Recent Blog Posts
The Infamous Sandwich Story and What it Means to You
Estate Planning for the Young?
What’s New at the OLG and Why You Should Put Your Biz in a Trust
The Straight Scoop on the New Tax Law and Your Estate Plan
- The estate tax has been restored retroactively to Jan. 1, 2010.
- You can pass $5 million through your own estate without having to worry in 2011. That amount will be indexed for inflation after 2011. Anything over the $5 million mark is taxed at a maximum of 35 percent.
- If you die in 2011, your surviving spouse can add any of your unused exemption to theirs – a new concept of portability. In calculating the total exemption (up to $10 million), the amount that’s portable is not indexed for inflation, but your surviving spouse’s own exemption amount is.
- The gift tax still applies, but the amount you can give away in your lifetime has been raised from $1 million to $5 million starting this year. This amount will be indexed for inflation as well, and you and your spouse can combine your lifetime limits for a total of $10 million. If you plan to give away more than $5 million, the tax rate on the excess will remain at 35%.
- Generation-skipping transfer tax has been reinstated starting this year. This tax is applied on top of the estate or gift tax to any assets you pass on to your grandchildren or to a trust you establish for their benefit. The $5 million exemption applies to this tax as well. The excess will be taxed at 35%. Portability does not apply to the generation-skipping transfer tax.
If you haven’t yet heard this one, here’s a recap:
Pregnant and hungry, an Oahu mom brought her 2-year-old daughter and husband to Safeway to buy food on October 26, 2011. They bought two deli sandwiches on special for $5 and ate them while shopping.
At checkout, they forgot to pay for the eaten sandwiches with their other groceries and were detained by Safeway security.
Safeway officials proceeded to hold the couple for FOUR HOURS in a break room at the store. Reportedly, police officers arrived after about 2 hours, and they waited another 2 hours for a Child Welfare Services worker to take their 2-year-old daughter into PROTECTIVE CUSTODY. Both parents were taken to jail, where they later bailed out for $50 each.
The incident sparked much debate in the blogosphere and on the radio about whether or not parents should permit their children to eat unpurchased food while shopping. I am not interested in continuing that debate here. What I would rather do is share with you what you need to do to avoid ever being in a situation like this one. Get a Kids Protection Plan.
Child Welfare Services is the government’s plan for you. If you want a different set of rules to apply—if you want to maintain any semblance of control over who watches and raises your children, even in short-term scenarios, then you need to formulate and implement a Kids Protection Plan. Nominate short-term first responders and get the right legal documents in their hands so they can take custody of your keiki in an emergency.
If you don’t already have a plan in place to protect your children in the event that something renders you unable to parent, then you need to develop one now! Call us today to schedule your Family Wealth Planning Session, and we’ll focus on helping you create a plan to safeguard your children when you are unable to protect them yourself.
Estate planning needs a new name. When most people think of estate planning, words like elderly, wealthy, or death often come to mind. It also conjures images of vast tracks of land surrounded by high fences or gigantic portfolios. However accurate the word associations that go with “estate planning” may be, one thing is certain: Everyone needs some form of estate planning, even the young, single, and broke. Bet those words didn’t come to your mind though!
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Living Plans for the Young
There are a couple essential documents that everyone needs, whether you have a family with children or are a single professional.
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Durable Power of Attorney
The first thing everyone needs is a durable power of attorney. There are many varieties of the durable power of attorney. The most popular variety goes into effect only when a doctor concludes and certifies that you are without capacity to make legally binding decisions. Without a durable power of attorney, your spouse, parents, siblings, live-in partner, or other loved ones would have to petition a court for the right to handle things for you. That’s an additional hassle they won’t want or need if they’re faced with your incapacity. All you need to do to set up a financial durable power of attorney is select a friend or family member that you trust to act as your “agent,” and contact our offices. We can handle the rest for you!
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Advanced Health-Care Directive
Another document that everyone needs is an Advanced Health-Care Directive. Giving loved ones the authority to handle your financial affairs in case of incapacity isn’t enough. Someone needs to be in charge of making medical decisions on your behalf in the event that you cannot make or communicate your own medical decisions. Leaving the burden of tough decisions to a group is unfair. Moreover, you need to designate one person who is capable, willing, and emotionally strong enough to carry out your wishes and look out for your best interests.
Your Advanced Health-Care Directive also spells out what types of medical treatment you want or don’t want in the event that you are incapacitated and suffer from a terminal illness or are in a persistent vegetative state. In either of those cases, it’s only fair that your wishes be followed, but that can only happen if you’ve expressed your wishes and desires before becoming ill. It’s also important to share your wishes with your physician. That way everyone is on the same page.
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Professional Advice
Life planning is not something that you want to tackle alone. There is simply too much at stake, especially when professionals like us are available to help you create and implement a plan that is appropriate for your situation, whether you need only the documents listed above or a full blown estate plan with a will and revocable living trust.
I hope you are enjoying your summer! Those of you who have called or come into the office have met Alice Adams, our new assistant, who is staffing our never-dull front office area. Alice joins our family and immigration attorney, Anne Leete; our estate planning Client Services Director, Karissa Baker; our Funding Coordinator, Bari Vallas; and me, along with whoever’s children happen to be running around that day.
We also had a summer intern from Columbia (the school not the country), who managed to make it into the office before noon several times over the course of his tenure with us. After he left, we found his checkbook on his desk, so we are planning to shut down the office for a few days and take a much-needed vacation on Tommy the Intern.
Ok, we probably will just mail it to him.
My family and I did get to take our first *real* vacation together (not funded by Tommy). We had a California extravaganza–Disneyland, Legoland, San Diego Zoo and Wild Animal Park. It was fantastic!
As you know, there are a lot of small businesses here on Maui, and we’ve been getting questions about why business owners would put their business in a trust. Read on…
Estate Planning and Business Succession
What do businesses and people have in common? Business entities, like people, have their own legal existence. That just means that business entities can enter contracts, buy and sell goods, sue and be sued, and do just about anything else that a person can do.
The similarities end, however, when the discussion turns to continuity. A business entity, unlike a person, can exist perpetually. Sure, businesses can be wound up and their existence terminated, but they can and often do outlive their founders–at least, that’s the hope of many business owners.
The Living Trust Solution
Without a plan in place for what will happen in the event of death, all assets owned by individuals, whether businesses, cash, stocks, or real estate, may become subject to the court system. In the case of assets like cash, being subjected to probate simply means that attorney fees will eat up part of the estate.
In the case of a business, the probate process can very well mean a total loss. That’s because probate takes a long time, and if there is no succession plan in place, then a business may not be able to operate lawfully and may have to be wound up.
It goes without saying that if you own a profitable business, you want to pass it along to those who matter most in your life. A living trust is a great mechanism for people–business owners and non-business owners alike–to pass on their assets without involving the court system, at a significant cost savings, and with a high degree of privacy.
In the case of business owners, there are some specific benefits to using a living trust:
-The ability to pass ownership of your business without the need for court involvement, so that operations never skip a beat.
-The ability to specify a succession plan in accordance with your business’s governing documents (e.g. operating agreement or partnership agreement).
Tailoring living trusts is a big part of our legal practice. We are here to serve your needs and provide a customized solution to your estate and succession planning needs, so that you never have to worry about what will happen to your loved ones, your assets, or your business in a worst case scenario.
Tax laws are confusing on a good day…
What you can deduct…
What you have to claim…
And with all the recent changes to the laws, it’s almost impossible to know if you’re doing the right thing.
We’re hoping this will help.
Here’s the straight scoop on how the new tax law affects your estate plan:
A Quick and Dirty List of What Changed
On December 16, 2010, Congress passed a new tax law that changes how your estate should be planned:
Interesting note: When considering income tax on inherited assets, remember that the cost basis for the assets is adjusted to the fair-market value on the date the owner dies. This will help limit the capital-gains tax that your heirs have to pay if they sell the asset.
So, What Do You Do Now?
Keep in touch with your estate planning attorney (or hire one if you don’t already have one) and talk to him or her about the changes now and in the future (this law is only for two years).
When you start planning your estate, make sure you have your hands on records showing what your assets cost when they were purchased. If you can’t prove what the assets originally cost, the IRS is going to assume that the cost was zero and your heirs could be stuck paying capital gains tax on the total sales amount. For the sake of your heirs, keep all your purchase records in one place, preferably with your estate planning documents.
If you’ve been chosen to be the executor of someone else’s estate, document every conversation and always follow up verbal communication in writing. If the family disagrees with what you recommend, you may be better off doing what they want to do. Just make sure they sign documentation releasing you from liability and indemnifying you from any losses they take as a result.
If you have an estate plan or are thinking about planning your estate and would like an opinion on how to deal with the most recent changes to the estate tax laws, call us to schedule your Family Wealth Planning Session today. We can identify what needs to be done to ensure that you have the right plan in place to take full advantage of all the recent changes. Our Family Wealth Planning Session is normally $750, but this month I’ve made space for the next two people who mention this article to have a complete planning session with me at no charge. Call today and mention this article.
