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When Pat Haden was named as the new Athletic Director at USC this week, I was reminded that he was a Rhodes Scholar. We all know that makes him impressive, but do we know why? This is a prime example of why I love the internet. Within seconds of entering a search, I was reminded that Cecil Rhodes founded DeBeers Diamond Company, which today markets 40% of the world’s rough diamonds. He was instrumental in the expansion of the British Empire, founded Rhodesia and had a hand in conquering South Africa. Cecil Rhodes left a lengthy Will, part of which established the Rhodes scholarship.
Mr. Rhodes’ Will contains four criteria by which prospective Rhodes Scholars are to be selected:
- Literary and scholastic attainments;
- Energy to use one’s talents to the fullest, as exemplified by fondness for and success in sports;
- Truth, courage, devotion to duty, sympathy for and protection of the weak, kindliness, unselfishness and fellowship;
- Moral force of character and instincts to lead, and to take an interest in one’s fellow beings.
The bottom line here is that buying diamonds helps support education!
Criteria taken from http://www.rhodesscholar.org/faq
As seen in the article below by “Congress Daily,” a resolution for the estate tax predicament is in major jeopardy. In short, this means that the estate tax exemption will be $1 Million in 2011 and anything over that exemption amount will be taxed at a 55% rate upon death. In the state of California, anyone who owns a home is most likely in danger of falling above this $1 Million exemption. Another note to make is that this exemption and tax rate are indefinite until the Congress passes a resolution. Meaning if they cannot come to an agreement (which happens more often than not anymore!) this low exemption and high tax rate could stay this way for years to come. The bottom line here is to make sure you have your planning in order, so that you protect what you have worked so hard to build and avoid this problem no matter what Congress decides or does not decide.
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Senate Disagreements Stymie Any Deal on Estate Tax
Democrats sharply divided on estate tax rate and exemption threshold.
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Posted May 20, 2010
WASHINGTON – Congress Daily reports that an estate tax agreement is far from certain and speculates that it could even return at a 55 percent rate and $1 million per spouse exemption beginning January 1, 2011.
Senate Democrats discussed the issue at a heated policy luncheon earlier this week, while failing to reach a consensus.
Sen. Bernie Sanders (I-VT) advocated the 55 percent/$1 million exemption approach, maintaining that the pre-2001 rates would only affect 2 percent of the country’s estates. When asked about reducing the tax to 35 percent while lifting the exemption to $5 million, he said, “I will do everything I can to stop that.”
On the other side is Senate Small Business Chairwoman Mary Landrieu (D-LA), who supports the reduced rate and higher exemption. “We’ve been rasslin’ and struggling with how to resolve this estate tax issue, and the fact of the matter is, even in the Democratic Caucus, there are varying views,” she told the news source, calling the 35%/$5 million parameters a “reasonable compromise.”
Landrieu said she would exempt more than 99 percent of small businesses from the tax, though acknowledged that votes remain scarce. “I don’t know what’s going to happen,” she said. “It just doesn’t seem like there’s enough votes to do anything. There doesn’t seem to be 60 votes at this point to do any of those proposals.”
Sen. Bob Casey (D-PA) said that the majority of Senate Democrats oppose the 35 percent/$5 million plan, estimating the split at “80 percent, 20 percent” against.
“I think we’re not yet at the point where we’re drawing lines, but the idea that we’re going to give an incredible economic advantage to less than 1 percent of our taxpaying population is really offensive to me, to understate it dramatically,” Casey said. “Most of our caucus is very concerned about what will happen on the estate tax, and I think there are some who would probably be with Sen. Kyl, but I think it’s a small number.”
Capitol Hill insiders said that Finance Chairman Max Baucus (D-MT) and Minority Whip Jon Kyl (R-AZ) previously were in general agreement on the 35 percent rate with a $5 million exemption, though Baucus dismissed talk of any loose agreement earlier this week. “There is no agreement on the estate tax in either substance or process. None whatsoever.”
Kyl conceded that whatever agreement might have existed has now disappeared. “We no longer have an agreement, because the Democratic side has decided that unless a matter has a guaranteed majority of Democratic votes going in, they’re not going to allow it on the floor, at least not voluntarily,” Kyl said.
Senate Finance Republicans expressed frustration at the unsettled issue. “It’s very frustrating because we thought we had a deal,” said Sen. Orrin Hatch (R-UT). “We thought we put it together in a way we thought was acceptable, and the Democrats are backing off on resolving it.”
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We are pleased to announce our First Annual Dock Party was a success. A great day had by all. Great weather…great people…great food and, most importantly, great festivities! We can hardly wait for next year! Here are some pictures from our fabulous day. To those that could not make it out, we hope to see you next year!  Looks like the perfect spot for a party!
 Captain Vito and some of our friends.
 Gentleman, start your engines!
 Relaxing after checking out the festivities.
 After a long, satisfying day…take us into the sunset, Captain!
February 3, 2010 – 2:21 pm
The looming question over the past few years has been, “What will Congress do about estate taxes beyond the 2010 repeal?” Many predictions have been thrown around. The more popular one being that the repeal would continue while others felt the exemption level would stay at $3.5 Million. Now that we’re in 2010, who ended up being right? Nobody it turns out! Congress has failed to do anything about the estate tax issue and now we are in a carryover basis regime.
As professionals, how do we guide our clients through the uncertain future with regards to their estates? For your convenience the following is a list of the most compelling concerns.
- Potential Disinheritance of Surviving Spouse – The problem is that formula clauses in many trusts say something along the lines of “leave the Exemption amount to the Bypass Trust and Marital Deduction amount to the Marital Trust.” These clauses are now rendered inherently ambiguous as there is no Exemption or Marital Deduction amounts this year. The result of this ambiguity could be a lawsuit between the surviving spouse and other potential heirs, or even a Petition for Instructions from a wary Trustee. Both would be an undesirable and costly mess.
We have reviewed the formula clauses in the trusts prepared by our office. We are happy to report that there is no ambiguity regarding the rights of a surviving spouse in those trusts.
- Application of the Modified Basis Step Up – A step up in basis is now limited to $1.3M for heirs and another $3M of a qualified inheritance for a surviving spouse. Most estate plans do not specifically address how the step up is to be applied nor does it address how to divide the property in a way that does not disqualify the trust from both the $1.3 M and $3 M basis step up. We will be contacting our married clients to discuss any necessary changes needed to take advantage of the new basis step up system.
- Basis Record Keeping – Clients will need to know what their adjusted basis in property is; otherwise the IRS may presume that the basis is zero. As usual, inadequate documentation may result in unnecessary tax for your clients.
In short, clients need to have their estate plans reviewed. If you would like to discuss this further, or if you would like to schedule a time for your clients to come and review their estate planning needs with me, please contact my office. I look forward to assisting you and your clients navigate through these confusing and potentially burdensome laws. For a more elaborate explanation of 2010 Estate Tax issues, please contact us and we will provide to you.
January 17, 2008 – 4:50 pm
Were your real estate taxes increased because of a transfer of property to your registered Domestic Partner? If so, you may be entitled to have that tax increase reversed. You must apply for the reversal on or before June 30, 2009. Contact your county assessor to obtain the appropriate form.
Financial advisors - please forward this information to your clients or update them at your client meetings. CPAs - you should definitely include a notice about this change in your tax packets for this upcoming tax season.
As you probably know, California allows Domestic Partners to register with the Secretary of State. The Domestic Partner then qualifies for inheritance rights, health benefits and numerous other benefits. However, the Revenue and Taxation Code did not allow an exemption from reassessment of real estate taxes on a transfer to a Domestic Partner. Therefore, when a Domestic Partner was added to a deed, the real estate taxes were increased. California has now amended the Revenue and Taxation Code to allow for the exemption from reassessment of real estate taxes for transfers after January 1, 2000. The county assessor is required to reverse the reassessment between registered Domestic Partners provided the transferee submits an application for reversal before June 30, 2009.
Since a raise in real estate taxes is going to be effective for life, this exemption can result in thousands of dollars of additional real estate tax per year. That’s going to add up. This information can be very important to clients who qualify for this benefit.
November 27, 2007 – 8:29 pm
Our primary goal of this blog is to make better connections and enhance communications with our clients, colleagues, and friends. In pursuit of this goal, we feel that a blog will help us provide the resources and insight necessary to provoke discussion, make informed decisions, and set better expectations when addressing your estate planning needs. Any member of our staff may provide information and commentary which may emanate from our philosophy, experience, readings, or continuing education. We very much hope that you will find this blog to be enlightening, entertaining, and above all else, a window to our office.
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