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Estate Tax

Monday, April 4, 2016

No More ABC Trusts

 

    For years the standard in the Estate Planning industry was the ABC Trust so there is a good chance you have one.   You will know you do if you have a Trust that requires mandatory divisions into separate irrevocable Trusts when the first spouse dies.  If you do please have it reviewed immediately.

    Why?  Because unless you and your spouse have more than about $15 million you do NOT need this.  Even worse, I see Trusts everyday that have ABC provisions and owners have less than $500,000 - meaning they never even needed such a Trust and were simply "oversold" by their attorney. 

    ABC Trusts are tedious and EXPENSIVE to administer following the death of the first spouse and are simply are not necessary.  Some attorneys justify their persistent use of ABC Trusts as a way to protect a surviving spouse in the event they end up remarried to some "grifter" or as having some sort of Asset Protection benefit.  

    But I can assure you that in my 19 years of Estate Planning, I have never seen a situation where an Irrevocable Trust prevented anyone from stealing from a surviving spouse or provided any form of effective asset protection.

    On the other hand, on a daily basis I deal with surviving spouses whose hands are tied by having to deal with these Irrevocable Trusts in situations such as trying to get a Reverse Mortgage or line of credit, or trying to eliminate a child beneficiary who has a drug or gambling problem.

    When I started doing this and the Estate Tax Exemption was $600,000 these Irrevocable Trusts had a lot of benefits.  But it has been a long time since the average family was anywhere near the Estate Tax Exemption levels and it is time to search out these outdated Trusts and fix them.


Wednesday, March 30, 2016

Property Tax More Important Than Estate Tax For Most Of Us

 

    Today the threshold for advanced Estate Planning is really $12-15 million.  For most people the most important tax consideration is being able to transfer property and keep our beneficial Prop. 13 values.  Many of the oversold and unnecessary strategies such as the use of LLC's and Irrevocable Trusts for "Asset Protection" will put your Prop. 13 Tax Basis at risk.  The County Assessor is ready to pounce on any questionable transfer and the need for tax revenue to support our local governments and soaring pension obligations will only increase. 

    The bottom line is this In today's environment - NEVER RECORD A DEED WITHOUT BEING ABSOLUTELY SURE OF THE PROPERTY TAX IMPLICATIONS.




The Tonkovich Law Firm assists clients with Estate Planning, Wills, Trusts, Durable Powers of Attorney, Conservatorship and Contested Probate Procedures and Business and Real Estate Litigation in Irvine, CA as well as El Toro, Aliso Viejo, Lake Forest, Laguna Hills, Tustin, Newport Beach, Santa Ana, Newport Coast, Ladera Ranch, Foothill Ranch, Mission Viejo, Laguna Woods, Corona Del Mar, Silverado, Orange, Laguna Beach, Rancho Santa Margarita amd Fountain Valley in Orange County.



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