We at Burt + Clerc are happy to share the news that Julia E. Burt was named “Top Lawyer” by Palm Springs Life Magazine for 2013. Julia is a certified specialist in Estate Planning, Trust and Probate Law as well as a California Certified Public Accountant. You can read all about this year’s Top Lawyers in the current issue of Palm Springs Life Magazine.
As La Quinta probate attorneys, we have many clients with children in high school or college. In the wake of graduation season, it is important to note that even 18 year olds needs some type of estate planning. We recommend the unconventional graduation gift this year: a durable power of attorney and an advance health care directive.
The minute your child turns 18 he is considered an adult in the eyes of the laws of California. The problem for parents is that this means they no longer have unfettered access to financial and health records. Most parents are surprised by this realization and often shocked at the legal barriers imposed once their child reaches the magical age of majority.
What happens if your child has a medical emergency during his first semester at college 2,000 miles away? Without a signed Advance Health Care Directive you will not have any access to information regarding your child’s medical condition and have no legal authority to make any health care decisions. This can be devastating for any parent but especially so for the parent of a child with a medical emergency.
Our Palm Springs Estate Planning attorneys have clients who frequently ask about putting their children’s name on their real property deed. The assumption is that this will avoid probate and will also avoid the necessity for a living trust or other complicated estate planning documents. However, this technique is usually a bad idea.
Minor Children
Except under very limited circumstances, minor children should not own real property. A minor cannot execute legal contracts and thus it becomes extremely problematic when you want to mortgage, sale or rent real property that is jointly owned with a minor.
Creditors
When you own property with your children then the property becomes part of their estate. This means that any creditor of your children’s estate can attach liens and judgments against this property. Although your child may not have any known creditors beware of the unknown creditors. What happens if your child is at fault in a car accident? The creditor in this scenario can attempt to attach a lien or judgment against the property.
Joint Ownership
You may have transferred part of the property to your child just to avoid more complicated estate planning documents. However, now your child actually owns a piece of the property. This means that you will need their written consent to sale, mortgage or rent the property.
Predeceased Children
No one wants to contemplate that their child may predecease them. Unfortunately, this does occur. Also, many families travel together. If you and your children die simultaneously now the property must be probated but it will be a mess. The child’s ownership interest and your ownership interest must go through separate probate cases.
Gifting Concerns
The minute you put your child’s name on your deed it is as though you just gifted to them a portion of the property. If the value of the gift is over $14,000 you will be required to file a Gift Tax Return. Although you probably will not owe any taxes on this gift transfer, you are still required to file the return.
Continue reading
The Supreme Court heard arguments last week regarding the constitutionality of the Defense of Marriage Act (DOMA). The legal arguments focused primarily on the 10th amendment and the freedom of individual states to choose how to define marriage. Ending DOMA would mean that the federal government would recognize any union that an individual state recognizes. For instance, a same-sex married couple from Massachusetts would be treated as a “married couple” under federal law. As the law stands now, that same-sex married couple from Massachusetts is not recognized as married under federal law.
The impact of DOMA on same-sex married couples is vast. DOMA prevents these couples from enjoying federal pension benefits, immigration benefits, gift and estate tax benefits, income tax benefits and many other things that opposite-sex married persons enjoy. Another important impact of DOMA is the effect on estate planning for same-sex married couples.
An opposite-sex married couple’s estate plan is usually pretty straightforward. They create a joint trust, execute some Power of Attorneys and Advance Health Care directives and reciprocal wills. However, estate planning for a same-sex couple is much more complicated. If a same-sex married couple creates a joint trust there are various legal and tax hurdles to overcome. Since the federal government does not recognize the couple as “married” any gifts made between the couple will be subject to federal gift taxes. When the couple funds the joint trust with assets they must trace the genesis of the assets. If one partner contributes more than the other, then there may be some gift tax complications. Furthermore, the Trust would require its own Taxpayer Identification Number since a same-sex couple could not use one of their Social Security Numbers as the identifier for joint assets.
Many parents fail to complete a will because they struggle with the decision of who to nominate as a guardian. However, failing to put your wishes in writing is detrimental to your whole family. The following are some of the most common concerns and possible solutions when naming a guardian for minor children.
Guardian is Too Old
Grandparents are increasingly popular guardian nominations. But, some parents worry that if they pass away in 10-15 years their parents (the children’s grandparents) will be too old. Do not worry about the age of the guardian in 10-15 years. By that time, you may have a different person to nominate. Also, your children’s’ needs will be significantly different in 10-15 years so an older guardian may be perfectly fine.
Your Family Won’t like Your Choice
Try to disregard the opinions of your family members when nominating a guardian. You understand and appreciate the needs of your children better than anyone else. Explain your choices in your will and don’t get hung up on whether your sister or mother-in-law will agree with your choice.
Your Children Won’t Like Your Choice
If your children are old enough to understand, have a discussion with them about your choice. Teens can nominate their own guardian and judges are generally receptive to their choices. If your kids understand your choice this may help them better decide for themselves.
The Guardian is Bad with Money
A court will appoint a guardian of your children’s person and estate. However, these positions can be filled by different individuals. If you have a trust the trustee can be appointed guardian of your children’s estate and he or she will manage the money for the children’s benefit. However, if you want to name a different individual for the person and estate your wishes should be clear in your will.
Continue reading
All parents want to make sure their young children are provided for financially in the event of their death. Grandparents may also wish to leave assets to grandchildren in a will or trust. However, leaving assets outright to minor children is usually not a good idea. Additionally, naming minor children as beneficiaries on life insurance policies or retirement accounts is also troublesome.
If you name a minor child as a beneficiary on a life insurance policy, retirement account or bank account the child has the right to 100% of the proceeds upon their 18th birthday. Equally scary is that the guardian of the child can’t access any of the money while they are raising the child. Some parents have overcome this by naming the guardian as the beneficiary with the agreement that all proceeds will be used for the child. This is not foolproof since technically the guardian has no legal obligation to use the funds for the child. Also, once the funds are transferred to the guardian they become assets of the guardian and can be used to satisfy personal debts of the guardian.
Overcoming these hurdles is simple. Establish a revocable trust and name the trust as the beneficiary for all of the accounts. We still recommend that if you have a spouse you name your spouse first, but as a contingent beneficiary you can name your trust. This way, all the financial institutions will pay out the proceeds to the trust and the trust provisions will dictate when and how the money is used.
Continue reading
We didn’t fall off the fiscal cliff. In the wee hours of January 1, 2013 Congress finally reached a deal on taxes. The American Taxpayer Relief Act (ATRA) outlines the changes to taxes in 2013. The new laws are similar to those in existence in 2012 with some slight modifications.
Ordinary Income Taxes
Tax rates are 10%, 15%, 25%, 28%, 33%, 35% and an additional 39.6% was added in 2013. This new tax bracket will be assessed for incomes >$400,000 for single filers and $450,000 if married filing jointly.
Qualified Dividends/Long-Term Capital Gains
0%, 15% and a new 20% bracket was added for incomes >$400,000 for single filers and $450,000 if married filing jointly.
Medicare Tax on Net Investment Income
This is a brand new tax of 3.8% for modified adjusted gross incomes >$200,000 for single filers and $250,000 if married filing jointly.
Social Security Payroll Reduction
The 2% reduction enjoyed for the past two years expired January 1, 2013.
Estate/Gift/GST Taxes
40% for Estates/Gift/Generation Skipping Transfers over $5,000,000 adjusted for inflation. (Adjusted amount for 2013 is $5,250,000).
Continue reading
Our Palm Desert Estate Planning lawyers see too many clients fail to timely update their estate plan. Since Congress has not given us any idea if they will address the tax laws before January 1, 2013, our lawyers are planning for Estate Tax Armageddon. As we have previously posted, the laws for gift and estate taxes are changing at 12:01 A.M. on January 1, 2013 unless Congress passes new legislation. Unfortunately, this means there is only eight more weeks to schedule an appointment with your estate planning attorney to revise your documents.
Engaging in last-minute estate planning can be sloppy and dangerous. Numerous issues can arise having very costly consequences if you don’t timely review and revise your plan. If you’re interested in taking advantage of the life-time gift exemption of $5.1 million, make sure your gift is completed before January 1, 2013. This doesn’t mean you can hand a check to your child and hope that he or she cashes it before New Year’s Day. A safer method is to do a wire transfer that ensures the funds are deposited fully before January 1st. If you’re gifting real property, make sure the deed is signed AND recorded before January 1, 2013.
Don’t miss out on these valuable opportunities by waiting until the last minute to address your estate planning problems. Schedule an appointment with your attorney early so that you have enough time to review, revise and execute new documents before New Year’s Eve.
There are some common estate planning mistakes that our Palm Desert estate attorneys frequently see in our practice. Avoid these mistakes to ensure your estate plan is valid and accurately reflects your wishes.
Beneficiary Designations
Check your beneficiary designations on life insurance and retirement accounts. These assets generally pass outside of a living trust through a beneficiary designation. However, if you neglect to designate a beneficiary court action may be required to transfer these assets.
We had a very great summer here at Burt + Clerc. Palm Springs Life named Julia Burt as a Top Lawyer in the field of Estate Planning again this year in their June 2011 issue. Julia also recently received her specialist designation in Estate Planning, Trust & Probate Law by the State Bar of California on June 30, 2012.
Palm Springs Estate Planning Lawyer Blog