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Law Offices of Givner & Kaye Newsletter | November Issue
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Greetings!
To engage in estate tax planning, asset protection planning and even some types of income tax planning, you need to establish an irrevocable trust for the benefit of your heirs. Many people are uncomfortable with engaging in the planning because they do not want to set up an irrevocable trust. Why would I want to set up a trust that I can't revoke??? What if I change my mind??
The answer is that even though the trust is not revocable, it can be quite flexible. If we didn't have the ability to make the clients feel comfortable that they can remain in practical control, they would not engage in any planning.
What are the elements of practical control? The client can remove the trustee, at any time, and without giving a reason, and name a new one. The client can make the trust's investments by having the trustee drop the trust assets into a single member LLC of which the client is the non-member manager. The trust can have a "protector" who can be given the power to remove a beneficiary, add a beneficiary, change the allocation among the beneficiaries and change the manner of distribution among the beneficiaries.
With these and other reassurances, our clients are comfortable establishing flexible, irrevocable trusts to allow them to engage in sophisticated planning. If you would like to explore this, please give us a call.
Best regards,
Bruce Givner
Owen Kaye
Kathleen Givner
Neda Barkhordar
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Featured Article: Not Happy with Your Irrevocable Trust? Here Are Some Options
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What if you have already established an irrevocable trust that you do not like? What if the irrevocable trust was not established to be flexible as described in the opening part of this Newsletter? Are there still steps that you can take to make changes?
The answer is a resounding "maybe." First, under California law (Probate Code Section 15404(a)), a trust can be amended without going to court if the grantor (creator) and all of the beneficiaries agree. You might be concerned that one of the beneficiaries might not agree to the change. However, in many situations the beneficiaries will have little choice but to agree because if they fail to do so you can disinherit them from the rest of your estate. There are several other sections of the California Probate Code under which irrevocable trusts can be changed with the approval of the Probate Court Judge.
Next, what if the irrevocable trust you do not like owns an insurance policy on your life? Set up a new irrevocable trust with terms that you like. Deposit enough money into the new trust so that it can buy the policy from the old trust. This way the beneficiaries of the old trust, not all of whom you like, will only receive the current fair market value of the policy, not the ultimate death benefit.
What if the irrevocable trust is going to terminate in the near future and you would prefer to keep the assets in trust for a longer period of time, for example to protect the beneficiaries from their own possible mis-use of the funds? Have the trustee contribute the assets to an LLC of which you are the managing member or to a limited partnership in which you are the general partner. This way, when the trust ends, the beneficiaries will get non-marketable, minority interests in an LLC or limited partnership.
In other words, there are often ways to pragmatically deal with an irrevocable trust that you do not like.
For more specific recommendations regarding your irrevocable trust, contact us today.
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YouTube Videos
 | | Modify An Irrevocable Trust in California |
We post new videos on YouTube each week filled with advice and tips. For more, click here.
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| Attorney Spotlight: Upcoming Engagements |
Bruce Givner is giving a nationally broadcast seminar on November 13th at 9 a.m. for the Ultimate Estate Planner: "Capital Gains Tax Planning Strategies - All Of Them." Contact UltimateEstatePlanner.com.
Owen Kaye is speaking to the Institute For Wealth Planning in Chicago on November 13 on Capital Gains Tax Planning. Contact InstituteForWealthPlanning.com.
Bruce Givner is teaching his course entitled "Community Property: The CPA's Guide" for the California CPA Society in San Mateo live and for future rebroadcast on December 4.
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Captive insurance companies are undergoing a lot of pressure right now from the Internal Revenue Service. On August 28, 2014, GS Manufacturing, Inc. petitioned the U.S. Tax Court because the IRS disallowed the $710,000 premiums it paid to its Section 831(b) captive for the years 2010 and 2011. We understand that the basis for the disallowance is that the Captive Manager's (Alta's) risk pool was not "risky" enough to provide risk distribution. On September 10, 2014, another large captive manager - Artex Risk Solutions, Inc. - lost a battle in Illinois District Court. It tried to prevent the IRS summons which sought all of its client files. We understand that this dispute began due to concerns about potential securities violations related to the Artex risk pool.
Given these concerns it is interesting to note that one local captive manager has a different approach to meeting the risk distribution requirements, one that does not require a taxpayer's Section 831(b) captive to participate in a risk pool. If you have an interest in establishing a "micro-captive" (also called a "wealth captive"), or in switching your existing captive away from reliance on a risk pool, give us a call.
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Bruce Givner & Owen Kaye |
Upcoming Thursday Insights Series Seminar:
IRS National Office Private Letter Rulings (and the CA Equivalents). with Bruce Givner, Esq.
December 20
2:30pm-4pm
Includes a discussion on User Fees, Legal Fees, Topics, e.g., IRAs, 355 Split-Offs. Timing. Opinion Letters and the Accuracy-Penalty.
Join us in the office or online via webinar, where you can watch the folks in the room listen to and question Bruce.
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Tax Law Comics:
The Adventures of Reese & Ira Sponsible
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Let your friends know you like the newsletter! |
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 For almost four 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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November, 2014
Compiled by Givner Strategies, LLC
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Copyright � 2014. All Rights Reserved.
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