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.

In this difficult economy, the incidences of intra-family loans have increased over the past few years.  An Orange County estate planning attorney warns that those who make family loans need to be sure they are structured properly to avoid income and gift tax implications.

Here are some tips on properly structuring a family loan:

Be clear about the terms of the loan – are you giving a gift or a loan?  If it is not clear, it could lead not only to tensions within the family, but also questions from the IRS if it is really a gift subject to tax.

Document the loan – create a written agreement that spells out the terms of the loan, including repayment and interest rates.

Set an interest rate.  You will need to set an interest rate or the IRS will do it for you.  However, if the loan is less than $10,000, you will not need to charge interest.

Follow tax laws – depending on the size of the loan, lenders may be required to report income on interest earned, and could be liable for gift taxes if the loan does not meet certain criteria.  If the borrower plans to deduct the interest, the loan must be set up properly in order to do so.

Estate planning issues – if the lender or borrower dies before the loan is paid off, will the loan be forgiven?  Discuss estate planning implications with your Orange County estate planning attorney.

Our Newport Beach 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 list of key numbers that every retiree – or those who plan to retire soon – needs to know was published recently at ElderLawAnswers.com:

• Medicaid Spousal Impoverishment Figures for 2012
  • The new minimum community spouse resource allowance (CSRA) is $22,728, and the new maximum CSRA is $113,640. The new maximum monthly maintenance needs allowance is $2,841. The minimum monthly maintenance needs allowance remains $1,838.75 until July 1, 2012.
• Income cap
  • The income cap for 2012 applicable in “income cap” states will be $2,094 a month.
• Medicaid home equity limit
  • Minimum: $525,000; Maximum: $786,000
• Medicare Premiums, Deductibles and Copayments for 2012
  • Basic Part B premium: $99.90/month (was $96.40 for most beneficiaries)
  • Part B deductible: $140 (was $162)
  • Part A deductible: $1,156 (was $1,132)
  • Co-payment for hospital stay days 61-90: $289/day (was $283)
  • Co-payment for hospital stay days 91 and beyond: $578/day (was $566)
  • Skilled nursing facility co-payment, days 21-100: $144.50/day (was $141.50)
• Premiums for higher-income beneficiaries:
  • Individuals with annual incomes between $85,000 and $107,000 and married couples with annual incomes between $170,000 and $214,000 will pay a monthly premium of $139.90 (was $161.50).
  • Individuals with annual incomes between $107,000 and $160,000 and married couples with annual incomes between $214,000 and $320,000 will pay a monthly premium of $199.80 (was $230.70).
  • Individuals with annual incomes between $160,000 and $214,000 and married couples with annual incomes between $320,000 and $428,000 in 2010 will pay a monthly premium of $259.70 (was $299.90).
  • Individuals with annual incomes of $214,000 or more and married couples with annual incomes of $428,000 or more in 2010 will pay a monthly premium of $319.70 (was $369.10).
• Social Security Benefit Changes for 2012
  • Monthly federal Supplemental Security Income (SSI) payment standard will be $698 for an individual and $1,048 for a couple.
  • Average monthly Social Security retirement payment: $1,229 a month (was $1,186) for individuals and $1,994 (was $1,925) for couples
  • Maximum amount of earnings subject to Social Security taxation: $110,100 (was $106,800).

Our Orange County 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.

On Monday, the IRS announced that it had collected $4.4 billion during its two previous offshore voluntary disclosure programs in 2009 and 2011, and that it is opening a third program in 2012.

The IRS said that the new program is very similar to the 2011 program, with a few differences for the 2012 program:

• There is no deadline to apply;
• The penalty on the highest aggregate account balance in a taxpayer’s foreign account increases from 25 percent to 27.5 percent;
• Taxpayers with offshore assets of $75,000 or less in any calendar year covered by the program will qualify for a 12.5 percent penalty rate;
• A narrowly defined list of taxpayers will qualify for a 5 percent penalty rate;
• The IRS can increase the penalties or end the program at its discretion.

As in the 2011 program, participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.

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.

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.

They call it the “boomer boomerang” – adult children of retiring baby boomers who continue to rely on their parents for their financial needs.  Unfortunately, continuing to support grown children can have a significant detrimental effect on boomers’ savings and retirement plans, according to a Wall Street Journal article yesterday.

To avoid having your adult children jeopardize your financial future, financial planners recommend the following:

No blank checks.  While you may be able to help your children out here and there, don’t make it a blank check.  Be sure you can pay your own bills before you cover theirs.

Establish limits.  Let your children know exactly how much you can comfortably provide, and set a time limit on when the support will stop.

No guilt.  Parents often feel guilty when they have to say no, but you must be honest with your adult children about how you are putting your own retirement at risk.

Reassess goals.  Reassess your own financial goals and develop a new financial plan to stick to them, even if that means cutting off the support at some time.

Make them accountable.  Make your children accountable for their finances; unless you do, they are liable to make the same mistakes over and over.

Of course, the best way to avoid having adult children depend upon you for financial help is to educate them when they’re young about the importance of saving and budgeting as well as self-reliance when it comes to paying their own way in life.

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.

A Forbes.com post by a reader whose father had recently passed away is a poignant tribute by a daughter to a father who left her with a lasting legacy of love through careful estate planning.  In the post, she shares what her father did to make his passing easier on her and her brothers:

Build a team.  The author’s father, diagnosed with stage four colon cancer just a few months after retirement, built a strong team of financial advisers and insisted that his daughter meet each one of them.  After he passed, she says, these connections were invaluable – she knew whom to call and they knew her.

Negotiate fees.  The author’s father negotiated the estate fees, which are typically 3 to 5 percent of the total value of the estate.  Her father negotiated a 2 percent fee and put the money in a separate bank account that the author, as executor, had immediate access to.

Plan ahead.  When he was still healthy, the author’s father added his daughter to his bank accounts and put her name on his checks.  When he began to fail, this made it much easier for her to handle his bills.  He also made sure there was enough money in the account to pay bills in case his house did not sell for two years.

Prepare for the end.  When the author could not bring herself to discuss her father’s funeral wishes with him, he created a master binder and simply told her that his final wishes would be listed under “F” for “funeral”.   He even authored his own obituary, including photos to use with the text.

Settle accounts.  The author’s father urged her to take an executor’s commission of 2 to 3 percent, which she declined.  Once he passed, she had second thoughts, since she found that being an executor is a big job.  When she and her brothers went to split his IRA, she found that he had stipulated in the beneficiary forms that she was to receive 1 percent more than her brothers for her job as executor.  In doing so, he preserved her relationship with her brothers and let her know he valued the job she was doing as executor.

Finally, the author notes that, “I honestly consider my father’s financial planning to be a selfless act of love.”  Estate planning is much more than distributing assets; it is very often a lasting gift to those you love and an enduring part of the legacy you leave behind.

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.