California Estate Planning Blog by Kevin Staker

March 7, 2018

IRS Announces Estate and Gift Tax Exemptions for 2018 by Kevin Staker

Filed under: Uncategorized — Kevin Staker @ 9:24 am

IRS Announces Estate and Gift Tax Exemptions for 2018

The IRS has announced the estate and gift tax exemptions for 2018.  In Revenue Procedure 2018-18, the IRS announced the exemptions will be $11,180,000.  The Revenue Procedure is part of Internal Revenue Bulletin 2018-10, released on March 5, 2018.  Kevin Staker states that the IRB may be found at https://www.irs.gov/irb/2018-10_IRB#RP-2018-18.

Therefore, Kevin Staker shares that a married couple can now shelter at least $22,360,000 from estate tax through the use of bypass trusts, estate tax exemption portability, gifts, and other estate tax planning devices.

However, if the law does not change, in 2025, we will go back to a $5,600,000 exemption adjusted for inflation.

You are advised to see your estate planning attorney to get proper advice on this issue.  In particular, if you are a married couple, all your children are of this marriage, and your total estate between the two of you is under $5,600,000, you should have a “simple” trust.   A simple trust remains as one trust at the death of the deceased spouse.

By Kevin Staker

 

January 16, 2018

Divorce and Estate Planning by Kevin Staker

Filed under: Uncategorized — Kevin Staker @ 1:17 pm
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If you or spouse file for divorce, your assets will still likely go to your estranged spouse.  You likely would not want this.  The follow are the alternatives.

Do Nothing

Your estranged spouse likely get all .  The spouse likely gets all under joint tenancy, beneficiary designatons or your living trust.

Few divorcing individuals would want such a result in their case. What to do?

What Should You Do Instead?

First – Write a new Will and revoke any living trust.

Write a new Will.  Cut out the spouse by name.

If you have a living trust, revoke it. In California you must file notice with the court and then deliver it to your spouse.  Then you can sign a revocation and deliver that to your spouse.  Your Will will then control to whom you share of trust will go.

Second – Sign a new living trust

You can and should sign a new revocable living trust. Make sure you say nothing goes to your estranged spouse.

The problem is you cannot fund the trust until the divorce is final. California law provides for an automatic temporary restraining order (“ATRO”) on both parties. Neither party can transfer any asset. However, your pour over Will will then get your trust share to the new trust.

Third – Sign new durable powers of attorney

Immediately sign new powers of attorney for finance and health care. Of course, name someone other than the spouse. The ATRO does not prevent signing new durable powers.

Fourth: Sever joint tenancies

Next, sever any joint tenancies with the spouse, especially real property. Use the same type of procedure as revoking the living trust. Your Will will then control where your interest will go.

Fifth: Revoke IRA and other beneficiary designations

Use the same notice procedure to revoke all beneficiary designations.  Your Will will then likely control where the account or plan will go (except for the community property interest of your spouse).

Summary

In summary, a divorce is usually very emotionally troubling. In the midst of the maelstrom do not forget to do what you can to make sure your assets do not go to your estranged spouse and will go to whom you really want them to go. Take action now.

For more details on the above go to the Linkedin article by Kevin Staker found at https://www.linkedin.com/pulse/divorce-change-your-estate-planning-kevin-staker-kevin-staker/?published=t.

December 18, 2017

Personal Biography Website of Kevin Staker, kevin-staker.com, Is Back Up by Kevin Staker

Filed under: Uncategorized — Kevin Staker @ 11:25 am

Personal Biography Website of Kevin Staker, kevin-staker.com, Is Back Up

The personal biography website of Kevin Staker, kevin-staker.com, was down for several weeks.  It is now back up.  It is found at kevin-staker.com.

The site has many interesting facts regarding the law and mediation practice of Kevin Staker.

Kevin Staker  is the president of his law firm, Staker Law Tax and Estate Planning Law Corporation.

He has a bachelor’s degree in Economics from Brigham Young University and law degree from the University of Utah. He also has a Master of Laws in Taxation degree from New York University.

Kevin Staker is admitted to the State Bars in California and Utah.  He is certified as a specialist in both Taxation as well as Estate Planning, Probate and Trust Law by the California Board of Legal Specialization.   He is one of the few attorneys in the State of California with such a dual specialization.

By Kevin Staker

 

December 17, 2017

Humorous Insights in the Tax Cuts and Jobs Act by Kevin Staker

Filed under: Uncategorized — Kevin Staker @ 3:17 pm

We now have the conference committee report.  A few humorous insights:

Qualified Business Income

The corporate rate is being cut.  This is a disadvantage to small business owners.  The final bill has a great item for the poorer business folk.

This is great if you do not make too much money, like the donut shop owner or shoe repair guy.  They get a 20% deduction on the lesser of taxable income or “qualified business income (“QBI”).”  However, if you are in a service profession, such as attorney (me), CPA or physician, the deduction starts to phase out as taxable income exceeds $157,500 for single taxpayers, $315,000 for joint filers.

In the past we worried about ordinary income versus capital gain.  Now we have a third category to worry about, QBI.  Surely we will find ways to game the system.  Even complying will be challenging.  This is real complex stuff, for example if you are a CPA and own a restaurant, these two businesses will be treated separately.  This is not tax simplification, no filing on a postcard as President Trump promised.  This actually should be called “The Tax Preparers Full Employment Act of 2017”.

So the message for most people: self employment is better than employment.  This flies in the fact of Thomas Jefferson’s  Declaration of the Rights of Man and of the Citizen.  The Declaration says this about taxes:

A common contribution is essential for the maintenance of the public forces and for the cost of administration. This should be equitably distributed among all the citizens in proportion to their means.

 

State Income Taxes

Limiting the total deduction for state and local property, income and sales tax to $10,000 is a very big deal.  Many fewer people will be able to itemize deductions.  This does away with the prior great idea of prepaying income taxes for several years.  Oh Well.

However, the law says nothing about prepaying property taxes.

Kevin Staker will continue his quest to find some humor in the 2017 tax act.

By Kevin Staker

December 14, 2017

The Conference Committee of Congress on Tax Reform Reaches Agreement

Filed under: Uncategorized — Kevin Staker @ 7:38 am

Senate-House Conferees Reach Agreement on the Tax Cuts and Jobs Act of 2017, the Republican Version of Tax Reform

Top individual tax rate is lowered from 39.6 percent to 37 percent.

Corporate tax rate is lowered from 35 percent to 21 percent — this rate is 1 percentage point higher than the 20 percent rate initially passed by the Senate and House.

Deduction for pass-through businesses is set at 20 percent.  This deduction when combined with the decreased top rate for individuals makes a top marginal tax rate of 29.6 percent.

Mortgage interest deduction is lowered to $750,000.  This amount is a compromise.  This is half way between the $500,000 limit passed by the House and the prior $1 million limit of the law favored by the Senate.

Estate tax exemption is doubled.  This was the Senate position. Hence for 2018, the exemption will be $11.2 million.  This rate is indexed for inflation from 2010 from $5 m

Income tax exclusion for tuition waivers are preserved for grad students.  This was the Senate position.

Deduction for student loan interest is preserved.

Deduction for medical expenses is preserved.  The House wanted to eliminate the deduction.  However, the floor is actually lowered for two years from 10 percent to 7.5 percent of adjusted gross income. Senator Collins of Maine, a Republican moderate, insisted on this change to assure her vote.

Corporate alternative minimum tax is repealed.

Exemption for the personal alternative minimum tax is raised from $54,300 to $500,000 for individuals and from $84,500 to $1 million for families.

Penalty for not having health insurance is repealed.   This effectively eliminates ObamaCare’s individual mandate.

The Arctic National Wildlife Refuge is opened to energy exploration. This was required to get the vote of Senator Murkowski, another Republican moderate. Adding a non-tax provision was required for it to be a reconciliation bill, so only a majority vote is required in the Senate. Otherwise the Senate filibuster rule of 60 votes would required. This is how Democrats in 2010 got the Affordable Care Act, Obamacare, passed.

Note, not all of the bill has been drafted. They are still working on other details, such as how many tax brackets to have. We shall see.

This article has been written by Kevin Staker. Kevin Staker is found on Twitter at https://twitter.com/kevinstaker. The Superlawyer profile of Kevin Staker is found at https://profiles.superlawyers.com/california-southern/camarillo/lawyer/kevin-g-staker/d9fa5c59-0c2a-4e8f-94e0-682892fe4481.html. Kevin Staker is also on Facebook at https://www.facebook.com/Kevin-Staker-of-StakerLaw-38289441240/. Finally, please note the probate and trust mediation practice of Kevin Staker has completed its first, very successful year. The website is found at http://kevin-staker-mediation.com/.

December 9, 2017

Differences Between Senate and House Tax Reform Bills by Kevin Staker

Filed under: estate tax,Kevin Staker,Uncategorized — Kevin Staker @ 6:22 am
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Differences Between Senate and House Tax Reform Bills by Kevin Staker

 

The two houses of Congress have passed two separate tax bills:

Major Differences:

  • Medical Expense Deduction – House repeals and Senate actually expands.
  • Mortgage Interest Deduction – House reduces maximum loan amount to $500.000 and Senate keeps at $1,000,000.
  • Graduate Student Tuition Waiver – House treats as taxable income and Senate keeps tax free
  • Pass Through Income – House caps rate at 25 percent but excludes service businesses and Senate adopts a 23 percent income deduction for all businesses, including professionals.
  • Alternative Minimum Taxable Income – House repeals corporate and individual, and Senate retains corporate and retains individual but with higher exemption.
  • Estate Tax – House increases exemption to $10 million indexed for inflation since 2010 with repeal in 2023, and the Senate does the same but no repeal.

The two houses will next have a conference committee to hash out the differences.  I suspect the final bill will be closer to the Senate version because they can afford to lose only one more Republican senator.

We shall see.

By Kevin Staker

December 8, 2017

Kevin Staker is a Probate and Trust Mediator in Ventura County

Filed under: Uncategorized — Kevin Staker @ 10:10 am

Kevin Staker is a Probate and Trust Mediator in Ventura County.

In probate or trust mediation, the parties work with a neutral mediator to try to resolve their disputes without litigation and an eventual trial. Parties may go to mediation before or after filing a lawsuit. The parties and their attorneys meet with the mediator in a private, confidential setting.

The probate and trust mediation website of Kevin Staker is found at http://kevin-staker-mediation.com/.  The website includes a page by Kevin Staker on Principles of Probate and Trust Mediation, this is found at http://kevin-staker-mediation.com/principles-probate-trust-mediation/.  Another page by Kevin Staker is Focus of Probate and Trust Mediation; this page is found at http://kevin-staker-mediation.com/trust-probate-mediation-focus/.

By Kevin Staker

November 30, 2017

The Professional Bio Website of Kevin Staker, www.kevinstaker.com, is Back Online

Filed under: Kevin Staker,Uncategorized — Kevin Staker @ 3:23 pm
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The Professional Bio Website of Kevin Staker, http://www.kevinstaker.com, is Back Online.

The http://www.kevinstaker.com website, the professional biography website of Kevin Staker is back online.  This website of Kevin Staker can me found at kevinstaker.com.

Kevin Staker is a living trust attorney and probate and trust mediator in Camarillo, Ventura County, California.

See also https://twitter.com/kevinstaker

By Kevin Staker

November 6, 2017

Estate Planning and the The Tax Cuts and Jobs Act, 2017 Tax Reform by Kevin Staker

Filed under: estate tax,estate tax news,Kevin Staker,Uncategorized — Kevin Staker @ 4:56 pm
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Estate Planning and 2017 Tax Reform

The Republicans in Congress have introduced the The Tax Cuts and Jobs Act, H.R. 1.  The is the 2017 attempt at tax reform by the Republicans in Congress.

The changes proposed include the following:

  • The exemptions from the Estate Tax and the Generation-Skipping Transfer Tax are doubled from $5 million (as of 2011) to $10 million, which is indexed for inflation. This provision would apply to tax years beginning in 2018.  Hence, with inflation the exemptions for 2018 will be $11.2 million.
  • Beginning in 2024, the estate and generation-skipping taxes are repealed.
  • The step up in income tax basis is maintained.
  • The gift tax is lowered to a top rate of 35 percent and retains a basic exclusion amount of $5.6 million for 2018, again indexed for inflation.
  • The annual exclusion of $14,000 increases to $15,000 in 2018 and is also indexed for inflation.

The stated reasons are:

• The estate and generation-skipping taxes impose additional levels on tax on income and
assets that have generally already been subject tax. By repealing the estate and
generation-skipping taxes, family businesses that would pass from one generation to the
next would no longer be subject to double or even triple taxation.
• By repealing the estate and generation-skipping taxes, a small business would no longer
be penalized for growing to the point of being taxed upon the death of its owner, thus
incentivizing the owner to continue to invest in more capital and hire more employees.

Current law provides property in an estate is generally subject to a top tax rate of 40
percent before it passes to the estate’s beneficiaries. When property is transferred during the life of a donor, it is subject to a top gift tax rate of 40 percent, with the first $14,000 being excluded from the gift tax on a per-donee, annual basis. Additionally, property that is transferred beyond one generation, whether by bequest or by gift, is subject to an additional generation-skipping tax
Transfers between spouses are excluded from these taxes, and when an individual dies
without his or her assets exhausting the basic exclusion amount, any unused basic exclusion amount passes to his or her surviving spouse, with a top basic exclusion amount of $10.98 million for 2017. When a beneficiary receives property from an estate, the beneficiary generally takes a basis in that property equal to its fair-market value at the time the decedent dies, which is known as taking a step-up in basis. However, when a donee receives a gift from a living donor, that donee generally takes the donor’s basis in that property, which is known as taking a carryover basis.

Please note: for the Act to pass, only two Republican senators can oppose it.  Otherwise, the Act will be defeated just as was Obamacare repeal.

By Kevin Staker

June 13, 2017

IRS Extends Missed Deadlines for Estate Tax Portability by Kevin Staker

To transfer the unused estate tax exemption of a deceased spouse, the transfer must be done in an estate tax return filed for the deceased spouse.  The deadline for such a return is nine months after the death of the deceased spouse.  That deadline cannot be extended by the typical extension for filing an estate tax return.

Many surviving spouses have missed that deadline.  Such a spouse up until June 9th had to apply for an expensive private letter ruling from the IRS to be allowed to file the estate tax return after the nine month deadline had been missed.  That entailed a filing fee of thousands of dollars and attorney’s fees of thousands and thousands of dollars to fill out the amazingly complex paperwork applying for a simple extension.

The IRS has come to its senses and on June 9th in Revenue Procedure 2017-34 (https://www.irs.gov/pub/irsdrop/rp-17-34.pdf) has ruled such a late return may now be filed by the later of January 2, 2018, or two years after the death of the decedent.

I personally had one client I called immediately.  I had recommended he go through the private ruling process because it would have saved tens of thousands of dollars in estate tax if he were to die in the near future.  Lucky for him he did not follow my advice.

See also http://www.journalofaccountancy.com/news/2017/jun/portability-election-extension-201716844.html

By Kevin Staker

 

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