The information provided here is for informational
purposes only. It is not,
nor is it intended to be, legal advice.
You should consult an attorney for
individual advice regarding your own situation.
Attorneys in the Los Angeles Law Offices of
David A. Solitare are experienced in all types of estate planning
techniques and their tax implications. We begin by consulting with
you to analyze the extent of your assets and clarify your objectives
in conserving and transferring them. Based on your situation, objectives
and family dynamics, we identify estate planning options and help
you evaluate their benefits. We take care of the details to implement
your estate plan.
We realize that the distribution
of personal assets can be a source of friction in the best of family
and business situations. We assist you in thinking through steps
to avoid possible conflicts.
Our
services include Estate Planning, Post-Death Estate Administration,
and Probate Matters:
Estate
Planning
Wills
Living
Trusts
Irrevocable
Trusts
Life
Insurance Trust
Personal
Residence Trust
Grantor
Retained Income Trust
Charitable
Trusts
Powers
of Attorney
Asset
Management
Advance
Health Care Directive
Estate
and Gift Tax Planning
Life
Insurance Review
Family
Limited Partnerships
Charitable
Planned Giving
Post-Death
Estate Administration
and Probate Matters
Learn more about
Irrevocable
Trusts: Life Insurance Trust, Charitable Remainder Trust, Grantor
Retained Income Trust, and Qualified Personal Residence Trust.
Situation: Client is a Los Angeles double income married
couple in their early forties with three minor children. Their
estate is currently (2005) valued at $1,400,000 asfollows:
Cash
& Marketable Securities
200,000
Retirement
200,000
Life
Insurance
600,000
Home
Equity
400,000
TOTAL
$1,400,000
They expect their estate to continue to grow, especially in
light of Southern California real estate values. Their objective
is to minimize future estate taxes and transaction costs.
Solution: Establish a revocable living
trust (also known as an inter vivos trust or a family trust).
As the name suggests, the trust is revocable at any time. The
couple will be able to manage their own assets in the trust.
All trust assets pass to designated beneficiaries without probate.
Benefit: If the client's estate continues
to grow at a conservative 5% a year, while adding $10,000 to
savings annually through earnings, it will be worth $2,050,000
in 2011. If both spouses were to pass away at that time, with
a revocable living trust the client receives the following benefits
over the do-nothing approach:
$439,000
tax savings. In 2011 in a do-nothing approach, they would
pay $459,500 in estate tax under existing law. Their taxes would
be $20,500 with living trust.
$100,000
probate transaction costs savings, usually estimated at
5% of the estate's value. They would, however, have to pay some
transaction costs with the trust.
Estate assets
readily available to provide for their children. In a do-nothing
approach, their estate would likely be in probate for two years or
more, tying up many of the assets.
Children taken
care of by designated guardians. In a real do-nothing approach,
without a will, they would not have designated their preferred
guardian for their three children.
Privacy regarding
family wealth transfers. All probate actions are a matter
of the public record.
Benefit
if the clients are incapacitated:
A
designated trustee manages the assets.
If the clients are incapacitated without a trust, their children
will have to petition the court for a conservatorship to manage
the assets, a time-consuming and expensive process.
Situation:
Client is a married couple in their late thirties with two young
children in 2005. They are planning to have another child in 2006.
Client owns a Los Angeles business which they expect to grow at a rate of 10%
per year. They would like to transfer a portion of the ownership
of the businesses to their children now, while the value is relatively
low, to leverage the reduction in the size of their taxable estate.
If possible, they would like to make the gift to the class composed
of their children (including the planned child).
Solution: Establish an irrevocable trust. Use
the maximum statutory gift tax exclusion of $11,000 per donor per
recipient per year to transfer trust assets to the children. The
portion of the assets transferred, and any appreciation of those
assets, will be excluded from estate tax.
Benefit: The business is currently worth $2,500,000
and is expected to be worth about $5,000,000 in 2011. Each year
the two existing children are gifted a combined total of $44,000.
If the third child is born in 2006 and is gifted $22,000 annually,
the total value of the children's portion of the trust with 10%
appreciation is about $646,000 in 2011. If both parents were to
pass away at that time, the $646,000 would be excluded from
estate tax at a rate of 49%. The resulting savings is $316,000.