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Leslie Daff, JD, MBA - Orange County Estate Planning Lawyer

Monday, October 12, 2009

Twelve Indicators You Need to Update Your Estate Plan

Read my recent contribution to the Journal of Financial Planning for indications you may need to update your estate plan.


Saturday, August 1, 2009

O.C.'s Top Lawyers

See my inclusion in OC Metro's August 2009 cover story naming Orange County's top attorneys:  http://www.estateplaninc.com/index.aspx?TypeContent=CUSTOMPAGE&custom_pagesID=1293


Wednesday, June 3, 2009

Planning Opportunities in Our Economic Downturn

Click here to read my recent contribution to the Journal of Financial Planning about hidden treasures buried in the American Recovery and Reinvestment Act of 2009 and other recent legislation: http://estateplaninc.com/global_pictures/Planning%20Opportunities.pdf


Wednesday, April 8, 2009

Charitable Gift Annuities: A Way to Both Give and Receive

A Charitable Gift Annuity is a way to benefit your favorite charity and in return receive a guaranteed income for life. After you pass away, any amount remaining from your initial contribution passes to the charity.  

A Charitable Gift Annuity enables you to:
     ·        Receive fixed income for life
     ·        Obtain an immediate income tax deduction
     ·        Benefit from annuity rates ranging from 5%
          to 9.5%
     ·        Receive partially tax-free income
     ·        Defer capital gains tax on appreciated
          assets
     ·        Support your favorite charity
 
Charitable Gift Annuities are not insured. However, many charities retain ample annuity reserve funds from which to pay the annuities.
 
To set up a Charitable Gift Annuity, a donor contributes cash, stock, or other assets to the charity and receives an annuity based on the donor’s age. The current annuity rates published by the American Council on Gift Annuities are as follows:                      

 
Donor’s Age
Charitable Gift
Annuity Rate
60
5.0%
65
5.3%
70
5.7%
75
6.3%
80
7.1%
85
8.1%
90
9.5%

 
 
 

 
Generally, 30% to 50% of a donor’s capital gain will escape capital gains tax entirely. The remaining capital gain will be reported in small annual installments as part of the donor’s annuity payments.
 
Charitable Gift Annuities can also be structured to provide annuity payments for other beneficiaries you name. So a Charitable Gift Annuity can be a valuable estate planning tool. Not only can a donor contribute assets that have appreciated in value but bring in minimal income, the donor and/or other beneficiaries the donor names receive fixed annuity payments, and the donor has reduced the size of his or her estate.

Wednesday, March 4, 2009

For Their Inheritances, Give Your Children the Gift of Lifetime Beneficary-Controlled Descendants' Trusts Instead of Outright or Staged Distributions

When drafting your estate plan, it is very important to consider giving your children the gift of lifetime beneficiary-controlled descendants' trusts instead of outright or staged distributions of their inheritances (e.g., 1/3 of the trust principal at age 25, ½ of the balance at 30, and the remaining balance at 35), a subject nicely covered in Chapter 88 of the new WealthCounsel© Estate Planning Strategies book, and  written by James N. Voeller, an estate planning attorney in San Antonio, Texas, re-printed here with his permission:

Beneficiary-Controlled Descendants’ Trusts
 
The majority of people who set up wills and revocable trusts leave their assets outright in equal shares to their children when they die. What most people don’t realize is that many times by leaving the inheritance outright, they may be unintentionally disinheriting their grandchildren! Suppose you die leaving assets to your son, and shortly after your death he passes away too. It is likely his will or trust leaves everything to his spouse – who may spend the inheritance on herself, or worse yet, give it to a new spouse – leaving your grandchildren with no part of the inheritance.
 
Instead of leaving your assets outright to your children, consider the potential advantages of leaving your assets to trusts for the benefit of your children, which you can design and create during your lifetime.
 
A descendant’s trust is created by you, today, within your revocable trust, naming your child as trustee and beneficiary when you die. For example, if your daughter is named Mary Smith, the trust would read, “Mary Smith, as Trustee of the Mary Smith Trust.”
 
There are a number of good reasons to leave assets in descendants’ trusts you create as a part of your overall estate plan for each of your children. These include the following benefits:
 
  • The assets will be protected from your child’s spouse in the event of divorce.
  • The assets can be protected from your child’s creditors in the event of financial hardship.
  • The assets are sheltered from lawsuits to which your child may become a party.
  • The assets will not be part of your child’s probate estate in the event of the child’s incapacity or upon his or her death.
  • The assets can be removed from your child’s estate so that no further estate taxes will be due when the property passes to the next generation.
  • Upon your child’s death, the unused assets will go to your blood relatives (such as grandchildren) instead of to in-laws or others who are not part of your plan.
The reality of a descendant’s trust is that it is much easier for your child to keep assets separate from a spouse when the assets have been left to the child in trust. At the time of your death, all of your assets are re-titled directly from your trust to your child’s trust. There is a world of difference between a child saying to a spouse “my parents left this money to me in a trust” and the alternative of having the child receive the inheritance “in hand” and needing to take active steps to keep those assets separate from a spouse, or trying to shelter them from an unexpected lawsuit.
 
A descendant’s trust may be drafted to provide that during your child’s lifetime he or she has complete access to the income and the principal of the trust – so that you are not necessarily giving a “gift with strings attached” or “ruling from the grave.” (If circumstances are warranted, however, you may elect to impose tighter control over the assets.) But when your child dies, you can ensure that the unused portion of the trust goes to your grandchildren or to a charity you would like to support. The trust can provide that until your grandchild reaches the age where he or she will likely be more responsible, say age 30, someone else will manage the assets, distributing so much of the assets as may be needed for the grandchild’s health, education, maintenance, and support. Once the grandchild reaches age 30, you may want the grandchild to be the trustee of his or her own trust. If one of your children dies without leaving children, the assets of that child’s trust could go to the trusts created for your other children.
 
The time to design these trusts for your children is now – when you are preparing your own estate plan. Upon your death, your plan will provide this important protection for your children. In the overwhelming number of states, once your children have inherited assets from you, it is too late for them to create their own protective trusts.
 
If you are going to leave it all to them anyway, consider leaving your children’s inheritance to them in a protected trust by doing some additional planning for them today. Your children will greatly appreciate what you have done to put them on the right track to plan for themselves and their families. Talk to your estate planning attorney about how to incorporate these ideas into your trust.

Friday, January 16, 2009

New Estate Planning Strategies Book

Read the news release about the newly published WealthCounsel (R) Estate Planning Strategies book - edited by Leslie Daff and Randy Gardner - at the end of this entry.  The book is available on Amazon.com or by contacting our office at LDaff@estateplaninc.com or (949) 497-5056.

Reviews of the book:

“Estate planning today is a dauntingly complex challenge. The experts in this book cut through that complexity to offer useful insights into trusts, taxation, insurance, and many other estate-related topics.” 

Kenneth Silber

Senior Editor, Research magazine

Hoboken, New Jersey

 

“WealthCounsel has brought together a collection of articles that should be read by both the professional adviser and the theoretician who wants to understand how the financial concepts discussed can be used in practical applications.  This collection of articles is both timely and relevant and will prove to be a valuable resource for consumers, financial planners, and estate planning professionals.”

 

Robert J. Lindner, ChFC, CFP, AIF

CEO of Lindner Capital Advisors, Inc.

Marietta, Georgia

 

“This book is a great tool. It can help you gain an easy understanding of the many estate strategies available. The information discussed throughout this book is invaluable. It is a “must have” for advisors that work with high net worth clients.”

 

Jeffrey A. Carbone, CFP®

Cornerstone Financial Partners

Cornelius, North Carolina

“WealthCounsel's new book, Estate Planning Strategies, clearly shows the reader who has an interest in preserving and protecting his or her hard-earned wealth the procedures to make sure those dollars and benefits go to the ones they love.  Written and edited by experienced estate planning experts, it flows, is easy to follow, and has good illustrations and flowcharts to boot.”
 

John J. Checki Jr.  CPA, CFP®, CRC®

Richardson, Texas

 

“This book is a treasury of wisdom, usable suggestions, and resource information that will be of great benefit to readers.  Its broad coverage will appeal to the novice as well as the seasoned professional.”

 

Burk Rosenthal, CFP®, ChFC®, CRC®, CFS
President of Rosenthal Retirement Planning, LP

“This is a state-of-the-art, best practices compendium of estate planning tools and thinking. Estate planning continues to be, if done properly, a priceless gift to the ones we care about and this publication can greatly enhance that gift.”

 

Gary L. Myers, J.D., LL. M. in estate planning

Family Investment Center, Inc.

 

"This book could create the 'new' state-of-the-art of estate planning, written at the intersection of a high level of expertise and practical client application.  A critical reference tool for the client looking for unbiased planning tools based upon multiple lifetimes of experience (and ‘written in English’ for non-lawyers), this work contains a plethora of useful material for the practitioner in the financial planning, legal, and accounting fields as well. What makes this work so fascinating is its approach in the delivery of dozens of experts over multiple topics, complete with enough overlap to create an inherent second opinion."

  
Andrew Samalin
Samalin Investment Counsel, LLC
Mount Kisco, New York

 

“A remarkably practical and useful book! Think of it as Everything You Always Wanted to Know about Estate Planning, But Were Afraid to Ask. Short and to-the-point chapters, clear definitions, abundant worksheets, and (best of all) many practical examples to help us get our heads around this arcane but vitally important field. I especially appreciate the inclusion of unexpected topics such as: transferring your values and ideals (and not just your stuff); non-traditional relationships and evolving definitions of marriage; “modest philanthropy” (i.e., expressing your values with small gifts); and Pet Trusts. WealthCounsel® Estate Planning Strategies lives up to the promise of its subtitle: “Collective Wisdom. Proven Techniques.” A great reference for financial planners and their clients!”

 

Ed Jacobson, Ph.D.

Author of Appreciative Moments: Stories and Practices for Living and Working Appreciatively

 

“This book is an invaluable resource and "must-have" for both professionals and consumers who are interested in maximizing their wealth through estate planning. It makes complex estate planning strategies easy-to-read and comprehend for virtually anyone...which is quite an accomplishment!”

 

Deborah Price

CEO and Founder of The Money Coaching Institute

Author of Money Magic: Unleashing Your True Potential for Prosperity and Fulfillment

“Fantastic!  It’s like a "Chicken Soup for the Wealth Advisor's (and their clients) Soul!" This book is smart, easy to read and full of great ideas.  I love the variety of estate planning insights and the geographic diversity of the attorneys who present them.  It’s a "first step" resource I can use to help my clients understand what can often be challenging concepts.”

Lisa Dickholtz, CFP®
President of Dickholtz Wealth Management
Northbrook, Illinois  

“This book is the perfect book for the lay person.  Confusion melts away as the reader reviews the simple examples and clearly written chapters.”

 

John L. Jenkins, AEP, EA, CFP®

Fellow, Esperti Peterson Institute

President and CEO of Asset Preservation Strategies, Inc.
San Diego, California

 

“By far, the best book on estate planning I've ever seen.  It offers everything consumers and allied professionals need:  it's comprehensive, authoritative, up-to-date and clearly written, answering all the common questions people ask about estate planning, and then some.  I can't wait to give this book to my financial planning clients.  They're going to love me!”

 

Peter W. Johnson, Jr.

Principal of PWJohnson Wealth Management

Host of Pro Money Talk

Founder of The Financial Literacy Project

“The WealthCounsel Estate Planning Strategies book will be one of those publications you keep within reach as a comprehensive, search-here-first resource for all of your estate planning questions.  Nearly 100 estate planning attorneys and experts give you brief, to-the-point guidelines for every imaginable estate planning scenario, complete with worksheets and information tables.  And this book isn't just for advisors’ clients; with chapters like 'Business Succession Planning' and 'Limited Liability Companies,' you'll find it essential in running your own business, too.” 

David J. Drucker, MBA, CFP
Columnist for Morningstar Advisor and frequent contributor to Financial Planning, Research, Wealth Manager and Financial Advisor magazines
Author of three books including Tools and Techniques of Practice Management (National Underwriter Company, 2006)
President of Drucker Knowledge Systems and Principal, Virual Office News, LLC 

"A great resource for financial advisors and anyone wanting a robust, easy-to-use guide to the ins and outs of estate planning.  I highly recommend this book to professional financial advisors and anyone wanting to take control of his or her personal financial life and legacy."

 

Sheryl Garrett, CFP®

Founder of the Garrett Planning Network

Author of Just Give Me the Answers

 

“You need not be threatened by estate planning any longer; this book introduces straight-forward, easy to understand answers to life’s questions about crafting continuity for your family’s legacy. In today's complex world, simplicity is a welcome gift.  Tie a bow around this book.” 

 

Marc S. Freedman CFP®

President and CEO of Freedman Financial

Author of Oversold and Underserved:  A Financial Planner's Guidebook to Effectively Serving the Mass Affluent

Peabody, Massachusetts

 

“If you’ve ever received advice you didn’t understand, or had a question about any estate planning matter, this book will give you clear answers.  This is one of the most valuable estate planning resources I’ve seen, and shall serve as a great resource on the book shelf of any professional or high net worth family.”

 

John P. Napolitano, CFP®, CPA, PFS, MST, RLP®

Chairman and CEO of U.S. Wealth Management

Editor of TheParagonAdvisorBlog.com

Author of The Complete Idiot's Guide to Success as a Personal Financial Planner 

 

January 15, 2009 News Release about the New Estate Planning Strategies Book:

 

http://www.reuters.com/article/pressRelease/idUS142929+15-Jan-2009+PRN20090115


Thursday, December 18, 2008

Planning Opportunities for January 2009

The current low Section 7520 rate provides tremendous opportunities for a number of planning techniques, including Grantor Retained Annuity Trusts, Intentionally Defective Grantor Trusts, Self-Canceling Installment Notes, and Charitable Lead Trusts.  See here.   


Wednesday, October 29, 2008

Dangers of Joint Tenancy

Quite often married couples believe they don't have to do any estate planning because they own their property as joint tenants and everything will pass to the surviving spouse at the first spouse's death.  Although it is true that titling property in this manner can avoid probate, there are serious drawbacks to this approach.

1.  Not Taking Advantage of Each Spouse's Federal Estate Tax Exemption.  Leaving everything outright to a surviving spouse means you are not taking advantage of both spouses' federal estate tax exclusions, or "coupons" against federal estate tax ($2 million each in 2008; $3.5 million each in 2009).  With proper planning you can take advantage of both spouses' exclusions.  This means in 2008, you and your spouse can pass $4 million free of estate tax.  However, if you do not plan in advance (i.e., instead, leave everything outright to your surviving spouse), the surviving spouse will only get to use his or her single exemption.  So assuming a $4 million estate in 2008, applying a single exclusion leaves $2 million in assets subject to a 45% federal estate tax rate.  This results in a $900,000 mistake - this $900,000 could have easily gone to your loved ones instead of the IRS.

2.  Simultaneous Death Leading to Probate of Your Estate.  None of us can predict how or when our time will come.  In the unfortunate situation of, for example, a common accident, assuming no other estate planning has been done, there will be a court-supervised probate of the property.  Your heirs will be determined by the intestacy laws of the State of California, and may not be the people whom you would like to receive your property.  Probate fees in California are based on the gross value of the assets (not net of mortgages or other indebtedness), are set by law, and can consume a significant portion of your estate.  Thus, for example, if you own nothing more than a $500,000 house, even if the mortgage is $495,000, probate fees to the court-appointed administrator and attorney, if hired by the administrator, will exceed $25,000.  Court costs and probate referee fees (for the court to appraise your property) will also be assessed.  Other drawbacks to probate include the fact that it is a public process, allowing anyone to access information about your heirs and the nature and extent of your assets.  Lastly, probate is a time-consuming process.  Because creditors must be notified and given four months to file claims, and there are court filings, notice requirements, hearings, and accountings, etc., the probate process can take from six months to several years to complete. 

3.  Not Taking Advantage of the Double Step Up in Cost Basis.  When a joint tenant dies, his or her interest in the property receives a step up in cost basis to fair market value on the date of his or her death.  However, the surviving joint tenant will retain his or her cost basis.  Therefore, if you and your spouse bought a home years ago for $200,000 as joint tenants and that home is worth $2 million at the first spouse's death, the survivor's new cost basis at the first death will step up to $1.1 million (the deceased spouse's cost basis steps up to $1 million and the surviving spouse's cost basis remains at $100,000).  If the surviving spouse then wants to sell the property, this $900,000 will be subject to capital gains tax.  If, however, the property is held in community property (and typically also held in a revocable living trust), there is a double step up in basis to $2 million (both interests step up to $1 million each) so there is no exposure to capital gains tax if the property is sold for $2 million. 

4.  Blended Family Situations.  If you are in a blended family situation with children from prior relationships, do you really want to leave everything outright to your surviving spouse?  With proper estate planning (use of B/Bypass/Credit Shelter/ Exemption/Family and C/Marital/QTIP trusts), you can provide for your spouse during his or her lifetime with your share of the assets, yet ensure the remainder will go to your children or other loved ones.

Lastly, quite often a parent will want to add a child to title on his or her residence so that the property passes to the child upon the parent's death.  Problems with this approach are that 1) you are giving up a present interest in your property now instead of at death, 2) a child's divorcing spouse may make a claim to the property, 3) the value of the gift exceeding your annual gift tax exclusion ($12,000 in 2008; $13,000 in 2009) is dipping into your lifetime $1 million gift tax exclusion, for which you will need to file a gift tax return, and 4) if, for example, your child gets in an accident, a creditor can force a sale of your property to satisfy a judgment.  It is often advisable to have the property pass at death so you retain control during your lifetime.  If your child inherits your property at your death, he or she will receive a full step up in cost basis to the fair market value on the date of your death so that if your child turns around and sells the residence, he or she will not incur any capital gains tax. 


Monday, October 13, 2008

23 Common Estate Planning Mistakes

1.  Failing to plan.

2.  Not planning for both death and incapacity.

3.  Not funding, or only partially funding, your living trust.

4.  Forgetting to name or failing to update agents, executors, and trustees in your estate planning documents. 
 
5.  Not taking advantage of both estate tax exemption amounts ($2 million in 2008) available to married couples, due to inadequate planning.
 
6.  Inappropriate formula funding clause for subtrusts used in a trust for a married couple and the attendant potential exposure to capital gains tax.
 
7.  Married couple holding property in joint tenancy rather than community property and not benefiting from the double step-up in cost basis.
 
8.  Inadequate beneficiary designations for insurance policies, retirement plans, and IRAs - beneficiary designations that do not coordinate with the rest of your estate plan.  
 
9.  Neglecting to properly structure a business venture or entity to protect personal assets from creditors and failing to follow through on formalities (e.g., holding regular owner and board of director meetings, preparing written minutes to include in the entity's records, and/or respecting other formalities to assure the entity is honored for all purposes).
 
10.  Neglecting to have an owners' agreement and a binding buy-sell arrangement when you own a business with another or others.
 
11.  Failing to properly plan for family business succession. 
 
12.  Not creating flexibility or addressing liquidity needs in the design of your estate plan.
 
13.  Not taking a holistic view by considering the financial and tax ramifications of every personal, investment, or business decision.
 
14.  Failing to structure trusts for asset protection purposes (i.e., inability, disability, creditors, divorcing spouses, and predators of beneficiaries – e.g., lifetime beneficiary-controlled trusts) in your estate plan.
 
15.  Failing to fund your buy-sell agreement or family entity, such as a family limited partnership or family limited liability company.
 
16.  Forgetting to consider the options available to finance long-term care needs.

17.  Waiting too long to create or update a plan.

18.  Not leaving a “paper trail” and location list.

19.  Not having an appropriate definition of "incapacity" in your estate planning documents.

20.  Not having an Advance Health Care Directive wallet card to alert medical professionals about whom to contact in the event of emergency if/when you are not able to make medical decisions for yourself.

21.  Not having an executed HIPAA authorization form to circumvent medical privacy laws so that  your designated agent can discuss your care with medical professionals in the event you are incapacitated

22.  Do-it-yourself estate planning, such as adding your child as a joint tenant on title to your real property, being unaware and uninformed about the attendant risks and problems of such an approach.

23.  Not hiring appropriate professionals to advise you and/or trying to scrimp on estate planning.

Tuesday, October 7, 2008

Best Estate Planning Strategies in Our Current Low Interest Rate Environment

Click here to read my current contribution to the October 2008 edition of Journal of Financial Planning about estate planning strategies that are especially attractive in  today's low interest rate environment Best Estate Planning Strategies In Low Interest Rate Environment


Friday, September 19, 2008

Obama and McCain on Federal Estate Taxes

In 2008, each person can pass $2 million in assets free of federal estate tax at death.  The maximum federal estate tax rate on assets exceeding this $2 million exemption amount is 45%.  Under current law, this $2 million exemption amount is scheduled to increase to $3.5 million per person in 2009, is scheduled to be unlimited in 2010 (meaning no matter how large your estate is it can pass free of estate tax), and then the exemption reverts to $1 million in 2011, and thereafter, with a maximum federal estate tax rate of 55% on assets in excess of the $1 million.  It is widely believed Congress will not allow the entire repeal of the federal estate tax in 2010 to occur and will instead pass legislation in 2009 under the new presidency.  Where do the candidates stand?  Obama favors a $3.5 million exemption per person and a maximum federal estate tax rate of 45% on assets over this amount, whereas McCain favors a $5 million exemption per person and a maximum federal estate tax rate of 15%.  What legislation actually makes it through Congress, especially in this turbulent economic climate, however, is anyone's guess.





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