The city’s distinguished Council Members for Santa Barbara, and the County Council of our fair county have become needlessly tangled up in its Medical Marijuana Dispensaries (MMD) decisions. There is no doubt that something had to be done about the dubious dispensaries popping up all over town, and their motley crew that ran them.
But the California State Department of Justice came out with “Guidelines For The Security and Non-Diversion of Marijuana For Medical Use” in August of 2008. Therefore reasonable minds have a very safe backup for their city ordinances regulating the distribution of medical marijuana to those for whom it was meant to help -- those that have cancer, hepatitis C, glaucoma, arthritis, migraines, chronic pain, spasticity “and any other illness marijuana provides relief.”
But first let’s do a fact check that explains how California State law got us to this point of trying to help the sick.
For those 38 percent that still believe marijuana to be the devil’s lettuce, have no fears. It is still illegal under the 1970 Federal Controlled Substance Act and the DEA makes a point of proving it whenever they feel like it. But for California law enforcement, they are regulated by what started out as Prop. 215 – The Compassionate Use Act of 1996 which decriminalized the cultivation and use of marijuana by seriously ill patients upon a doctor’s recommendation. It may be true there is no scientific proof that it is a healer of any of the above illnesses, but somehow it seems to work for some people the same way vitamins work, even though there is no scientific proof of its healing powers. It is therefore “holistic.”
In 2003 Senate Bill 420 – The Medical Marijuana Program Act (MMP) limited the amount to be decriminalized by a registered patient to 6 full size plants or 12 small plants and eight ounces of the dried bud from the plant. It also mandated the Department of Public Health to establish and maintain a program for the voluntary registration for qualified patients, and to issue medical marijuana identification cards. All of this includes the patient’s care-giver also but that is not the point.
The point is that California has taken the crime out of marijuana for registered patients. That’s it! The question still remains how are people over 50 years old, let alone 70, suppose to get the relief which is their right under the law, if the City Council cannot adopt or modify to their liking the guidelines permeated by the State’s Attorney General, Edmond G. Brown Jr. in 2008.
A certain amount of common sense would be necessary. Anyone who has read Hemingway’s “A Clean Well-Lighted Place,” would know what a dispensary should look like. The vendors would ideally be courteous and want to help you. Even a little compassion may be shown. It should be the type of professional ambiance a 70 year old woman, or her care-giver, felt good walking in and better walking out. There should not be 100 kinds of bongs and various smoking apparatus. If the dispensary wants to sell something else let it be books on health or literature, not free advertisement magazines on how to take a picture of a bud or send away for cannabis seeds.
But here is the kicker, in 2007 the California State Board of Equalization (BOE) noticed all dispensaries that are according to the guidelines suppose to be non-profit co-ops, that they are taxing marijuana sales, as well as requiring these businesses to hold seller’s permits. This is where the rubber meets the road. Who does not want the tax revenue from marijuana transactions to go into California’s county and state coffers? The other option is the Mexican Cartel.
The longer the City Council keeps the moratorium on dispensaries going, the better it is for the illicit drug trade. But more importantly, those that truly are in need and the persons for whom the marijuana was made legal have been deprived of the compassion the law provided them.
At a recent City Council meeting May 18th only one person spoke on behalf of the ailing seniors. The focus seemed to be on the children and schools. To those people I ask, to whom do you think the cartel and every other drug dealer dispenses their drugs? It is certainly not to the ailing seniors.
Wednesday, May 26, 2010
Sunday, May 23, 2010
Scams: A Friendly Warning to the Wise and How to Stay Out of Trouble
Scams: A Friendly Warning to the Wise and
How to Stay Out of Trouble
How to Stay Out of Trouble
Beware of estate planning tax scams and the con men (or women) selling them. Do not believe a word if something appears too good to be true. There is no cutting edge “pure” trust or “unincorporated organization” that allows you to not pay any taxes. Nor is there some new tax plan so clever that attorneys have not yet heard of it. “No, Virginia, there is no Santa Claus.”
The only thing more outrageous than promises of fraudulent estate planning promotions, are their appeal to hard working Americans. The con men tell you these are the same closely guarded trusts used by the Rockefellers and the Kennedy Foundation to keep their fortunes intact for generations. They claim that not only can you pay yourself in dividends which are “never subject to taxes,” but your assets held in a PURE TRUST are “beyond the reach of probate and inheritance tax laws.”
Do not believe it. There is no such thing. These scams, and what is known as a “living trust mill” where Living Trusts are churned out through seminars using pre-printed forms and no availability to a lawyer, are fairly common. The illegal ones are sometimes shut down by your local district attorney’s office, and in many cases the scammers are prosecuted and the victims must answer to the IRS.
But these professional cons come back months or years later using different colors, names, faces, brochures, and definitely different catch phrases. “Pure” trust will be changed to “constitutional” trust, and instead of using the Rockefellers, they will be friends of the “Alliance for Mature Americans.”
For your information, the statute of limitations for the IRS is three years from the date filed or from the date your taxes are due to find your mistake. That three years works both ways: if you made a mistake on your taxes you have three years to amend those tax forms, after which you live with your mistake which could prove costly if found. But there is no statute of limitations for fraud on your IRS filing. Let’s all remember Al Capone and what finally brought him down.
Finding an Attorney
Many people erroneously believe that to get the best representation you must pay the highest dollar to the largest law firm. Nothing could be further from the truth. Size has nothing to do with quality. The right hand in many large firms does not know what the left hand is doing. You pay for their expensive taste and lavish overhead by being charged $2.50 a page for a single photocopy.
In this day of modern technology, any solo practicing attorney sitting at their desk has the advantage of having a thousand law clerks at their beck and call. What was once the province of the large and prestigious law firm is now at the fingertips of any attorney who subscribes to Lexis or Westlaw, the two largest legal resources in the United States. There is no limitation on an attorney’s ability to get answers fast from these internet resources, and find the most current law to apply to a situation.
Therefore, you can hire any attorney with confidence and not feel guilty that you are settling for something less just because he or she has a solo practice with one paralegal or maybe one secretary.
Many times throughout my books and articles it has been recommended you seek the advice of a certified tax expert. In fact, it bears repeating that you will need to seek expert advice from an estate planner or certified estate planning specialist, and a tax attorney or discount valuation specialist and CPA, anytime you are attempting to use complex trusts or business entities to transfer wealth, avoid extraordinary tax consequences, or governmental regulations. Make sure your attorney has these experts on hand. They are not necessarily found in the same building.
Experts are expensive, but they are worth it. In the long run, if they could not save people like you thousands of dollars yearly, they would not have a job. There are many, many ways to save money on taxes and savings that are simply beyond the scope of any book. My own books stop with sufficient information for you to understand our death and inheritance system and know what you want out of it. But attorneys are the ones educated to do the job right, and there are harsh repercussions for them if they fail to do so.
CONFUSED? LOOK AT THE BIG PICTURE.
If you think estate planning is confusing given the present lack of any federal law that explains if the estate tax has been repealed, or replaced by heirs having to pay the capital gains based on their parents’ original cost basis of their family home, then just wait for next year when the 2001 Reconciliation Act has truly come to an end. Congress has to do something. Meanwhile, think about this:
What makes it impossible to write a thorough analysis of all the twists and turns of estate planning as they apply to every state in the USA is that although a great number of people may live in community property states, their laws differ from each other as much as other states’ laws that are considered not community property states. Each state has different and complex laws. Even community property states have vast differences in the law.
For example, there are nine community property states, including California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. (In Alaska you can choose whether or not you want a community property estate.)
In Idaho, Louisiana, Texas and Wisconsin if you own separate property, the income from that property is considered community property. That is not the law in California, unless you commingle it with community property funds with your spouse. If necessary, it can always be traced back to separate property in case of a divorce. But this same property is not traceable in the case of death.
Another example is that in most community property states, if you stop living with each other, your income becomes separate property, but not in all of the states.
So, in different states, there are going to be as many different ways of determining what is, and what is not separate or community property. State laws have the final say on how your property is going to be characterized before it is distributed according to federal law, also known as the Internal Revenue Code. State laws vary and can be easily misunderstood. Local law should always be consulted for applicability to your personal situation.
A specific example of confusing state laws can be found in the concept of “quasi-community property.” This type of property evolves when you lived in a non-community property state and acquired separate property that would have been community property had you been domiciled in a community property state such as Washington, California, or Arizona when you acquired the separate property. These states will treat it as community property and it will be characterized as such in your estate plan or divorce.
Regardless of the fact that the terms remain the same, they can be interchanged and treated much differently depending on what state you moved to when you wrote your Revocable Trust, and under the laws of the state in which you come to rest.
Adding to this state law confusion, eighteen states have adopted the “Uniform Probate Code” (at least in part, and some with substantial changes). This Code is intended to allow all citizens to walk to the beat of the same drummer when entering probate court. Three community property states have adopted it, but 32 other states, such as California, have not adopted it at all. In fact, California has its own set of probate rules and procedures operating their superior courts the same as Texas and Florida have their own rules operating their higher courts.
What this means is that all the federal estate planning tools are all well defined and interpreted with some similarity in federal courts, but in all likelihood your case is never going to get there. All probate matters begin in state courts which for the most part are operating under different state laws and “Rules of Court.” These rules of concept, analysis and implementation are created by state legislators.
Breaking it down further, every county in every State has “Rules of Court” pertaining particularly to how things will be handled by the courts in their particular county. There are 58 counties in California and many of them have rules quite different from the others. The differences may not be so substantial as to change the outcome of a case, but on every court bench there sits a different personality with his or her set of personal rules and bias.
The important thing to remember is that you must always get the opinion from an attorney in your state before implementing the federal estate tools you may read about in books such as “Estate Planning: The Heroes Way for Baby Boomers. Not even Suze Orman would ever disagree with that advice, just read her disclaimers.
What makes it impossible to write a thorough analysis of all the twists and turns of estate planning as they apply to every state in the USA is that although a great number of people may live in community property states, their laws differ from each other as much as other states’ laws that are considered not community property states. Each state has different and complex laws. Even community property states have vast differences in the law.
For example, there are nine community property states, including California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. (In Alaska you can choose whether or not you want a community property estate.)
In Idaho, Louisiana, Texas and Wisconsin if you own separate property, the income from that property is considered community property. That is not the law in California, unless you commingle it with community property funds with your spouse. If necessary, it can always be traced back to separate property in case of a divorce. But this same property is not traceable in the case of death.
Another example is that in most community property states, if you stop living with each other, your income becomes separate property, but not in all of the states.
So, in different states, there are going to be as many different ways of determining what is, and what is not separate or community property. State laws have the final say on how your property is going to be characterized before it is distributed according to federal law, also known as the Internal Revenue Code. State laws vary and can be easily misunderstood. Local law should always be consulted for applicability to your personal situation.
A specific example of confusing state laws can be found in the concept of “quasi-community property.” This type of property evolves when you lived in a non-community property state and acquired separate property that would have been community property had you been domiciled in a community property state such as Washington, California, or Arizona when you acquired the separate property. These states will treat it as community property and it will be characterized as such in your estate plan or divorce.
Regardless of the fact that the terms remain the same, they can be interchanged and treated much differently depending on what state you moved to when you wrote your Revocable Trust, and under the laws of the state in which you come to rest.
Adding to this state law confusion, eighteen states have adopted the “Uniform Probate Code” (at least in part, and some with substantial changes). This Code is intended to allow all citizens to walk to the beat of the same drummer when entering probate court. Three community property states have adopted it, but 32 other states, such as California, have not adopted it at all. In fact, California has its own set of probate rules and procedures operating their superior courts the same as Texas and Florida have their own rules operating their higher courts.
What this means is that all the federal estate planning tools are all well defined and interpreted with some similarity in federal courts, but in all likelihood your case is never going to get there. All probate matters begin in state courts which for the most part are operating under different state laws and “Rules of Court.” These rules of concept, analysis and implementation are created by state legislators.
Breaking it down further, every county in every State has “Rules of Court” pertaining particularly to how things will be handled by the courts in their particular county. There are 58 counties in California and many of them have rules quite different from the others. The differences may not be so substantial as to change the outcome of a case, but on every court bench there sits a different personality with his or her set of personal rules and bias.
The important thing to remember is that you must always get the opinion from an attorney in your state before implementing the federal estate tools you may read about in books such as “Estate Planning: The Heroes Way for Baby Boomers. Not even Suze Orman would ever disagree with that advice, just read her disclaimers.
WHO MAKES UP THESE ODD ESTATE TAX LAWS?
Gambling on your life expectancy against the IRS actuary tables, used to standardize the average age of your death, in order to get a huge tax break is the type of legal strategy that really makes you wonder who writes these tax avoidance tools into law.
Are you feeling lucky? Here is a legitimate way to put your residence into a trust, then transfer ownership to your children and earn a great tax advantage for yourself – providing you live long enough.
It is called a Qualified Personal Residence Trust (QPRT). The IRS allows you to bet that you will outlive their actuary tables. Say you are 60 years old. You put your residence (or vacation home) in an irrevocable trust naming your children as final beneficiaries after a term of your choice of years. Let’s say 15 years.
If you live long enough to see your children own your house, you not only get full ownership rights to your house for those 15 years, but a big reduction by the IRS on the gift tax, and the residence is not included in your estate tax upon your death! That means no “carryover” of the cost basis to your heirs. At the end of the 15 year term, the transaction typically results in a “leaseback” to the transferor – that’s you. These lease payments will further decrease the size of the transferor’s estate.
The term of the trust is up to you, but the older you are, and the longer the term of the trust, the bigger the IRS tax credit. In other words you get bonus points if you outlive your predetermined age of death.
If you do not outlive the 15 year term of the trust, the residence is added back into your estate and there is no added benefit. It is simply a lost opportunity and you are out the money for the formation of the trust. However, you can do it for five years also; it will just give you a lesser tax break. But however many years you choose, you must outlive the term.
The QPRT is actually a good deal, but it has to be done for the right reasons. There are many reasons to gift your assets to your heirs, but tax reduction should not be the main one. Too many things can go wrong between the gifting and the afterlife. Once you gift an interest in your home or other property to your children under a QPRT it cannot be undone.
To illustrate such a gift gone awry here is a true scenario. When I became an attorney in 1982 I went to work in an office downtown where there was a much older and respected attorney. Let’s call him Bill. Bill always did his own taxes. He presented himself as having the expertise of a tax specialist, but while I doubt he was a certified specialist, he certainly had the experience.
He was an intimidating attorney and he worked constantly changing various aspects of his large estate plan. His family included two daughters by a previous marriage, and his very lovely, active and friendly wife. He was a multi-millionaire, and as part of the estate plan, he transferred ownership interest in several of his properties to his daughters while he was still alive, with the remainder to go to them after he was gone. Unfortunately, they did not want to wait for their inheritance.
Whatever their interest may have been, and whether it was a QPRT or not, makes no difference. The point is, because they had an ownership interest in the properties, they had the right to sue their father on whatever creative breach or tort an attorney could dream up regarding an interference with their prospective business advantage of their interest gifted to them by their father.
That is exactly what they did, despite the lack of legal credence. As a result, Richard was in litigation against his two daughters for the next two years. His heart was finally broken enough to give in to the emotional stress. He signed over his remaining interest in the properties to his daughters, and they never spoke again for the rest of his life.
That being said, the QPRT is actually a gift from the IRS. Of course your gift deduction would be greatly reduced if you chose a term of years rather then challenge the actuary tables, but that is not the actual advantage of the tax tool for normal Baby Boomers. In fact, the law is not for “normal” Baby Boomers; or is it? The question is, what kind of creative mind was able to get the QPRT into the IRS Code?
Are you feeling lucky? Here is a legitimate way to put your residence into a trust, then transfer ownership to your children and earn a great tax advantage for yourself – providing you live long enough.
It is called a Qualified Personal Residence Trust (QPRT). The IRS allows you to bet that you will outlive their actuary tables. Say you are 60 years old. You put your residence (or vacation home) in an irrevocable trust naming your children as final beneficiaries after a term of your choice of years. Let’s say 15 years.
If you live long enough to see your children own your house, you not only get full ownership rights to your house for those 15 years, but a big reduction by the IRS on the gift tax, and the residence is not included in your estate tax upon your death! That means no “carryover” of the cost basis to your heirs. At the end of the 15 year term, the transaction typically results in a “leaseback” to the transferor – that’s you. These lease payments will further decrease the size of the transferor’s estate.
The term of the trust is up to you, but the older you are, and the longer the term of the trust, the bigger the IRS tax credit. In other words you get bonus points if you outlive your predetermined age of death.
If you do not outlive the 15 year term of the trust, the residence is added back into your estate and there is no added benefit. It is simply a lost opportunity and you are out the money for the formation of the trust. However, you can do it for five years also; it will just give you a lesser tax break. But however many years you choose, you must outlive the term.
The QPRT is actually a good deal, but it has to be done for the right reasons. There are many reasons to gift your assets to your heirs, but tax reduction should not be the main one. Too many things can go wrong between the gifting and the afterlife. Once you gift an interest in your home or other property to your children under a QPRT it cannot be undone.
To illustrate such a gift gone awry here is a true scenario. When I became an attorney in 1982 I went to work in an office downtown where there was a much older and respected attorney. Let’s call him Bill. Bill always did his own taxes. He presented himself as having the expertise of a tax specialist, but while I doubt he was a certified specialist, he certainly had the experience.
He was an intimidating attorney and he worked constantly changing various aspects of his large estate plan. His family included two daughters by a previous marriage, and his very lovely, active and friendly wife. He was a multi-millionaire, and as part of the estate plan, he transferred ownership interest in several of his properties to his daughters while he was still alive, with the remainder to go to them after he was gone. Unfortunately, they did not want to wait for their inheritance.
Whatever their interest may have been, and whether it was a QPRT or not, makes no difference. The point is, because they had an ownership interest in the properties, they had the right to sue their father on whatever creative breach or tort an attorney could dream up regarding an interference with their prospective business advantage of their interest gifted to them by their father.
That is exactly what they did, despite the lack of legal credence. As a result, Richard was in litigation against his two daughters for the next two years. His heart was finally broken enough to give in to the emotional stress. He signed over his remaining interest in the properties to his daughters, and they never spoke again for the rest of his life.
That being said, the QPRT is actually a gift from the IRS. Of course your gift deduction would be greatly reduced if you chose a term of years rather then challenge the actuary tables, but that is not the actual advantage of the tax tool for normal Baby Boomers. In fact, the law is not for “normal” Baby Boomers; or is it? The question is, what kind of creative mind was able to get the QPRT into the IRS Code?
Wednesday, May 19, 2010
CONFUSED? LOOK AT THE BIG PICTURE
If you think estate planning is confusing given the present lack of any federal law that explains if the estate tax has been repealed, or replaced by heirs having to pay the capital gains based on their parents’ original cost basis of their family home, then just wait for next year when the 2001 Reconciliation Act has truly come to an end. Congress has to do something. Meanwhile, think about this:
What makes it impossible to write a thorough analysis of all the twists and turns of estate planning as they apply to every state in the USA is that although a great number of people may live in community property states, their laws differ from each other as much as other states’ laws that are considered not community property states. Each state has different and complex laws. Even community property states have vast differences in the law.
For example, there are nine community property states, including California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. (In Alaska you can choose whether or not you want a community property estate.)
In Idaho, Louisiana, Texas and Wisconsin if you own separate property, the income from that property is considered community property. That is not the law in California, unless you commingle it with community property funds with your spouse. If necessary, it can always be traced back to separate property in case of a divorce. But this same property is not traceable in the case of death.
Another example is that in most community property states, if you stop living with each other, your income becomes separate property, but not in all of the states.
So, in different states, there are going to be as many different ways of determining what is, and what is not separate or community property. State laws have the final say on how your property is going to be characterized before it is distributed according to federal law, also known as the Internal Revenue Code. State laws vary and can be easily misunderstood. Local law should always be consulted for applicability to your personal situation.
A specific example of confusing state laws is can be found in the concept of “quasi-community property.” This type of property evolves when you lived in a non-community property state and acquired separate property that would have been community property had you been domiciled in a community property state such as Washington, California, or Arizona when you acquired the separate property. These states will treat it as community property and it will be characterized as such in your estate plan or divorce.
Regardless of the fact that the terms remain the same, they can be interchanged and treated much differently depending on what state you moved to when you wrote your Revocable Trust, and under the laws of the state in which you come to rest.
Adding to this state law confusion, eighteen states have adopted the “Uniform Probate Code” (at least in part, and some with substantial changes). This Code is intended to allow all citizens to walk to the beat of the same drummer when entering probate court. Three community property states have adopted it, but 32 other states, such as California, have not adopted it at all. In fact, California has its own set of probate rules and procedures operating their superior courts the same as Texas and Florida have their own rules operating their higher courts.
What this means is that all the federal estate planning tools are all well defined and interpreted with some similarity in federal courts, but in all likelihood your case is never going to get there. All probate matters begin in state courts which for the most part are operating under different state laws and “Rules of Court.” These rules of concept, analysis and implementation are created by state legislators.
Breaking it down further, every county in every State has “Rules of Court” pertaining particularly to how things will be handled by the courts in their particular county. There are 58 counties in California and many of them have rules quite different from the others. The differences may not be so substantial as to change the outcome of a case, but on every court bench there sits a different personality with his or her set of personal rules and bias.
The important thing to remember is that you must always get the opinion from an attorney in your state before implementing the federal estate tools you may read about in books such as “Estate Planning: The Heroes Way for Baby Boomers. Not even Suze Orman would ever disagree with that advice, just read her disclaimers.
What makes it impossible to write a thorough analysis of all the twists and turns of estate planning as they apply to every state in the USA is that although a great number of people may live in community property states, their laws differ from each other as much as other states’ laws that are considered not community property states. Each state has different and complex laws. Even community property states have vast differences in the law.
For example, there are nine community property states, including California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. (In Alaska you can choose whether or not you want a community property estate.)
In Idaho, Louisiana, Texas and Wisconsin if you own separate property, the income from that property is considered community property. That is not the law in California, unless you commingle it with community property funds with your spouse. If necessary, it can always be traced back to separate property in case of a divorce. But this same property is not traceable in the case of death.
Another example is that in most community property states, if you stop living with each other, your income becomes separate property, but not in all of the states.
So, in different states, there are going to be as many different ways of determining what is, and what is not separate or community property. State laws have the final say on how your property is going to be characterized before it is distributed according to federal law, also known as the Internal Revenue Code. State laws vary and can be easily misunderstood. Local law should always be consulted for applicability to your personal situation.
A specific example of confusing state laws is can be found in the concept of “quasi-community property.” This type of property evolves when you lived in a non-community property state and acquired separate property that would have been community property had you been domiciled in a community property state such as Washington, California, or Arizona when you acquired the separate property. These states will treat it as community property and it will be characterized as such in your estate plan or divorce.
Regardless of the fact that the terms remain the same, they can be interchanged and treated much differently depending on what state you moved to when you wrote your Revocable Trust, and under the laws of the state in which you come to rest.
Adding to this state law confusion, eighteen states have adopted the “Uniform Probate Code” (at least in part, and some with substantial changes). This Code is intended to allow all citizens to walk to the beat of the same drummer when entering probate court. Three community property states have adopted it, but 32 other states, such as California, have not adopted it at all. In fact, California has its own set of probate rules and procedures operating their superior courts the same as Texas and Florida have their own rules operating their higher courts.
What this means is that all the federal estate planning tools are all well defined and interpreted with some similarity in federal courts, but in all likelihood your case is never going to get there. All probate matters begin in state courts which for the most part are operating under different state laws and “Rules of Court.” These rules of concept, analysis and implementation are created by state legislators.
Breaking it down further, every county in every State has “Rules of Court” pertaining particularly to how things will be handled by the courts in their particular county. There are 58 counties in California and many of them have rules quite different from the others. The differences may not be so substantial as to change the outcome of a case, but on every court bench there sits a different personality with his or her set of personal rules and bias.
The important thing to remember is that you must always get the opinion from an attorney in your state before implementing the federal estate tools you may read about in books such as “Estate Planning: The Heroes Way for Baby Boomers. Not even Suze Orman would ever disagree with that advice, just read her disclaimers.
Wednesday, May 5, 2010
CINCO DE MAYO: THE BATTLE TO END CONFUSION
CINCO DE MAYO: THE BATTLE AGAINST CONFUSION
In the practice of estate planning, whether it concerns building your estate in these volatile financial times, to estate distribution by guessing if Congress is repealing the estate tax for 2010, to whether real property will be passed on to your children next year by them inheriting their parent’s cost basis on the property, then being taxed on the capital gains valued between when it was originally purchased until the time of sale. Mutual funds, reverse mortgages, annuities, refinancing, government bailouts and every other aspect of estate planning seems to be summed up in one word: confusing.
It is time to clear the air and although I have no laws edged in stone to support it, it is time to use common sense to predict what is going to happen this year. First, time enough has elapsed to confidently say there will be no estate tax for all those dying in the year 2010. Although it is possible Congress could attempt to pass a new estate tax law prior to September 1, 2010, the last date possible to pass a retroactive estate tax beginning January 1, 2010, it isn’t going to happen. That is the last thing on their mind this election year, for so many reasons they do not even have anything in the hopper.
There is a good and a bad side of this lack of Congressional inaction. The good side, as one estate attorney mentioned, his client passed away in mid-January with an $18 million estate. This entire $18 million will pass to his heirs tax free, which in prior years would have cost the heirs $9 million dollars. Congratulations if you are in that extremely small sector of America.
The down side, according to the IRS actuary tables upon which they rely for determining the duration of the average life, the chances of your rich grandpa passing away in 2010 is minimal. (Or maybe that’s the good side.) If you are 73 years old, the probability of your living well into the next year is 96.85 per cent. If you are 80 the probability for living one more year is 93.85 per cent, and if you are 90 years old, don’t worry about it, the probability of living another year is 84.91 per cent.
Secondly, according to the Time’s magazine I saw in Dr. Woolf’s dental office, all you have to do is read it and it will tell you about the remarkable economic recovery that America has undergone. Unfortunately, this is where you have to ask yourself, “What has the economic recovery done for me? The wiser you are, the least susceptible you will be to believing the enormous opportunity that many conmen and women are taking advantage of in this fast talking age of confusion with incredible offerings in annuities such as those that cannot possibly make you less than 6 per cent interest per year for the rest of your life. In fact, it can only go higher, never downward.
Senior citizens are those most prone to become involved in scams and Ponzi schemes. That is certainly not to say there are not ethical and extremely honest people in every facet of financial advice, but do your home work. Stop and think of Bernie Madoff, Goldman Sachs, AIG, and all the other names you thought you could trust, or read about in the news on a daily basis. They are cropping up even in your little town. To make it easy, if you are 65 years old or older, and you feel yourself being pressured into a state of urgency by having to respond by a date certain or pay for another expensive product, and that product is “deferred variable annuities,” just run away. Always get a second opinion.
Even attorneys are not immune to cheats and frauds on the internet. One recent story told in the Lawyer Magazine involved an internet scam originating in Japan and targeting attorneys in the sector of divorce settlements. A lady from Japan asks a lawyer for help in obtaining the rest of a large settlement and discusses the possibility of a large advance. If the attorney agrees he receives a very authentic looking check for a large amount and is asked to cash the check for legal fees and return the remainder to the client, usually by depositing the check in a foreign account.
Don’t be confused. It can happen to you! Now have a nice Cinco de Mayo.
— No opinion herein is a “marketed opinion” and no information provided herein can be used to avoid tax penalties for which the taxpayer would otherwise be responsible. Mark S. Cornwall has lived in Santa Barbara for more than 30 years and practiced law there for 25 years. He is accepting new clients. His book, "Estate Planning: The Heroes Way for Baby Boomers," can be purchased via his Web site, www.MarkCornwall.com; www.Amazon.com; or Borders bookstores. To schedule an appointment, contact him at mark@babyboomerpublishing.com.
In the practice of estate planning, whether it concerns building your estate in these volatile financial times, to estate distribution by guessing if Congress is repealing the estate tax for 2010, to whether real property will be passed on to your children next year by them inheriting their parent’s cost basis on the property, then being taxed on the capital gains valued between when it was originally purchased until the time of sale. Mutual funds, reverse mortgages, annuities, refinancing, government bailouts and every other aspect of estate planning seems to be summed up in one word: confusing.
It is time to clear the air and although I have no laws edged in stone to support it, it is time to use common sense to predict what is going to happen this year. First, time enough has elapsed to confidently say there will be no estate tax for all those dying in the year 2010. Although it is possible Congress could attempt to pass a new estate tax law prior to September 1, 2010, the last date possible to pass a retroactive estate tax beginning January 1, 2010, it isn’t going to happen. That is the last thing on their mind this election year, for so many reasons they do not even have anything in the hopper.
There is a good and a bad side of this lack of Congressional inaction. The good side, as one estate attorney mentioned, his client passed away in mid-January with an $18 million estate. This entire $18 million will pass to his heirs tax free, which in prior years would have cost the heirs $9 million dollars. Congratulations if you are in that extremely small sector of America.
The down side, according to the IRS actuary tables upon which they rely for determining the duration of the average life, the chances of your rich grandpa passing away in 2010 is minimal. (Or maybe that’s the good side.) If you are 73 years old, the probability of your living well into the next year is 96.85 per cent. If you are 80 the probability for living one more year is 93.85 per cent, and if you are 90 years old, don’t worry about it, the probability of living another year is 84.91 per cent.
Secondly, according to the Time’s magazine I saw in Dr. Woolf’s dental office, all you have to do is read it and it will tell you about the remarkable economic recovery that America has undergone. Unfortunately, this is where you have to ask yourself, “What has the economic recovery done for me? The wiser you are, the least susceptible you will be to believing the enormous opportunity that many conmen and women are taking advantage of in this fast talking age of confusion with incredible offerings in annuities such as those that cannot possibly make you less than 6 per cent interest per year for the rest of your life. In fact, it can only go higher, never downward.
Senior citizens are those most prone to become involved in scams and Ponzi schemes. That is certainly not to say there are not ethical and extremely honest people in every facet of financial advice, but do your home work. Stop and think of Bernie Madoff, Goldman Sachs, AIG, and all the other names you thought you could trust, or read about in the news on a daily basis. They are cropping up even in your little town. To make it easy, if you are 65 years old or older, and you feel yourself being pressured into a state of urgency by having to respond by a date certain or pay for another expensive product, and that product is “deferred variable annuities,” just run away. Always get a second opinion.
Even attorneys are not immune to cheats and frauds on the internet. One recent story told in the Lawyer Magazine involved an internet scam originating in Japan and targeting attorneys in the sector of divorce settlements. A lady from Japan asks a lawyer for help in obtaining the rest of a large settlement and discusses the possibility of a large advance. If the attorney agrees he receives a very authentic looking check for a large amount and is asked to cash the check for legal fees and return the remainder to the client, usually by depositing the check in a foreign account.
Don’t be confused. It can happen to you! Now have a nice Cinco de Mayo.
— No opinion herein is a “marketed opinion” and no information provided herein can be used to avoid tax penalties for which the taxpayer would otherwise be responsible. Mark S. Cornwall has lived in Santa Barbara for more than 30 years and practiced law there for 25 years. He is accepting new clients. His book, "Estate Planning: The Heroes Way for Baby Boomers," can be purchased via his Web site, www.MarkCornwall.com; www.Amazon.com; or Borders bookstores. To schedule an appointment, contact him at mark@babyboomerpublishing.com.
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