct112011

Maximizing Your Annual Gift | Tax Free Gift Exemption

Trusts & Estate Planning Attorney

 

by Kira S. Masteller
818.907.3244

 

If your estate is valued over the Federal estate tax exemption ($5,000,000 in 2011 and 2012 and returning to $1,000,000 in 2013), you should consider making annual gifts to your family now so that those assets that would be received by the family anyway, will NOT be exposed to unnecessary estate taxes .

 

Your estate includes your:

▪ real estate,
▪ bank accounts,
▪ investments accounts,
▪ retirement assets,
life insurance,
▪ personal property, and
▪ all other assets

Annual Gifts that Don’t Keep on Giving (to the Government)

 

You are allowed to give $13,000 to as many individuals as you desire each year prior to December 31st without having to report the gift to the IRS, and a gift of $13,000 or under will not reduce your lifetime Gift Tax Exemption (presently $5,000,000; scheduled to return to $1,000,000 in 2013).

This means that you can give your son $13,000, his wife $13,000, and each of his three children $13,000 so that you have removed $65,000 that would be taxed at a rate of 35 percent (in 2011-2012; may return to 45 percent in 2013) if you left it in your estate and paid estate tax upon your death.

You can also directly pay tuition for students (your children, grandchildren and great- grandchildren), and health care expenses without affecting your lifetime Gift Tax Exemption. This is another way to help your family and reduce your exposure to Federal estate tax at the same time.

Of course when you have less assets in your estate, you may earn less income. This is something to consider prior to making gifts. Alternatively, if you are paying excessive income taxes, by reducing your income annually, you will pay less income tax annually.

If you have any questions regarding making annual gifts, you should contact your estate planning attorney or accountant to determine whether or not you should plan to make annual gifts to reduce the value of your estate.

Kira S. Masteller is a California Trust Attorney in our Trusts and Estate Planning Practice Group. For more information, call Ms. Masteller at 818.990.2120.

 

 
Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

Thursday
Sep152011

Buy Sell Agreements – Protecting Your Interests From the Four Ds

Trusts & Estate Planning

 

by Kira S. Masteller
818.907.3244

 

Buy sell agreements are common estate planning tools for people with business partners. They ensure the continuity of the business in the event of the death, disability, retirement or withdrawal of one or more of the principles.

If you run a successful company with a business partner, you should consider executing a buy sell agreement to protect your own interests, as well as those of your family. Here are some scenarios to consider:

1. Death

▪ When a principle dies, will that person’s stock be repurchased, or can he or she leave that stock to a person of his or her choice? To assure the continuity of the business, it is usually best to repurchase the stock.

▪ Will the repurchase, if any, be done by the corporation or the other shareholders? This involves business and tax issues which will need to be discussed one on one with your attorney, since individual situations vary.

▪ A proper repurchase arrangement requires the use of life insurance, which also needs to be discussed in person to address your unique needs. For example, in a corporate redemption situation, if there is a $500,000 purchase price, the corporation will likely not have sufficient assets to pay that purchase price. Generally, life insurance is used for these purposes. (Be sure to read my previous blog, “Your Life Insurance Review” to understand why it’s important to keep your policies up to date.)

2. Disability

▪ If a principle becomes disabled, will s/he continue to receive salary and benefits? If yes, for how long? That person cannot receive salary payments indefinitely, because at some point those payments will be deemed to be dividends, which is subject to double tax.

▪ Will a disabled shareholder’s stock be repurchased? If so, we will have to discuss how the payments will be made, since life insurance will not be available for this purpose.

▪ Some of these issues can be addressed in employment agreements.

3. Departure or Retirement

▪ Will a shareholder’s stock be repurchased in the event s/he retires or withdraws? Typically, this does not happen because it places an economic drain on the corporation.

4. Divorce

▪ If your partner separates or divorces, will that put your interests in the company at risk? A buy sell agreement can protect you or your partner from unforeseen events like this.

If you co-own a business, it might be time for you to consider the future of your company and maintaining financial interests for yourself and your family. Buy sell agreements are one of the best ways to protect those interests from unforeseen events.

Kira S. Masteller is a California Trust Attorney and Shareholder in our Tax and Estate Planning Practice Group. You can reach her at 818.990.2120.

 

 
Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

Thursday
Jul142011

Carmageddon To Do List: Trust and Estate Planning

 

by Robert A. Hull

 

Of all the things your Carmageddon To Do list should include, trust and estate planning should be ranking right after:

#1. Avoid driving in Los Angeles unnecessarily this weekend like the city’s infested with bubonic plague (though, I vaguely remember that getting around town during the 1984 Olympics wasn’t so bad – here’s to hoping).

Plague or not, many businesses along the 405 corridor are encouraging visitors by offering discounts and other incentives to lure foolish drivers to their doors. Don’t take the bait. Instead, stay home, relax with your family, and plan for the future. When was the last time you did that?

I know, trust and estate planning is a chore, like dead-heading the geraniums or re-caulking the bathtub. But if you’re not going to plan for your future and that of your loved ones this weekend, when WILL you take the time for it?

That being said, here are some estate planning points to ponder while you’re doing other things around the house:

 

Is it better to have a will, a trust, or both?

 

Best to view a will and a trust as a unified whole. With a will, you can decide how to distribute all of your property upon your death and name an executor to do so. However, without a funded trust, your estate will be “probated” – i.e., subject to Court-supervised administration (which can be, to the uninitiated – like re-caulking geraniums and dead-heading bathtubs – all while paying for the privilege in time and money).

With a trust, you have even more flexibility to distribute your property. However, if enough of your assets are not transferred into your trust, you can end up, again, in probate.

A trust can be set up with your spouse or partner, and like a will, you get to name someone to administer the trust (the “Trustee”), who will very likely be your spouse or partner.

Again, you must fund your trust before your demise, so that your loved ones can avoid -- da, da, dum -- probate.

 

Make it Easy for Your Executor or Trustee

 

Don’t hide your assets unless you’re committing an act of revenge.

If you actually like your Executor or Trustee and want to make it easier for him or her, make a list of all of the assets you’re distributing and make sure s/he has a copy, along with your accountant or attorney (or at least one of the above).

Upon your death, your trustee or executor must maintain records regarding any transactions related to your estate, i.e. payments from the estate for your funeral expenses, interests and gains on your accounts, fund transfers between accounts and more. S/he has a fiduciary duty to the beneficiaries of your estate to administer the assets according to the terms of the operative will/trust, and may be liable to beneficiaries for failing to do so.

The executors and/or trustees will have to give notice to your beneficiaries and heirs . . . in some cases, along with regular accounting statements. And courts may enforce notice and reporting, even for trusts outside of the court’s supervision, or not in probate.

 

Taxing Questions

 

Currently, California does not have an inheritance tax like some other states, and generally speaking, there is no federal estate tax due upon the death of the first spouse. Currently, there are no federal estate taxes for assets worth under $5 million dollars (and, a surviving spouse may use the deceased spouse’s unused portion of his or her $5 million exemption).

You may gift up to $5 million dollars, tax free. So, if you’re thinking about gifting property or funds to a particular someone…this may be the very time to do it because the law is set to reduce the estate/gift tax exemptions to $1 million dollars in 2013, absent further legislative action. Remember, though, that gifting now will reduce your estate tax exemption to the extent that you use your gift tax exemption…

 

Trust and Estate Planning Accountability

If you’d like more information, read my colleague’s, Michael Hackman’s blog, California Trust Attorney – Three Things You Should Know About a Trust.” 

Stay safe this Carmageddon weekend, steer-clear of driving and start a little estate planning for the family… 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

Friday
Jun102011

Will and Probate Explained – Why You Should be Prepared

 

by Robert A. Hull

Sound estate planning, the realm of the trust, will and probate generally keep property in the family, make sure debts are settled and don’t become burdens on your loved ones, and ensure your wishes for the distribution of your property – assuming such wishes are legal – are implemented according to your instructions.

Let’s start with wills.

If you pass away with a will, your property will be distributed according to its terms. Your will can leave your assets to a trust you created during your lifetime. In such a case, your will is called a “pour over” will because it “pours” assets not already in your trust, into your trust. Your will can also include a trust created in the will itself.

Your will also names an executor to administrate your “probate estate” (more on that in a minute). This executor organizes and distributes your assets per the terms you outlined in your will, and arranges payments of debts and taxes.

And, if you have minor children, your will should name a trusted guardian for them.

 

What is Probate?

 

Probate is the process by which the Court supervises and validates your executor’s management and distribution of assets, as well as payment of your debts. Probate generally takes a long time, sometimes several years.

If there are assets which are subject to the probate process, the executor must file papers to “open a probate” with the Court. The will and probate process is highly specialized and very time-sensitive (i.e., there are many hard and fast deadlines based on your date of death, the date certain documents were filed with the Court, etc.). Thus, we don’t recommend that your executor handle this process without the assistance of a knowledgeable trust and estate attorney.

Generally, state law sets the fees that an attorney assisting with a will and probate may charge (a certain percentage of the gross value of the assets probated). However, such fees, and the time and inconvenience of managing a probate, will inevitably be significantly greater than the fees necessary to draft a complete estate plan which can avoid the need for probate.

However, probate is necessary to lawfully settle your debts and assets only if you die with “probate assets”.

 

Your Assets – What Should be Covered in Your Will and Probate Planning?

 

Only certain assets do not require a probate process – they are called, logically, “non-probate assets”. Some examples include:

▪ Assets in Joint-Tenancy
▪ Assets held by Trusts
▪ IRAs
Life Insurance Proceeds
▪ Other assets with named beneficiaries

The administration of these assets are not governed by your will, but rather by the terms of the specific instrument. So even if you wrote a will, the executor may not need to open a probate, provided all of your assets are “non-probate” assets (or if you have less than $100,000 in probate assets). That’s good news for you and your beneficiaries.

 

No Will – What Happens Then?

 

If you pass away without a valid will, you die “intestate”. That is, the Probate Court will dispose of your property according to the California intestate beneficiary succession laws in place at the time of your death. If you are married, there are different schemes for community property and separate property.

If you don’t have a will, you don’t have an executor, so the Court will appoint a person nominated according to the statutory scheme (probably someone from your family) to act as your estate administrator. There is no authority to make transfers of your probate assets without the transferor being appointed executor, and an executor, with exceptions, cannot act without court approval.

Without a will, you can only hope that the people that you would have as beneficiaries and the amounts they would receive are consistent with the distributions provided for under the intestate succession laws.

A simple will and probate plan is a good first step toward the efficient management of your assets following your death. However, there is a much more powerful tool which, when used in conjunction with a will, can also have numerous tax benefits and help your estate avoid probate entirely.

Robert A. Hull is a Los Angeles trust and estate planning attorney at the Firm, and his practice includes business and corporate law. Contact Mr. Hull at 818.990.2120, or by e-mail: rhull@lewitthackman.com

 

 
Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

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