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4 Important Steps to Protect Personal Wealth From Business Liabilities

Asset Protection, Business PlanningNo Comments

asset protection 150x150 4 Important Steps to Protect Personal Wealth From Business LiabilitiesEvery business owner makes the decision to assume some portion of risk when they operate their own business, but no one wants that potential risk to affect their personal wealth.  Unfortunately, there are all too many business owners who neglect to implement the correct asset protection strategies to firmly separate business risk from personal wealth.

There are a number of important steps business owners should take to make sure personal wealth is protected from business liabilities, including:

Choosing the right business entity.  Setting your business up as a corporation or limited liability company (LLC) will better protect you in case of a business lawsuit than if you establish your business as a sole proprietorship.

Keeping finances separate.  Business and personal finances must be kept totally separate and the correct business name (not your personal name) should be used on all business documents, including property titles, contracts, etc.

Complying with all rules and regulations.  Taking shortcuts can come back to bite a business owner if someone suing you can prove you have been negligent or have acted fraudulently.

Having the right insurance.  If you own your own business as well as the building that houses your company, you will need to have different insurance policies for both.  Having the right kind of business insurance makes your own personal wealth less of a target in case of a business lawsuit.

To learn more effective business protection strategies, contact our Costa Mesa law firm.

7 Key Questions to Ask Your Aging Parents

Estate Planning, Retirement PlanningNo Comments

caregiver 150x150 7 Key Questions to Ask Your Aging ParentsMost of us spent the holidays with family members that we don’t see as often as we like or should, including aging parents.  Many Americans now live in different cities or towns from their parents, so can’t get real peace of mind by dropping in for a check on their health and happiness.

If you have not had a discussion with your aging parents about their finances, retirement and estate planning, consider beginning that important talk with these 7 key questions that you need the answers to:

1.  Have you made a will and, if so, has it been updated to reflect any changes since you made it?

2.  Do you have an estate plan in place?  Is a trust part of that plan?

3.  Have you created a written inventory of your assets and debts, a list of your bank and credit card accounts with passwords and other important financial data?  If so, where is that information being kept?

4.  Have you done any retirement planning?

5.  Have you reviewed your beneficiary designations for life insurance policies, retirement and investment accounts lately to be sure they are up to date?

6.  Is the executor of your estate fully informed on your last wishes?

7.  Have you executed an advance medical directive so your family is aware of your wishes for medical treatment in case you become incapacitated?  Do you have a Living Will that spells this out?

We can help you and your parents with estate planning and retirement planning strategies; contact our Newport Beach law office for more information.

5 Ways to Avoid a Will Contest

Estate Planning, WillsNo Comments

last will 150x150 5 Ways to Avoid a Will ContestWhen inheritances are made unequally, it usually means that the will could face a contest in court.  While there are many good reasons for giving unequal distributions, your heirs may not agree with the decisions you’ve made.

Here are 5 tips for heading off a will contest if you plan to give unequal shares to heirs:

Explain why.  It’s best to let children know why you have decided to structure your will to provide more or less for each child.  If you can’t do it face-to-face, then include a letter in your will.

Provide evidence of capacity.  Again, a letter in your will explaining disparities can help you prove your capacity to make the decisions you made.  If you want to make a video, consult first with your estate planning attorney – or better yet, have them there when you do it.

Gift now.  If one child needs more help than the others, consider making gifts now while you are still alive rather than unequal distributions via your will.  Then you can make everything even after you pass.

No-contest clause.  This can deter your heirs from filing a claim if your will includes a clause that disinherits those who file suit.

Update your will.  Be sure you keep your will up to date, making changes as necessary and as the lives of you and your family change.

To learn more about effective estate planning, contact our Orange County law firm.

3 Reasons to Hire a Probate Attorney

Estate Administration, ProbateNo Comments

help button 150x150 3 Reasons to Hire a Probate AttorneyIf you are an executor of an estate, you hopefully take the job seriously enough to want to do the best possible job – and to ensure that all your actions are in accordance with California law.

This can be a primary motivation for trying to do everything yourself, thinking you will be saving the estate money in the long run.  And while some simple estates can be administered without any professional help, there are three instances when it is in the best interest of an executor to hire a probate attorney:

When there is family discord.  Disagreements among family members over an estate can prove to be a major headache for an estate administrator.  If there is a potential for a will contest – a process that can drain assets from the estate and take a long time to settle – it will be better for all involved to involve an experienced probate lawyer.

When there is a lot of debt.  If the estate is financially sound, an executor will usually be able to satisfy all debts.  However, if an estate cannot pay its debts, the executor may find it difficult to make decisions about who gets paid what.  The law does give certain creditors priority over others, and a probate attorney can help you discern which debts should be paid first.

When the estate includes a business.  If the estate contains a business, it complicates the process – and the more complicated things get, the more you need professional guidance.  Business assets will likely need to be valued, managed or sold off, and you will welcome professional help if this is the case.

If you need help with estate administration or probate, contact our Orange County law firm.

Inconsistency a Hobgoblin for Estate Plans

Asset Protection, Estate PlanningNo Comments

yes and no e1389221463324 Inconsistency a Hobgoblin for Estate PlansElements of an estate plan that work at cross-purposes can wreak havoc on your assets, and estate plans that were created years ago but never updated may contain inconsistencies that could cost you and your heirs plenty.

From a recent Financial Planning article, here are some common inconsistencies that plague many estate plans:

Power of Attorney.  While designating an agent to protect your best interests for financial, legal and tax matters is a given with estate plans, many people hesitate to give their chosen agent immediate authority, instead opting for a springing power of attorney which kicks in once you become disabled.  However, confusion can reign when a disabled diagnosis is unclear and a third party has to be persuaded that a power of attorney is warranted.

Balance Sheet Planning.  Many estate plans are devised based on a person’s current balance sheet, but in fact it may be advisable to use financial projections instead.  If a person’s wealth is likely to grow, conducting financial projections may reveal additional opportunities to save on estate or gift taxes.

Gift Provisions.  A power of attorney often provides a designated agent with the ability to make certain gifts, like continuing the support of a family member.  If the estate plan also includes a living trust, these often include gift provisions as well.  It is important that these are coordinated.

Estate Tax Allocation.  For people facing a 40% federal estate tax, the tax allocation clause of their estate plan that determines which bequest will bear the cost of the estate tax can be a significant factor in determining who inherits what.  Your objectives for inheritance should be clearly thought out when considering this clause.

Multiple Trusts.  People whose estate plans include more than one trust need to determine if these trusts are efficient and serve their interests.  Trusts established at different times for different reasons could result in tax planning complications as well as greater administration costs.

To be sure your estate plan doesn’t include any of these or other costly inconsistencies, contact our Newport Beach law firm.

Common Misunderstandings About IRAs

Retirement PlanningNo Comments

broken egg e1326911352154 Common Misunderstandings About IRAsEven the most savvy saver may fall victim to some of the common misconceptions about IRAs.  Arming yourself with the proper knowledge about how IRAs work will ensure you can protect and grow your retirement nest egg without incurring unnecessary taxes and expenses.

Here are some of the most common misunderstandings about IRAs and the straight scoop:

You need multiple IRA accounts.  Having multiple IRA accounts can merely complicate and confuse your financial picture.  You can contribute to the same IRA every year.

You can wait to fill out the beneficiary form.  The future of your retirement assets depend on how you fill out your beneficiary form, so don’t wait.  It’s simple and takes just a few minutes, yet its importance cannot be diminished as it governs how your IRA will eventually be taxed and passed on to heirs.

401(k)s are better than IRAs.  While the benefit of a workplace retirement plan can be great, the reality is that each employer treats their plans differently and your 401(k) plan may not offer as much flexibility as an IRA and may be more expensive in terms of administration fees.

You must take your required minimum distribution in cash.  If you own a traditional IRA, you will be required to take an annual minimum distribution when you reach the age of 70 1/2.  You can take it as cash, but you don’t have to – you can use in-kind security transfers, which don’t require you to incur a transaction cost or trade to rebalance your portfolio.

Rollovers are always best.  If you leave your employer, chances are you believe you should move your 401(k) into a rollover IRA.  This can be a good idea, but not always.  If a large portion of your 401(k) is in company stock that has appreciated, you lose the opportunity for a net unrealized appreciation tax break.

You can get a loan from your IRA.  Unlike 401(k)s, IRAs do not allow you to take out a loan against your account.  If you want to move money into another tax-advantaged account, you need to do a trustee-to-trustee transfer so you don’t incur a big tax bill.

Proper retirement planning can be a complicated process, but we can help.  Contact our Costa Mesa law firm for assistance.

How to Achieve Your Goals When Leaving an IRA to Heirs

Estate Planning, Tax PlanningNo Comments

ira e1346184593476 How to Achieve Your Goals When Leaving an IRA to HeirsA recent article by Deborah Jacobs reiterated the importance of checking IRA beneficiary designations, noting that the biggest – and costliest – mistake many people make is failing to designate the right people to inherit IRA assets.

Do not make the mistake of lumping your IRA assets into what you are bequeathing to heirs via your will.  IRA assets are passed through beneficiary designations forms.  If no form has been filled out, then your heirs are at the mercy of the IRA custodian’s policy.  Many times, the assets will go to the estate, which will negate important tax benefits.

January is the perfect time to review your IRA beneficiary designations and the best way to fill out your forms will depend on the goals you want to reach by bequeathing your IRA assets.  For example:

You want to provide for your spouse.  Name your spouse as the beneficiary, but name contingent beneficiaries as well in case your spouse predeceases you.

You want to maximize the stretch.  Name a younger heir as beneficiary, as inherited IRA distributions are calculated based on life expectancy.

You want to keep things even.  If you have more than one child and wish to leave equal portions of your IRA to those children and their heirs, then designate the portions as “per stirpes”.  This will ensure that if one of your children dies before you do, their share will go to their children.

You want to preserve assets.  Name a trust as the beneficiary.

You want to give your heirs options.  Name primary and alternate beneficiaries, so if one of your primary heirs wants to disclaim the inherited IRA for any reason, the assets can pass to the alternate(s).

You want to give to charity.   Name a charity as beneficiary to gain estate and income tax benefits.

If you need help reaching your estate planning goals in 2014, contact our Orange County law firm.

5 Steps to Get Ready for Retirement

Retirement PlanningNo Comments

retirement new life sign e1388784629918 5 Steps to Get Ready for Retirement1. Start planning. When planning for retirement, boomers need to take a long view; many will live 25 or more years in retirement. You need to figure out how much you need and then what you have to do to get there.

2. Decide on what retirement means to you. Everyone’s retirement is different; some of us will work either full time or part time, and some of us just want to lie on the beach. You need to envision your retirement lifestyle, including what you will do, where you will live, how much you will travel and plan accordingly.

3. Manage debt. Carrying high interest debt into retirement is a sure way to deplete your savings. Reduce as much debt as possible prior to retirement, including credit card debt, mortgage debt and any student loan debt you may be carrying.

4. Get help. The help of a financial advisor and an estate planning attorney can be invaluable in planning for retirement. Having the right team that can give you financial and estate planning strategies to help you fund your retirement can save you plenty in the long run.

5. Expect the unexpected. Having an emergency fund of at least six months’ living expenses can provide the cushion you may need for unexpected events that could severely impact your finances. You also need to have the proper estate planning documents in place – a will, durable power of attorney, health care directive, etc. – so you and your family are fully protected.

If you need some help with retirement planning in 2014, contact our Newport Beach law firm.

4 Special Trusts for Achieving a Specific Purpose

California TrustsNo Comments

trust pic e1378498532909 4 Special Trusts for Achieving a Specific PurposeTrusts are generally used to preserve and manage assets for trust beneficiaries, but there are certain trusts designed to help you achieve a special purpose, like caring for a special needs person, protecting assets from being spent unwisely or simply minimizing estate taxes.  Some special trusts include:

Crummey Trust:  designed to preserve assets for a child’s future use, this trust is generally used when a child is a minor or ill-equipped to deal with a financial windfall.  A Crummey Trust utilizes the annual gift tax exclusion — $14,000 in 2014 – that the grantor places into the trust to preserve for future use by the beneficiary.

Totten Trust:  a simple trust established through a financial institution, where the account is in the grantor’s and the beneficiary’s names.  The grantor adds funds to the account during his or her lifetime, and when the grantor dies, the account automatically goes to the beneficiary.

Spendthrift Trust:  this trust features a special provision that prevents the beneficiary from squandering trust assets.  The trustee controls all distributions from the trust, protecting assets from creditors, divorce or a spendthrift beneficiary.

Special Needs Trust:  this trust is used to provide for the educational and/or discretionary spending needs for a person with special needs without jeopardizing his or her eligibility for governmental benefits.  A trustee manages the assets of the trust for the benefit of the special needs beneficiary.

If you need to create an estate plan to provide for the special people in your life, contact our Costa Mesa law firm.

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.

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