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Law Offices of Givner & Kaye Newsletter | March Issue
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Greetings!
Now is the time to have your family trust reviewed. Virtually all family trusts provide that on the first spouse's death that spouse's assets must be allocated to the "bypass" trust. That was done so that the first spouse's "unified credit" equivalent would be protected from estate tax on the survivor's death.
However, with the increase in the exclusion amount to $5,340,000 in 2014 (an amount which will increase each year with the cost of living) and with the "portability" (the ability of the surviving spouse to use the deceased spouse's unused exclusion) the analysis has changed. In many estates a better result may be to leave the assets (i) outright to the surviving spouse or (ii) in a marital (or QTIP) trust for the surviving spouse. This way the assets will receive a "step-up" in basis on the death of both spouse. That will provide the children a higher basis for purposes of a future sale.
In any event, this dramatic change in the law means that you should sit down with us face-to-face to discuss which approach might be best for your family. No one answer is best for all families. Act now. If you do not act it will harm your assets and your heirs. The difference may be millions of dollars of income taxes.
So please call us now at (310) 207-8008 to set up a discussion about reviewing your family trust.
Best regards,
Bruce Givner
Owen Kaye
Kathleen Givner
Neda Barkhordar
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Featured Article: Captive Insurance Companies - Good For Real Estate Investors Too!
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Captive insurance companies have been around since the 1950s. Virtually all of those were formed by public companies and they are located in Vermont or the Cayman Islands. The tax law regarding them was largely settled by the 1989 case of Humana vs. Commissioner.
However, what our clients are involved with are micro-captives (also sometimes called "wealth captives"), which are a product of a 1986 change in the law: Internal Revenue Code Section 831(b). That subsection provides that a small property and casualty insurance company which receives no more than $1,200,000 of premium income can elect to not pay tax on the premiums. Why has it only been in the past 6 years or so that most advisors have heard of captive insurance companies for closely held businesses? First, because of the proliferation in the number of captive management companies. There are now so many that the competition has driven the fees down to prices that even 3 years ago would have seemed absurdly low. Some captive managers will do the work for as little as $35,000 to $45,000 per year, down from $60,000 to $75,000 just 5 years ago.
The other reason why advisors are now hearing about captives for closely held businesses is because of the availability of series LLC structures in a few states. Normally the capital required to start a captive is, depending upon the state, $250,000. So if a business has a target premium of $400,000, being asked to pony up $250,000 is quite a burden. By contrast, with a series LLC the required capital might be only $80,000.
Please call us if you would like to discuss captives in detail. However, the purpose of this article is to alert you to the fact that you need not have an active business to take advantage of the tax deduction by the payor which is received tax free by the family owned insurance company. If you have significant investment real estate, such that a premium of $250,000 or more is appropriate, you too may be a candidate for a captive. So even though the ownership of real estate may not be an active business, a captive may still be appropriate. Again, call us now at (310) 702-7851, as the process should take several months for you to feel comfortable with the idea and with choosing a particular captive manager.
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YouTube Videos
We post new videos on YouTube each week filled with advice and tips. For more, click here.
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 Upcoming Thursday Insights Series Seminar: LLCs - Beyond the Basics with Bruce Givner March 20th LLCs are considered to be helpful structures for both estate tax and asset protection planning. Their status for asset protection planning was considerably weakened in California effective January 1, 2014, due to the change in Corporations Code Section 17302(c)(2). However, they are still more valuable than owning your assets directly.
This seminar will focus on the interesting uses of LLCs in California and other states both for asset protection and estate tax planning purposes. This is not a course for beginners.
Call (310) 207-8008 or sign up online to join the seminar in-person or via webinar!
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If you are being audited by the IRS, never agree (i) to an extension or (ii) to go to Appeals directly from the audit. Once the IRS auditor has articulated a position negative to a taxpayer, the audit is effectively over. At that point you should clam up. Only respond to direct questions. Do not volunteer facts and theories. Anything you say and provide the IRS auditor will use to make the file stronger against you. The IRS auditor's job is to determine the facts and apply the law, not to negotiate. If the IRS auditor requests an extension you should promise to provide (and in fact provide) any requested information in an extremely timely fashion. Your goal is to have the IRS auditor write up the Notice of Deficiency (90 Day Letter). Call if you have questions.
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Attorney Spotlight: Neda Barkhordar, Esq.
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Neda joined the firm in Fall, 2012. She is a graduate of UCLA, where she completed her degree in 3 years summa cum laude; she received her law degree from UCLA where she completed the Business Law and Policy Specialization in Taxation and received A's in all of the major tax classes; and she earned her LLM in tax from NYU (with a 3.8 GPA), 35 years after Bruce did.
At Givner & Kaye Neda has advised clients on both regular estate planning, such as pourover Wills and family trusts, and complex estate tax planning involving private annuities, QPRTs, SCINs and GRATs. She has been the primary advisor to clients and their other advisors about the Offshore Voluntary Disclosure Program (taxpayers with delinquent Foreign Bank Account Reports). Neda is constantly working on inbound planning (non-U.S. people who wish to invest in the U.S. or give assets to their U.S. family members) and multi-national planning (clients with assets in the U.S. and other countries, e.g., Germany, Russia and France). Neda has filed Tax Court petitions and is actively engaged in negotiations with the Internal Revenue Service and the California Franchise Tax Board on behalf of taxpayers with collection and other problems. She is also currently at work on two large tax-free spin-offs under Internal Revenue Code Section 355. And those are just a few of her past and current projects.
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 For over three decades, our experienced Los Angeles estate planning, asset protection and expert tax attorneys have met each client's unique planning needs by collaborating with our longtime partners - attorneys, accountants, business managers, financial planners, stockbrokers and insurance professionals. Contact Givner & Kaye today! |
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