Why do I like Retirement Trusts best of all beneficiaries for retirement assets? Because unlike any other beneficiary, with an Irrevocable Retirement Trust, we can achieve every objective clients have for their estate planning. (Although the trust has to be irrevocable — according to one case in Kansas — it’s easy to replace it with a new trust as long as the plan participant is alive and well.)

We can achieve estate tax planning goals by keeping the first spouse’s retirement assets out of the second spouse’s taxable estate; especially valuable if the retirement plan is a substantial portion of the estate. This is applying the A-B formula that allows married couples to double the amount they can pass on to beneficiaries free of estate tax to retirement assets.

We can maximize the income-tax deferral benefits of the retirement asset by ensuring that the stretch-out is fully utilized. (That means that your beneficiaries can withdraw and pay tax on the retirement plan over the course of their entire lives, rather than all at once.  If they have to withdraw it all right away, it may put them in a higher tax bracket so that they have to pay very high income tax rates on the inheritance.  Imagine a $1M IRA reduced to $650k through income taxes.  Imagine the beneficiary finding out that it was avoidable…)

We can provide asset protection, divorce protection, remarriage protection and disinheritance protection to all beneficiaries, from the spouse to the grandchildren. Unlike in an RLT’s conduit trust provisions (at our firm, a standard clause we include that, in some cases, allows a stretch-out), a Retirement Trust can contain Accumulation Trust provisions that allow the trustee to accumulate required minimum distributions inside of the trust instead of distributing them to the beneficiary each year. This allows true protection because there is no right to attach or take away.

Two cases (one from Delaware – a powerful state), have recently held that an inherited retirement plan has NO asset protection on its own.  Listen, while you own your own retirement plan, you get great asset protection, especially if that retirement plan is under ERISA — 401(k)s, 403(b)s, etc.  If you get sued or go bankrupt, your entire 401(k) is protected (the protection for contributory IRAs is limited; comment below if you want details), no matter how big it is.  Your beneficiaries don’t get this protection.

Finally, we can ensure the asset is never accidentally probated. You may wonder how it could ever be probated.  All it takes is for the primary beneficiary to fail to complete her own beneficiary designation form.  Or the custodian could lose the designation form.  Or you could name a minor child as a beneficiary.  Lots of paths to probate.

The Irrevocable Retirement Trust is an estate planner’s dream for her clients!  DEFINITELY consider it if your retirement assets make up more than 20% of your total estate or exceed $300k.

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Welcome to the newly redesigned blog. The redesign of the blog is part of an effort to redesign the entire website, which grew out of the many changes that led to our new firm name. No longer The Law Office of Diedre Wachbrit, APC, this email is coming to you from Wachbrit Braverman PC.

And the lead attorney is not Diedre Dennis Wachbrit, single mother.  Instead, it’s Diedre Wachbrit Braverman, remarried mother of two fourth-graders. I changed my name when I wed Bennett Braverman, of Boulder, Colorado, in May. Bennett is also an estate planning attorney, and the kids just love him.

I have another big change to tell you about before I get down to the serious business of blogging about legal topics. (I’ve got some good ones already written for including a three-part series on a topic that generates a lot of questions: retirement plan beneficiary designations!)

The other big change is that our firm once again has an Associate Attorney, Mrs. Annabel Blanchard Spatola. A recent law school grad, Mrs. Spatola decided early on that she wanted to focus on estate planning and related areas. We are fortunate to have her because she is a quick learner and she shares the team’s dedication to client service, integrity and the right result, every time.

So please consider this blog a resource for learning (use the comments area for questions), and for sharing. We will continue to email you blog snippets but if you want to see blog articles as soon as they’re published, subscribe to this blog using an RSS reader.

- Diedre Wachbrit Braverman

Today’s Forbes.Com has a quick comprehensive graphic article on 10 estate planning moves everyone should be making now. Forbes even includes a calculator that will tell you where your assets will go if you die without a will. Check it out by clicking here.

Today’s Wall Street Journal features an article, “Tax Report: Tips for Dodging an Audit.” Tax audits on those filing with incomes of $200,000 and above are sharply up and likely to continue at higher rates.

The IRS is especially fond of auditing those who use Schedule C. If you have a business, you can avoid Schedule C by incorporating (call us for details).

A few other interesting facts from the article:

- Most audits now are done by mail

- Enforcement revenues dropped from 2007 to 2008

- Anyone can “tip off” the IRS that you are cheating and the agency is likely to investigate.

You’ve all heard the stories of people losing their family homes when a person on Medi-Cal dies. They’re true. Medi-Cal can take your family’s home if an owner of the home was a Medi-Cal recipient. In fact, you are required to report the death of anyone who was a Medi-Cal recipient just so that they can decide if they are going to go after their assets or not.

When you send the notice to the Department of Healthcare Services, they will respond with a claim for repayment of all the payments they made after the Medi-Cal recipient turned 55 years old. This claim will be asserted against any assets the recipient owned when he died whether they are in a revocable living trust, a probate, an IRA or most other forms of ownership.

There are some limitations. Medi-Cal will not take the home while a spouse is still alive. In that situation, Medi-Cal will take the home when the surviving spouse dies. Now if the family is survived by a minor, blind or disabled child, Medi-Cal will not take the home at all. Finally, Medi-Cal cannot take the home if it has been properly transferred into a Medi-Cal House Trust.

With the Medi-Cal House Trust, the elder retains the right to live in the house for as long as he is able but the rest of the interest in the house is transferred to the beneficiaries of the trust (usually the children). A successful Medi-Cal House Trust ensures that the beneficiaries get a step-up in capital gains basis, that the house is not subject to estate tax, that the elder never has to move against his wishes and that Medi-Cal can make no claim against the property.

P.S. For those loyal readers who are interested, I’m delighted to announce my engagement to Bennett Braverman, another estate planning attorney.

“The Social Security Administration has unveiled an online calculator that will project your Social Security benefits based on your actual work record. The agency has other online calculators and every year mails benefit estimates to adult workers. But this latest calculator goes further than these, allowing you to quickly run various scenarios based on earning projections and differing retirement ages. “I’m impressed. It’s a wonderful tool. It brings some clarity to one of the key sources of income for people in retirement,” says Stuart Ritter, a T. Rowe Price Associates financial planner who tried the calculator yesterday. “Knowing more about your Social Security benefits will help you plan better for what you need to be saving.” Find the Retirement Estimator on the agency’s home page at www.ssa.gov.”

Source: NAELA e-bulletin and Baltimore Sun. For the full story go to: http://www.baltimoresun.com/business/investing/bal-bz.ym.ambrose22jul22,0,4246352.column
To go to the calculator: http://ssa.gov/estimator/

While involved in a chain-reaction freeway accident, a vehicle lost control, vaulted over the center median barrier, and landed on top of plaintiff’s vehicle, resulting in traumatic brain injury.

Verdict: $22,566,373

But there were other verdicts this month too. Here’s one:

Spilled coffee caused a driver to swerve across the centerline and collide head-on with a car that then rolled over, leaving the 48-year old driver with devastating injuries.

Verdict: $16,789,835

Source: California Bar Journal

Creating an estate plan is a very personal matter, and is usually done privately, with your attorney and with your partner, if you have one. However, there are some circumstances under which estate planning should be a family affair-perhaps even a multigenerational one.

Sean Condon writes about when it might be appropriate to include the whole family in the estate planning process in his article Estate Planning Can Be A Multigenerational Matter. Condon’s article mentions specific situations in which families would want to consider planning as a whole unit, including the following:

Planning for succession within a family business.

When multiple generations of families own property together.

If the family is responsible for significant debt.

If a family has a history of supporting certain charitable foundations and desires to continue doing so.

To provide for family members who live out of the country.

To make provisions for a non-traditional family situation, such as unmarried partners.

In many situations, you won’t have to choose between an estate plan that is private and one for your extended family. There are many ways to create individual estate plans for each nuclear family while still respecting and arranging for matters that affect the extended family as a whole. Of course, the process is easier if each nuclear family is able to work with the same attorney, but it is certainly not necessary as long as each attorney and family is willing to communicate and act together.

If you aren’t sure if you should plan privately for your family or include your whole multigenerational unit in the process, give our office a call. We can help you look down the road ahead and create a plan of action that will make every member of your family feel secure.

One of the most powerful tools in the landlord’s asset protection kit is the Limited Liability Company. Unlike insurance, LLCs have no exclusions for mold or other types of liability.

Recently, Los Angeles County courts awarded another large mold verdict. Here’s the verdict as reported in the California Bar Journal:

“Water Damage

Verdict: $859,478

Water damage from a leaking bathtub forced a neighboring tenant from his unit during mold and asbestos remediation…”