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No Love for Stretch IRAs in Latest Bill Before Congress, Says Orange County Estate Planning Attorney

Asset Protection, Estate Planning, Tax PlanningNo Comments

broken heart1 150x150 No Love for Stretch IRAs in Latest Bill Before Congress, Says Orange County Estate Planning AttorneyWhat is a provision that could potentially outlaw stretch IRAs doing in a transportation funding bill?  We have no idea.  But unfortunately, there it is.

Montana Senator Max Baucus, who is also Senate Finance Chairman, added the provision to the Highway Investment, Job Creation and Economic Growth Act of 2012.  Under the proposed legislation, starting in 2013, nonspouses who inherit traditional IRAs will be required to withdraw the entire amount from a traditional IRA within five years.

Currently, nonspouses who inherit IRAs have to begin taking distributions by Dec. 31 of the year following the receipt of the inheritance, but can “stretch” their withdrawals over their expected life spans – which provides potential decades of tax-deferred growth in a traditional or Roth IRA.

The proposed legislation would put an end to the “stretch” IRA except for beneficiaries who are disabled, chronically ill, a minor child or a beneficiary who is not more than 10 years younger than the IRA owner.  The rules for inherited Roth IRAs would remain unchanged.

If passed, this legislation could put a halt to an important estate planning strategy used, for example, by grandparents who leave an IRA to fund a grandchild’s college education.  The tax on the inherited IRA could be high enough in some cases to thwart these plans, discouraging saving and transfers of wealth between generations.

Your California legal and financial planning experts are at your service; Contact us today.

Estate Planning Attorney: Don’t Let Tweets and Posts Be Your Final Legacy

Estate PlanningNo Comments

Facebook icon 150x150 Estate Planning Attorney: Don’t Let Tweets and Posts Be Your Final LegacyAs an estate planning attorney, I am rarely surprised at what people do to leave that one lasting impression on loved ones and friends.   However, I must admit being a little taken aback that those who wish to communicate from the grave can now do so via Facebook and Twitter.

A new Facebook app – If I Die – provides users with a way to leave one last post and tweet upon passing.   Its promotional message of “What will you leave behind?” really begs the question, “Is that it?”

There are many more meaningful ways to create a lasting legacy for your loved ones – a will, any number of trust instruments – that come to my mind as a California estate planning attorney.  The video on the If I Die website encourages users to leave a lasting message, even suggesting a message regarding “an old score you want to settle.”  If that “old score” involves a disinheritance, a Facebook post or tweet will not do the job – you must specify exactly who you wish to disinherit in your will, and leaving such an important move to a social media network would likely unravel your plans and lead to litigation for your estate.

I blogged recently about the 10 reasons to create an estate plan – there are undoubtedly several reasons that apply to you.  Tomorrow is Valentine’s Day – take the opportunity to create a lasting legacy for your loved ones by contacting a California estate planning attorney to help you develop your estate plan soon.

Let our Costa Mesa law offices help you get started by contacting us today.

Orange County Estate Planning Attorney Outlines What Women Should Know About Estate Planning, Part 2 of 2

Asset Protection, Estate PlanningNo Comments

woman with thumbs up e1328806708410 Orange County Estate Planning Attorney Outlines What Women Should Know About Estate Planning, Part 2 of 2As an Orange County estate planning attorney, I believe it is important for women to know these additional important estate planning facts, as a continuation of yesterday’s post:

Women need to execute financial and healthcare durable powers of attorney and consider choosing a close family member if that person is willing to assume the responsibility of making financial and/or medical decisions on your behalf in case of incapacity.

Don’t own your own life insurance policy as the proceeds may be subject to estate tax after you die.  Instead, designate a spouse or other family member as owner or set up an irrevocable life insurance trust (ILIT), which buys the policy and holds the proceeds for beneficiaries.

Keep beneficiary forms for retirement accounts (IRAs, 401(k)s, etc. ) up to date, as they determine who receives the assets of each retirement account.

Make sure there is enough money in a joint account to cover any immediate expenses if your spouse dies suddenly. You may not be able to access a deceased spouse’s separate bank account right away.

Remember that the individual 2012 estate tax exclusion of $5.12 million ($10.24 million for married couples) is scheduled to return to $1 million in 2013 unless Congress acts.

Help is available to you by contacting your Southern California financial planning experts today.

Orange County Estate Planning Attorney Outlines What Women Should Know About Estate Planning, Part 1 of 2

Asset Protection, Estate PlanningNo Comments

mother daughter 150x150 Orange County Estate Planning Attorney Outlines What Women Should Know About Estate Planning, Part 1 of 2Women outlive men, make less during their careers and have less in savings due to pay discrepancies and time taken out of the workforce to raise their children.  In the opinion of this Orange County estate planning attorney, this is why it is important for women to know these important estate planning facts:

The unused portion of a deceased spouse’s estate tax exclusion can be transferred to the surviving spouse’s exclusion through 2012 (unless Congress acts) – which means the surviving spouse can have an estate tax exclusion of up to $10.24 million.  However, this exclusion transfer must be claimed by the deceased spouse’s executor filing an estate tax return.

Assets inherited or received as a gift from a spouse are not taxable.  A surviving spouse has nine months to renounce any gifts received from the deceased spouse, so it can be transferred to another family member or put into a trust for their own benefit.

Married couples can participate in “gift splitting”, which means they can share each other’s $5 million lifetime gift exclusion and give more to their children now tax-free.

A will and a living trust are both essential estate planning tools, and although both can be used to transfer assets upon death, they serve separate purposes.  A living trust can take effect while you are alive or after death, and allows you to hold assets for your benefit during your lifetime, which can be helpful in the case of future incapacity. A living will can also be beneficial if you own real estate in another state. A will only takes effect upon death, and is used to appoint guardians for minor children, cover assets that are not part of a living trust and create trusts that kick in after death.

Get started by contacting our Orange County asset protection estate planning law firm as soon as possible.

Newport Beach Estate Planning Attorney Shares Retirement Decision-Making Tools

Asset Protection, Estate Planning, Retirement PlanningNo Comments

retirement couple hugging 150x150 Newport Beach Estate Planning Attorney Shares Retirement Decision Making ToolsAs a Newport Beach estate planning attorney, I see lots of people who are struggling with decisions about retirement.  That is why I am happy to share a new set of tools from the Society of Actuaries – a non-profit organization that focuses on the measurement and management of risk – that may help new or soon-to-be retirees navigate some of these difficult planning decisions.

The Society of Actuaries’ Committee on Post-Retirement Needs and Risks has just completed a two-year analysis of the decisions that affect retirement, and has issued 11 reports on the following topics:

Big Question: When Should I Retire?

When Retirement Comes Too Soon

Women Take the Wheel: Destination Retirement

Deciding When to Claim Social Security

Designing a Monthly Paycheck for Retirement

Treating Asset Allocation Like a Roadmap

Securing Health Insurance for the Retirement Journey

Taking the Long-term Care Journey

Where to Live in Retirement

Estate Planning: Preparing for the End of Life

Finding Trustworthy Financial Advice for Retirement and Avoiding Pitfalls

To download each one of these reports in PDF format, click here.

Contact us today and let our Newport Beach law firm help you with all your financial planning needs.

Citibank Issues 1099s for Its Mileage Rewards Accounts

Asset Protection, Estate Planning, Tax PlanningNo Comments

tax wallet empty 150x150 Citibank Issues 1099s for Its Mileage Rewards AccountsIn a move that even made Forbes cry “Eeek!”, Citibank has issued 1099s to their mileage rewards account holders, reporting as income the mileage awards they received by opening a Citi account.

The 1099s report income to the IRS at a valuation of 2.5 cents per mile, which University of San Francisco tax law professor Dominic Daher called “ridiculous” in the Forbes article.  He acknowledged that taxpayers who receive a 1099 for free miles find themselves having to make a tough choice:  report the inflated income and pay the tax or ignore it and face an audit.

Daher recommends affected taxpayers first call the bank and request a corrected 1099.  If that doesn’t work, he suggests reporting the gross amount on your 1040 and then claiming an adjustment that brings the income down to a fair amount.

The Wall Street Journal’s Tax Report noted that the IRS has not issued any definitive rulings on frequent flier miles.  WSJ consulted with the American Institute of CPAs and the publisher of Inside Flyer magazine about taxation on different categories of frequent flier miles:

Miles award from an airline in return for flying with them – “almost certainly” a nontaxable rebate.

Miles awarded in connection with credit card usage – nontaxable rebate.

Miles awarded in connection with business travel – nontaxable.

Miles awarded as an incentive to open an account – taxable, says the IRS.

Miles awarded as an incentive to put money in a mutual fund – the IRS has issued a private-letter ruling declaring these miles taxable.

Miles awarded as a prize – taxable.

Contact us today for individualized planning strategies to meet your unique needs.

 

Orange County Estate Planning Lawyer Shares Most Common Reasons for Estate Litigation

Asset Protection, Estate Planning, Trust Litigation, WillsNo Comments

Boxing e1321902650338 Orange County Estate Planning Lawyer Shares Most Common Reasons for Estate LitigationIt seems that as soon as news breaks about a celebrity’s passing, the next report out is how his or her potential heirs are lining up for litigation over the estate.  Recently, Reuters interviewed an estate planning attorney on the East Coast who has authored a book entitled, Probate Wars of the Rich and Famous: An Insider’s Guide to Estate Planning and Probate Litigation.  Here’s what he had to say about the most common reasons for estate litigation:

Remarriage.  The estates of those who marry for a second or third time and have children from multiple marriages are ripe for litigation if their estate plan doesn’t provide adequately for the children of the first marriage and a subsequent spouse.  To help guard against this scenario, be sure to have a prenuptial agreement in place and appoint an independent fiduciary or trustee for the estate.

Family business.  Families who own lucrative businesses can get into a tangle if a clear plan is not crafted for succession and for fairly compensating spouses and children who may not be involved in the business.

Fraud.  This is especially prevalent in situations where one child is caring for an elderly parent and begins to believe they are entitled to more than the other children.  Re-titling bank or investment accounts to pass to one child often leads to litigation.

Family home.  It is not uncommon for a child to move into the family home to care for an elderly parent.  However, when that parent dies, the children often battle over who gets the house.  There should be a will stipulating that the child who moved in may keep the home, but needs to take out a mortgage to compensate other siblings.

Your California legal and financial planning experts are at your service; Contact us today.

Newport Beach Asset Protection Lawyer Shares 5 Mistakes to Avoid to Protect Assets in Retirement

Asset Protection, Estate PlanningNo Comments

asset protection 2 e1327093749885 Newport Beach Asset Protection Lawyer Shares 5 Mistakes to Avoid to Protect Assets in RetirementA good asset protection plan is not only necessary for funding your retirement; it is also vital for ensuring that you can continue to have a suitable income once you’ve retired.  A Newport Beach estate planning attorney shares five common mistakes retirees make that you should avoid:

Over-gifting.   Many retirees tend to over-gift to children, grandchildren or other relatives without regard on how those gifts will affect their own finances.  To ensure the sustainability of your retirement portfolio, gift wisely.

Not Downsizing.  It is not uncommon for retirees to have a more emotional attachment to their home than is economically practical.  While moving to a smaller home doesn’t make financial sense for everyone, it should be a consideration.

Not Timing Social Security Benefits.  Giving careful consideration to when to take Social Security benefits – both yours and your spouse’s – is something all retirees should do to improve the sustainability of their investment portfolio.  Deferring benefits for just a few years can add hundreds of dollars per month to your future benefits.

Neglecting Estate Planning.  Estate planning is so much more than tax avoidance, and is necessary for individuals of all income levels.

Not Planning for Long-Term Care.  Financing long-term care needs can quickly eat away at your retirement nest egg.  You can avoid this by considering long-term care insurance and other financial vehicles to fund any long-term care needs that may arise.

Let our Costa Mesa law offices help you get started by contacting us today.

On Groundhog Day, Orange County Asset Protection Attorney Warns These Estate Planning Mistakes May Bury You

Asset Protection, Estate PlanningNo Comments

Groundhog eating 150x150 On Groundhog Day, Orange County Asset Protection Attorney Warns These Estate Planning Mistakes May Bury YouEven though we celebrate it every year, watching for a groundhog’s shadow is not really an accurate way to forecast the weather.  And in today’s economic climate, not having an estate plan is no way to face the future.

This year, be sure you avoid these common estate planning mistakes:

Procrastination.  This is the #1 asset killer, whether it’s putting off creating an estate plan altogether, or neglecting to revise your estate plan when life circumstances – divorce, remarriage, births – bring change into your life.

Not Choosing a Guardian.  This could be filed under procrastination as well – putting off the naming of a guardian because you and your spouse can’t decide on someone.  However, in this case, done is always better than perfect.  And you can always change your mind.

Wrong Beneficiaries.  This happens a lot – someone divorces, remarries, has children and never updates the beneficiary list for their IRAs, 401(K)s and life insurance policies.  Ex-spouses benefit a lot from this one, since a beneficiary form trumps a will.

No Power of Attorney Designations.  Who do you want to make your healthcare or financial decisions for you if you can’t?  A stranger?  Probably not.  Executing durable powers of attorney allows you to appoint who you want to carry out your wishes in case of incapacity.

Not Enough Life Insurance.  If you are important to your family as an income provider, you need to have enough life insurance to see them comfortably through a difficult financial and emotional time.

Help is available to you by contacting your Southern California financial planning experts today.

Newport Beach Asset Protection Attorney Notes Interesting Strategy: Adopt a Girlfriend

Asset Protection, Estate PlanningNo Comments

Confused man e1328135692826 Newport Beach Asset Protection Attorney Notes Interesting Strategy: Adopt a GirlfriendAs Newport Beach asset protection lawyers, we routinely recommend a number of ways our clients can legally protect their assets from creditors as well as lawsuits.  Here’s one we’ve never recommended:  adopting a girlfriend.

According to today’s Palm Beach Post, International Polo Club founder John Goodman has adopted his 42-year-old girlfriend, Heather Hutchins, as his legal daughter.  Goodman is currently being sued by the parents of a 23-year-old man for wrongful death in an accident where Goodman allegedly ran a stop sign while intoxicated, killing Scott Patrick Wilson in 2010.

Wilson’s attorneys say that Goodman devised the adoption strategy in order to shield his assets against the wrongful death claim.  The court had previously found that Goodman’s trust for his two biological children could not be considered part of his financial worth if a jury awarded damages in the wrongful death suit.  The adoption papers state that Hutchins is immediately entitled to at least one-third of the trust assets since she is over 35, and (now) his legal daughter.

In an order granting the Wilsons the right to information about the adoption, Circuit Judge Glenn Kelley wrote, “The events which serve as the grounds for the relief sought by the Plaintiffs border on the surreal and take the Court into a legal twilight zone.”

Since the wrongful death suit was filed prior to the adoption, it will be interesting to see if it is nullified under the fraudulent conveyance law.  Fraudulent conveyances are conveyances made (or presumed to be made) with the intent to delay or defraud creditors. Usually, fraudulent conveyances are characterized by a lack of fair and valuable consideration and/or an attempt by debtors to place their assets beyond the reach of creditors.

Get started by contacting our Orange County asset protection estate planning law firm as soon as possible.

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