Trusts and Estates Blog

Antelope Valley Estate Planning Law Firm Thompson Von Tungeln Advises California Residents to Review Their Power of Attorney Options

Antelope Valley estate planning law firm Thompson Von Tungeln advises California residents to review the different power of attorney options available to them. The power of attorney options include the General Power of Attorney, the Durable Power of Attorney, the Non-Durable Power of Attorney, and an Advanced Health Care Directive. Each has its uses, and a combination of them is essential to good estate planning.

Lancaster, California (PRWEB) January 5, 2010 — Antelope Valley estate planning law firm Thompson Von Tungeln recommends that California residents review the different power of attorney options available to them as part of their estate planning process.

“There are a number of different types of power of attorney vehicles available for use in estate plans,” said Kevin Von Tungeln, partner at Thompson Von Tungeln. “Each type has its uses, and can provide protection in the event of incapacitation. You should consult with your estate planning attorney to determine, which, if any, are necessary for your estate plan.”

A General Power of Attorney designates a person to handle the business, financial and legal affairs of another person, either for a specific function or for overall day-to-day needs. This basic estate planning document is necessary in the event you become incapacitated or unable to make decisions for yourself. A Durable Power of Attorney comes in two forms for estate planning purposes. It can be effective immediately or upon disability. Estate planning attorneys utilize the Durable Power of Attorney to designate someone to make financial, housing and other care decisions for someone who can no longer make them for his or her self.

An Advanced Healthcare Directive is an estate planning document that allows you to designate someone to make medical decisions on your behalf. Your estate planning attorney can help you include your wishes on life-saving measures, end-of-life care, organ donation and choice of a physician into your directive. Another, less commonly used vehicle is the Non-Durable Power of Attorney.

“The time to review these with your estate planning attorney is when you are healthy and in the process of creating your estate plan,” said Von Tungeln. “Directives that are signed when a person is seriously ill are prone to being challenged in court if one of your loved ones believes you were not of sound mind and body when you signed the Power of Attorney form. Your estate planning attorney can review your options on which of these Power of Attorney forms to include in your estate plan.”

Antelope Valley Estate Planning Law Firm Advises California Residents to Monitor Changes to the Federal Estate Tax

Antelope Valley estate planning law firm Thompson Von Tungeln advises California residents to closely monitor the many estate tax proposals before the Congress. The changes may add some clarity to the current confusion, but they may also significantly affect current estate plans.

Lancaster, Calif. (PRWEB) January 12, 2010 — Antelope Valley estate planning law firm Thompson Von Tungeln is advising California residents to monitor the proposed changes to the federal estate tax that are before the Congress.

“The federal estate tax system is in a bit of flux right now,” said Kevin Von Tungeln, partner at Thompson Von Tungeln. “The current law is due to expire in 2010, and allow the federal estate tax rate to revert to the 55 percent level that it was prior to 2001. The top rate has been declining since 2001 and is scheduled to drop to zero percent in 2010. The potential for changes after 2009 is creating anxiety for anyone creating their estate plan.”

One proposal that is gaining some traction comes from the Obama administration. President Obama’s 2010 budget proposal calls for keeping the estate tax at 45 percent on estates valued at $3.5 million or higher from 2011 for the foreseeable future.

“If the administration proposal becomes law, it will give Americans some certainty in their estate planning,” said Von Tungeln. “The uncertainty of what would happen in 2011 and beyond caused many estate planning attorneys to create estate plans that had vehicles in them that were tied to the changes in the rates from the 2001 law. Some certified estate planning specialists have been including language in their estate plans to guard against changes in the estate tax law not knowing what types of changes may be enacted.”

Some alternative proposals include indexing estate tax to inflation, which would effectively reduce government revenue. It is unclear which proposals, if any, will be enacted into law. Given the present fiscal situation in Washington, it is possible that Congress may revisit the issue as they search for additional revenue sources. Checking with your estate planning attorney every year or two to review your estate plan is a wise planning strategy.

About Kevin Von Tungeln

With more than 18 years’ legal experience, Kevin L. Von Tungeln serves Thompson Von Tungeln in the areas of estate planning, probate, trusts, wills, trust administration, conservatorships, guardianships and elder law. He is certified by the State Bar of California Board of Legal Specialists as a Board Certified Specialist in Estate Planning. Get to know more about Kevin’s approach to estate planning by viewing his informational videos at: http://www.youtube.com/user/EstateLawyers. Kevin can also be found at LinkedIn by going to: (www.linkedin.com/in/kevinvontungeln)

About Thompson Von Tungeln

Antelope Valley estate planning law firm Thompson Von Tungeln (TVT) offers sophisticated estate planning and administration for the affluent, discriminating client. As Board Certified Specialists in Estate Planning, Trusts and Probate as certified by the State Bar of California Board of Legal Specialization, partners Mark E. Thompson and Kevin L. Von Tungeln are expertly equipped to serve these clients with the creative, effective and custom solutions they demand. For more information, contact TVT at 661-945-5868 or visit their website at www.EstatePlanningSpecialists.com.

Gifting… An Easy and Satisfying Way to Reduce Estate Taxes

If you have a sizeable estate, you may want to consider giving some of your assets now to the people or organizations who will receive them after you die.

Why? First, it can be very satisfying to see the results of your gifts – something you can’t do if you hold onto everything until you die. Second, gifting is an excellent way to reduce estate taxes because you are reducing the size of your taxable estate. (Just make sure you don’t give away any assets you may need later.) And third, well, we’ll wait and explain the third reason at the end.

One of the easiest ways to do this is through annual tax-free gifts. Each year, you can give up to $13,000 to as many people as you wish. If you are married, you and your spouse together can give $26,000 per recipient per year. (This amount is now tied to inflation and may increase every few years.)

So if, for example, you have two children and five grandchildren, you could give each of them $13,000 and reduce your estate by $91,000 each year – $182,000 if your spouse joins you.

You can also give an unlimited amount for tuition and medical expenses if you make the gifts directly to the educational organization or health care provider. Charitable gifts are also unlimited.

Gifts do not have to be in cash. In fact, appreciating assets are usually the best to give, because any future appreciation will also then be out of your estate. For example, if you want to give your son some land worth $52,000, you can give him a $13,000 “interest” in the property each year for four years.

As long as the gift is within these limits, you don’t have to report it to Uncle Sam. Just the same, it’s a good idea to get appraisals (especially for real estate) and document these gifts in case the IRS later tries to challenge the values. It’s also a good idea to do this under the watchful eye of your attorney or tax advisor.

What if you want to give someone more than $13,000? You can, it just starts using up your $1 million federal gift tax exemption. If your gift exceeds the annual tax-free limit, you’ll need to let Uncle Sam know by filing an informational gift tax return (Form 709) for the year in which the gift is made. After you have used up your exemption, you’ll have to pay a gift tax on any gifts over $13,000 (or whatever the annual tax-free amount is at that time). The gift tax rate is equal to the highest estate tax rate in effect at the time the gift is made; in 2009, it is 45%.

Which brings us back to reason number three. Even though the gift and estate tax rates are the same, it costs you less to make the gift and pay the tax while you are living than it does to wait until after you die and have your estate pay the estate tax. That’s because the amount you pay in gift tax is no longer in your taxable estate.

How Should You Hold Title to Real Estate?

family in front of homeYour home is probably the most valuable asset you own. Yet most people don’t think about how to hold title until the title company poses the question when you buy or refinance. But this deserves careful consideration, because how you hold title to real estate has far-reaching effects. Let’s look at some common ways to hold title.

Individual Name: You can hold title in just your name even if you are married. However, there are some drawbacks you should know about.

First, what would happen if you become mentally or physically incapacitated due to illness or injury and the property needs to be refinanced, or a line of credit needs to be opened or increased? If you are unable to conduct business, the court will need to appoint someone to act for you.

“But, I have a will,” you say. A will can’t help; it only goes into effect after you die, not if you are incapacitated.

“But, I have a power of attorney,” you say. Most powers of attorney end at incapacity. A durable power of attorney is valid at incapacity. However, many financial institutions will not accept one unless it is on their form. And if accepted, it may work too well, giving the person the ability to do whatever he or she wants with your assets. You could recover to find the property mismanaged or even sold and the proceeds gone.

The court’s job is to provide supervision to protect your assets. But once the court gets involved, it will stay involved until you recover or die. The court, not your family or friends, will control how your assets are used to care for you. It is a public process that can be expensive, embarrassing, time consuming and difficult to end if you recover.

Next, what happens when you die? If yours is the only name on the title, the property will almost certainly have to go through the probate court system before it can be distributed to your heirs, even if you have a will. Think about it: if your name is the only one on the title, and you have died, you can’t sign your name to transfer title. While there can be exceptions, in most cases the only way to remove your name and put the new owner’s name on is through the probate court.

Joint Tenants with Right of Survivorship: This is how most married couples hold title, because it seems fair, it’s easy and it’s free. Parents and their adult children also often hold title this way, as do unmarried couples.

Indeed, when one owner dies, full ownership does transfer automatically to the surviving owner without probate. But usually this just postpones probate. If the surviving owner dies without adding another owner (which often happens), or if both owners die at the same time, the property will almost certainly have to go through probate before it can go to the heirs.

There are other problems, too. When you add a co-owner, you lose control. With real estate, all owners must sign to sell or refinance. If your co-owner disagrees with you, you could end up in court. If your co-owner is incapacitated, the court will probably get involved to protect your co-owner’s interest…even if the ill owner is your spouse.

You expose the property to your co-owner’s debts and obligations; you could even lose your home to your co-owner’s creditors if he or she is successfully sued. There could also be gift and/or income tax problems if your co-owner is not your spouse.

Finally, because a will does not control jointly owned assets, you could disinherit your family when your co-owner inherits your share. Sadly, and all too often, children from a previous marriage are disinherited when a new spouse is the surviving owner.

Tenants-In-Common: With this kind of ownership, each owner’s share will be distributed as directed in his or her will. If there is no will, the property will go to the owner’s heirs.

Community Property: Nine states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) have a form of joint ownership between spouses commonly called community property. When you die, your share of community property automatically goes to your surviving spouse, unless your will says otherwise.

The problem with both tenants-in-common and community property is that you could find yourself with several new co-owners when your co-owner dies and the heirs inherit the property. Imagine how difficult it could be to get several owners to reach an agreement, especially if you are trying to sell the property.

You can also run into the other problems (incapacity, lawsuits, etc.) as explained under joint tenants with right of survivorship, but with several owners involved, your risks and problems are multiplied.

Tenants-by-the-Entirety: This form of joint ownership, available between spouses in some states, is similar to joint tenants with right of survivorship in that when one spouse dies, his/her share automatically goes to the surviving spouse, even if the will says otherwise. So you have many of the same risks, including unintentional disinheriting and court interference if one spouse becomes incapacitated.

However, as tenants-by-the-entirety, neither spouse can transfer his/her half to someone else without the other’s approval – something joint tenants with right of survivorship and tenants-in-common can both do.

Revocable Living Trust: When you have a living trust, the title of your real estate can be held in the name of the trustee of your trust. Usually you will be your own trustee, so you keep full control of the property. You can buy, sell and refinance real estate just as you can when the property is not in your trust.

If you become incapacitated, the successor trustee you named when you set up your trust will be able to step in and act for you. Because the title is no longer in your individual name (or joint names if married), there will be no need for court interference. (If you are married, you and your spouse can be co-trustees, in which case your successor trustee would step in only after you have both become incapacitated or have died.)

Your successor is legally obligated to follow the instructions you put in your trust. If you recover, your successor simply steps aside and lets you resume control. When you die, the property will be distributed without probate according to the instructions in your trust, so you don’t have to worry about unintentionally disinheriting someone.

SUMMARY: How you hold title to real estate should be given careful consideration. Check your titles and make any changes now while you can.

If you would like more information concerning holding titile to real estate, or any other aspect of estate planning, visit www.EstatePlanningSpecialists.com today. www.EstatePlanningSpecialists.com is a comprehensive online resource for estate planning and related issues. As Board Certified Specialists in Estate Planning, Trusts and Probate as certified by the State Bar of California Board of Legal Specialization, Mark E. Thompson and Kevin L. Von Tungeln are expertly equipped to serve clients with the creative, effective and custom solutions they demand.

An Introduction to Planning for Long Term Care

Long term care is the kind of care you need if you are not able to perform normal daily activities (such as eating, dressing, bathing, and toileting) without help, and it is expected that you will need this help for an extended period of time, often for the rest of your life.

This kind of care is often needed due to aging, chronic illness or injury, and most of us will need it for at least some time before we die. But it is not just for the elderly; a good number of younger, working-age adults are currently receiving long term care due to accident, illness or injury.

Long term care can be provided in your home, in an assisted living facility, or in a nursing home. All can become very expensive.

Home health care can easily run over $20,000 per year. That’s at $16 per hour, for just 25 hours a week. Depending on the skill required, number of hours needed and where you live, it can cost considerably more.

Assisted living facilities can cost more than $25,000 per year; the more services you need, the higher the cost. Nursing home facilities, with round-the-clock care, are now $50,000 or more a year. Expect to see these costs go even higher, thanks to rising medical costs.

Also, expect to pay these costs for a while. The average stay in a nursing home is three years. Alzheimer’s patients usually need care longer.

Unfortunately, long term care is not covered by health insurance, disability income insurance, or Medicare.

Health insurance plans cover nursing home expenses only for a short period of time while you are recovering from an illness or injury.

Disability income insurance will replace part of your income if you are not able to work after a specified time, but it does not pay for long term care.

Medicare, which covers most people over the age of 65, provides limited coverage for skilled care for up to 100 days immediately following hospitalization. After that, you’re on your own.

So who will pay the cost if you need long term care? There are only three sources: your (or your family’s) assets, Medicaid, and long term care insurance.

Medicaid pays the bills for a large number of people in nursing homes today. But because the program is designed to provide services for those who cannot support themselves (children, the disabled, the poor), you will have to “spend down” your assets and be practically penniless in order to qualify for benefits. Your spouse is also limited to the amount of assets he or she can have. Also, you will only be able to receive care from a facility that accepts Medicaid. But if you have minimal assets, it may be the best option for you.

For many people, long term care insurance is the best option, especially if you have assets and income you want to protect, you want to avoid being a financial burden on others, and you want to have some choice in the care you receive. With LTC insurance, you will have the option of receiving care in your home or a private pay facility. The premiums are lower when you are younger and in good health. If you wait too long, the cost could be prohibitive and you might not qualify.

When planning for long term care, the experience and advice of a qualified professional can be most helpful. If you are considering trying to qualify for Medicaid, make sure you talk with an expert in Elder Law before you do anything. An innocent mistake could disqualify you from receiving benefits for many months.

Business Owners: Have You Planned Your Exit?

You’ve worked hard building your business, but have you thought about what will happen when you are no longer there running the show?

According to one study (Small Business Review, Summer 2001), only 30% of all family-owned businesses survive to the next generation; only 12% make it to the third generation; and a meager 3% are functioning into the 4th generation and beyond.

Why? Most business owners simply do not plan an exit. They do not do proper estate planning, which often results in unnecessary estate taxes that drain the life out of their businesses. And they do not plan for a successful transition to the next generation.

Who could take over your business? You may have more choices than you think.

Family members are often a logical choice. Most business owners feel a certain pride in being able to pass down a family business. In fact, you may already have a child or two working in the business with you.

Depending on your financial needs, you can gift and/or or sell your business to family members. Some techniques will provide you with retirement income and let you transfer the business at a discount, saving estate and gift taxes. Most let you keep some control.

Be sure to consider family members who will not be involved with the business. Life insurance is often used to “equalize” inheritances. You also need to be objective when considering the abilities of family members whom you consider potential successors.

Business partners are also logical options. You can have reciprocal buy/sell arrangements with each other, so that when one of you is ready to retire or dies, the other automatically buys his/her share of the business. Life insurance is often used to fund these arrangements.

Your employees could also be a source. An Employee Stock Ownership Plan lets your employees enjoy the benefits of ownership, yet you can keep control until your retirement or death.

How about a charity? Charitable trusts can provide terrific income, capital gain and estate tax savings. With a charitable remainder trust, you can receive a lifetime income. And you have the added benefit of helping a charity that has special meaning to you.

Of course, you can also consider an outright sale to another company. But the tax benefits are usually not as good as other planning options.

A good business succession (exit) plan should also provide for the possibility of a long-term illness or disability. Make sure you work with an experienced professional who can help you evaluate your goals and objectives, and can provide you with the best options for your situation.

Grantor Retained Annuity Trust (GRAT) & Retained Unitrust (GRUT)

GRATs and GRUTs have much in common with the qualified personal residence trust. The main difference is that a GRAT or GRUT lets you transfer any asset (not just your home) out of your taxable estate. And, with a GRAT or GRUT, you receive an income, instead of continuing to live in your home, for a set number of years.

When you set up a GRAT or GRUT, you transfer an income-producing asset (like a family business, stocks or real estate) into an irrevocable trust for a set number of years. During this time, the trust pays you an income.

If the income you receive is a set dollar amount and does not fluctuate each year, the trust is a GRAT (Grantor Retained Annuity Trust). If the income is a percentage of the trust assets and the amount of income you receive fluctuates each year, the trust is a GRUT (Grantor Retained UniTrust).

At the end of the trust term, the asset will be owned by the beneficiaries of the trust (usually your children) and will not be included in your estate when you die. However, depending on the duration of the trust, if you die before the trust term is over, some or all of the asset may be taxed as part of your estate.

Like the qualified personal residence trust, the beneficiaries will not receive the asset until sometime in the future (when the trust term is over). So the value of the gift you are making (transferring the asset to the trust is considered a gift) is reduced. This uses less of your federal gift and estate tax exemptions than if you had kept the asset (and any future appreciation) in your estate.

A GRAT or GRUT can be a great way to save estate taxes by transferring an asset (especially a business) and any future appreciation, to your children at a discounted value, especially if you want (or need) the income.

Private Charitable Foundation

Instead of giving all that tax money to Uncle Sam after you die and letting Congress decide how to spend it, you can set up your own charitable foundation, donate your assets to it and keep some control over how the money is spent! (The IRS does have a few restrictions on how the money is used.)

You can set up the foundation while you are living, or it can be established after you die. To qualify, a small percentage of the trust assets must be distributed to charity each year. But you can name whomever you wish to run the foundation, including your children, and the foundation can pay them a reasonable salary. You can be very specific about which charities you want to support, or you can leave that up to the trustees of the foundation to decide (within the IRS guidelines, of course).

The tax benefits of setting up your own foundation can be substantial. You can save estate, capital gains and ordinary income taxes:

* The assets you give to the foundation will be removed from your taxable estate. So, for example, if you give your entire estate to the foundation (or the entire amount over the estate tax exemption), your estate will pay no estate taxes!

* There will be no capital gains tax when the assets are sold by the foundation, so it’s great for appreciated assets.

* And, if you donate publicly traded securities to a private foundation, you can get a charitable income tax deduction for their full fair market value – up to 30% of your adjusted gross income. (The deduction is less than the 50% limit for standard charitable contributions because this is a private charitable foundation.)

Got Stuff? You Need An Estate Plan!

George Carlin would have been a great pitchman for estate planning. You may remember his stand-up routine on “stuff.” We all have stuff, and we’re pretty particular about our stuff. We move it around with us, it’s hard for some of us to get rid of it, and some of us don’t like our stuff mixed up with other people’s stuff.

During your lifetime, you collect a lot of stuff, some of it valuable and some of it not. But because it’s your stuff, it means something to you. You already know you can’t take it with you when you die, so there has to be some way of distributing your stuff to other people who are still living. Normally, you want your stuff to go to people you care about…usually your family and special friends, sometimes a worthwhile cause. And you may want certain people to have certain things to remember you by.

When you die, all your stuff, no matter how valuable or invaluable it is, is called your “estate.” In the simplest terms, an “estate plan” is your instructions for getting your stuff to the people you want to have it after you die.

An estate plan must meet certain legal requirements, including that it must be written down, it must be signed by you, and it must be witnessed by other people who see you sign it. Your estate plan may be very simple, or it may be more complex, depending on how much stuff you have, how long you want your stuff to provide for the people you care about, and when you want them to actually get your stuff. For example, you’d probably want to wait a few years before that two-year-old receives grandpa’s antique pocket watch.

How do you get an estate plan? You decide who you want to get your stuff and when you want them to get it. Your attorney then puts your instructions into a legal document called a will or trust. (There are distinct advantages to using a trust, but we’ll save that discussion for another time.) Also, while you can legally write your own, you’re much better off having an experienced attorney do it for you.

What if you die and you don’t have an estate plan? Well, there still has to be a way to get your stuff to other people, so the state in which you live has a plan waiting if you don’t have one. The only problem is that you won’t have any say in who gets your stuff, and someone might get left out.

Example 1: If more than one of your relatives want the same part of your stuff, that can get messy and expensive…and a lot of your stuff will be used to pay the courts and attorneys to sort it all out. (Happens all the time.)

Example 2: If you’re not married and you want your significant other to get some of your stuff when you die, you’d better get your plan in place, or it just won’t happen. Under the state’s plan, your stuff will go to your blood relatives. Period.

Example 3: If you’re married and you’ve got kids, don’t be too sure that your spouse is going to get all your stuff. Your kids will probably get their share of your stuff, which means your spouse may not get enough of your stuff to live on.

By the way, if your stuff includes kids, then you’ve really got to get a plan. Otherwise, the court will decide who will raise them if something happens to both parents.

Scary thoughts? You bet!

Bottom line: If you’re responsible enough to have your own stuff, you need to be responsible for making sure what will happen to it after you’re gone.

What You Need to Know About the Generation-Skipping Transfer Tax

Hiring an estate planning attorney could make all of the difference in your family’s financial certainty.

As estate laws constantly change, and the economic landscape becomes increasingly unstable, the assurance of knowing that you have covered all the bases you need to cover can be worth more than its weight in gold (as the saying goes).

For example, in planning for the allocation and distribution of your assets on the event of your death, would you consider such taxes such as the generation-skipping transfer tax?

Would you know what it is?

The generation-skipping transfer tax (GST) is a 45% tax that is applied to estates that are either passed on to grandchildren, thereby skipping one’s children, or to someone who is at least 37.5 years younger than the deceased.

Some other information you might not have known about the generation-skipping transfer tax follows:

- This tax was initially created as an attempt to dissuade savvy estate planners who used the generation-skipping technique as a way to circumvent the regular estate tax.

- The generation-skipping transfer tax is repealed, as of the year 2010, but will be reapplied to all estate transfers in 2011.

- There are lifetime exemptions to the generation-skipping transfer tax, and a highly qualified estate planning attorney who has experience in overseeing the transfer of estates will be able to counsel you regarding these exemptions.

The generation-skipping transfer tax is just one of many examples of why having a estate planning attorney who is well-versed in estate law is important – not only for your own certainty, but for the peace of mind it could bring to your family and loved ones who are counting on you to stabilize their financial futures.

Navigating the complicated arena of estate and tax law on your own could potentially be detrimental to your careful planning.

With a large number of individual taxes, loopholes, and penalties imposed by various entities, your hard-earned money could find its way into the hands of someone other than your own family.

Why take that risk, when an expert can guide you toward the best opportunities that are available to you in consideration of your individual estate planning goals.

If you would like more information concerning your estate planning options, check out the comprehensive online resources for personal wealth management solutions through wills and revocable trusts.

Whether your estate planning goals are immediate or long-term, a qualified California estate planning attorney will be able to counsel you on the best options available to you to meet your individual needs.

Kevin Von Tungeln is the Managing Partner of EstatePlanningSpecialists.com and Thompson Von Tungeln, P.C. Kevin practices exclusively in the areas of estate planning, probate, wills, conservatorships and trust administration.Visit http://www.EstatePlanningSpecialists.com or http://www.linkedin.com/in/kevinvontungeln to learn more.

Article Source: http://EzineArticles.com/?expert=Kevin_Von_Tungeln

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