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

Click on the link below to read our article in the December 2012 edition of the Journal of Financial Planning entitled The Closing Wealth Transfer Windows.  The article discusses one of the strategies outlined in our recently published book:
http://www.fpanet.org/journal/TheClosingWealthTransferWindows/

Our newest book, The Closing Wealth Transfer Window: Post-Election Steps to Take Immediately to Protect Your Family Legacy, was released November 28, 2012, and is available at:
http://www.estateplanning.com/store/.

I was selected by my peers for inclusion in Southern California's Top Rated Lawyers, published by the Law.com and the Los Angeles Times in November 2012.

Darrcy Loveland, President of the Laguna Beach Community Foundation, speaks at the Laguna Beach College of Art & Design on November 14, 2012 at an event for the Laguna Beach Community Foundation Professional Council, of which I am Co-Chair.  The Professional Council consists of charitably minded professionals who support the Foundation's mission to enhance philanthropy in the community.

Read my current article in the October 2012 ediition of the Journal of Financial Planning entitled "Do Your Tax Strategies Accomodate the Affordable Care Act?"

See my inclusion in OC Metro magazine's annual list of the best attorneys in Orange County - in estate planning, probate, and trust law - for the fourth consecutive year.

On July 30, 2012, I was appointed to the nine-commissioner Estate Planning, Trust and Probate Law Advisory Commission by  the State Bar of California Board of Trustees, effective October 2012, to advise the State Bar of California Board of Legal Specialization about its program to certify legal specialists in the area of estate planning, trust and probate law.

Read my current article in the June 2012 edition of the Journal of Financial Planning entitled "Defining Incapacity in the Modern Estate Plan."

I was recently elected, along with Linda Butterwick and Debbie Meeker, to the Board of Laguna Beach Seniors, Inc., a 501(c)(3) tax-exempt organization devoted to enhancing  the lives of seniors through programs and services promoting independence, wellness and community.  I currently provide pro bono legal advice to seniors at the organization's Susi Q Senior Center on a monthly basis.  In my capacity as a Board member I will be serving on the Planned Giving Task Force.

In our practice we often work with young professionals and parents with minor children, but many of our clients are over the age of 50 and are thinking more about retirement or are already retired.  Following are some tips for a worry-free retirement:

1.  Maximize the quality of your life.  Your health is your greatest wealth; so continue to eat right, exercise, and stay engaged by doing volunteer or part-time work.   Frequent contact with family and friends is what makes most retirees happy, while others value travel and new experiences. We have noticed our clients who seem to live the longest, happiest lives, and who stay mentally sharp into their 90s are walkers - they walk a half hour or more a day - virtually every day. 

2.  Time when you draw Social Security benefits.  Social Security provides an inflation-adjusted annuity for life.  Many start to draw a reduced annuity at 62 and later regret it.  Unless you have a shorter-than-normal life expectancy, usually the better strategy is to wait until 70.  If you are married, draw the lower-earning spouse’s benefit at 66 and the higher-earning spouse’s benefit at 70.

3.  Watch your spending.  You should limit your withdrawals from your investment portfolio to about 4% per year if you want the portfolio to last your lifetime.  Adjust your standard of living so your Social Security, pension, and 4% investment withdrawals cover your spending. 

4.  Don’t change your investment strategy.  If you switch to a conservative portfolio, inflation will chip away at your standard of living.  Investors with a longer than five-year investment horizon (time before you expect to die, not retire) should continue to allocate about 60% of their investable assets to stocks and about 40% to fixed-income investments. 

5.  Look into buying long-term care insurance.  Nothing zaps a family’s resources and legacy more rapidly than the cost of end-of-life medical and long-term care.   What is your family’s history with longevity and dementia?  Retirees should look into tax-favored long-term care insurance before they have a medical event which makes it unavailable. 

6.  Get your estate in order.  Experience the peace of mind of knowing you are not leaving behind a mess for your loved ones.  A well-done estate plan generally includes a revocable living trust, pour-over will, financial power of attorney, advance health care directive, and HIPAA authorization.  The plan names decision makers who will manage your affairs when you are incapacitated and distribute your assets after you die. 

7.  Get the input of others before making important decisions.  Sometimes it is not best to be a do-it-yourselfer.  Family and friends can help with most decisions, but for some decisions you may need the advice of experts, such as physicians, attorneys, accountants, and financial planners. 

“Is now the right time to start my business?” is a common question we analyze for clients.  Favorable labor, rental, and lending rates make it appealing to start a business, but it is difficult to give up the security and fringe benefits of a job in this uncertain market.

Many people do not realize that nearly all the deductions available to self-employed individuals, such as advertising, mileage, phone charges, internet fees, computers, travel, entertainment, education, subscriptions, office supplies, contract labor, etc., are also available to employees if the expenses are not reimbursed by the employer. 

The expenses are deducted in different places on the Form 1040 – from adjusted gross income (AGI) on Schedule C for self-employed individuals and from AGI on Schedule A (itemized deductions) for employees.  This treatment favors self-employed individuals, especially considering that employee expenses are subject to a 2% of AGI floor, but it does not consider the self-employment tax (13.3% for 2012 under proposed legislation).

Consider this contrast:  Self-employed Barbara and employee Ed both gross $120,000 and have $20,000 of business-related expenses.  Both are in the 34% marginal tax rate bracket.  Barbara will have net income of $100,000 on which she will owe approximately $13,300 of self-employment tax.  Half of this self- employment tax is deductible for income tax, giving Barbara $93,450 of taxable income and $31,773 of income tax, for a total tax of $45,073.

Ed’s entire salary of $120,000 is subject to payroll tax of approximately $6,360.  His $20,000 of expenses must be reduced by $2,400 (2% of $120,000), meaning his taxable income is $103,600 and his income tax is $35,224.  His total tax is $41,584.

What are other considerations?  Self-employed individuals can make larger deductible contributions to retirement plans and take deductions for health insurance premiums, but they must pay higher amounts for tax return preparation, are audited by the IRS at a rate of 5% compared to 1% for individuals, and should pay estimated taxes throughout the year.  In contrast, employers often match employee retirement plan contributions and subsidize health insurance and other fringe benefits. 

Although the decision whether to leave an employer to start your own business is based primarily on non-tax factors, it is important to consider the tax aspects as well.