A Match Made in Bar Heaven

 Matching young lawyers with those in need of pro bono legal services

By Autumn Ronda

Pro bono work is a valuable experience for any young attorney. Specifically, a young attorney will find that he or she is creating the opportunity to gain practical lawyering skills, while making a positive impact in the community by helping those who cannot afford legal services. In an article I wrote for the Beverly Hills Bar Association, I discuss the reciprocal benefits of pairing young lawyers in need of real-world experience with those in need of pro bono legal services, and suggest ways in which young attorneys can find a volunteer program that is right for them. 

Read the full article here: http://www.bhbaweb.com/barristers/category/barbrief/

Who Needs a Mentor?

By Autumn Ronda, President 

Beverly Hills Bar Association Barristers

 Autumn Ronda

Everyone! The importance of mentorship cannot be understated. Oftentimes it can mean the difference between a budding professional’s determination to succeed, and their tangible success. Though a mentor relationship can exist in many forms, it always guides the mentee to the most clear and advantageous path to attaining their goals and the mentor will find the experience equally enriching. 

I am fortunate to have maintained mentorship relationships with both attorneys and non-legal professionals alike. Though I am glad to have mentors within my firm, having mentors outside of one’s organization is imperative. It is often these individuals who can provide the most impartial view of a problem or obstacle. Sometimes I ask my mentors to comment on the strategy I’ve selected for a particular client, edit something I’ve drafted, or simply brainstorm with me. Other times, I’m looking for advice on the “big picture.” Regardless of the scale of my request, their experienced opinions and helpful reassurances help me to achieve my short and long-term goals. Read More… 

Contact: Autumn Ronda

Looters Beware: Breaches of Fiduciary Duty are Actionable by Beneficiaries of a Revocable Trust After a Settlor’s Death

By Autumn Ronda, Esq.

Autumn Ronda

In Estate of Giraldin; 12 S.O.S. 6575, the California Supreme Court ruled in a 5-2 opinion by Justice Ming Chin that the beneficiaries of a trust which is revocable by the settlor have standing to sue the non-settlor-trustee of the trust after the settlor's death for a breach of a fiduciary duty owed to the settlor while the settlor was living.  Under Probate Code Section 15800, unless the trust instrument otherwise provides, while the settlor is living and holds the power to revoke the trust, the trustee must only account to and owes fiduciary duties only to the settlor of the revocable trust. This is consistent with the fact that, by definition, a revocable trust can be revoked or amended by the settlor at any time while the settlor is living and has mental capacity, thereby divesting a beneficiary's interest in the trust. Thus, until the trust becomes irrevocable at the settlor's death and in doing so vests the rights of the beneficiaries, the named beneficiaries merely have a contingent interest in the trust.  This ruling provides a precedent that despite a beneficiary's mere contingent interest in a revocable trust during the settlor's lifetime, any fiduciary breaches committed by the non-settlor-trustee against the settlor, while the trust is revocable by the settlor, are actionable by the beneficiaries after the settlor's death, to the extent that the violation harmed the beneficiaries' interests.  The Court proclaimed, "A trustee…cannot loot a revocable trust against the settlor's wishes without the beneficiaries' having recourse after the settlor has died."

The factual circumstances giving rise to this case are not uncommon.  The settlor, William Giraldin established a trust for the benefit of his blended family consisting of his wife, his four children from another marriage, his wife's three children from another marriage and their twin sons from their marriage. One of the twin sons of the current marriage, Timothy, was appointed as sole trustee.  The trust made substantial investments in a company owned by both Timothy and his twin brother Patrick.  The company failed and the trust lost substantial value.  The trust terms included fairly standard revocable trust language which attempts to relieve some of the duties and liabilities of the trustee during the settlor's lifetime, namely, waiving accounting duties, relaxing the prudent investor rule, discounting the importance of the remainder beneficiaries and making the trustee's distribution decisions binding on all beneficiaries.  The four children of the settlor's first marriage sued Timothy in his capacity as trustee alleging that his self-interested investments in his and Patrick's unsuccessful company and the personal loans that the trust made to both Timothy and Patrick had deprived the other seven children of their inheritance.  The trial court sided with the plaintiffs, order Timothy to be removed as trustee, provide an accounting to the beneficiaries and to be surcharged for his various breaches of fiduciary duties. 
 

On appeal, Timothy argued that the plaintiffs did not have standing to sue him and the Court of Appeal agreed, explaining that the plaintiffs' claims consisted of breaches of fiduciary duties allegedly owed to the plaintiffs themselves, rather than breaches in the trustee's fiduciary duties owed to William, stating that the trustee's "duties as trustee were owed solely to [William] during [the time William was alive], and not to the trust beneficiaries…" 

The California Supreme Court's limited review of the standing question resulted in a reversal of the Court of Appeal's decision. The Court disagreed with the Court of Appeal and found that the plaintiffs had actually alleged breaches of fiduciary duties owed directly to William as the settlor of the trust during his lifetime.  Thus, the Court's question was only whether the plaintiffs had standing to bring a lawsuit based on a trustee's breaches of fiduciary duties owed to a now deceased settlor which occurred during the settlor's lifetime. The Court answered yes, stating that the beneficiaries had standing to sue, "[b]ecause a trustee's breach of the fiduciary duty owed to the settlor can substantially harm the beneficiaries by reducing the trust's value against the settlor's wishes."  The Court did not however address the question of whether or not the alleged breaches of fiduciary duties had in fact occurred and remanded the case with instruction to rule on this issue in a manner consistent with their ruling.

 

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2012 Year-End Tax Planning Tips

Year-end planning is a bigger challenge this year than in past years because, unless Congress acts, tax rates will go up next year, many more individuals will be snared by the alternative minimum tax (AMT), and various deductions and other tax breaks will be unavailable. To be more specific, as a result of expiring Bush-era tax cuts, unless Congress ascts, individuals will face higher tax rates next year on their income, including capital gains and dividends, and estate tax rates will be higher as well. The AMT problem arises because, for 2012, AMT exemptions have dropped and fewer personal credits can be used to offset the AMT. Additionally, a number of other tax provisions expired at the end of 2011 or will expire at the end of 2012. Rules that expired at the end of 2011 include, for example, the research credit for businesses, the election to take an itemized deduction for State and local general sales taxes instead of the itemized deduction permitted for State and local income taxes, and the above-the-line deduction for qualified tuition expenses. Rules that will expire at the end of this year include generous bonus depreciation allowances and expensing allowances for business, and expanded tax credits for higher education costs.

These adverse tax consequences are by no means a certainty. Congress could extend the Bush-era tax cuts for some or all taxpayers, retroactively "patch" the AMT for 2012 to increase exemptions and availability of credits, revive some favorable tax rules that have expired, and extend those that are slated to expire at the end of this year. Which actions Congress will take remains to seen and may well depend on the outcome of the elections. While these uncertainties make year-end tax planning more challenging than in prior years, they should not be an excuse for inaction. Indeed, the almost certain prospect of some higher taxes next year makes it even more important to engage in year-end planning this year. To that end, we have compiled a checklist of actions that may help you save tax dollars if you act before year-end. Many of these moves may benefit you regardless of what Congress does on the major tax questions of the day. Not all actions will apply in your particular situation.

We can narrow down the specific actions that you can take once we meet with you to tailor a particular plan. In the meantime, please review the following list and contact us at your earliest convenience so that we can advise you on which tax-saving moves to make. We also should schedule a follow-up for later this year to see whether the November election results will require changes to year-end planning strategies.

 Year-End Tax Planning Moves for Individuals  

  (1)   Realize losses on stock while substantially preserving your investment position. There are several ways this can be done. For example, you can sell the original holding, then buy back the same securities at least 31 days later. It would be advisable for us to meet to discuss year-end trades you should consider making. 

(2)   If you are thinking of selling assets that are likely to yield large gains, such as inherited, valuable stock, or a vacation home in a desirable resort area, try to make the sale before year-end, with due regard for market conditions. This year, long-term capital gains are taxed at a maximum rate of 15%, but the rate could well be higher next year as noted above. And if your adjusted gross income (as specially modified) exceeds certain limits ($250,000 for joint filers or surviving spouses, $125,000 for a married individual filing a separate return, and $200,000 for all others), gains taken next year (along with other types of unearned income, such as dividends and interest) will be exposed to an extra 3.8% tax (the so-called "unearned income Medicare contribution tax").

(3)   Make gifts sheltered by the annual gift tax exclusion before the end of the year and thereby save gift and estate taxes.You can give $13,000 in 2012 to each of an unlimited number of individuals but you can't carry over unused exclusions from one year to the next. The transfers also may save family income taxes where income-earning property is given to family members in lower income tax brackets who are not subject to the kiddie tax. Savings for next year could be even greater if rates go up and/or the income from the transfer would have been subject to the 3.8% tax in the hands of the donor.

 Year-End Moves for Business Owners

(1)   If your business is incorporated, consider taking money out of the business by way of a stock redemption if you are in the position to do so. The buy-back of the stock may yield long-term capital gain or a dividend, depending on a variety of factors. But either way, you'll be taxed at a maximum rate of only 15% if you act this year. If you wait until next year to make your move, your long-term gains or dividends may be taxed at a higher rate if reform plans are instituted or the Bush-era tax cuts expire. And if your adjusted gross income (as specially modified) exceeds certain limits ($250,000 for joint filers or surviving spouses, $125,000 for a married individual filing a separate return, and $200,000 for all others), gains taken next year (along with other types of unearned income, such as dividends and interest) will be exposed to an extra 3.8% tax (the so-called "unearned income Medicare contribution tax"). Keep in mind that you will need expert help to plan and execute an effective pre-2013 corporate distribution.

  

(2)   Set up a self-employed retirement plan if you are self-employed and haven't done so yet. 

(3)   Increase your basis in a partnership or S corporation if doing so will enable you to deduct a loss from it for this year. A partner's share of partnership losses is deductible only to the extent of his partnership basis as of the end of the partnership year in which the loss occurs. An S corporation shareholder can deduct his pro rata share of an S corporation's losses only to the extent of the total of his basis in (a) his S corporation stock, and (b) debt owed to him by the S corporation.

 

These are just some of the year-end steps that can be taken to save taxes. Again, by contacting us, we can tailor a particular plan that will work best for you.  Please contact a member of the Tax & Wealth Planning Group for more information.

Patient Protection and Affordable Care Act of 2010 Upheld by the Supreme Court, and How We'll Pay For It

By Autumn Ronda

On June 28, 2012, the Obama Administration was successful in its battle to have the Supreme Court uphold most of the provisions of the Patient Protection and Affordable Care Act of 2010 (the "Act").  In an effort to fund the Act, beginning January 1, 2013, taxpayers at higher income levels will feel the pinch of the new taxes included in the bill, which initially passed in March, 2010.

The first tax is a .9% increase in the Medicare Hospital Insurance Tax portion of FICA on wages over $200,000 ($250,000 for couples, $125,000 for married filing separately). Generally, every wage earner owes a 2.9% tax, which is split between the employee and the employer. Under the new tax, the additional .9%, which brings the total Hospital Insurance Tax for these high earners to 3.8%, is payable entirely by the employee.  Self-employed persons will be equally affected by a .9% increase Hospital Insurance Tax portion of the SECA tax on self-employment, subject to the same income limits.

The second tax, called the Unearned Income Medicare Contribution Tax, is a tax on lesser of net investment income, or the excess of Modified Adjusted Gross Income over the threshold amount of $200,000 (or $250,000 for couples, $125,000 for married filing separately), at a 3.8% flat rate.  Investment income is a broad category including, but not limited to, most interest, rents, dividends, royalties, capital gains from the sale of stocks and bonds, and passive rental and business income. Even taxable gain on the sale of a home is hit by this new tax to the extent the gain exceeds the Section 121 exclusion for the sale of a principal residence.  The tax on investment income not only affects individual taxpayers, but also can have a significant effect on the income taxes owed by trusts and estates. 

The effort to raise revenue to pay for the costly healthcare act has made two very significant changes to the tax system. Historically, the tax on wages to fund Medicare has been a flat tax and has only been imposed on earned income. The new .9% tax will impose a progressive Medicare Hospital Insurance Tax on wages, and the new Unearned Income Medicare Contribution Tax of 3.8% will impose a Medicare tax on investment income which previously did not exist.

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Autumn Ronda Speaks to the California Society of CPAs, Estate Planning Committee

Tax and Estate Planning attorney Autumn Ronda, spoke to the California Society of CPAs, Estate Planning Committee at an August 8, 2012 panel titled "Wealth Transfer Strategies in Low-Interest Rate Environment." 

The program detailed those advanced estate planning strategies that are specifically helped by the recent historically low interest rates, including Grantor Retained Annuity Trusts, Charitable Lead Annuity Trusts, Sales to Intentionally Defective Grantor Trusts and Intra Family Loans.

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Autumn Ronda to speak on Ethics on Panel at CalCPA Joint Meeting, January 12, 2011

Valensi Rose Tax and Estate Planning associate, Autumn Ronda, will be a guest speaker on a panel at an upcoming joint meeting between CalCPA and the Los Angeles Young Tax Lawyers. As the Chair of the LA YTL association and a CalCPA Steering Committee member, Autumn brings a young and fresh perspective to both organizations.

She was invited to speak on the panel in order to share her perspective on the ethical issues she faces as a young estate planning attorney. The seminar, entitled "Ethical Implications of Estate Planning Practice," is being offered by CalCPA and is open for registration to all.

Click here for more information and to register for the event.

President Obama and Republicans have reportedly reached an agreement on some of the burning tax issues.

Posted by Autumn Ronda

The proposal boils down to a two-year extension of the Bush tax cuts. President Obama made it clear in the statement he made after Monday night’s compromise, that he doesn't favor extending tax cuts for the upper tax brackets, but that he compromised in order to keep the tax breaks for the middle class. Although the agreement on these tax issues still needs to be introduced as legislation, voted on by Congress and signed by the President (meaning that the agreement could vary from its reported form), President Obama stated that legislators "have arrived at a framework for a bipartisan agreement," and it is expected that the proposed legislation will look something like the following…

- The estate tax will be reinstated with a 35 percent rate on estates worth more than $5 million for individuals and $10 million for couples;

- The current tax rates from 10% to 35% will remain intact for the next two years, rather than reverting back to 15% to 39.6%;

- The section 179 deduction will be expanded to allow businesses to completely write off their investments next year;

- The top rate of 15 percent on capital gains and dividends would remain in place for 2011 and 2012;

- There will be a reduction in the employee-portion of Social Security taxes to 4.2% from 6.2%.

- The child tax credit will continue to be $1000, rather than reverting back to $500;

- The earned income credit will continue to provide tax credits for a three dependents, rather than reverting back to a maximum of two dependents;

- The American opportunity credit for college expenses will be extended;

- Unemployment insurance benefits will be extended for 13 months.

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Paying for Health Care Reform

Posted by Autumn Ronda

Starting in 2013, taxpayers at higher income levels will feel the pinch of two new tax hikes included in the Health Care bill that passed in March. The first is a .9% increase in the Medicare tax on wages over $200,000 ($250,000 in the case of a couple). Generally, every wage earner owes a 2.9% Medicare tax, which is split between the employee and the employer. Under the new tax, the additional .9%, which brings the total Medicare tax for these high earners to 3.8%, is payable entirely by the employee.

The second tax contained in the bill is a Medicare tax on investment income at a 3.8% flat rate for taxpayers with a modified adjusted gross income of $200,000 (or $250,000 for couples). Investment income is a broad category including, but not limited to, most interest, rents, dividends, royalties, capital gains from the sale of a stocks and bonds, and passive rental and business income. Even any taxable gain on the sale of a home is hit by this new tax. The tax on investment income not only affects individual taxpayers, but also can have a significant effect on the income taxes owed by trusts and estates.


Congress’s effort to raise revenue to pay for the costly healthcare bill has made two very significant changes to the tax system. Historically, the tax on wages to pay for Medicare has been a flat tax and have only been imposed on earned income. The new .9% tax on wages will impose a progressive Medicare on the previously flat tax, and the new 3.8% tax will impose a Medicare tax on investment income which previously did not exist.

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Tax and Business Attorney Autumn Joins Firm

We are pleased to announce that attorney Autumn Ronda has joined their firm as an associate, working in the Tax & Wealth Planning, Entertainment Group and Transactional Group practice areas.

Managing Partner Arlen Gunner said, “She is a welcome addition to our team of tax and business professionals that service a variety of individual, business and nonprofit clients.”

The San Francisco Bay Area native earned her law degree from Southwestern University School of Law while concurrently earning her M.B.A. at Loyola Marymount University. After passing the bar, Autumn joined a small entertainment and real estate development company as in-house counsel. Subsequently, she elected to continue her legal education earning a Master of Laws in Taxation.
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