Northern Virginian

Settlement w/DOJ re Virginia's ADA compliance

noreply@blogger.com (Richard Mayberry) — Tue, 14 Feb 2012 02:15:00 +0000

"Governor Bob McDonnell announced today that a settlement agreement has been reached between the Commonwealth and the U.S. Department of Justice (DOJ) regarding Virginia's compliance with the Americans with Disabilities Act (ADA) and the 1999 Supreme Court decision in the Olmstead case. Major highlights include:

Expanding Community-Based Services

Adds 4,170 new Intellectual Disability (ID) waiver slots over 10 years to transition individuals currently living in training centers to community services and to provide for continued growth of slots for individuals in the community who are on the waiting list for waiver slots

Supporting Quality Community-Based Services

Strengthens quality and risk management systems for community services
Expands the role of licensing specialists and the responsibilities of case management services

Transitioning from Training Centers

Helps guide and support individuals moving from training centers to new homes by creating teams to facilitate communication and planning with individuals and families, and to resolve any problems delaying discharges Virginia is required to provide a plan to cease residential operations at four of Virginia's training centers. Plans have been developed and include timeframes for training center closures as follows: Southside Virginia Training Center in Petersburg (to close by June 30, 2014), Northern Virginia Training Center in Fairfax (by June 30, 2015), Southwestern Virginia Training Center in Hillsville (by June 30, 2018), and Central Virginia Training Center in Lynchburg (by June 30, 2020). Southeastern Virginia Training Center in Chesapeake will continue to downsize to 75 beds."

This year, Governor McDonnell included an additional $30 million in his proposed budget for the coming session to continue to meet the terms of the agreement. cite January 2012 VA Gov. McDonnell's Press Release, see link in header for litigation documents

Mayor Bloomberg Finds Simple Answer metro DC traffic deaths?

noreply@blogger.com (Richard Mayberry) — Thu, 29 Dec 2011 21:39:00 +0000

"...[NYC] Police Commissioner Kelly [said] "About a third of the summonses are related to seat belt enforcement and distracted driving, both life and death concerns. It’s also reflected in arrests for DWI. [emphasis added]

Mayor Bloomberg Announces All-Time Record Low in Traffic Fatalities in 2011

DOJ Legalizes Internet Gambling

noreply@blogger.com (Richard Mayberry) — Mon, 26 Dec 2011 18:35:00 +0000

The NYT reports "The Justice Department has reversed its long-held opposition to many forms of Internet gambling, removing a big legal obstacle for states that want to sanction online gambling to help fix their budget deficits." Reversing Justice's long standing position against Internet gambling, read DOJ political opinion, [or should I say DOJ determining political winds, then writing law that blows in the Democratic political direction in 2012 presidential elections]; like acid corrodes public confidence in the rule law. Instead AG Holder actions suggest American law is open to the highest bidder and most influential [perhaps e.g. casinos, NY governor, Nevada Senator and majority leader, off shore interests, Indian tribes, organized crime, foreign governments....who knows how many have a dog in this fight?] irrespective of the impact from the spread of a social cancer like gambling. In my view, Internet gambling will cost the states more in social welfare to respond to addictions/ruined lives of its citizen-gamblers than it will ever net from taxation. Read NYT article Online Gaming Loses Obstacle at Justice Department - NYTimes.com quote "“This is quite a Christmas present,” said I. Nelson Rose, a distinguished senior professor at Whittier Law School and a consultant to gambling companies and governments. “It says, ‘Keep it in your state and it’s legal'. Given the continuing budget crisis, and so many states looking for ways to raise money, it’s really a major decision.[emphasis added]’”" Professor Rose on his site Gambling and the Law, reasons "...the conclusion by the DoJ that the Wire Act’s “prohibitions relate solely to sport-related gambling activities in interstate and foreign commerce,” eliminates almost every federal anti-gambling law that could apply to gaming that is legal under state laws."

Northern Virginian

noreply@blogger.com (Richard Mayberry) — Wed, 21 Dec 2011 22:28:00 +0000

"Gifting around Tax" in 2012
Top Mistakes and Dangers in Gifting by Richard Mayberry[1]

The increase of the gift exemption to $5 million and the decrease of the tax rate of 35% for 2011 and 2012 provide golden gifting opportunities. For a couple, the gift exemption is $10 million. This generous gifting window ends on January 1, 2013, when it is scheduled to go back to $1 million with a tax rate of 55%. Although some are concerned that there may be a claw-back event for people giving above $1 million, many believe that this period is a great gifting opportunity.

Gifting now will reduce the income tax liability of the donor. In addition, the gift to an irrevocable family trust will help the accumulation of wealth if the trust income keeps on being reinvested in the trust. For instance, a $5 million gift would grow to $15 million by the time of the donor’s death. The estate taxes saved could be $5.5 million (55% of the $10 million of the appreciation).

It is important to remember that many states[2] do not have a gift tax whereas most states have an estate tax. Gifting now will prevent future state estate taxes.

This good-sized tax exemption creates an additional cushion for hard-to-value assets such as limited partnership interests or ownership interests in closely held businesses.

I. Understanding Which Gifts Are Subject to Reporting vs. Payment of Gift Tax

A. Gifts Subject to Gift Tax

The gift tax applies to transfers by gift of property (including money) without expecting to receive something of at least equal value in return, unless excluded.

A “gift” is a completed transfer of property made for less than adequate and full consideration in money or money’s worth. If any consideration is paid, then the gift is the difference between the value of the property transferred and the consideration furnished.[3] Once the gift is made, a tax may be imposed. The gift tax will apply whether the gift is in trust or otherwise, direct or indirect, and whether the transferred property is real, personal, tangible or intangible. Generally, a transferor’s donative intent is not essential to establish whether or not a gift was made; rather the facts and circumstances of a particular transfer determine whether a gift was made.

Because the gift tax applies only to completed transfers, it is important to determine whether a transfer is complete or incomplete. The transfer is deemed complete when the donor has fully relinquished dominion and control over the property transferred. Examples of uncompleted gifts: (1) the donor retained the power to revoke the gifts; (2) the donor retained the right to change beneficiaries; (3) the donor retained the power to change beneficial interests other than in accordance with a fiduciary power governed by an ascertainable standard.

A completed gift could be the following situation: The donor transfers property to himself/herself as trustee, receives income from the trust but retains no power over the property except in a fiduciary capacity, and retains no power of appointment over the property to direct to whom the property should go at the donor’s death. However, the Internal Revenue Service (IRS) requests that such complete transfers of property be included in the donor’s estate for estate tax purposes.

Therefore, taxable gifts consist of the total transfers or aggregate gifts made during the calendar year minus allowable exclusions and deductions. The current year’s tax is then reduced by the donor’s available “Applicable Credit Amount” to arrive at the actually payable tax.

The donor is primarily liable for the payment and filing of the gift tax return. However, if the donor does not pay the tax, the donee may become personally liable for the tax due and any interest accrued thereon. A gift tax return is due on April 15 of the year following the calendar year in which the gift is made. The donor’s executor or personal representative is responsible for filing the gift tax return, which is due on the earlier of the due date of the estate tax return, including extensions, or April 15 of the year following the year in which the gift is made.

Gifts made by either spouse to a third party will be treated as if made one-half by each spouse if the donor elects the gift-splitting. The following rules need to be followed:

ü Both spouses need to consent to split the gift

ü The spouses need to be married to each other at the time of the gifts and do not remarry during the remainder of the calendar year period

ü Both spouses were U.S. citizens or residents at the time of the gift

The increase in the gift tax exemption from $1 million to $5 million creates a great opportunity for income shifting. A wealthy taxpayer can transfer up to $5 million in assets to family members who are in lower income tax brackets than the donor.

B. Gifts Excluded from Gift Tax

The IRS accepts that people pay medical bills and tuition fees for other people without qualifying these payments as gifts. There is no cap on the amount transferred. In order to benefit from this status, the donor has to directly pay the bills or fees to the qualified institution or care provider.

a.) Tuition Fees

The exemption is limited to the payment of tuition fees; it does not include books, supplies or dormitory expenses. A qualifying educational institution is defined as one that: (1) maintains a regular faculty and curriculum; and (2) has a regularly enrolled student body at the place where its educational activities are carried out.

The donor can also enter into a contract with the institution to pay future tuition. The IRS has ruled that a grandmother would qualify for the exclusion under § 2503(e) for the payment in advance of the tuition of her grandchildren. The IRS requires that the payments could not be refunded and would be forfeited if the grandchildren ceased to attend the school.

b.) Medical Expenses

Medical care is defined to include expenses incurred for the diagnosis, cure, mitigation, treatment or prevention of disease, or for transportation for such medical care, and applies only to payments that have not been reimbursed by the donee’s insurance. In addition, the person who pays medical expenses for a third person may report the payment as a deduction on his/her own income tax returns. If the yearly medical expenses exceed 7.5% of the Adjusted Gross Income (AGI), then this deduction can be reported. This is very important when a family member pays a nursing home. Health care premiums and long-term care insurance are deductible medical expenses.

The person who pays tuition fees for a spouse or a dependent may also be eligible for an income tax deduction by filing Form 8917 with the federal income tax return.

c.) Gifts to Political Organizations

Gifts to a political organization – defined in section 527(e)(1) – for the use of the organization are not taxable. However, the organization’s primary purpose cannot be political; otherwise gifts would be taxable. See 26 U.S.C. §527(e)(1), which states as follows:

(e) Other definitions

For purposes of this section—

(1) Political organization

The term “political organization” means a party, committee, association, fund, or other organization (whether or not incorporated) organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures, or both, for an exempt function.

“Exempt function” is defined under 26 U.S.C. § 501(c)(4) as follows:

Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.

Stephanie Strong, in her recent article published by The New York Times[4], reported that the I.R.S. was enforcing the provisions mentioned above, and that the agency had contacted several big donors for political campaigns for a review of their contributions. The I.R.S. was reportedly verifying whether their contributions to nonprofit advocacy groups were actually tax exempt. Donald B. Tobin, a legal expert on campaign finance, expressed his opinion that a lot of people are misusing (c)(4) groups as a means of getting around campaign finance regulations.

d.) Using the Annual Exclusion

For gifts of present interest only, a donor may exclude the first $10,000 of gifts, adjusted to inflation, made to each donee during any calendar year. Currently the annual exclusion amount is $13,000. As a result, the first $13,000 of gifts made to each donee during the year is subtracted from the total gifts made during the calendar year in determining the amount of taxable gifts. If the donor is married, the annual exclusion may be aggregated per couple and increased to $26,000.

In addition, a donor can contribute a lump sum of $65,000 ($130,000 for married donors) to a 529 College Savings Plan. The IRS allows a donor to book his/her upcoming 5 years of annual exclusions for the beneficiary of the 529 College Savings Plan. The beneficiary will be able to take immediate advantage of the potential growth of the 529 Plan’s investments. If the donor were to die within this 5-year period, a portion of the gift may be includable in the gross estate of the donor.

e.) Annual Exclusion for Non-Citizen Spouse

As we will discuss in more detail below, a U.S. citizen spouse has an unlimited transfer deduction. A non-U.S. citizen is not allowed this deduction. In addition, the presumption that joint property with right of survivorship held between spouses is owned 50% by each, does not apply either. Upon the death of the first spouse, the IRS will presume that the joint property was owned 100% by the decedent. The alien spouse will have to prove his/her ownership interest in the property by tracing the origins of the funding.

The IRS, under Section 2523(i), allows an annual exclusion of $100,000, adjusted to inflation. The annual exclusion is in the amount of $134,000 for 2011. This is a good estate planning tool when at least one spouse is an alien and the other spouse has a higher income. By making an annual gift, the couple can rebalance their assets.

f.) Deductions for Transfer to Spouse

There is an unlimited marital deduction[5] for transfers to a U.S. citizen spouse. This unlimited marital deduction is recognized for transfers of joint property, but where a life estate or a terminable interest in property is created the deduction is generally not allowed. There is an exception to this rule. When the life estate is coupled with a power of appointment in the donee spouse, a marital deduction will be allowed if the following five (5) conditions are met:

· The donee spouse is entitled for his/her lifetime to all of the income generated by the property;

· The income is paid to the donee spouse at least annually;

· The donee spouse has the power to appoint the interest to himself/herself or his/her estate;

· The donee spouse’s power to appoint rests solely in the donee spouse; and

· The entire interest is not subject to a power in any other person to appoint any part to any person other than the donee spouse.

Therefore, a terminable interest in trust will be eligible for a marital deduction if it is a “qualified terminable interest” and satisfies all of the requirements set forth under IRC § 2523(f)(2) for “QTIP” treatment.

A non-U.S. citizen spouse may have the bequest qualifying for the marital deduction if the bequest is held in a Qualified Domestic Trust (QDOT). This trust postpones the payment of the tax due until the first spouse dies, whereas under the unlimited marital deduction the assets are transferred into the surviving spouse’s estate and the tax is calculated on the surviving spouse’s estate. Basically, the QDOT needs to have a U.S. trustee and when distributions of principal are made, estate tax needs to be paid.

g.) Deductions for Transfers to Charity

A charitable deduction is allowed for all transfers to or for the use of the public or any corporation exclusively established for religious, charitable, scientific, literary or educational purposes. The income tax charitable deduction[6] is parallel to the estate and gift tax charitable deductions.[7] However, the estate and gift tax charitable deductions for property passing outright to charity are unlimited and do not vary with the identity of the charity, so long as the charity is qualified, and are available for foreign charities.

Some donors are making a charitable gift through a “split interest.” A split interest gift is a gift made in part to a charity and in part to a non-charitable beneficiary. For instance, a property is transferred in trust to pay income to an individual for life with the remainder interest going to charity. No charitable deduction is allowed for a split interest gift unless the charity’s interest is in the form of a:

ü Charitable remainder annuity trust[8]

ü Charitable reminder unitrust[9]

ü Pooled income fund[10]

ü Charitable lead trust (in the form of either an annuity or unitrust)[11]

Section 725 of the Act provides tax-free distributions from individual retirement plans for charitable purposes. The termination date of IRC Section 408(d)(8) extended through December 31, 2011, is retroactive to January 1, 2010. For instance, a donor aged 70 ½ or over may make charitable donations up to $100,000 directly from Individual Retirement Accounts (IRAs) to charity. Donations made in January 2011 may be counted as having been made in 2010.

C. Taxable Gifts

1. All gifts [not excluded from gift tax] which exceed a person’s Unified Credit or “Applicable Exclusion Amount.”

2. The Applicable Exclusion Amount under the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” or “2010 Tax Act” for gifts made in 2011 and 2012 is $5 million per person. The $5 million Applicable Exclusion Amount is reached by both transfers triggering gift tax inter vivos and transfers subject to federal estate tax.

3. Uncertainty for 2013 Gifts: Uncertainty of Gift Rules Returns Similar to 2010 for Tax Planning.

i. The 2010 Tax Act “sunsets” on December 31, 2012. Effective January 1, 2013, the law reverts to the “Economic Growth and Tax Relief Reconciliation Act” or “2001 Tax Act.”

ii. The applicable exclusion under the 2001 Tax Act is $1 million. In 2013 the gift and estate tax will have separate annual exclusions: $3.5 million for estate tax and $1 million for gift tax.

iii. “Coupling” means a gift tax dollar paid to the state offsets federal gift tax liability.

a. Decoupled means a tax credit is not applied for payment of state gift taxes.

b. Only two states have a gift tax in 2011 – only Tennessee and Connecticut impose gift taxes.

c. Gifts are subject to Generation-Skipping Transfer Tax or GST.

1. The GST tax is applied to gifts or direct skips occurring at your death to skip persons.

2. The GST tax is calculated on the value of the gift, after subtraction of any allocated GST exemption, at the maximum estate tax rate for the year involved.

3. Each individual has a GST exemption equal to the applicable exclusion amount for the year involved. For 2011 the GST applicable exclusion is $3.5 million.

4. A direct skip is a transfer made during your life or occurring at your death that is:

a. Subject to the gift or estate tax

b. Of an interest in property, and

c. Made to a skip person.

i. A skip person is generally a person who is assigned to a generation that is two or more generations below the generation assignment of the donor.

ii. For instance, your grandchild will generally be a skip person to you or your spouse.

d. The GST tax is computed on the amount of the gift or bequest transferred to a skip person, after subtraction of any GST exemption allocated to the gift or bequest at the maximum gift and estate tax rates.

5. Seldom do the earth, moon, and stars align.

a. A married couple can gift their combined $10 million applicable exclusion and avoid a combination of the three taxes.

iv. The 2010 Act sets gift rules for two years but leaves the future unknown: is there opportunity in these murky waters?

1. Absent congressional action, the tax law reverts to the Tax Act of 2001 on January 1, 2013. If history is consistent in 2012 the Congress may or may not reach agreement on a new gift tax. If agreement is reached it may be similar in timing to the 2010 Tax Act which passed in December of 2010, leaving the entire tax year for 2010 difficult to plan.

2. Remember that a tax law may be effective retroactively, which makes 2012 especially difficult to project the terms of a new law.

3. Deficits pressure public policy to change revenue laws to exact greater taxes. This includes the gift tax.

4. Thus significant opportunity exists in these two years to reduce the size of an estate by inter vivos gifting which reduces the amount subject to federal estate tax.

4. Split Gifts. A couple can make a joint gift and use both of their annual exclusions and lifetime exemptions. Usually, if the couple elects gift splitting, they both must file their own individual gift tax returns. However, if only one spouse makes the gift and uses the exclusion of the other spouse, then the one spouse must file his/her own gift tax return, and his/her consenting spouse will sign on the consent line of the return.

5. Joint Tenancy. Please note that when a property in bought in joint names with right of survivorship while actually only one person contributed to the purchase, the purchaser has made a gift of 50% of the property to the other joint tenant. It is the same for a joint account, however, the gift is made when the donee draws on the account for his or her own benefit. The IRS defines this gift as “the amount that the donee took out without any obligation to repay you.”[12] The situation with a U.S. savings bond is the same in that the gift is made when the donee cashes the bond without any obligation to pay the donor.

6. Crummey Notices. The annual exclusion is only available for gifts of a “present interest.” An outright gift of a life insurance to a trust is a non-qualifying gift of future interest. Because of the Crummey demand powers, the future interest can be re-qualified into a present interest.[13] The trustee will give notice to the beneficiaries of the following rights:

ü Notice of the right to make a withdrawal

ü Notice of each gift to which the withdrawal relates

ü When there are minors, notice to the guardian or the minor’s parent

The IRS considers the notice as a fundamental requirement that cannot be waived by the beneficiary. It seems that an oral notice will probably suffice as long as the power holder actually is informed of his/her right. However, a written notice is preferable, particularly if the IRS asks for proof of the notices.

It is recommended that the notice provide the following:

ü Inform the beneficiaries that the only expected gifts to the trust are the premium gifts

ü Gives the beneficiaries a schedule of the dates on which premium gifts will be made to the trust

ü Informs the beneficiaries of their demand rights

ü Promises supplementary information only if there are gifts not made according to this schedule

The notice is not required to be sent to the beneficiary who is also the trustee.

It is required that the demand period be long enough to give the beneficiary a meaningful interest in the property given to the trust. The beneficiary must be given a realistic opportunity to actually withdraw the settlor’s contribution. In Estate of Cristofani v. Commissioner[14] the Tax Court held that a 15-day withdrawal period was sufficient.

The common gift tax pitfall in Crummey powers is that the trustee forgets to send the notices or we don’t have records of the notices. It seems that may not be a problem anymore. In Estate of Turner v. Commissioner[15], the tax court held that the right to withdraw a share of the trust assets equal to the value of the contribution was sufficient. In this case, the trust gave the beneficiaries the right to withdraw. The settlor never made payments to the trust. Instead the settlor directly paid the premiums on the policies to the insurer. The IRS denied the annual exclusion for the direct payment of the insurance premiums. The tax court stated that the fact that “some or even all of the beneficiaries may not have known they had the right to demand withdrawal” did not prevent the creation of a present interest.

There are three kinds of Crummey powers: (1) five-or-five Crummey powers, (2) Crummey powers with testamentary control, and (3) hanging Crummey powers.

The most common way to eliminate the beneficiary’s gift tax problem is through limiting each demand power to a noncumulative annual right to withdraw the greater of $5,000 or 5 percent of the value of the trust funds. Section 2514(e) specifically provides that the lapse or release of a general power of invasion is not a taxable gift except to the extent that it exceeds the greater of $5,000 or 5 percent of the trust funds from which it could have been satisfied.

However, this power restricts the donor’s annual exclusion to $5,000 per donee. If the trust has a principal value of more than $100,000, the 5 percent alternative limitation would increase the demand limitation, but few life insurance trusts have such significant principal values. Thus the $5,000 limitation is commonly applied, and it may not shelter from gift tax all of a grantor’s gifts to a life insurance trust. To the extent that these gifts are not covered by the $5,000 demand powers, the grantor must file gift tax returns and expend his or her unified credit or pay a current gift tax.

In addition, this power is required to be measured annually. Since the demand power is only exercisable after the receipt of notice of the gift, it compels the donor to make gifts before December 1 in order to leave enough time for the power to lapse by the end of the year. Furthermore, it seems that the power shall lapse and cannot be released. A release could be viewed as a taxable event.

Finally, multiple demand powers held by the same beneficiary must be aggregated.

7. Importance of an Appraisal. It is important to remember that every gifted real estate property needs to have an appraisal. The tax assessed value is not sufficient. Any gift of a work of art needs to be appraised. Finally, any gifts of an interest such as a partnership interest, an interest in an LLC or a business needs to be appraised. The cost of an appraisal can be pretty high and takes time. A lot of information needs to be provided to the appraiser. You have to ensure that your client is willing and ready to provide such information and to pay for the appraisal.

Discounts for an interest in a partnership, family limited partnership or other businesses are often the cause of an audit. Therefore, caution should be taken on the level of discounts. Special valuation rules for Grantor Retained Annuity Trusts (GRATs) and Qualified Personal Residence Trusts (QPRTs) are also strictly reviewed by the IRS.

On the other hand, the IRS usually does not challenge discounts applied to tenancy-in-common interests.

D. Generation Skipping Transfer Tax (GST Tax)

The first Generation-Skipping Transfer Tax was enacted by the 1976 Act. This tax was created in order to prevent the avoidance of transfer taxes over a period of successive generations. The tax was tremendously complex. The 1986 Act repealed it and replaced it with a new transfer tax applicable to all generation-skipping transfers whether by way of a trust, trust equivalent, or direct transfer. The Generation-Skipping Transfer (GST) Tax applied to estate tax and gift tax. This tax was created for people dying after October 22, 1986.

The GST tax rate for 2010 was still 0%. The Tax Act provides the same increase of tax exemption and tax rate for years 2011 and 2012: $5 million exemption (adjusted to inflation) and 35% tax rate. The exemption is scheduled to be reduced in 2013 to $1 million with a 55% tax rate. However, unlike the unused estate tax exclusion, an unused GST exemption at the first spouse’s death is not transferrable to the surviving spouse.

As a result of the increased exemption of the gift and GST tax, a gift can be made to a trust that could be structured to continue for multiple generations (“Dynasty Trust”). The GST exemption to the gift can be allocated to the trust so that the trust would never be subject to a GST tax, even though it may extend for multiple generations.

The tax is imposed only on the value of the interests in property that actually pass to certain transferees, who are referred to as “skip persons.”

1.) Generation-Skipping Transfers

The GST tax brings new concepts such as “transferor” and “generation.” Under I.R.C. Section 2652(a) the transferor is the donor or the decedent. The generation is defined among the family lines. There is the generation of the transferor which includes the transferor, the transferor’s spouse, and the transferor’s siblings. The children are part of the next generation. The grandchildren are part of the following generation. If the transfer is made outside the family, generations are determined by ages. A person who was born not more than 12½ years after the decedent is in the same generation of the decedent. A person born more than 12½ years, but not more than 37½ years, after the decedent, is in the first generation younger than the decedent. A similar rule applies for a new generation every 25 years. Therefore, a skip person is a natural person who was born more than 37½ years after the decedent.

There are three types of generation-skipping transfers:

(1) taxable terminations,

(2) taxable distributions, and

(3) direct skips.

A taxable termination occurs upon the termination of an interest in a trust. After the termination event the skip person holds all interest in the trusts. For instance, a father created a trust, giving income for the lifetime of his daughter and the remainder to his granddaughter.

A taxable distribution exists when there is a distribution of principal or income from the trust to a skip person. For instance, a mother created a trust providing payment of income and principal to her children and grandchildren. What is collected by the grandchildren is subject to GST tax.

A direct skip is when property is transferred without compensation to a skip person. Among family members, a skip person would be a grandchild. For a non-family member, a skip person is a person of two or more generations below the transferor.

2.) Married Couple Special Rule

A married couple may elect to treat generation-skipping transfers as being made one-half by each spouse. The QTIP election used for estate tax purposes is separate and ignored for the GST tax. The fiduciary may allocate part or all of the decedent’s GST exemption to the property. Because each person is entitled to a GST exemption, indexed for inflation, the GST election on a QTIP trust allows using two times the GST exemption. This is a reverse of the QTIP election.[16]

3.) Tax Allocation

The amount of tax imposed on any generation-skipping transfer is determined[17] by multiplying the “taxable amount” by the “applicable rate.”

3.1.) Taxable Amount

The taxable amount varies depending on the transfer. For a taxable distribution transfer, the taxable amount is the transfer received by the transferee, reduced by the expenses incurred in the determination, collection, or refund which Chapter 13 tax imposed. For a taxable termination transfer, the taxable amount is the value of property received at the termination reduced by deductions similar to Section 2053. For a direct skip transfer, the taxable amount is the amount received. The taxable distribution transfer and the taxable termination transfer are tax-inclusive transfers while the direct skip transfer is a tax-exclusive transfer. In a tax-inclusive transfer the tax is calculated on the amount of the transfer. The transferee receives the net of the transfer, therefore less than the gross amount of the transfer.

For instance, if the transfer amount is $2 million and the tax rate is 45%, the transferee will receive $1,100,000 [$2 million – ($2 million x 45%)]. In a tax-exclusive transfer, the transferred amount is what the transferee will receive. If the transferee receives $1.1 million, the tax to pay out of the gift is $495,000. The cost of the gift is $1,595,000. However, for inter vivos transfers to a direct skip, the IRS considers the transfer a tax-inclusive/tax-exclusive transfer. In this situation, the payment of tax is considered to be an additional gift. An additional $222,750 should be paid. The total cost of the $1.1 million gift is $1,817,750.

3.2.) GST Exemption

In 2011 and 2012, the GST exemption is $5 million with a 35% tax rate. The exemption is scheduled to be reduced to $1 million in January 1, 2013 with a 55% tax rate. Because the exemption is indexed for inflation, the GST exemption presumably will be the 2013 amount of the GST exemption: $1,136,000. There is currently no credit for state tax paid with respect to direct-skip, generation-skipping transfers.

3.3.) Applicable Rate and Ratio

The applicable rate of tax[18] is defined as the maximum transfer tax rate then in effect multiplied by the inclusion ratio.

Each transfer has an inclusion ratio of one if none of the transferor’s GST exemptions is allocated to the trust or transfer. This exclusion ratio can be reduced by any GST exemption allocated. For instance, John transfers $4 million to an irrevocable trust which provides that income is to be accumulated for 10 years. At the end of the term, the accumulated income is to be distributed to John’s daughter, Mary, and the trust principal is to be paid to John’s granddaughter, Suzie. John allocates $3.5 million of John’s GST exemption to the trust on a timely filed gift tax return. The applicable fraction with respect to the trust is 0.88 [$3.5 million/$4 million]. The inclusion ratio is 0.12 (1.00 - 0.88). If the maximum federal estate tax rate is 45% at the time of the GST, the rate of tax applicable to the transfer will be 0.054.

3.4.) Transfers Subject to an Estate Tax Inclusion Period (ETIP)

If the transfer to a direct skip was received within less than 3 years from the date of death of the donor, the direct skip is treated as having been made at the end of the ETIP rather than at the time of the actual transfer. Transfers to be reported on an estate tax return, Form 706, would be transfers where the ETIP ends because of the death of the donor. For instance, the donor reserved a life estate on the gift of a real estate property. When the close of the ETIP is due because of a different event than the death of the donor, then the transfers should be reported on the Gift Tax Return, Form 709.

3.5.) President’s 2012 Budget Proposals

The President’s 2012 budget proposal includes a 90-year limit on the GST inclusion ratio. The proposed legislation states that on the 90th anniversary of the creation of a trust, the GST exclusion allocated to the trust would terminate. The inclusion ratio would move to one.

E. Simplifying the Gift Tax Rules

a. Generally, the following gifts are not taxable gifts:

i. Gifts, excluding gifts of future interests, that are not more than the annual exclusion for the calendar year

ii. Tuition or medical expenses you pay directly to a medical or educational institution for someone

iii. Gifts to your spouse

iv. Gifts to a political organization for its use, and

v. Gifts to charities.

b. File a gift tax return if any of the following apply:

i. Gifts to at least one person (other than spouse) exceed the annual exclusion for the year

ii. Gift-splitting by married couple.

Gifts to third persons (other than citizen spouse) of a future interest that he or she cannot actually possess, enjoy, or receive income from until sometime in the future.

iii. Gift to a citizen spouse of an interest in property that will be ended by some future event.

F. State and Gift tax systems unified.

Pay gift tax on gifts which exceed the annual applicable exclusion when added with any estate tax payable on an estate or GST.

II. Failure to Gift Tax High Net Worth Taxpayers in 2011 and 2012

A. Couples can make, without incurring gift tax, five time more gifts than prior [2010] or future laws [2013] permit. Also any gift tax is subject to a significantly lower rate than before.

B. “Super-Sizing” Gifts

1. For individuals, the gift-tax applicable exclusion for 2011 and 2012 jumps to $5 million from $1 million.

2. For couples, the jump is to $10 million from $2 million.

3. These gifts are tax free because of the enhanced annual exclusion “...meaning people can give away that much without paying a penny in taxes...5.4 million households had net worth of $2 million or more [last measured 2007 by Federal Reserve].”See generally January 29, 2011, Wall Street Journal Weekend Investor, "The $5 Million Tax Break".

4. Moreover, the tax rate on large gifts fell from 55% to 35%.

5. Prudent planning dictates undertaking a gifting strategy study for taxpayers that fit these profiles.

a. Net worth approaches or exceeds the estate tax exemption of $5 million for a single taxpayer and $10 million for couples.

b. Net worth approaches or exceeds $1 million and $2 million for married couples, that has a high degree of risk tolerance.

i. One could speculate that Congress will reduce the gift tax to $1 million in 2013.

ii. Consideration factors of age, health, and intent of taxpayer and a. projected speed of appreciation of asset gifting are some of the guiding lights.

6. The taxpayer must be mindful that gifts are irrevocable and the donee cannot be lawfully compelled to return part or all of a gift.

a. Changed circumstances, such as living longer than the life expectancy of the taxpayer or incurring more medical expenses than planned for, militates the risk toleration of the taxpayer be carefully gauged.

b. Danger of good faith and loving acts, like gifting to children and grandchildren, can leave taxpayer destitute.

c. Refusal or inability of children or grandchildren donees to return gift could end up destroying family harmony – a goal loftier for most than tax avoidance.

7. Other Risks

a. Future Law Lowering Applicable Exclusion

i. Congress could lower the gift tax applicable limit as well as the estate tax and GST exclusion.

ii. The new law would be applied in accordance with the law at the time of death, e.g., gift in 2012 and death in 2014.

iii. Retroactive application of reduced tax exclusion may lead to an unforeseeable planning result – greater taxes than if the gifts had not been made.

iv. A law effective in 2013 or later could apply to all past gifts, or the law might "claw back" gifts greater than the exemption at the time the donor dies.

b. Loss of step up

i. If donee plans to sell the gifted asset, the cost basis is the donor’s cost of purchase of the asset.

ii. A transfer of the same asset at death has its cost basis stepped up to the fair market value at time of death.

iii. The advantage of aggressive gifting in 2011 could lead to a lower net to the donee.

iv. For example, the writer has probated or administered many estates involving homes in Northern Virginia bought after World War II with a cost basis of $35,000. Even in the down 2011 market, the home’s Fair Market Value typically exceeds $400,000. The step up is an important part of the gifting calculus.

III. Jeopardizing Medicaid Benefits

A. Much confusion for taxpayers between IRS gift rules and Medicaid rules

Much confusion exists for taxpayers between the IRS gift rules and Medicaid rules, coupled with the desire to move assets so they don’t all go to the nursing home. For example, many clients have told the writer their belief that “gifts excluded from gift tax don’t count towards the Medicaid Penalty.” This is incorrect.

B. Medicaid qualification

Medicaid qualification requires meeting a medical test and financial test. A single person that requires long term custodial care [meets medical test] must spend down all assets until $1,000. A couple’s financial test is more complicated. For purposes of the study of gifting mistakes, assume all the income of the institutional spouse goes to the nursing home, and the healthy spouse spends down until left with approximately $100,000 in nonexempt assets.

C. Gifts and Medicaid

All gifts by Medicaid applicants will lead to a disqualification for Medicaid. The penalty period is computed by dividing the value of the gift into the average cost of nursing care in your community. Thus heartfelt gifts, including generous Christmas gifts, can leave the donor with funds to pay the nursing home and not eligible to receive Medicaid during the penalty period.

D. Dangers of gifting assets outright to children

1. There is a risk of not qualifying for Medicaid by failure to meet the financial test. Past gifts are treated as though still in custody of the Medicaid applicant in computing spend down.

2. Risks Emanating From Donee

a. Once the gift is in the donee’s asset, it may be subject to donee’s creditors, i.e., hitting a bus full of lawyers going to a Washington ABA meeting could lead to the loss of gifted assets.

b. Adult children may divorce, die, owe taxes, be sued, file bankruptcy or be spendthrifts, and the gifted assets may become dissipated.

3. One Solution - Family Protection Trust

a. Estate Plan Design: irrevocable, grantor, income only trust reserving powers to change beneficiaries with lifetime power of appointment.

b. Assets owned by trust, not children, and not subject to children's creditors-only trust.

c. Grantor receives income so assets invested in insurance company annuities or bank CDs come back to parent; also used to pay taxes on real property in trust.

d. Home put into trust and trust maker retains right to occupy home for life.

e. Gift tax return timely filed, disclosing transfers to trust.

f. Assets remaining at death are legacy to beneficiaries of the trust, usually children.

g. Trustees are adult children with full discretionary powers to make distributions.

h. Grantors maintain a lifetime general power of appointment reserving the right to direct trust assets to third parties, often charities, at death.

i. Adult children are trustees and death beneficiaries.

j. Permits parents to live in home for rest of life and transfer residence to children with step up in cost basis. Compare to the loss of step up in an outright gift.

4. Trust Protection Solution

1. Avoids risk of dissipation of gifts by adult children creditors.

2. Takes home out of estate for Medicaid qualification if gift to trust occurs 5 years prior to application of Medicaid.

3. Not for everybody.

i. Requires taxpayer to understand complicated irrevocable grantor trust with power of appointment.

ii. Requires parents to agree to give up control of home prior to death.

IV. Inaccurate Beneficiary Designations

A. Major danger missed by most.

1. No copy or inability to locate copy of beneficiary designation leads to probate

court.

2. Beneficiary designations do not take into account the owner’s consideration and skew the donor’s intent. For example, a living trust provides for equal shares to descendants per stirpes and $100,000 insurance policy designated beneficiary is spouse first and youngest child second for college tuition. Spouse predeceases policy owner, resulting in unequal distribution.

B. Avoid danger by updating all beneficiary designations when the estate plan is created and at each update. Writer recommends updating every three years and finds historical trend of clients is updating on a five-year basis.

C. Rules to Follow

1. Always update beneficiary designations when updating estate plan.

2. Store beneficiary designations in a safe place where they can be located.

3. Ensure design of an estate plan to meet taxpayer’s goals that incorporates the impact of beneficiary-designated assets on the ultimate distribution.

[1] Presented by Richard Mayberry, Esquire, www.McLeanEstatePlan.com, (703) 714-1554 nationwide CLE webinar 12.14.11.

[2] Connecticut and Tennessee have a gift tax.

[3] IRC §2512(b), Reg. § 25.2512.8

[4] “I.R.S. Moves to Tax Gifts to Groups Active in Politics” by Stephanie Strom, The New York Times, May 12, 2011.

[5] IRC § 2056 & 2523(a).

[6] IRC § 170(f)

[7][7] IRC §2055 & 2522

[8] See definition under IRC §(d)(1)

[9] See definition under IRC § 664(d)(2)

[10] See definition under IRC §(c)(5)

[11] See IRC § (f)(2), 2055(e)(2), 2522(c)(2)

[12] 2010 Instructions for Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, IRS.

[13] Crummey v. Commiss’r, 397 F2d 82 (9th Cir. 1968)

[14] Estate of Cristofani v. Comm’r, 97 TC 74 (1991)

[15] T.C. Memo. 2011-209 (Aug. 30, 2011)

[16] See I.R.C. Section 2652(a)(3).

[17] See I.R.C. § 2602.

[18] See I.R.C. § 264(1a).

Continuing Debate re legal Education

noreply@blogger.com (Richard Mayberry) — Tue, 13 Dec 2011 23:27:00 +0000

"The question asked by...this newspaper is whether what my students have learned will be of any help to them when they enter practice. At first glance the answer seems to be “no.....[However, a closer look may lead to a different answer because]... knowledge is reflective. It is developed not on the wing, but in a course of study. It is academic knowledge in the best sense, knowledge that becomes yours by pondering abstract, hypothetical questions; and while the answers to those questions may not have an obviously direct relationship to a particular moment in practice, moments in practice will be illuminated by them in ways of which the practitioner may sometimes be unaware...The emphasis on practical short-term payoffs has already laid waste to the traditional project of the liberal arts, which may not survive. Is the law next? "

Teaching Law - NYTimes.com

December 12, 2011NYT Opinion By Law Professor STANLEY FISH

Write your own will? Consumer Reports tested 3 software products that claim to help you

noreply@blogger.com (Richard Mayberry) — Wed, 23 Nov 2011 20:41:00 +0000

Friends,

All lawyers have an interest in the extent citizens can help themselves on professional matters by using the Internet. A number of bar associations and class action plaintiff lawyers have sued one site in particular Legal Zoom. California based with Bob Shapiro of OJ fame out front, Legal Zoom appears to attack attention regular. North Carolina State Bar Claims LegalZoom Practices Law Without a License This is the second of a series I will write from time to time to respond to the consumers question whether a lawman can handle his own legal matters with a self help site and without incurring legal fees..

Currently, the middle class is undeserved in terms of access to lawyers. As a practicing lawyer, I would like to believe this disparity can be equalized by use of legal self-help sites, like www.Nolo.com. Unfortunately, the answer is far from clear today. However over the next 5 years or so I hope to report the problems with self help sites I will be blogging about have been resolved. My gut says it will happen; but many hurdles have to be resolved before the risk of injury to the do-it-yourselves outweighs legal fees. One purpose of the blog is to identify the hurdles for the uninformed non-lawyer reader.

Legal Software Products

I good place to review the self-help legal software products is the in 2011 issue of Consumer Reports which identifies the "big 3" - LegalZoom, Rocket Lawyer, and Quicken WillMaker- in the business and discusses each in some detail. Professor Beyer, someone whom I hold in the highest regard within our trusts and estate national bar concludes: "All three are better than nothing if you have no will. But unless your needs are very simple—say, you want to leave everything to your spouse with no other provisions—none of them is likely to meet your needs."

all the best, and have a great Thanksgiving 2011! Dick Mayberry

Top Mistakes and Dangers in Gifting | Live CLE Teleconference | 58435ER

noreply@blogger.com (Richard Mayberry) — Fri, 18 Nov 2011 16:35:00 +0000

Register for Wednesday, December 14, 2011National Program on End of Year Gifting Strategies

Session Time: 10:00 AM - 11:30 AM Eastern

Presenter: Richard Mayberry, Esquire

practical introduction to pitfalls of gifting, including gift tax planning principles and procedures, jeopardizing Medicaid benefits and handling inaccurate beneficiary designations. Whether you're just beginning your estate planning practice or are an experienced attorney, you'll find value in this fundamental legal course that will steer you clear of common mistakes made in this tricky area of estate planning. Gain invaluable strategies to help you properly protect your client to the best of your ability. Enroll today!

Assess the client's financial situation to determine whether a gifting plan will help.
Avoid simple but costly mistakes such as failure to gift high net worth taxpayers in 2011 and 2012 and jeopardizing Medicaid benefits.
Provide your client with a solid plan: learn what types of assets cannot be gifted.

Misunderstanding Which Gift Subject to Reporting vs. Payment of Gift Tax
1. Gifts Subject to Gift Tax
2. Gifts Excluded from Gift Tax
3. Taxable Gifts
4. Simplifying the Gift Tax Rules
5. State and Gift Tax Systems Unified
Failure to Gift High Net Worth Taxpayers in 2011 and 2012
Jeopardizing Medicaid Benefits
Inaccurate Beneficiary Designations

Top Mistakes and Dangers in Gifting | Live Teleconference | 58435ER

Occupy NoVa Will Snarl Traffic on Thursday afternoon and evening

noreply@blogger.com (Richard Mayberry) — Wed, 16 Nov 2011 23:30:00 +0000

ARL Now points us to another march that could add to commuting issues on Thursday: Occupy Northern Virginia, a group that hopes to march from Ballston to the Key Bridge, according to the schedule on the group’s site.

This march, which would begin at 3:30 p.m. and meet up with the other march at 5 p.m., could cause traffic issues on Wilson and Clarendon boulevards before heading north on Fort Myer Drive in Rosslyn. (The group was kind enough to post a map on their site, so if you commute in the area you can just check out the map to see what roads to avoid.)

March could snarl traffic on Thursday afternoon and evening - Dr. Gridlock - The Washington Post

'Occupy NoVA’ Plans March | ARLnow.com

noreply@blogger.com (Richard Mayberry) — Wed, 16 Nov 2011 23:22:00 +0000

New Development

"A national day of action is taking place around the country in the Occupy movement,” Occupy NoVA said on its website. “We are going to be marching on this day in solidarity with Occupy DC, from Welburn Square to join in a Labor-Community-Occupy Day of Action and March on the Key Bridge in Rosslyn/Georgetown in protest of the deterioration of our public infrastructure and public"

DEVELOPING — ‘Occupy NoVA’ Plans March on Thursday | ARLnow.com

Supreme Court Review Healthcare Law

noreply@blogger.com (Richard Mayberry) — Mon, 14 Nov 2011 19:18:00 +0000

Joe Paterno’s Grand Experiment Meets an Inglorious End - NYTimes.com

noreply@blogger.com (Richard Mayberry) — Wed, 09 Nov 2011 15:58:00 +0000

One man's view of a legend: Football excellence and academic integrity coexisted with Coach Joe Paterno for 40+ years. His legacy of “Success With Honor” is tested at the end of his career by a sexual abuse scandal whose scope is unknown. A Greek tragedy may have been written for one of the most respected coaches in all sports. Paterno retires at the end of the 2011 football season.

Joe Paterno’s Grand Experiment Meets an Inglorious End - NYTimes.com

How and When Did Daylight Saving Time Start?

noreply@blogger.com (Richard Mayberry) — Fri, 04 Nov 2011 23:26:00 +0000

Ben Franklin—of "early to bed and early to rise" fame—was apparently the first person to suggest the concept of daylight savings, according to computer scientist David Prerau, author of the book Seize the Daylight: The Curious and Contentious Story of Daylight Saving Time.

While serving as U.S. ambassador to France in Paris, Franklin wrote of being awakened at 6 a.m. and realizing, to his surprise, that the sun would rise far earlier than he usually did. Imagine the resources that might be saved if he and others rose before noon and burned less midnight oil, Franklin, tongue half in cheek, wrote to a newspaper.
For most Americans, daylight saving time 2011 ends at 2 a.m. on Sunday, November 6, 2011, when most states fall back an hour. Time will spring forward to daylight saving time again on Sunday, March 11, 2012, when daylight saving time begins again.

Attribution National Georgraphic

Post limited to Scribners, like elder lawyers

noreply@blogger.com (Richard Mayberry) — Thu, 03 Nov 2011 16:09:00 +0000

On whether to put one space or two spaces after a period in a sentence?

"Two spaces is wrong. ... The reason two spaces were put into practice was because of the manual typewriter. And there was a type of font on the manual typewriter called 'monospace font,' which means the space between every letter was the same, and the width of every letter was the same. So in that type of font, it looked slightly more readable to have two spaces between sentences than it did to have one space. But when we switched to computers, we went back to using the kinds of fonts called proportional fonts. With proportional fonts, every letter has a different width that corresponds to what it is used for. Because every letter has a different width, the space after a period has its appropriate width when you use just one [space after a period]. So that's how many you use. ... The two-space rule is really a holdover from typewriters. The reason you were taught it in school was because your teachers learned to type on typewriters but we no longer type on typewriters." Attribution; NPR [go bottom of page] and for more on this frivolous subject that I as an estate planning and elder lawyer find fascinating read Slade.

In the future , will Richard Mayberry living trusts have one space or two spaces after a period in a sentence? We will have to wait and see, but I am inclined towards one space for space efficiency.

What a Deal!

noreply@blogger.com (Richard Mayberry) — Mon, 31 Oct 2011 15:43:00 +0000

Get Planning Done Before Holidays hit!

Writing your own will test of software products

noreply@blogger.com (Richard Mayberry) — Fri, 21 Oct 2011 17:40:00 +0000

Attribution: Consumer Reports in Money Adviser issue: July 2011

A well-written will allows your estate to be distributed legally and efficiently, costing your beneficiaries the least money and heartache. But you don't need an attorney to write a will. A number of software providers promise to help you draft a legal will for far less than you'd pay a lawyer.

Like tax software, these products guide you through an interview to draw out your intentions regarding, say, how you want your property distributed and who you want as executor of your estate.

We tested three electronic offerings: LegalZoom, Rocket Lawyer, and Quicken WillMaker Plus. The first two allow you to create a will online; the third is available as either a download or a CD-ROM (see Product details). First we created profiles of individuals from three different New York families. Our reporter then completed the interviews as if she were those individuals, drafting nine wills in all.

We sent the wills and interview records—with product identification hidden—to Gerry W. Beyer, a professor at the Texas Tech University School of Law in Lubbock who specializes in estates and trusts. Beyer judged each product on how comprehensive the interviews were and how much information was provided, and on the overall quality of the wills. Our reporter evaluated the software for ease of use. See How 3 products handled 3 scenarios. for more details on the scenarios and how the products worked.

All three are better than nothing if you have no will. But unless your needs are very simple—say, you want to leave everything to your spouse with no other provisions—none of them is likely to meet your needs. And we found problems with all three:

Outdated information

We tested the products in mid-March, and two referred to federal estate-tax limits that were outdated as of Jan. 1.

Insufficient customization

The products rarely referred in detail to state estate law. So they offered no guidance on how states treat wills that, for instance, fail to leave property to children born after a will is signed. (WillMaker Plus doesn't do Louisiana wills because of the state's unique estate laws; Rocket Lawyer provides a Louisiana will but recommends that consumers consult a lawyer.)

Too little flexibility

We found it hard to distribute property the way we wanted to. WillMaker Plus, for instance, provided arbitrary age and time limits for some provisions. The program wouldn't let a child's trust go beyond age 35 or set up conditions on bequests in a will, such as stipulating that a child receive money only after finishing college.

Too much flexibility

After you finish the Rocket Lawyer interview, the program allows you to edit your completed will. LegalZoom lets you put anything you like in the special-directives section. Both features could lead you to add clauses that contradict other parts of your will.

Incompleteness

None of the packages created a special-needs trust. Only WillMaker Plus gave information on registered domestic partnerships and included a pet trust in its main interview. None of them touched on "digital assets," such as ownership and management of server-stored documents and photos. And none dealt with specifics on compensating executors. (LegalZoom sells a stand-alone pet-protection agreement. Rocket Lawyer says it's adding pet and digital-assets options this summer. And WillMaker Plus 2012 will address digital assets.)

No way to handle some tax issues

None of the products explained how to structure trusts to reduce estate-tax liability. With the current federal estate-tax floor mirrored in many state laws—$5 million per person, $10 million per couple—most people won't have to worry about federal or state estate taxes. But some states set limits far lower. New York, for instance, levies estate tax on assets of $1 million or more.

Educational tool

WillMaker Plus was the best of the three. Beyer found it to be competent—though far from ideal—for drawing up a simple will. Rocket Lawyer also made a good simple will, provided comprehensive information, and had an interview that handled most needs. But our expert said consumers would be better off consulting an attorney for more complex cases.

We found one good use for these products: education. Going through the interviews forced our reporter to think about issues like, "Who should be the alternative executor?" and "Who gets your estate if your spouse and kids don't survive you?" The information is more digestible in interview form than as straight estate law.

If you want to save time at an attorney's office—and unless you're paying a flat fee, time with a lawyer means money—take a practice run on either Rocket Lawyer or WillMaker Plus. Use the links and pop-ups to get more information. And you can use the prompts to prepare the inventory lists and instructions your beneficiaries and executors will need in your absence. Then call an attorney.

Product details

Each product used for this test included guides for executors and guardians; checklists or instructions on notarizing, storing, and updating documents; and worksheets for property inventory.

Quicken WillMaker Plus 2011

Price

$25 to $40 as a CD-ROM (Windows only) from various retailers or $38 as a download fromwww.nolo.com.

How it works

Create and store documents on your computer, and print.

Includes

Wills and other estateplanning documents for an unlimited number of people, a letter discussing final arrangements, and an information letter for caregivers and survivors.

Help

Includes a comprehensive legal manual and free estate-planning news and information atwww.nolo.com.

LegalZoom

Price

$69 for the basic product.

How it works

Pay after creating documents online at www.legalzoom.com. You’ll be mailed a printed copy, which the company says is checked by its staff for spelling, grammar, and consistency (but not for legal issues). Our printed wills arrived in about nine days.

Includes

A will, a statement of interment, and a comprehensive estate-planning brochure. For $10 more you can get the “Legal Advantage Plus” service, which includes faster processing of the will and legal advice for 30 days (available in 35 states; renewable monthly for $14.99). Also available: a living trust ($249 to $269); living will ($39 to $49); power-of-attorney form ($35 to $45); and pet-protection agreement ($39 to $79).

Help

Online education center, FAQs, glossary, and phone assistance.

Rocket Lawyer

Price

Free for seven days. After that, $19.95 a month or $119 a year for the Basic Legal Plan.

How it works

Pay after creating documents online at www.rocketlawyer.com. Store online; print them yourself.

Price

The Basic Legal Plan lets you create an unlimited number of estate documents plus dozens of other personal legal forms.

Help

Free library of estate-planning articles, an attorney directory, and “Just Answer” (not tested), a pay-per-question e-mail service. Live Chat technical help on weekdays from 6 a.m. to 6 p.m. Pacific Standard time. (It was not available the day we called at 7:48 a.m.)

This article appeared in Consumer Reports Money Adviser.

Writing your own will test of software products

Ten Things the IRS Wants You to Know About Identity Theft | Daniel Stoica Accounting Professional

noreply@blogger.com (Richard Mayberry) — Fri, 14 Oct 2011 23:12:00 +0000

Criminals use many methods to steal personal information from taxpayers. They can use your information to steal your identity and file a tax return in order to receive a refund. Here are 10 things the IRS wants you to know about identity theft so you can avoid becoming the victim of a scam artist.

Identity thieves get your personal information by many different means, including stealing a wallet or purse or accessing information you provide to an unsecured Internet site. They even look for personal information in your trash. They also pose as someone who needs information through a phone call or e-mail.
The IRS does not initiate contact with a taxpayer by e-mail.
If you receive an e-mail scam, forward it to the IRS at phishing@irs.gov.
If you receive a letter from the IRS leading you to believe your identity has been stolen, respond immediately to the name, address or phone number on the IRS notice.
Your identity may be stolen if a letter from the IRS indicates more than one tax return was filed for you or the letter states you received wages from an employer you don’t know.
If your Social Security number is stolen, it may be used by another individual to get a job. That person’s employer would report income earned to the IRS using your Social Security number, making it appear that you did not report all of your income on your tax return.
If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost wallet, questionable credit card activity, or credit report, you need to provide the IRS with proof of your identity. You should submit a copy of your valid government-issued identification – such as a Social Security card, driver's license, or passport – along with a copy of a police report and/or a completed Form 14039, IRS Identity Theft Affidavit.
Show your Social Security card to your employer when you start a job or to your financial institution for tax reporting purposes. Do not routinely carry your card or other documents that display your SSN.
If you have previously been in contact with the IRS and have not achieved a resolution, please contact the IRS Identity Protection Specialized Unit, toll-free at 1-800-908-4490.
For more information about identity theft – including information about how to report identity theft, phishing and related fraudulent activity – visit the IRS Identity Theft Resource Page, which you can find by typing “Identity Theft” in the search box on the IRS.gov home page.

Attribution RS TAX TIP 2010-58

Inside the Law School Scam

noreply@blogger.com (Richard Mayberry) — Fri, 14 Oct 2011 23:07:00 +0000

"...law schools don't teach people much if anything about practicing law, and they should do something about that...Why do law schools engage in so little vocational training?" Inside the Law School Scam

How to Teach Law: Two approaches from my Alma Maters in 1970's

Gonzaga Law School, Spokane Washington [tended more toward black letter law, but has moved to "law in practice" approach so a grad knows as much as you can first year about practicing law]. Grads outperformed state average law bar exam, and the school is geared towards practical experiential learning. I am proud to have achieved my JD at Gonzaga.

George Washington Law School, WDC [tends more towards theoretical]-9000 applications for about 450 freshman spots entered fall 2011. GW geared towards developing the mind and analytical thinks, writing and analysis. I studied Supreme Court Practice under the man who wrote the book-Eugene Gressman, one great professor. I am proud to have achieved an advance law degree, LL.M. from GW.

Gonzaga and GW different orientations rounded off my legal education practice law for 20 years in Washington and a practice over a decade in a suburban hub called Tyson's Corner.

To the dean and faculty of both my law schools thank you.

Dick Mayberry

DOJ vs. Gibson Guitar Company

noreply@blogger.com (Richard Mayberry) — Mon, 05 Sep 2011 01:28:00 +0000

I grew up playing a Gibson guitar when red wood was legal and Gibson was one of the finest American guitar manufacturers; I find Gibson's alleged continued use of foreign shops [and alleged redwood] to be very disappointing. See DOJ vs. Gibson Guitar Company

-not legal opinion-

5 Ways US Can Get Out Of Debt

noreply@blogger.com (Richard Mayberry) — Thu, 01 Sep 2011 16:24:00 +0000

1. Opening Our Borders

2. Raising the Retirement Age

3. Easing Off On Regulations

4. Revamping the Tax Code

5. Taking Cues from Abroad

Attribution Forbes Magazine http://www.forbes.com/sites/investopedia/2011/06/24/5-ways-the-united-states-can-get-out-of-debt/ and and http://www.investopedia.com/#axzz1WiZ2N7ui

Visit Virginia-Learn, see early American History

noreply@blogger.com (Richard Mayberry) — Wed, 24 Aug 2011 12:18:00 +0000

Virginia is so diverse that you can interact with pirates, full-dress Native Americans and early colonists, vintners, green innkeepers and jockeys, not to mention all the great music, arts, and wine festivals to take in. Whether you are making your way back and forth to work or planning a weekend getaway, you can come here to check the ever changing conditions on Virginia's highways or follow the links that take you to information about the vast array of special events and gorgeous destinations that make up our wonderful Virginia!

Attribution Virginia.gov

Virginia.gov Fun Facts Widget

noreply@blogger.com (Richard Mayberry) — Wed, 24 Aug 2011 12:12:00 +0000

Virginia.gov Fun Facts Widget: every Virginian put this on your sites for the benefit of future visitors to our great commonwealth.

T&E lawyers Industry Survey

noreply@blogger.com (Richard Mayberry) — Wed, 24 Aug 2011 12:09:00 +0000

One of the largest and most respected attorney organizations in the country is called WealthCounsel. They just released their Third Annual Survey of Industry Trends and there were some results that I thought you might be interested in hearing about. Since this group is exclusively “by attorneys” and “for attorneys,” it isn’t very often the general public gets to see our inside information. Let’s take a peak…

While many businesses are down, 40% of the attorney’s said their business had increased – at least in the estate planning area. Why? More people were focused on updating and getting some plans in place to hold onto more of what they had after many had lost a bundle due to the economic crisis. This was not only good for the attorneys but was very good for their clients to get an update and better plans in place. (Especially true in California where we got four new statutes in 2009 alone that affect every estate plan.)

The survey asked attorneys what is the number one reason why people plan – make your guess now. <drum roll> The number one reason was to avoid probate and minimize estate taxes. Probate starts at 8% of the gross estate and estate taxes may reach as high as 55% of the net estate. It’s no wonder they’re planning. Another major factor that motivates people to do their planning is to avoid the answer to the question, “What would happen if they don’t plan?” Most attorneys expect to see an increase in activity as the population of baby-boomers starts aging – which has already begun.

Wachbrit Braverman PC is well positioned to serve this baby-boomer population because of our strengths in asset protection planning for next generation and in special needs planning, two key motivators. And when we started the firm, we worked with many young families who are older families now (yes, it’s been over 10 years!) so we’re very familiar with many of the issues boomers are facing.

I have the privilege of being part of this wonderful group of attorneys where I get to share ideas and insights to help my clients from San Diego to San Jose. I have been a part of Wealth Counsel for eight years, and each year brings more great ideas than the previous one. I feel honored to be a part of such a wonderful group of attorneys and am proud to call them my friends

Attribution Wachbrit Braverman PC Blog Richard Mayberry is a founding member of WealthCounsel.

.-not legal opinion-

Long-term care insurance gets a makeover | Reuters Money

noreply@blogger.com (Richard Mayberry) — Tue, 23 Aug 2011 14:50:00 +0000

Long-term care insurance gets a makeover | Reuters Money a new product:

With long-term care policies, the costs of assisted living facilities, in-home care and private nursing homes are covered, in many cases with inflation protection. But since not many people are signing up for policies, the companies that offer them are trying to make them more palatable. On Monday,Genworth Life Insurance Company launched Privileged Choice Flex, a long-term care solution that allows consumers to more easily choose an insurance plan that best suits their lifestyle and budget.

“It’s been 24 months in development and it will be another eight months before it’s fully available across the United States,” says Matthew Sharpe, Genworth’s long-term care product manager. “It takes a long time. We had three different products in the marketplace and combined them into one offering.”

Some features of Privileged Choice Flex include a shared benefit where a husband or wife can reach into their spouse’s portion of the policy for additional coverage. Even if a sick spouse exhausts the total benefit, the well spouse still maintains 50 percent minimum coverage, Sharpe says.

Privileged Choice Flex also allows access to Genworth’s new Live+Well, a wellness program run in partnership with the Mayo Clinic that provides tools, resources and services to long-term care policyholders, and their spouses or partners.

“We wanted to provide a feature that would be available immediately, and that fills the gap between employer benefits and a long-term benefit,” Sharpe says.

Genworth has been in the long-term care business more than 35 years, and was the first such provider in the U.S. Even so, the company has faced challenges educating consumers about long-term care policies because most people avoid the subject.

“Long-term care is definitely under-penetrated, there’s no doubt about it,” Sharpe says. “About 4 percent of the population that is eligible actually has a policy. But it’s a tough topic to broach. We’re still fighting this battle.”

“Long-term care is a growing, looming threat to retirement security,” says Whit Cornman, spokesman for the American Council of Life Insurers in Washington D.C. He cited figures from Genworth’s 2011 Cost of Care Survey, which shows a private nursing home stay rising 3.4 percent over the last year to $77,745 annually. That cost, Cornman says, “is only going to go up”— to a whopping $330,000 in 2040.

-not legal opinion-

The 2011 Entering J.D. Class « 20th & H: GW Law Dean's Blog

noreply@blogger.com (Richard Mayberry) — Tue, 23 Aug 2011 12:50:00 +0000

I reject the notion college grads should reject law school because there are less large firms, hi paying jobs. On point, one of my alma maters, GW Law, welcomed August 2011 approximately 490 new J.D. students selected from a pool of more than 9,000 applicants. The 2011 Entering J.D. Class « 20th & H: GW Law Dean's Blog I believe I read elsewhere that the average debt for GW law grads was approximately $100,000, but don't quote me on that. Everyone, of all ages, should pursue with vigor that which they have a passion for, and the rest should all works out over a life time. I love the law; my message to college grads-joy in life is largely derived from work and family-don't cut yourself short if you want to be a lawyer. It is yours to earn.

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noreply@blogger.com (Richard Mayberry) — Sat, 20 Aug 2011 11:46:00 +0000

Sea turtles are one of the great wonders of the ocean. Enjoy pictures at

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-public issues; not legal opinion-