Year End Planning

Many clients have contacted me and asked about the most effective planning methods and techniques during this year where the "regular" estate, gift, and generation skipping tax rules will go back in effect next year (more on that below). With regard to each person's unique situation, different planning techniques may provide you or them with some extra benefit if done before the end of the year. In general, those include large lifetime gifts (as the tax rate on gifts over the million dollar lifetime gift credit) is 35% in this year, but reverts back to a maximum rate of 55% next year without any congressional action. Based on this, if you are a client who has been thinking about making large gifts and who does not mind paying gift taxes, then this is the year to make outright, large gifts. These types of gifts can be made to trusts as well, but based on the rules regarding generation skipping taxes, I am not recommending that you make large gifts to trusts that have beneficiaries who would trigger generation skipping taxes. The reason for this is that even though there is no GST tax this year, the GST tax will be assessed against distributions from trusts in the future if the gift that funded the trust was not exempt from this type of tax. Due to this change in the law that will occur on January 1, 2010, I am suggesting to clients that if they want to make large gifts to grandchildren or more remote heirs to avoid the GST tax in the future (and to take advantage of the lower gift tax rate this year), then the gifts should be outright. If the trust is set up to benefit the children of the Donor, then the large taxable gift can be made to a trust for that person's benefit, but the trust must be set up to be included in that beneficiary's estate if you do not want it to be subject to GST taxes in the future.

In general, planning techniques involving charitable gifting (outright gifts to charities, creation and funding of private foundations, public charities, etc.) all must be done before the end of the calendar year instead of the tax due date of April 15th next year. Based on this, if you are working with your CPA to determine if you need additional charitable deductions for this tax year, make sure that you work with your attorney to provide enough time to make these gifts prior to the end of the year. Even the formation of private foundations can be done prior to year end as they can be formed and funded (giving you the tax deduction) if the entity obtains its 501(c)(3) status within a close period of time of the formation of the entity (you must generally file the 1023 form within 27 months of formation if you want the operations of the entity to be tax exempt from the date of formation).

In addition to all of the above, Congress is going to modify the GRAT rules sometime next year, so if you would benefit from a two year GRAT, then that may be another planning technique to consider. Life Insurance is also another great option that people sometimes consider too late (based on developing health issues). The earlier you get a life insurance plan in place, the better your costs will be (and you will often be able to get more coverage).

If you have questions about what any of the above means, do not hesitate to contact me by phone or email and we can discuss your questions in greater detail.

New Firm and Services Offered

It has been a while since I last posted on this blog, but that should change from this point forward as I have left my prior Firm and have opened up my own office. My new contact information is as follows:

Ziebold Law Group
9870 Research Drive, Suite 105
Irvine, CA 92618
949-788-1819 x 129 (phone)
949-788-1869 (fax)
Mark@Zieboldlaw.com

In addition to this, two others and myself are planning on offering Christian Fiduciary Services (Trustee services from a Christian Worldview) in the near future (outside of my law practice). Please update your contact information for me with the information above and have a great day.

Content on Avvo website

I have started providing legal answers and legal guides on Avvo (www.avvo.com). Take a look at the following:

Next Asset Protection Society Meeting

The next meeting of the Asset Protection Society in Orange County will be held on Tuesday, July 20, at 7:00 PM at our offices located at 3737 Birch Street, Suite 400, Newport Beach, California 92660. Todd Rustman of GR Capital Asset Management (www.gr-cam.com) will be speaking about absolute return investing and market alternatives in the current economic environment. He will also be highlighting several methods in these strategies to protect your investments from market downturns and other factors. If you would like to attend this meeting, please contact me to RSVP at mziebold@ferruzzo.com or call me at 949-608-6900.

Highlighted Charity for June

From time to time I will highlight some of the charities that I learn about and/or work with in my practice. At this time, I want to highlight blood:water mission for the work that they are doing in Africa.

Blood:Water Mission is a grassroots organization that empowers communities to work together against the HIV/AIDS and water crisis. They work to provide clinics and clean water to communities in Africa, in order to combat the ongoing problem (instead of just dealing with the symptoms of the overall problem). You can see more about their organization and what they are doing on their website at:

www.bloodwatermission.com

I highly recommend what they are doing and will be supporting their ministry on an ongoing basis in the future.

State Certification

The State Bar has approved my application and now I have received the certification as a specialist in Estate Planning, Trust, and Probate Law:

http://members.calbar.ca.gov/search/member_detail.aspx?x=227950

You can read more about the specialization designation here:

http://www.calbar.ca.gov/state/calbar/calbar_generic.jsp?cid=11584&id=9161

Many thanks to my Firm, Ferruzzo and Ferruzzo, who has supported me through the process of receiving this designation.

Next Asset Protection Society Meeting

The next meeting of the Asset Protection Society in Orange County will be held on Tuesday, May 18, at 7:00 PM at our offices located at 3737 Birch Street, Suite 400, Newport Beach, California 92660. I will be speaking about the changes to the estate tax laws in 2010 and about effective planning techniques that will aid clients in 2010 or in later years. If you would like to attend this meeting, please contact me to RSVP at mziebold@ferruzzo.com.

Speaking at Signature Resources on 4/29

I will be speaking at Signature Resources on Thursday, April 29, at 7:00 PM. There will be a time for wine tasting, Hors d'oeuveres, and an art display beginning at 6:00 PM. If you are interested in attending, please contact myself ( mziebold@ferruzzo.com or 949-608-6900 ) or the host, Wil Smith of Signature Resources (contact information below).

The topic for the evening will be Important Planning Issues for 2010 and Beyond.

Date: Thursday, April 29,2010
Time: Wine tasting, Art display and Hors d’oeuveres, 6:00 pm
Presentation, 7:00 pm
RSVP 949 794-0184 or wsmith@SRIFS.com

New Franchise Tax Board News Release

It looks like California, even with the debt issues that it has, has decided to help people who have lost their homes with this release.

Beginning of Release:

April 13, 2010

Subject: California Enacts Mortgage Forgiveness Debt Relief

Sacramento –A new state law allows taxpayers to immediately exclude from their income the amount of mortgage debt on their home loan that has been forgiven by their lender. The law largely brings California statutes into conformity with current federal law. Previously, California conformed to federal debt relief only for 2007 and 2008, according to the Franchise Tax Board (FTB).

“California has been particularly hard hit by the housing crisis,” said State Controller and FTB Chair John Chiang. “This is a critical tax change that will help people in our state who already are suffering the loss of their homes.”

The new law, SB 401 (Wolk), allows most taxpayers to exclude canceled mortgage debt income of up to $500,000 on their principal residence. The limit is $250,000 for married/registered domestic partner (RDP) individuals filing separately. It applies to debt forgiveness in 2009 through 2012 resulting from a foreclosure, “short sale,” or loan modification of a taxpayer’s qualified personal residence.

Prior to the law’s passage, these amounts were taxable to California. If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount often is taxable. These amounts are generally reported on a 1099-C and are provided to both the taxpayer and the government. Debt forgiveness on other types of debt, such as a second home or business property, does not qualify for exclusion under the new law.

The law largely brings California into conformity with the federal Mortgage Forgiveness Debt Relief Act for discharges that occurred in tax years 2007 through 2012. However, California’s limits of qualifying principal residence indebtedness differ from federal limits.

Qualifying taxpayers who have already filed their 2009 tax returns should file Form 540X, Amended Individual Income Tax Return, to subtract the amount of debt relief from income. To expedite processing, write “Mortgage Debt Relief” in red across the top of the amended tax return. Taxpayers must attach a copy of their federal return, including Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), with their state tax return.

Like federal law, the new state law allows individuals and businesses to exempt energy grants that are provided in lieu of federal energy credits from their gross income and alternative minimum taxable income. It also conforms California law to many other federal provisions.

According to FTB estimates, approximately 100,000 people may benefit from mortgage debt relief for tax years 2009-2012. For more information, taxpayers are urged to visit FTB’s website at www.ftb.ca.gov.

End of Release.

Speaking at Signature Resources on 2/18

I will be speaking at Signature Resources ( www.signatureresources.net ) on February 18, 2010, at 5:30 PM. The topic for this presentation is the changes to the estate tax laws, along with planning recommendations during this year that will benefit your estate no matter what changes ultimately occur in the future. If you are interested in attending this presentation, contact Wil Smith at Signature Resources at 949-794-1006 or wsmith@srifs.com . You may also contact me at mziebold@ferruzzo.com and I can give you additional information about the presentation.

The Next Business Killers Presentation on 2/18

The next Business Killers presentation will be held on Thursday, February 18 from 11:30 AM to 1:00 PM. This presentation covers important topics for business owners that I regularly see in my practice. Some of these topics are buy/sell agreements, key person insurance, valuations of businesses, business succession planning, and many others. If you are interested in learning more, then you can read about the presentation here: ( http://www.businesskillers.com ). If I can answer any questions about these topics or if you would like to attend this presentation, feel free to email me at mziebold@ferruzzo.com.

Next Asset Protection Society Meeting on 3/16

The next meeting of the Asset Protection Society in Orange County will be held on Tuesday, March 16, at 7:00 PM at our offices located at 3737 Birch Street, Suite 400, Newport Beach, California 92660. Our speakers will be Hilary Schneider and Marc Nelson of ESOP Corporate Resources and they will be speaking about various uses of ESOPs for employee compensation planning, asset protection, tax planning, and much more. If you would like to attend this meeting, please contact me to RSVP at mziebold@ferruzzo.com.

The Next Business Killers presentation on 1/21

The next Business Killers presentation will be on January 21 from noon to 1:30. This presentation covers important topics for business owners that I regularly see in my practice. Some of these topics are buy/sell agreements, key person insurance, valuations of businesses, business succession planning, and many others. If you are interested in learning more, then you can read about the presentation here: ( http://www.businesskillers.com ). If I can answer any questions about these topics or if you would like to attend this presentation, feel free to email me at mziebold@ferruzzo.com.

Upcoming Asset Protection Society Meeting

The next meeting of the Orange County chapter of the Asset Protection Society will occur on Tuesday, January 19 at 7:00 PM at our office in Newport Beach, California. The speaker will be Jason Forsyth of FFG Valuations. He will be speaking on a variety of topics including business valuations and discounts. If you would like to attend, feel free to contact me by phone or email to RSVP.

Changes to 2010 Estate Tax Law and Client/Advisor Teleconferences

Most of the practitioners who work with me in the area of tax and estate planning would not have gambled on the estate tax being repealed in 2010. However, this is where we sit at this time with no guidance as to what Congress will do in the future. Ultimately, each and every client has to decide what they will do with the changes that have occurred (whether to amend their current planning or to wait until Congress acts). The problem is though that many clients do not understand what the issues are as the only thing that the news focuses on is the repeal of the actual estate tax. Unfortunately no one is talking about the negative aspects of the transfer tax law in 2010, and especially for our California clients there are new developments with the California Probate code which will require amendments to your existing plan as well. Based on the above, our Firm is hosting teleconferences for existing clients of the firm and for other professionals who are friends of the Firm. For those who would like to attend one of our teleconferences, call our Firm's general line (949-608-6900) and ask for Deanna who will provide you with the information.