What needs to be done to administer a Living Trust when the trust creator (“Trustor”) passes away? Well, it could be virtually nothing at all, or it could be very involved. If the Trust only holds cash assets and stocks, it might be limited to distributing the cash and stock among the Trust beneficiaries. If it holds real property which is intended to be sold immediately, the title company will take care of much of the paperwork required at close of escrow, perhaps leaving only the distribution … [Read more...] about Administration of a Living Trust
Non-qualified annuities and life insurance can now be tax-free exchanged for long term care insurance (“LTCI”). This is huge because benefits paid out of a LTCI policy are paid out tax free. Example, Fred has an annuity. Right now he doesn’t need the income, but he expects the after tax stream of annuity payments will not be enough to pay for the in-home support services he might need to stay in his home. He can exchange this annuity for LTCI which might pay out benefits as much as 4 to 5 … [Read more...] about Tax-Free Exchange of Non-Qualified Annuities and Life Insurance for Long Term Care Insurance
In a 2-1 split decision, a recent Court of Appeal agreed with the IRS that an FLP with holdings that consisted only of Dell corporation stock had no legitimate business purpose, but was primarily an estate planning device. The dissenting opinion disagreed stating that maintaining family control is a legitimate business purpose. If the underlying asset had not been a highly liquid, publicly traded stock, I might agree with the dissenting opinion, but I have to ask myself how some members of the … [Read more...] about 2nd Update – Valuation Discounts – Thomas H. Holman Jr. et ux. v. Commissioner; No. 08-3774 (7 Apr 2010)
While not earth shattering, a Court of Appeal just issued a ruling in the above referenced case. First, in the facts are that parents created an FLP and transferred into it their substantial holdings of Dell stock. Five days later, they gifted some of the FLP ownership interest to their children. When they filed their gift tax return they claimed valuation discounts. The IRS argued that the transfer of the FLP interest was tantamount to a gift of the Dell stock and thus no valuation discounts … [Read more...] about Update valuation discounts – Thomas H. Holman Jr. et ux. v. Commissioner; No. 08-3774 (7 Apr 2010)
A family limited partnership (FLP) is not uniquely different from a limited partnership except that the participants are generally limited to family members and an FLP is often structured to receive special estate tax treatment. However, I personally haven’t created a limited partnership in years. Why? A limited partnership is required to have one or more limited partners, and one or more general partners. The general partners have UNLIMITED liability for the partnership debts, so any time you … [Read more...] about Family Limited Partnerships
The recent health care legislation includes several provisions which are intended to amend the Medi-Cal law. As you know, Medi-Cal is the federal law which enables each state to pass its own version of public assistance and to fund the resulting programs. The federal government made amendments to the Medi-Cal law in 1993 (OBRA) and 2006 (DRA) which of course included requirements to compel each state to conform. Notwithstanding, California has done little to implement either the 1993 or 2006 … [Read more...] about Health Care Reform and Medi-Cal
For those who qualify, Medi-Cal will pay for the cost of skilled nursing home care (a facility that has a licensed doctor or licensed registered nurse on staff 24 hours a day, 7 days a week). Medi-Cal will also pay for some limited in home services (services to help the person be able to stay in their home). Medi-Cal will not pay for adult day care, independent living or assisted living. Medicare will pay all costs associated with hospice care. … [Read more...] about What Costs Will Medi-Cal Pay?
If an estate plan is in place, the first place to look for an answer to this question is in the estate planning documents. Normally the documents will set forth a procedure for making a determination of incapacity, and the provisions of one document (such as a living trust) might be different than those included in another (such as a Durable Power of Attorney for Property Management or a Durable Power of Attorney for Health Care Decisions). A thorough/comprehensive set of documents will likely … [Read more...] about Who Determines Incapacity?
The court proceedings known as “probate” has one primary function, to change the legal title of assets held in the name of a decedent to the name of the new legal owners (the decedent’s heirs). Although there is much more to it than that, if it weren’t for the need to change legal title upon someone’s death, there would be no need to undertake a probate. Assets which will pass to the decedent’s lawful heirs without the need of doing a probate (in California) are: 1) life insurance and pension … [Read more...] about What is Probate?
Yes, we are in crisis, but only because we don’t know where we are. Technically, the Federal Estate Tax has been repealed as of January 1, 2010. However, under the current law, the Estate Tax comes back January 1, 2011 but with a lower exemption ($1,000,000) and a higher maximum tax rate (55%). It seems our government caught the entire professional estate planning community flat footed on this one because no one in their right mind anticipated that we would ever see a one year repeal of the … [Read more...] about Estate Tax Crisis of 2010