Law Office of Derryl H. Molina

(408) 244-4992

 

WEALTH MANAGEMENT

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DIFFERENT WEALTH MANAGEMENT TECHNIQUES

                                                                       

Possible Client goals:

1) Get income,

2) Not sell properties,

3) Avoid Medi-Cal and pay for own health care,   

4) Put properties into a business so it will continue to provide income,

5) Put personal residence into living trust to avoid probate,

6) Save on taxes: income, estate, gift, property, capital gains, or generation-skipping .

 

Form

Purpose

Benefits

Disadvantages

Best For

Cost

 

Living Trust

 

Estate planning

Avoids probate, reduces estate tax.

Accessible for Medi-Cal recovery.  Counts as part of estate

 

 

 

Anyone with assets over $100,000.

1 person - $1500

2 person -- $2000

 

Grantor Retained (annuity GRAT or income GRIT) Trust

Specified time period annuity or income (based on value on date GRAT estab. Remainder interest passes to non charitable beneficiaries

 

 

 

Die after expiration of annuity; no trust of property included in deceased's estate.

Useful in period of low interest rates.

Die before expiration of annuity, ALL trust property included in deceased's estate. GRIT only personal residence if passing to family.

 

Person who wants fixed income despite changing market.

 

 

 

 

 

$3000-$6000

GRUT Grantor Retained Unitrust

Grantor retains fixed amount of trust principal valued annually.

 

Useful in period of changing interest rates.

Int. retained is fixed amount of principal annually.

 

 

 

 

Same as GRAT.

Person who wants fixed income despite changing market.

 

 

 

 

 

$3000-$6000

 

 

Form        

Purpose

Benefits

Disadvantages

Best For

Cost

 

FLP

 

Asset protection. Gifts interests in FLP rather than outright ownership in assets. Can* be consid-ered a Medi-Cal unavail-able asset. Interest passes through will.  No probate needed. Disc on FMV

Continued control of assets.  Asset protection.  Ease of transfer of interests.

Valuation discounts

Must have GP with total control over mgmt (unlimited liability) and LP (limited liability and no say in mgmt. Taxed on partners personal returns.

Family business to pass on assets

 

 

 

 

 

$3000-$6000

 

 

 

 

FLLC

 

 

 

 

 

 

 

Same as FLP.

Same as FLP.

Flexible in ownership, mgmt, transfer of interest.  All members have ltd liabil. (Good for real estate ownership) Taxed as sole prop or partnership.

 

 

Same as FLP.

 

 

 

 

 

$3000-$6000

 

PAT

 

 

Installment plans to defer capital gains.

Tax shelter for land.  No estate or gift tax.Works when 1031 property not available.

 

 

 

Unsecured promise to receive annuity payment.

Persons ready to retire; finished investing.

 

 

 

$3000-$6000

 

 

 

 

 

 

 

Form        

Purpose

Benefits

Disadvantages

Best For

Cost

 

CRUT

 

After death gift to charity, fixed lifetime income to donor

Useful in period of changing interest rates. No taxable gain. Insures income stream without management.

Same as GRAT.  Not good for mortgaged property.  Could cause to lose tax-exempt status.

Person wanting charity to get remainder.  Objective not affected by changing interest rates.

 

 

 

 

 

$5000-$6000

CLUT

Charity gets current interest and remainder passes to non-charitable beneficiaries

Useful in period of changing interest rates.

Same as GRAT.  Not good for mortgaged property.  Could cause to lose tax-exempt status.

Same as CRUT.  To leave something to grandchildren and avoid GST. (DO NOT create CLAT for this purpose.)

 

 

 

$5000-$6000

 

CRAT

 

 

After death gift to charity, lifetime annuity to donor or beneficiaries.

Insures income stream w/o management responsibil.

Taxable gain if annuity value exceeds FMV of donated assts. Not good for mortgaged property. 

Person whose assets are not mortgaged property.

 

 

 

$5000-$6000

 

1031 Exchange

 

Defer capital gains until heirs inherit and get stepped up basis

Lower or no capital gains on property sale.

Time intensive.  Needs intermediary.  Must be done BEFORE closing.

Person still actively engaged in commercial rentals

Cost of intermediary: About $1500

The information on this website is for educational purposes only and should not be considered legal advice or an attorney-client relationship. For clarification of any material of this website or to seek help on your particular issue, feel free  to contact  The Law Office of Derryl H. Molina at  (408) 244-4992 or email  Derryl H. Molina at attderryl@comcast.net