Pleas join us for a FREE lunch and learn
"Don't be Scared, be Prepared"
Wed April 30, 2014
12:00pm - 1:30pm
H2U Mountain View office
3150 N Tenaya Way #114
Please call 702-233-5474 to register.
Firm representative, Sandy Simpson presenting The Veterans Foundation with a check.
Clients of the firm will soon be receiving copies of our Client Focus newsletter that goes out several times per year. One of the articles in this installment of the Client Focus teased readers with some examples of application of the 3.8% Net Investment Income Tax. As promised, here are a couple simplified examples of application of the new tax:
Example 1: A married couple has salary income of $220,000 and investment income of $48,000. Since their MAGI is $268,000 (and exceeds the $250,000 limit for married individuals), they will be subject to the NIIT. They are taxed 3.8% on the lesser of: 1) $48,000, their investment income, or 2) $18,000, the amount by which their MAGI exceeds the $250,000 threshold for married individuals. Their additional tax would be $684 ($18,000 x 0.038).
Example 2: George, a single person has salary income of $175,000 and interest and dividend income of $20,000. MAGI would be $195,000 so George would not be subject to the 3.8% NIIT. However, let’s assume that George retired at the end of this year and at retirement was required to exercise $30,000 worth of deferred compensation stock options. This $30,000 is not part of net investment income, but does increase George’s MAGI to $225,000 (which exceeds the $200,000 limit for single individuals). The 3.8% tax will apply to George’s $20,000 of investment income and result in $760 of additional tax (which is less than the $25,000 of excess MAGI).
If you didn’t get a copy of our Client Focus newsletter and you would like to read it please click here (warning: large file size).
Interesting article in November 2013 Nevada Business Magazine. http://www.nevadabusiness.com/2013/11/estate-tax-changes-require-immediate-attention/
We always encourage our clients to properly fund their trust. Ideally a person’s trust should become the new owner on real estate, bank accounts, life insurance, non-qualified retirement investment accounts, and even cars.
Naturally, plenty of clients balk at our instruction to transfer title ownership of their cars to the trust. After all, in Nevada this can require making a change to your liability insurance policy so that the registration and insurance can be verified to match by the DMV. And why go to all the effort when you are just going to upgrade the car next year?
While transferring title of a vehicle to a revocable trust is the best advice for dealing with contingencies, we do often recommend the following alternative: the use of Nevada Department of Motor Vehicles Form VP239– titled Transfer on Death Application. The form can be found here. This form allows current title holders to add one transfer-on-death beneficiary to the title. The vehicle cannot have a lienholder, but the form is useful for permitting a hassle-free transfer of ownership of a vehicle upon a person’s death. So, if the vehicle is paid for and if you are satisfied with the vehicle transferring directly to just one beneficiary, then this method is potentially much easier than transferring title to the trust.
For those interested in doing it the official way, the form for transferring title of a vehicle to a trust is Form VP188 and can be found here. Make sure to read the information on the DMV website here under “Family Trust” for instructions on how to properly accomplish the transfer.
Please join us for:
Dementia/Alzheimers and the Law
Presented by Attorney Corey J. Schmutz
Thursday August 15, 2013
3:00 PM
Vintage Park at San Martin
7230 Gagnier Blvd.
Las Vegas, NV 89113
Snacks & refreshments will be served.
1 approved CEU credit for nurses and social workers
Please RSVP to Sandy Simpson at 433-4455
The Law Firm of JEFFREY BURR will be presenting to The How To, Can Do Club at the Anthem Center on Thursday, January 17, 2013 at 10am at Sun City Athem, 2450 Hampton Road, Las Vegas, Nevada (Delaware Room) Presenting from our firm are Jason Walker, Esq. & Corey Schmutz, Esq. Topics will be 2013 Estate Tax Law Changes: Do You Need an Update? and Guardianship: What you Need to Know. Please RSVP to Sandy at 433-4455 if you would like to attend.
Continuing the discussion of the 7 Major Errors in Estate Planning, a recent article written for Forbes, leads me to the seventh error –
Leaving Assets Outright to Adult Children
When an individual creates a trust, they will be asked by the estate planning attorney how the trust assets are to be distributed to the beneficiaries. For many individuals with adult children who will be the beneficiaries of the trust estate, the answer is simply to have the trust make outright distributions to the adult child. This choice may lead to some unintended consequences. Most assets held in an individual’s name may be subject to the claims of a judgment creditor. Living in a litigious society, we often contemplate ways to protect those assets which not only we earn during our life but pass on to our beneficiaries upon death. An effective approach to protecting those assets passed on to our beneficiaries upon death is by creating a trust in which the assets remain in trust, even for adult children, for as long as the laws of the state will allow primarily for purposes of asset protection. If held in trust, the assets will be available to the beneficiary while being protected within the “walls” of the trust.
Here in Nevada, we are lucky. First, as far as natural disasters, we don’t have to worry about hurricanes, tsunamis, blizzards (at least here in Las Vegas). Tornados are highly unlikely and we have no track record of regular earthquakes. Second, we’re blessed with pretty decent weather most of the year. Last but not least, we have the best domestic asset-protection trust statutes in the country!
We’ve talked at length on our blog about the Nevada On-Shore Trust. Please take a minute to look at our newly revised web page and tell us what you think.
I really wanted to take a minute and talk about an option that we have used to accompany the Nevada On-Shore Trust. We regularly team one or more limited liability companies (LLCs) with the Nevada On-Shore Trust to maximize the protection we are seeking for our clients. For clients with multiple investment properties, or for clients with a broad range of investments that deserve isolation of risk, we have often opted to utilize a Nevada series LLC with the Nevada On-Shore Trust.
A series LLC can be illustrated by the following example: Imagine the series LLC as a building with four walls and a roof. Within that building, one could build out individual rooms. Each room can contain furniture and the furniture in one room does not belong to another room.
The series LLC is like the building. There is one LLC that is formed with the Nevada Secretary of State, this is sometimes called the “container” LLC. This means that there is one initial filing fee, and one annual fee. Within the “container”, one can then begin to create the “series.” The statutes authorize additional companies to be created and each series is a separate and distinct entity. The assets and liabilities of each series is separate and apart from the other companies. Each series must maintain its own separate books and records, should have a separate bank account, and each series is provided its own operating agreement.
The primary advantage to the series LLC is that one can accomplish the goal of having a separate LLC for individual assets (such as investment rental properties) while saving money on state filing fees that might otherwise be prohibitive.
The one down-side to a series LLC is that, from our experience, it is best to keep the series operating only in the State of Nevada. Perhaps the series LLC would work in other states without too much effort if it is another state that recognizes series LLCs, such as Utah. But it has proven difficult to achieve foreign LLC status in states that are unfamiliar with the series LLC. This is because each series does not have its own record with the Secretary of State; therefore we cannot obtain a certificate of good standing for each series. The only proof of existence is for the entire “container.” But for clients that have limited their investments to Nevada alone, the series LLC is a nice option when a large number of LLCs has been recommended by counsel.
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