Gift Taxes: How Much Your Generosity Could Cost You

Posted February 20, 2013 in Estate Planning by Michael Lonich.

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February 20, 2013
Gift Taxes: How Much Your Generosity Could Cost You
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Should you liquidate your trust to take advantage of the new federal estate tax exemption? You may not need to. Not immediately, anyway. As 2012 came to a close, there was some worry that the generous federal tax gift exemption would fall off of the fiscal cliff, leaving many estates vulnerable to the 35% federal estate tax for gifts. To the delight of many taxpayers and estate planners alike, the federal tax provision allowing an individual to give tax-free gifts totaling up to $5 million over his or her lifetime, is now permanent.* This “unified credit” may also be applied to an individual’s estate at death if it is not utilized before death.

If your estate isn’t large enough to cover a gift of $5.12 million during your lifetime, you may be delighted to know that the annual gift tax exclusion has also survived. So, any taxpayer may make a tax-free gift of $13,000 a year per recipient. For example, in 2013, a father can give $13,000 to his daughter, $13,000 to his grandson, and $13,000 to his neighbor, all tax free. Slowly making these tax-free gifts is a great way to ensure that your taxable estate is worth less than the federal estate tax threshold of $5.25 million when you pass, effectively insulating your loved ones from an estate tax of 40% down the road.

No matter what the size of your estate, it is smart to have a plan for the future. The attorneys at Lonich & Patton have decades of experience handling complex estate planning matters including wills and living trusts. If you are interested in developing an estate plan or reviewing your current estate plan, contact the experienced estate planning attorneys at Lonich & Patton for further information.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

*See http://www.irs.gov/pub/irs-pdf/p950.pdf for a detailed explanation of the gift exemptions.

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Annulment: Cleaning the Marital Slate

Posted February 15, 2013 in Family Law by Gina Policastri.

Whether or not we care to admit it, Kim Kardashian remains in the spotlight. Consequently, so do her legal troubles. Kardashian and Kris Humphries were famously married in August 2011. Their nuptials allegedly cost $11 million and the wedding itself was televised as a special on the E! Television network. After 72 days of marital bliss, Kardashian filed for divorce in October 2011.

Although the couple split almost two years ago, Kardashian and Humphries remain legally married. Their divorce has never been finalized because Humphries is seeking an annulment. Humphries believes that Kardashian fraudulently lured him into marriage for financial gain as Kardashian reportedly made $1 million from the wedding. Humphries claims she had planned to take the money and run. Kardashian, of course, claims that she married for love.

In the eyes of the law, a successful annulment makes a marriage disappear as if it never happened.* There is a fundamental difference between a judgment of dissolution and a judgment of nullity. While a judgment of dissolution terminates a valid marriage, a judgment of nullity declares that the marriage was invalid from the start. In California, a marriage built upon a fraudulent foundation is not a marriage at all. An annulment is, however, much more difficult to attain than a divorce.

According to California Family Code Section 2210, a marriage that is voidable may be declared a “nullity” only in the event at least one of six specific conditions existed at the time of marriage:

  1. Infancy
  2. Bigamy
  3. Unsound Mental State
  4. Fraud
  5. Force
  6. Physical Incapability

The certified Family Law Specialists as certified by The State Bar of California Board of Legal Specialization at Lonich & Patton have decades of experience handling complex family law matters.  If you find yourself on either side of an annulment, contact Lonich & Patton for further information.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

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Protecting the Hand-Me-Down Business

Posted February 12, 2013 in Business Law, Estate Planning by Michael Lonich.

Big businesses routinely have succession plans in place. Do smaller family-owned businesses? Infrequently, which is surprising and unfortunate. Without well thought-out succession plans in place, many family-owned businesses cease to exist.

To be sure, many family business owners would love to eventually “pass the torch” to a son or daughter. But what will happen in the event of sudden death or disability before they are ready to accept the responsibility? It is in the best interest of all parties involved that a proper estate plan is in place to avoid probate of business assets. The probate process is expensive, may take upwards of two years, lacks privacy, and takes nearly all control out of your family’s hands. Additionally, a plan could eliminate potentially crippling estate taxes on the business.

A business is a sophisticated property interest. For an owner of a small family business, however, the business is more than just a source of income—it represents the history and livelihood of their clan. With adequate planning, the business and its value may be protected, perhaps by creating a family limited partnership or by placing the family’s assets into a living trust. There can be significant estate tax advantages to creating a limited partnership for your family business and transferring minority interests to future inheritors.

Estate planning is a complex field. Whether you are concerned with devising a plan for either a family estate or that of a business, it is important to get good advice. The attorneys at Lonich & Patton have decades of experience handling complex estate planning matters including business succession plans, wills, and living trusts. If you are interested in developing an estate plan or reviewing your current estate plan, contact the experienced estate planning attorneys at Lonich & Patton for further information.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

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Retirement Benefits: I Earned Them So They Are Mine, Right?

Posted February 7, 2013 in Family Law by kfrench.

When parties consider divorce or separation they are rightfully concerned about their property. For example, parties may contemplate who will get the house, the dog, the cars, or even the family’s prized Dyson vacuum cleaner. But what about retirement benefits? They don’t typically rank at the top of the “coveted marital property” list, but maybe they should. If you have worked for an organization for most of your adult life, you and your spouse may be entitled to substantial benefits.

Under the California Family Code, retirement benefits are divisible community property assets and will be affected by divorce, legal separation, or termination of domestic partnership. Even if the party that earned the benefits has not yet retired and has no immediate plans to retire, all retirement benefits accrued during a marriage or domestic partnership are fair game when the parties decide to part ways. In fact, the non-earning spouse is generally entitled to fifty percent of any retirement assets accumulated during the marriage.

Division of retirement benefits can be complicated and may implicate complex tax issues. The Lonich & Patton team, which includes several certified Family Law Specialists who are certified by the State Bar of California Board of Legal Specialization, offer decades of experience handling complex family law matters. If you are contemplating divorce, legal separation, or termination of a domestic partnership or have been served in an action for divorce, legal separation, or termination of a domestic partnership, please contact Lonich & Patton for further information.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

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