Estate Tax & Gift

Monday, October 16, 2017

How Should Your Estate Plan Change in Response to Trump’s Tax Plan?

President Trump and the GOP have unveiled a potential tax reform plan that could impact your estate plan.  Any Californian with an estate plan in place, or those who have put off estate planning, should take the time now to fortify their estate plan in the face of potential tax changes.  Our California estate planning lawyers explain what is included in the new tax plan, and what it leaves unclear, as well as what you should do to prepare for coming changes.

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Friday, March 3, 2017

Proving The Old Adage Right

“In this world nothing can be said to be certain, except death and taxes.” -Benjamin Franklin

Truer words have never been spoken, and it is the intersection of these two certainties that leads to many a headache and oftentimes heartache. Working with an experienced attorney can help ensure that all the taxes owed are paid without unduly burdening surviving family members or other beneficiaries of an estate.

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Monday, February 27, 2017

Living In A Tax Deduction

You have probably heard about how Hugh Hefner sold the Playboy Mansion but retained the right to live there until he dies. And you might have read that Zsa Zsa Gabor did something similar since to her famous estate, leaving her (ninth) husband, Frédéric Prinz von Anhalt, homeless when she died. But did you know that quite a few non-famous people are also selling or gifting away their home while keeping the right to live in it?

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Monday, December 26, 2016

Want To Avoid Estate Taxes? Take A Cue From Santa And Start Gifting

The holiday season is upon us and 2017 is right around the corner. In all of the holiday hustle and bustle it is easy to forget or skip a few items on your to-do list. One thing you should be sure to get done before the end of the year if you are committed to passing on as much of your wealth as possible to the next generation without getting hit by a huge tax bill, is gift giving.
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Wednesday, July 20, 2016

6 Events Which May Require a Change in Your Estate Plan

6 Events Which May Require a Change in Your Estate Plan

Creating a Will is not a one-time event. You should review your will periodically, to ensure it is up to date, and make necessary changes if your personal situation, or that of your executor or beneficiaries, has changed. There are a number of life-changing events that require your Will to be revised, including:

Change in Marital Status: If you have gotten married or divorced, it is imperative that you review and modify your Will. With a new marriage, you must determine which assets you want to pass to your new spouse or step-children, and how that may relate to the beneficiary interest of your own children. Following a divorce it is a good practice to revise your Will, to formally remove the ex-spouse as a beneficiary.

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Monday, June 1, 2015

5 Common Estate Planning Myths in California

I hear a lot of different information about the consequences of making a mistake in an estate plan. How can I separate fact from fiction? 

Estate planning is, of course, an important consideration for every family, regardless of size or financial situation. However, there are a number of myths out there, many of which are designed to coax folks into purchasing costly plans or unnecessary trusts on the promise of tax avoidance and the like. The following explores five common myths circulating the estate planning industry, followed by helpful suggestions to avoid being duped or misguided. 

Myth #5: Everyone needs a revocable trust: A revocable trust is an estate planning tool that requires testators (known as “grantors” or “settlors”) to retitle their property into the name of the trust, which will then be distributed according to the terms of the trust agreement. This tool is handy for probate avoidance, but will not necessarily save on estate taxes or other assessments if not properly drafted. Likewise, a revocable trust may not be necessary for everyone, as it can be costly to set up and maintain. 

Myth #4: A trust avoids estate tax: Only a very small fraction of estates in the U.S. are subject to the estate tax. To avoid paying estate tax, an elaborate and complex network of trusts, gifting, asset transfers, and charitable bequests is necessary – and begins long before the testators reach their final years. In sum, a simple trust will generally not avoid estate tax, and most individuals need not worry about this issue in the first place.

Myth #3: Probate is to be avoided at all costs: Many will have you believe that enduring the probate process will be an intolerable experience fraught with delay, expense and unnecessary court procedures. While true that probate proceedings can be inconvenient, executing an elaborate and expensive estate plan to avoid the process may be unnecessary for some, particularly those with a small estate. 

Myth #2: Transferring assets to my children will qualify me for Medicaid: This myth may be partially true, provided the transfers occurred long ago and fall outside the five-year look-back period. By contrast, transferring property to children immediately prior to applying for Medicaid will trigger a lengthy penalty period, and you may be better off selling the assets for value in order to pay for medical expenses prior to reaching eligibility.

Myth #1: I can download my will from the Internet: At first blush, downloading a will template from the Internet may seem like a cost-effective exercise, particularly if your estate is relatively straightforward. However, this can also invite disaster, particularly if the will form is not drafted with California formalities in mind.

Contact a reputable Orange County estate planning attorney today


OC Wills & Trust Attorneys have more than 20 years of experience guiding clients in their estate planning journey. Contact our Orange County, California office today by calling (949)347-5256.

Wednesday, May 27, 2015

What You Need to Know About the Proposed ‘Death Tax Repeal Act of 2015’

My estimated gross estate will be at or above the current federal exemption threshold. How is this tax law expected to change in the near future?

While it is always considered a wise idea to prepare an estate plan with an eye on the federal exemption, this figure is constantly increasing, decreasing, or being (temporarily) eliminated altogether. Currently, the individual estate tax exemption is $5.43 million, whereas a married couple can defer estate tax liability for a total exemption of $10,860,000 upon the death of the second spouse. However, legislation making its way through Congress could mean the ultimate death of the death tax, creating a number of alternative planning tools for high-net worth testators seeking to properly dispose of assets and provide for loved ones. 

Death Tax Repeal Act of 2015

In April, 2015, the United States House of Representatives voted 240-179 to repeal the estate tax all together. The measure, known as the Death Tax Repeal Act of 2015, was introduced on February 26, 2015 by Rep. Kevin Brady (R-TX) and works to amend the Internal Revenue Code by repealing both the estate tax and the generation-skipping transfer taxes levied upon any estate created on or subsequent to the date the Act is executed. 

The proposal contains two exceptions, however, including (i) distributions from such trust before the death of a surviving spouse made more than 10 years after the enactment date of this Act, and; (ii) assets remaining in such trust upon the death of the surviving spouse. 

Moreover, the Act addresses the federal gift tax rates, and would lower the top rate to 35%. Also, transfers in trust are still considered a taxable gift unless the trust is drafted as wholly-owned by the donor or the donor’s spouse. 

While the Act was met with substantial Republican support in the House, it has yet to meet its fate in the Senate. According to Congressional insiders, Democrats promise a filibuster of the Act, and the President is expected to veto any attempt to do away with the estate tax. 

In 2013, only one out of every 700 estates – or 0.1% – was required to pay the estate tax. Industry experts expect that level to rise once the data from 2014 is compiled, but only to approximately 0.2% of all estates. 

In many cases, exposure to estate tax liability can be significantly reduced with proper planning. For more information, contact Orange County estate planning attorney Brian Chew by calling 949-347-5256 today. 

Wednesday, May 20, 2015

Top 4 Ways a California Living Trust Can Enhance Your Estate Plan

I am thinking about executing a revocable living trust, but I am not sure if it will be beneficial. How will a trust help my family administer my estate? 

A revocable living trust is a popular and powerful tool for estate planners, and offers a number benefits for both surviving family members and beneficiaries. The following lists the top four ways in which executing a revocable living trust can help effectuate convenience, as well as possibly help high-net worth clients preserve assets and even avoid the over-imposition of estate tax.

#4: Increased Privacy – A revocable living trust is created with a trust agreement. It lists the creators (known as “trustors”), the trustees, and the beneficiaries. In the appendix, the trust lists the real and personal property placed in trust and subject to the distribution terms in the residuary estate clause. 

Assuming the trust is properly funded, and assets are fully re-titled in the name of the trust, the language of the trust agreement will govern the transfer of property. In other words, no public revelation of transfers will occur, and recipients will receive their inheritances seamlessly and privately – unlike the typical situation involving probate court (discussed further below). 

#3: Seamless Transition – As a follow-up to the explanation offered above, beneficiaries will not have to wait months (or years) for the estate to travel through the probate administration process. In many cases, beneficiaries will have access to their assets immediately, or within a few weeks if a deed or title transfer is necessary. As the testator, you may be able to further reduce the wait-time by creating payable-on-death accounts on behalf of your children or beneficiaries, which will transfer immediately upon remittance of a death certificate. 

#2: Possible Avoidance of Estate Tax - With more advanced estate and trust planning, married couples may be able to maximize their marital estate tax deduction to avoid the double-imposition of estate taxes upon the death of both spouses. Fortunately, there is no separate estate tax imposition by the State of California, however the federal government’s estate tax exemption is currently set at $5.43 million, with a 40 percent tax bill imposed on all assets above and beyond this limit. For married couples, using trusts can help maximize this even further upon the death of the second spouse – thereby leaving more for surviving children and heirs. 

#1: Avoidance of Probate - For estate valued at greater than $150,000, the administrator or executor will likely be required to file a Petition for Probate – which jumpstarts the official probate administration process, that can take up to 1 ½ years. Using a trust, assets will transfer from the trust corpus to the named beneficiary, and will not be subject to any probate proceedings or unnecessary inconvenience. 

If you are considering a revocable living trust, please contact experienced estate planning attorney Brian Chew. Conveniently located in Orange County, California, you can reach the office by calling (949)347-5256. 

Tuesday, September 23, 2014

Estate Planning Lessons from Joan Rivers

Many of us like to make an entrance.  But, some of us, like recently passed Joan Rivers, want to make an exit.  When referring to an exit, we mean a final exit, or a funeral.  Rivers wanted her funeral to be Hollywood affair. She wanted a flashy, star-studded event, a Valentino gown and even a Harry Winston toe tag.  While most of her requests were facetious, she did want a larger than life funeral and that costs money.  After her recent passing, her family has been charged with this task and expense.  Luckily, funeral expenses can be deducted when calculating Federal estate taxes, which will save them a lot of money.  

Currently, the Federal estate tax will be assessed on estates worth over $5,340,000.  As Rivers’ estate is most likely worth much more than that, it will probably be subject to the tax.  Just like with an income tax return, certain things can be used as deductions on an estate tax return.    One of these deductions is funeral expenses.  Funeral costs can be claimed as deductions on Schedule J of the Federal estate tax return.  There is no cap on how much can be claimed except that it cannot be more than the gross estate is worth.  There are really no other regulations governing the amount, but there are some guidelines.  The costs have to be reasonable in light of the life of the person who has passed.  The costs that may be deducted include expenses for basic funeral components such as the funeral home, burial plot and marker, bringing the body to the place of rest and even flowers and sometimes the refreshments after the burial or service.

As the State of California does not assess an estate tax, if your loved ones estate is above the Federal exemption, the only place to claim these expenses as deductions would be on an estate tax return.  If you have questions about the Federal estate tax or estate planning in general, call OC Wills and Trust Attorneys at (949)347-5256.

Friday, January 18, 2013

2013 Estate Tax & Gift Update

Once you’re worth more than a certain amount, your estate will have to pay estate taxes upon your death. Under the 2010 tax law, each spouse can transfer up to $5 million tax-free during life or at death. The tax rate for amounts transferred over the exemption was 35%.

If Congress had not acted, the tax-free amount would have been reverted back to $1 million per person and the rate for most estates would have gone up to 55%. This would have greatly affected the middle class by exposing them to the estate taxes. However, on New Year's Eve and New Year's Day, the Senate and the House of Representatives passed the tax law that made permanent the system that has been in effect for the past two years.

EXEMPTION?: $5.25 million per person

Congress did in fact act, and on January 11, the IRS announced that with the inflation adjustment, the estate tax exclusion amount for deaths in 2013 will be $5.25 million from the $5.12 million in 2012.


In 2011 ande 2012, the maximum tax rate was 35%.  If Congress did not act, the amount would have increased to 55%. However, with the new law, the estate tax rate for amounts transferred over the estate tax exemption was increased to 40%.


Yes, portability is still available for the surviving spouse. The new law has made portability permanent. This means that a surviving spouse can use the decedent spouse’s unused federal estate tax exemption, enabling them to transfer up to $10.24 million tax-free.

Wednesday, March 23, 2011

2011 Estate and Gift Tax Update

2011 Estate Tax Update
In December of 2010,  President Obama has reached a deal with Republicans on the status of the estate tax for 2011 and 2012.  The highlights of the bill include

  • The estate tax exemption for individuals is now 5 million dollars.  This is up from 3.5 million in 2009 and $600,000 in 2000
  • The lifetime gift tax exemption is now 5 million dollars.  This is up from 1 million dollars in 2010
  • The estate and gift tax rate is now 35%.  Thus any estates or gifts larger than 5 million dollars will be taxed at a rate of 35% for every dollar above the 5 million dollar threshold
  • Portability of the estate tax exemption: Married couples may not need to split up their estate when one spouse passes in order to take advantage of both spouses estate tax exemption.  In other words if you and your spouse are worth ten milllion dollars, the surviving spouse can still directly inherit the deceased spouses share of the estate without having to worry about not taking advantage of the deceased spouses's exemption.  When the surviving spouse passes, their estate can now not only use the current exemption but also the unused portion of the estate tax exemption not used by the deceased spouse to whom they were last married.
  • This new estate tax law will expire at the end of 2012 unless the government renews it and if they fail to do so, we will go back to the 1 million dollar exemption.

While I would not expect the estate tax exemption to fall after 2012, no one has an idea exactly what will happen after 2012.  With the rising deficit and sluggish economy it is possible that the estate tax exemption could fall after 2013 although it is more likely that they would increase the tax rate rather than reduce the exemption. With that in mind, it is still imperative that married couples make sure that their living trust is set up in such a way to minimize the impact of the estate tax regardless of what the exemption amount turns out to be.  In addition, those couples who set up their trusts when the estate tax exemption was $600,000 should also have their trusts reviewed as they may contain cumbersome provisions that are no longer necessary.

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