Trusts, Wills, Powers of Attorney and Estate Planning

Don't Bet the House on Tax Reform!

If you or your clients are waiting for meaningful tax reform measures to be signed into law this year, don't hold your breath.

The prospects are, in a word, dim. This isn't 1986, when President Reagan and House Speaker Tip O'Neill got together to overhaul the tax system. The chasm that divides the political sides is much greater than it was nearly 30 years ago, and The Washington Post says that's one of the reasons why passing meaningful reform this year will be difficult - if not impossible. Next year might hold a better promise of reform, but the issues that make it unlikely today will have to be dealt with before it can happen. (http://tinyurl.com/lby3cgg)

Three problems

Foremost among the sticking points is how the next tax codes will divide the money. Republicans, for the most part, want a new tax structure to remain revenue neutral, The Post reports, as was agreed upon in the 1980s. Neutral, in tax code political terms, means lowering the corporate tax rate and closing loopholes instead of generating money that could be used to plug holes in federal budget, support infrastructure or pay down the debt.

The process is also part of the problem. Sen. Max Baucus (D-Mont.) and Rep. David Camp (R-Mich.), two reform champions, haven't put together a full-blow bill, which the framers of the 1986 law did. Instead, Baucus and Camp have gone with a so-called "blank slate" approach in which special interests must justify their inclusion in a new bill. With so many competing interests to be weighed against each other, a political stalemate is nearly inevitable. Keeping corporate income tax within U.S. borders - and taxing it - is another thorny issue. With the growth in multinational companies and the global economy in the past 30 years, billions of tax dollars from U.S. companies are never collected. Republicans have pushed for a "territorial tax," and President Obama has shown some openness to it, The Post reports, but creating one that doesn't lose the treasury a lot of revenue will be difficult.

Other issues

Political races, specifically Senate elections in 2014, call into question how much meaningful tax reform can happen anyway, The Christian Science Monitor says. (http://tinyurl.com/k83xj9d) Sen. Mitch McConnell (R-Ky.) is facing a tea party candidate for the GOP nomination. There's also a credible Democrat who could pose a problem in the November 2014 election, something McConnell hasn't seen since first elected in 1984. If a tax reform bill were to pass, McConnell would have to defend his vote, and no matter what the vote was, opponents would use it against him. That's just politics. The Post says public opinion is partly to blame. Only 50 percent of Americans are unhappy with income tax rates, making the status quo easier for politicians to maintain. In the 1980s, more than 60 percent of the public was unhappy, and politicians - fearful of an angry electorate come voting time - made sure a bill was passed. Current administration idle Finally, President Obama hasn't tied himself to tax reform the way Reagan did. While Reagan toured the country, giving speeches with soaring rhetoric to drum up support, Obama has yet to put the full weight of the presidency into getting a deal done, The Post reports. Without a significant push from Obama to keep any deal moving forward or jump-start it when it looks dead, tax reform in 2013 is more theory than reality. We hope this information was useful to you and helps your clients and their families.

If you have a specific case or a question, don't hesitate to call our office.

Umbrella Insurance: What It Is and Why You Need It

Lawsuits are everywhere. What happens when you are found to be at fault in an accident, and a significant judgment is entered against you? A child dives head-first into the shallow end of your swimming pool, becomes paralyzed, and needs in-home medical care for the rest of his or her lifetime. Or, you accidentally rear-end a high-income executive, whose injuries prevent him or her from returning to work. Either of these situations could easily result in judgments or settlements that far exceed the limits of your primary home or auto insurance policies. Without additional coverage, your life savings could be wiped out with the stroke of a judge’s pen.

Typical liability insurance coverage is included as part of your home or auto policy to cover an injured person’s medical expenses, rehabilitation or lost wages due to negligence on your part. The liability coverage contained in your policy also cover expenses associated with your legal defense, should you find yourself on the receiving end of a lawsuit. Once all of these expenses are added together, the total may exceed the liability limits on the home or auto insurance policy. Once insurance coverage is exhausted, your personal assets could be seized to satisfy the judgment.

However, there is an affordable option that provides you with added liability protection. Umbrella insurance is a type of liability insurance policy that provides coverage above and beyond the standard limits of your primary home, auto or other liability insurance policies. The term “umbrella” refers to the manner in which these insurance policies shield your assets more broadly than the primary insurance coverage, by covering liability claims from all policies “underneath” it, such as your primary home or auto coverage.

With an umbrella insurance policy, you can add an addition $1 million to $5 million – or more – in liability coverage to defend you in negligence actions. The umbrella coverage kicks in when the liability limits on your primary policies has been exhausted. This additional liability insurance is often relatively inexpensive in comparison to the cost of the primary insurance policies and potential for loss if the unthinkable happens.

Generally, umbrella insurance is pure liability coverage over and above your regular policies. It is typically sold in million-dollar increments. These types of policies are also broader than traditional auto or home policies, affording coverage for claims typically excluded by primary insurance policies, such as claims for defamation, false arrest or invasion of privacy.
 

When planning your estate, you must consider how you hold title to your real and personal property. The title and your designated beneficiaries will control how your real estate, bank accounts, retirement accounts, vehicles and investments are distributed upon your death, regardless of whether there is a will or trust in place and potentially with a result that you never intended.

One of the most important steps in establishing your estate plan is transferring title to your assets. If you have created a living trust, it is absolutely useless if you fail to transfer the title on your accounts, real estate or other property into the trust. Unless the assets are formally transferred into your living trust, they will not be subject to the terms of the trust and will be subject to probate.

You don’t have to be retired to dip into your Social Security benefits which are available to you as early as age 62.  But is the early withdrawal worth the costs?

A quick visit to the U.S. Social Security Administration Retirement Planner website can help you figure out just how much money you’ll receive if you withdraw early. The benefits you will collect before reaching the full retirement age of 66 will be less than your full potential amount.

Top 3 Real Estate Tips for Small Businesses

The only real estate transaction most small businesses engage in is to enter into a lease for commercial space. Whether you are considering office, manufacturing or retail space, the following three tips will help you navigate the negotiation process so you can avoid costly mistakes.

“Base Rent” is Not the Only Rent You Will Pay

Most prospective tenants focus their negotiation efforts on the “base rent,” the fixed monthly amount you will pay under the lease agreement. You may have negotiated a terrific deal on the base rent, but the transaction may not be the best value once other charges are factored in. For example, many commercial lease agreements are “triple net,” meaning that the tenant must also pay for insurance, taxes and other operating expenses. When negotiating “triple net,” ensure you aren't being charged for expenses that do not benefit your space, and that you are paying an amount that is in proportion to the space you utilize in the building. Another provision to watch for is tenant's responsibility to also pay a pro rata share of increases in real estate taxes. 

There’s No Such Thing as a “Form Lease”

Most commercial property owners and managers offer prospective tenants a pre-printed lease containing your name and various terms. They present these documents often with a rider, and adamantly explain that it is the landlord’s “typical form lease.” This, however, does not mean you cannot negotiate. Review every provision in the agreement, bearing in mind that all terms are open for discussion and negotiation. Pay particular attention to the specific needs of your business that are not addressed in the “form lease.”

Note the Notice Requirements

Your lease agreement may contain many provisions that require you to send notices to the landlord under various circumstances. For example, if you wish to renew or terminate your lease at the end of the term, you will likely owe a notice to the landlord to that effect, and it may be due much earlier than you think – sometimes up to a year or more. Prepare a summary of the key notice requirements contained in your lease agreement, along with the due dates, and add key dates to your calendar to ensure you comply with all notice requirements and do not forfeit any rights under your lease agreement.

Establishing a Life Estate is a relatively simple process in which you transfer your property to your children, while retaining your right to use and live in the property. Life Estates are used to avoid probate, maximize tax benefits and protect the real property from potential long-term care expenses you may incur in your later years. Transferring property into a Life Estate avoids some of the disadvantages of making an outright gift of property to your heirs. However, it is not right for everyone and comes with its own set of advantages and disadvantages.