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    Joshua and Laura Meier Newport Beach Trust and Estate Planning Attorneys Focused on Helping Families with Young Kids
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    Category Archives: Death Tax

    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.

    Hollywood Legend Lauren Bacall Leaves Large Estate and Two Potentially Large Headaches for Heirs

    Legendary Hollywood actress Lauren Bacall died on August 12, 2014, leaving behind an estate estimated at $26.6 million and three children who face a couple of potentially serious problems that could have been avoided through effective estate planning. Home estate

    Bacall, who was married to Humphrey Bogart and Sam Robards, passed away in her New York City apartment, which at a $10 million valuation constitutes a sizeable part of her estate.  Bacall used a will as the governing document of her estate plan instead of a revocable living trust, so the division of her estate is public record.

    Her will was made public a mere 10 days following her death because her children plan to auction off her artwork this fall.  As a resident of New York, Bacall’s estate will be subject to both state and federal estate taxes.  A trust left to her by Bogart will also be subject to tax based on its valuation.

    Unfortunately, her estate only included $100,000 in liquid assets at the time of her death, so her heirs face a potentially serious liquidity problem when it comes to paying these taxes. This is probably the reason behind the rush to auction her artwork. Her family has only nine months from the date of her death to pay estate taxes.

    Although Bacall directed in her will that her apartment be sold, there is no guarantee that it could sell in time to pay the estate taxes. Life insurance is one of the most common ways to ensure there is sufficient liquidity to pay taxes and other expenses.

    Besides the financial assets, Bacall left her children the right to her likeness and other intellectual property associated with her illustrious career.  (She did request that her children not sell her personal effects, letters and memorabilia in her will.) This could be of significant value in future years, and the IRS could come after the heirs for taxes based on that value.

    There could also be issues that arise regarding the management of this intellectual property in the coming years, which could lead to litigation as it has in the cases of other Hollywood greats, like Michael Jackson. To help avoid this, the family could establish a trust or family entity to manage these assets and make decisions on how they will be used in the future.

    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. Call your Newport Beach Estate Planning Attorneys today 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.

    5 Things We Should Learn From Our Parents About Retirement

    When we talk about retirement, most of us are still thinking about our parents’ retirement and how they did – or did not – plan properly for it.  It’s no big stretch to think that our retirement will differ significantly from that of our parents, but there are still lessons to be learned from them in preparing:retirement

    1.  Seek out a pension plan.  If you are considering a career change or job move, look for companies that offer traditional pension plans.  Having a pension can make an incredible difference in retirement security.

    2.  If you don’t have a pension plan, compensate.  Start investing now in a 401(k), an IRA or other defined contribution plan early and keep investing in it throughout your working life.  Figure out what you could have made if you had a pension plan, and contribute that amount to your own plan.

    3.  Save for a long life.  None of us lives forever, but that doesn’t mean you shouldn’t save as if you would live forever.  Running out of money in your 80s or 90s should you live that long is a frightening prospect; medical advances are extending life spans and you need to save for a long life.

    4.  Plan for health care expenses.  It is estimated that most Americans will spend at least $240,000 on health care in retirement, and you will either need to save that amount or have a health coverage plan in place to cover your retirement medical costs.

    5.  Start early and stay the course.  As soon as you start working, aim to save at least 10 percent of your income every year – 15 percent is even better if doable.  And keep saving throughout your working years.  As your salary increases, try to set aside even more so the comfortable retirement you envision can become a reality.

    If you’d like to learn more about retirement planning strategies for your family, call our office today at 949.718.0420 to schedule a time for us to sit down and talk about an Achieve Your Dreams Planning Session.

    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.

    Death & (Income) Taxes

    Death and taxes may be equally inevitable, but the taxman demands the last word. Death does not excuse a final accounting with the IRS. In fact, taxes can further complicate the lives of survivors.

    Of the two certainties in life – death and taxes – the taxman always gets the grim last word. End-of-life taxes are, moreover, often considered the most onerous. For many loved ones, writing those last few checks to the IRS can be especially tough … and seem to never end. Enter the postmortem income tax return.

    The death taxes are one thing, and inheritance taxes are generally another, since they are paid by the inheritor. However, as a recent article in Kiplinger makes clear, there usually is one final income tax return to file for the decedent. I recommend the article, titled Death and Taxes, for your reading.

    The burden of filing this final income tax return is something you assign in your will, usually to the executor or administrator, or failing that it falls upon a survivor. If you are planning your estate or if you are administrating one, this burden is not one to be taken lightly. To make matters worse, the fiduciary is on the hook for any sins of commission or omission. If ever there was a time to retain appropriate legal, accounting and tax advice, then this is one of them.

    Bottom line: The income taxes likely are the least of your taxation concerns with the estate, inheritance, gift, and generation-skipping taxes all vying for attention. Unfortunately, that doesn’t diminish the importance of income taxes.

    Even if an estate will not be subject to extra taxation, this last rite to the IRS has to be observed.

    Reference: Kiplinger (March 2012) “Death and Taxes




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    Meier Law Firm | 2103 Vista Entrada, Newport Beach, CA 92660
    phone: 949.718.0420 e-mail: office@meierfirm.com