Understanding Living Trusts – Upcoming Free Seminar

“Understanding living Trusts and the New Laws”

On Monday, November 2, 2015, Gita K. Nassiri, JD, MBT, CPA from Capital legacy Law will be presenting an estate planning seminar at Carlsbad Dove library from 5:30 p.m. to 7 p.m.  The seminar entitled “Understanding Living Trusts and the New Laws” will provide an overview of living trusts, the advantages of setting up a living trust and the recent changes to the estate tax laws.

This event is free and open to the public but advance registration is required as seating is limited.  Light refreshments will be provided.

To pre-register contact us by completing the contact form on our website or by contacting us at (760) 979-1280 or info@CapitalLegacyLaw.com.

Be Specific About Personal Effects

It’s Ours- Now What!

Recently I read something in the news that, as an estate planning attorney, caught my attention and that I would like to share with you.  Actress Audrey Hepburn’s two sons are apparently fighting in court over the distribution of her memorabilia and other personal items. Why is this newsworthy?  Well it is newsworthy because we are talking about the famous actress and humanitarian Audrey Hepburn and because she passed away 22 years ago!  This situation showcases something I constantly remind my estate planning clients: Leaving your personal effects in your will or trust to be divided equally is not a good idea!

We all know Audrey Hepburn for her elegant demeanor, her movies, including “Breakfast at Tiffany’s” and her humanitarian efforts on behalf of children’s rights all over the world.  She passed away in 1993 and was survived by two sons.   According to the news reports, a storage locker in Los Angeles full of her personal items including her clothing, movie posters, awards etc. was left to her two sons to be divided equally between them.  Therein lies the problem.  The two sons (now ages 45 and 54) cannot agree about how the property in storage should be divided amongst them.  So, the items are sitting in storage and gathering dust while the matter is now before the courts to be resolved by a judge or jury.  At the end of the day, the property will be divided but after a long, stressful and costly process that could have been avoided.

What is the lesson in all this?  It is preferable not to leave your personal effects to a group of people and ask them to divide and distribute them amongst themselves as they wish.  Even though your personal effects may not be worth millions like Ms. Hepburn’s, the more specific you are about who gets what, the easier it will be for your loved ones.  You can give specific gifts and, if you like, leave a written explanation so that your intent is clearly stated and understood.  You can have one person (your executor or trustee) decide who gets what and distribute the personal assets that way.  You can set up a system where, under the supervision of the trustee or executor, each beneficiary can take a turn picking an item until all items are handed out.  You can be as creative as you like.  What you want to avoid is ambiguity that can cause disputes and hurt feelings.

How have you handled this aspect of your planning?  Have you provided specific instructions about your personal effects?  Sometimes we may think that it is easier to not make these decisions and to let our loved ones figure it out.  Or we don’t want to think about it and procrastinate and leave it as something to take care of later and put it on our “to do” list.  The Audrey Hepburn case is a lesson to us all about taking proactive steps to be as clear as possible in our estate plans about who gets what and not leaving it to our loved ones to figure it out. 

Gita K. Nassiri | Attorney-at-Law/ CPA
CAPITAL LEGACY LAW, INC.
760.979.1280
2794 Gateway Road, Suite 101
Carlsbad, CA 92009
www.CapitalLegacyLaw.com

Charitable Contributions Before Year End- Part 3

Charitable contributions are a means to support and help a cause you believe in and, at the same time, you may be able to deduct your contributions for income tax purposes. In order to obtain an income tax charitable deduction for 2014, your charitable gifts must be made by December 31 and properly documented. The added benefit of your charitable contributions is that, for estate planning purposes, this type of gifting can reduce your estate and, therefore, your possible estate tax exposure.

Gifting Appreciated Assets to Charity– If you are considering giving to charity, one way to avoid capital gains taxes and the 3.8% surtax on net investment income on the sale of appreciated property is to gift the appreciated property to a charity (instead of selling the property, recognizing the gain, and contributing cash to charity). You get an income tax deduction equal to the fair market value of the property (subject to normal AGI and itemized deductions limitations), and the charity can sell the property and pay no capital gain tax because it is a tax-exempt entity. The appreciated property must be a long-term capital gain property (held for more than one year). Also, your contribution must be to a qualified charity. Different rules apply, for example, to gifting appreciated properties to private foundations. If you are uncertain of an organization’s charitable status, you should consult with your tax and legal advisors.

Substantiate and Document Your Gifts– When making significant charitable contributions, their deductibility depends on your proper compliance with the IRS substantiation rules. In other words, you need the proper documentation for your gift. Generally, you can substantiate cash gifts to charity of less than $250 with a reliable record such as a canceled check, written receipt or a credit card statement. The record should include the name of the charity, the amount and date of the gift. For any cash gifts in excess of $250, be sure to obtain a proper “contemporaneous” receipt from the charity before filing your tax return, even if the donation was made to your own private foundation. The receipt must include the date and amount of the gift, describe any non-cash donations, indicate the value of any goods or services provided you received as consideration for the donation and any intangible religious benefits provided. A canceled check does not meet these requirements. The receipt and acknowledgement from the charity can be sent by email.

If your non cash gifts total more than $500 for the year, you need to file Form 8283 with your federal income tax return. Also, if your gifted property is valued at more than $5,000 ($10,000 for closely held stock) you’ll need a “qualified appraisal” from a “qualified appraiser”. No appraisal is needed for publicly traded stock.

There are specials rules for gifts of art, clothing, household items and used cars.

Charitable contributions not only benefit the recipient of the gift but also provide you, the donor, with an income tax deduction opportunity and a reduction in your estate and your possible estate tax exposure. Compliance with the charitable contribution rules, including the substantiation rules, is required to take advantage of these tax opportunities. Consult with your tax and legal advisor if you are considering a significant gift to a charity.

Gita K. Nassiri | Attorney at Law/ CPA
NASSIRI LAW FIRM, INC.
760.216.9593
2794 Gateway Road, Suite 101
Carlsbad, CA 92009
www.nassirilawfirm.com

 

529 Plan- Estate Planning Before Year End- Part 2

What is a 529 Plan? It is basically a college savings plan sponsored by states, state agencies and certain educational institutions.

Consider funding a 529 plan before December 31st to use your annual gift tax exclusion of $14,000 ($28,000 for married couple) per recipient. Moreover, you have the option of using up to five years of gift tax exclusions in a single year, allowing you to make an accelerated gift through a 529 plan of up to $70,000 ($140,000 for couples) per beneficiary without generating gift tax or using any of your gift tax exemption.

There is no specific amount limitation on the amount of contribution; however, the tax code requires the plans to provide “adequate safeguards to prevent contributions on behalf of a designated beneficiary in excess of those necessary to provide for the qualified higher education expenses of the beneficiary”. Your contribution to the 529 plan effectively removes the cash assets (and any future earnings) from your taxable estate.  Anyone can set up a 529 plan, i.e. parent for child, grandparent for grandchild — you don’t have to even be related.

Some advantages of the 529 plans are that, even though the contributed cash asset is no longer included in your estate for estate tax purposes, you still retain certain rights to change beneficiaries, control the timing of the distributions, move the assets from one plan to another. You can also get your money back subject to certain taxes and penalties.  The contributions to the 529 plan are not deductible for federal income tax purposes; however, any distributions (including accrued earnings) for “qualified higher education expenses” are not taxable.

Note that the 529 plan accounts will be treated as the parents’ assets on a student’s financial aid application if the student files as a dependent, and that there are administrative fees associated with these plans.

Overall 529 plans are very attractive education savings vehicles and should be considered if college or higher education expenses are in your future. Consult with your estate planning attorney about 529 plans and other education savings options.

Part 3 will address the topic of charitable giving.

Gita K. Nassiri | Attorney at Law/ CPA
NASSIRI LAW FIRM, INC.
760.216.9593
2794 Gateway Road 
Carlsbad, CA 92009
www.nassirilawfirm.com

Estate and Gift Tax Planning Before Year End 2014- Part 1

Before the end of 2014, there are some estate and gift tax planning opportunities and gift tax savings that you may want to consider. One such gifting opportunity is the Annual Gift Tax Exclusion which will be covered in Part 1 of this post.  

The Annual Gift Tax Exclusion allows you to gift up to $14,000 per recipient in 2014 without incurring any federal gift tax obligation. Spouses together may gift up to double that amount ($28,000) per recipient in 2014. In other words if you and your spouse have 5 children and 5 grandchildren, you can gift $28,000 to each child and grandchild without having to pay federal gift taxes on the gifted amount of $280,000. If the recipient is a minor, you can set up a trust for the child and annually contribute to that trust for the child’s benefit. If the minor is your grandchild, your son or daughter can act as trustee, or anyone else you would like to take on that role. Also, the recipient does not have to be related to you. This exclusion allows you to give gifts every year without incurring a tax liability and, for estate planning purposes, this gift planning opportunity allows you to reduce your estate amount and your potential estate tax exposure.

Regarding the potential estate tax exposure, in 2014 the lifetime federal gift and estate tax exclusion is $5.34 million ($10.68 for married couples), the largest gift and estate tax exemption in history. This means that, as the law stands today, up to and including $5.34 million of the value of what you give away during your lifetime (above the annual gift exclusion) and what is remaining in your estate at your death is not subject to federal estate and gift taxation. For example, a single person passes away in 2014 and gave away $2 million (over and above the annual exclusion amount) during his/her lifetime and has $3 million in their estate at death. The estate of this person will not owe any estate taxes because of the lifetime exclusion of $5.34 million.

Please note that any gifts above the annual gift tax exclusion of $14,000 per recipient (or $28,000 for a married couple) will require filing a gift tax return even if no tax is due. Before making such a gift, please consult with your estate planning attorney.

In Part 2 we will address the topic of gifting through a 529 plan.

Gita K. Nassiri | Attorney at Law/ CPA
NASSIRI LAW FIRM, INC.
760.216.9593
2794 Gateway Road 
Carlsbad, CA 92009
www.nassirilawfirm.com

Reasons To Update Your Estate Plan- A Checklist

Have any of the following changes occurred in your life since you signed your will or trust? Answer the following questions to evaluate if you need to update your estate plan:

  • Has your marital status changed? Have you married or been divorced?
  • Have you had children, more children or grandchildren?
  • Have your children gone to college or moved out of, or into, your home?
  • Have relatives or beneficiaries or the executor/agent/trustee died or has your relationship with them changed and your will or trust does not cover this situation?
  • Has the mental or physical condition of any of your relatives or beneficiaries or one of your executor/trustee/agent changed substantially?
  • Have you moved to another state?
  • Have you bought, sold, mortgaged a business or real estate?
  • Have you acquired major assets such as a car, home, or bank account)?
  • Have your business or financial circumstances changed significantly (increase or decrease in estate size due to inheritance, pension, salary, ownership)?
  • Have any federal laws changed that might affect your tax and estate planning?
  • Do you have a trust that was drafted prior to 2013?

If you answered “yes” to any of the foregoing questions, it may be time to review your estate planning documents and to update your estate plan.  Review this checklist every once in a while to evaluate whether you need to update your estate plan.

Gita K. Nassiri | Attorney at Law/ CPA
NASSIRI LAW FIRM, INC.
760.216.9593
2794 Gateway Road 
Carlsbad, CA 92009
www.nassirilawfirm.com

Estate Planning for College Students

It is that time of year when students are heading back to school, and this includes many young adults who are heading out to college and away from home. The two estate planning documents every young adult needs to have in place are: (1) a health care power of attorney; and, (2) a financial power of attorney.

Even though most parents feel that they are responsible for their college-age children, the law does not see it that way because the”children” are now adults. In other words, once your children are 18, from a legal standpoint, you are not able to represent them, make decisions for them or have access to their financial or health information.

Planning for our death or incapacity is something that we put on our “to do” list and don’t really want to think about. The general misconception is that estate planning is for the elderly, people with kids or dependents, and/or people with “lots of assets”. We tend to forget that estate planning is necessary for every adult, including young adults, because without proper estate planning we are giving up control over what happens to us in case of incapacity.

College-age students may not have dependents or assets but, for everyone’s peace of mind, an estate plan that gives authority to their parents to make financial and health decisions for them is highly advisable.

For example, if a college student gets hurt and ends up in the hospital, as the parent of an adult child you have no legal right to access their medical records and cannot make medical decisions for them (even if the student is unable to make such decisions) unless you have the proper estate planning/ legal documents in place or go to court to get the authority. The risk is real. Each year a quarter million Americans between the ages of 18 and 25 are hospitalized due to nonlethal injuries.

Some college students may not want their parents to have access to their grades or have complete control over their finances. In these cases, the powers of attorney can be drafted to limit the powers of the agent(s) parent(s), and/or also limit when the parents(s) can exercise those powers. A springing power of attorney for financial decisions goes into effect only in case the student is not able to make decisions for him or herself, i.e. in case of incapacity.

Going off to college is an exciting and new phase in a young adult’s life and in the life of their parents. As part of the planning process for college, parents and their college students should consult with an estate planning attorney about having the proper estate planning documents in place. This is one item that should not be on left on anyone’s “to do” list.

Gita K. Nassiri | Attorney at Law/ CPA
NASSIRI LAW FIRM, INC.
760.216.9593 Direct
760.929.8008 Fax
2794 Gateway Road 
Carlsbad, CA  92009

www.nassirilawfirm.com

Outsource your Legal Business Needs

Outsourcing your legal business needs for “In-house” counsel services without the overhead.

It is not cost efficient for most businesses to employ in-house counsel, yet these businesses are involved in many transactions that would benefit from the review and input of a competent business attorney who can spot issues of concern and provide advise. This is where Nassiri Law firm steps in. We are the cost-efficient answer to your business legal needs. We are readily available to our clients on an as-needed basis to address their business legal needs.

We establish long-term client relationships and are there to advise them through the different phases of their development and growth. We advise and assist clients in forming their business entities and guide them through the choice of entity process. We draft and review their business documents to address any potential legal issues and to help protect their interests. These documents may include leases, purchase or sale agreements, employment or consulting agreements, and other business-related documents. We are there to assist our business clients that merge with or acquire other entities or purchase other assets. Making important business decisions with the advise of legal counsel can avoid added costs, tax and regulatory problems and litigation expenses down the road.

Nassiri law Firm provides the services of skilled business counsel without the large retainers. Businesses need consistent legal representation that they can call on when needed, not just when they have a legal problem. Our firm provides personal attention and dedicated advocacy on behalf of our clients so they can focus on what really matters – the running their business.