The post What Is a Family Limited Partnership, and Do You Need One? appeared first on Mediation Attorney Hayward CA | Law Offices of Denise Eaton May.
]]>An FLP is a form of limited partnership among family members. It is a legal entity established to hold assets such as real estate, investments, or family businesses. The structure of an FLP is divided into two types of partners: general partners, who manage the partnership and have full liability, and limited partners, who are typically passive investors with liability limited to their investment in the partnership.
The operation of an FLP begins with transferring assets into the partnership. The family members who contribute assets usually receive interest as general or limited partners. The general partners manage the FLP, making decisions about the assets, while limited partners have no role in management and enjoy limited liability.
To establish an FLP in California, you must file a Certificate of Limited Partnership with the California Secretary of State. The partnership must also create a Limited Partnership Agreement, which outlines the roles, responsibilities, and distribution rules among the partners. This agreement is not filed with the state but is a critical internal document.
This structure allows for the efficient transfer of wealth to younger generations while enabling the senior family members to retain control over the assets. It also provides an avenue for consolidating family assets into a single entity, making management more straightforward and centralized.
FLPs can significantly affect estate planning and administration. They allow for the gradual transfer of assets to heirs without relinquishing control, which can be particularly advantageous for families with substantial real estate holdings or businesses.
One of the primary advantages of an FLP in California is the potential for estate and gift tax savings. Parents can transfer assets into the FLP and then gift limited partnership interests to their children or other beneficiaries, potentially at a reduced value for gift tax purposes due to lack of control and marketability discounts. This strategy can lower the taxable value of their estate.
Furthermore, FLPs in California offer a degree of creditor protection for the limited partners. Creditors of a limited partner generally cannot seize the partnership assets or take over the limited partner’s interest in the partnership; instead, they may only obtain a charging order against distributions made from the arrangement to the debtor partner.
However, the Internal Revenue Service (IRS) scrutinizes FLPs closely to ensure they are not merely tax evasion schemes. Other potential complications of a family limited partnership include:
These issues make the formation and operation of an FLP executed with genuine business purposes and in compliance with all legal requirements essential. In addition, families must institute a non-adversarial dispute resolution method within the partnership to avoid unnecessary legal battles.
The power structure of an FLP can lead to a variety of possible disputes among family members. Some of the most common causes for these disagreements include management decisions, the distribution of income, or the transfer of partnership interests.
Litigation for FLP disagreements can be costly, time-consuming, and damaging to family relationships. That’s why including a mediation clause in your partnership agreement can be so valuable.
Mediation offers a confidential, less adversarial alternative for resolving disputes. In mediation, a neutral third party helps the disputing parties find a mutually acceptable solution. This process can preserve family relationships, reduce legal expenses, and provide a more flexible, personalized resolution to conflicts within an FLP.
Deciding whether an FLP is right for your family depends on several factors, including the nature and value of your assets, your estate planning goals, and your family dynamics. An FLP can be a powerful tool for asset protection, estate tax minimization, and family business succession planning. However, it requires careful consideration, proper structuring, and ongoing compliance with legal and tax obligations.
Consulting with estate planning professionals, including attorneys and tax advisors, is crucial to determining whether an FLP fits your family’s needs and objectives. They can provide guidance on the formation, operation, and benefits of an FLP, ensuring that your estate planning strategy is effective and compliant with current laws and regulations.
Family limited partnerships offer a versatile and strategic option for estate planning and asset management. By understanding how FLPs work, their benefits, and the mechanisms for dispute resolution, families can make informed decisions about integrating FLPs into their estate planning efforts, potentially securing their financial legacy for generations to come.If you are considering adding an FLP to your estate plan, or if you need assistance resolving a dispute related to your family’s FLP, the experienced legal professionals at the Law Offices of Denise Eaton May, P.C., can help. We have decades of experience offering comprehensive estate planning services as well as professional mediation, so we are well-equipped to help you avoid or resolve disputes. Learn more about how we can assist you with your FLP concerns by scheduling your consultation today.
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]]>The post Mediation and Mental Health: 10 Benefits of Alternative Dispute Resolution appeared first on Mediation Attorney Hayward CA | Law Offices of Denise Eaton May.
]]>Unlike traditional litigation, mediation is inherently collaborative. It involves a neutral third party who facilitates a dialogue between disputing parties to help them find a mutually acceptable resolution. This process is less adversarial and more about understanding each other’s perspectives, which is less stressful and anxiety-inducing compared to the confrontational nature of a courtroom battle.
Many studies have found that alternative dispute resolution methods like mediation have benefits for everyone involved. While most research focuses on the immediate benefits of resolving the conflict, it appears that the process also has longer-term impacts, including:
The informal and confidential nature of mediation can greatly reduce the stress and anxiety associated with public court proceedings. The process is typically quicker and less formal, which helps in reducing the duration and intensity of stress. Moreover, the avoidance of a public trial protects individuals from the potential stress of exposure or public scrutiny.
One of the key aspects of mediation that contributes to better mental health outcomes is the sense of empowerment and control it gives to the disputing parties. Unlike in a courtroom, where a judge or jury makes the final decision, mediation allows the parties to have a say in the outcome. This active involvement and the ability to influence the resolution process can significantly enhance mental well-being.
Participating in mediation can enhance communication and conflict-resolution skills. As individuals engage in the process, they learn to listen, understand different perspectives, and work collaboratively towards a solution. These skills are invaluable and can lead to fewer conflicts in the future, thereby reducing potential stress and anxiety issues over the long term.
Mediation is particularly beneficial in disputes where the parties have ongoing relationships, such as in family or workplace conflicts. The process promotes communication and understanding, helping to preserve relationships that more adversarial methods might otherwise damage. Maintaining these relationships is crucial for mental well-being, as it fosters a supportive and understanding environment.
Mediation is a private process that can alleviate the anxiety and stress associated with public court proceedings. Nothing said during the process may be made public unless both parties agree. Furthermore, should negotiations fail, the information revealed during the process cannot be used as evidence in any resulting litigation. This confidentiality can make parties more comfortable in discussing sensitive issues and being more candid. As a result, the process is often less stressful and more likely to lead to positive resolutions.
Mediation can often lead to a quicker resolution of disputes compared to litigation. This speed is in part because there is no need to schedule hearings within California’s overcrowded civil court system, so meetings can be scheduled when it’s convenient for the disputants. Additionally, the less formal atmosphere makes it easier to hash out specific disagreements with fewer meetings. The shorter dispute resolution process can limit the duration of stress and uncertainty, leading to better mental health outcomes.
Mediation allows for more creative and personalized solutions that can address the specific needs and interests of all parties. This tailored approach can lead to more satisfactory outcomes, enhancing mental and emotional well-being.
The collaborative nature of mediation helps reduce feelings of hostility and promotes understanding between parties. This can lead to improved mental well-being, as ongoing hostility and anger are associated with negative psychological outcomes.
Mediation is often more cost-effective than going to court. This financial aspect is an important consideration, as the economic strain of litigation can be a significant source of stress and anxiety. Parties can save money, which in turn can alleviate financial stress and contribute to better mental health.
Mediation often leads to resolutions that are satisfactory to all parties involved. Successfully resolving a dispute with a mediator can provide a sense of accomplishment and closure. This emotional closure is crucial for emotional well-being. It allows individuals to move on from the conflict, reducing lingering feelings of resentment or anger, which are detrimental to mental health. Furthermore, the sense of satisfaction can be empowering for individuals, contributing to emotional healing and improved mental health.
Mediation offers a less adversarial, more collaborative, and potentially faster way to resolve disputes. This approach can significantly benefit the mental health of everyone involved by reducing stress, preserving relationships, enhancing communication skills, and providing a sense of control and closure.
Its benefits extend beyond the immediate resolution of conflict, positively impacting the mental health of those involved. By fostering a collaborative environment, reducing stress and anxiety, preserving relationships, and enhancing communication skills, mediation stands out as a beneficial choice for anyone seeking a healthier and more constructive way to handle disputes.
As we continue to navigate a world rife with conflicts, embracing mediation could be a significant step towards a mentally healthier society. At the Law Offices of Denise Eaton May, P.C., our skilled mediators are available to help you make mediation a key part of your dispute resolution toolkit. Whether you’re facing family conflicts during estate planning, internal disputes within your business, or external conflict with another organization, our mediators can help you find a collaborative solution. Schedule your consultation to learn how we can assist you with resolving conflict in a healthier way.
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]]>The post Freelancers and Independent Contractors: You Need an Estate Plan appeared first on Mediation Attorney Hayward CA | Law Offices of Denise Eaton May.
]]>One critical area that demands your attention is estate planning. If you want to make sure your family, business, and assets are protected if you are incapacitated, a strong estate plan is essential. Here’s what you should know about the importance of estate planning if you’re a contracted worker and the challenges that you might face during the process.
Estate planning is not just for the wealthy; it’s a vital process for anyone who wants to manage their assets and ensure their loved ones are taken care of after their passing. For freelancers whose income and work can fluctuate, a solid plan provides a sense of security and clarity for the future. Some of the biggest benefits of freelancer estate planning include:
In short, estate planning for freelancers is not just about managing assets after death; it’s also about making strategic decisions that affect your business, family, and personal healthcare preferences, tailored to the unique challenges and dynamics of freelance life.
Despite its value, developing an estate plan can be particularly challenging for freelancers, largely because of the nature of their work and financial situations. Some of the biggest complications involved can include:
Updating the Estate Plan: The dynamic nature of freelance work means that freelancers’ financial and personal situations can change rapidly. Regular updates to their estate plan are essential to reflect these changes, yet staying on top of these updates can be challenging.
These challenges make developing a comprehensive plan harder but not impossible. The solution is to work with an experienced estate planning attorney.
As an independent contractor, you are probably used to explaining to your clients the value of working with an experienced professional. You may already have a team of your own, such as an accountant or commercial attorney. Your estate plan is not the time to try to handle things without help. Instead, reach out to the skilled Bay Area attorneys at the Law Offices of Denise Eaton May, P.C. We have over 30 years of experience in the field and can help you build an estate plan that fits your life and your business. Let us help you ensure that your legacy is preserved and your wishes are honored by scheduling your consultation today.
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]]>The post Gift Tax in California: What You Need to Know appeared first on Mediation Attorney Hayward CA | Law Offices of Denise Eaton May.
]]>In particular, understanding the relationship between gift taxes and estate planning can help you effectively manage your estate’s size, minimize taxes, and ensure that your wealth is distributed according to your wishes. Here’s how gift taxes affect estate planning.
The federal government levies a gift tax on transfers of money or property made from one person to another without adequate compensation in return. The IRS allows individuals to give away a certain amount of money or property to another person each year without having to pay gift tax or even report the gift. For 2024, this annual exclusion amount is $18,000 per recipient. This means you can give up to $18,000 to as many people as you like in a single year without incurring a gift tax.
In addition to the annual exclusion, there’s a lifetime exemption amount that applies to the total of all taxable gifts (those exceeding the annual exclusion) made during your lifetime and the value of your estate at death. The lifetime exemption amount was significantly increased by the Tax Cuts and Jobs Act of 2017 to $11.18 million in 2018 and has been adjusted for inflation since, reaching $13.61 million in 20234 This means that an individual can transfer up to this amount either as gifts during their lifetime or as part of their estate at death, without incurring federal gift or estate taxes.
It’s important to note that the Tax Cuts and Jobs Act increase of the lifetime exemption is set to revert to pre-2018 levels (adjusted for inflation) after 2025, barring further legislative action. This means that the exemption will fall to approximately $7 million. If you have already exceeded that amount, any future gifts above the annual limit will be taxed at a rate between 18% and 40%. This is the case for any amount you want to pass on to your heirs through your estate, as well.
In addition, for gifts or bequests to individuals two or more generations below the donor (e.g., grandchildren), the GST tax may apply in addition to other taxes. Proper planning can help manage GST tax implications, often through the use of trusts.
Minimizing the tax burden for beneficiaries in estate planning involves a combination of legal strategies, financial planning, and timely gifting. Here are several approaches that you can consider to ensure your estate is passed on to your beneficiaries with minimal tax implications:
You can gift up to the annual exclusion amount to as many people as you like each year. This reduces your assets without incurring gift tax or using your lifetime exemption. Similarly, you can pay for loved ones’ education or medical expenses. Payments made directly to a medical institution for someone’s medical care or to an educational institution for tuition (not including books, supplies, or living expenses) do not count towards the annual gift exclusion or the lifetime gift exemption. This practice allows for strategic gifting without impacting your ability to make other tax-free gifts.
While not directly reducing taxes, a revocable trust can help avoid probate, potentially saving time and money and keeping estate matters private. Meanwhile, assets transferred into an irrevocable trust are removed from your estate, potentially reducing taxes. Types of irrevocable trusts include life insurance trusts, bypass trusts, and charitable trusts.
Leaving part of your assets to charity can reduce the size of your estate and, consequently, any tax liability. Charitable remainder trusts (CRTs) and charitable lead trusts (CLTs) can provide tax benefits while supporting philanthropic causes.
Family limited partnerships (FLPs) or family limited liability companies (LLCs) can be used to manage and control family assets while providing tax advantages through valuation discounts for lack of marketability and minority ownership.
Proceeds from life insurance are typically not taxable to beneficiaries. Owning the policy in an irrevocable life insurance trust can remove it from your estate, avoiding taxes on the proceeds.
For business owners, transferring business interests to heirs over time, especially using valuation discounts, can reduce estate taxes while ensuring the continuity of the business.
Techniques like selling assets to a grantor trust in exchange for a promissory note can freeze the value of your estate, allowing future appreciation to occur outside of your estate and reduce taxes.
While California residents do not face state gift taxes, federal rules, and other tax considerations make understanding gift and estate planning vital. Effective use of annual exclusions, lifetime exemptions, and strategic planning with trusts can help minimize the overall tax impact of transferring assets. Always consider professional advice to navigate these complex areas effectively and ensure that your assets are transferred in the most tax-efficient manner possible.At the Law Offices of Denise Eaton May, P.C., we can help you craft an estate plan that accounts for all of these concerns and more. Our skilled attorneys have decades of experience working within California and federal laws to create plans that suit individual clients’ needs and preferences. We encourage you to schedule your consultation today to learn more about how we can help you minimize the impact of gift taxes on your estate and beneficiaries.
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]]>The post Is It Time to Mediate? Navigating Potential Probate Disputes appeared first on Mediation Attorney Hayward CA | Law Offices of Denise Eaton May.
]]>Mediation offers a way to resolve probate disputes without breaking relationships, but knowing when to initiate this process is crucial. Here’s what you need to know about the causes of probate disputes and the signs that indicate it’s time to mediate a potential probate dispute.
A probate dispute in California is a disagreement or conflict that arises during the process of administering a deceased person’s estate under the supervision of a probate court in California. When these conflicts occur, it can complicate the administration of the estate and strain family relationships.
Here are some common types of probate disputes that may arise in California:
Resolving these disputes often involves legal proceedings in probate court. Still, parties are encouraged to use mediation or negotiation to settle outside of court, which can be faster, less expensive, and less contentious. Recognizing the early signs of such disputes can prevent them from escalating, which is better for your entire family.
Mediation can be a particularly effective tool for resolving probate disputes while preserving family relationships because it is designed to help people collaborate instead of compete. Here are key ways mediation helps in this regard:
By providing a more empathetic, cooperative, and private setting, probate mediation can help you and your family members resolve disputes in a way that not only addresses the legal and financial issues at hand but also preserves and potentially strengthens your relationships.
Recognizing the right time to initiate mediation in a potential probate dispute is crucial for resolving issues efficiently and amicably. It can help you maintain better relationships with family members and friends who are involved in the dispute while finding fair solutions to your probate disagreements. Here are six key signs indicating that it might be time to consider mediation for a probate dispute:
In general, engaging in mediation at an early stage of a dispute is best because it can prevent further escalation and reduce the emotional and financial toll on all parties involved.
However, mediation is most effective when all parties are open to negotiation and willing to find a mutually acceptable solution. If one party isn’t ready to negotiate, mediation may not be the right fit. But if everyone is open to working together and the issues above are causing difficulties in probating your loved one’s estate, it might be an opportune time to propose mediation.
Deciding to mediate a probate dispute is a significant step towards finding a peaceful resolution. By recognizing the signs that it’s time to mediate, preparing adequately, and focusing on constructive communication, you can navigate these challenging situations while maintaining your rights. The next step is to talk to an experienced probate mediator about your concerns. At the Law Offices of Denise Eaton May, P.C., our skilled mediators are available to help you. We encourage you to get in touch today to learn how our Bay Area mediators can help you resolve probate disputes without harming your family relationships.
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]]>The post Using Trusts for Charitable Giving in Your Estate appeared first on Mediation Attorney Hayward CA | Law Offices of Denise Eaton May.
]]>Before delving into the benefits of using trusts for charitable giving, it’s important to understand the basics of charitable giving in an estate plan. Charity through an estate plan typically takes one of two forms:
Trusts can be an attractive option for charity within your estate plan for several reasons:
In combination, these features make trusts an excellent way to leave a lasting legacy for your favorite causes in your estate plan.
To effectively incorporate charity into your estate plan, consider the following types of trusts:
A skilled attorney can help you decide the best option to achieve your goals.
Using trusts for charitable giving in your estate plan can be a powerful and versatile strategy to leave a lasting legacy while maintaining control over your assets. By leveraging various trust vehicles, you can tailor your philanthropic efforts to align with your values, secure tax advantages, and provide for your loved ones.
Whether you choose to use a trust or a direct bequest, consulting with an experienced estate planning attorney is crucial to ensure your philanthropic goals are achieved efficiently and effectively. With the right trust structure, your gift can continue to make a positive impact for generations to come. Get in touch with the experienced estate planning attorneys at the Law Offices of Denise Eaton May, P.C., to learn how we can help you develop a philanthropic plan for your estate plan.
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]]>The post 5 Active Listening Skills for More Successful Negotiations appeared first on Mediation Attorney Hayward CA | Law Offices of Denise Eaton May.
]]>However, listening actively is a skill that needs to be practiced like any other. It can be particularly difficult to manage when you’re in the midst of a conflict and the urge to advocate and argue your point is strong. Negotiating on your own can make it hard to actually hear what the other party has to say.
That’s why listening skills and mediation are so closely tied. A skilled mediator can help you communicate more effectively, listen more attentively, and achieve better outcomes from your negotiations. Let’s delve into what actively listening actually entails and five skills you can practice to make dispute resolution easier.
Active listening is a communication technique used to fully engage with and understand a speaker and thoroughly understand the speaker’s message, both in content and emotion. It’s not just about hearing the words spoken, but also interpreting the complete message being conveyed, both verbally and non-verbally. This communication technique is designed to ensure that the speaker feels heard, understood, and validated.
The overarching goal of active listening is to enhance the quality of communication, ensuring that all parties involved in a conversation feel valued and understood. This not only strengthens relationships but also promotes a more empathetic and collaborative environment, whether at home, in the workplace, or during mediation and alternative dispute resolution.
Active listening is a crucial skill in negotiation, helping to build rapport, understanding, and trust. Here are five skills you can practice that may significantly enhance negotiation outcomes:
This involves being fully present in the conversation, avoiding distractions, and not thinking about your response while the other person is speaking. It means focusing on the speaker both verbally and non-verbally (through eye contact, body language, etc.), indicating that you are fully engaged and interested in what they have to say.
After listening, reflect or paraphrase what has been said. This shows the speaker that you are trying to understand their perspective. It involves summarizing the main points of what the speaker said in your own words, which can also help clarify any misunderstandings.
Open-ended questions encourage the speaker to elaborate on their thoughts and feelings. These questions cannot be answered with a simple “yes” or “no” but require more detailed responses. This approach can uncover deeper insights into the speaker’s perspective and can lead to a more thorough understanding of their position.
Empathy involves understanding and sharing the feelings of another. In negotiation, this means trying to understand the situation from the other person’s point of view, including their emotions and motivations. Expressing empathy can build a stronger connection and trust, making it easier to find mutually beneficial solutions.
At different stages of the conversation, it’s important to summarize the points discussed and validate the feelings or viewpoints expressed by the other party. This practice does not mean you have to agree with them, but it shows that you acknowledge and respect their perspective. It can create a more cooperative and collaborative environment for negotiation.
These skills not only help in understanding the other party’s position better but also contribute to creating a positive and constructive atmosphere for negotiation. By demonstrating that you value the other person’s input, you are more likely to reach a mutually satisfactory agreement.
Listening actively is beneficial in any interaction, but it can be particularly valuable during negotiations and mediation.
In short, active listening makes mediation more successful by promoting better communication, avoiding misunderstandings, and encouraging a collaborative approach to dispute resolution.
Active listening is a cornerstone of successful mediation. It enables mediators to facilitate a more productive and positive dialogue between disputing parties, paving the way for understanding, compromise, and resolution.If you’re considering mediation as a solution to your dispute, the experienced mediators at the Law Offices of Denise Eaton May, P.C., are available to assist you. Schedule your consultation to learn how we can support you through alternative dispute resolution.
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]]>The post What Disputes Benefit from Mediation? appeared first on Mediation Attorney Hayward CA | Law Offices of Denise Eaton May.
]]>Mediation, a negotiation process facilitated by an experienced mediator, is a powerful tool for resolving disputes, especially in the workplace. In this article, we will explore the benefits of mediation and help you determine when it’s suitable for your specific situation. We will also discuss examples of disputes well-suited to mediation and cases where litigation may be the better course of action.
Before delving into the types of disputes that benefit from mediation, let’s first understand why it is valuable. Mediation offers the following advantages, making it an attractive choice for resolving conflicts:
While these benefits are valuable, some disputes may not be well-suited to collaborative resolution. In those circumstances, attempting negotiations may lead to higher costs and longer delays than simply proceeding with litigation immediately.
Mediation is a valuable option for many types of disputes. However, you should consider whether it’s the right choice for your situation before diving in. Here are some key factors that may mean your conflict is suited to mediation:
While these are not the only factors that come into play, a complex, time-sensitive dispute involving important relationships and confidentiality concerns is a strong candidate for mediation.
Now that we’ve explored the factors that make conflict suitable for negotiation, let’s delve into specific examples of disputes where mediation is highly effective:
Workplace conflicts, such as employee disputes, discrimination claims, or disagreements over work conditions, can be effectively addressed through private negotiation. It allows parties to find common ground, rebuild trust, and work together productively.
Mediation is an excellent option for resolving contract disputes, where parties may interpret the agreement terms differently. Guided negotiation can help both parties reach a mutual understanding and compromise.
When partners in a business venture have disagreements or disputes, mediating can help them navigate the complexities of their relationships and find solutions that work for all parties involved.
Mediation can be particularly useful when disputes arise over intellectual property rights, as it allows the involved parties to explore potential licensing or partnership agreements that benefit both sides.
Franchisees and franchisors or licensors and licensees can benefit from mediation to resolve disputes over terms, royalties, or other contractual matters without straining their ongoing business relationships.
While mediation is a powerful tool for many disputes, there are situations where litigation may be the more appropriate course of action:
In the complex business world, disputes can be inevitable, but how you resolve them can significantly impact your operations and relationships. Mediation, led by an experienced mediator, is an excellent option for many employment and business-related conflicts. Its confidentiality, cost-effectiveness, flexibility, and focus on preserving relationships make it a compelling choice for resolving disputes.
However, the suitability of mediator assistance depends on the nature of the conflict, the willingness of the parties involved, and other factors. In cases where legal precedent, unwilling parties, urgent injunctions, or the clarification of legal rights are paramount, litigation may be the more appropriate course of action.At the Law Offices of Denise Eaton May, P.C., we can help you make litigation a key part of your dispute resolution strategy. Our skilled mediators can help business owners and managers navigate challenges while preserving their businesses’ integrity and fostering positive working relationships by making informed decisions about dispute resolution methods. Schedule your consultation to learn more about how we can help you.
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]]>The post Is It Time to Decant Your Incomplete Nongrantor Trust in California? appeared first on Mediation Attorney Hayward CA | Law Offices of Denise Eaton May.
]]>This change primarily impacts high-net-worth parties who have already established significant estate plans. If you have an ING in place, it may be time to decant it into another type of trust. Let’s break down what constitutes an ING, how California’s new law affects these trusts, and your options if you decide it’s time to change your estate plan.
Trusts typically fall into one of two categories: grantor and nongrantor trusts. A grantor trust (sometimes called a revocable trust) permits the grantor, or the person who creates it, to retain some control over the entity’s rules and assets. In exchange for that control, the grantor remains responsible for paying income taxes on any revenue generated by those assets, even if the revenue stays in the trust.
In contrast, a person who establishes a nongrantor trust (sometimes known as an irrevocable trust) gives up control over the terms and assets of the entity once it is formed. The assets are entirely removed from the grantor’s estate. As a result, the entity is responsible for paying any income taxes, not the grantor.
An incomplete nongrantor (ING) trust is intended to skirt the line between these two categories. It uses a combination of careful legal wording and strategic establishment to combine the benefits of grantor and nongrantor trusts. To be considered an ING, the entity must be:
The extra tax protection makes INGs particularly popular in states with high income tax rates, such as California. However, they are no longer as useful as they were due to recent legislation.
In July, Governor Newsom signed Senate Bill (SB) 131 into law, closing the loophole that permitted INGs to function for California residents. The law added section 17082 to the state tax code, which says, “For taxable years beginning on or after January 1, 2023, the income of an incomplete gift nongrantor trust shall be included in a qualified taxpayer’s gross income to the extent the income of the trust would be taken into account in computing the qualified taxpayer’s taxable income if the trust in its entirety were treated as a grantor trust.”
In other words, the new tax code explicitly requires grantors to pay income taxes on assets placed in any trust that does not meet the definition of a grantor trust if the assets transferred are treated as an incomplete gift, according to the IRS. While the entity may still protect the included assets from gift taxes, it will not shield them from state income tax.
Furthermore, the new law is explicitly retroactive. While it went into effect in July, it applies to any income earned by an ING dating back to the start of 2023. Any California resident with an ING in place should prioritize the adjustment of their estate plan if tax reduction is a primary goal of the entity.
If your ING can no longer serve its intended purpose due to SB 131, it may be time to decant it. In 2018, California adopted the Uniform Trust Decanting Act to permit trustees to change the terms of both revocable and irrevocable entities by transferring the assets to a new trust.
This permits grantors of INGs to alter their terms when normally it would not be possible due to their irrevocable nature. Under the law, you may work with an experienced estate planning attorney to determine the best structure for the entity into which the ING will be decanted. Depending on your goals, this may include alternatives such as:
Your attorney will help you choose the best ING alternative to accomplish your goals and guide you through the legal process of decanting your existing ING.If you have an ING and live in California, it’s likely that it no longer supports your goal of minimizing your income tax burden. Decanting the assets can help you reclaim control over your finances and ensure your estate plan meets your needs. At the Law Offices of Denise Eaton May, P.C., we can help you update your plan under new state laws. Schedule your consultation to start the process of decanting your ING today.
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]]>The post Your Rights During Mediation in California appeared first on Mediation Attorney Hayward CA | Law Offices of Denise Eaton May.
]]>This could not be further from the truth. Mediation is not only more flexible and effective than other forms of dispute resolution, but it also offers you rights that aren’t found elsewhere. Below, we explain how California intends mediation to be used and the principles that protect your rights during the process.
Mediation has been a valued alternative dispute resolution (ADR) method in California for decades. State public policy favors methods that allow parties to work together to resolve disputes without requiring court intervention. That is precisely what mediated negotiations accomplish.
During mediation, two or more parties meet under the guidance of a neutral third-party mediator to resolve disputes. The goal of these meetings is for the disputants to collaborate on finding solutions rather than presenting arguments and having a judge or adjudicator decide matters on their behalf. The mediator helps the parties achieve this by promoting clear communication, encouraging collaborative approaches over adversarial ones, and providing an unbiased outside viewpoint as a touchstone for negotiators.
However, the best mediator in the world cannot help parties resolve disputes unless the parties’ rights are respected. These rights are less widely known than others, but they are crucial to successfully resolving disputes.
So, what are your rights while you participate in mediation? California laws and regulations require mediators to consider the following as fundamental principles of equitable dispute resolution:
The California Rules of Court specifically name “voluntary participation” as a critical element of the proocess. You do not have to agree to mediate a dispute unless you genuinely want to do so.
While certain areas of law may require parties to attend mandatory court mediation programs, this does not violate the principle of voluntary participation. You may be ordered to attend meetings, but you do not need to participate in the process. The Rules of Court specifically state that mediators must “Respect the right of each participant to decide the extent of his or her participation in the mediation, including the right to withdraw from the mediation at any time.” This is true even in court-ordered programs.
The same rule names “self-determination” as a fundamental principle in successful dispute resolution. Self-determination means that you have the right to participate in the process and decide for yourself whether to make a decision or continue the negotiation process.
Your mediator should inform you of this right when the proceedings start. They should also make it clear that “any resolution of the dispute in mediation requires a voluntary agreement of the parties.” In other words, you do not have to agree to any specific solution if it does not satisfy you. Furthermore, no one may force or coerce you into agreeing to a solution or continuing to participate.
Under the California Evidence Code section 1119, all materials used, admissions made, and other statements produced during mediated negotiations are fully confidential. Additionally, these materials cannot be used during a court case if either party withdraws from negotiations.
The goal of keeping these materials confidential is to encourage open negotiations. Since everyone involved knows that they are off the record, it’s easier to have candid conversations about needs, preferences, and expectations. However, this does mean that withdrawing from the process requires you to rebuild evidence for your claim in any subsequent litigation from the ground up.
Mediators and attorneys must obtain their clients’ informed consent before beginning mediation. Under Evidence Code section 1129, attorneys must clearly inform their clients of the confidentiality restrictions involved in the process. Similarly, the Rules of Court require mediators to notify all participants that all agreements reached during the proceedings must be voluntary.
Informed consent requirements ensure that everyone involved understands their rights and options. If you were not informed of these rights before beginning, you did not have all the information to fully and freely participate in the process.
The principles of self-determination, voluntary participation, confidentiality, and informed consent are intended to place all parties on equal footing during negotiations. They also permit participants to walk away from the process at any time and pursue litigation instead.
This ability is invaluable because it guarantees that the parties feel free to negotiate in good faith. If any participant acts in bad faith, the other can walk away and take the matter to court. However, abandoning negotiations should not be taken lightly.
The confidentiality restrictions can make subsequent court cases particularly frustrating. You must be prepared to ignore the statements and documents provided during mediation since they are not admissible. You will also need to find new legal counsel, as attorneys representing you during mediation may not continue to represent you after you withdraw. It may still be worthwhile to withdraw should the other party refuse to negotiate, but it should be considered a last resort.
When you understand the principles of fair mediation, it becomes clear that this ADR method is one of the most effective tools for resolving disputes in California. While it is not the best solution in every scenario, it is an effective and powerful option when parties are willing to collaborate. If you have questions about what to expect during mediation, or if you want assistance mediating a commercial or estate dispute, contact the Law Offices of Denise Eaton May, P.C. We have decades of experience in business law and estate administration in California, and we can help you resolve your disputes while respecting your rights.
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