Probate, Trusts, and Estate Law Blog

Minimize Gift Tax When Transferring Money to Loved Ones in the U.S.

Janet Brewer — Sun, 23 Oct 2011 17:53:00 GMT

Q: What is the best way for my parents in China to give me money for buying a house in the United States?

My parents in China are ready to transfer $20,000 to me as a gift because my boyfriend and I plan to buy a house together. So far though, I'm just in the U.S. on a visitor's visa. How should I handle this to minimize tax on the gift? Should I ask them to transfer it into my boyfriend's bank account?

A: Having your parents transfer $20,000 to a bank account inside the U.S. is not necessarily a good idea from a gift tax standpoint. If you are here in the US on a visa (rather than a green card), it might be a better idea for them to transfer the money to you in China (for example, to your bank account in China, assuming you have one). That way the entire gift takes place "offshore", and would not be subject to US gift taxes.

Examples

Here is a sketch of three possible scenarios:

Scenario 1: Having your parents make one $20,000 transfer to a bank account inside the U.S. -- since gift tax limit is $13,000, your parents would owe gift tax on the remaining $7,000. They would need to file a gift tax return (Form 709) and if the cumulative amount of the gifts exceeded $60,000 then they would have to write a check to the IRS.
Scenario 2: Having each of your parents transfer $10,000 to a bank account inside the U.S. -- since each transfer is under the $13,000 limit, your parents would not owe gift tax.
Scenario 3: Having your parents make the transfer to your bank account in China -- there is no limit on the transfer amount, but you may have to report the existence of the account under the "FBAR" rules if you are required to file a US income tax return

An FBAR is a Report of Foreign Bank and Financial Accounts. U.S. tax law requires that this report be filed by "any United States person who has a financial interest in or signature authority or other authority over any financial account in a foreign country, if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year."

Even though your parents are non-resident aliens for US tax purposes, if they make the gift in the U.S. (by depositing it to a U.S. bank, for example) they are subject to the $13,000 annual gift tax exclusion -- they would also have to pay gift tax on the difference. Therefore, another suggestion would be for your father to gift $10,000 to you and then for your mother to separately gift $10,000 to you. That way, each gift would qualify for the gift tax exclusion under US laws.

New Guide: Buying U.S. Real Estate When Your Child Studies in America

International Estate Planning and Structuring Real Estate Ownership

Risks and Rewards of Buying U.S. Real Estate as a Non Resident Alien

The Sasakis Learn Risks of Online Legal Forms: An International Estate Planning Example

Fees and Legalese in San Mateo County Probate

Janet Brewer — Mon, 19 Sep 2011 10:00:00 GMT

Of all the topics I cover at this blog, probate seems to involve the most legalese. It's an ongoing challenge to translate legal jargon into examples and tips that make sense to non-lawyers. So I am glad to see that a new TV show called "Trial & Heirs" is in the works. Last time I checked, PBS was going to stream an episode in August and start airing it nationally in December.

While I don't litigate, I hope the show highlights how wills, trusts, and other elements of estate planning affect real people... and that it prompts more families to do sound planning.

Avoiding probate is important because probate adds stress, costs (including court filing fees), and other pressures on loved ones during a period that is already painful. In brief, get a comprehensive will and living trust in place and review them about every three years with an eye to whether your situation (or the tax law) has changed.

If you must deal with probate - an example

Suppose your relative, Roger, passes on at his home in Redwood City, and you learn that you are named in his will. Because he did not have a living trust, you will probably be involved in the probate of Roger's estate.

Probate is a legal procedure that identifies the heirs to an estate and determines how much of that estate the heirs are legally entitled to receive. It is used to sort out how much you owe to your creditors, to pay them, and to officially prove your Will is genuine (or to determine who should receive your property if you die without a Will).

Roger's estate must be probated in the county where he died. So Roger's Will should be filed with the Clerk of the San Mateo County Probate Court -- within 30 days after his death -- in Room B on the first floor of the Hall of Justice at 400 County Center in Redwood City.

Since Robert's will named beneficiaries, the representative filing the form fills out a “Petition to Probate Decedent’s Estate”. Filling it out requires:

Name of the personal representative who will oversee the estate
Estimated value of the decedent’s estate
Names and addresses of the beneficiaries designated in the will
Names and addresses of all legal heirs

Once the representative files the petition, the court sends a Notice of Petition to all parties named in the petition, publishes a notice in the newspaper, and sets a hearing date.

(If Roger died without a will -- or "intestate" -- the court may “administer” his estate. In such cases, rather than filing a Petition to Probate Decedent’s Estate, the petitioner would file a “Petition to Administer Estate”.)

After the hearing, the probate judge will enter an order granting or denying the petition. If the petition is granted, and all the required documents have been filed with the court, the court will issue Letters Testamentary (or Letters of Administration in cases involving an intestate estate).

Legalese, hearing dates, and more

As I said earlier, probate involves a ton of legalese. The Court provides some help navigating the process, including a link regarding Initial Petition documents. But on the subject of being your own lawyer it clearly states,

"...before taking any legal action it is highly advisable to consult with a lawyer who can inform you about important legal rights. An experienced attorney may be able to quickly assess your situation and highlight the best course of action to assert or protect your interests. Failure to consult with an attorney may result in unnecessary delays or costly measures in the future to remedy errors."

Getting legal help

Probate is often more complex, more stressful, and more time consuming in cases involving especially large estates (say $5M or more). If you face such a probate, hire the best San Mateo County probate attorney you can for legal help! He or she can represent you in all aspects of the probate process, from initial filing of the will and petition to closure.

Learn about retaining our services

Access additional free resources

Checklist & Guide: Choosing Your Bay Area Estate Planning Attorney
Worksheet & Guide: Picking Your Trustee in California
Glossary: See what terms like Will and Intestate mean
Blog articles: Learn about adding a child's name to a deed and see an example of how thoughtful estate planning for a wealthy Portola Valley family helps avoids probate

How is Review of a Living Trust Different from Estate Planning?

Janet Brewer — Tue, 13 Sep 2011 10:00:00 GMT

Learn more about our asset protection legal services, probate services, and fiduciary counseling »

This is the second of two articles on reviewing a trust. In this one, discuss how we evaluate a living trust agreement, and how that differs from developing an estate plan.

My team and I examine dozens of things when we evaluate a trust document. To give you an idea, a few of them are:

Does the trust agreement confirm to third-parties that a married trustor/trustee has authority to act when his/her spouse cannot (if desired by client)?
Does the trust agreement include provisions to alter distributions to a surviving spouse in the event of remarriage after the death of the first spouse?
Does the trust agreement include a common trust provision when one or more of the primary beneficiaries has not yet graduated from college?
Does the trust agreement give the trustee of a continuing trust an appropriate amount of flexibility to make disproportionate distributions based upon the relative needs of the beneficiaries?
Does the trust agreement set up continuing trusts for the beneficiaries, which are tailored to the needs of each trust beneficiary?

Is there evidence that the trust is properly funded? An unfunded or partially funded revocable living trust does not avoid probate. Great care must be taken to ensure that all necessary assets held by the trustor individually are either retitled to the trust, or that the trust is considered as an appropriate “designated beneficiary.”

The difference between evaluation of a trust and creating an estate plan

In trust reviews, my intention is to provide you with an objective analysis of the document, and nothing more. Still, my review may be very beneficial to you because your estate plan will eventually be interpreted by attorneys and financial professionals that you do not know. So it is far better to identify ambiguities or omissions in your estate plan while you are alive and healthy than when you are not.

When I am hired for estate planning, I conduct an in-depth "discovery" process that includes:

Gathering personal and financial information

First I need to review your personal data and your financial information, and discuss a potential plan to meet your goals and objectives. I need to learn about your family and how the various members handle money. I understand that this is sensitive information, something not always easy to talk about. I am not shocked by any characters lurking in your family tree – we all have our fair share of them!

Discussing goals and values

You have built up a large estate, and you probably have very specific wishes that you want someone to carry out. Before I can recommend any course of action, we need to meet in person so that I can learn about you, your values, what you are trying to accomplish and, maybe most importantly, what you want to avoid. When I am creating a plan for both spouses, it is an absolute requirement that both spouses meet with me.

Focus areas in an estate planning engagement

Here are a few of the many questions I ask the first time we get together to discuss your estate plan. The following is not a complete list - it is a sampling:

Did you have any prior marriages?
Have you signed any pre- or post-marriage contracts?
Do you have an “umbrella” liability insurance policy?
If any children are under 18, have you decided who would be their guardians?
Do you have any business interests?
Do you wish to leave money or assets to charitable or religious causes?
Are you concerned about providing for your grandchildren’s education?
Do you wish to prevent anyone from receiving a portion of your estate?
Do you wish to make any provisions in your estate plan for your pets?

The more I understand about your circumstances, the better I can educate you about your choices and guide you so that your family members won’t need to make stressful decisions in trying times. You will have the peace of mind of knowing that you have “done right” by your family.

International Estate Planning and Structuring Real Estate Ownership

Janet Brewer — Thu, 08 Sep 2011 10:00:00 GMT

This article is part of our series of articles on the risks and rewards of buying U.S. real estate as a non resident alien.

Accountants know a lot about keeping track of your money, but estate planning isn’t their primary job. By working with an attorney experienced in international estate planning law, you can get all your questions answered and gain peace of mind that your loved ones will not face a snarl of tax issues down the road.

If you own property outside of the United States, it’s even more important to have a network of experts to call upon when you have an issue. Not all countries recognize trusts and other tools that work here. To reduce or eliminate tax liability, you may need to choose an appropriate ownership structure. Keep in mind that the net tax savings will vary depending on the ownership structure as well as individual circumstances.

Ownership structures include:

Individual
Pass through entity (limited liability company or partnership)
U.S. corporation
Foreign corporation
Foreign trust
Real estate holding company

Not all of these structures will avoid U.S. estate and gift tax liability and some provide better income tax benefits than others. It is important that you seek competent legal advice before you purchase U.S. real property (or as soon afterward as possible).

Resources

Examples provided in our guides and here on this blog help illustrate this point:

Palo Alto Family Needs a Trust Review - Use Same or New Attorney?

Janet Brewer — Tue, 06 Sep 2011 10:00:00 GMT

Learn more about our asset protection legal services, probate services, and fiduciary counseling »

This is the first of two articles on reviewing a trust. In this one I address whether a Palo Alto family with a living trust should have the creator of the trust do the review, or find a different attorney to take a fresh look.

Q: We live in Palo Alto, California and in the 90s our family chose a Burlingame estate planning attorney to establish a living trust. Now we are trying to verify if the attorney who drew it up really is trustworthy and experienced with living trusts. We need a trust review. Specifically:

Is it better to go to the same attorney for this "check up" or someone new?
Since we are asking for a trust review, would the fees be much lower than if we were starting from scratch?

A: You were smart to use an estate planning attorney instead of using off-the-shelf forms or packages from a self-service legal website. You are smart to check and update your living trust, too. Circumstances can change alot in a short time. In fact, it is a good idea to do a trust review and update your trust every three to five years.

Vetting estate planning attorneys using Avvo

I am glad to hear that you are vetting estate planning attorneys before hiring anyone. One way to check out a lawyer is to look on Avvo. Search for "estate planning" in the Palo Alto area and see which lawyers' names appear with high Avvo ratings. See if they've answered questions and read the answers to see what you think of their approach.

Checking out attorneys using the State Bar website

Also check out the State Bar website. Use the "Advanced Search" feature and the "Additional Search Criteria" to find a specialist in Estate Planning law. Less than 1% of all California lawyers are certified as specialists in Estate Planning. In order to be certified, a lawyer has to pass a specialized bar exam and meet rigorous experience requirements.

Also, check out these individuals' websites to see what their approach is to estate planning to see if you think the "chemistry" will be right.

What you can expect to pay

You get what you pay for! If price is your most important criterion, then skip all of the above and just phone lawyers until you find the one with the lowest price. Just remember, if they don't do it right, it cannot be corrected after you die or become incompetent.

Depending on the complexities of your situation (and whether you're married or single, have children who need to be protected, etc.), an experienced attorney's fees will be anywhere from $2,000 to $10,000. As a very rough rule of thumb, figure out your net worth and multiply by 0.10% to 0.25%. That usually approximates the complexity of your estate and the cost of planning for it properly.

For example, if you have an estate worth $3 million dollars, you should expect to pay between $3,000 and $7,500... a little less if your situation is really "plain vanilla"; a little more if it's complex.

Look for the next article on trust reviews

In the next article on trust reviews, tentatively titled "How is Review of a Living Trust Different from Estate Planning?" I'll show an example of what we examine when we do a trust review, and how a trust review differs from creating an estate plan.

Getting legal help

If you are currently working with a highly qualified estate planning attorney that you are comfortable with, it is probably best to continue working with him or her. On the other hand, if you have doubts about the advice you are getting or the experience you have working with the person, it's time to look elsewhere.

The Sasakis Learn Risks of Online Legal Forms: An International Estate Planning Example

Janet Brewer — Sun, 04 Sep 2011 10:00:00 GMT

A stack of forms can’t “know” the nuances of your situation. Work with an attorney experienced in international estate planning to craft a plan that fits your unique circumstances. Protect your loved ones and assets by examining your options now »

This fictional example is drawn from our guide Buying U.S. Real Estate When Your Child Studies in America.

Hiro Sasaki, 19, will be a freshman at Stanford this fall (Class of 2015). Hiro’s parents, Emiko and Dai Sasaki of Tokyo, are looking to purchase a place for Hiro to live. They want to do everything they can to help him succeed, and that means providing a study environment free of the distractions common in a dormitory.

$675,000 cash for Palo Alto townhouse

The Sasakis identify a townhouse in Palo Alto listed for $675,000. It’s close enough for Hiro to bike to campus. Dai pays the listing price in cash, putting the title in his name.

Dai reads online about the importance of having a revocable living trust in the U.S. Dai has seen those online legal programs where it is possible to purchase do-it-yourself-forms. To Dai it seems like a good option. He uses a do-it-yourself form to establish the trust.

Establishing trust does not lower Sasakis' tax liability

Unfortunately, while a revocable living trust is useful for avoiding probate, it does not lower his tax liability. Dai still has only a $60,000 exemption. So if something happened to Dai, his family will have a massive estate tax bill – in the neighborhood of $142,800.

The online legal program where Dai purchased his form wouldn’t “know” about the unique circumstances he is in. And despite diligently completing the form he downloaded, he is about where he started off with respect to his tax liability.

A minor car accident in Tokyo gets Dai thinking again. He realizes he has not protected his loved ones from a big tax bill, should anything happen. He finds a Bay Area attorney experienced in international estate planning, and gets a sound plan in place.

Takeaway

This example is made up, but it's true that a stack of forms can’t “know” the nuances of your situation. If your situation is anything like the one described here, consider working with an attorney experienced in international estate planning to craft a plan that fits your unique circumstances.

Risks and Rewards of Buying U.S. Real Estate as a Non Resident Alien

Janet Brewer — Fri, 02 Sep 2011 10:00:00 GMT

This article is part of our series on Buying U.S. Real Estate When Your Child Studies in America

Trend: more NRAs purchasing in college areas

The June 29, 2011 article “U.S. is Top Choice for Real Estate Investors,” in Generation America, has some interesting facts and figures from a survey was conducted by the National Association of Realtors as part of its 2011 Profile of International Home Buying Activity.

Among the survey’s findings (paraphrasing): real estate in the U.S. is the top destination for foreign buyers; the number of foreign exchange students at U.S. colleges and universities has increased the demand for real estate by foreign buyers; and some foreign families are purchasing U.S. properties in college areas so their child has a place to live.

The president of the National Association of Realtors observes that, "the U.S. has always been a desirable place to own property and make profitable investments. In recent years, we have seen more and more foreign buyers coming here to take advantage of low prices and plentiful inventory."

Why putting off estate planning is especially risky for NRAs

No one likes to think about dying someday. Some people even consider it bad luck to discuss death. But family members who have come to the United States from elsewhere may find U.S. tax law quite different than what they were used to.

It’s important to set aside our emotions and consider a key fact: Federal estate and gift tax laws impose onerous restrictions on non-citizens (even if you have a “green card”).

Consider:

Outright gifts during your lifetime to a non-U.S. citizen spouse – including making him or her joint owner of certain assets – can trigger gift tax problems immediately.
A non-resident non-citizen with no green card who bought a $1.5 million house with cash, intending to leave it to one of his children through a will or trust could trigger an estate tax of $495,000. With advice from the right expert, she could avoid that tax bill.
Likewise, gifts at death to a non-citizen spouse may not qualify for the “unlimited marital deduction.” Your unsuspecting widow or widower may be forced to pay hundreds of thousands of dollars in estate taxes shortly after your death.
If an investor buys a $1.5 million property in U.S. and dies owning it without ever having put it in a trust, the probate cost alone could be as much as $28,000. If that investor also happens to be a non-resident alien, the estate taxes could be $495,000.

Taking steps to protect your loved ones and your assets

Even if your estate is modest, the tax effects of poor planning on NRAs can be devastating. Choosing the right lawyer takes an investment of time and money, and it is a wise investment. We can set up documentation, write any complex agreements, and take other steps to help protect you. But you need to take the first step: contacting us. Protect your loved ones and your assets by examining your options now. Call +1 650 325 8276 or get started at our website »

New Guide: Buying U.S. Real Estate When Your Child Studies in America

Janet Brewer — Thu, 01 Sep 2011 19:48:00 GMT

Presenting our newest guide on international estate planning

We've just posted a new international estate planning guide, Buying U.S. Real Estate When Your Child Studies in America. (Note: If you get value from it, would you please recommend it to others on Facebook, Twitter, or other places you're connected to friends and family? Thank you!)

In my 20+ years as an estate planning attorney, I've found that most families – and perhaps especially nonresident aliens (NRAs) – want straight talk when it comes to legal and financial matters. And in this guide I've tried to dispense with legalese and give you exactly what the title says.

Don't "fly in the dark"

Too many parents “fly in the dark” when it comes to securing the financial future of their loved ones. As someone who works on estate tax and probate issues with NRA families, I hear heart breaking stories of families having to pay dearly during painful times, just because they never found a trusted advisor to ensure they keep all the assets they deserve.

Five fictional examples illustrate key issues NRAs face

In this guide (as well as a previous guide, U.S. Gift Tax and Estate Tax Planning for Non-Residents and Non-Citizens), you'll find examples of nonresident aliens from several countries facing key questions, issues and choices. The examples are made up, but if your situation is anything like ones presented, you could probably use help from an experienced international estate planning attorney.

Comparing your options

Unfortunately, with the way that most international estate planning lawyers present themselves to the world, it seems like we’re all the same. In reality, each lawyer does have certain qualifications.

Some might be experts at tax law, or in working with corporations or with debt collection, or a whole variety of different things…but are they really providing what you, the family person, wants and needs?

Protect your loved ones and your assets by examining your options now

I hope this free guide and checklist opens your eyes to the importance of setting up your plan. My team and I can set up documentation, write any complex agreements, and take other steps to help protect you. But you need to take the first step: contacting us! Please call +1 650 325 8276 or get started using a simple form here at our website.

Can Creditors Force a California Successor Trustee to Sell Assets?

Janet Brewer — Wed, 10 Aug 2011 16:03:00 GMT

Request services using a convenient form here at our site or learn more about our asset protection legal services, probate services, and fiduciary counseling »

I frequently answer questions on other sites about estate planning, wills, trusts, and probate law. Here is one question I recently answered.

Q: Can creditors force me to sell dad's assets to pay off his debts? Specifically:

Can the bank holding the mortgage force me to sell his car and give them the money?
Can the credit card companies that he owes force me to sell his car to pay off his debt?

A: If your father's "probate estate" -- that is, the assets that do not have beneficiaries named on them or are not held in his trust -- are worth less than $100,000 then you can transfer title to yourself by using the "small estates affidavit".

The California DMV has its own small estate affidavit. As you will see when you read the affidavit, you are required to "indemnify" anyone who transfers property to you against all claims. That means that if a credit card company sues to get the car or the proceeds from its sale after the DMV has transferred it to you, you are agreeing that you will "assume" responsibility for the debt.

So, yes, it is possible that the credit card companies can force you to sell the car to pay off the debts. The mortgage company may or may not be able to do the same thing... in California, the answer depends on whether the mortgage loan was:

"Recourse" - meaning that the borrower is personally liable for repayment, or
"Non-recourse" - meaning that the borrower does not have any personal liability.

By law in California, the loan your father took out to purchase the house originally was "non-recourse". If he refinanced, though, the loan is probably (but not necessarily) a "recourse" loan.

Getting legal help

Talk with a Bay Area attorney experienced in fiduciary counseling to determine what’s right for your situation. I am a board certified estate planning and probate attorney specializing in asset protection for Palo Alto -area clients, and the surrounding areas -- and can help you develop the best strategy.

Additional resources that may help you

Here are related blog articles that might help you:

Planned Charitable Gifts Can Ensure Family Legacy, Shrink Tax Bill

Janet Brewer — Tue, 19 Jul 2011 10:00:00 GMT

Not only is charitable giving a praiseworthy choice, it can also reduce tax liability. Certain kinds of gifting is income- and estate tax deductible, and in this article I share the IRS's guidelines.

In order to take advantage of the income tax savings benefits of charitable giving, a donation must meet certain requirements established by the IRS.

IRS rules for charitable giving

The donor cannot benefit from the donation*
The donor must be able to substantiate the donation
The donation must be made to or for the benefit of a qualified charitable organization, and
The donation may not exceed the current statutory ceiling

* However, structured properly, you can receive an income stream from a charitable trust and still receive an income tax deduction for the charitable portion of the gift - please contact us to discuss your particular situation.

Taxes and charitable giving

Let's distinguish between the income tax side and the estate/gift tax side:

If it goes to charity it is deductible from your estate

If it goes to loved ones, it's not

The Tax Code limits the income tax savings of a charitable gift to a percentage of the donor’s adjusted taxable income (or AGI) reported each year on your 1040. But every dollar you give to charity is deductible if the charitable gift it is made as part of your will or trust. So people like Warren Buffet and Bill Gates can give their kids up to $5M - and pay no estate tax if they give their other billions to charity through their will or trust.

Outright gifts vs. deferred gifts

Charitable gifts fall into two categories: outright gifts and deferred gifts. An outright gift is an immediate gift made to a charitable organization. An outright gift has the following characteristics:

The donor has no influence or control over the charity
The donation is at the disposal of the charity, and
The donor retains “no legal or equitable interest” in the donated property

A deferred gift is also known as a planned gift or a partial gift and may take any of the following forms:

A bequest in a will or living trust
A beneficiary designation on a retirement plan or life insurance policy (caution: this needs to be handled carefully to avoid unintended tax consequences)
An irrevocable commitment to transfer property to a specific charity upon the death of a specific beneficiary or after the lapse of a stated period of time (a Charitable Remainder Trust); or
An irrevocable commitment to convey property temporarily to charity in trust with the understanding that the property will be returned to a non-charitable entity upon the death of a designated beneficiary or after the lapse of a stated period of time (a Charitable Lead Trust)

Getting legal help

Charitable gifts can take many forms. Talk with an attorney experienced in planned giving to determine what’s right for your situation. It depends on your age, your goals, age of beneficiaries, size of the gift, and more. In addition to trusts, there are several other charitable gifting strategies which may be utilized to maximize estate tax savings. I am a board certified estate planning and probate attorney specializing in the representation of high-net worth clients in Los Altos, Santa Clara, Palo Alto, Stanford, and the surrounding areas -- and can help you develop the best strategy.

Get started >>

I Inherited a $8M Woodside Home. Do I Need a CPA or a Tax Attorney?

Janet Brewer — Fri, 15 Jul 2011 10:00:00 GMT

Say you inherit the 5-bedroom family home in Woodside and it's worth roughly eight million dollars. You wonder if IRS and state of California are going to expect a piece of it. You need help to take care of filing the right forms and/or meeting tax obligations. Should you consult with a tax attorney or a CPA?

My answer: Yes! Consult with both. The reason is that we overlap, but have different primary jobs.

The lawyer can advise you on whether the inheritance is a "taxable event" from an income tax standpoint -- and, if so, whether there are ways to mitigate estate taxes.

The accountant can advise you on your finances, including how best to keep track of your money. And although some CPAs and financial planners call themselves “estate planners”, they cannot prepare wills & trusts & other legal documents. Legally, only a lawyer can prepare estate planning documents.

What an estate tax attorney is

Every attorney must have a J.D. (Juris Doctor) degree and be admitted to the state bar in any state in which they practice law.
An estate tax attorney specializes in representing clients who have complex, advanced, or technical estate planning, probate, and/or estate tax issues. Estate tax attorneys handle a variety of legal and estate tax matters including estate plan formulation; gift and estate tax return filings; business entity formation, structuring, and tax treatment; and asset protection.
Many estate tax attorneys (NOT including me) also represent clients facing criminal investigation or prosecution for tax fraud or evasion tax or those who have a civil claim against the Internal Revenue Service.

Specializations within estate planning

A few estate planning attorneys also hold an advanced legal degree in tax law, known as an LL.M.

Some also have expertise in international estate planning. If you are a foreign national with substantial U.S. assets or an overseas U.S. citizen – especially one who is married to a foreign national - it’s even more important to have a network of experts to call upon when you have an issue. Not all countries recognize trusts and other tools that work within the United States. And the U.S. estate and gift tax laws may be more onerous for you.

Achieving peace of mind while minimizing tax liability

By retaining an experienced attorney, you can get all your questions answered and gain peace of mind that your loved ones will not face a snarl of tax issues down the road. Smart estate planning doesn’t take as much time as you might think, and typically pays for itself by lowering your exposure to tax liability.

I hold a J.D., LLM-Tax, and have experience in international estate planning - a rare combination that can help you achieve peace of mind while minimizing tax liability.

p.s. If you are a Bay Area CPA, financial planner, enrolled agent, or insurance professional and your client has inheritance tax questions or needs to get his or her estate planning in order, we would be delighted to work with you. Please get our Tax Law Update for San Francisco Bay Area CPAs for information that may help you and your clients.

Updating Estate Beneficiaries and More: A Pre-Vacation Tick List

Janet Brewer — Wed, 13 Jul 2011 10:00:00 GMT

Peaceful moments with a child, grandchild, or other family member may be the very best thing about taking vacation. Before you head out of town, tick off essential estate planning steps like updating your beneficiaries. Knowing you've planned for everything you own and everyone you love might make the time together even more fulfilling. Learn more »

Taking a break this summer?

It may seem like a drag to discuss estate planning in these warm summer months, but see if you can fit in some essential steps. Among other benefits, you may feel a deeper sense of well being during family visits and vacations, if you know you have planned for everyone you love and everything you own.

My mental tick list

Here are the things I mentally tick through before any big out of town trips:

Have I chosen a reliable trustee or executor?
Does my trustee/executor have access to my key documents? (If they are in a safety deposit box or safe, for example, do they have a key or combination handy, just in case?)
Do I have enough insurance coverage?
Are the beneficiary designations on my life insurance, retirement plans and annuities, in synch with my estate plan? (For most people, they are not.)
Is my living will and healthcare power of attorney up-to-date with the HIPAA Act?
Has anything changed that my advisors need to know about before I go?
Are there are provisions in our estate plan for care of our family pets, should anything happen to me?

Getting essentials squared away before you leave town

Have I convinced you to at least check into these things before you leave town? If so, we are here to help. And unless you're leaving town tomorrow, we can probably get essential work done before you go -- freeing you to take a restful, guilt free holiday. Get started using a convenient form here at our website »

Checklists and guides that may help you

Here are guides I've published that might help you:

Estate Planning Helps Non Citizens Provide for U.S. Born Children

Janet Brewer — Wed, 22 Jun 2011 11:00:00 GMT

Everyone with a high net worth should put together an estate plan. Here is an example showing how people with complex financial circumstances benefit from finding the right legal advisor. For more examples, see my latest guide and checklist .

Meet Sanjay and Ling, U.S. residents with young children born in the U.S.

Meet Sanjay and Ling, young, bright, hard working professionals. They don’t think of themselves as rich, but they have substantial savings. They want to make sure their two young children are cared for if anything bad happened. They are not U.S. citizens, but their children were born in the U.S.

An experienced estate planning attorney will know which laws apply. And by establishing a long-term relationship, the attorney can help Sanjay and Ling update their plan as their family grows, as their finances change, and as they move to new places. They will also counsel fiduciaries in connection with carrying out legal responsibilities - whether they are personal representatives, trustees, or guardians.

If their proposed guardians don’t live in the U.S., the kids are at risk of having the Court not permit them to be taken out of the U.S. – or at least there might be a protracted guardianship dispute/case. There are also issues with making sure the kids have passports that permit them to travel with someone other than their parents.

How does the attorney know what Sanjay and Lin want?

First he or she works with the couple to gather personal data and financial information. This is their estate plan, so the attorney needs to review personal data and financial information, and discuss a potential plan to meet their goals and objectives. The attorney needs to learn about their family and how the various members handle money. This is sensitive information, something not always easy to talk about. But an experienced estate planning attorney won't be shocked by any characters lurking in the family tree – everyone has them!

Both spouses meet a few times with the attorney to discuss goals, values, and -- maybe most importantly -- what they want to avoid. In the process, Sanjay and Ling discover that they have very specific wishes they want someone to carry out were something to happen. The attorney listens carefully and prepares the appropriate strategy and documents.

Few estate planning lawyers have the knowledge and expertise to avoid the pitfalls in these situations

Sanjay and Ling are made up people. But if your circumstances are anything like their, I do recommend that you retain an attorney familiar with helping non citizens and non residents.

Also, here are guides I've published that might help you:

Choosing Your Bay Area Estate Planning Attorney
U.S. Gift Tax and Estate Planning for Non-Residents and Non-Citizens
Picking Your Trustee in California: A Guide for High Net Worth Individuals

Estate Planning With Four Children, One $7M Portola Valley Home

Janet Brewer — Mon, 20 Jun 2011 11:00:00 GMT

Here is another example (adding to the one in my last post and pulled from several in my newest guide) of a person with relatively complex financial circumstances, who would benefit from hiring an experienced estate planning attorney.

Meet Edna, mother of four with a $7M family home in Portola Valley

Edna wants all four of her children to share equally in her estate. But she wants her son to have the $7 million family home.

An experienced estate planning attorney will recognize some of the pitfalls in that scenario, such as the financial burden of taking over a mortgage and property taxes on an expensive home.

Unless Edna has a $28MM estate, after estate taxes she’s not going to be able to give one son the home and treat the other 3 children equally ($7MM x 4 = $28MM) – unless:

The son can qualify for a $5,250,000 mortgage (and then, by the way, only the 1st million would be income tax deductible interest), or
She has a boatload of other assets

The planner also will talk to Edna to find out how each of the children handle money, making sure that the plan specifies ways to distribute the estate that help each child do his or her best.

Few estate planning lawyers have the knowledge and expertise to avoid the pitfalls in these situations

There is a great deal that must be considered in situations like this. Fortunately, Edna carefully chose the right estate planning attorney. That meant making an investment, since top shelf legal guidance is not cheap. But she gained the peace of mind that comes with knowing that distributions from her estate will help her children.

Getting a plan tailored to your needs

Edna is a made up person. But if your circumstances are anything like hers, I do recommend that you retain an attorney familiar with helping families protect their assets and do advanced estate planning.

Here are guides I've published that might help you:

$20M and a Green Card: How the Right Estate Tax Attorney Can Help

Janet Brewer — Fri, 17 Jun 2011 11:00:00 GMT

Everyone with a high net worth should put together an estate plan. Some may be straightforward, while others will be complex. Here is one example (there are others in my newest guide) of a person with relatively complex financial circumstances, who would benefit from hiring an experienced estate planning attorney.

Meet Barry, the Silicon Valley entrepreneur

Barry is an entrepreneur in his 50s. He is not a U.S. citizen, but he has a green card. He owns real estate here, plus stock in U.S. companies, and lots of expensive stuff in his home -- cars, antiques, etc. He also has assets in South America and Europe.

Barry wants a little bit of his estate to go to his children (who are already doing well on their own), most to go to his grandchildren, and nothing to go to his ex-wife.

A good estate planning attorney will know the applicable laws, both domestic and foreign, that apply to Barry’s situation. His estate plan can be structured so that his grandchildren don’t get control the money until they are old enough to handle it.

The planner will go through several years of tax returns to see how Barry is handling his finances now, what he paid for the properties and what they are worth today. In addition to minimizing estate taxes, the plan will minimize capital gains taxes and property taxes.

Few estate planning lawyers have the knowledge and expertise to avoid the pitfalls in these situations

There is a great deal that must be considered in international estate planning and there are no easy answers or simple solutions. That is why Barry avoided the cookie cutter approach to estate planning -- the one offered by using pre-printed forms. He did make an investment -- top shelf legal guidance is not cheap -- and got a handsome return.

Getting a plan tailored to your needs

Barry is a made up person. But if your circumstances are anything like his, I do recommend that you retain an attorney familiar with helping non citizens and non residents.

Guides I've published that might help you:

Choosing Your Bay Area Estate Planning Attorney
U.S. Gift Tax and Estate Planning for Non-Residents and Non-Citizens
Picking Your Trustee in California: A Guide for High Net Worth Individuals

Hire Me for Estate Planning, But Please Do It For the Right Reasons!

Janet Brewer — Thu, 16 Jun 2011 11:00:00 GMT

When estates are valued in the millions of dollars, good planning takes more than filling in the blanks on a stack of one-size-fits-all forms. Get a copy of my new guide that tells the kind of training and experience a good estate-planning attorney needs to do it well. The guide even has a checklist that people can use to compare the services offered by a variety of law offices.

Obviously, I hope people choose me for their estate planning. But I want them to choose me for the right reasons, and I want them to understand those reasons. It actually makes my job easier and more rewarding -- because it leads to better client relationships.

With that in mind, I've put out a Guide to Choosing Your Bay Area Estate Planning Attorney. You can find it here on my website at www.calprobate.com/choosing.

It's hard enough for most people to think about estate planning in the first place. They may not know the best way to make sure their goals are met, and they certainly don't know all the legal work involved in making sure their wishes are carried out when they are no longer around to supervise. That's the whole point of hiring an estate planning attorney!

But I want to be the navigation system, not the driver. I want them to be comfortable with their decisions, rather than having me tell them what they should want. Each client is unique. It takes the collaboration of my expertise and their goals.

When I sit down with prospective clients, I want them to understand that when estates are valued in the millions of dollars, good planning takes more than filling in the blanks on a stack of one-size-fits-all forms.

So get the guide. It explains what kind of work goes into a solid estate plan, and the kind of training and experience a good estate-planning attorney needs to do it well. The guide even has a checklist to use when comparing attorneys.

Here's something else you'll find in the guide: My fees. A lot of attorneys get very shy when it comes to discussing money. I don't see the point. I can't offer to do the job for everyone for the same flat fee, but the guide gives a range of what to expect for the typical kinds of estate planning services I perform.

Take a look at my guide and see how much better you understand what to look for when hiring an estate planning attorney. And please come back and comment to let me know what you think!

Common Question: How Much Are Estate Planning Attorney Fees?

Janet Brewer — Fri, 03 Jun 2011 21:08:00 GMT

Palo Alto estate tax attorney Janet Brewer discusses her fee structure and how she ensures a win-win with clients in the Bay Area and abroad.

Recently I read a blog post all about ﬁnding the time and attention to do your best creative work. It led me to resolve to stay efficient in 2011.

Have you worked hard to build up a multi-million dollar estate?

If you are my client (or leaning toward getting started with our services), you're probably a talented person who has worked very hard to build up a multimillion-dollar estate. So it's no surprise that you don't want to overpay for estate planning services. On the other hand, with your entire estate at stake, it's no time to cut corners.

Practical, tax-saving estate plans for affluent people

I create workable, tax-saving estate plans for very well-off people. Some of those plans can get quite complex, involving trusts, limited partnerships and other business arrangements.

Relatively few people have the training and experience to do this. That’s what my clients are paying for. They know that if their estate plan is poorly designed, nobody will know until it’s too late. There are no opportunities for a do-over. When a plan doesn’t work, your loved ones have to cope with the mess.

Keeping my fee structure simple makes it easier to devote my time to the people who understand the value. That benefits us both.

It’s knowledge and experience you're investing in

Even when I can put a plan together quickly, it’s not time that a client is paying for. Rather, they are paying for me to know what they don't. In particular:

What needs to be done
How to get it done efficiently
When to take which actions
Why to pick one option over all the others, and
Who will be affected

There are areas of law (and countless other topics) where I’m not an expert. I stay clear of those areas! On the other hand, even in my area of expertise, I give away alot of expertise free. I regularly post free answers to questions on Avvo; I offer free guides in our online Resource Room. And I publish free tips here in the Probate, Trusts, and Estate Law Blog just about weekly.

Typical estate planning fees

Unlike many Bay Area estate planning attorneys, my typical fee includes funding more than just the client's personal residence; it usually includes funding brokerage accounts, additional real estate, changing beneficiaries on life insurance policies, and changing beneficiaries on retirement accounts.

Learn more about my services >>

View my fee structure >>

Get started >>

Advanced Estate Planning in the Bay Area -- Who's Got the Chops?

Janet Brewer — Fri, 27 May 2011 17:17:00 GMT

Who really has the chops to help you with advanced planning for a high net worth estate... and how can you really tell beforehand? A new guide I'll release next week has in depth answers - here is an excerpt:

Many people would rather not think about estate planning, especially those with estates worth millions of dollars. (Note: Silicon Valley area homeowners may be richer than they think they are, and especially need help with wealth preservation.)

It seems like it will take a lot of effort, a lot of difficult decisions -- and who knows what kind of legal work is needed to make your plan hold up when you aren’t around to explain what you really wanted?

On the other hand, your estate plan involves everything you own and, more importantly, everyone you love. You can’t leave anything to chance. And there are no do-overs if it turns out the plan does not work.

The right estate planning attorney can smooth out those imposing twists and bumps in the road. You stay in the driver’s seat, of course. It’s your wealth that you are protecting, and only you can say how you want it to be distributed some day. But nothing beats a good navigation system when you are driving into unfamiliar territory.

Fine, but how to choose?

So: How do you find an attorney who's got the chops for advanced estate planning? Next week you can download a new guide with thorough answers to that question -- in the meantime, here are the basic qualities to look for:

Education

You need someone who has learned about finance as well as law. Make sure they understand the use of family limited partnerships and the many different types of trusts available.

Experience

Any attorney can call himself an estate planner, even if he has no qualifications or experience in estate planning. Look for an attorney with at least 7 to 10 years of experience in estate planning, probate, and trust law. Also make sure that the attorney has experience with high net worth clients. If your estate involves international holdings or a non-citizen family member, seek out someone with experience in those areas, too.

Dedication

An attorney simply cannot handle divorces, traffic tickets, and other matters and still be an estate planning expert, too. Estate planning is a complicated and sophisticated area of legal practice. The attorney you choose should be devoted to this area of law full time.

Personal involvement

Beware when someone tries to hand you an off-the-shelf plan that only requires filling in some blanks. Your estate plan should be crafted for your unique circumstances.

You need an attorney who will listen, and who can explain the law clearly. Attorneys used to be called “counselors at law,” and the counseling aspect is still important. You want someone who can help you figure out who should be your trustee, who should make health decisions, how to untangle the complex relationships of children from prior marriages, and more. Business ownership and immigration status require even more important decisions. You won’t get much help from a one-size-fits-all stack of forms.

Credibility

If other people and independent organizations have dealt with the attorney and given approval, you can have a much higher level of trust. It's been my mission for over 20 years to deliver all of the above and more (see my bio for details).

Listening skills

Can the attorney you're working with actually listen? It's an essential skill.

I listen. My goal is to create the plan that effectively carries out your wishes. The more I understand about your circumstances, the better I can educate you about your choices and guide you so that your family members won’t need to make stressful decisions in trying times. You will have the peace of mind of knowing that you have “done right” by your family.

Ability to explain in plain language

Some attorneys speak legalese -- making it hard to grasp the issues or choices (if this sounds familiar, follow the link for definitions of that jargon you're hearing). I provide common sense solutions and avoid legal jargon where possible. I don’t expect you to be experts in estate planning, and I don’t talk down to you if you aren’t.

Next steps

If you are ready to retain a Bay Area estate planning attorney, please Get Started here at this site.

Wealth Preservation Tips and Examples: Are You Richer Than You Think?

Janet Brewer — Tue, 17 May 2011 10:00:00 GMT

Are you rich? Many people don’t think they are, even when the numbers say otherwise. Maybe it’s because most of us know at least a few people who are a lot wealthier. Compared to them, you might feel like you are “middle class.” Or maybe it’s because you live in a place with a high cost of living...

Bay Area real estate is a relatively big asset

Owning a house in a place like the San Francisco Bay Area means having a much bigger asset than the same house would be in Ohio or Iowa. And maybe you never really thought of how much your assets add up to.

Avoiding a big tax bill for your family

The Internal Revenue Service does think about it. If you fail to measure your own wealth the same way the IRS does, you may be setting up a big tax bill for your family.

Being “wealthy” doesn’t always mean you have a lot of cash in your purse or wallet. For example, you might have:

Wealth tied up in a home and other real estate that has appreciated in value since you bought it
A lot of insurance coverage
Lots of money saved up in your retirement accounts

All of that counts as “wealth” when it comes time for your estate to be distributed. If there’s enough wealth, it could trigger the 35 percent federal estate tax.

Getting a "pass" on the first five million

The good news is that you get a free pass on the first $5 million of your estate. That’s true for both U.S. citizens and for most “green card” holders, or at least those who die in 2011 and 2012.

Does your estate add up to more than that? If so, we need to talk.

Calculating "richness"

So you’ve added up your bank accounts, stock portfolio and the equity in your real estate. Now include the value of your cars, furniture, antiques or other collectibles. Do you have some business ownership interests? They’re part of your estate too. Your 401ks, and IRAs are included, too. Life insurance is included unless it’s in an “irrevocable life insurance trust” (ILIT).

Here is an example - are your circumstances at all similar?

It’s not that hard to get to a total over $5 million, is it? To give you an example of what your heirs might face, let’s assume that your estate is worth $6.2 million. Your estate would owe the federal government $420,000 in taxes, and there may be a state estate tax too, depending on where you live (if you live in California, there is no state estate tax).

You can read all about this in a Wall Street Journal blog from February 2011. Blogger Bill Bischoff notes that life insurance often pushes the estate over the magic $5 million mark. For married couples it’s not as much of a problem because spouses get an unlimited deduction on insurance death benefits -- IF the spouse is a U.S. citizen.

The gain without the pain

Does this sound ridiculously complex and irritating? Welcome to estate law. Fortunately for you, I’ve already gone through much of the pain of learning the best strategies for minimizing taxes. Give me a call and let’s talk about ways that you can minimize your estate’s tax bill.

"But I'm not really rich!"

Yes, you should call me even if you are one of those people who “isn’t really rich.” Because you don’t want the IRS to make you any less rich.

How Can Non-Citizens Protect U.S. Assets? Estate, Gift Tax Exemptions

Janet Brewer — Tue, 19 Apr 2011 16:43:00 GMT

A test worth millions

Currently, U.S. citizens enjoy a $5 million exemption from both estate and gift taxes (at least in 2011 and 2012). But many non-citizens are limited to an estate and gift tax exemption of only $60,000. The key question is where the non-citizen considers home or “domicile” to be.

Determining your home country

If a non-citizen does not consider the U.S. to be his home country, he can only claim a $60,000 lifetime estate and gift tax exemption. To determine where a non-citizen’s home is located for estate and gift tax purposes, the IRS uses a “facts and circumstances” test. The test includes many factors, including review of:

Your Visa status
Locations and values of other residences (real property)
Where your family members and close friends live
Where your personal property is located - especially valuable items like fine art, currency, cash, stocks, and bank accounts
The location of your business interests
Where you are registered to vote
Where you are licensed to drive
Where your primary residence is
Where you intend to be buried

Non-resident alien status

If a person is neither a citizen of the U.S. nor considered to be domiciled in the U.S. (a non-resident alien or “NRA”) for gift and estate tax purposes, then the only assets which would be subject to U.S. gift and estate taxes are those situated in the United States.

As an attorney experienced in international estate planning law, I can help you determine whether you are subject to U.S. estate and gift tax laws.

Call me at (650) 325-8276 or download my new guide, U.S. Gift Tax and Estate Tax Planning for Non-Residents and Non-Citizens >>

How Do I Avoid Probate? A Palo Alto Probate Attorney Answers

Janet Brewer — Fri, 08 Apr 2011 02:50:00 GMT

Q: I’ve heard that I should avoid probate, but I don’t even know what it is?!

“Probate” comes from one of those Latin words that lawyers love to use. Basically it means “to prove.” When you leave a will, someone has to prove to a court that the will is valid. But it’s possible to sidestep probate by putting your estate into a living trust.

Q: Planning ahead is ideal, but what if that doesn't happen?

A: Unfortunately, people avoid planning their estates for a variety of reasons. If a California resident owns real estate or has assets worth more than $100,000 and dies without having those assets in a living trust, it will probably be necessary to probate the estate.

An experienced probate attorney can help you decide if a probate is necessary or if you can use an alternate procedure instead. If it is necessary to initiate a probate proceeding, your attorney can prepare all of the required court documents and make all of the necessary court appearances.

If the entire estate (including real estate) totals less than $100,000, your attorney can prepare a Small Estate Affidavit that may make probate proceedings unnecessary.

If the estate has more real estate or more personal property than that amount, probate is necessary, even where there is a will. In fact, a will has no legal effect until it is approved by the Probate Court ("admitted to Probate").

Q: Should I also avoid intestate succession? Or what is that?

If you do not have an estate plan in place at the time of your death, the state distributes your property according to the laws of intestacy. These laws vary by state. In California:

If you are married, your spouse receives all of the "community property"
If you are married and have one child, your spouse receives 1/2 of your "separate property" estate and your child receives the other half (at age 18)
If you are married and have more than one child, your spouse receives 1/3 of your "separate property" estate and your children receive the other 2/3 (at age 18)

Q: I don't want to deal with my family members - can you?

A: Despite people's best intentions, families often fight when someone dies. Probate and related proceedings often end up in disputes, including contests of wills and trusts, construction (interpretation) of wills and trusts, disputed ownership, claims for debts or services rendered, division of personal property, proceedings to retrieve assets from individuals who received them improperly, and other areas too numerous to list.

In those instances where family members don't all get along, and I am hired for probate legal services, I can act as a buffer. If a contest arises, I try to settle it to my clients’ satisfaction.

Learn more

If you are interested in legal services, you can learn more at this site about my services and background -- or download additional resources.

Bay Area Estate Tax Attorney's Tips for Noncitizens and Nonresidents

Janet Brewer — Mon, 21 Feb 2011 11:00:00 GMT

To many, Bay Area real estate seems like a bargain right now. Prices are still some of the lowest in years, and foreign nationals, among others, are paying cash -- sometimes millions of dollars in cash -- for property in San Francisco area communities.

As I explain in a new guide, U.S. Gift Tax and Estate Tax Planning for Non-Residents and Non-Citizens, such investments are at risk if the buyer is a non-citizen or non-resident without a sound strategy to minimize gift taxes and/or estate taxes. The guide outlines key elements in an international estate plan, including:

What is considered “home” for the purpose of estate planning?
How the tax law treats citizens, non-citizens, and non-residents differently
Treatment of minor children, including issues surrounding the choice and citizenship of a guardian
One useful estate planning tool, the Qualified Domestic Trust

U.S. gift tax and estate tax laws are tough on non-citizens

The timing of international estate planning is key because federal estate and gift tax laws are tough on non-citizens -- even when non-citizens with ‘green cards’. In addition, many clients have assets both in the United States outside of the U.S. and not all countries recognize trusts and other tools that work within the United States.

The rules for a noncitizen and nonresident are even more complex if he or she dies owning 'U.S. situs' assets. The most common U.S. situs assets are real estate located in the U.S., stock options in a U.S. company, stock ownership in a U.S. company, and a U.S. company's corporate bonds.

Preventing asset erosion from fees and taxes

If you are a non-citizen or non-resident buying up U.S. assets, real estate agents, accountants and attorneys may each play an important role in asset protection. For example, accountants know a lot about keeping track and building up clients' money. On the other hand, estate planning isn’t their primary job. A real estate agent can help find killer deals on Bay Area houses, condos, and land -- but they won’t be an expert on tax law. And a title company can’t tell you the best way to pass your real estate assets to loved ones, either.

An attorney experienced in international estate planning law can help you can gain peace of mind that your loved ones will not face a snarl of tax issues down the road. At least, with this new guide as a start, families will know what kind of legal help they need, and the right questions to ask.

Download the guide >>

Palo Alto Entrepreneur Plans Business Succession, Exit Strategy for Silicon Valley Business

Janet Brewer — Sun, 06 Feb 2011 23:29:00 GMT

I recently consulted with a very successful Palo Alto business owner and was surprised to learn that he did not have an exit strategy for his Silicon Valley business. As a matter of fact, he told me that he had never really even thought about what would happen to his business if he died or became incapacitated. He assumed that his wife or children would continue to operate the business once he was gone.

What is an exit strategy?

Business succession planning is an essential element of estate planning. Business succession planning enables a business owner to implement an exit strategy for leaving the business either voluntarily (retirement or sale) or involuntarily (incapacity or death).

Without a relevant and up-to-date exit strategy, the departure of a business owner can have a devastating impact on the business – including bankruptcy or closure.

Six elements of a sound succession plan

For high net-worth clients who are business owners, there are six keys to planning a business succession exit strategy.

1. What are your financial goals?

In putting together an exit strategy, a business owner must determine what his financial goals are. This includes determining long term income needs and retirement goals. It’s also important to consider these goals in light of the costs of medical care in the event of a major illness.

2. When will you retire?

It’s important to establish a timeline for retirement. This gives the business owner ample time to groom a replacement, if necessary, and otherwise get her proverbial ducks in a row.

3. What is the current value of the business?

Knowing the value of the business is important because it directly impacts the business owner’s timeline for exiting the business. To determine the value of the business, a certified public accountant (CPA) or other financial expert will analyze the business’s profit and loss statement and balance sheet and compare it with those of similar businesses in the area.

4. Increasing the value of the business

If the value of the business is insufficient for the owner to achieve his financial goals or meet his income needs upon his exit, it’s essential that a plan for increasing the value of the business be formulated and implemented.

5. Selling the business

Consider the pros and cons of selling the business. The pros and cons will vary depending on whether the business will be sold to its employees, family members, or an outside third party. Moreover, the type of purchaser will impact employee compensation and benefits packages and tax planning strategies.

6. Planning for disaster, incapacity or death

In an ideal world, every exit would be voluntary. Unfortunately, there are instances when a business owner is forced to exit because of incapacity or death or when a business is destroyed in an earthquake, fire, or other disaster. Every business succession plan should include a contingency plan for these unexpected events. A good contingency plan often includes:

Business buy-sell agreements
Business, disability and life insurance policies
Key employee incentive programs

Intersection of business succession planning and estate planning

Having a relevant and up-to-date estate plan is essential. The business succession plan directly impacts the owner’s estate plan. How it impacts the estate plan, however, depends largely on whether the exit plan calls for the sale of the business versus a bequest (gift) of the business.

Getting legal help

It’s essential that a business owner formulate an estate plan that addresses every aspect of the business succession plan and that as each phase of the succession plan is achieved, the estate plan is updated accordingly. I am experienced in formulating personalized business exit plans and estate plans for business owners throughout the Palo Alto, Los Altos, and San Francisco Bay areas.

The Importance of Advanced Estate Planning for Bay Area High Net Worth Families

Janet Brewer — Mon, 24 Jan 2011 03:41:00 GMT

For many people, a will is the beginning and the end of their estate plan. For individuals with modest estates, a will alone may be sufficient. However, for people with substantial assets, advanced estate planning is a must. Advanced estate planning is the only way to preserve wealth, maximize asset protection, and minimize tax liability.

Key component #1: tax planning

An essential element of advanced estate planning is tax planning. The purpose of tax planning is to reduce estate taxes, gift taxes, and generation skipping transfer taxes. A well-formulated estate plan utilizes various trusts and other estate planning vehicles to reduce tax liability.

Key component #2: asset protection

The next important element of advanced estate planning is asset protection. Use of creative asset protection strategies provides a shield against various threats which could potentially deplete an estate. These threats include

Creditors;
Con artists who prey on the wealthy and their heirs and beneficiaries; and
Lawsuits arising from acts of negligence

The best way to achieve asset protection is through the use of trusts. Depending on your short and long-term financial goals, the types of assets you have, and your individual and familial circumstances, the following trusts might be appropriate asset protection mechanisms:

Lifetime trusts;
Continuing trusts;
Spendthrift trusts;
Beneficiary protection trusts;
Foreign asset protection trusts; and
Discretionary trusts.

Utilizing these asset protection strategies is also appropriate if you have a child or other beneficiary with special circumstances. If a beneficiary may be facing divorce or bankruptcy, establishing a trust for his or her benefit is advisable. It’s also a good idea to establish a trust for a beneficiary with a substance abuse problem.

When to include a special needs trust

If you have a disabled or mentally ill child or beneficiary, your estate plan should include a special needs trust. A special needs trust allows you to provide for a disabled or mentally ill child or beneficiary without interfering with his or her government benefits.

A special needs trust often includes clauses relating to the provision of housing, medical care, legal assistance, and other essential needs as well as for supplemental needs such as vacations, hobbies, and social activities.

Consider a buy-sell agreement for a closely held business

Business succession planning is also an essential element of advanced estate planning. Business succession planning allows you to formulate a plan for the transfer of ownership and control of a closely held business in the event of your disability or death.

Next steps

If you have questions about advanced estate planning for a Bay Area high net worth estate, please use this website to let me know your needs. Your information is private and I never send unwanted email.

Or, pick up one of my guides, Picking Your Trustee in California. This free 13 page download includes a worksheet to start thinking through key issues in advanced estate planning.

How the Tax Cuts Compromise Package Will Impact Estate Planning

Janet Brewer — Fri, 31 Dec 2010 17:53:00 GMT

High net worth clients taking action to maximize savings

In the past week or so, I’ve been contacted by a number of my high net-worth clients in Palo Alto, Atherton, Los Altos, Portola Valley, and Woodside who wanted to revisit their estate plans in light of the provisions of the tax cut compromise which affect the estate, gift, and generation skipping transfer (GST) tax. I applaud these clients for reviewing existing estate plans to ensure that their estate and gift tax savings are maximized.

Under the new law, the exemption amount for estate, gift, and GST is $5 million ($10 million for couples). This exemption amount is effective for 2010, 2011, and 2012. The estate, gift, and GST tax rate for 2010, 2011, and 2012 is 35%. Additionally the exemption amount will be indexed for inflation beginning in 2011.

Executors have an important choice

Pursuant to the new law, estates of decedents who died in 2010 can choose between applying the new estate tax rules and the former modified carryover basis rules.

In a nutshell, this ability to choose allows the executor of an estate to choose between paying estate taxes or capital gains taxes if and when the assets of the estate are sold. The larger the estate tax exemption amount, the more likely it is that the executor of an estate will choose to apply the estate tax rules.

New laws could impact key estate planning tools

At first glance, these reduced taxes rates and increased exemption amounts may appear to reduce the need for planning. However, that could not be further from the truth. The new laws could potentially impact the use of various estate planning tools including:

Grantor Retained Annuity Trusts;
Qualified Personal Residence Trusts;
Bypass Trusts;
Dynasty Trusts;
Qualified Domestic Trusts; and
Spousal Access Trusts.

The new law may also impact charitable transfers. If your estate plan calls for the distribution of the applicable exemption amount to your heirs with the remainder going to charity, it’s quite possible that your wishes may not be carried out when the exemption amount changes (assuming that the exemption amount equals or exceeds the value of your estate). Therefore, it’s always advisable to revisit such self-adjusting clauses to ensure that any changes required to achieve your wishes are made.

Note for non-resident alients with U.S. assets

An important note of caution for non-resident aliens who own assets in the United States – the new law does not change your maximum estate and gift tax exemption of $60,000 per person ($120,000 per married couple). There are a number of steps you can take to lessen the impact of the estate and gift tax laws; those are unchanged by the new law.

Remember that this $60,000 limit can also impact green card holders who decide to move back to their “home” country and still own assets (such as a house) in the United States.

Because the new estate tax laws will undoubtedly have a significant impact on estate planning, now is the time for an estate plan check-up. Contact the Law Offices of Janet Brewer for help in drafting unique estate plans to protect assets in the San Francisco Bay Area, Santa Clara County, San Mateo County, or nearby.