It seems as if money can buy happiness…at least it can if you were fairly happy already.  That is the conclusion of several studies on lottery winners brought to light during last week’s Mega Millions frenzy.

If you’ve been living under a rock, the $640 million jackpot will be split three ways, by winners in Maryland, Illinois and Kansas, who have yet to come forward.  Hopefully they are all busy consulting with their estate planning attorneys before getting their big payout.  Experts estimate that once taxes are taken out, each will walk away with a little more than $100 million.

Perhaps to make all the lottery losers feel better, the media was full of stories last week about lottery winners who ended up broke, bankrupt, estranged from family and miserable.  However, a Wall Street Journal Wealth Report column says that just the opposite is true for most lottery winners.

Citing several different studies, lottery winners in general enjoy significantly better psychological health and improvements in mental well-being.  Only about one percent have gone broke.  And a University of California study found that the overall happiness level of lottery winners spiked when they won, but settled back down to pre-winning levels in a few months.

As the article notes, sudden wealth usually serves to exaggerate your current status – if you are a happy person, have good relationships and are good with money, chances are great you will have those same attributes if you hit it big.  If you’re a spendthrift, you’ll just have a bigger pile to eventually fritter away.

Hopefully, you are not counting on winning the lottery before you schedule a consultation with a California estate planning attorney to develop a more rational plan for your financial future.  With more than 35 years of experience in asset protection and estate planning, we can help you make the right choices for your family and your future.

A story yesterday in USA TODAY reported that as America’s largest demographic reaches the age when they need long-term care insurance, the market for that insurance is shrinking and the cost is growing.

Earlier this month, Prudential Financial – a top five provider –announced that they would exit the long-term care insurance market.  USA TODAY reports that with their exit, 10 of the top 20 long-term care insurance providers are out of the market.

As the marketplace shrinks, prices are rising.  Long-term care insurance premiums are now six to 17 percent higher than last year, according to the American Association for Long-Term Insurance.

Many people don’t like long-term care insurance since if you never use it, you lose the money you put into it.  This has led to a growing market for “hybrid” policies that require a large one-time payment, which can then either be used for long-term care or a life insurance benefit.  Although not everyone can afford to sink a big chunk of change into a hybrid policy, a New York Life Insurance spokesman said the sales of its hybrid Asset Preserver policy have risen steadily over the past three years.

In addition, Californians have access to a long-term care partnership program that allows residents to purchase enough insurance to cover the assets they want to protect.  The California Partnership for Long-Term Care is an alliance between the State of California and a select group of private insurers that provides long-term health care policies to allow you to keep a dollar’s worth of assets for each dollar your partnership policy pays out for long-term care, thus enabling you to still maintain your ownership of your assets.  In effect, you purchase a partnership policy that is equal to the amount of asset protection you want.

A partnership policy also allows you to pass assets to a spouse, children or other family members because it exempts protected assets from Medi-Cal Estate Recovery.

If you are concerned about long-term care costs, consult with an Orange County estate planning attorney about partnership policies and the asset protection these long-term care policies provide.

Some Family Offices may be required to register with the Securities and Exchange Commission as investment advisers thanks to new Dodd-Frank regulations.  A Family Office is a private legal entity that manages investments and trusts for a single family; faced with the new regulations, some Family Offices may elect to reorganize as a private trust company (PTC).

A recent Trusts and Estates newsletter article on this topic listed both advantages and disadvantages to restructuring as a PTC.  Some of the advantages include:

• Retention of family control, privacy and liability protection for decision makers;
• Can be set up in a state that doesn’t have state income or capital gains taxes on trusts;
• If PTC is regulated by state law and submits to some kind of regulatory oversight, it may be exempt from registration as an investment adviser;
• Flexibility in managing and investing trust assets;
• If regulated, a PTC can create a common trust fund, which offers greater efficiency and economies of scale.

Some of the disadvantages of a PTC include:

• PTCs are relatively untested.
• Potential for family conflict if trustee is not free from family control.
• High initial capitalization, start-up costs, and continuing administration costs;
• Family members may have no real recourse against a fiduciary in cases of financial mismanagement;
• Potential tax consequences if some family members have too much control over PTC activities;
• Additional regulatory and financial reporting requirements.

Weighing the advantages and disadvantages of establishing a private trust company should be undertaken with the expert guidance of a California estate planning attorney.  With more than 35 years of experience in asset protection and estate planning, we can help you make the right choices for your family and your future.

The New York Times reported earlier today that a settlement has been reached in the battle over the estate of New York philanthropist and society maven Brooke Astor, who died in 2007 at the age of 105.

The settlement defines how Astor’s $100 million fortune will be distributed, and reduces in half the inheritance of her only child, Anthony D. Marshall, who was convicted in 2009 of defrauding and stealing from her in the last years of her life.  He was sentenced to 1-3 years in prison, and is still free on appeal.

According to the Times, the settlement strips Marshall and his wife of all control over the estate and nullifies amendments made to her 2002 will, which were the subject of the case against her son.  Marshall and estate planning attorney Francis X. Morrissey were charged with tricking Mrs. Astor into signing amendments that gave Marshall control over her estate upon her death, and that cut bequests to a number of charities.  Morrissey is also appealing a conviction in the case.

Financial abuse of the elderly is an issue that is all too common in our society, but one that rarely gets much attention. And it isn’t only the very wealthy who fall victim to elder abuse. According to the National Center on Elder Abuse “between 1 and 2 million Americans age 65 or older have been injured, exploited, or otherwise mistreated by someone on whom they depended for care or protection.”

Financial abuse of elders in particular goes under-reported in our culture, mainly because it leaves no visible scars to tip off friends and family. It is disheartening to discover that in most cases of financial exploitation of elders, the perpetrator is a family member, often the victim’s own son or daughter.

One way to prevent this from happening is to make your own decisions about who will serve as your physical and financial caretakers by executing a nomination of conservator, health care directive, and durable power of attorney. These three simple documents can allow you to choose the best person to care for you when you are unable to care for yourself.

Contact our Newport Beach estate planning and asset protection law firm for help; we’ve been helping California families protect and grow their assets for more than 35 years.

For those who turned 70 ½ during 2011, March 30 is the deadline for taking the mandatory required minimum withdrawal from their IRAs and all employer-sponsored retirement plans, including 401(k)s.  RMD rules do not apply to Roth IRAs if the owner is still living.  The deadline has historically been April 1, but since that date falls on a weekend this year, the deadline is now this coming Friday.

The required minimum withdrawal (RMD) is calculated by an IRS table based on age, life expectancy and account balance.  Here is the table:

If you are married to someone who is younger than you by 10 years or more, then you can use your joint life expectancy to figure your RMD.

This is the last time anyone who turns 70 ½ in the prior year has an extra three months to take their RMD; in 2012 – and beyond – you must take the RMD by Dec. 31 of the same year you turned 70 ½.  If you fail to do so, you could face a heavy penalty of up to half of the amount you should have withdrawn.

For those who didn’t want or need the extra taxable income, an IRA charitable rollover was a common estate planning strategy.  However, Congress did not extend the IRA charitable rollover into 2012, so unless it reinstates the rule retroactively for 2012, this strategy can no longer be used to remove taxable income in 2012.

Our Newport Beach estate planning and asset protection law firm has been helping California families protect and grow their assets for more than 35 years.  Contact us today for asset protection and estate planning strategies to meet your unique needs.

Earlier this month, the Wall Street Journal reported that a number of large law firms are facing increasing pressure on their bottom line to support unfunded retirement plans for retired partners.  And with the Baby Boomer generation the largest retirement population in history, there is now more financial pressure on younger attorneys who are seeing their paychecks threatened by pension payouts as well as lower fees.

The article noted that partners at many of these firms are often entitled to 20-30 percent of their peak pay after retirement – which could mean payments of as much as $400,000 to $600,000 annually.  Law firms remain loyal to their pension plans because they say it breeds firm loyalty by retaining top talent and gives partners a sense of security.

Some firms have moved to cut their pension plans by shrinking benefit amounts or lowering the caps to match a percentage of firm profits.  Some firms have established funded plans to pay for future benefits and provide individual retirement plans owned by individual attorneys.

Preserving and protecting and increasing assets during one’s lifetime, as well as planning for the orderly disposition of assets at death in the most tax advantaged manner, is the twofold focus of asset protection planning.

Lawyers and doctors are among a select group of professionals whose estate plans need to include strong asset protection strategies to protect personal assets against professional liability.

If you are an attorney, doctor or other professional who needs information on estate planning strategies to protect both personal and professional assets, contact our California estate planning and asset protection law firm.

Grantor Retained Annuity Trusts – or GRATs – are a favored estate planning tool for transferring assets with little or no gift tax consequences.  A Newport Beach estate planning attorney warns that the time for setting up a GRAT is now, since the Obama administration’s 2013 budget proposal includes a provision that would greatly limit the flexibility and effectiveness of GRATs.

To establish a GRAT, the grantor sets up the trust to which assets are transferred for a retained annuity for the duration of the trust, which can (currently) be as short as two years.  GRATs have become increasingly popular over the past few years because of depressed asset values and low interest rates.

The assets placed into the trust are invested and whatever appreciation remains after the required annuity payments to the grantor are transferred to beneficiaries free of gift tax.  To be successful, the GRAT assets must appreciate faster than the IRS-required interest rate, which is set monthly and known as the 7520 rate.  The March rate is currently at 1.4 percent – a very low hurdle, which makes GRATs so attractive right now.  And even if the trust didn’t generate returns above this rate, there is no penalty – the trust assets are returned to the grantor as a final annuity payment at the end of the trust term.

Our Newport Beach estate planning and asset protection law firm has been helping California families protect and grow their assets for more than 35 years.  Contact us today for asset protection and estate planning strategies to meet your unique needs.

The 2010 tax laws that increased the lifetime gift tax exemption from $1 million to $5 million still have many wealthy Americans reassessing if it is better to transfer their wealth while they are still living or after they are gone.

Before the 2010 tax laws were passed, it made more economic sense to transfer wealth after death since the gift tax exemption was considerably less than the estate tax exemption. However, the best plan may be what works best for you and your family now.

Some of the advantages of gifting now include:

• The ability to help cash-strapped beneficiaries now when it may be needed most;
• If Congress rolls back the gift tax exemption in 2013 — and decides not to grandfather gifts made in 2011 and 2012 – a gift made now would still eliminate the future appreciated value of the gift from an estate.
• To protect assets, professionals with high malpractice claim risk can transfer up to $5 million into a trust.
• Unmarried couples have the opportunity to move assets without the tax burden.

Our Newport Beach estate planning and asset protection law firm has been helping California families protect and grow their assets for more than 35 years.  Contact us today for asset protection and estate planning strategies to meet your unique needs.

As much as none of us like to think of planning for our own death or that of a loved one, doing so becomes even more important when you realize that funerals are one of the most expensive purchases you will ever make.

This infographic explains it in graphic detail:

by killerinfographics.

For tips on how to cut funeral costs, see our previous post on how to plan a thrifty funeral.

For tips on how to plan for a healthy financial life for you and your loved ones, contact our Newport Beach estate planning law firm.

Estate planning is universally recognized as the most efficacious way to pass down wealth to your heirs, but it has another equally important role: protecting assets from creditors.

A Newport Beach estate planning attorney shares several ways you can protect assets from creditors using legally sound estate planning techniques:

Family Limited Partnership (FLP) – an FLP protects assets by limiting the ability of a limited partner’s creditor from accessing partnership assets to satisfy a debt.  Even if a creditor gets a charging order against a limited partner’s interest, the creditor would only be able to receive distributions if they are made – and a general partner could elect not to make any distributions.

Irrevocable Life Insurance Trust (ILIT) – the cash value of the policy is protected from creditors while you are still living, and the proceeds that go to beneficiaries are also protected when you die.

Inter Vivos Qualified Terminable Interest Property Trust (QTIP) – this spousal trust protects assets from creditor claims for both spouses.

Qualified Personal Residence Trust (QPRT) — allows an individual or married couple to gift up to two homes to their children and continue to live there. The purpose of a QPRT is to remove the value of a grantor’s primary or secondary residence from their taxable estate, and insulating it from creditor claims.

Our Newport Beach estate planning and asset protection law firm has been helping California families protect and grow their assets for more than 35 years.  Contact us today for asset protection and estate planning strategies to meet your unique needs.