1.
2010 Financial & Legal Checkup for the LGBT Community
2.
Discussion of joint tenancy vs. tenants in common
3.
New IRS ruling requiring Domestic Partners to share
income.
4.
Fee increase coming August 1, 2010, take advantage of lower fees
now
2010 Financial &
Legal Checkup for the LGBT Community
A Comprehensive Look at the Current
Financial & Legal Challenges
Faced by the LGBT Community
You are cordially invited to an
educational workshop
Kyle D.
Young, CFP®
Associate
Vice President – Investment Officer
Accredited
Domestic Partnership Advisor sm, Wells Fargo Advisors, LLC
Steven W.
Schmitt, CFP®, MBA
Vice
President – Investment Officer
Accredited
Domestic Partnership Advisor sm, Wells Fargo Advisors, LLC
Philip J.
Hoskins
Attorney at
Law, Law Offices of Philip J. Hoskins
Thursday, July 15 * 7:00 p.m. – 9:30 p.m.
OR
Saturday, July 24 * 1:00 p.m. – 3:30 p.m.
Plummer Park
7377 Santa
Monica Boulevard, Room 5 * West Hollywood, CA 90046
OR
Saturday, July 17 * 1:00 p.m. – 3:00 p.m.
OR
Wednesday, July 21 * 7:00 p.m. – 9:00
p.m.
First
Congregational Church
241 Cedar
Avenue * Long Beach, CA 90802
*
Refreshments will be served. Seating is limited.
RSVP
to Kyle D. Young at 973-564-6983 or
kyle.young@WFadvisors.com OR
Steven W.
Schmitt at 973-564-6997 or
Steven.Schmitt@WFadvisors.com
TOPICS OF
DISCUSSION WILL INCLUDE
Kyle D.
Young, CFP® & Steven W. Schmitt, CFP®, MBA
The
importance of working with an advisory team who understands the needs of our
community
Ensuring that
your assets will pass to the people you choose
Reducing
Federal, Estate and Inheritance taxes
Overview of
other major financial challenges faxed by our community
Philip J.
Hoskins
Legal
implications of the CA Marriage Act for you and your family
The
importance of establishing a proper estate plan
Changes in
the law for couples to consider
Revocable
Living Trusts vs. Wills: Settle your estate privately and help protect your
assets from family members
Healthcare
documents and Powers of Attorney
Joint tenancy is a type of ownership in California where two or more people share an interest in real or personal property often with a right of survivorship. Homebuyers in Los Angeles, Orange, Santa Barbara and Ventura Counties are often advised to hold the property in joint tenancy with a right of survivorship so that when one of them dies, the other receives the property. Married couples often take title to their home as joint tenants and when one of them dies, the surviving spouse gets full title to the property.
There are occasions where joint tenancy may be the correct way to hold title; when doing that, just make an informed decision.
One benefit to joint tenancy is the avoidance of probate. Since title “automatically” transfers to the surviving joint tenant, probate is unnecessary.
However, joint tenancy in California has problems associated with it. For instance:
Problems with Creditors - Creditors of a joint owner can come after the property to satisfy the debts of one of the joint owners which means the other joint owner can lose his interest in the property even when he is not responsible for the credit problem. If a joint owner has a judgment rendered against him, the creditor can seek to satisfy the judgment by forcing a sale of the property.
Capital Gains Tax Issues - By using joint tenancy instead of a living trust, a husband and wife may be forfeiting certain tax benefits that would be available such as what is called a “double step-up in basis”.
Gift Tax Issues – Also, by putting someone on title with you as a joint tenant, you may be making a taxable gift and a gift tax return may have to be filed.
Loss of Flexibility – The surviving joint owner who receives an asset will get the asset outright. The joint owner cannot spread out distribution of the asset over time. Let’s say a 20 year old receives an inheritance from a joint checking account upon the death of the co-owner, he will receive the entire account all at once rather than over a period of years as he matures.
Loss of Control - When you own property with other joint tenants, you give up unilateral control over the property. You no longer have the right to act alone with regard to selling, making improvements or refinancing the property.
· Immediate transfer upon death
· IRS presumes survivor paid for it all, difficult to challenge
· Then no “basis” increase on first death
· If couple owns jointly and separates, property may pass to wrong person
· Each owns their share
· Each can give their share on death as they desire
· Tax basis increase on death for portion owned by deceased owner
· If couple separates, each has legal right to pass their share to who they wish
What happens when joint property is then sold?
· Property was purchased in 1990 for $500,000
· For tax purposes, this is known as the “basis”
· Property is sold after the death of the first joint tenant this year.
· The tax on the sale of the property is the “gain”, or difference between the basis and the sale price
Tax treatment of sale after distribution
· Basis - $500,000
· Sale = $800,000
· No increase in basis on portion of first to die, so entire gain will be taxable to survivor
· Taxable Gain is $300,000 to survivor
· Basis - $500,000
· Sale = $800,000
· Basis step up to $400,000 (1/2 sale price) for portion of first to die
· Gain is for the survivor is only $150,000 for portion held by survivor
The
IRS on May 28 issued three important rulings dealing with tax issues faced by
same-sex couples who are registered domestic partners under California law.
Priv. Ltr. Rul. 201021048 (May 5, 2010):
Chief Counsel Advice 201021050 (May 5, 2010):
On February 24, 2006, the Office of Associate Chief Counsel (Income Tax & Accounting) issued Chief Counsel Advice (CCA) 200608038 concluding that an individual who is a registered domestic partner in California must report all of his or her income earned from the performance of personal services. In light of a change to California law, effective in 2007, you asked us whether California registered domestic partners should each report half of the community income on their federal returns. You also asked whether individuals who filed returns in accordance with CCA 200608038 must amend those returns. ...
By 2007, California had extended full community property treatment to registered domestic partners. Applying the principle that federal law respects state law property characterizations, the federal tax treatment of community property should apply to California registered domestic partners. Consequently, for tax years beginning after December 31, 2006, a California registered domestic partner must report one-half of the community income, whether received in the form of compensation for personal services or income from property, on his or her federal income tax return.
You also asked how to treat a registered domestic partner who reported all of his or her earned income in accordance with CCA 200608038. For tax years beginning before June 1, 2010, registered domestic partners may, but are not required to, amend their returns to report income in accordance with this CCA.
Chief Counsel Advice 201021049 (May 5, 2010):
[T]he IRS can consider the assets of the taxpayer's registered domestic partner in the State of California when determining whether to accept the taxpayer's Offer in Compromise under § 7122. State law determines whether there is a property interest, ... and California state law provides that both domestic partners have an equal interest and liability in the community property.
I
have held the line on my fee structure for many years but unfortunately find I
must pass along to my clients the considerable increase in my cost to provide
services. I will still be offering very competitive fees:
1.
Hourly
rate will increase to $325.00
2.
Fees for
Estate Planning for an individual will increase to $895.00
3.
Fees for
Estate Planning for a couple will increase to $1,195.00
All fee increases will
take effect on August 1, 2010. If you have previously delayed planning your
estate planning or making changes to an existing plan, I encourage you to
contact me now so you can take advantage of the existing lower fees and save
money.