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    Category Archives: 2012

    Newport Beach Families are Giving Gifts: Big, Small …Or Not at All

    Everyone
    is talking about the importance of making big gifts in 2012, but the critical
    question for many, is how much can you realistically afford to gift without
    jeopardizing your own financial security?

    Gifts in Woman's HandHow much can you afford to gift
    now, with a possible resurgence of the gift tax lurking next year? As you may
    know, current law allows you gift the fairly huge sum of $5 million (more than
    $10 million for a married couple) without triggering a gift tax. That law is
    expiring at year’s end, and it’s anyone’s guess what happens next. It certainly
    is possible that next year’s tax climate will be much less generous.

    So, from a tax planning
    standpoint, there may never be a better time for you to make a large gift. But,
    you know that life is about more than tax planning. The real question you need
    to answer, if you are inclined to make substantial gifts, is whether – and how
    much – you can afford to give. Wealth
    Strategies Journal
    recently published an article, “How Much Can You Gift,” to help you
    through the decision process.

    Some things to consider:

    • Your personal goals, especially for retirement.
      Will they still be adequate after your generous gift?
    • Your age and health. Do you have many more
      income-producing years ahead, or is it possible you may need more money to
      provide for yourself and your spouse, especially if there are health issues to
      consider.

    Remember, you should not gift
    away – in any form – assets that are essential for your own financial needs.
    You can gift away assets to your children (or trusts for them) that you will
    never need. And, there are estate planning tools that can help you make gifts
    that you may need, with “just in case” access if you do.

    Contact your Newport Beach
    estate planning attorneys at Meier Law Firm to discuss all of your estate planning
    needs
    .

    Reference: Wealth Strategies
    Journal
    (November 8, 2012) “How Much Can You Gift

    Selling Your Business? The Clock is Ticking for Newport Beach Families

    Many
    business owners—mostly founders who could gain a lot from a sale—are looking to
    close deals before next year, when the maximum tax on investment income is
    scheduled to rise from 15% currently to at least 23.8% on most capital gains,
    at least for higher-income households. Many sellers intend to convert their
    equity into retirement funds or just start anew.

    Alarm ClockThere’s only so much time left
    in 2012, and yet so much to do. Hopefully Congress will get to work and hammer
    out a deal to avoid the “fiscal cliff” (and trigger another recession).

    Regardless, it certainly looks
    like 2013 still won’t be quite as advantageous as the current tax code. This
    especially is the case if you’re looking to make a major sale that will invoke
    capital gains taxation. Accordingly, you’d better get to work and get that sale
    completed before the ball drops in Times Square!

    For business owners considering
    the sale of their businesses, this advice includes you. In fact, you will be
    interested in a recent article in The
    Wall Street Journal
    titled “Looming Tax Hike Motivates Owners to Sell.”

    As you likely know, the first
    tsunami to hit will be the automatic relapse in the tax code to pre-Bush era
    days, with an effective increase in capital gains taxation from a current 15%
    to a less advantageous 20%. And it gets worse: the Affordable Care Act (Obamacare)
    tacks on an extra 3.8% to capital gains that also goes into effect next year.
    Bottom line: capital gains will increase to 23.8% (that’s an increase of almost
    60%!).

    It’s yet to be seen what the
    lame-duck Congress will do with their time or how they’ll solve this problem.
    But it seems unlikely that Obamacare and that extra 3.8 % surcharge is going
    anywhere. That alone is enough to encourage some business owners to advance
    their sale dates to 2012.

    It might already be too late to
    sell your business. Nevertheless, there may be time yet or other transfers
    besides. Looking for an example? Well it’s worth noting that George Lucas
    didn’t wait until January to sell his company, Lucasfilm, to Disney, potentially shaving $176 million
    off his would-be tax bill.

    Contact your Newport Beach
    estate planning attorneys at Meier Law Firm to discuss all of your estate
    planning needs
    .

    References: The Wall Street
    Journal
    (November 1, 2012) “Looming Tax Hike Motivates Owners to Sell

    The
    Trust Advisor
    (November 4, 2012) “Disney Deal Gives George Lucas a
    Billion-Dollar Tax Break

    To Give or Not To Give (In 2012) – An Important Question for Newport Beach Families

    Hurry up and wait – that's what some financial
    advisers are telling their clients as an uncertain tax environment makes it
    tough to plan charitable giving in 2012.

    Please Give sign on coinsWith 2013 almost upon us and
    only two short months of 2012 to go, now is the time to act. For some matters,
    like planning for your estate and gifts to loved ones, that means acting with
    immediacy. But then again it might still mean to just hurry up and wait!

    Depending upon your goals and
    hopes for the coming year, it might still be time to wait when it comes to
    charitable gift planning.

    The rallying cry of “hurry up
    and wait” regarding charitable giving was sounded by Reuters in a recent article titled “Charitable
    giving in unclear tax times
    .” One
    reason for playing “wait and see” is that we are still in the dark when it
    comes to the tax implications 2013 will bring. In fact, that darkness may not
    lift until long after the election, especially with retroactive tax policies a
    possibility.

    Nevertheless, giving is easy, as
    far as major financial moves go. So you can wait and see if some definitive
    answer pops up before year’s end. If 2013 will be a bad year tax-wise, and the
    gift can wait until 12:01 a.m. on New Year’s Day, then the deduction can do the
    most good to offset new taxation. But, on the other hand; you might not want to
    waste the giving opportunity this year, and a deduction for 2012, by that
    minute.

    In the end, you might end up
    going with your gut instinct on this one either way. Unfortunately, your legal,
    financial and tax advisors likely do not have a crystal ball to help you make
    the call.

    Contact your Newport Beach
    estate planning attorneys at Meier Law Firm to discuss all of your estate
    planning needs
    .

    Reference: Reuters (October
    18, 2012) “Charitable
    giving in unclear tax times

    Time Is Running Out on Tax Planning Options for Newport Beach Families

    Much
    of what is being written on the prospect of the expiration of the Bush-Era tax
    cuts focuses on its income tax implications. Yet, I believe that there is a
    greater likelihood that the estate and gift taxation aspects of this looming
    expiration are both less likely to be continued in prospective new legislation,
    and have a far more significant dollar impact for many. Accordingly, consistent
    with my past postings, there are more definitive gifting actions that should be
    considered prior to year-end – that is, NOW!

    Alarm ClockTrick-or-treaters have come and
    gone, the turkey is on its way, and before you know it the holidays and the
    year itself will be over. What then? For many Americans the new year may find
    us in the grip of a potentially disastrous tax predicament, either the fiscal
    cliff itself or something else entirely.

    When it comes to estate and gift
    taxes there are some actions you may want to take while it is still 2012. This
    matter was taken up in a recent Forbes article
    appropriately titled “Year-End Estate Tax Considerations — TIME
    IS RUNNING OUT
    .

    Yes, time is running out
    on your ability to take advantage of more than a few powerful tax tips and
    tricks. In fact, this countdown clock has been ticking toward this very
    precipice since the final days of 2010. If you haven’t been carefully planning
    all along, then now’s the time to jump to it! What can be done is another
    question and, while it depends on your unique goals, the original article
    offers a few examples of your options before the buzzer sounds.

    Another Forbes article titled “Major Estate Tax Change Looming – Don't Be A
    Last Minute Louie
    ” points out rather directly how 2012 has been a year
    of waiting – of waiting for Congressional action, of waiting for an election to
    come and go, and of waiting for a settled law to base your planning around.

    Instead of waiting, however, the
    best advice would seem to be to take action as best we can.

    Remember: this is an excellent
    time to schedule a consultation with your legal, financial and tax advisors.
    Don’t go it alone, as too much is at stake.

    Contact your Newport Beach
    estate planning attorneys at Meier Law Firm to discuss all of your estate
    planning needs
    .

    References: Forbes
    (October 23, 2012) “Year-End Estate Tax Considerations — TIME
    IS RUNNING OUT

    Forbes (October 26, 2012) “Major Estate Tax Change Looming – Don't Be A
    Last Minute Louie

    Racing the Clock on 2012 Mega Gifts for Newport Beach, California Families

    I think the case for urgency is fairly
    self-evident.  Given how difficult and
    involved estate planning can be, people, for whom this is relevant, should be
    gearing for action now, if they have not already done something.

    When it comes to 2013 taxation, the future
    may be catastrophic for estate tax planning. As each day of 2012 passes us by,
    incredible wealth transfer opportunities are dwindling away.  Can you beat the clock before time runs out?

    These last few months are either a time to
    seize the unprecedented gifting opportunity of a $5.12 million gift tax
    exemption, or a time to run out the clock on this opportunity perhaps for the
    rest of your lifetime. The gift tax exemption is scheduled to return to $1
    million.






    Alarm ClockIf you are looking to seize the
    opportunity in 2012, then you will find encouragement in a recent Forbes article titled “Romney Wants No Estate Tax – Case For 2012
    Mega Gift Remains Compelling
    .
    In short, the article notes that there are ways to give now without spoiling
    future opportunities, if you think carefully about the right kinds of assets to
    give. The author of the article calls such strategic assets “legacy assets,”
    and offers this quote from an attorney comrade:

    Legacy assets are ideal for the
    “megagift” for several reasons:

    1. art, real estate, family business interest and other Legacy Assets
      are secular investments, that is held for more than 10 years, and so the
      gifting of an asset does not substantially reduce the lifestyle or
      disposable financial wealth of the client,
    2. The financial value of Legacy Assets is not correlated to the
      investment market,
    3. The personal and social value of legacy assets is both real and significant,
    4. Since there is both a financial and a social value to the
      ownership of legacy assets, they work well with charitable split interest
      trusts that can significantly leverage the Unified Credit, and
    5. There are techniques that can be used with legacy assets that
      cannot be used for investment assets.

    In terms of a Mega Gift, legacy
    assets are definitely worth considering. Remember, the time is now to
    act on these amazing wealth transfer opportunities.  Don’t wait until it’s too late and the ball
    is already dropping in Time’s Square.

    Contact your Newport Beach, California Estate Planning Attorneys at Meier Law Firm to discuss estate planning for your family.

    Reference: Forbes
    (October 14, 2012) “Romney Wants No Estate Tax – Case For 2012
    Mega Gift Remains Compelling

    Medicare Premiums Expected to Hold Steady in 2013

    Medicare beneficiaries will pay the same premium for prescription drugs
    next year as they did this year, the U.S. Department of Health and Human
    Services said.

    Finally, a little good financial
    news for seniors – your 2013 Medicare premiums are projected to remain the
    same.

    That’s right, the Department of
    Health and Human Services issued its estimate not long ago, and Businessweek reported it in an article
    titled “Medicare Drug Plan Premiums to Stay at $30
    in Coming Year
    .” Indeed, according to the estimate and bids from
    private insurers, the premiums for Medicare drug plans are expected to hold
    steady at the $30 average where they stand today.

    While this is welcome news in
    trying times, we can only hope that the estimate stands the test of 2013 and
    the current political posturings. For that matter, keep Medicare in mind as we
    glide to the annual enrollment period that begins October 15.

    Reference: Businessweek
    (August 6, 2012) “Medicare Drug Plan Premiums to Stay at $30
    in Coming Year

    State Death Taxes Revisited

    There has been a marked uptick in state-level activity on the estate tax front. With numerous legislative proposals swirling, which ones survived?

    When it comes to the federal level and the estate tax, we’re all simply waiting for some word from Congress and the White House. As if that weren’t enough, you need to keep a sharp eye on your own legislature and governor too.

    Recently, Wealth Strategies Journal took a snapshot of 16 states considering amendments, higher exemptions, and even outright repeals. As you might expect, the results were mixed. The article is titled Multi-State Estate Tax Update: Much Activity – What Are The Results?

    Here’s the takeaway. With many state budgets bleeding red ink, all sources of potential revenue are on the table, to include inheritance and estate taxes at the state level. So even if your state does not currently have such taxes, things can change in the future.

    Contact Meier Law Firm to discuss all of your estate planning questions.

    Reference: Wealth Strategies Journal (July 10, 2012) “Multi-State Estate Tax Update: Much Activity – What Are The Results?

    The Clock is Ticking on a Gift Tax Exemption Bonanza

    TIME may—or may not—be running out for one of the biggest tax breaks for wealthy Americans: the chance to give up to $5.12 million to heirs tax-free and then pay a comparatively low 35 percent rate on any gift above that. The break is scheduled to expire in six months, but no one will hazard a guess about its fate because it is just one of many tax and spending measures expiring at the same time.

    A few poignant reminders never hurt anybody, especially when the issues are this pressing. Case in point: There are fewer than six months remaining to make use of the $5.12 million gift tax exemption.

    If you have not noticed, communication between Congress and the White House is rather contentious. After all, it is an election year and the stakes are high regarding the future of our country. Who will control the levers of power in 2013? That question will not be answered until November 6. In the meantime, the future of the gift tax (and the estate tax) hangs in the balance.

    Against the backdrop of this uncertainty, one known is that the $5.12 million gift tax exemption is available through December 31, 2012. That amount (or $10.24 million, if married) is yours to givein liquid assets, unappreciated stock, real estate, or what have youbut only until the end of the year. The New York Times recently addressed this issue in a recent article titled “To Give or Not to Give, Up to $5.12 Million.”

    In the end, you may find yourself in this very real tax predicament. You could be stuck between the known and the unknown, 2012 and 2013 gifting exemptions, or, a rock and a hard place.

    Contact Meier Law Firm to discuss all of your estate planning options, including your current gifting options before the law is set to change in 2013.

    Reference: The New York Times (June 22, 2012) “To Give or Not to Give, Up to $5.12 Million

    Consider “Cleanup” Gifts Before 2013

    With the government's $5.12 million gift-tax exemption set to fall to $1 million at year-end, more families are using the current leeway to do some financial housekeeping.

    The clock is winding down on the first half of 2012— the “Year of Gifting.” With the nation’s capitol rather rancorously heading into election season, the time for “cleanup gifts” is closing. In fact, “cleanup gifts” were the subject of a recent article in The Wall Street Journal titled “A Golden Age of Gift Giving.”

    With the historically generous $5.12 million gift-tax exemption set to expire on December 31, 2012, this may be the time to cleanup gifts among your family so your family members are treated equally. For example, say you made a “loan” in the past to a family member that likely will never be repaid (and may even be challenged by the IRS anyway as being a “gift” rather than a “loan”). Why not consider “forgiving” that loan in 2012 and thereby convert it into a current “gift” within the current generous gift tax exemption?

    Forgiving family loans has to be done correctly, so it’s important to secure competent legal counsel before taking action.

    Contact Meier Law Firm to learn more about the gifting strategies that you may use to take advantage of the currently large gift-tax exemption.

    Reference: The Wall Street Journal (May 25, 2012) “A Golden Age of Gift Giving

    The “Big Gift” Window Closing?

    While it is well known that compromise legislation at the end of 2010 extending Bush-era temporary tax reductions increased the estate tax exemption to $5 million, it is less well known that the lifetime gift tax exemption was also raised to $5 million.

    With April 17th – Tax Day – safely in your rearview mirror (and your nerves beginning to calm), it is time to plan now for Tax Day 2013. That’s right, it’s still tax season!

    There are fewer than nine months left to avoid gift taxes and, for some, massive estate taxes.

    This clarion call rang out in the run-up to Tax Day 2012 in an article in AdvisorOne titled “Estate Planners: 9 Months Left for Tax-Free Transfer of $10 Million.” Here’s the rub: The estate tax exemption for 2012 is $5 million (with a potential combined exemption of $10 million for married couples). However, as reported in the AdvisorOne article, the estate tax seems to be getting most of the buzz when the greatest benefit may actually lie with the gift tax and its generous levels. The gift tax, which is unified with the estate tax exemption amount, also is set to $5 million (and potentially $10 million for married couples).

    Albeit focusing on the gift tax exemption over the estate tax exemption may seem like semantics, given that they are “unified” (i.e., they are in practical reality one and the same amount and using the lifetime gift tax exemption will correspondingly lower your personal estate tax exemption). The important distinction is that not everyone will be transferring their entire estate through gifting this year, but everyone should assess whether making substantial gifts is prudent in the context of their unique circumstances.

    Regardless, under current law, the opportunity for making substantial lifetime wealth transfers expires on December 31, 2012. If the White House and Congress do not act together before such expiration (and things are rather rancorous right now), then we revert automatically to the pre-Bush-era days with $1 million unified exemptions for both gift and estate taxes.

    Bottom line: Engage qualified legal counsel to help determine whether making substantial gifts now can protect and preserve more of your hard-earned wealth for your loved ones instead of the IRS.

    Reference: AdviserOne (March 30, 2012) “Estate Planners: 9 Months Left for Tax-Free Transfer of $10 Million




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