What is a dynasty trust?

1. What are dynasty trusts?
Most trusts — bank accounts held by one person, a trustee, for the benefit of another person or group — come with expiration dates. A few states, including Delaware and South Dakota, permit trusts to last forever. People from across the U.S. can open dynasty trusts in these states.

2. Why are they getting popular now?
The tax overhaul of 2017 doubled — to $11.2 million for an individual and $22.4 million for a married couple — the amount that can be passed to heirs without triggering estate and gift taxes. However, these higher thresholds are only in place until 2025 giving the rich a potentially limited opportunity to pass more wealth to family members tax-free while also exerting some control over how heirs spend their inheritances.

3. Why use a trust in the first place?
Trusts protect assets from creditors and former spouses. They can enable clever financial maneuvers that maximize the estate and gift-tax exemption. And trusts give donors some control over how the money is spent. For example, a donor can limit withdrawals so money can only be used for college, to purchase a home, or other specific purposes.

4. Why choose a dynasty trust?
Under the previous estate tax limits, many wealthy Americans already had set up trusts for the benefit of their children. If you wish to make your grandchildren or great-grandchildren rich, a dynasty trust can make that easier.

5. How do they work?
They can be funded with cash, stock or other assets, and structured to pay each generation only some of the trust’s proceeds while the rest of the money grows free of estate and gift taxes. While trusts or their recipients generally need to pay taxes on income and gains, they don’t owe capital gains taxes until assets are sold. With the right planning, a trust funded up to the maximum threshold tax exemption amount could be worth far more than that.

Divorce and Estate Plans – Arizona Law

What happens to a will upon divorce?

Under Arizona law, a divorced person’s will remains valid but the ex is disqualified as a potential beneficiary of the estate. But, a decree of separation does not terminate the marriage and does not disqualify the spouse as a beneficiary. If there is a divorce, the ex is removed from any position named in the will such as personal representative, executor, guardian or trustee. A new will could be drafted reinstating the ex.

What happens to a revocable trust upon divorce?

In the event of a divorce, Arizona law treats a living revocable trust similar to a will. If one or both spouses dies before the trust is dissolved as part of the divorce settlement, each spouse’s share of the trust would be distributed to the beneficiaries as if there was no surviving spouse. If there are separate trusts, the ex is disqualified as a beneficiary of the trust. The ex would also be removed as a successor trustee. However, if the trustmaker (settlor) wanted to keep the ex-spouse as a beneficiary or successor trustee, the trustmaker could sign a restatement of the trust to stating this.

What about powers of attorney?

An ex is automatically removed as an agent named in a financial or health care power of attorney. The power of attorney could still be used if an alternate agent is named.

What happens if a divorced person fails to remove the ex as a beneficiary on an IRA?

Under Arizona Revised Statute 14–2804, an ex is automatically removed as an IRA beneficiary. However, the IRA custodian may not have knowledge of the divorce. There are cases where an ex contested the matter in court.

What about pension, 401(k), profit-sharing and other plans governed by ERISA?

ERISA refers to the federal law governing federal retirement plan accounts such as 401(k), profit-sharing plans, pensions, and other federal retirement plans. These are not affected by Arizona law. The beneficiary designation on file with the plan administrator controls.

Is the ex-spouse automatically removed as beneficiary under a life insurance policy?

Yes. However, there are cases where it is part of the divorce settlement or the policy owner wants the ex to remain as beneficiary despite the divorce. To remove these complications, the policy owner should either rename the ex as a beneficiary after the divorce is final, or put a provision in the divorce decree stating the parties intend that the ex remain as beneficiary on a life insurance policy, or both.

How about payable-on-death, transfer-on-death, or in-trust-for provisions?

An ex is automatically removed as a beneficiary on an account with payable-on-death, transfer-on-death or in-trust-for designations. An account holder should update these accounts immediately upon divorce.

What about property held as joint tenants with right of survivorship or community property with right of survivorship?

Upon divorce, the property automatically becomes tenants in common – each party owns a separate 50% interest, and his or her interest becomes part of his or her estate at death.

Supreme Court rules for New Jersey in sports betting case  

The U.S. Supreme Court ruled Monday that states can legalize sports betting, breaking up Nevada’s monopoly on the practice.

The court upheld the legality of a 2014 New Jersey law permitting sports betting at casinos and racetracks in the state and voided the federal Professional and Amateur Sports Protection Act. Some states see sports betting, like lotteries, as a potentially important source of tax revenue.

The Supreme Court justices struck down the entire federal law on a 6-3 vote, with Justices Ruth Bader Ginsburg, Sonia Sotomayor and Stephen Breyer dissenting.

“The legalization of sports gambling requires an important policy choice, but the choice is not ours to make. Congress can regulate sports gambling directly, but if it elects not to do so, each state is free to act on its own,” Justice Samuel Alito wrote in the majority opinion.

The state law at issue would allow people age 21 and above to bet on sports at New Jersey casinos and racetracks but would ban wagers on college teams based in or playing in the state.

“Today’s ruling will finally allow for authorized facilities in New Jersey to take the same bets that are legal in other states in our country,” New Jersey Gov. Phil Murphy said in a statement. “I look forward to working with the Legislature to enact a law authorizing and regulating sports betting in the very near future.”

The ruling takes the U.S. a step closer to legal sports betting in numerous states, possibly even nationwide. Currently, the practice is legal only in select places such as Nevada, home to the gambling capital Las Vegas. While Nevada’s Gaming Control board reported $4.8 billion in sports bets last year, the black market total is considered to be many times the legal market.

Americans wager “$150 billion illegally each year through off-shore, black market bookies,” DraftKings CEO Jason Robins said in a statement. The fantasy sports company has nearly 10 million customers across the country. After the ruling, DraftKings announced plans to launch a mobile platform for sports betting to tap into the new market.

“States are now free to allow their residents to place mobile sports bets with licensed, trusted companies based in the U.S. and that pay taxes here,” Robins said.

Websites Delete Ads

Craigslist has closed its dating ads section in the USA in response to a new bill against sex trafficking. The bill states that websites can now be punished for “facilitating” prostitution and sex trafficking. Ads promoting prostitution and child sexual abuse have previously been posted in the “personals” section of Craigslist. In a statement, Craigslist said the new law would “subject websites to criminal and civil liability when third parties (users) misuse online personals unlawfully”.

The US Congress recently passed the Allow States and Victims to Fight Online Sex Trafficking Act. Websites are not usually held responsible for the content that members post, as long as illegal material is removed as soon as the service provider is made aware of it. But, the bill states that “websites that facilitate traffickers in advertising the sale of unlawful sex acts” should not be protected. It imposes fines and prison terms for those who own or operate a website that facilitates prostitution. The website Reddit also banned its escorts message board for the same reason.  

 

CA Allows Driverless Cars

This week the California Department of Motor Vehicles approved new rules that would allow self-driving cars to hit the road without a human behind the wheel at all.

These regulations, which take effect on April 2, 2018, will pave the way for companies like Waymo, Uber, GM, and others to continue autonomous vehicle testing on the roads of the Golden State and likely will lead to the technology becoming mainstream.

In 2014, California was the first state to have rules for testing autonomous vehicles on public streets. But many felt that those regulations were too restrictive and unable to adapt to a technology that is rapidly maturing. As a result, testing programs have flourished in other states, like Arizona.

“This is a major step forward for autonomous technology in California,” DMV Director Jean Shiomoto said. Safety is our top concern and we are ready to begin working with manufacturers that are prepared to test fully driverless vehicles in California.”

Among other requirements imposed as part of the permitting process, companies must show that there is a link for remote control, allowing the car to be operated from afar.

Autonomous vehicle makers must also provide a “law enforcement action plan” that includes instructions as to how to contact the remote human operator and how to disengage the AV mode, among other requirements. The rules do not say what type of data law enforcement will be able to access from AVs. Consumer Watchdog, a group that has routinely opposed AV technology, slammed the new rules this week. “A remote test operator will be allowed to monitor and attempt to control the robot car from afar,” said John M. Simpson, the group’s privacy project director. “It will be just like playing a video game, except lives will be at stake.”

 

New Tax Laws For 2018

Between the IRS and the recent changes in the tax law, here are a number of significant changes that will impact taxes now and going forward.

Those who are married and filing jointly will have an increased standard deduction of $24,000, up from $13,000 as under previous law.

Single taxpayers and those who are married and file separately now have a $12,000 standard deduction, up from the $6,500.

For heads of households, the deduction will be $18,000, up from $9,550.

The personal exemption has been eliminated with the tax reform bill.

A new 37 percent top rate will affect individuals with incomes of $500,000 and higher. The top rate applies for married taxpayers who file jointly at $600,000 and over. 

The estate tax exemption doubles to $11.2 million per individual and $22.4 million per couple in 2018.

The child tax credit has been raised to $2,000 per child — those under 17 — up from $1,000. A $500 credit is available for dependents who do not get the $2,000 credit.

The deduction for mortgage interest is capped at $750,000 for mortgage loans  taken out after Dec. 15 of last year. The limit is still $1 million for mortgages that were established prior to Dec. 15, 2017.


The itemized deduction is limited to $10,000 for both income and property taxes paid during the year.





Employees who participate in certain retirement plans ‒ 401(k), 403(b) and most 457 plans, and the Thrift Savings Plan – can now contribute as much as $18,500 this year, a $500 increase from the limit for 2017.

Savers who contribute to individual retirement accounts will have higher income ranges following cost-of-living adjustments. Note that the deduction phases out for individuals and their spouses who are covered by workplace retirement plans.
 For single taxpayers, the limit will be $63,000 to $73,000.
 For married couples, the phase out range will vary depending on whether the IRA contributor is covered by a workplace retirement plan or not. When the spouse who is investing has access to an employer plan, the range is $101,000 to $121,000.

For individuals who don’t have a retirement plan but are married to someone who does, the phase out has been raised to $189,000 to $199,000.
The phase out was not adjusted for married individuals who file a separate return and who are covered by a workplace retirement plan. That range is $0 to $10,000.





                   

           

New Laws in Arizona 2018

The start of 2018 means new laws taking effect in Arizona.  

Employees are happy about an increase in the minimum wage, but some business owners are worried about now having to pay their workers $10.50 an hour.  “It costs me approximately four thousand dollars a month employing twelve to fifteen people, that’s a big hit for a small business owner to take,” said Frank Silverman of Midtown Tavern.

After being signed into law by President Donald Trump a new tax law is set to take effect.  The law doubles the standard deduction, doubles the child tax credit, and gets rid of the nearly $4,000 personal exemption. However, none of these will have an impact on your next tax return. None of the new tax laws affect the 2017 taxes.

Looking ahead, there’s a new proposal emerging for the 2018 ballot allowing the recreational use of marijuana. The initiative, sponsored by a medical marijuana dispensary, would expand the list of conditions for which a doctor could recommend a patient be allowed to use the drug. It also would make it easier and cheaper for patients to get marijuana, including allowing a large percentage of them to grow their own plants.

Proponents, the operators of the Independent Wellness Center, a medical marijuana dispensary in Apache Junction, need 150,642 valid signatures on petitions by July 5, 2018, to put the measure.

Howard Hughes’ Estate: No Will

Howard Hughes’ net worth when he died is unknown, but he did have billions of dollars while alive. When he died, it appeared that Hughes had no direct descendants or immediate family, and he didn’t leave behind a will. After contacting his various banks, lawyers, and employees, every hotel he’d ever stayed in, posting classifieds in various newspapers, and even consulting a psychic, it appeared no will could be found.

Those associated with Hughes assumed he wanted the money to go to the Howard Hughes Medical Institute. It was well-known that he didn’t want the money falling into the hands of distant relatives. A battle ensued between the temporary administrator of the Hughes estate, cousin and lawyer William Lummis, and those who ran the Medical Institute. It was a multi-state war, with Nevada, California, and Texas all claiming to be responsible for the distribution of the estate, all having different laws about inheritance.

A couple of different wills surfaced, though eventually thrown out as fakes. A notable one was the three-page document that declared Melvin Dummar, a gas station attendant, was to inherit 1/16 of Hughes’ fortune. Supposedly, Dummar once picked Hughes up off the side of the road and gave him a ride to his hotel, and Hughes was so grateful that he left Dummar a huge chunk of money. In 1978, the will was thrown out as a forgery.

Next, “wives” started emerging from Hughes’ past, taking advantage of his reclusive reputation to explain why no one had heard of them before. Terry Moore, an actress, claimed to have married Hughes twice, but provided no documentation to support her assertions.  She did, in fact, once live with Hughes in the 1940s, but her claim that they were not only married, but never divorced, was called into question given the fact that she married three times after her supposed marriage to Hughes.

In addition to wives, an extraordinary number of Hughes’ supposed children decided to acknowledge their deceased father. After years of struggle trying to sort the people with legitimate claims from the fakers who were in it to try to grab some of the cash, a lot of the money did end up going to the Howard Hughes Medical Institute.

However, a huge chunk did go to various Hughes heirs. According to the Wall Street Journal, around 1000 people have benefited from the estate, including 200 of Hughes’ distant relatives. After liquefying many of his assets, they collectively were awarded about $1.5 billion.

Interestingly, the liquidation of the estate wasn’t completely finalized until 2010—34 years after his death. The last piece of the puzzle was the Summerlin residential development. In 1996, Rouse Co. (now General Growth) agreed to buy the Summerlin land from the Hughes’ estate on a 14-year repayment plan, finally wrapping up the estate.

The John Steinbeck Estate

When celebrated author John Steinbeck died in the late 1960s, he left a considerable literary legacy that included the classic American novels The Grapes of Wrath, East of Eden, and Of Mice and Men.  He also left confusion as to the rights to his works that would pit members of the next generation of his family against each other in court for more than 40 years!

In September of 2017, a Los Angeles jury in a federal California court awarded Steinbeck’s stepdaughter more than $13 million after finding that the late author’s daughter-in-law purposely sabotaged negotiations to make new film versions of The Grapes of Wrath and East of Eden.

The Pulitzer- and Nobel Prize-winning author died in 1968. He bequeathed the income from some copyrighted work. He also left to his third wife, Elaine Anderson Steinbeck, royalties from other works (which weren’t then eligible for copyright renewal during the author’s lifetime).  He also left royalties to his two sons from a previous marriage.

Steinbeck’s widow owned those works, pursuant to Steinbeck’s will, for which Steinbeck had been able to renew the copyrights during his lifetime. But, in accordance with federal copyright law, Steinbeck’s widow and his two sons were all entitled to royalty payments from those works for which the copyrights renewed after the author’s death.

It didn’t take long for the arguing to start over the royalty distributions, culminating in a number of lawsuits. These disputes also highlight the importance of careful estate planning that considers the long-term implications of asset distribution, particularly with royalties, and management for future generations.  For one thing, Steinbeck would have benefitted from a trust naming a neutral third party as the trustee, but his primary estate planning document was a will.    

The parties entered into a settlement agreement in 1983. The author’s sons relinquished their rights to “exploit” 16 of Steinbeck’s works that had their copyrights renewed after the author’s death in favor of his third wife, Elaine. In return, the sons received an increased share of the royalty payments and Steinbeck’s widow received a decreased share, according to court documents.

Steinbeck’s sons, John Steinbeck IV and Thomas Steinbeck, died in 1991 and 2016, respectively. Steinbeck’s widow, Elaine Anderson Steinbeck, died in 2003.

Waverly Scott Kaffaga, the daughter of Steinbeck’s widow, Elaine, and the executor of her mother’s estate, filed a lawsuit in 2014 against Thomas Steinbeck, his wife, Gail Knight Steinbeck, and their company, Palladin Group Inc., in which she alleged that they repeatedly interfered with the ability of Elaine Steinbeck’s estate to exploit the works, in direct violation of the 1983 settlement agreement. Kaffaga accused the couple of lying that they had rights to exploit the works and inserting themselves into negotiations between the estate and third partiess, according to the complaint. She sought to recover lost profits from alleged film adaptations of Steinbeck’s novels, including East of Eden and The Grapes of Wrath, in addition to punitive damages.

A district court judge ruled before the trial that the defendant’s actions were in violation of the 1983 settlement agreement. On September 5, 2017, a jury found that Gail Knight Steinbeck and her company intentionally interfered with Kaffaga’s efforts to negotiate deals to remake film versions of The Grapes of Wrath and East of Eden and awarded Kaffaga $13.15 million ($5.25 million in compensatory damages and $7.9 million in punitive damages).  The next chapter in the dispute may take place if Gail Knight Steinbeck decides to appeal the award.

 

New Laws in Arizona Summer 2017

The following new laws become effective in Arizona on August 9, 2017:

The Motor Vehicle Division cannot suspend the licenses of those who fail to respond to their citations. 

Dog racing is now illegal across the state. 

For spouses or dependents of military members killed in the line of duty, free car registrations become available.

The minimum wage will be increasing for workers, who can now expect $10 an hour. 

Homeowners with short-term rental homes on sharing websites like Airbnb and Homeaway will now have state taxes collected from the companies. The website companies will then forward the taxes to the Department of Revenue. 

In upcoming elections, pamphlets must be mailed to every household with registered voters showing what will be on the ballots. 

Got one of those plastic covers on your license plate to thwart photo radar?  They are now illegal.

Other laws range from expanding who can teach in Arizona classrooms and when police need warrants to track cell phones to exactly how much of someone’s foot a podiatrist can amputate (it’s a toe — not a foot).

Legislation to bar the state’s newest drivers from using cell phones does not take effect until July 1, 2018.

And a bill to set up procedures for people to argue about what they are charged by out-of-network hospitals does not become law until Jan. 1, 2019.