Law Offices of Givner & Kaye Newsletter | April Issue 

Greetings!
         

          April is the time when most of us have the news from our certified public accountants about what the income tax liability is from 2013, and what our quarterly tax deposits are going to be for 2014.  This is, therefore, an excellent time to think about income tax planning for calendar 2014 (for the tax return that will be due on April 15, 2015). 

 

          Whether it is income tax planning for your business, or income tax planning that can be done at the personal level, now is the time to make an analysis and consider what might be attractive to you and best for you.  Please call us now at 310-207-8008 to set up a discussion. 

 

          Also, if you have a limited liability company and would like to discuss the possible change to a limited partnership to increase the level of creditor protection in light of the January 1, 2014, change in California law, again, give us a call.  Take the action now to protect your assets and yourself.

 

 

                    Best regards,

 

                    Bruce Givner

                    Owen Kaye

                    Kathleen Givner

                    Neda Barkhordar

Featured Article: Should You Amend Your Family Trust to Eliminate the "Bypass" Trust?

Action is needed to avoid harm to your heirs and your assets.  This is a new world in estate tax planning.  We have a $5,340,000 per person estate tax exclusion which is adjusted by the cost of living so that, in 2015, it will increase to at least $5,450,000 per person.  At that rate it won't be long before it reaches $6,000,000 per person, meaning that the first $12,000,000 per couple will pass to the children free of estate tax. 

 

The other factor is that the maximum capital gain tax in California is now 20% + 3.8% + 13.3% = 37.1%, which is not significantly less than the 40% estate tax rate.  Traditionally the wisdom was to reduce the estate tax since it was due on a date certain (9 months after the surviving spouse's death) and it was higher than the capital gain tax. By contrast, the capital gain tax could be postponed if the children moved into the real estate; held on to the real estate; or did a tax deferred exchange under IRC Section 1031 with the real estate.

 

However, with almost $11,000,000 per couple able to pass free of estate tax we have a new possibility: maybe it is better to have that $11,000,000 "subject to estate tax" so that the children get a "step-up" in basis on the surviving parent's death.  The elimination of capital gain on that entire $11,000,000 (which, as we have seen above, will soon be $12,000,000), will eliminate a lot of capital gain at a rate of as high as 37.1%.  And yet it won't cost any estate tax due to the exclusion. 

 

What does that mean?  On the first spouse's death, instead of having that spouse's assets first go to the "bypass" trust, which skips the surviving spouse's estate, it may be best - in estates of about $11,000,000 - to have those assets go to a marital (QTIP) trust.  This way the assets will still be assured of going to the children of the first marriage.  However, they will be "included" in the surviving spouse's estate and, therefore, will "step up" to the date of death fair market value at the survivor's death.  If the estate turns out to be "too large," the survivor will have the option to disclaim all or a portion of the first spouse's assets into a "bypass trust."

 

This type of engineering may be advantageous for your family.  There are, of course, other alternatives.  Give us a call or send us an email to discuss these interesting possibilities.  You have the chance to save your heirs a great deal of income tax. 

YouTube Videos
Late Tax Returns
We post new videos on YouTube each week filled with advice and tips. For more, click here.
Tax Tip of the Month

Again this month we had a client contacted by the Criminal Investigation Division of the IRS.  As you can imagine, the client panicked when people arrived at the front door of his business and showed him their badges (they also carry weapons).  However, the client had the good sense to ask for their business cards and tell them he wanted to consult with his counsel before going into detail with them.  As it turns out, our client is not the target of an investigation; the IRS believes that our client is the source of information about a party with whom our client has business dealings.  So, if this unlikely event occurs, do not panic.  If you have done nothing wrong, ultimately you have nothing to fear.  The IRS does not undertake criminal prosecution lightly; it is a very expensive tool that the IRS only uses in very important situations.

 

In This Issue
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Upcoming Thursday Insights Series Seminar: How Parents Keep Control Both During Their Lifetimes And After They Are Dead
 
May 1st
 
To engage in effective asset protection or estate tax planning the parents must establish an irrevocable trust for the benefit of their children and/or later heirs.  However, parents do not like the word "irrevocable".  How do we reassure them that despite the irrevocability of the trust they still have significant influence, if not control, over the trust and its assets?  Were we not able to make them feel comfortable they would never engage in the planning the first place.  Well, we are able to make them comfortable.  Come find out why.
 
Call (310) 207-8008 or sign up online to join the seminar in-person or via webinar!
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Attorney Spotlight: Kathleen Givner, Esq. 

Kathy graduated from U.S.C. law school in 1987.  Her practice and areas of expertise are eclectic.  Last year she successful received three private letter rulings from the National Office of the Internal Revenue Service which allowed the now deceased grantors of irrevocable trusts formed in the 1980s an extension of time to elect to allocate generation skipping transfer tax exclusion to the trusts.  The trusts, worth $30,000 in the 1980s, are now each worth $10,000,000 to $20,000,000.  Kathy also recently successfully navigated an adult adoption, something which the presiding judge herself had never done.  She is the firm's expert on the taxation of damages and on the taxation of international transactions. 

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!

Givner & Kaye, A Professional Corporation | bruce@givnerkaye.com 
www.GivnerKaye.com
12100 Wilshire Blvd.
Suite 445
Los Angeles, CA 90025

April, 2014


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