Caring for Your Estate Plan
You have invested time and money in your estate planning documents, but ongoing attention is needed to ensure that it will carry out its objectives.
One of the goals of estate planning is to avoid a court-supervised probate, the primary method being the use of a revocable living trust. Another common way to avoid probate is with the use of beneficiary designations, which have historically controlled the distribution of life insurance and retirement benefits. However, estate planning does not stop once the documents are signed. Assets change, banks change, new accounts are opened, and often a new job means new retirement benefits. Assets that you acquire in the future do not automatically become part of the trust, and sometimes trust assets are transferred from the trust back to you, for example, if you refinance a home.
Likewise, a job change might result in both a new plan and a rollover from a former company 401(k) plan to an IRA. Each time this happens, the old beneficiary designation may no longer be valid and a new one must be completed and submitted. Be vigilant about funding your trust and maintaining current beneficiary designations. Although…
Dear Clients and Friends,
You have likely heard by now that President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“2010 Tax Act”) on December 17, 2010. The new law provided long-awaited guidance for the estate, gift and generation-skipping transfer (“GST”) tax law for 2010, but few observers could foresee all of the provisions of the bill that was finally enacted. The new law also contains many income tax provisions for individuals and businesses that extend the so-called “Bush Tax Cuts.” It includes important new provisions, including the following:
1. The New Tax Law is Temporary. The new 2010 Tax Law will expire on December 31, 2012. If Congress fails to act, by then, the estate, gift and GST tax law in effect prior to 2001 will be resurrected. That will mean a $1 million estate tax exemption and a maximum 55% graduated tax rate.
2. Estate Planning for 2011 and 2012. Beginning January 1, 2011, the estate, gift and GST tax exemptions are “reunified” at the same $5 million, with a single tax rate of 35 percent for cumulative transfers over the exemption amount. This is the lowest rate on estate and gift…
Local Attorney Obtains Ground-Breaking Private Letter Ruling for Gay Couples
By Ariel Sosna and Sarah Van Voorhis
On May 5, 2010, the IRS issued a ground-breaking private letter ruling stating that California registered domestic partners (RDPs) must be treated the same as heterosexual couples for tax purposes. Bay Area tax attorney Don Read requested a private letter ruling on behalf of a client asking for clarifi cation on how the client and his RDP should fi le their federal taxes. Th e IRS explained that pursuant to California community property law, each RDP obtains ownership of half of the community income by operation of law and not by a transfer. Therefore, the sharing of income does not result from a transfer independently subject to gift or income tax. Specifi cally, the 58,000 RDPs in California should combine their income and each report half of it on their separate federal tax returns. RDPs must also equally split the credits for income tax withheld by the employer(s) of RDPs.
Th e private ruling (201021048) was made public in a redacted version on May 28, 2010, and a Chief Counsel Advice (201021050) was issued announcing the same rule. Th is is the fi rst time the IRS has treated gay couples as a “partnership” for tax purposes. This off ers a clear tax benefi t for RDPs where one partner earns significantly…