Watch out for IRA’s -- One of the most significant means of preserving wealth in this country in recent years has been the Individual Retirement Account, as well as various other deferred income retirement packages which may be offered by employers or established by the self-employed. Because of the fact that these funds are taxable when withdrawn, many retirees take minimal distributions, preferring to draw on other assets for their retirement income. Be aware! On the death of a holder of such an account (usually on the death of the surviving spouse), such accounts will be subject to both Estate Taxes and income tax (when withdrawn). Often, children will not have the same flexibility in rolling-over such accounts as would a surviving spouse. That can mean that they will pay significant estate taxes and income taxes at the time of their parents’ death. The owner of such an account may want to take this factor into consideration in deciding whether to cash out a CD or take an increased draw from an IRA. Much of an individual’s estate plan is directed at providing for children. Although mom and dad should always come first, they should keep in mind the double whammy of the tax laws on retirement accounts.

Major asset protection is available to seniors with significant assets. As Alzheimer’s disease and other afflictions of an aging population become more prominent in our thoughts, many seniors become pre-occupied with concerns about what will become of their spouse if such an affliction strikes. Well, the old days of both spouses being required to exhaust their assets in order to qualify for skilled nursing assistance from Medi-Cal are over. At minimum, a well spouse is entitled to have a residence (of any value!), an automobile (of any value!) -- yes, that can be a mansion in Malibu and a Mercedes - together with other assets in the amount of $90,660.00, and monthly income of $2,267 (that’s year 2003 figures). In addition, circumstances often allow assets to be substantially increased. There are too many variations to discuss here, but this firm has recently been able to qualify a farmer for Medi-Cal in a skilled nursing facility, while allowing the well spouse to retain the farm valued at nearly $1,000,000.00 (considered an “exempt” asset), and substantial cash. In addition we were able to design an estate plan which completely protected the farm from Federal Estate taxes when the husband passed away.

Limited Liability Companies are now allowed to have only one owner. In the past few years, one of the most popular vehicles for establishing business entities has been the Limited Liability Company (“LLC”). This form of business organization permits the owner to enjoy the limited liability of a corporation together with the tax benefits of a partnership (thereby avoiding the risks of double taxation and allowing the “pass-through” of depreciation and other tax deductions). One of the drawbacks to this form of organization has been that an LLC was originally required to have two or more participants. This requirement could be a limiting factor in many situations. The law has been changed to allow an LLC to have only one member, greatly increasing its usefulness to small business owners.