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    Category Archives: Beneficiary

    Why Your Old Trust May Lock Your Family Into Nightmare Scenario!

    Last week, I was talking with a couple at my son’s baseball game, when the wife mentioned that they had set up their revocable living trust up back in worried couple2005. The couple said they were concerned it needed to be updated.

    Aside from the major life changes they’d had since then, including having more children, and moving out of state, there was a larger red flag that went up for me when I heard the date of the trust.

    Basically, for many years, including 2005, the common structure for trusts for married couples was called the A/B Trust. This meant that upon the death of the first spouse, the trust was divided into two sub-trusts: Trust A for the surviving spouse, and Trust B for the late spouse.

    The main reason for this mandatory split structure was to mitigate estate taxes, a likely problem for couples back then because the amount of money the government would allow you to pass at a death without triggering estate tax was significantly less than it is today. Due to changes in law and changes in the tax exemption, the need for the A/B Trust as a tax avoidance strategy became less necessary.

    The other problem is that for the assets and real property put in Trust B, the family will not receive a “step-up” in basis for capital gains tax purposes upon the death of the surviving spouse. This means the beneficiaries of a Trust B can be stuck with significant capital gains tax on assets or real property if there was significant appreciation between the death of the first spouse and the death of the surviving spouse.

    There are however some benefits of having an A/B Trust, such as asset protection for the late spouse’s assets and real property in Trust B, and a guarantee those assets and real property will only pass upon the surviving spouse’s death to the beneficiaries the couple had chosen together.

    New laws and planning techniques such as the Clayton Election Trust, now afford couples many benefits of the A/B Trust without the negative tax consequences, or at least provides them a choice between realizing tax advantages versus asset protection depending on what’s right at the time. Talk to your Newport Beach Family Estate Planning Lawyers about replacing your old A/B trust with a Clayton or Disclaimer trust today. It literally may save you hundreds of thousands of dollars in the long run!

    Meier Law Firm is now offering a free trust review of any trust as long as you contact our office by May 1, 2017 to schedule your appointment.   Be sure to mention this article to receive the free review.  Call (949) 718-0420.

    5 Must Do’s Before 2016 Ends

    Most of us are so focused this holiday season on what gifts to buy the kids, or where we’ll be spending Christmas Eve, that the more importanthappy-single-person things that benefit us most end up on the back-burner.  It’s good to take time this holiday season to focus on the fun, but not at the expense of tying up loose ends that matter most in the long-run.

    Here are 5 Must Do’s for any family before the year comes to an end.

    1. Review Your Finances. For most of us during Christmas, we are so busy swiping our card and checking our bank account balances that we forget to be checking our investment accounts, health saving accounts, retirement accounts, and emergency funds.  Take time to meet for an hour with your financial advisor and your accountant to review your financial performance this year and discuss strategies for starting 2017 off right.
    2. Update Your Beneficiaries. Did you get married this year or have a new child?  Did a relationship end?  Did you set up a family trust?  Every person should take time to review who their beneficiaries are on their current policies and make sure it reflects their current wishes. You should also double check to make sure all of your banking and investment accounts, and your home, are properly titled in the name of your trust (especially if you refinanced this year).
    3. End Whatever Is Not Working For You. Take time to look at where you have been spending your time, who you are spending it with, what services you are using, where you are spending your money, and what is and is not working for you. There is no need to drag into 2017 what did not work for you in 2016. (Family members excluded course!!)
    4. Prioritize Your Health. The Christmas season is full of holiday cheer, and full of holiday carbs. The best quote I heard was from a personal trainer who asked a crowd in December ‘Do you want to be a Fat Santa or a Buff Elf’?  His point was, don’t wait until the new year to get healthy and fit.  One of the best ways we can combat the stress and foods of the holidays is to take a walk, do some yoga, or lift some weights. When we feel better physically, we feel better mentally.
    5. Let it Go. Most of us were offended or wronged by someone this year. It may even be a family member we now have to sit across from at the Christmas Dinner table. Whatever it was or whoever it was, no matter how bad it hurt, give yourself the best gift this holiday season and let it go. Enjoy the holiday season knowing that you may have been wronged, but you are giving yourself a free pass to feel at peace.

    One of our roles as your trusted Newport Beach family trust attorney, is to not only help you set up and update your estate plan, but to make sure you have all of the support and resources you need to be the best you this Holiday Season. We are happy to refer you to the best financial advisors, accountants, therapists, spiritual advisors, personal trainers, and life coaches—whoever you need to end this year with the best possible outcome.  Call your Newport Beach Family Trust Attorneys today at (949) 718-0420 for guidance and referrals, and to make sure your family trust reflects your current wishes and circumstances.

    Advice on Wills: Should Each Child Get the Same?

    *This article originally appeared on Investopedia.com. Laura K. Meier. Esq. was interviewed and contributed to this article.*

    So when does it make sense to leave each of your children the same inheritance, and when does a different arrangement make more sense? And how might each choice affect sibling harmony and whether your wishes are carried out as you intended?

    When to Do Equal Amounts

    If there are three children, each will get one-third of the remaining estate after both parents have passed away.

    “It makes sense for each child to get the same inheritance when each child has similar needs and is similarly situated in life, each child has received similar support in the past from their parents, and each child is mentally and emotionally capable and responsible,” says Laura K. Meier, an estate planning attorney in Newport Beach, Calif., and the author of “Good Parents Worry, Great Parents Plan – Wills, Trusts, and Estate Planning for Families of Young Children.”

    For example, if your children have all completed college (with you paying their tuition) and no longer rely on you for financial assistance; if no child has a handicap or serious illness; and if all have demonstrated that they’re responsible with money, it’s logical to divide your assets evenly among them.

    If your bequests include real estate and other tangible assets, you will need to determine the dollar value of each asset and figure what makes the most sense to leave to each child. Consider the common situation where children are scattered across the country. “If one child always loved the primary house in Connecticut and still lives nearby, it could make sense to bequeath it to him or her,” says Eric Meermann, a certified financial planner and portfolio manager with Palisades Hudson Financial Group in Scarsdale, NY. Another child, who lives in Florida, could inherit the beach house in Boca. “Any differences in the values of the properties could be made up in cash or other assets,” he says.

    There are also less pleasant reasons to leave an equal inheritance, even if you feel one or more of your children don’t deserve it: Doing so can help avoid the costs of conflict, both emotional and financial. Merely from a litigation standpoint, the best way to decide is to weigh the likelihood of a child dragging an estate through litigation, says Philip Ruce, an estate planning attorney with Stone Arch Law Office in Minneapolis. A lawsuit “is financially and emotionally draining for your family and for your estate,” he says, and will “cause some of your assets to end up in a different place than you had hoped – in lawyers’ pockets.”

    When to Do Different Amounts

    Leaving each child an equal piece of the pie doesn’t always feel right. Perhaps one of your offspring is acting as your caregiver, and you want to reward him or her for that devotion or make compensation for lost time and wages, says Candice N. Aiston, an estate planning attorney with Aiston Law in Portland, Ore.

    Or perhaps you’ve given one child considerably more money during your lifetime than you’ve given to another: say, $50,000 for a wedding, grad school or a down payment on a house. In this scenario, if you would otherwise leave your two children equal inheritances of $200,000 apiece, you would instead leave $175,000 to the child you previously gifted money to and $225,000 to the child you didn’t. This distribution follows the equitable, not equal guideline.

    If you have a child who cannot care for him or herself, you may want to leave most of your estate to provide for that child’s care through a special needs trust, Aiston says. A disabled child may need income support to meet basic living expenses and funds to pay for ongoing medical needs. Siblings will likely understand such a situation and not be offended by receiving less money, but it’s still a good idea to let them know your plans, so there are no surprises after your death.

    You might also decide to bequest disparate amounts when you have a blended family, and one child can expect to continue receiving support from another parent; when you run a family business and one child has a larger ownership share than another; or when one child is financially irresponsible, has an addiction you don’t want to support or otherwise doesn’t deserve or can’t be trusted with a windfall.

    Aiston says the overall guideline should be promotion of family harmony. “It is unbelievable how many families fall apart after the parents die because of how the estate is divided up,” she says.

    Could a Child Sue for More?

    If you decide not to divide your assets equally among your children, understand that you’re putting your plans and your children at risk of going through a lawsuit. How significant is this risk, and how likely is it that the result will be a different division of assets than the one you desired?

    “Children can always sue, but there generally needs to be a valid basis for a will contest,” says Jeffrey R. Gottlieb, an estate planning attorney in Palatine, Ill. With careful estate planning, however, you can mitigate any challenge. The first step is to draft your will with the assistance of an estate planning attorney, while you’re of sound mind and memory, and without undue influence from one of your children.

    “Undue influence” means that one of your other children believes – or at least thinks it can be proved in court – that you were manipulated during the process of creating your will. As a result, that child contends, you expressed wishes that you otherwise wouldn’t have or that weren’t really what you wanted.You won’t be there to defend yourself against such a claim so you need to make sure no one can successfully argue it.

    “Lack of capacity,” another way a will can be challenged, means that you didn’t understand what you were doing when you created or changed your will, perhaps because of your age or because a physical or mental illness had deteriorated your ability to make sound decisions. A child could also try to argue that your will isn’t valid because of fraud or because your signature wasn’t witnessed.

    There are ways to minimize the chances of a less-favored child contesting your will in court, and ways to minimize their chances of winning if he or she does. “A no-contest clause paired with at least some nominal gift can create a disincentive to challenge,” Gottlieb says. The no-contest, or non-contestability clause, is, basically, language in your will stating that any inheritor who takes your will to court forfeits any bequests. That’s where the nominal gift comes in – for the clause to be effective, your child has to have something to lose. You’ll need to leave the less-favored child enough that he or she likely has more to gain by keeping quiet than by going to court.

    It’s an unpalatable option, to be sure, but it might mean the best chance of keeping your will intact. The enforceability of these clauses varies by state, however, so check your state’s laws before considering this option.

    Estate-planning experts say other ways to avoid challenges to your will include:

    • using a trust to provide structure for a child who might not be able to manage an inheritance responsibly on his or her own
    • having your doctor be a witness when you sign your will to invalidate claims of lack of capacity
    • excluding all children from the will-writing process to invalidate claims of undue influence
    • discussing your will with each child to avoid surprises and explain your reasoning

    A lawsuit of this type is always most likely to end in a settlement, Ruce says. “That settlement will in some way vary your estate plan because funds will likely end up in a different place or with a different person than you had hoped.”

    The Bottom Line

    “The most important thing to remember when dividing up an inheritance is that it is your money, and you have a right to do with it what you choose,” Ruce says. That said, an equal inheritance makes the most sense when any gifts or financial support you’ve given your children throughout your life have been minimal or substantially equal, and when there isn’t a situation where one child has provided most of the custodial care for an aging parent.

    “When there is actual or perceived inequality,” Ruce says, “the likelihood of someone looking for legal remedies increases substantially.” You have to decide how significant that risk is given your children’s temperaments and their relationships with each other, and whether any risk in leaving an unequal inheritance is worth what you’re trying to accomplish.

    If you have questions about your will or trust, and how to best leave money to your children, we invite you to call your Newport Beach Family Trust Attorneys at 949.718.0420 or visit meierfirm.com.

    This article originally appeared on Investopedia.com and is authored by Amy Fontinelle.

    Casey Kasem’s Estate Planning Not in Anyone’s Top 40

    Casey Kasem, the celebrity radio host who counted down America’s Top 40 popular songs for years, died on June 15 at the age of 82 and left behind an estimated $80 million fortune.  He also left a family feud of biblical proportions between his surviving spouse and his three children from a prior marriage.  This is why we do what we do — to keep your family out of court and connected in love, not conflict.

    Kasem married his second wife, Jean, who is 22 years his junior, in 1980.  Together, they had one child, Liberty Kasem.  Casey also had three children from a prior marriage: Kerri, Mike and Julie.  The family was apparently in discord prior to Casey’s death; in mid-May, Mike and Julie filed a missing persons case with the Santa Monica police department saying they could not locate their father.  At that time, Kerri was fighting with Jean over control of his care.

    After Kasem died, news broke that his body had been taken from the Washington state funeral home and a judge awarded Kerri a temporary restraining order preventing Jean from removing his remains or having him cremated before an autopsy had been performed.  Kerri hired a private investigator who says the body has been moved to Montreal, the hometown of a man that Jean has allegedly been involved with for the past two years.

    A mess, right?  And they haven’t even gotten to the money yet!                lawyer confused

    A little advance estate planning could have helped prevent this scenario, which is not uncommon when an older man takes a second wife who is significantly younger and has children from a prior marriage.

    A recent WSJ Marketwatch.com article outlined four estate planning tools that could have helped to head off this disaster:

    Revocable trust.  Placing assets in a revocable trust can help protect the trust owner’s wealth transfer wishes, and provides the flexibility to make changes as long as the trust owner has the legal capacity to make those decisions.  Upon the owner’s death, the assets are dispersed as outlined in the trust without having to go through probate.  A trust is also more difficult to contest than a will.

    Life insurance.   A life insurance policy can be a good way to provide for a surviving spouse while leaving the rest of the estate to children from a previous marriage, or vice versa.

    QTIP trust.  A qualified terminal interest property (QTIP) trust is used to set aside assets for a surviving spouse’s benefit while that spouse is alive.  After the surviving spouse passes, the remaining assets in the trust are passed on according to the trust terms.

    Family meeting.  Having a family meeting so that everyone knows their beneficiary status and what will happen to the estate after the estate owner dies is a good way to head off conflict.  An estate planning attorney can mediate these meetings, which is usually advisable when there is a potential for conflict.

    One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation without conflict or concern.  Call our office today to schedule a time for us to sit down and talk about a Family Wealth Planning Session, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security.

    The Talk You Need to Have With Your Parents

    grandparent and parentWhen you were a kid, your parents probably dreaded the talk they had to have with you.  You know the one.  Well, now that you are an adult, there’s a talk you need to have with your parents that is likely to be just as awkward – which is why so many of us put it off.

    It’s about money.  Specifically, your parent’s money.  The money that may become yours one day. Or may not.

    Whether you or your parents think it’s none of your business, it is.  You are most likely the one(s) who will need to deal with all the financial issues your parents leave behind when they become incapacitated or after they die.

    Not knowing anything about their finances will place you at an immediate disadvantage, making what will be a hard job almost impossible.

    So how do you get the conversation started?  Here are some tips from a recent New York Times column on the subject:

    Think about what you need to know.  You need to know more than where to find the will, you need to know if parents have executed powers of attorney, advance health care directives or a trust as well.  You need to know if they have life insurance or other assets and, if so, where the policy is located.  You need to know if they keep a list of all their debts and, if they bank and pay bills online, you need their log-in information for each account.

    Bring in a support team.  Your parents may feel more comfortable discussing financial issues with their attorney or financial planner present to facilitate the conversation. They may also feel more comfortable talking with all their children at once, or to only one – take family dynamics into consideration.  And call us in at the beginning of the process.  We can help ease the way tremendously.

    Make a plan.  Chances are you will need immediate access to cash in order to pay expenses related to a parent’s passing.  Since probate can be a lengthy process, you may want to plan for this eventuality by having parents establish a revocable living trust, which allows assets to pass outside probate.

    Document storage.  Be sure your parents do NOT store their important documents in a bank safe deposit box because getting at them could require you to obtain a court order.  Use a strongbox or safe that is kept in the home instead. Or make sure you are a signer (and there are back-ups besides you) on the safe deposit box.

    If you would like to have a talk about estate planning for your family, call our office today to schedule a time for us to sit down and talk. We normally charge $750 for a Planning Session, but because this planning is so important, we’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call Meier Law Firm today at 949.718.0420 and mention this article.

    Unconditional Love Doesn’t Have to Mean Unconditional Inheritance

    Most parents love their children unconditionally and want to do whatever they can to smooth life’s rough road for them. But that unconditional love doesn’t necessarily mean that unconditional trust exists when it comes to leaving children with a hefty inheritance.

    A recent Forbes article looked at smart ways that parents can pass the love along while still protecting the wealth they have spent their lifetimes working hard to accumulate:

    Annual exclusion gift test. A parent can gift up to $14,000 every year to each child without incurring gift taxes; both parents together can give a total of $28,000 to each child. You can use this annual exclusion gift to test the waters on how your children will handle a financial windfall. Do they pay off debt, save it or place it on the ponies? Their actions can give you insight into how they might handle their inheritance.

    Incentive trust. Parents that have worked hard to accumulate their wealth often worry that a large inheritance may harm a child’s ambition to succeed on their own. If that is a worry for you, an incentive trust allows you to set goals or milestones for your children to achieve before distributions are made.

    Staged distributions. Parents can create a trust with the distributions tied to different age stages or events (graduating college, starting a business) so the inheritance is doled out over time.

    Leave a legacy. Creating a personal foundation to support the causes you believe in, and involving your children early on in that foundation, will help them learn about the responsibilities that come with wealth and create empathy for a world outside their own.

    Hold the cash. Instead of giving cash directly to your children, consider alternative giving strategies, like paying down their college or home loan mortgage debt. This will make a big difference to their financial future without tempting them with large amounts of cash.

    Wealth creation trust. As mentioned in a previous post, one of the best ways your unconditional love can be expressed to a child or grandchild is through the establishment of a wealth creation trust to commemorate a birth or a milestone birthday or event, and then directing monetary gifts to the trust over time.

    When your child gets to be an age specified in the Trust, he or she can step into the role of Co-Trustee of the Trust, learning how to operate the trust and best utilize the funds in the Trust.  He or she will be trained on the best types of investment for the Trust, learn the purpose of the Trust (to encourage the creation of wealth from one generation to the next, rather than the squandering or wasting of assets); how to protect it (keep the investments in the name of the Trust, regardless of how funds are used, so always title investments properly and sign on behalf of the Trust); and how to create more wealth in the future using the Trust assets.

    One of the main goals of our law practice at Meier Law Firm is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our Irvine Estate Planning Law Firm today at 949.718.0420 to schedule a time for us to sit down and talk about an Achieve Your Dreams Planning Session, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security.

    Important Tips for Designating Beneficiaries in Newport Beach



    Assets that allow beneficiary designations
    provide powerful benefits that permit the owner to designate who will inherit
    the assets, how they can inherit the assets, avoidance of probate, and
    potential tax minimization, to name a few. Most individuals do not give the
    necessary attention to how they designate their beneficiaries.


    Family on HillThere is the right way to do
    just about anything, and it’s usually not the easy way. Thankfully there are
    those rare shortcuts that are actually pretty solid, so long as you remember
    when and where to take them.

    When it comes to proper estate
    planning, the shortcuts are the existing options you already have with
    insurances and retirement accounts that allow you to designate your
    beneficiaries on a simple beneficiary designation form.

    For many of us, the beneficiary
    form is the first practical experience we have with estate planning. For
    thoughtful and downright tactful tips for designating your beneficiaries
    designations, consider a recent article in Fox
    Business
    titled “Bulletproofing Your Beneficiaries.

    When it comes to beneficiary
    designations, some of them are shortcuts and some of them are dead-ends, and
    still others can completely undo your estate plans if you simply forget about
    them. That noted, there are at least two key points to consider. The second
    point is the beneficiary designation must be coordinated with your overall
    estate plan to the right beneficiaries (or even a system of trusts) to
    eliminate probate and minimize taxes. The first point, and a source of
    immediate concern, is that you must know who all of your beneficiaries are on
    all your accounts at all times. If you don’t know already, then it’s high time
    for a “beneficiary audit” of all your accounts and, if necessary, a reworking
    of those designations to meet your distribution goals.

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

    Reference: Fox Business
    (October 1, 2012) “Bulletproofing Your Beneficiaries

    Estate Taxes – The Gift That Keeps on Taking

    When you inherit money or property you shouldn’t have to pay taxes. It’s not subject to income tax. Plus, if there’s an inheritance tax to pay, the estate or person giving it to you has already paid it or provided for its payment. At least that’s how it’s supposed to work. But what if it turns out the estate tax was not paid, or there’s an audit and the estate owes more?

    Death does not necessarily mark the end of your estate. In fact, for some families, it may mean the beginning of your financial legacy. On the other hand, for other families, it may mean the beginning of some serious taxes.

    The prospect of future tax battles with the IRS was the subject of the recent case of U.S. v. Mary Carol S. Johnson. Forbes explored this case in an article titled “When Estates Don't Pay Tax, IRS Chases Beneficiaries.”

    The case recounts the story of Anna Smith, her fortunes in the Stateline Hotel, and the IRS audit that ultimately led to a battle over a lost fortune. Smith’s fortune was bound up in stock in the hotel, and it was worth enough at her passing to trigger an estate tax that the family elected to pay in installments over several years (which can be done). According to her estate plan, the family distributed the stock among themselves with an agreement to set aside a portion to pay the estate taxes owed.

    Apparently that agreement was reached in the “good days” of the hotel. In fact, those days were so good that the IRS audit on the estate tax return, years later, came up with higher numbers and a greater tax. Of course, when the IRS finally got around to making that decision, the hotel was not doing so well. But the family agreed to pay the higher tax as a matter of duty and paid on those rates for several years.

    Boom. The hotel value collapsed, the stock became worthless, and the estate had nothing left to pay for the taxes on the past wealth. The IRS, not being one to forgive and forget, didn’t forget and carried on the fight to the beneficiaries and personal representatives of the estate. In the end, the IRS held two members of the family acting as personal representatives to be personally liable, even though they did the right thing by the original numbers.

    The original article is an interesting read and a sobering reminder, albeit far from unique. The IRS can audit any taxpayer, even if it’s an estate, and sometimes it has good reasons to do so. As a sidebar, the case demonstrates the importance of an accurate valuation.

    Regardless, this U.S. v. Mary Carol S. Johnson serves as a lesson for those currently planning their estates. With the current lifetime gifting exemption pegged at $5.12 million, this may be a window of opportunity to pass significant wealth before the year’s end.

    Bottom line: If the estate doesn’t fully pay off any amounts due, the IRS turns to the estate beneficiaries, sometimes even for amounts forgotten until years later.

    Contact Meier Law Firm to discuss your estate planning.

    Reference: Forbes (June 28, 2012) “When Estates Don't Pay Tax, IRS Chases Beneficiaries




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