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.

The Internal Revenue Service has announced that it is extending this year’s tax filing deadline to April 17, 2012, giving taxpayers an additional two days this year to file taxes.

The reason for the extension?  This year, April 15 falls on a Sunday, and Monday is Emancipation Day, a Washington, D.C. holiday that celebrates the freeing of slaves in the District of Columbia.

The IRS will begin accepting e-file tax returns on January 17, 2012.  If you need an extension, you have until October 15, 2012 to file your 2011 return.  However, any estimated taxes due still need to be paid by April 17, 2012.

For the first time, the IRS is offering virtual assistance to taxpayers via two-way videoconferencing from 10 select IRS offices, including one in Laguna Niguel (24000 Avila Rd.).

The IRS has also unveiled an app that lets taxpayers check on the status of their refund and receive tax information.  Called IRS2Go, the free app is available for iPhone users from the Apple App Store and for Android users at the Android Marketplace.

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.

According to an article in the Journal of Accountancy earlier this week, 2012 has ushered in several changes in tax provisions.  These changes include:

Inflation Adjustments – Applicable amounts for many tax items increased on January 1 due to annual inflation adjustments, including contribution limits for pension plans and retirement accounts.

Capital Gain and Loss Reporting — Taxpayers now need to report both short-term and long-term gains and losses of certain capital assets utilizing schedule D on Form 1040, and must also file a new Form 8949, “Sales and Other Dispositions of Capital Assets,” in certain situations.

Veterans Work Opportunity Credits – Businesses that hire certain military veterans after November 20, 2011 and before January 1, 2013 are eligible for tax credits.

Foreign Asset Reporting – Under the Foreign Account Tax Compliance Act (FACTA), taxpayers have to report interest in foreign financial assets by filing a Form 8938, “Statement of Specified Foreign Financial Assets,” for 2011 tax returns.

Bonus Depreciation — A 50% bonus depreciation is available for property placed in service in 2012.

Estate Tax — Estates of decedents who died in 2010 have until Jan. 17, 2012 to elect not to have estate tax apply and to have heirs’ bases in assets they inherit determined under the modified carryover basis rules. The estate and gift lifetime exclusion tax increases from $5 million in 2011 to $5.12 million in 2012.

EITC Due Diligence — Failure to meet due diligence requirements of the earned income tax credit will incur a penalty of $500 for returns required to be filed after December 31, 2011.

Voluntary Classification Settlement Program – Allows eligible taxpayers to reclassify their workers as employees for federal employment tax purposes and receive relief from part of the tax liability of previously classifying these workers as nonemployees.

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.

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.

Estate planning can often be complex and that’s why California estate attorneys are always warranted when planning your estate and organizing your assets. Planning your estate, creating a living will and planning for a healthcare surrogate or medical power of attorney are all wise choices. But these choices and all the work you and your attorney put into them may fall by the wayside if continued revision is not attended to regularly. It is recommended that estate plans and decisions about your health care in the event you cannot communicate should be revisited every one to three years.

By reviewing and revising your estate and the medical options in a living will, you will stay on top of changes within the law that could prevent your plans from being effective. In addition, matters within your family can change, and as such, your estate and living will should be changed as well. Wealth transfer planning should be revised for a number of reasons in the event of changes in family or in personal assets; many of these reasons are personal while others may be caused by factors such as economic decline or incline, changes in retirement assets and changes in tax law associated with taxable estates.

Many wills include a federal applicable exclusion amount that helps to eliminate or lessen the amount of federal taxes on the estate. As estate law changes, the size of an estate can change how well it is protected against this type of taxation. A surviving spouse, children and others will be grateful for this protection, so be sure that your will and estate plan are revised to reflect the current laws regarding federal applicable exclusion.

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.