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Learning from Famous Estate Planning Mistakes

Estate PlanningNo Comments

Oops 150x122 Learning from Famous Estate Planning Mistakes The mistakes many celebrities have made in their estate plans (or lack thereof) have caused plenty of pain and suffering for their families and their estates.  Here is the list of those celebrity mistakes and what we can learn from them:

Sonny Bono – Bono died unexpectedly of a skiing accident and had no will when he died, as well as a child he fathered out of wedlock who stepped forward to claim a part of the estate.  Creating a will is important at any age since none of us knows when we will die.

Jimi Hendrix – Hendrix intended for his estate to go to his brother, but he never made a will.  When he died at 26, his estate was divided between his father and adopted daughter according to state intestacy laws.

Leona Helmsley – the well-known New York hotelier left the majority of her $12 million estate to her dog.  Her grandchildren contested the validity of the will, claiming mental incompetence.  If you intend to leave an unusual bequest, you should consult with an estate planning attorney to ensure your wishes cannot be challenged due to mental incompetence.

Stieg Larsson – Larsson never got to see the riches his Girl With the Dragon Tattoo and subsequent novels brought, and neither did his girlfriend of 32 years since he never made a will naming her as a beneficiary.  His entire estate was divided between his father and brother.

Princess Diana – While she did indicate that she wished to leave £100,000 each to her sons and her godchildren upon her death, she did not execute the formal estate planning documents to do so.  When she died tragically at the age of 36 in a car accident, her wishes were not honored because they were never formalized.

Michael Jackson – the King of Pop executed a pour-over will that placed all his assets in a trust, but he neglected to fund the trust with those assets.  His family continues to battle in court over his assets.

Heath Ledger – the actor neglected to update his will following the birth of his daughter, so all his assets went to his parents and siblings.  Wills should always be updated following a major life event like the birth of a child, a marriage, a divorce, etc.

To avoid any missteps with your estate planning, contact our Orange County law firm.

3 Considerations for an Overseas Retirement

Retirement PlanningNo Comments

retirement sign e1367526898975 3 Considerations for an Overseas RetirementRetiring overseas has become increasingly popular as Americans try to stretch their retirement dollars as far as possible while still enjoying an active lifestyle.  In fact, it has been estimated that over a half million American retirees are currently enjoying the expatriate lifestyle in countries all over the world.

However, before you decide on an expat existence, you should discuss your plans with an estate planning attorney so you understand all the financial implications of your decision, including:

Taxes – the IRS allows Americans living overseas to exclude up to $97,600 of income earned abroad by using the Foreign Earned Income Exclusion (FEIE).  However, to qualify, you must have lived outside the U.S. for no less than 330 days in a 12-month period.  If you do not qualify for FEIE, you will still need to file and pay U.S. income taxes.

IRA Contributions – generally, once you move out of the country, you will not be allowed to contribute to an IRA since to do so, you must be earning taxable income.  If you apply for and claim a FIFE, you would not have taxable income so would be precluded from making contributions to an IRA or, in fact, most retirement accounts.

Social Security Benefits – living overseas will not stop you from receiving your Social Security benefits, but depending on what country you choose, it could be a hassle.  The government cannot send funds to some countries; in others, it may take up to four weeks for your check to clear.  Most expats get around this by keeping a U.S. bank account and accessing their funds via an ATM card.

If you’re planning to retire in 2014, contact our Newport Beach law firm for more information on retirement planning.

Taxes That Must Be Paid By The Self-Employed

Business Planning, Tax PlanningNo Comments

tax wallet empty 150x150 Taxes That Must Be Paid By The Self EmployedIf you are considered as self-employed by the IRS, you are responsible for paying self-employment taxes based on your earnings. The IRS defines self-employment as any business that does not file a business income tax return – including LLCs, sole proprietorships, partnerships and independent contractors.

The biggest tax burden for the self-employed is the self-employment tax. You are required to pay Social Security and Medicare taxes both as employee and employer. If you have over $400 in annual net earnings – which is the profit left over after business expenses are deducted – you’ll owe self-employment tax.

The earnings threshold for Social Security tax in 2013 was $113,700; any earnings over that limit are not subject to the Social Security portion of the self-employment tax. However, the Medicare tax portion still applies.

You may also be responsible for federal, state or local taxes, depending on the size and nature of your small business.

A business planning attorney can advise you on the laws surrounding self-employment taxes.  Contact our Costa Mesa law firm for help.

Steps That Baby Boomers Need To Take Now For Retirement Planning

Retirement PlanningNo Comments

retirement sign e1367526898975 Steps That Baby Boomers Need To Take Now For Retirement Planning1. Prioritize your own needs. Boomer parents are finding it increasingly difficult to put themselves first, ahead of their children’s financial and educational needs. However, there are other financial resources available for college educations, but not for retirement. Interest rates are at historic lows, and your children can take advantage of these without counting on you to bankrupt your retirement.

2. Plan to retire now. Early retirement planning provides you with some wiggle room if your financial picture changes dramatically prior to your actual retirement.

3. Ramp up your savings rate. Most of us have not saved what we should have in our early working years. Now that you are older and the children are gone, you may have the opportunity to catch up. Those over the age of 50 are allowed to make catch-up contributions to IRAs and 401(k)s.

4. Review your investments. Review your portfolio to be sure your investments are allocated properly as you near retirement and that fees associated with those investments are reasonable.

5. Look into long-term care insurance. It has been estimated that we will spend $240,000 during our retirement years on healthcare and medical expenses. If you can’t afford these on your own, you will want to consider purchasing long-term care insurance.

6. Create a comprehensive estate plan. A comprehensive estate plan will help you and your heirs protect assets and save time and money in costly probate proceedings. As you age, you will also want the protection of a durable power of attorney and an advance health care directive to ensure your financial and healthcare wishes are followed. Only a comprehensive estate plan can provide you and your family with these protections.

Contact our Newport Beach law firm to learn more about planning your retirement.

We Wish You a Merry Christmas!

Asset Protection, Estate PlanningNo Comments

christmas tree e1355953727677 We Wish You a Merry Christmas!We are here for you any time of the year for estate planning and asset protection strategies to benefit you and your family.  Contact our Orange County law firm soon.

Financial Planning for Boomer Widows

Estate PlanningNo Comments

help button 150x150 Financial Planning for Boomer WidowsIt is currently estimated that 70 percent of baby boomer women will outlive their husbands, and a recent ING Direct USA survey found that almost 80 percent of boomer women say they lack the financial savvy to make the right financial planning decisions.

Taking action now can spare you from financial panic; here are some recommendations:

Start estate planning now.  Many women cannot count on having a lot of time to get their financial affairs in order after a spouse dies.  Make sure all your accounts are jointly held and steps are taken to avoid probate if possible.  You will want continuing access to all your assets if your spouse dies before you do.

Educate yourself.  Know what you have in terms of assets and where to find those assets.  Sit down now with your spouse and make a full list of all accounts, passwords and contacts and keep that list in a safe place.

Delay Social Security.  If a husband was the primary earner and can hold off taking Social Security benefits until age 70, a surviving wife will qualify for a significant benefit premium.

Don’t make hasty decisions about money. Experts recommend that widows not make any major decisions – financial or otherwise – in the first six months of widowhood.

Get professional help.  The help of an estate planning attorney or financial planner can be invaluable following the death of a spouse, helping you navigate the estate administration process and ensuring your financial future.

For more information on financial and estate planning, contact our Orange County law firm.

The 10 Last Best Things You Can Do for Loved Ones

Estate PlanningNo Comments

number 102 The 10 Last Best Things You Can Do for Loved OnesDeath is something no one likes to think about and far too few of us plan for – yet everyone will do it.  And leaving grieving loved ones with a lot of extra work and confusion is probably not something most of us would want to leave as our legacy.  Here are 10 of the last best things you can do for your loved ones now, before you pass:

1.  Make a will.  Don’t make your family have to drag through an expensive court proceeding where a judge who never knew you will have to decide how to divvy things up.

2.  Sign a health care power of attorney.  Make your decisions now on how or if you want to health care providers to treat you in case you become incapacitated, and choose someone you trust to respect your decisions on end-of-life care.

3.  Plan your funeral.  Do you want to be cremated or buried?  Yes or no to a viewing?  Make these decisions now and let your loved ones know.

4.  Plan your estate.  Will there be taxes on your estate and how will your heirs pay them?  What do you want to happen to your house?  Should you put your assets in trust to protect them for future generations?  Meet with an estate planning attorney and get all these things squared away.

5.  Make a list.  Let loved ones know where they can find your will and powers of attorney, the key to your safety deposit box, your email and online accounts and password information and other important papers.

6.  Gather important paperwork.  Get your deed, car title, insurance policies, pensions, bank account information, CDs and bonds and put them in a file for your family.

7.  Update your address book.  Be sure you have current addresses for friends and family members who live far away as well as contact information for your estate planning attorney and accountant.

8.  Stop hiding things.  If you hide jewelry or cash in your home, find a better place for it and let family members know where it can be found or those things may be gone for good after you are.

9.  Share your history.  One of the greatest gifts we can pass on are our family memories and history, so don’t let yours die with you.

10.  Make amends.  If you’re on the outs with family members, mend fences now before it’s too late.

The last best thing you can do for yourself is to have a comprehensive estate plan and tax strategy in place.  Contact our Newport Beach law firm for help.

Know the Rules for Making Gifts

Tax PlanningNo Comments

money gift 2 e1316545217983 Know the Rules for Making GiftsThe timing of making year-end gifts is important because a transfer of property is only counted as a gift once a donor has unconditionally relinquished all control over it.  Here are the rules concerning gifts:

Gifts by Check – the check must be cashed or deposited into the recipient’s account by Dec. 31 to count as a 2013 gift, so if you have given a gift via check, be sure the recipient follows through by cashing or depositing the check before the end of 2013.

Gift of Securities – the securities must be physically transferred into the recipient’s account by year-end.

Large Gifts – gifts above the $14,000 annual exemption count toward your lifetime exemption, which is $5.25 million for 2013.  You should consult with your estate planning attorney about the tax consequences of gifting more than $14,000.

Charitable Gifts – if you are making a donation by check, it must be mailed by Dec. 31.  If you are making a donation via credit card, you must also make it by Dec. 31, even though you will not pay for it until 2014.

To learn ore about how gifting can benefit your estate, contact our Costa Mesa law firm.

4 Estate Planning Errors to Avoid

Estate PlanningNo Comments

Oops 150x122 4 Estate Planning Errors to AvoidEstate planning is crucial to protecting your assets, not only for your own use during your lifetime but also for future generations.  However, it is just as important that you avoid these common estate planning mistakes or all the care you have taken to protect your estate may be undone:

Failure to name the right heirs—failing to designate the right beneficiaries or to update your estate plan after a divorce, birth of new children or other major life event.

Lack of liquidity—leaving high value assets to heirs without the sufficient liquidity that will allow them to pay any estate taxes when they are due could result in having to sell off those assets.

Lack of estate management at critical times—it may not always be the best strategy to leave everything to heirs immediately following your death.  You can establish trusts that will distribute assets at intervals you deem appropriate.

Choosing an incompetent executor—sometimes choosing an unqualified family member to serve as executor of your estate is not the best choice.

Don’t make the mistake of having an outdated estate plan.  Contact our Newport Beach law firm for assistance.

How Married Couples Can Maximize Social Security Benefits

Estate Planning, Tax PlanningNo Comments

boomer couple1 150x150 How Married Couples Can Maximize Social Security BenefitsFor married couples where both spouses have a work record and will be entitled to receive Social Security retirement benefits, there are some strategies that will help you maximize your benefits for the largest possible payout.  These include:

File and Suspend – When the highest earning spouse – we’ll call him Bob — reaches retirement age, he files for benefits and then immediately suspends them.  This allows Bob’s wife Carol to choose the higher benefit – half of Bob’s benefit or her own benefit.  Bob can continue to work or draw income from an IRA and delay receiving his benefits – which will be larger – until he is 70.

Double Dip – This term is applied to the ability to draw your spousal benefit and your own benefit at different times.  To do this, you must file for the spousal benefit first, even though it may be smaller.  Taking your own benefit down the road will mean a bigger check.

62/70 Strategy – If you can’t afford to postpone taking your Social Security benefits, this strategy allows you to maximize your benefits as a married couple.  The lower earning spouse files first at age 62, and the higher earning spouse delays filing for benefits until age 70.  Even though Bob is waiting until age 70 to begin taking his benefits, he can file for a spousal benefit based on Carol’s record once he reaches full retirement age.  When he turns 70, he then drops the spousal benefit and starts taking his larger benefit.

For more information on how married couples can benefit from estate planning, contact our Orange County law firm.

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