What you can leave to your heirs without paying federal estate tax is
a burning tax questions Congress is deliberating on amid the approach
of the fiscal cliff . Today a group of wealthy Americans put out a
proposal that would set the estate tax exemption at $2 million per
person, with a 45% teaser rate that would “rise on the largest
fortunes,” according to Mike Lapham, director of Responsible Wealth, a
project of the non-partisan, non-profit United for a Fair Economy, which
is shopping the proposal on Capitol Hill today.
The proposal has some big name backers: Warren Buffett, former
President Jimmy Carter, George Soros, Bill Gates Sr., John C. Bogle,
founder of the Vanguard Group and Robert Rubin, former secretary of the
Treasury. “A substantial estate tax along the lines of what’s being
discussed here can provide revenue at a time when our federal government
badly needs revenue,” said Rubin on a call to pitch the proposal to
Congressional staffers and the press.
“We have the choice of taxing a small percentage of the wealthiest
who certainly can afford it, or we can cut social programs for those who
need them,” said Abigail Disney, a philanthropist and filmmaker and
heir to the Disney fortune.
In 2012 (if you die in 2012) an individual can leave $5 million
federal estate tax free, and the tax rate on assets above that exemption
level is a flat 35%. If Congress does nothing, on 1/1/13 the exemption
level reverts to $1 million per person with a top rate of 55%. President
Barack Obama’s proposal is a $3.5 million per person exemption, with a
flat 45% rate.
“We think Obama’s proposal leaves too much on the table,” says
Lapham. If the estate tax law reverts to the $1 million exemption/55%
rate that would bring in $536 billion over the next decade. By
comparison, Obama’s proposal would bring in $256 billion less. “We’re
trying to find somewhere in between,” Lapham says.
For more go to www.dalexander.com
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Tuesday, December 11, 2012
Monday, April 9, 2012
Protect a Disabled Child with a Third Party Special Needs Trust
A third party special needs trust is either a trust set up with in a persons living trust or is set up as a separate stand alone trust.
The primary purpose of a third party special needs trust is to preserve government benefits for disabled beneficiaries. Usually the benefits that are trying to be protected are from government programs that have eligibility requirements. Receipt of an inheritance will disqualify the beneficiary for future government benefits.
For example, the typical programs that are based on financial need are Supplemental Security Income (SSI) and Medi-Cal, which is California’s Medicaid program. Housing subsidies, also called the Section 8 program, In Home Support Services, food stamps, and utility payment assistance are also based on financial need.
Social Security and Medicare are not based on financial need, but are based on age and earning records.
For example, a couple has two adult children who are to receive their estate of $300,000 after they are gone. One child is receiving SSI due to a disability. Additionally that child has difficulties with money. That child is also eligible for Medi-Cal benefits for his continuing medical problems. If this child received his share of the inheritance out right he would be disqualified from SSI and Medi-Cal. That child would then have to spend his inheritance to live and for medical care. The child will have no assets left form the inheritance and have great difficulty in returning to the SSI and Medi-Cal programs.
Instead of leaving assets directly to the disabled adult child, the parents could establish a Third Party Special Needs Trust. This trust would not be under the control of the child and therefore would not disqualify the child from the above government benefits. Additionally the child would not be able to revoke it and use the assets on his own which would help in cases of children who have difficulty handling funds. The trust would have an independent trustee (for example the other non-disabled child) and the trustee would manage the funds and pay out for the beneficiaries “special needs” for their lifetime.
A Third Party Special Needs Trust can own various assets, such as a house, that are used by the child, but due to the ownership by the trust, the assets are not counted as being owned by the child. The trust could also pay for services required by the beneficiary, such as telephone, education, car repairs, etc., without affecting the beneficiary's eligibility for the government programs.
The above mentioned type of Third-Party Special Needs Trust has no obligation to notify the state or pay back Medi-Cal payments after the beneficiary's death because the Special Needs Trust was funded through the parents trust, a third party, and the beneficiary did not own the assets in their name.
For more information on Special Needs Trusts please contact Attorney Daniel H. Alexander and the Law Offices of Daniel H. Alexander, PLC http://www.dalexander.com/
The primary purpose of a third party special needs trust is to preserve government benefits for disabled beneficiaries. Usually the benefits that are trying to be protected are from government programs that have eligibility requirements. Receipt of an inheritance will disqualify the beneficiary for future government benefits.
For example, the typical programs that are based on financial need are Supplemental Security Income (SSI) and Medi-Cal, which is California’s Medicaid program. Housing subsidies, also called the Section 8 program, In Home Support Services, food stamps, and utility payment assistance are also based on financial need.
Social Security and Medicare are not based on financial need, but are based on age and earning records.
For example, a couple has two adult children who are to receive their estate of $300,000 after they are gone. One child is receiving SSI due to a disability. Additionally that child has difficulties with money. That child is also eligible for Medi-Cal benefits for his continuing medical problems. If this child received his share of the inheritance out right he would be disqualified from SSI and Medi-Cal. That child would then have to spend his inheritance to live and for medical care. The child will have no assets left form the inheritance and have great difficulty in returning to the SSI and Medi-Cal programs.
Instead of leaving assets directly to the disabled adult child, the parents could establish a Third Party Special Needs Trust. This trust would not be under the control of the child and therefore would not disqualify the child from the above government benefits. Additionally the child would not be able to revoke it and use the assets on his own which would help in cases of children who have difficulty handling funds. The trust would have an independent trustee (for example the other non-disabled child) and the trustee would manage the funds and pay out for the beneficiaries “special needs” for their lifetime.
A Third Party Special Needs Trust can own various assets, such as a house, that are used by the child, but due to the ownership by the trust, the assets are not counted as being owned by the child. The trust could also pay for services required by the beneficiary, such as telephone, education, car repairs, etc., without affecting the beneficiary's eligibility for the government programs.
The above mentioned type of Third-Party Special Needs Trust has no obligation to notify the state or pay back Medi-Cal payments after the beneficiary's death because the Special Needs Trust was funded through the parents trust, a third party, and the beneficiary did not own the assets in their name.
For more information on Special Needs Trusts please contact Attorney Daniel H. Alexander and the Law Offices of Daniel H. Alexander, PLC http://www.dalexander.com/
Tuesday, January 17, 2012
create a tax-shelter that eliminates capital gains, recapture taxes, and give your heirs a nice tax break
Want to create a tax-shelter that eliminates capital gains, recapture taxes, and gives your heirs a nice tax break?
All you have to do is die.
You may not want to rush to take advantage of this extreme tax strategy but you should know that keeping your home until death, and in a living trust, has distinct advantages. At death, your estate avoids both capital gains and recapture taxes, and passes the home to your heirs at a fair-market stepped-up basis.
Unfortunately may people decide, without advice, to put their heirs on title with them as Joint Tenants. The problem is the heir(s) take over at your tax basis and may have to pay capital gains and recapture taxes when selling the home. Plus if the heirs have creditors they could then attach your home if they obtained a judgment against your heir(s).
The best advice it to get advice. Find out more at www.dalexander.com
All you have to do is die.
You may not want to rush to take advantage of this extreme tax strategy but you should know that keeping your home until death, and in a living trust, has distinct advantages. At death, your estate avoids both capital gains and recapture taxes, and passes the home to your heirs at a fair-market stepped-up basis.
Unfortunately may people decide, without advice, to put their heirs on title with them as Joint Tenants. The problem is the heir(s) take over at your tax basis and may have to pay capital gains and recapture taxes when selling the home. Plus if the heirs have creditors they could then attach your home if they obtained a judgment against your heir(s).
The best advice it to get advice. Find out more at www.dalexander.com
Sunday, January 15, 2012
New California employment laws for 2012 affect your business’ day-to-day operations and policies.
New employment laws passed in 2011 could affect your California business’ day-to-day operations and company policies in 2012. Review the summaries of these new laws provided by CalChamber and how each of these California laws could affect your business by clicking on the link below:
For example:
AB 22 prohibits employers and prospective employers, not including certain financial institutions, from obtaining and using consumer credit reports (credit information) about applicants or employees.
SB 459 provides new penalties of between $5,000 to $25,000 for the "willful misclassification" of independent contractors, defined as "avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor."
AB 469 requires employers to provide nonexempt employees, at the time of hire, a new notice that specifies, among other things, specific information regarding payment of wages. This legislation also increases penalties for wage violations.
AB 551 increases the maximum penalty from $50 to $200 per calendar day for each worker paid less than the determined prevailing wage and increases the minimum penalty from $10 to $40 per day for violations of prevailing wage obligations.
To keep updated be sure to follow me on Twitter: @dalexanderlaw or visit www.dalexander.com
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