Estate Planning Archives - Page 20 of 21 - Lonich Patton Ehrlich Policastri

Two Reasons Why Your Family Business May Need a Business Succession Plan

December 29, 2010/in Estate Planning /by Michael Lonich

According to the Small Business Administration, about 90 percent of all U.S. businesses are family owned and controlled. Unfortunately, only about 30 percent of these businesses pass successfully to the second generation. What is worse is that only about 15 percent of those then pass to the third generation. A comprehensive business succession plan can ensure that your business continues in the family for generations to come.

There are two important reasons why you should have a business succession plan in place. First, a business succession plan provides liquidity for owners. While some business owners have sufficient savings to transfer their business to the next generation, others rely entirely on their business for income. For those relying on business income, it is important to ensure the company will be able to fund the owner’s retirement plan. If the owner desires to transfer the company to a younger generation, periodic gifts and sale of stocks to these individuals over the years should be part of their business succession plan.

Second, a business succession plan may allow a client to minimize the impact of transfer taxes. For example, if successors to the business include grandchildren, the federal generation-skipping transfer (GST) tax might be imposed in addition to the estate tax. As the tax implications can be quite large without a business plan, your family may be forced to sell off company assets in order to pay the transfer taxes. However, careful planning and use of estate, GST, and gift tax exemptions are essential to minimizing the aggregate affect of taxes on your business.

Please contact our firm, Lonich Patton Erlich Policastri, for more information on how to create a successful business succession plan. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

“Do It Yourself” Estate Plans Can Be Problematic

December 20, 2010/in Estate Planning /by Michael Lonich

Are you a person who is intrigued by a deal? If so, you should understand that a “bargain-priced” estate plan may really not suit your needs nor save you money in the end. While there are many online templates for wills, you need to be very careful when creating an estate plan without an attorney. Each state has different rules and regulations on what makes a will valid and enforceable. In addition, the differing financial and personal goals of individuals call for unique estate plans.

The need for caution when looking for a “bargain” estate plan was expressed in an article by the Morgan Law Group that wrote that regardless of whom you designate as a beneficiary to your IRA in your estate plan, the proceeds of your IRA will actually pass to whomever the beneficiary is on your IRA beneficiary designation document. Although you may be able to create a trust online, in order for it to be effective, you must follow very specific steps to fund your trust.

For more information about estate plans tailored to your specific needs, please contact us. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Do You Need a Revocable or Irrevocable Trust?

December 10, 2010/in Estate Planning /by Michael Lonich

If you are confused about the difference between a revocable and irrevocable trust, you are not alone. In fact, they do have some similarities. For example, both revocable and irrevocable trusts allow the settlor (person putting assets in the trust) to distribute or transfer their property as provided for in the trust document.

The main difference between the two trusts is related to the settlor’s control over the trust assets. The settlor of an irrevocable trust generally gives up a large degree of control over the property that he or she transfers into the trust. In addition, the settlor may often derive tax benefits from creating an irrevocable trust.

On the other hand, a revocable trust can be canceled (revoked) at any time. However, the revocable trust often has less significant tax benefits. You may wish to create a revocable trust, regardless of any decrease in tax benefits, if you desire to maintain a large degree of control over the trust property. It is important to work with an experienced estate planning attorney to create an estate plan that fits your lifestyle and goals.

For more information about trusts, please contact us. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Unsettled Law Makes Estate Planning for Same-Sex Couples Challenging

December 1, 2010/in Estate Planning /by Michael Lonich

Not all states recognize the rights of lesbian, gay, transgender, or bisexual (LGTB) partners to make end-of-life care decisions for their significant others. This can lead to distressing situations where a loved one’s wishes are ultimately disregarded. However, in California, most of the rights and responsibilities that apply to married couples also apply to same-sex registered domestic partners. Estate planning for same-sex couples remains complicated because there are many areas of unsettled law. For example, it is not clear if a certain provision of the California Family Law code imposing the same rights and responsibilities of marriage on domestic partnerships will be validly applied retroactively. This particular legal question makes it difficult for estate planning attorneys to properly characterize same-sex couples’ assets. In addition, there are legal distinctions for validly married same sex couples and registered domestic partners. [To date, same sex couples married in California between June 16, 2008 and November 4, 2008 as a result of the ruling in In re Marriage Cases, remain validly married.] An example of one such distinction is that the law is not clear on whether same-sex married spouses will be able to report their earnings as community property income on federal income tax returns. Currently, domestic partners are not allowed to report income as community property when filing federal returns.

An out-of-state example of a same-sex couple’s wishes not being honored arise from a case involving Janet Park. Park wanted to be cremated after she passed. However, instead of following the direction of Park’s partner of 22 years, the funeral home followed the instruction of Park’s aunt. Loss of a partner can be especially devastating to lesbian and gay partners who are not officially recognized as “widows” or “widowers.” In addition, many LGTB individuals are ostracized from their deceased partners’ family and left to grieve alone.

If you are a lesbian, gay, transgender, or bisexual individual, it is very important to have a strong estate and end-of-life plan in order to ensure that your wishes are followed upon your death. Don’t leave your partner powerless in making key financial and health care decisions for you when you are unable to make them for yourself.

For more information about securing your future, please contact us, Santa Clara, California Wills & Trust attorneys, at Lonich Patton Erlich Policastri. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Please click here to read the full article.

Lifetime Gifts May Have Significant Tax Advantages

November 30, 2010/in Estate Planning /by Michael Lonich

An estate planning attorney can help you develop a plan that maximizes your assets and helps you take advantage of the estate and gift tax system. If you are considering leaving an asset to someone upon your death, you may be interested in learning about the tax benefits of an “inter vivos” gift. An inter vivos gift is a gift that is transferred during the giver’s lifetime.

Lifetime gifts have several tax advantages. These advantages are particularly helpful to individuals whose estate will likely be subject to federal estate taxation. Also, lifetime gift plans are particularly important for people whose estates will exceed the applicable estate tax exclusion ($3.5 million for decedents dying in 2009).

The main advantage of an inter vivos gift is that some, or all, of the gift may not be subject to transfer tax. The Internal Revenue Code provides that individuals may make gifts of $13,000 per year per donee without incurring gift tax liability and without having to file a gift tax return.

In addition, interspousal gifts provide the donee spouse with an adequate estate and also allow the donee spouse to use his or her annual exclusions and estate and gift tax exclusion amounts. The gift tax marital deduction is unlimited for a donee spouse who is a United States citizen. For non-citizen spouses, there is an inflation adjusted annual gift tax exclusion that totaled $128,000 in 2008.

For more information about lifetime gifts, please contact us. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

The Proper Estate Plan May Help You Avoid the Expense and Hassle of Probate

November 23, 2010/in Estate Planning /by Michael Lonich

If you are trying to decide what estate planning instruments you need in order to meet your goals and to avoid the cost of probate, you might want to look into the revocable trust. A revocable trust is the primary testamentary transfer device used by professional estate planners in California. A revocable trust can be used not only to manage your property during your lifetime, but it also serves to distribute your assets upon your passing.

There are several key advantages of a trust. First, it avoids probate. Probate is the court-supervised process of distributing a deceased person’s assets according to their will or California intestacy law. This process can sometimes take over 6 months to complete and can be expensive. For example, the estate of a person with only a will operating to distribute their assets after death would have to carry the costs associated with providing and preparing the initial petition, petitions for instructions, and the petition for final distribution. In addition, costly court hearings to discuss creditor (and other) issues may be required.

Second, a trust can help to maintain confidentiality regarding your assets. Probate proceedings are a part of the public record. This means that anyone is able to access the information in the record regarding your assets and their distribution. If privacy is important to you, a trust can help you achieve greater (but not necessarily complete) confidentiality.

Third, a trust also serves property management functions during your lifetime. With a trust in place, there is no need to incur the costs and inefficiency associated with a formal conservatorship in the event of your lifetime disability or incapacity. In addition, a trust is useful as it provides for long-term continuity for handling your assets.

For more information about wills and trusts, please contact our San Jose estate planning lawyers at Lonich Patton Erlich Policastri for more information. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Selecting a Successor Trustee for Your Revocable Trust

November 22, 2010/in Estate Planning /by Michael Lonich

A “trustee” is a person who is responsible for managing the trust assets. Many individuals choose to name themselves as the trustee of the trust so they can exercise control over the trust during their lifetime. In addition, it is wise to add a successor trustee who will manage the trust assets if you ever become incapacitated or die.

When choosing a person to serve as your trustee or successor trustee, make sure you pick someone who is reliable and honest. The trustee has a vast amount of authority and will not be required to act under the court’s direct supervision.

Just recently, the individuals in charge of the estate of 104 year old heiress, Huguette Clark, have come under attack for some questionable dealings with her estate. A criminal investigation is pending regarding the attorney and accountant in charge of handling Clark’s money. The investigation is looking into the sale of her Stradivarius violin for $6 million and a Renoir painting for $23.5 million. Click here for the full article.

To learn more about successor trustees, please contact us. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Estate Taxes Cause Some to Plan their 2010 Death

November 22, 2010/in Estate Planning /by Michael Lonich

Estate Taxes Cause Some to Plan their 2010 death.

Recently the AP press reported, U.S. Rep. Cynthia Lummis says her constituents are planning to die just to avoid estate taxes.[1] Currently, there is no estate tax for individuals who pass away in the year 2010. However, if legislators do not act quickly then the estate tax will revert back to a one million dollar exclusion with a 55% top rate. Many had speculated with recent current events that Congress would not be able to pass any estate tax legislation prior to the November elections. Now that the November elections are finished, it is hopeful that some guidance will be given to the future of estate taxes.

Sometimes the Estate Tax is nicknamed the Death Tax. In reality the tax is imposed on the inheritance of wealth. For much of the country a one million dollar exclusion is generally enough to exclude their inheritances from being taxed. However, in the Silicon Valley area where detached single family homes are nearly a million dollars this exclusion can be used up rather quickly.

Bay Area Estate Value Much Higher then Average

Take for example, an estate valued at $1.5 million dollars. Although mere mention of the word million suggests this is not the type of estate that affects the majority of the population. It is actually very common in the Bay Area. Home values in the Bay Area are much higher than national average values. In a recent report, Cupertino, CA median home value is over $1,000,000.00. The median home value in Sunnyvale, CA is reportedly over $750,000.00. Since the value of a home is much more in California the one million dollar exclusion does not allow for much of the estates to transfer without tax.

Practical Calculation How Estate Tax is Applied

To calculate the Estate Tax on $1.5 million dollar estate, we must examine the Estate Tax Tables below.

Estate Tax Rates Table
Subject to Exemptions and Maximum Tax Rates Table
Estate Amount Exceeding:	Up to:	Is taxed at a rate of:
$1,000,000	$1,250,000	41%
$1,250,000	$1,500,000	43%
$1,500,000	$2,000,000	45%
$2,000,000	$2,500,000	49%
$2,500,000	$3,000,000	50%
$3,000,000	$10,000,000	55%
$10,000,000+	$17,184,000	60%
$17,184,000+		55%

Exemptions and Maximum Tax Rates
Year	Estate Tax Exemption	Highest Rate
2003	$1 million	49%
2004	$1.5 million	48%
2005	$1.5 million	47%
2006	$2 million	46%
2007	$2 million	45%
2008	$2 million	45%
2009	$3.5 million	45%
2010	N/A (taxes eliminated)	0%
2011	$1 million	60%

In 2010, the estate would incur no estate tax and the inheritance would be the full 1,500,000.00.

In 2011, the estate would have a $1,000,000.00 exclusion, and the balance would be taxed. The table below shows my tax calculation on a $1,500,000.00 estate in the year 2011.

Tax Rate	Calculation	Tax	Total Inherited
0%	1,000,000 exclusion		$ 1,000,000.00
$1,000,000-$1,250,000 @ 41%	41% of $250,000.00	$ 102,500.00	$ 147,500.00
$1,250,000-$1,500,000 @ 43%	43% of $250,000.00	$ 107,500.00	$ 142,500.00
		$ 210,000.00	$ 1,290,000.00

In 2010, the estate would be free of estate tax but in 2011 the estate tax would be $210,000.00. Estates of even higher values would have even more drastic tax differences in 2011. Simply put a 2 million dollar estate would have to pay nearly a million dollars in estate taxes.

This is only a theoretical computation and many people are hopeful that Congress will pass new estate tax legislation, while others argue that estate tax relief is not an important issue. Although there is no way to be certain if Congress will act, many believe that the only certain thing in life is death and taxes. However, no one says that you have to pay the maximum tax rate. In fact, each individual is permitted a $13,000.00 gift tax exemption per year. That is only one of the many ways an attorney can assist in your estate planning.

For more information about Estate Planning, please contact us. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

[1] CHEYENNE, Wyo. (AP) — U.S. Rep. Cynthia Lummis says some of her Wyoming constituents are so worried about the reinstatement of federal estate taxes that they plan to discontinue dialysis and other life-extending medical treatments so they can die before Dec. 31. The Associated Press: US rep.: Estate tax rise has some planning death, http://www.google.com/hostednews/ap/article/ALeqM5iE6x5QNARlHHqT8EKF-KUYWflVpg?docId=01c363eeccd542fe9dc9f9742699686b (last visited Nov. 4, 2010).

Making Your Wishes Known at the End of Life

April 30, 2010/in Estate Planning /by Michael Lonich

April 16, 2010 is Health Care Decisions Day, a national campaign to encourage Americans to complete their advance directives, living wills, and basically document their preferences regarding medical treatment at the end of life.

Researchers at the University of Michigan in Ann Arbor have discovered that almost a third of patients over the age of 60 would eventually become so incapacitated that they would be unable to express their preferences regarding end of life treatment. Patients who specified all care possible in their living wills were far more likely to receive aggressive care as opposed to those who didn’t.

The number of individuals who possess living wills has increased over the years. Without these documents, they patient remains vulnerable despite whether or not they had end of life discussions with their doctors. With 40 million new patients in the healthcare system and the decreasing number of physicians , end of life discussions are becoming nearly impossible.

An attorney is not needed to obtain these documents. Patients can designate a healthcare proxy. A healthcare proxy is a trusted friend or relative who can make decisions for a patient. Proxies won’t have as much of an effect as a documented living will, but it’s a good backup.

For Full Article: http://www.nytimes.com/2010/04/16/health/15chen.html

Estate Planning Red Flag

April 9, 2010/in Estate Planning /by Michael Lonich

If you’ve recently divorced and haven’t yet revisited your estate plan, or don’t have one, you may be in for some surprises. It is important to review your estate plan to be sure that it does not confer any unintended benefits or rights on your former spouse. Here are some questions to consider:

1. Does your former spouse have access to any jointly owned assets, such as bank accounts, investments or real estate?
2. Is your former spouse still the designated beneficiary of any life insurance policies, IRAs or other retirement plans?
3. If an ERISA plan, was an appropriate ERISA waiver obtained at the time you negotiated your divorce settlement?
4. Did you give your former spouse any powers of attorney or designate him or her as your agent for health care decisions?
5. Did you name your former spouse as a beneficiary of any trusts? Are they irrevocable? If so, do they provide for your spouses’ interest to terminate automatically in the event of divorce? If not, do the trust documents and applicable state law allow you to change beneficiaries or modify the disposition of the trust assets?
6. Does your divorce settlement or judgment address any of these issues?

After a divorce, or any other major life change, such as marriage, birth of a child or death of a family member, you should meet with your estate planning advisor as soon as possible to review your plan. Failure to modify your plan to reflect these changes can lead to unexpected and, in many cases, undesirable results.