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The Importance of Funding your Trust
Don't Get Lazy: Re-title your Assets in the Name of the Trust
By: Joann Deutch, Attorney in Studio City, CA
How do you designate the beneficiaries for your bank accounts if you have a Trust?
No doubt the attorney who has prepared your Revocable Trust and Will advised you to put all of your bank and investment accounts in the name of the Trust. [Fund the Trust] The bad news is that people often “back-slide” on this part of their estate planning. It’s too big a hassle.
Revocable Trusts serve several purposes. One is to avoid “probate”. This means that you don’t need to hire an attorney who will charge you:
No doubt the attorney who has prepared your Revocable Trust and Will advised you to put all of your bank and investment accounts in the name of the Trust. [Fund the Trust] The bad news is that people often “back-slide” on this part of their estate planning. It’s too big a hassle.
Revocable Trusts serve several purposes. One is to avoid “probate”. This means that you don’t need to hire an attorney who will charge you:
4% of the first $100,000 of the gross value of the probate estate;
3% of the next $100,000;
2% of the next $800,000;
1% of the next $9 million;
0.5% of the next $15 million.
If you do have to appear before a Judge, in Los Angeles, the shortest continuance will be about 6 weeks. That’s 6 weeks before you can get in front of the Judge to resolve outstanding issues. Plan to spend 8+ months going back and forth with all the advisors that need to weigh in with the Court on your behalf. The Trust also gives the surviving spouse the latitude to do tax planning. The tax advantage defers paying taxes until the last spouse dies. The surviving spouse gets to use more money during their lifetime, and inheritance/death taxes are paid when they're both gone. (Example: You inherit $100.00. You have to pay $20.00 in taxes. With a trust you plan to pay that $20.00 in taxes after the remaining spouse dies. The surviving spouse has the use of the $100.00, rather than just the $80.00)
While most clients are overwhelmed by the pages and pages of “technical” language in a Trust, one of the MOST important parts of the estate planning is in the Will.
You’ll see language like this: "Disposition of Residue: I give the residue of my estate to the trustee(s) of YOUR REVOCABLE TRUST created under the YOUR REVOCABLE TRUST dated 2016 The trustee(s) of that trust shall add the residue of my estate to the trust principal and hold, administer, and distribute the property in accordance with the provisions of that trust…”
Based on this provision, many clients believe that bank and investment accounts will be automatically transferred to the Trust.
SURPRISE: The banks have a different take. They will only release funds to the person you have designated on their paperwork as the beneficiary. In most cases those accounts are “pay on death” to the joint account holder, usually the spouse. The proper thing to do is to title the account in the name of YOUR TRUST right from the beginning. If you and your spouse are Co-Trustees, the bank will be on shaky ground trying to deny the surviving spouse access and control over the funds on deposit. It's not best practices to designate YOUR TRUST as the Beneficiary.
Your bank will be uncooperative with your spouse until you have the Death Certificate from the County. They are protecting themselves from releasing funds and getting sued later.
You need to take steps to transfer your joint accounts into YOUR TRUST. You and your spouse both act as co -Trustees of the Trust. While both of you are alive you can change a Trust. The Trust usually becomes Irrevocable after the death of the first of you to die. (It’s a tax requirement)
Employee or Independent Contractor
Don't Let the IRS Decide for You
By: Joann Deutch, Attorney in Studio City
Most people think “Oh goodie, I won’t have to pay taxes for this employee.” Sure the company can classify you as an Independent Contractor. What you might not know is that there are some serious risks.
From the business owner’s point of view it looks like a great deal. Pay the worker without the paperwork and deductions that accompany a regular paycheck, saving about 30%. The salary is reported on I.R.S. form 1099 at the end of the year. The company might even save a bundle on Worker’s Comp premiums.
The I.R.S. says,
“Generally, you must withhold income taxes; withhold and pay Social Security and Medicare taxes; and pay unemployment taxes on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.”
There’s always a BUT. If it were that easy, there’d be no employees. Call the worker what you want, but when he gets hurt, you’ll have to deal with the Department of Labor, Worker’s Compensation Board or the legal system.
So here we are at the Practical Legal Pointers: The employer’s decision to classify the worker as an Independent Contractor doesn’t protect the employer from liability to and for the employee. The government agency, and the Courts will evaluate the following facts about the worker and his job duties and decide for themselves whether the classification is proper.
Here is what everyone is going to look at:
“Facts that provide evidence of the degree of control and independence …:
Behavior: Does the company control or have the right to control what the worker does, and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? Here is what they consider. How the worker is paid; are expenses are reimbursed; who provides the tools/supplies.
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan; insurance; vacation pay, etc.) Will the relationship continue and is the work performed a key aspect of the business?”
If the worker doesn’t have the kind of independence that these benchmarks require, then he/she will be classified by the government agency and the Court as an employee.
Now you've got big trouble. The worker is not listed on your insurance. Your Worker’s Comp carrier refuses to provide you with coverage. Your company will be exposed for the liability.
“If an individual has been misclassified as an independent contractor and the employer has not provided workers’ compensation coverage for the individual, the employer can be held liable for civil tort liability not only to the individual, but also to third parties who are injured as a result of negligent acts engaged in by the misclassified individual in the course and scope of employment.” California Labor Code Sec. 3602; 3706)
Of course when it rains it pours. On top of being financially responsible for this worker who’s no longer such a great bargain, you’ll be hit with owing all those back taxes and deductions, your part of social security, and the part usually paid by the employer, along with a whopping 10% penalty.
“If individuals classified as independent contractors are found to be employees, the employer will be assessed amounts due for unemployment insurance contributions, disability insurance contributions; state income tax withholding [unless an employer can show the income was reported and all taxes due were paid by the employee] Employers who fail to pay contributions for unemployment or state disability insurance benefits without good cause, will pay a penalty of 10 %.” Unemployment Insurance Code Sec.1112
So don’t take shortcuts when it comes to employees. If you’re not sure whether the worker can be classified as an Independent Contractor the IRS has a form you can fill out and file with your query.
Form SS – 8: Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. It may take as long as 6 months to hear from the IRS. In the meantime pay the worker on the regular payroll, and then file for a refund of the deductions paid after the worker’s status is confirmed. https://www.irs.gov/pub/irs-pdf/fss8.pdf . Talk this over with your accountant, and attorney.
By: Joann Deutch, Attorney in Studio City
Most people think “Oh goodie, I won’t have to pay taxes for this employee.” Sure the company can classify you as an Independent Contractor. What you might not know is that there are some serious risks.
From the business owner’s point of view it looks like a great deal. Pay the worker without the paperwork and deductions that accompany a regular paycheck, saving about 30%. The salary is reported on I.R.S. form 1099 at the end of the year. The company might even save a bundle on Worker’s Comp premiums.
The I.R.S. says,
“Generally, you must withhold income taxes; withhold and pay Social Security and Medicare taxes; and pay unemployment taxes on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.”
There’s always a BUT. If it were that easy, there’d be no employees. Call the worker what you want, but when he gets hurt, you’ll have to deal with the Department of Labor, Worker’s Compensation Board or the legal system.
So here we are at the Practical Legal Pointers: The employer’s decision to classify the worker as an Independent Contractor doesn’t protect the employer from liability to and for the employee. The government agency, and the Courts will evaluate the following facts about the worker and his job duties and decide for themselves whether the classification is proper.
Here is what everyone is going to look at:
“Facts that provide evidence of the degree of control and independence …:
Behavior: Does the company control or have the right to control what the worker does, and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? Here is what they consider. How the worker is paid; are expenses are reimbursed; who provides the tools/supplies.
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan; insurance; vacation pay, etc.) Will the relationship continue and is the work performed a key aspect of the business?”
If the worker doesn’t have the kind of independence that these benchmarks require, then he/she will be classified by the government agency and the Court as an employee.
Now you've got big trouble. The worker is not listed on your insurance. Your Worker’s Comp carrier refuses to provide you with coverage. Your company will be exposed for the liability.
“If an individual has been misclassified as an independent contractor and the employer has not provided workers’ compensation coverage for the individual, the employer can be held liable for civil tort liability not only to the individual, but also to third parties who are injured as a result of negligent acts engaged in by the misclassified individual in the course and scope of employment.” California Labor Code Sec. 3602; 3706)
Of course when it rains it pours. On top of being financially responsible for this worker who’s no longer such a great bargain, you’ll be hit with owing all those back taxes and deductions, your part of social security, and the part usually paid by the employer, along with a whopping 10% penalty.
“If individuals classified as independent contractors are found to be employees, the employer will be assessed amounts due for unemployment insurance contributions, disability insurance contributions; state income tax withholding [unless an employer can show the income was reported and all taxes due were paid by the employee] Employers who fail to pay contributions for unemployment or state disability insurance benefits without good cause, will pay a penalty of 10 %.” Unemployment Insurance Code Sec.1112
So don’t take shortcuts when it comes to employees. If you’re not sure whether the worker can be classified as an Independent Contractor the IRS has a form you can fill out and file with your query.
Form SS – 8: Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. It may take as long as 6 months to hear from the IRS. In the meantime pay the worker on the regular payroll, and then file for a refund of the deductions paid after the worker’s status is confirmed. https://www.irs.gov/pub/irs-pdf/fss8.pdf . Talk this over with your accountant, and attorney.
Do You Need a Will
By: Joann Deutch, Attorney in Studio City
If a relative has passed away without a Will, do you need to have an expensive lawyer help you work things out? No. Is that a surprise? Technically if the “gross estate” is under $100,000, and there is NO real estate, the next–of-kin can manage the property of the person who died. First question. What’s the “gross estate” mean? That means all the bank accounts, stocks, jewelry, checking accounts, cash, insurance benefits payable to the estate, money owned by your relative and other stuff your relative had at the time she/he died. DON’T include cars, unpaid salary, or property held in joint tenancy or anything held in a Trust.
If you are the closest kin, you get the money. BUT if you take the money you also have to pay off all the obligations. Out of this money you need to pay funeral expenses, medical bills, phone bills, rent, car notes, anything that was left unpaid.
So if your relative was broke, but the bank has a few bucks. This is your answer.
If your dead relative was rich, this explains why he should have had his assets held in Joint Tenancy or a Trust. It is only the stuff that is rattling around that needs to be taken care of, and you can do that without attorneys to help relieve you of the money. Heh, we have bills to pay too ya know !
In order to kick the money loose, you need to prepare and sign a Declaration. That’s a sworn statement. The statement needs to say the following things.
1. Your relative’s name
2. The date and place of his death
3. State that it’s been more than 40 days since the death
4. No Probate file has been opened in any Court
OR - The Personal Representative of your dead relative has given you permission to collect this money..
5. “The current gross fair market value of the decedent's real and personal property in California, excluding the property described in Section 13050 of the California Probate Code, does not exceed one hundred thousand dollars $100,000)."
6. Describe what you want to have control over
7. Who’s the closest next-of-kin
8. If you are the closest next-of-kin, say so. If not, say who is, and that they agree to your taking this property.
9. No one has a better claim by blood
10. I hereby direct that the property listed herein be delivered to: [your name and address]
11. You need to have a Jurat: [ "I _____ [your name] hereby declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct."
12. The Declaration needs to be notarized
13. If you have permission from the next-of-kin, they need to sign it also
California Probate Code Section 13101
Attach a Certified copy of the Death Certificate. Evidence that your dead relative owned the personal property, and the Consent of any of the closer relatives.
And bring some ID for you.
If the bank that has the account refuses to cough up the dough, ask if they have a form you can sign which "waives thier liability for mistakenly giving you the money". The bank is most concerned with being sued by other family members, and wants to protect itself. There is an offfical pamphlet which you can use www.howtoprobate.com/wp-content/uploads/.../Small-Estate-Transfer-Pamphlet.pdf . You can also go to the Probate Division of the nearest Superior Court of the State of California and get help from the “Probate Attorney” who works on the court staff.
If you are the closest kin, you get the money. BUT if you take the money you also have to pay off all the obligations. Out of this money you need to pay funeral expenses, medical bills, phone bills, rent, car notes, anything that was left unpaid.
So if your relative was broke, but the bank has a few bucks. This is your answer.
If your dead relative was rich, this explains why he should have had his assets held in Joint Tenancy or a Trust. It is only the stuff that is rattling around that needs to be taken care of, and you can do that without attorneys to help relieve you of the money. Heh, we have bills to pay too ya know !
In order to kick the money loose, you need to prepare and sign a Declaration. That’s a sworn statement. The statement needs to say the following things.
1. Your relative’s name
2. The date and place of his death
3. State that it’s been more than 40 days since the death
4. No Probate file has been opened in any Court
OR - The Personal Representative of your dead relative has given you permission to collect this money..
5. “The current gross fair market value of the decedent's real and personal property in California, excluding the property described in Section 13050 of the California Probate Code, does not exceed one hundred thousand dollars $100,000)."
6. Describe what you want to have control over
7. Who’s the closest next-of-kin
8. If you are the closest next-of-kin, say so. If not, say who is, and that they agree to your taking this property.
9. No one has a better claim by blood
10. I hereby direct that the property listed herein be delivered to: [your name and address]
11. You need to have a Jurat: [ "I _____ [your name] hereby declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct."
12. The Declaration needs to be notarized
13. If you have permission from the next-of-kin, they need to sign it also
California Probate Code Section 13101
Attach a Certified copy of the Death Certificate. Evidence that your dead relative owned the personal property, and the Consent of any of the closer relatives.
And bring some ID for you.
If the bank that has the account refuses to cough up the dough, ask if they have a form you can sign which "waives thier liability for mistakenly giving you the money". The bank is most concerned with being sued by other family members, and wants to protect itself. There is an offfical pamphlet which you can use www.howtoprobate.com/wp-content/uploads/.../Small-Estate-Transfer-Pamphlet.pdf . You can also go to the Probate Division of the nearest Superior Court of the State of California and get help from the “Probate Attorney” who works on the court staff.
What Happens when your Business Partner Dies?
Good Manners In Court Count
What your behavoir tells the Judge
By: Joann Deutch, Attorney in Studio City
You’re due to appear in Small Claims Court. You’re a nervous wreck. It always helps to know what to expect.
Here are some Practical Pointers.
1. Be early – on time is not good enough
2. Dress appropriately
3. Have your papers organized
4. Don’t have an attitude
You need to get there early because you have to talk to the other side. Even if you HATE that scum, talk to see if you can settle. The Judge will ask you if you’ve done that. If not, you may get sent out into the hallway later, and have to wait to have your case called again.
While you might not think it’s important, what you wear and how you act is important. The minute you step into the Courtroom you are being judged by strangers who can help you or hassle you. So don’t dress like you’re going to a night club. Don’t wear gangsta clothes. The proper dress is “business casual”. That’s like when you are going for a big job interview. No shorts, no flip flops. Ladies, no stomach showing. Guys, if you need to borrow your little brother’s clothes so they look like they fit, do it. No hats, no shades.
Why? Part of the legal process includes judging which side is telling the truth. If you dress with an eye toward being respectful to the Court and the judicial system, it’s in your favor. After all, you’re there to win, right?
When you arrive outside the Courtroom you will see a “Calendar”. That’s a set of long sheets of paper scotch taped to the wall. Your name should be on the list. You should write down what number your case is on the calendar. If you need documents or information on the case, if you know what number you were on the calendar it should make it easier to find your paperwork later. It also helps you know when your case might be called. [There are some exceptions]. If you’re not on the list check your Notice to Appear. Go inside the Courtroom and talk with the Bailiff.
Once inside the Courtroom, you’ll see the Bailiff, in a brown/beige uniform. That could be a Marshall, or usually a Sherriff. Their job is to keep everything orderly so the Judge can hear all the cases that are on the Calendar. You need to be seated. There is no bride’s or groom’s side of the Courtroom. Sit in the spectator’s area. Either side will do. The first row is usually for lawyers, so don’t sit there. The little half wall between the spectator area and the Judge is called “The Bar”. No they aren’t serving drinks to calm your nerves. Stay behind “The Bar”.
On one the side of the Judge’s bench is the Courtroom Clerk. That’s the person who takes care of all of the paperwork and information. You can not go over to the Clerk without the permission of the Bailiff. The area between the Counsel tables and the Judge and Clerk’s area is called “The Well”. Don’t go in there. It’s a big No No.
When your case gets called you go to the Counsel tables, which are on the Judge’s side of “The Bar”. The Plaintiff usually stands at the table on the right nearest the Jury Box [seating area] or the Witness Box - if there is no Jury Box. The Plaintiff is the person who filed the Complaint. If you are being sued, you’re the Defendant, and you stand on the left. There might be a sign telling which table is for the Plaintiff and which is for the Defendant.
The Plaintiff goes first to tell their side of things. Don’t interrupt. Then the Defendant tells their side of the story. Then the Defendant should comment on whatever the Plaintiff told the Judge that was incorrect.
You’ll be nervous when the Judge asks you questions. Listen carefully, and answer the question. Don’t blurt out whatever is on your mind. Answer the Judge’s question.