Should You Make Gifts in 2012?

May 15, 2012 in Estate Planning, Taxes with 0 Comments

The 2012 gift tax exclusion is a whopping $5,120,000. It is scheduled to drop to $1,000,000 in 2013.

If you have an estate value greater than $1,000,000 or greater than $2,000,000 if you are married, you may, depending on your age and your relationship with your children, want to take advantage of this year’s big gift tax exclusion by making significant gifts to your children, thereby reducing or eliminating your potential estate tax.

And if you do make gifts to your children, we highly recommend you use irrevocable gift trusts.

If you make outright gifts to your children, the gifted asset could be fair game in a lawsuit or divorce claim against your child. If you make gifts in trust, the gifted asset could be significantly protected from lawsuits or divorce claims against your child. If you make a gift, why not protect the gift?

Happy Mother’s Day

May 13, 2012 in Family with 0 Comments

Jason Gay has a great column on the real MVP.

My mother never really helped me with sports. I’m not even certain if she loves sports. All she ever did was pack me up in the car for the first 17 years of my life, dragging me out of bed and telling me to eat something before driving me off to tryouts, to practice, to tournaments and playoff games that I can no longer remember. All she ever did was make sure that I always had a ride home after the game. All she ever did was abandon huge chunks of her day—her life—to make sure I could play sports with my friends because I enjoyed playing sports with my friends.

I am not sure what the big deal is about this. It’s not like my mother taught me how to throw a curve ball.

READ THE REST.

WIlliam Jessup University

May 7, 2012 in Churches and Nonprofits, Other Stuff with 2 Comments

Counsel Protect supports William Jessup University, the Sacramento private university, that is making a positive difference in the Sacramento community at large and in the lives of its students. We encourage you to support its transforming work by participating in their “Because of You” campaign to keep tuition affordable and graduate debt low. My friend, Eric Hogue, says they are looking for 500 viewers to give $10 to $50 today. Check out the video.

Here is the link to participate.

Estate Planning is Not Complicated

April 28, 2012 in Estate Planning, Family with 0 Comments

If you have a family, you need to protect it. It’s your job.

If you die, what happens to your spouse and children? The solution can be simple. An estate plan and life insurance. The estate plan usually involves a living trust and the life insurance can be a 20 year term policy. That will protect most families. It doesn’t have to be difficult, but it does have to be done. Don’t make it more complicated than it has to be.

Guardians. Of the people you know, who is the best one to raise your kids if needed, Hint – not some best case scenario person you haven’t met yet, but the best of the people you know. For good or bad, your choice is limited to the people you already know. Who is the best of those?  You can always change your selection. Better that you to choose, then have the court choose for you.

Life Insurance. If you are healthy, term life insurance can be surprisingly affordable. Talk to your insurance adviser and lock in a 20 year term policy.

Making Charitable IRA Donations in 2012

April 23, 2012 in Churches and Nonprofits, Estate Planning, Taxes with 0 Comments

Making charitable donations from your IRA is different in 2012. Congress has made life difficult for tax attorneys, accountants, financial advisors and their clients as they continue to give and take away deductions.

In 2011, under the Qualified Charitable Distribution provisions of the tax code, you could make an IRA distribution to a qualified charity and not include the distribution as income. IRA owners age 70½ or older could contribute up to $100,000 of IRA funds to a qualified charity and not recognize income on the distribution. The donation was not tax deductible, but the distribution was not included as taxable income.

Congress let this provision expire on December 31, 2011.

Beginning January 1, 2012, any IRA owner 59½ or older can make an IRA distribution to a qualified charity. But, like other IRA distributions, you will have to report the distribution as income and then claim a corresponding charitable deduction. This will increase your adjusted gross income on your tax return.

The Wall Street Journal had a good summary of the current status here.

Is Your Living Trust Funded?

April 21, 2012 in Estate Planning, Probate with 0 Comments

Although most families have not done their estate planning, many have, and many have established living trusts. The objectives in establishing a living trust are to avoid the high costs and hassles of a California probate and to provide an easy administration of the estate assets. Living trusts are great and will accomplish these objectives – if they are maintained.

Your estate will still go through probate, even if you have a living trust, if you have not transferred your assets to your living trust. We tell our clients to consider their living trust like a container. The trust will only control the assets that have been transferred to the container. If when you die, you left significant assets (real property, bank and investment accounts) outside the container, your loved ones may have to take your estate through probate. Probate is unwelcome to most families because it is expensive and generally takes at least a year in court.

Ask yourself these questions to confirm your assets are in your living trust. Continue Reading…

Do You Need Money for Your Business?

April 18, 2012 in Entrepreneurs with 0 Comments

My entrepreneur clients often ask me how to raise capital. My first response is the same response I give entrepreneurs when they ask me to help them issue stock to an employee: Do you really need to?

Just like I advise business owners to not issue equity to an employee unless absolutely necessary, I advise business owners not to take on investors unless absolutely necessary.

Why? You tend to make better decisions when you have a tight budget. The “extra” money you get from an investor tends to lead to sloppy decision making. “Oh just buy it, we can afford it” verses – “do we really need that, is there a better and less expensive way to do that?”

There may be a time you have to get capital. In that case, try to make it a loan rather than give up equity in your business. And make the payments amortized, rather than interest only with a balloon payment. The future may be bright and a balloon payment in 5 years may seem easy, but 5 years can go by fast without a significant uptick in revenues. If you can’t afford an amortized loan (interest and principal in each payment), then maybe you can’t afford the loan. And maybe – you don’t need the loan or capital because there are other more creative solutions you haven’t discovered yet.

Be Content and Indispensible

April 13, 2012 in Entrepreneurs with 0 Comments

Seth Godin writes about needing more to be happy:

If your happiness is based on always getting a little more than you’ve got…

then you’ve handed control over your happiness to the gatekeepers, built a system that doesn’t scale and prevented yourself from the brave work that leads to a quantum leap.

The industrial system (and the marketing regime) adore the mindset of ‘a little bit more, please’, because it furthers their power. A slightly higher paycheck, a slightly more famous college, an incrementally better car–it’s easy to be seduced by this safe, stepwise progress, and if marketers and bosses can make you feel dissatisfied at every step along the way, even better for them.

Their rules, their increments, and you are always on a treadmill, unhappy today, imagining that the answer lies just over the next hill…

All the data shows us that the people on that hill are just as frustrated as the people on your hill. It demonstrates that the people at that college are just as envious as the people at this college. The never ending cycle (no surprise) never ends.

An alternative is to be happy wherever you are, with whatever you’ve got, but always hungry for the thrill of creating art, of being missed if you’re gone and most of all, doing important work.

Sounds similar to someone else who said:

I know what it is to be in need, and I know what it is to have plenty. I have learned the secret of being content in any and every situation, whether well fed or hungry, whether living in plenty or in want. I can do all this through him who gives me strength.

Estimated Taxes and Tax Refund Robbers

April 10, 2012 in Asset Protection, Entrepreneurs, Taxes with 0 Comments

Is it malpractice for CPAs to recommend their clients pay estimated taxes in light of the tax fraud epidemic? Here is a provocative article suggesting it might and it is generating a lot of discussion among lawyers and accountants. The issue is if you pay estimated taxes and someone steals your identity and files your return and gets your refund (which came from your estimated tax payments), would you have been better off not paying the estimated taxes?

I don’t believe it’s malpractice for accountants to advise their clients to do what the law requires (pay estimated taxes). On the other hand, clients may want to think through whether it’s better not to pay the estimated taxes and deal with the IRS penalty (if any) rather than risk identity theft.

What do you think?

Another Reason to Do Your Estate Planning

April 8, 2012 in Estate Planning, Family with 0 Comments

According to Forbes, one in eight baby boomers will get Alzheimer’s after they turn 65. That in itself is enough reason to do your estate planning. If your planning is done – meaning you’ve done a durable power of attorney and a revocable living trust -  then incapacity won’t require a court proceeding and court monitoring, And the agent you choose (your spouse, child or friend) will manage your affairs as needed, not someone the court appoints.

What about your parents? Have they done their estate planning? If so, talk to your parents and make sure they get their estate planning done. Otherwise you and your siblings will be left to clean up the mess.

Estate Planning at William Jessup University, Rocklin

March 30, 2012 in Estate Planning with 0 Comments

I’m speaking at William Jessup University in Rocklin tomorrow on estate planning

Baby Boomers and Estate Planning

March 30, 2012 in Estate Planning with 0 Comments

Kaycee Krysty in Forbes explains Five Reasons Baby Boomers Need to Review Their Estate Plan. (And none of them are about taxes.) The five reasons are:

1. Relationships change

2. Kids grow up

3. You know more about your health

4. You own different assets

5. You care more about your legacy

Like everything else in life, as you get older, your perspective and objectives change. Make sure your current perspective and objectives are reflected in your estate plan.

Gift Tax and Clawback

March 23, 2012 in Estate Planning with 0 Comments

Peter Reilly in Forbes discusses the possibility of clawback and how making substantial gifts in 2012 is still a good idea.

. . .  the inertia of the law as it is now written and the unlikelihood of a Republican sweep make it likely that the unified credit will cover significantly less than $5,000,000 in 2013.  Unless I missed a beat somewhere in the last thirty years, I don’t think that the unified credit equivalent has ever gone down.  That would account for nobody being sure exactly how the estate tax computations will work for someone who makes a mega gift in 2012 when the credit covers $5,000,000 and then dies in 2013, when the credit covers $1,000,000.  Here is an excerpt from Chuck Rubin’s explanation of the potential problem:

If correct, this means that when a donor later dies, and substantial 2011 or 2012 gifts are added into his or her estate tax computation, the constructive gift tax reduction applied to the tentative estate tax will be low – and there will not be a corresponding high unified credit amount available for estate tax purposes to offset this enhanced tax. Thus, in effect, this statutory analysis recaptures some of the gift tax that avoided tax at the time of the gift under the then-available unified credit, as estate tax due at death.

Got that.  Right.  Well, I hate to say it, but I can’t figure out how to make it any clearer. At the risk of gross oversimplification I’ll speculate that someone who is left with a $3,000,000 estate after having made a $5,000,000 mega gift might have estate taxes computed as if the estate were $7,000,000, which conceivably could wipe out the estate.  Does that make the mega gift a bad idea ? It does not.  I’ll steal from Mr. Rubin again:

Nonetheless, even with clawback, the benefits of a larger 2012 gifts remain. These include (1) enhanced GST exemption for generation-skipping gifts or gifts to trusts that may later have a skip, (2) shifting of appreciation in gifted assets to third parties after the gift that would not otherwise occur (which may provide future estate tax savings), and (3) in many circumstances overall tax savings may still result, even with clawback. Thus, while clawback at worst may reduce benefits of 2012 gifting, enough remain that it may still make sense in many situations.

Folsom Estate Planning Attorneys Arrested Part 2

March 16, 2012 in Estate Planning with 1 Comment

This Sacramento Bee article has more details on the arrest of Folsom estate planning attorneys Cynthia Flahive, Gregory Flahive and Michael Johnson. They were partners in the Flahive Law Firm. According to the article, Cynthia Flahive and Michael Johnson are listed as attorneys with the Cinder Law Group in Folsom and Gregory Flahive now runs Prestige Law Corp. in Sacramento.

The Flahive Law Firm was very aggressive in advertising for legal services and were very prominent in radio and tv appearances.. They started out doing a lot of high volume low cost estate planning and then added bankruptcy and loan modifications.

From the Bee:

The three arrested were Gregory Flahive of El Dorado Hills, Cynthia Flahive of Folsom and Michael Kent Johnson of Elk Grove, who face up to 22 felony counts, including grand theft by false pretense, conspiracy and false advertising.

According to the state attorney general’s office, the Flahives, who are ex-spouses and owners of Flahive Law Corp., and Johnson, the firm’s former managing director, took upfront fees of up to $2,500 to perform home loan modification services that never happened.

They allegedly targeted homeowners in Placer, Sacramento, Butte and Yuba counties, using fliers, radio and TV infomercials. According to the attorney general’s investigation, they processed hundreds of loan modifications for homeowners, some of whom went into foreclosure after being advised to not pay their mortgages.

It’s the third set of arrests since state Attorney General Kamala Harris launched a mortgage fraud strike team last May.

 

Getting Into the Best College

March 10, 2012 in Family, Other Stuff with 0 Comments

Cal Newport has written an incredible counter-intuitive book which is a must read for middle school and high school students and their parents.

The premise of How to be a High School Superstar is that your child doesn’t have to sacrifice his or her life by joining silly clubs, taking endless AP classes, competing on every sports team offered and dominating student body elections. Newport interviewed many students who made it into their dream college by jumping off the workaholic assembly line and working less.

The secret – these successful students (and Newport was one) became unique. The top colleges require top grades and SAT scores as a threshold, but then they want uniqueness. Your child can stand out by being different – writing a book, starting and running a business or nonprofit, writing an app, creating software, teaching other kids, living in a foreign country – get the picture? And best of all, these unique activities are more fun, less time consuming and way more meaningful than the follow the herd achievement stock piling vortex many students get pulled into.

I highly recommend this book.

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