Estate Planning Attorneys

Tuesday, November 26, 2013

Breaking News: Robert Keebler with an Estate Planning Alert

Estate Planning Alert - Robert Keebler from The Ultimate Estate Planner, Inc on Vimeo.

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.

Thursday, November 21, 2013

Explaining Trust Income Strategies: An End-of-the-Year Q&A

Reproduced with the expressed written consent and permission from Robert L. Moshman, Esq., author of the The Estate Analyst. To contact Bob Moshman to be included on his distribution list of his monthly newsletter, e-mail Bob at

“This is the end, beautiful friend,
This is the end, my only friend.
The end of our elaborate plans,
The end of everything that stands,
The end, no safety no surprise,
The end, I’ll never look into your eyes again.”

—Jim Morrison

The waning moments of the year sometimes provide an opportunity for several gratifying tax-saving adjustments. On the other hand, dramatic year-end revisions of estate plans in anticipation of cataclysmic tax law changes have become an ill-advised pattern.

This year, there are no cliff-hangers per se, but high trust income tax rates, the Medicare surtax, the arrival of the Affordable Health Care Act, and the recognition of same-sex marriages by the IRS have prompted a number of considerations.

Here, we address the questions that clients are asking their professional advisors, with special emphasis on explaining trust income taxation to clients.   

Bad Traditions
It is the time of year when professionals and their clients maximize stress for each other and then arrive in the New Year with a hangover.

Professionals—bombarded by the annual pageant of year-end planning strategies in professional literature and lectures, and pressured by the hard deadline of December 31 that terminates most effective tax moves for the year—feel obligated to inform their clients of the potential tax-saving moves that can be made.

For their part, some clients become aware of the savvy tax-saving maneuvers of others and clearly want in on that action—being decisive, avoiding taxes, outsmarting the IRS, and being able to able to brag about it to in-laws, golf buddies, colleagues, and the collective universe of people who will be irritated and jealous of the cool, smart moves that they missed out on.

Other clients who haven’t had a concern about their estate plan for years can encounter one piece of information and contact their financial advisor about it with three weeks left in the year. “Do I need a trust?” “Should I make a gift?” “Should I revise my entire estate plan before the end of the year?”

Last year’s exercise (the end of 2012), with the potential expiration of the $5.12-million gift tax exemption, prompted great concern at the end of the year. Transfers of a number of rushed gifts were subsequently regretted (which in turn led to a pronounced interest in the topic of decanting trust funds during the past year).

The end of 2010 also created a dramatic year-end planning concern when the estate tax repeal faced automatic termination. The tax code faced the same potential end to the “Bush tax cuts” and an automatic return to 2001 rules. Chaotic predictions and speculative planning resulted.

If we have learned anything from these exercises, it is that 1) Congressional brinkmanship, wrangling, drama, hyperbole, and last-minute (or retroactive) fixes are standard operating procedure; 2) the estate tax system has resisted revisions, such as repeals or shifts to a carryover basis for assets owned at death, and we gravitate back to the unified estate and gift tax exemption each time, perhaps, because it has organically evolved over a century; and 3) year-end tweaking of income and deductions is useful for some people, but the emergency year-end revision of entire estate plans has been the unfortunate collateral damage from our nation’s political dysfunction. “Let’s never do that again,” some of us have vowed.


Here are some questions that people are asking their financial advisors, as well as some responses that might be offered.

Q: Aren’t you the same planner who suggested that I put $5 million in an irrevocable trust last year?

A: I’m sure you have me confused with someone equally handsome.

Q: What is the income tax rate for trust income?

A: The top rate for trust income is 39.6%; for 2013, that rate applies to trust income exceeding $11,950. Under the Patient Protection and Affordable Health Care Act of 2010 (PPACA), there is also a 3.8% Medicare surtax on undistributed net investment income or the adjusted gross income exceeding the trust’s top income tax bracket. 

Q: In English, please?

A: For 2013, trust income over $11,950 is likely to be taxed at a rate of 43.4%.

Example: A trust fund has stocks and bonds worth $2 million; in 2013, it generates, after expenses, $100,000. The graduated taxes on the first $11,950 amount to $3,090. The tax rate of 39.6% on the remaining $88,050 of trust income amounts to an additional $34,867.80 of tax. The surtax of 3.8% would apply to the amount of income in the 39.6% bracket, which adds another $3,345.90. The total tax on the trust income would be $41,303.70. By comparison, an individual with $100,000 of income would pay income tax rates graduating from 10% to 28% and would have a tax of $21,293.25 (not allowing for any deductions or adjustments). So the effective tax rate on the same income in a trust would be 41.3% compared with an individual’s effective rate of 21.3%. The trust would pay $20,010.45 more in tax. 

Q: What capital gains tax rate applies to trusts?

A: For 2013, the top capital gains rate rose from 15% to 20% for individuals in the 39.6% tax bracket, i.e., individuals earning more than $400,000 and married people filing jointly with income exceeding $450,000. But for trusts, the top bracket of 39.6% applies at $11,950 of income and so does the top capital gains tax rate of 20%. Note: For 2014, it is projected that the 39.6% bracket will rise to $406,750 for individuals and $457,600 for married people filing jointly.

Q: Does the 3.8% Medicare surtax apply to capital gains income of trusts?

A: Yes. So if the trust has income between $2,450 and $5,700, that income would be subject to a top rate of 25% and would therefore have a standard capital gains tax rate of 15%. The additional 3.8% Medicare surtax would be added to that amount for a total tax rate of 18.8% on the capital gains realized by that trust. However, if the trust has income exceeding $11,950, then it would be in a top tax bracket of 39.6% and would have a capital gains tax rate of 20%. For that estate, the additional Medicare surtax of 3.8% would result in a total capital gains tax rate of 23.8%.

Q: How does the Medicare surtax on capital gains apply to individuals?

A: The 3.8% surtax applies to individuals with income exceeding $200,000 or married couples filing jointly with income exceeding $250,000. These individuals will pay capital gains tax at a 15% rate, and the 3.8% surtax will bring that amount to 18.8%. But if those individuals have more than $400,000 of income for single taxpayers or $450,000 for married taxpayers filing jointly, their capital gains tax rate would be 20%, and the surtax would bring their total to 23.8%.

Note: Trusts with relatively small capital gains and small amounts of income can end up in the top capital gains bracket of 23.8% that would only apply to individuals earning more than $400,000. 

Q: Will I have to pay a 3.8% “sales tax” on the sale of my real estate because of the new health care law?

A: This is a misconception. The 3.8% Medicare surtax applies to net investment income, i.e., the gain from the sale, not the entire sale. Actually, the surtax applies to the lesser of net investment income or the amount that adjusted gross income exceeds $200,000 for single taxpayers, $250,000 for married taxpayers filing jointly.

Q: What about selling a primary residence? If I utilize the $250,000 exemption for capital gains as an individual owner or the $500,000 exemption for joint owners, will the 3.8% surtax apply to the amount covered by the exemption?

A: No, the surtax does not apply to amounts excluded under the Internal Revenue Code.

Q: What else does the 3.8% tax apply to?

A: Along with net capital gains for the disposition of property, the 3.8% Medicare surtax on net investment income applies to many types of income: interest, dividends, capital gains, rents, royalties, and nonqualified annuities. It also applies to income from passive activities and income from the trading of financial instruments or commodities.

Q: Does the 3.8% tax apply to mandatory minimum distributions from a retirement account?

A: No. The surtax also doesn’t apply to income from tax-exempt municipal bonds, items included in the calculation of self employment tax, gains on the sale of an active interest in a partnership, or income from an active trade or business.

Q: Does the Medicare surtax apply to regular earned income?

A: There is another Medicare surtax of 0.9% that applies to earned income. Employers are to withhold this surtax for wages of single employees earning in excess of $200,000 or $250,000 for married employees filing jointly. Note: This Medicare surtax is in addition to the normal 2.9% Medicare tax on wages and the Social Security tax that employers withhold, which returned to 12.4% in 2013 after spending 2011 and 2012 at 10.4% due to a “payroll tax holiday.”

Q: So there are two different Medicare surtaxes?

A: Incredibly, yes. There is a 3.8% Medicare surtax on net investment income (NII) and a 0.9% Medicare surtax on earned income; in both cases, the starting point is at $200,000 of income for single taxpayers and $250,000 for married taxpayers filing jointly. At least one tax publisher is referring to the 3.8% tax as the “NII surtax,” which helps distinguish the two.

Trust Income
In the minds of Grantors, trusts take on a magical quality. People with few assets and no need for estate tax techniques nevertheless sit down with their lawyers and want to know if they need a trust. Even highly astute Grantors, who already have a trust that is designed for estate tax savings and asset protection against creditor claims, will nonetheless express shock to be reminded that trust income is subject to taxation.

The taxation of trust income at a steeply graduated rate is not new. There has been a noteworthy downside to the taxation of trust income for many years. But the severity and unfairness of taxation on personal trusts has become especially pronounced during 2013. Let us therefore consider how professionals can explain the taxation of trusts to clients, along with the alternatives.

For 2013, trust income exceeding $11,950 is taxed at the top income tax rate of 39.6%. Remarkably, an individual would only be taxed at that rate for income exceeding $400,000.

For many laypersons, it is difficult to distinguish one trust from another. Let’s define the various trusts and demonstrate their consequences.

Revocable living trusts, or Grantor trusts, are not an issue for this discussion. Revocable trust income is taxed to the Grantor at the Grantor’s tax rates.

Example #1: Gary the Grantor wants to keep several assets out of his probate estate. He sets up a revocable trust. Because he retains the authority to revoke the trust at any time, the assets will be included in his estate for estate tax purposes. The annual trust income is also part of Gary’s annual income.

Irrevocable living trusts are set up during the Grantor’s life (as opposed to “testamentary trusts” set up under the Grantor’s will), and they are typically designed to remove assets from the Grantor’s estate for estate tax purposes. However, there are rules that make it possible for the trust income to be taxed to the Grantor instead of the trust. This can reduce the income burden that would otherwise apply to the trust income. To accomplish this, the terms of the trust must provide for the Grantor to retain certain control over the disposition of the assets. Establishing Grantor trust status over an irrevocable trust is therefore desirable, and the term “intentionally defective” is applied to trusts that have been designed in this manner.

Example #2: An irrevocable trust is funded with $1 million and earns income of 5% or $50,000. The trust will pay 39.6% tax on the income exceeding $11,950. Compare this result to an individual who owns the $1 million and is taxed on the $50,000 of investment income directly. Such an individual may have a top tax rate of 25% or 28%—well below the tax rate applicable to the trust. If the income of the trust can be taxed to the Grantor instead, tax savings will result every year.

Simple Trusts and Income Distributions: If a trust distributes all of its income every year, the income can be taxed to the beneficiaries rather than at the trust’s high tax rate. Making the trust such a direct conduit can defeat many of the advantages of the trust, such as the ability to accumulate wealth over time and to protect assets from the creditors of beneficiaries. On the other hand, however, trustees and executors making distributions prior to the year’s end can cause a portion of income to be taxed to beneficiaries.

Tax-Free Bonds and Growth Assets: Trusts do not have to be exclusively devoted to assets generating taxable income. Trusts can hold tax-free bonds, land, and growth-oriented assets.

Example #3: William is a widower earning $125,000 annually. His top income tax bracket covers income from $72,000 to $146,400. William considered transferring income-producing assets to a trust for his grandchildren, so that he could reduce the size of his estate and provide a steady source of income inside the trust that could be used to pay life insurance premiums. But the income inside the trust would be taxed at a top rate of 39.6%. As an alternative, he can fund the trust with other assets and make annual Crummey gifts to the trust that can qualify for the annual gift tax exclusion and, when not withdrawn by his grandchildren, can be used to finance his insurance premiums.

Basic Year-End Strategies

  • Generally, you should defer income and, therefore, tax liabilities. A time to accelerate income is when you know you are in a lower bracket this year, have some excess capacity, and know that you’ll be in a higher bracket next year.
  • Offset gains with losses. But if you sell stock to realize the loss and buy it back within 30 days, you may run afoul of the wash sale rule. 
  • It is okay to pay for a deductible expense using a credit card during 2013, even if the actual payment follows in 2014.
  • If you don’t have enough deductions to itemize, then defer deductions. If you itemize every year, then accelerate deductions. But if your income is going into a higher bracket next year, consider deferring deductions.
  • If you are making investment decisions, base them on sound financial reasoning and not just tax motivations.
  • With so many variables, including state and local taxes and the alternate minimum tax, calculating the overall return is necessary to evaluate the consequences of any additional strategy.


  • The annual gift tax exclusion for 2013 is $14,000.
  • Because of the Supreme Court’s ruling about the Defense of Marriage Act (DOMA), same-sex couples who are married should be able to file joint returns.
  • The $500 lifetime credit for energy efficiency improvements to a primary residence expires December 31, 2013. There are other expiring deductions, including the optional deduction of state and local sales taxes in lieu of state and local income taxes, the deduction for the discharge of personal residence debt, and the deduction of up to 50% of adjusted gross income for contributions of conservation easements, which will return to a limit of 30% of AGI next year. Some of the expiring deductions may be extended by Congress.
  • Certain tuition deductions expire on December 31, 2013. Other deductions based on AGI thresholds affect whether to prepay 2014 tuition.

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.

Monday, November 18, 2013

BRAND NEW PRODUCT—Robert Keebler's Capital Gains Harvesting Calculator

Gain harvesting is a great year-end strategy that could potentially save the taxpayer substantial amounts of capital gains tax. The strategy applies to taxpayers who expect to be in a higher tax bracket in the future than in the current year. If this is the case, the taxpayer will sell the assets this year, pay tax on the gains at the lower current tax rate and step-up the basis of the assets to the sale price. Then the taxpayer will reinvest the funds and sell whenever he otherwise would have if the gain harvesting strategy had not been used.  By doing so, the taxpayer shifts recognition of part of the capital gain from the higher bracket future tax year to the lower bracket current tax year.  

What if you had an easy-to-use tool to help you determine for your clients whether or not the capital gains harvesting strategy makes sense?  What if this tool also provided you simple to follow charts and a resource to be able to show and explain this concept to your clients?

We are pleased to bring you...

Robert Keebler's Capital Gains
Harvesting Calculator

The Capital Gains Harvesting Calculator comes complete with: 

  • Capital Gains Harvesting Calculator in a simple and easy-to-use Microsoft Excel file that allows you to input appropriate information and then provides concise output for quick analysis, providing printable graphical comparisons of Harvesting ROI to a baseline (10-year treasury note) and graphic comparison of doing no planning, gain harvesting and converting to cash.  (Click here to view screenshots of the calculator) 
  • The Gain Harvesting Strategy that explains how harvesting gains can generate huge return on investments, the net investment income tax (commonly known as the Medicare Surtax), the current capital gains rates and how the recently codified Economic Substance doctrine might apply to the strategy.  This is provided in an 8-page PDF file and will provide you the in-depth explanation of the gain harvesting strategy so that you will better understand the technical aspects of this strategy, making it easier to explain to your clients and referral sources.
  • BONUS: The 2013 Capital Gains Harvesting Chart that summarizes the Harvesting Capital Gains concept, with a decisional flowchart, an outline of the applicable tax brackets and thresholds, five different capital gain harvesting scenarios and a capital gain harvesting return on investment chart.  This chart is 11"x17" and comes in a printable PDF format so that you can print multiple copies for your clients and referral sources.
  • You get all of this in an immediate downloadable zip file so you don't have to wait for your order or pay for any shipping or handling! 

You can get all of this for one limited-time introductory price of just $99.  But, you must order right away to take advantage of this special pricing - - before it's too late!  >>ORDER NOW 

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.

Friday, November 15, 2013

Final IRS Form 706 Instructions Posted

Thanks to Robert Keebler of Keebler & Associates, LLP for the heads up that the final Form 706 instructions were posted on the IRS website on Tuesday.



We also just held a teleconference with Bob on Wednesday on the New Form 706 & Portability.  To purchase the handout materials and audio recording of this program, click here.

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.

Tuesday, November 05, 2013

IRS Released 2013 Draft Form 706

The IRS posted an an early release draft of Form 706 (posted on October 23, 2013).  The IRS provides this information as a courtesy.  To download the Draft Form 706, click here.

Thanks to ATRA and the "permanent" $5+ million tax estate tax exemption, some people feel that fewer estates will be required to file a Form 706.  But they're wrong!

Lots of estates that don’t exceed $5.25 million may want to file a 706 because of another 2010 Tax Act provision… “Portability”!

Married couples may now fully utilize the first to die’s Estate Tax Exemption without bothering to set up “A” and “B” (or “credit shelter”) Trusts, provided the survivor elects portability - - on a timely filed 706. 

This makes sense when the total estate is worth over $5.25 million at the first spouse’s death. And this could also make sense if the total estate is less than $5.25 million but may grow to over $5.25 million by the surviving spouse’s death, or there are concerns that future laws may reduce the exemption amount available to the survivor’s estate.

Plus, keep this in mind…many times, even when “A” and “B” trusts are set up, the first to die’s exemption may not be fully used because assets like IRAs pass directly to the survivor - - and that unused exemption will be lost forever if you don’t timely file the 706!

What all this means is that many estates, even those well below $5.25 million may now need a 706 done, which is a golden opportunity for you, if you know how to properly prepare the new 2013 Form 706 just released by the IRS!

Join us and nationally renowned CPA and tax authority, Robert S. Keebler, CPA, MST, AEP, on Wednesday, November 13, 2013 at 9am Pacific (12pm Eastern), for a 90-minute teleconference entitled “The Traps of the New Form 706 and Portability”.

For more information or to register, click here.

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.

Friday, November 01, 2013

November 2013 Newsletter

Ultimate Estate Planner November NewsletterEarlier this year, we released our premier issue of our free monthly estate planning newsletter.  This is a newsletter unlike any others out there for estate planning professionals.  Not only is it intended for estate planning professionals of all designations - - including estate planning attorneys, CPAs, financial advisors, life insurance agents, and even administrative staff - - but it is intended to be practical, timely and provide useful technical, legal and practice-management strategies that professionals can actually use in their practice.




  • PRACTICE-MANAGEMENT: 8 Year-End Practice Building Tips to Implement RIGHT NOW by Philip J. Kavesh, J.D., LL.M. (Tax), CFP®, ChFC, California State Bar Certified Specialist in Estate Planning, Trust & Probate Law

  • TAX PLANNING: Year-End Roth Conversion Planning by Robert S. Keebler, CPA, MST, AEP (Distinguished)

  • LIFE INSURANCE: Sell More Life Insurance by Showing Prospects How to Avoid Income Tax by Philip J. Kavesh, CFP®, ChFC, J.D., LL.M. (Taxation)

  • NICHE-AREA OF ESTATE PLANNING: Estate Planning for Same-Sex Couples by Alma Soongi Beck, J.D., LL.M. (Taxation), California State Bar Certified Specialist in Estate Planning, Trust & Probate Law

  • SUPPORT STAFF & EXECUTIVE ASSISTANTS: How to Write a Proper Business Letter by Kristina Schneider and Megan DeLaGarza, Executive Assistants

CLICK HERE to read November's newsletter

Click the "Subscribe Now" icon below and make sure that you're signed up to receive our free monthly newsletter so you don't miss out!

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.

Tuesday, October 29, 2013

The Joint Exempt Step-Up Trust ("JEST" Trust) Legal Document Form Package—NOW AVAILABLE FOR SALE

Thanks to the help of Alan S. Gassman, J.D., LL.M. (Taxation), Florida State Bar Certified Specialist in Wills, Trusts & Estates and Christopher J. Denicolo, J.D., LL.M. (Estate Planning), MBA, we are pleased to announce the release of The Joint Exempt Step-Up Trust ("JEST" Trust) Legal Document Form Package.

This package comes complete with the following items:

  • Data CD-ROM containing the following documents:
    • The JEST Trust (Joint Trust) Legal Document Form which comes in a 66-page modifiable Microsoft Word document with all of the necessary provisions to implement the JEST Trust for your clients.
    • A Client Explanation Letter to be given to clients to help them understand what the JEST Trust is, what options they have and provide them a thorough overview of the JEST Trust they received.
    • The JEST Trust Steps Chart which shows the four steps from drafting to implementation of the JEST Trust strategy.
    • A JEST Trust Marketing Handout which is a modifiable one-page flyer summarizing the JEST Trust, its benefits and why clients should consider this strategy in their overall estate planning.  This flyer can be used with clients, prospective clients and professional referral sources.
    • The "JEST Lite" Legal Document Form which comes in a 41-page modifiable Microsoft Word document and was developed to accommodate clients with smaller asset basis who do not want the complexity associated with the complete JEST, but want a good chance at a stepped-up income tax basis of all trust assets on the first death.  The JEST Lite can also provide the benefit of having all trust assets locked up in trust for the benefit of the surviving spouse upon the death of the first dying spouse.
    • The JEST Lite Summary Sheet which is a simple one-page flyer explaining the "JEST Lite" in a client-friendly and plain-English format.
    • A Free Trial of EstateView Software
  • SPECIAL BONUS: "The Joint Exempt Step-Up Trust: Wealth Protection and Income Tax Benefits for Non-Community Property State Clients" On-Demand Program with Alan S. Gassman, J.D., LL.M. (Taxation), FL State Bar Certified Specialist in Wills, Trusts & Estates and Christopher J. Denicolo, J.D., LL.M. (Estate Planning), MBA (a $159 value!) You will also get the handout materials and the MP3 audio recording of this unique program to help kick-start your implementation of the JEST Trust in your practice and what better way to do that than to learn right from the experts in this area?!

All of the legal document forms come in a modifiable Microsoft Word format for you to be able to easily modify, edit and assemble (or add to your existing word processing software).  NOTE: This is NOT a software program and there are no automated/macro-type functions with our forms.  The documents included in this package were originally designed and drafted for Mr. Gassman's law firm based out of Florida, so purchasers will need to review the documents and their individual state laws and statutes.

For more information, click here.

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.

Friday, October 25, 2013

Beyond DOMA-Repeal: Property Tax Changes Affecting Unmarried, Non-Domestic Partners in California

By Alma Soongi Beck, J.D. LL.M. Taxation, California State Bar Certified Specialist in Estate Planning, Trust and Probate Law

With so much attention on the marriage cases, practitioners advising same-sex couples may be missing two crucial changes in property tax rules from 2013 affecting co-owners of property who are not married to each other or registered in the state as domestic partners. 

The issue is Property Tax Reassessment, which has often been bad news for same-sex couples.  California state property taxes have been governed by Proposition 13 since 1978, which in most cases sets property taxes based on the acquisition value, increasing the taxes only 2% a year until the property undergoes a “Change of Ownership.”  Upon Change of Ownership (e.g. sale), the new owners are “Reassessed” based on the current market value.  This means that when the property has appreciated faster than 2% a year, “Reassessment” can result in a huge increase in the property taxes, depending on how large the increase.

Change in Ownership also occurs at death, which is where same-sex couples have been burned in the past.  In fact, Reassessment can be one of the most serious issues for same-sex couples who inherit real property from each other.  Reassessment can result in such a large increase in the property tax that the surviving partner can no longer afford to keep the home.

Thankfully, Exemptions from Reassessment were extended to state-registered domestic partners (SRDPs) in 2006 under SB 565, and to same-sex married couples in 2008 when same-sex marriages were recognized and then upheld. 

However, for couples who are not married or registered as SRDPs , the issue of possible future Reassessment still looms.  In these situations, two options to avoid Reassessment are still available:

A.    2013 Cotenancy Rule, AB 1700 (effective January 2013)

Under AB1700, which amended Section 62.3 of the Revenue and Taxation Code,  a surviving co-owner can avoid Reassessment if all of the following conditions are met:

  1. Only two owners (or “cotenants”) had owned the property before death, and together they had owned 100% of the property either as joint tenants or tenants in common.
  2. Both cotenants had lived in the property as primary residence for at least one year prior to the death of an owner.
  3. Transfer of property is due to death of an owner, and after transfer, the remaining cotenant owns 100% of the property.
  4. The remaining cotenant signs an affidavit proving that he/she consistently lived in the property as primary residence at least one-year prior to death of the first owner.

B.     2003 Joint Tenancy Transfer Rule 462.040 – partly expired October 2013

While AB1700 will help many same-sex couples who are not married or SRDPs, for those cases not addressed by AB1700, the 2003 Joint Tenancy Transfer Rule might be the only other option for same-sex couples to avoid Reassessment upon death of a co-owner (other than getting married or registering as SRDPs).

Rule 462.040 was expanded in October 2003 in a way that allowed unmarried and same-sex couples the ability to avoid Reassessment upon death of a co-owner for the first time ever in California history.   Specifically, in 2003, 462.040 was expanded to allow two additional ways to qualify for Exemption:  (A)  transfer from co-owners as non joint tenants (e.g., tenancy in common) to joint tenancy; and (B)  transfer from joint tenancy into trusts (e.g., revocable trusts) where the other owner is named as beneficiary of the property upon death.

When couples properly understand the rule (usually upon consultation with legal counsel), they can qualify for Part A directly upon acquisition of a new property.  Specifically, they can acquire the property as tenants in common and then immediately transfer to themselves as joint tenancy.  

In many cases, however, Part A is not possible, such as when the property is already in Joint Tenancy.  In fact, most couples are still completely unaware of the 2003 rule expansion, as are many of their realtors, mortgage brokers, title officers, and in some cases, their legal counsel.  In these cases, the opportunity to qualify for Part A can be easily missed upon purchase of a new property.

So basically, on the one hand, the passage of AB 1700 is great news for same-sex couples who co-own primary residences, with no other people other than themselves.  But, on the other hand, the repeal of Part B of 462.040 now severely limits options for other same-sex couples whose situation falls outside the scope of AB1700.

People who are most affected include:

  • Couples who own real property that is not a primary residence for one or both;
  • Couples who own with other people, even if it is their primary residence (e.g., “tenancy-in-common” ownership  of multi-unit buildings);
  • Couples who have owned real property for less than one year, where one person may be terminal and possibly passing away before the one year mark;
  • Couples who may have relied on Part B in previous years, and who removed the property from Trust (e.g., during a refinance), but may not have put it back.

For these situations, and given that the October 1, 2013 partial repeal of Rule 462.040 has already occurred, practitioners may want to offer the following considerations:

(1)  Property tax protection is still available for transfers between married couples and California state domestic partners.  If your clients missed their opportunity to qualify for the now-repealed rule, they may want to re-think your decision regarding marriage or state domestic partnership.

IMPORTANT NOTE:  While marriage and California state domestic partnership both bring with them tremendous advantages under state and (for marriage, now federal) laws, there are some situations where either or both are not a good idea for a couple.  In some instances, the reasons are as simple as not wanting to be "out" about your relationship in the workplace due to concerns about discrimination.  In other cases, the reasons are financial or tax-based, such as the impact on federal or state income taxes, or the impact on qualifying for state Medicaid (or in California, Medi-Cal) in the event skilled nursing care is needed.

(2)  If your clients decide not to marry or register as state domestic partners, and they have already done a transfer from Joint Tenancy into Trust (where the Trusts each name the other owner as beneficiary upon death), and that transfer was done prior to October 1, 2013, they can still qualify for Rule 462.040 protection if they never take their property out of their Trusts, even for refinance purposes.

If any of your clients are relying on Part B of Rule 462.040 for future property tax protection, the repeal of this part of the Rule requires extra vigilance to make sure the property is never removed from the Trusts.  This situation could arise unexpectedly such as:

  • During estate planning, if you assist your clients to set up new trusts instead of amending and repealing their current trusts;
  • During refinance, if the clients’ lender or title officer says, sometimes casually or at the very last minute, that they can "just take the property out of the trust and put it back."

(3)  If your clients decide not to marry or register as state domestic partners, and they have previously already transferred from Tenancy in Common to Joint Tenancy (with the exact same co-owners), they still qualify for the part of Rule 462.040 that was not repealed and that is still on the books.  However, if they then do a subsequent transfer from Joint Tenancy into Trust and that transfer was done October 1, 2013 or later, they will then disqualify themselves from property tax protection under this rule.

The problem with this result is that it is counter-intuitive.  The exact thing that used to bring more protection before October 1, 2013, is not the very thing that eliminates the clients’ protection now.

This situation would most commonly arise during estate planning, such as when a practitioner suggests that the couple set up revocable living trusts, and then suggests to transfer the real property into the trusts.  

Such advice is understandable for practitioners, who have historically disfavored joint tenancy  for nonmarried, non-domestic partners has for several reasons, such as the double counting of joint tenancy property under Internal Revenue Code 2040, or the lack of control over who inherits after the second co-owner dies, or the probate risk upon the second death.

However, now that Part B of Rule 462.040 has been repealed, these factors have to be weighed against the potential impact of the increase in the Property Taxes.  The potential increase can be massive, depending on how much the Property has appreciated beyond its current assessed value.

For these reasons, practitioners will want to assist our clients in this situation regarding the pros and cons of each option.  This could also be an important opportunity to help our clients revisit the option of marrying and/or registering as California state domestic partners.

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.

Image courtesy of Simon Howden /

Tuesday, October 22, 2013

SPECIAL TELECONFERENCE: The Future of Estate Planning with Jonathan G. Blattmachr

Thanks to The Trust Advisor and Alaska Trust Company for allowing us the opportunity to replay a special audio teleconference rebroadcast of the special program entitled, "The Future of Trusts, Wills & Estate Planning: Predictions from Futurist Jonathan G. Blattmachr that May Impact Your Clients' Income, Wealth and Lifestyle" with speakers, Jonathan G. Blattmachr, J.D., LL.M. (Taxation) and Douglas Blattmachr on Wednesday, October 30, 2013 at 9am Pacific (12pm Eastern).

On this special 60-minute teleconference replay, you will learn:

  • How electronic wills will shape the future of estate planning
  • Where asset protection planning is going and why
  • How directed trust arrangements will shape the future of investing in the next 10 years
  • How outsourcing will help both estate planners and financial advisors alike
  • Why services like LegalZoom will be the new norm for services providers going forward
  • Why brick and mortar offices will become an estate planner's ball and chain
  • And much more!


Program Title: The Future of Trusts, Wills & Estate Planning: Predictions from Jonathan Blattmachr that May Impact Your Clients' Income, Wealth and Lifestyle

Date: Wednesday, October 30, 2013

Time: 9am Pacific (10am Mountain, 11am Central, 12pm Eastern)

Duration: 60 minutes

Cost: $159 for Immediate Download / $209 for Printed Materials & CD (Please note that no refunds will be issued once purchased)

Speakers: Jonathan G. Blattmachr, J.D., LL.M. (Taxation) and Douglas Blattmachr

Moderator: Barbara Kotlyar, Contributing Editor at The Trust Advisor

Registration Includes: Participation on live teleconference replay (no Q&A), Handout Materials, an MP3 Audio Recording (sent following the teleconference) and the opportunity to receive CE Credit*.

*IMPORTANT NOTICE ABOUT CONTINUING EDUCATION CREDIT: This particular program has been submitted for one(1) hour of continuing education credit with the regulatory agencies listed below courtesy of The Trust Advisor. However, please be advised that while multiple professionals in one office are granted permission to access of the handout materials and may listen to the teleconference replay, only one person will be able to receive continuing education credit per registration.  By default, this person is the individual listed on the registration unless we are informed otherwise in writing to prior to the replay of this program on October 30, 2013 at 9am PT. Any additional professionals seeking continuing education credit for participation in this teleconference replay will have to register separately.  This program has been submitted to the following regulatory agencies for continuing education credit:

    • CFA Institute: 1 hour of professional development credit (submitted for approval)
    • SCPE: 1 hour of CE credit through the National Association of State Boards of Accountancy (submitted)
    • CFP Board and IMCA: 1 hour CE credit (submitted for approval)

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.

Monday, October 21, 2013

NEW SERVICE: Personal Consultation on Seminar Marketing with Ultimate Estate Planner Executive Director, Kristina Schneider

Think seminar marketing is dead?  Not finding the same results with seminars as you used to?  Your results may be due to some very important details, systems and procedures that you aren't doing correctly (or even at all!).  The devil is in the details and not following the tested and proven procedures for successfully implementing seminars may severely impact your seminar results.  If you're not regularly getting business from seminars, closing over 75% of your seminar attendees and over 75% of those coming in from your seminars, you might benefit from this brand new expert consultation we are now offering.

During our Seminar Marketing Consultation, you will have the opportunity to speak with our Executive Director, Kristina Schneider.  She will be able to discuss with you your current seminar marketing procedures and assist you with advice on the following areas:

  • Seminar Marketing Piece Critique
  • Direct Mail Seminar Marketing Procedures
  • Seminar Reservation Procedures
  • Seminar Attendee Confirmations
  • Seminar Locations & Setup
  • Seminar Facilitation & Appointment Booking
  • Tips & Advice on Getting Clients to Actually Book Their Appointment
  • Appointment Booking Tips & Tools
  • And much, much more!

Think about it, if you converted just one more prospective client into becoming a client, this consultation would be worth the time and expense and your overall seminar marketing process would improve exponentially!

Our Seminar Marketing Consultation includes:

  • Review of Your Current Seminar Marketing Procedures (by completing a questionnaire)
  • A Review and Critique of Your Current Seminar Marketing Advertising
  • A 30-minute one-on-one phone consultation with Kristina Schneider
  • 25% Discount on Any Seminar Marketing Packages
  • 25% Discount on Our A-Z Guide to Seminar Marketing for Estate Planners
  • Additional Coaching Time May Be Purchased

One 30-Minute Seminar Marketing Consultation
Cost: $149

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.

Tuesday, October 15, 2013

New White Paper: "How to Handle the Q&A Session at the End of a Living Trust Seminar"

How to Conduct Q&A Session at Living Trust Seminar

Holding a Questions & Answers Session at the conclusion of a seminar presentation is always important, but perhaps not for the reasons that you might think.  The Q&A session of a retail seminar, geared to generate business from either your existing clients or prospective new clients, is a great opportunity to develop interaction between you (the speaker) and the audience.  It's also an opportunity for you to find out what issues people are most concerned with.  Keep in mind, while it might be tempting to want to completely answer each question you get, you don't want to get into too much detail (that's what the free initial consultation is for!).  It's important to not only answer questions in a way that's legally and technically correct, but so that you continue to motivate, inspire and call people at the seminar to action.

Learn techniques for holding the Q&A session at the end of a Living Trust seminar in this 20-page white paper assembled by our President, estate planning attorney, Philip Kavesh and his vast knowledge of effectively holding Q&A sessions at thousands of seminars over this 30+ years of experience. 

Even further, you will go through a series of common questions and how to phrase your answers in a way that gets them motivated to book their free consultation to come in and see you!


This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.

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The Ultimate Estate Planner, Inc. was formed to assist in the development and growth of estate planning professionals throughout the United States, including but not limited to estate planning attorneys, financial advisors, CPAs, life insurance agents, paralegals and much more. Through education, products and coaching, it is our goal to help estate planning professionals throughout the country unlock their practice’s potential.

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