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Los Angeles, CA Estate & Business Planning Blog

Tuesday, October 15, 2013

Property Ownership and Your Estate Plan

Coordinating Property Ownership and Your Estate Plan

When planning your estate, you must consider how you hold title to your real and personal property. The title and your designated beneficiaries will control how your real estate, bank accounts, retirement accounts, vehicles and investments are distributed upon your death, regardless of whether there is a will or trust in place and potentially with a result that you never intended.

One of the most important steps in establishing your estate plan is transferring title to your assets. If you have created a living trust, it is absolutely useless if you fail to transfer the title on your accounts, real estate or other property into the trust. Unless the assets are formally transferred into your living trust, they will not be subject to the terms of the trust and will be subject to probate.

Even if you don’t have a living trust, how you hold title to your property can still help your heirs avoid probate altogether. This ensures that your assets can be quickly transferred to the beneficiaries, and saves them the time and expense of a probate proceeding. Listed below are three of the most common ways to hold title to property; each has its advantages and drawbacks, depending on your personal situation.

Tenants in Common: When two or more individuals each own an undivided share of the property, it is known as a tenancy in common. Each co-tenant can transfer or sell his or her interest in the property without the consent of the co-tenants. In a tenancy in common, a deceased owner’s interest in the property continues after death and is distributed to the decedent’s heirs. Property titled in this manner is subject to probate, unless it is held in a living trust, but it enables you to leave your interest in the property to your own heirs rather than the property’s co-owners.

Joint Tenants:  In joint tenancy, two or more owners share a whole, undivided interest with right of survivorship. Upon the death of a joint tenant, the surviving joint tenants immediately become the owners of the entire property. The decedent’s interest in the property does not pass to his or her beneficiaries, regardless of any provisions in a living trust or will. A major advantage of joint tenancy is that a deceased joint tenant’s interest in the property passes to the surviving joint tenants without the asset going through probate. Joint tenancy has its disadvantages, too. Property owned in this manner can be attached by the creditors of any joint tenant, which could result in significant losses to the other joint tenants. Additionally, a joint tenant’s interest in the property cannot be sold or transferred without the consent of the other joint tenants.

Community Property with Right of Survivorship: Some states allow married couples to take title in this manner. When property is held this way, a surviving spouse automatically inherits the decedent’s interest in the property, without probate.

Make sure your estate planning attorney has a list of all of your property and exactly how you hold title to each asset, as this will directly affect how your property is distributed after you pass on. Automatic rules governing survivorship will control how property is distributed, regardless of what is stated in your will or living trust.


Saturday, October 5, 2013

Eight Common Mistakes Employers Make

Eight Common Mistakes Employers Make

American employers are subject to countless federal, state and local laws, imposing various requirements, including wage and hour and anti-discrimination laws. Unfortunately, many employers – particularly small businesses – are unaware of their obligations and violate various worker protection laws, often resulting in expensive lawsuits, civil settlements and criminal fines. Here are some common, costly mistakes employers make:

Misclassifying Non-Exempt Workers as Exempt
Generally, all workers are entitled to overtime pay and subject to minimum wage requirements. However, some employees – typically executive, managerial or professional employees – are “exempt” and receive a flat salary without overtime pay. The exemption only applies in certain situations, however, and many employees have improperly classified workers as “exempt” when they are legally entitled to overtime wages and minimum wage requirements.

Misclassifying Employees as Independent Contractors
Determining whether a worker is an employee or independent contractor depends on the level of independence or control the worker has in completing his or her tasks; the less control exercised by the worker, the more likely he or she will be classified as an employee. Factors to consider include how the worker is compensated, whether the worker faces any risk of loss in the transaction, whether the company pays the worker’s business expenses, whether the company can withhold payment for non-performance, and whether your industry as a whole considers workers in similar positions as employees or independent contractors.

Failing to Train Supervisors Regarding Employment and Labor Laws
Employment laws prohibit employers from taking action against an employee for certain reasons, including discrimination on the basis of a protected characteristic such as race, religion, etc. Employees are also protected from retaliation for complaints of discrimination or illegal activity. It is vital that supervisors be trained to manage their employees in accordance with all applicable laws.

Failing to Use an Employee Handbook
An employee handbook informs employees about the employer’s values and policies, and facilitates compliance with employment and labor laws.

Failing to Properly Document Employee Job Performance
Proper documentation clearly establishes the employer’s expectations and where the employee failed to reach them. Written job descriptions and employee evaluations serve as training tools, performance measures and critical evidence in the event you have to terminate an employee.

Failing to Accommodate Disabled Workers
The law not only prohibits employers from discriminating against those with disabilities, it also imposes a duty on employers to “reasonably accommodate” their disabled employees, so they can perform essential job functions. Accommodations may include assistive devices, a modified work schedule or a restructuring of job duties.

Failing to Comply with Wage Payment and Notification Requirements
Many states require employers to pay their employees in a certain manner, and provide written notice of pay periods and amounts. Failure to comply can subject the company to penalties.

Failing to Obtain Releases from Terminated Employees
When firing an employee, companies should obtain a signed release from the employee, waiving the employee’s right to pursue a legal claim against the employer. Often, this release is signed in exchange for a severance payment.
 


Wednesday, September 25, 2013

Exemption Requirements for Non-Profit Public Benefit Corporations

Exemption Requirements for Non-Profit Public Benefit Corporations

A public benefit corporation is a type of non-profit organization (NPO) dedicated to tax-exempt purposes set forth in section 501(c)(3) of the Internal Revenue Code which covers: charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.  Public benefit NPOs may not distribute surplus funds to members, owners, shareholders; rather, these funds must be used to pursue the organization’s mission. If all requirements are met, the NPO will be exempt from paying corporate income tax, although informational tax returns must be filed.

Under the rules governing public benefit NPOs, “charitable” purposes is broadly defined, and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency. These NPOs are typically referred to as “charitable organizations,” and eligible to receive tax-deductible contributions from donors.

To be organized for a charitable purpose and qualify for tax exemption, the NPO must be a corporation, association, community chest, fund or foundation; individuals do not qualify. The NPO’s organizing documents must restrict the organization’s purposes exclusively to exempt purposes. A charitable organization must not be organized or operated for the benefit of any private interests, and absolutely no part of the net earnings may inure to the benefit of any private shareholder or individual.

Additionally, the NPO may not attempt to influence legislation as a substantial part of its activities, and it may not participate in any campaign activity for or against political candidates.

All assets of a public benefit non-profit organization must be permanently and irrevocably dedicated to an exempt purpose. If the charitable organization dissolves, its assets must be distributed for an exempt purpose, to the federal, state or local government, or another charitable organization. To establish that the NPO’s assets will be permanently dedicated to an exempt purpose, the organizing documents should contain a provision ensuring their distribution for an exempt purpose in the event of dissolution. If a specific organization is designated to receive the NPO’s assets upon dissolution, the organizing document must state that the named organization must be a section 501(c)(3) organization at the time the assets are distributed.

If a charitable organization engages in an excess benefit transaction with someone who has substantial influence over the NPO, an excise tax may be imposed on the person and any NPO managers who agreed to the transaction. An excess benefit transaction occurs when an economic benefit is provided by the NPO to a disqualified person, and the value of that benefit is greater than the consideration received by the NPO.

To apply for tax exemption under section 501(c)(3), the NPO must file Form 1023 with the IRS, along with supporting documentation, including organizational documents, details regarding proposed activities and who will carry them out, how funds will be raised, who will receive compensation from the NPO, and financial projections. If approved, the IRS will issue a Letter of Determination. Public charities must also apply for exemption from state taxing authorities, a process which varies from state to state.


Sunday, September 15, 2013

The Risks of Tenant-in-Common Investments

The Risks of Tenant-in-Common Investments

Historically, tenant in common (TIC) projects were owned by a relatively small group of investors who knew each other, such as long-time friends, business partners or family members. Strategies to maximize tax savings and preserve equity typically guided investors to this type of structure, rather than creating a limited liability company or partnership to own the property.

In the late 1990s, real estate sales in the form of tax-deferred 1031 exchanges created a new industry. Promoters began soliciting and pooling funds from investors to purchase real estate. Participation in the pool helped investors find replacement property to guarantee their capital gains tax deferment continued.

In 2002, the IRS clarified when this type of pooling is considered a partnership interest as opposed to a TIC interest, a critical distinction for investors using funds from a 1031 exchange transaction. Following that, investments in TIC interests grew considerably due to the numerous advantages. For those who needed a place to invest their 1031 exchange funds quickly, TIC interests provide a relatively simple way to ensure the funds are spent within 180 days of the sale of the previous property, without the hassle of researching, investigating, negotiating and financing a property in less than six months. TIC investors do not have to burden themselves with the day-to-day management of their investment property. Finally, TIC investors can pool their resources to purchase fractional shares of investment-grade property which would otherwise be out of reach.

With all of its advantages, the TIC interest also carries its share of risks. For example, many TIC promoters charged fees that were excessive, or sold the property to the investors for more than it was worth. If property values decline or purchase loans mature, it may be difficult to refinance, forcing the property into foreclosure and taking the entire investment with it.

Other promoters failed to maintain reserve funds separate for each property. If a promoter filed for bankruptcy and did not properly use the reserve funds, TIC investors were left with no recourse and were forced to cover the reserves out of their own pockets or risk losing their investment.

Further risks are caused by the investors themselves and the nature of their relationship to one another – or lack thereof. Owners of TIC typically do not know each other. Decisions regarding TIC governance often require unanimous agreement by all owners, and just one objection can grind the action to a halt. When owners don’t know each other, or are spread across many states, it can be difficult to communicate and obtain a unanimous agreement.

Despite the risks, TIC interests can still be a good place to park your money – but you must be a cautious, diligent purchaser. Visit the property, seek information from sources other than the promoter, and carefully review the past and projected financial data.
 


Thursday, September 5, 2013

Eligibility to Work in the United States

Eligibility to Work in the United States

The United States government offers a number of work visas, enabling foreign-born nationals to legally enter and work in the U.S. These visas are non-immigrant visas, meaning they are issued for a specific period of time, but most work visas can be renewed, enabling the worker to remain in the U.S. for a longer period of time. Each work visa imposes different requirements on the applicant, and there are work visas available for a variety of jobs.

Work visas include the H-1B and H-2 Work Visas, the H-3 Trainee Work Visa, the O-1 Extraordinary Ability Work Visa, the P Athlete/Entertainer Work Visa, the E-1 Treaty Trader Work Visa, the E-2 Treaty Investor Work Visa, and the R-1 Religious Work Visa. Additionally, students in the U.S. on a student visa may be authorized to work on Curricular Practical Training or Optional Practical Training.  Citizens of Mexico or Canada may qualify for the North American Free Trade Agreement (NAFTA) Work Visa, provided the applicant meets all of the requirements and his or her profession is on the NAFTA list.

The most common work visas are the H-1B Work Visa for Persons in Specialty Occupations, the H-2AWork Visa for Seasonal Agricultural Workers, and the H-2B Work Visa for Temporary or Seasonal Non-Agricultural Workers.

The H-1B Specialty Occupation Visa can be issued to workers in positions which require the theoretical and practical application of highly specialized knowledge requiring completion of a specific course of higher education. This visa can also apply to other professionals, including fashion models, those working on government-to-government research and development, and those working on projects administered by the Department of Defense.

H-2A Seasonal Agricultural Visas allow U.S. employers to bring foreign nationals into the country to perform temporary agricultural jobs for which U.S. workers are not available. In addition to demonstrating that U.S. workers are not available, employers must also show that employment of these workers will not have adverse effects on the working conditions and wages of similarly employed U.S. workers.

The H-2B Seasonal Non-Agricultural Visa is similar to the H-1B in that the employer must show that the employment is temporary, that there are insufficient U.S. workers to perform the job, and that there will be no adverse effects on U.S. workers. The H-2B differs, however, in that there is a statutory maximum, or cap, on the total number of aliens who may be granted the H-2B visa in any given fiscal year. Once that cap has been reached, visa petitions may only be accepted for H-2B workers who are exempt from the cap.

Once granted a work visa, the holder is entitled to obtain a drivers license or state-issued ID in the United States, open bank and credit accounts, and travel in and out of the U.S. A visa holder’s spouse and children may be granted visas, as well, but they will not be permitted to work in the United States. When in the U.S. on a work visa, the foreign national retains his or her passport, and is only issued a United States passport upon naturalization as a U.S. citizen.
 


Sunday, August 25, 2013

Estate Planning Don’ts

Estate Planning Don’ts

Preparing for the future is an uncertain business, but there are steps you can take during your lifetime to simplify matters for your loved ones after you pass, and to ensure your final wishes are carried out. Planning for what happens to your property, or who cares for your family members, upon your death can be a complicated process. To simplify things, we’ve created the following list to help you avoid some of the pitfalls you may encounter before, or even long after, you create your estate plan.

Don’t assume you can plan your estate by yourself. Get help from an estate planning attorney whose training and experience can ensure that you minimize tax implications and simplify the process of settling your estate.

Don’t put off your estate planning needs because of finances. To be sure, there are upfront costs for establishing the estate plan; however establishing your estate plan is an investment in the future well-being of your family, and one which will result in a far greater cash savings over the long term.

Don’t make changes to your estate plan without consulting your attorney. Changes in one area of your estate plan could impact other provisions you have made, triggering legal or tax implications you never intended.

Don’t assume your children will intuitively know your wishes, and handle the situation appropriately upon your death. Money and sentimental items can cause a rift between even the most agreeable siblings, and they will be especially vulnerable as they deal with the emotional impact of your passing.

Don’t assume that once you’ve prepared your estate plan it’s set in stone. Estate planning documents regularly need to be revised, often due to a change in marital status, birth or death of a family member, or a significant change in the value of your estate. Beneficiary designations should be periodically reviewed to ensure they are up to date.

Don’t forget to notify your family members, friends or other beneficiaries of your estate plan. Make sure your executor and successor trustee have access to your end-of-life documents.

Don’t assume your spouse will handle everything if something happens to you. It’s possible your spouse may be incapacitated at the same time, for example if you both are injured in the same accident. A proper estate plan appoints alternate representatives to handle your affairs if both you and your spouse are unable to do so.

Don’t use the same person as your agent under both the financial and healthcare powers of attorney. Using the same individual gives that person an incredible amount of influence over your future and it may be a good idea to split up the decision-making authority.

Don’t forget to name alternate agents, executors or successor trustees. You may name a family member to fill one of these roles, and forget to revise the document if that person dies or becomes incapacitated. By adding alternates, you ensure there is no question regarding who has the authority to act on your or the estate’s behalf.


Thursday, August 15, 2013

Employers and Immigration Compliance

Employers and Immigration Compliance: What You Need to Know

The Immigration and Nationality Act (INA) makes it illegal for employers to knowingly hire undocumented workers and requires employers to verify each worker’s identity and eligibility by completing the I-9 Form. An employer’s failure to complete the I-9 Form can result in criminal and civil penalties.

The INA also protects individuals from employment discrimination based upon national origin, citizenship or immigration status. The Office of Special Counsel for Immigration Related Unfair Employment Practices (OSC) enforces the INA’s anti-discrimination provisions.  Victims of discrimination may file a complaint with the OSC to seek back pay, reinstatement and other remedies.

With so much at stake and so many potential pitfalls, it is important for all employers to familiarize themselves with the requirements and implement policies and procedures to ensure compliance.

Employers are prohibited from:

  • Discriminating on the basis of citizenship or immigration status, with respect to hiring, firing, recruitment or referral. This rule applies to employers of four or more employees.
  • Discriminating on the basis of national origin, with respect to hiring, firing, recruitment or referral. This rule applies to employers of between three and 15 employees. Employers may not extend different treatment to different individuals based on their birth place, country of origin, native language, ancestry or because they may look or sound “foreign.”
  • Requesting more or different documents to verify a worker’s employment eligibility. An employer may not request different or additional documents for determination of citizenship or national origin than those documents specified on the I-9 Form.  Furthermore, an employer is not permitted to reject genuine-looking documents.
  • Retaliating against an individual who files charges with the OSC, cooperates with an investigation or contests an action that may be considered discriminatory or in violation of the INA.

To improve compliance in your employment procedures, consider implementing the following practices:

  • Refrain from using discriminatory language in job postings, such as “green card only” or “U.S. citizen only,” unless it is required by law or by a government contract.
  • In completing the I-9 Form, do not request specific documents over other permitted documents. Each employee is permitted to present any document from the list of acceptable documents stated on the form.
  • Refrain from selectively verifying work eligibility for only certain employees based on their citizenship status or national origin; whatever your policy, make sure it is applied consistently to all employees.
  • Avoid the appearance of discriminatory practices by verifying employment eligibility only after you have made a hiring decision, and give the employee three days to provide the required documentation.
  • Do not immediately terminate an employee if you receive a “no match” letter from the Social Security Administration. While such a letter may mean the individual is not authorized to work in the United States, it is also possible that there is a discrepancy in the record due to a clerical error or legal name change.
  • If you suspect that an employee is not legally eligible to work in this country, notify the employee and request valid employment eligibility documents before terminating or suspending employment.

Monday, August 5, 2013

Medicare vs. Medicaid: Similarities and Differences

With such similar sounding names, many Americans mistake Medicare and Medicaid programs for one another, or presume the programs are as similar as their names. While both are government-run programs, there are many important differences. Medicare provides senior citizens, the disabled and the blind with medical benefits. Medicaid, on the other hand, provides healthcare benefits for those with little to no income.

Overview of Medicare
Medicare is a public health insurance program for Americans who are 65 or older. The program does not cover long-term care, but can cover payments for certain rehabilitation treatments. For example, if a Medicare patient is admitted to a hospital for at least three days and is subsequently admitted to a skilled nursing facility, Medicare may cover some of those payments. However, Medicare payments for such care and treatment will cease after 100 days or if the patient stops improving.

Nursing home patients often find their Medicare payments are terminated much sooner than 100 days. If a patient’s condition stops improving, Medicare coverage will be discontinued. For example, many older Americans are suffering from diseases with no known cure, such as Parkinson’s or Alzheimer’s Disease. Accordingly, it is simply impossible to “rehabilitate” these patients so Medicare typically denies skilled nursing facility coverage in these types of situations.

In summary:

  • Medicare provides health insurance for those aged 65 and older
  • Medicare is regulated under federal law, and is applied uniformly throughout the United States
  • Medicare pays for up to 100 days of care in a skilled nursing facility
  • Medicare pays for hospital care and medically necessary treatments and services
  • Medicare does not pay for long-term care
  • To be eligible for Medicare, you generally must have paid into the system

Overview of Medicaid
Medicaid is a state-run program, funded by both the federal and state governments. Because Medicaid is administered by the state, the requirements and procedures vary across state lines and you must look to the law in your area for specific eligibility rules. The federal government issues Medicaid guidelines, but each state gets to determine how the guidelines will be implemented.

In summary:

  • Medicaid is a health care program based on financial need
  • Medicaid is regulated under state law, which varies from state to state
  • Medicaid will cover long-term care
     

Thursday, July 25, 2013

Joint Bank Accounts and Medicaid Eligibility

Like most governmental benefit programs, there are many myths surrounding Medicaid and eligibility for benefits. One of the most common myths is the belief that only 50% of the funds in a jointly-owned bank account will be considered an asset for the purposes of calculating Medicaid eligibility.

Medicaid is a needs-based program that is administered by the state.  Therefore, many of its eligibility requirements and procedures vary across state lines.  Generally, when an applicant is an owner of a joint bank account the full amount in the account is presumed to belong to the applicant. Regardless of how many other names are listed on the account, 100% of the account balance is typically included when calculating the applicant’s eligibility for Medicaid benefits.    

Why would the state do this? Often, these jointly held bank accounts consist solely of funds contributed by the Medicaid applicant, with the second person added to the account for administrative or convenience purposes, such as writing checks or discussing matters with bank representatives. If a joint owner can document that both parties have contributed funds and the account is truly a “joint” account, the state may value the account differently. Absent clear and convincing evidence, however, the full balance of the joint bank account will be deemed to belong to the applicant.  


Monday, July 15, 2013

Dual Citizenship

Dual Citizenship

Dual citizenship, or dual nationality, means that a person is a citizen of two countries simultaneously. It is also possible to simultaneously be a citizen of three or more countries. Dual citizenship occurs when an individual becomes a citizen of another country, in addition to his or her birth country. Generally, countries define citizenship based upon one’s place of birth, descent, marriage or naturalization process.

A foreign citizen does not lose his or her citizenship when becoming a naturalized United States citizen. Nevertheless, some countries do not recognize dual citizenship, so it is important to consider the factors carefully before applying for citizenship in the U.S. or abroad.

Dual citizenship can also occur by automatic operation of laws for some individuals, such as a child born abroad to parents who are U.S. citizens, or a child born in the U.S. to non-citizen parents.

An individual who is automatically granted citizenship in another country does not risk losing his or her U.S. citizenship. On the other hand, a U.S. citizen who applies for and is granted foreign citizenship may lose his or her U.S. citizenship, provided the application was made voluntarily and with the intent to relinquish United States citizenship. Such intent can be shown by the person’s conduct or statements.

Each country has its own laws regarding dual citizenship. The United States recognizes dual citizenship, and does not require an individual to choose one citizenship over another. However, the U.S. government does not endorse dual citizenship as a matter of policy because of the problems it can cause.

Dual citizens owe allegiance to both countries and are required to abide by the laws of both countries. For example, citizenship often comes with legal obligations relating to taxes, military service and travel restrictions. There could be a conflict between the laws governing the two countries, which may cause problems for the dual national. In addition, dual citizenship may limit the U.S. government’s efforts to assist U.S. citizens abroad, because the country where the dual citizen is located generally has a stronger claim to that individual’s allegiance. Dual nationality also has its advantages. For example, dual citizenship affords an individual with a greater degree of flexibility in choosing where to live and work.

U.S. citizens, including dual nationals, must use a United States passport to enter and leave the U.S. Dual citizens may also be required by the foreign country to use that country’s passport when entering and leaving that country.

Most countries permit their nationals to renounce or otherwise lose citizenship. Americans can renounce their United States citizenship at U.S. Embassies and Consulates abroad; and information on giving up foreign citizenship is available from that country’s embassy or consulate in the U.S.

If you are in a dual citizenship situation, or are contemplating such a move, it is important to discuss your intentions and goals with an attorney who is knowledgeable in this particular aspect of immigration law to help weigh the pros and cons and avoid the pitfalls that may accompany dual citizenship.


Friday, July 5, 2013

Bypass Trusts

Changing Uses for Bypass Trusts

Every year, each individual who dies in the U.S. can leave a certain amount of money to his or her heirs before facing any federal estate taxes. For example, in 2010, a person who died could leave $3.5 million to his or her heirs (or a charity) estate tax free, and everything over that amount would be taxable by the federal government. Transfers at death to a spouse are not taxable.

Therefore, if a husband died owning $5 million in assets in 2010 and passed everything to his wife, that transfer was not taxable because transfers to spouses at death are not taxable. However, if the wife died later that year owning that $5 million in assets, everything over $3.5 million (her exemption amount) would be taxable by the federal government. Couples would effectively only have the use of one exemption amount unless they did some special planning, or left a chunk of their property to someone other than their spouse.

Estate tax law provided a tool called “bypass trusts” that would allow a spouse to leave an inheritance to the surviving spouse in a special trust. That trust would be taxable and would use up the exemption amount of the first spouse to die. However, the remaining spouse would be able to use the property in that bypass trust to live on, and would also have the use of his or her exemption amount when he or she passed. This planning technique effectively allowed couples to combine their exemption amounts.

Late last year, Congress changed the estate tax rules. For the years 2011 and 2012, each person who dies can pass $5 million free from federal estate taxes. In addition, spouses can combine their exemption amounts without requiring a bypass trust (making the exemptions “portable” between spouses). This change in the law appears to make bypass trusts useless, at least until Congress decides to remove the portability provision from the estate tax law.

However, bypass trusts can still be valuable in many situations, such as:

(1)  Remarriage or blended families. You may be concerned that your spouse will remarry and cut the children out of the will after you are gone. Or, you may have a blended family and you may fear that your spouse will disinherit your children in favor of his or her children after you pass. A bypass trust would allow the surviving spouse to have access to the money to live on during life, while providing that everything goes to the children at the surviving spouse’s death.

(2)  State estate taxes. Currently, 13 states as well as Washington D.C. have state estate taxes. If you live in one of those states, a bypass trust may be necessary to combine a couple’s exemptions from state estate tax.

(3)  Changes in the estate tax law. Estate tax laws have been in flux over the past several years. What if you did an estate plan assuming that bypass trusts were unnecessary, Congress removed the portability provision, and you neglected to update your estate plan? You could be paying thousands or even millions of dollars in taxes that you could have saved by using a bypass trust.

(4)  Protecting assets from creditors. If you leave a large inheritance outright to your spouse and children, and a creditor appears on the scene, the creditor may be able to seize all the money. Although many people think that will not happen to their family, divorces, bankruptcies, personal injury lawsuits, and hard economic times can unexpectedly result in a large monetary judgment against a family member.

Although it may appear that bypass trusts have lost their usefulness, there are still many situations in which they can be invaluable tools to help families avoid estate taxes.


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