IRS Withdraws Its Support of The Proposed Change to The Estate Tax Valuation Rules

Posted December 5, 2017 in Estate Planning by Michael Lonich.

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December 5, 2017
IRS Withdraws Its Support of The Proposed Change to The Estate Tax Valuation Rules
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The US Treasury originally enacted IRC Section 2704 in 1990 to prevent people from taking advantage of the tax system. Specifically, IRC Section 2704(b) states that in valuing property for estate and gift tax purposes, some restrictions on the ability of an entity to liquidate would be disregarded. Currently, the regulation permits certain discounts for lack of control (minority interests) and lack of marketability that are commonly applied to lower the value of transferred interests for gift, estate, and generation-skipping tax purposes.

On August 3, 2016, The Treasury published proposed regulations under IRC Section 2704 that would have disallowed valuation discounts for interest in family controlled businesses that currently apply to gift and estate tax planning. By eliminating the valuation discounts, the proposed regulation would negatively impact succession planning for many small family owned businesses.

On October 4, 2017, the Treasury announced its withdrawal of the proposed regulations, explaining that they took an “unworkable” approach to the problem of artificial valuation discounts. In a press statement, the Treasury stated that the IRC Section 2704 proposed regulations: “would have hurt family-owned and operated businesses by limiting valuation discounts. The regulations would have made it difficult and costly for a family to transfer their businesses to the next generation.” Certainly, if passed, the proposed regulations would have disallowed discounts for lack of control and marketability commonly used by families in wealth transfer planning.

While the Treasury withdrew its proposed valuation regulations, it has released its annual inflation-indexed amounts for 2018:

1.   The annual gift tax exclusion amount (i.e., the amount that can be given annually gift-tax-free to an unlimited number of donees) will increase to $15,000 per donee (or $30,000 for a married couple that elects to split gifts for the year), up from $14,000 in 2017.

2.   The annual gift tax exclusion amount for gifts to a spouse who is not a United States citizen will increase to $152,000, up from $149,000.

3.   The gift, estate, and GST tax exemption amount (i.e., the amount of taxable transfers that can be given transfer-tax-free in the aggregate during lifetime or at death) will increase to $5.6 million per person (or $11.2 million for a married couple), up from $5.49 million.

4.   Recipients of gifts from foreign persons who are corporations or partnerships must report such gifts if the aggregate value of the gifts received in 2018 exceeds $16,111. The threshold for reporting gifts from a foreign person who is an individual will remain at $100,000.

Consulting with an attorney to learn about how valuation and taxation can impact your testamentary wishes is always wise.  If you have any questions about your estate planning needs, please contact the experienced attorneys at Lonich & Patton—we offer free half-hour consultations.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

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Filing for Divorce After a Temporary Restraining Order

Posted November 3, 2017 in Family Law by Michael Lonich.

For many people in abusive marriages, the question is not whether to file for divorce or stick it out in a violent marriage.  The question is how to file for divorce while remaining physically and financially safe from retaliatory spousal abuse. Audrina Patridge faced this exact question.  Until recently, Audrina was stuck in an abusive marriage where she faced an aggressive, controlling, and physically threatening spouse.  It is reported that Audrina wanted to file for divorce but she was scared that if she did, her husband, Corey Bohan, would retaliate with physical harm to Audrina, their one-year old daughter, or Audrina’s family members.  Like others in similar situations, Audrina was scared to file for divorce without additional protection.  Fortunately, the Family Court can provide additional protections for people in Audrina’s situation.  That additional protection comes in the form of a Domestic Violence Temporary Restraining Order (DVTRO). On September 18, 2017, Audrina was granted a DVTRO against Corey.  Audrina sought the restraining order as a protective measure for herself and her family members while she initiated divorce proceedings against Corey.

A DVTRO provides the abused spouse immediate, but temporary protection from the alleged abuser.  There are numerous protections available under a DVTRO, protections that go far beyond simply keeping the alleged abuser away from the abused spouse.  Additional available protections include, but are not limited to, child custody and support, an order for the alleged abuser to move out of the residence, orders that specify which spouse must pay debts, and property control.  The myriad protections available under a DVTRO address the reality of domestic violence situations; the abused individual needs to protect their physical and financial safety, as well as that of their children, or other family members, including pets.  For Audrina, the DVTRO enabled her to file for divorce with the confidence that she and her family would be safe from threats or acts of violence from Corey.  With the DVTRO in place, Audrina filed her petition for divorce on September 20, 2017.

When a DVTRO is issued precedent to or simultaneously with a petition for divorce, the terms of the DVTRO necessarily become the status quo at the start of the divorce proceeding.  Thus, it is important that an abused spouse obtain a DVTRO with as many protections as are applicable to their unique situation, as those terms will likely remain in place, regardless of the outcome of the domestic violence proceeding. By example, if the abused spouse requested a “move out” order and/or exclusive use and possession of the family residence, the alleged abuser will have to find alternate housing, and often, the alleged abuser will have to do so even after the DVTRO expires.  When child custody orders originate from a DVTRO, the Court will modify custody orders only in rare instances, and typically it will only do so after numerous court appearances, and/or other ancillary interventions that take place over many months, e.g., the alleged abuser having professionally supervised visitation, parenting/anti-abuse classes, etc.  In light of the above, it is critical that individuals who need a DVTRO to enable them to safely initiate divorce proceedings, consult with an attorney to carefully draft their DVTRO.

For more information about obtaining a DVTRO and/or a divorce in California, please contact our attorneys at Lonich & Patton.  Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may include legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

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Estate Planning for Special Needs Children

Posted June 16, 2017 in Estate Planning by Michael Lonich.

Having a child with special needs brings countless challenges to overcome. Parents of these children, regardless of age, are their biggest advocates, providers, and caretakers. Life is unpredictable, but if parents have a well thought out plan they can take comfort in knowing their child will continue to be provided for. Therefore, it is essential that parents of a special needs child plan early regarding their estate.

Setting out an estate plan to provide for a child with special needs has its own unique hurdles. One is to design a plan that supplements a child’s government benefits while enhancing the quality of the child’s life. As a parent, if you leave your child too much outright this may risk them losing their public benefits. Another hurdle to overcome is to figure out how to provide for proper supervision, management, and distribution of the inheritance through a third party created and funded Special Needs Trust. The task of estate planning may feel daunting at times, but with a knowledgeable attorney and good organization parents can execute a successful estate plan.

The ultimate goal is to preserve public benefits for a disabled child. Parents will want the plan to provide a lifetime of money management for the child’s benefit, protect the child’s eligibility for public benefits, and ensure a pool of funds available for future use in the event public funding ceases or is restricted.

These goals can be accomplished by executing a Special Needs Trust. If properly drafted and administered, a Special Needs Trust will allow the child to continually qualify for public assisted programs even though their parents have left them an inheritance. This occurs since the assets are not directly available to the child and because this type of trust has strict limits on the trustee’s availability to give money to the child.

Parents who draft a Special Needs Trust will appoint a trustee to act as the child’s money manager. This is a very important decision because it will ensure the long-term success of the Special Needs Trust. Parents should closely counsel with their attorney before making this selection.

Parents may also wish to appoint a guardian or conservator. A conservatorship or guardianship are court proceedings that designate a person to handle certain affairs for an incapacitated person. Where a conservator cares for the estate and financial affairs, a guardian is responsible for personal affairs such as where the child lives or what doctor they see.

Parent’s planning will ensure their child is cared for in the best way possible. But it is important to plan now. If you are considering drafting an estate plan and would like more information about Special Needs Trusts or other options available, please contact the experienced estate law attorneys at Lonich & Patton.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship

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How Can Parents Secure Parental Rights in Assisted Reproduction?

Posted June 5, 2017 in Family Law by Mitchell Ehrlich.

Many couples are choosing to begin the expansion of their families later rather than sooner. With this new trend, assisted reproductive technology has gained tremendous popularity in aiding individuals embark on this process.

Assisted reproduction refers to all treatments which involve handling eggs or embryos outside of the body and includes procedures such as: in vitro fertilization, intracytoplasmic sperm injection, donor egg or embryo, surrogacy, gamete intrafallopian transfer, and zygote intrafallopian transfer. As fascinating as these medical processes are, legal considerations need to be addressed when parentage is being determined.

Parentage in the law deals with the legal relationship between parents and a child. We discussed establishing a child’s parentage generally in an earlier blog post here. But the right of parentage earns a new level of complexity when done through assisted reproduction.

Many couples who engage in assisted reproduction use a donated egg or donated semen. And there can be some natural concerns that come up when you are on the side of the donation recipient. Does the donor have rights as the parents-to-be do? How do parents-to-be secure their parentage rights?

Their rights as parents can prevent the donor from seeking parental rights. However, if the sperm donor and the intended parent wants the donor to be treated as the child’s parent then there must be a written agreement stating this prior to conception. Also, if an egg donor wishes to be treated as the child’s parent the court must find satisfactory evidence that the donor and person seeking treatment meant otherwise. This may be demonstrated by the donor taking on a role of raising the child.

Parents using a surrogate may have parentage concerns too, but preparing before birth will ease these anxieties. As long as the parents-to-be sign the appropriate surrogate contracts they shall be the lawful parents of the child.

Ultimately, the ruled and laws regarding assisted reproduction and parentage rights are complex. All relationships are unique and some may not fit perfectly within the box of California law. Moreover, the scientific abilities of reproductive assistance are constantly evolving at a rapid rate. Therefore, it is important to talk with a knowledgeable attorney like those at Lonich & Patton to discuss your specific situation.

If you would like more information about assisted reproduction and parental rights, please contact the experienced family law attorneys at Lonich & Patton.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

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What Parents with a Disability Need to be Aware of in a Divorce

Posted June 1, 2017 in Family Law by Michael Lonich.

Parenting while going through a divorce is hard, but also having a disability adds a new level of complexity that makes it is easy to feel overwhelmed and deflated. This is why it is so important to have a competent lawyer who will advocate for your parentage rights effectively and with care.

The thought of having parentage rights taken away will make any parent’s heart drop. But the chances of a disabled parent facing this nightmare is almost a guarantee. According to the National Council on Disabilities the removal rates of children from disabled parents are dispiriting. For children with psychiatric disabled parents the removal rates were between 70% and 80%; parents with intellectual disabilities were 80%; and parents with physical or sensory disabilities experienced high removal rates and loss of parental rights, as well.

If you are a disabled parent facing divorce or a child custody battle, it is important to find a lawyer who is sympathetic to your situation, who understands your condition, and will be effective in their advocacy for you. This is crucial because there are many unfortunate challenges a disabled parent can face in court.

Disabled parents may experience bias or speculation regarding best interest determinants. When dealing with a child, the court’s main objective is to produce a result that is in the child’s best interest; and a parent’s disability will be considered.

There is also a “no harm” requirement when determining a child’s best interest scenario, where the court factors the mental and physical health of all individuals involved to determine if there is a potential chance for harm to occur to the child. With this requirement, there is no obligation to show that the parent’s disability is actually causing, or will cause, any harm to the child or their environment. This can clearly disfavor any parent dealing with a disability.

If you are a parent who has a disability and is facing a divorce or custody battle, securing knowledgeable and effective counsel is imperative. There are a few key characteristics you should look for your future lawyer.

Of course, a knowledgeable lawyer in family law and child custody is a must, but you also want one who will focus on your parenting abilities and strengths. Your attorney needs to understand the specifics of your diagnosis in order to better advise and understand you. By being knowledgeable on your disability’s characteristics your lawyer will be more equipped to advocate on your parenting strengths and abilities. Finally, you want to find a lawyer who apprehends the benefits and pitfalls of various parental evaluations. Overall, your lawyer should give you assurance that your parental rights are protected and that you are given a fair opportunity to raise your child.

If you are considering a divorce or legal separation and would like more information about child custody and parental disability, please contact the experienced family law attorneys at Lonich & Patton.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

This article has no comment.

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