An Orange County estate planning attorney cautions that even if you have done everything right for retirement – invested in a 401(k), IRAs, diversified portfolio, and have significant cash savings – everything could be lost to long-term health care costs if you don’t work equally hard to protect your assets.

The fact is that most people do not have significant enough assets to pay for long-term care for one or both spouses, but still have too much to qualify for Medicaid.   While you can “spend down” your assets five years before you anticipate needing Medicaid benefits to qualify, this goes against the grain for most people who have saved their whole lives to accumulate their assets.

Fortunately, California is one of several states that offer long-term care partnership programs that allow you to purchase enough insurance to cover the assets you 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.

You owe it to yourself and your family to consult with an Orange County estate planning attorney about partnership policies and the asset protection these long-term care policies provide.

At a meeting of estate planners in Orlando this week, an estate planning attorney from Chicago parodied a Viagra commercial while imparting information on the portability provision contained in the 2010 tax law, which allows surviving spouses to add any unused estate tax exclusion of a deceased spouse to their own – enabling them to transfer up to $10.24 million tax-free.

Picture that romantic older couple in the Viagra ads while reading his parody:

For those couples who may experience a loss of applicable exclusion amount. Following the death of your spouse, you should use within 9 to 15 months to prevent a loss of exclusion. Using portability more than once may result in a decrease in benefits.

Portability is not for everyone. Consult your attorney before using portability. Portability is not a substitute for credit shelter planning. If you experience sudden appreciation of assets, you should not use portability. See your estate planning attorney immediately if your assets are subject to significant appreciation.

The benefits of portability may only last 11 months.

If you experience an election lasting more than 11 months, then portability may be permanent. There is no need to see your attorney, or a doctor. Permanent portability is beneficial.

If you experience dizziness, dry mouth, blurred vision, anxiety, breathing problems, chest pains, hallucinations, redness, blistering or peeling of the skin, or swelling of the hands or feet, none of these symptoms are caused by portability. What else are you taking?

Here are more details on what married couples need to know about portability:

• Portability applies only to those who die after Dec. 31, 2010.
• Portability applies to lifetime gifts as well as assets that pass through an estate plan.
• Portability is not automatic; the executor must pass the unused exemption on to the surviving spouse.
• If a surviving spouse remarries, he or she can only use the unused exemption of the new spouse.
• Portability does not apply to the exemption from the generation-skipping transfer tax.
• Couples with estates of less than $10 million can now leave everything to each other without a bypass trust – although if you want to shield assets from creditors or benefit children from a previous marriage, a bypass trust is still a good tool to use.

Our California asset protection and estate planning law firm has been a trusted source for estate planning, asset protection and business transactions for more than 35 years.  Contact us today for asset protection and estate planning strategies to meet your unique needs.

A sad but true reality in today’s economic climate is that one of the biggest threats to asset protection is failing to do financial planning for your dependents.  Many boomers who once thought they would be financially secure in their golden years find their assets being taxed not by Uncle Sam, but by parents and offspring.

Here are some tips for helping your financial dependents become a little more independent:

Make estate planning a priority.  If you have an aging parent or adult child who is still financially dependent on you, they should all have at least a simple estate plan.  Even if you have to pay for it, taking this step can save you in terms of probate or litigation.

Use asset protection planning for Medicare/Medicaid assistance.  This can help a parent who may need extensive Medicare/Medicaid coverage avoid losing their assets to the state, but you need to do it now – this must be done at least five years before the need arises.

Consider life insurance.  Look into purchasing life insurance for others, including parents and children.

Consider long-term care coverage.  If you have elderly parents or other family members who count on you for care, buying long-term care coverage may help reduce what can be a substantial cost for long-term care.

Review dependents’ health care coverage.  Review your dependents’ health care coverage and fill the gaps so your own financial future is not impacted by unexpected costs.

Our California asset protection and estate planning law firm has been a trusted source for estate planning, asset protection and business transactions for more than 35 years.  Contact us today for asset protection and estate planning strategies to meet your unique needs.

Most people who embark on creating an estate plan do so for two reasons: to ensure that financial resources are available for a comfortable retirement, and to secure the financial future of their family after they are gone.

Unfortunately, many people fail to plan for an unforeseen illness, which can come suddenly and rob their savings as well as the financial future of the family.  Fortunately, there are some steps you can take to plan for a potentially chronic illness:

Set up an emergency fund.  If you fall victim to a sudden illness, you will probably be working less (if at all) and will also have additional expenses.  Having six months’ worth of living expenses in an emergency fund or establishing a line of credit to tap in case of an emergency is often recommended to alleviate this worry.

Have health insurance.  If you do not have health insurance provided to you by an employer, you will need to have your own policy.  The time to obtain good health insurance is, of course, before you need it.

Get disability insurance.  Disability insurance replaces lost income, and can be a life-saver for employed people confronting chronic illnesses.  This type of policy typically replaces up to 60 percent of your normal income.

Consider long-term care insurance.  If you are nearing retirement, look into long-term care insurance before you are too old to afford it or to qualify.

Our California asset protection and estate planning law firm has been a trusted source for estate planning, asset protection and business transactions for more than 35 years.  Contact us today for asset protection and estate planning strategies to meet your unique needs.

Contrary to popular belief, the rich don’t always get richer. In fact, according to a Federal Reserve study, one-third of those in the top 1 percent wealthiest individuals in 2007 had fallen off the list in 2009.

According to a Wall Street Journal article, private banking CEO Maria Elena Lagomasino was curious about this wealth fall-off, and commissioned a report while she was CEO of J.P. Morgan Private Bank to research the matter.

The study found five main reasons why the rich become poorer:

Overconcentration – betting it all on a single company or investment.

Leverage – using debt to maximize investment gains, expand businesses, and fund lavish lifestyles.

Spending – many wealthy have no idea how much they can afford, and spend unwisely.

The “Toxic Cocktail” – Betting big, borrowing big on a business, and funding a large lifestyle.

Family issues – divorce, inheritance battles, family business disputes.

Financial experts recommend that if you’re wealthy and want to stay that way, your debt should not exceed 25 percent of your net worth, and you shouldn’t keep more than 25 percent of your wealth in one illiquid asset.

Our California asset protection and estate planning law firm has been a trusted source for estate planning, asset protection and business transactions for more than 35 years.  Contact us today for asset protection and estate planning strategies to meet your unique needs.

A timely Financial Planning article reminds us that the 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 2011 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 2011.

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

Large Gifts – gifts above the $13,000 annual exemption count toward your lifetime exemption, which is $5 million in 2011 and $5.12 million for 2012.  The gift exemption could potentially revert back to $1 million in 2013, so you should consult with a California estate planning attorney about the tax consequences of gifting more than $13,000.

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 2012.

Our California asset protection and estate planning law firm has been a trusted source for estate planning, asset protection and business transactions for more than 35 years.  Contact us today for asset protection and estate planning strategies to meet your unique needs.

Happy New Year to our clients, friends and readers!  We look forward to providing you with more estate planning insights in 2012.

An Eastern District of California judge has given the IRS permission to serve a “John Doe” summons on the California State Board of Equalization in an effort to track down state taxpayers who transferred property without paying gift tax.

According to a Forbes article, Judge Morrison C. England, Jr. initially turned down the government’s request for the summons last May, saying that the IRS had not proven that it could not reasonably obtain the information from the state’s 58 counties.  The U.S. Department of Justice filed the case again two months ago, and Judge England said in a December ruling that the government had shown that it would not be able to obtain the information from some of the counties, making the BOE “the most reliable and least burdensome option.”

The IRS has targeted intra-family property transfers in several states to uncover taxpayers who have made transfers but failed to pay gift tax on those transfers.  A “John Doe” summons allows the government to get information about a specific class of taxpayer it suspects may have broken the law.

U.S. taxpayers may give anyone up to $13,000 annually without that gift counting against their lifetime exemption, but gifts about this annual exclusion amount must be reported to the IRS via a Form 709, which the IRS uses to keep track of an individual taxpayer’s lifetime exemption usage.

Our California asset protection and estate planning law firm has been a trusted source for estate planning, asset protection and business transactions for more than 35 years.  Contact us today for asset protection and estate planning strategies to meet your unique needs.

A Wall Street Journal article last Saturday helps clarify the new reporting requirements for offshore assets as a result of the passage of the Foreign Account Tax Compliance Act (FACTA) in 2010.

The IRS released FACTA forms and guidance earlier this month, which requires a new tax filing for many with foreign accounts.  That new filing – via Form 8938 – must accompany 2011 returns and differs from the Foreign Bank Account Report that must be sent to the IRS by June 30 every year.

Taxpayers with foreign holdings must also include Form 8621 to report Passive Foreign Investment Company those holdings, which has largely been overlooked in the past.  According to the article, some commonly overlooked items that must be reported can include:

• Non-U.S. based checking or savings accounts that “sweep” into a money-market account.
• Proceeds from a parent’s life insurance policy left in an account overseas after the parent died.
• Company retirement accounts outside the U.S., such as ORSO accounts in Hong Kong or Second Pillar accounts in Switzerland.
• Funds deposited in a foreign account for a child who is living or working abroad. If the amount is more than $10,000 during the year, FBAR reporting is required.
• Foreign trusts with a beneficiary that is a U.S. taxpayer.

Consequences for not reporting can be severe, and can include interest, penalties and past tax due.

Our California asset protection and estate planning law firm has been a trusted source for estate planning, asset protection and business transactions for more than 35 years.  Contact us today for asset protection and estate planning strategies to meet your unique needs.

It may sound a little redundant, but assessing your assets is an essential part of the estate planning process and it’s an activity that you and your California asset protection attorney should get into early on in the estate planning game.

A basic inventory of your assets will make it easier when they time comes to decide who gets what, as opposed to trying to do it off the top of your head. The inventory of your assets should include everything from real property to retirement accounts, 401(k), pension, life insurance, and any other investments or property.  Some of these things can come as a surprise — your personal library of medical books may have real worth — do you give them to a grandchild in medical school or do you give them to a charity or another entity?

Decide what your estate includes, what it worth, and decide as best you can who should receive what. Make sure the language is clear to avoid a will contest and to lessen the complexity of probate.

And last of all, don’t be afraid to discuss with heirs and beneficiaries what may (or may not) be coming to them. Doing this while you’re alive will help people you love understand your reasoning rather than leave them wondering why you decided what you did after you’re gone.

Bottom line: inventory your assets, know their worth, let beneficiaries know where they stand, and of course, do all you do with the guidance and counsel of your California estate planning lawyer.

Our California asset protection and estate planning law firm has been a trusted source for estate planning, asset protection and business transactions for more than 35 years.  Contact us today for asset protection and estate planning strategies to meet your unique needs.

Recent statistics indicate that Californians, like many Americans, are not planning their estates. Of course, we have to consider high unemployment, the Wall Street scandals that have cost Americans billions, and the slowing of consumer activity.

While these are certainly understandable reasons why estate planning may not seem important, it actually makes it more important than ever.

Protect your assets: even if you have a fraction of what you had five years ago, you need to discuss with a California estate planning lawyer what you can do to protect what you still have.

Save yourself from creditor harassment: if you have assets in a trust or other sheltering vehicle, you can foreclose on a home and not worry about losing what is protected within your estate in offshore and most domestic trusts—but you won’t know if you qualify for this if you don’t discuss it with your Newport Beach asset protection attorney.

According to the most recent statistics concerning wealth management and estate planning, fewer Americans are estate planning today than five years ago. If you’re not protecting your assets, they are vulnerable and can easily become the prey of predatory lenders and creditors.

Protect what is yours and discuss the best ways to do it for your unique financial situation. Contact a California estate planning lawyer today—have your questions answered and stop putting off the planning of your estate!

Our California asset protection and estate planning law firm has been a trusted source for estate planning, asset protection and business transactions for more than 35 years.  Contact us today for asset protection and estate planning strategies to meet your unique needs.