Estate Tax Uncertainty

Now that the election is behind us and we have a Democratic President, House & Senate we can begin to speculate how this political climate will affect the estate tax or death tax as it is commonly referred to.

During the campaign there was much talk about eliminating the “Bush Tax Cuts” and “Redistributing the Wealth”. This leads me to speculate that the new administration and congress may return the estate tax to it’s prior levels of a maximum tax rate of 55% with a credit of only $1,000,000. This step would promote the ideas put forth in the campaign and provide additional tax revenue for all of these projects Mr. Obama wants to promote.

For the rest of us hard working entrepreneurs, it could mean disaster without proper planning. Lets first look at what’s included in the “Estate”: all of your assets, including real estate, businesses, personal effects, cash and accounts, and one people often forget, life insurance. For many of us it is life insurance that will put us over the top on estate tax. Ironically, life insurance is one of the best and easiest tools to combat this potential shift in the death tax. Through the use of Irrevocable Life Insurance Trusts we can reduce or eliminate the estate tax burden on our families. Please go to www.dickersonlaw.com/inforequest.html for more information on life insurance trusts. Or contact me at 956-791-5422 or by email jmd@dickersonlaw.com

Add comment November 10th, 2008

Should You Be My Own Lawyer?

Lately I have been seeing and hearing about companies that will provide legal forms for wills, and business entities (like corporations and limited liability companies), but not legal advice. Hence the question, “Should you be your own lawyer?”

Legally any individual can represent themselves in court. In today’s impersonal fast paced world, people want to buy the thing to solve their problem. In this case a piece of paper that acknowledges that your business has paid the appropriate filing fee and the appropriate piece of paper with the State allowing you to transact business as a corporation of LLC. That is a small part of what I do for my client’s.

Yes I prepare that paperwork plus more paperwork that is needed for the type of entity that is recommended. This is where the Lawyering starts and the form filling stops. I get to know what my client’s business is about, what risks they face and what their tax position may be. Based on that information I make a recommendation on the type of entity they should form and why.

The same holds true with your will. You know who you want to get your things and the kids, but you may not know that there are alternative ways to transfer those assets that will protect your assets from liabilities your family may be subject to, including estate taxes. Additionally, when you deal with an attorney he/she can help you evaluate the best way to handle potentially problematic heirs.

In full disclosure, I have not actually seen any of the forms advertised so I am not commending on the quality of the forms or correctness of the form filling. Ultimately, it is a question of Value. Do you value professional advice, or do you just want a piece of paper?

Joseph Michael Dickerson
www.dickersonlaw.com
www.theroadmaptorich.com

Add comment August 20th, 2008

My Summer Vacation

I just got back from a week in Polebridge Montana, just 6 miles from the Canadian Border. A buddy and I went to visit a friend who has a cabin there. The people are very interesting and unique. It was great to see how people are on the Northern Border.

We made some friends, like Greg and his brother Dan from Home Ranch Bottoms, (where you can get a hot shower for $7 or just get a cold beer) our fishing guide Nate, who knows where the fish are biting, and my friend’s realtor Allan who woke us up one day (by accident) so we could get some work done before heading out on some sightseeing.

Hiking is great in Glacier National Park. Bowman Lake was our starting point and we almost got to the lookout, but we ran out of time. On the way back I took a tumble and hobbled for a few days after. Thanks to that our hiking was reduced quite a bit.

Fly fishing on the North Fork of the Flathead River is great. Being my first time fly fishing, I proved that you don’t need to know what you are doing to catch fish. We caught many fish that day. I am sure our guide Nate is the true reason for our luck.

We explored the nearby towns on the remaining days, including Columbia Falls, Kalispell, and Whitefish. Unfortunately from our cabin, drive times were about two hours each way and roads were mostly unpaved. We also helped my friend make some improvements to his cabin, connecting to a new generator and installing a water heater.

All in all it was a great time, and a great escape from the real world. I am looking forward to getting away again.

Add comment August 14th, 2008

Real Estate – Owner Finance Options

Sellers are seeing their properties on the market longer and their asking prices getting smaller. Meanwhile the Buyers are having a harder time qualifying for loans, since mortgage companies are tightening their lending practices. Some Buyers and Sellers are resorting to creative alternatives. Owner financing is one of those options.

Basically there are three types of owner financing:

Promissory Note & Deed of Trust: Buyer signs a note to Seller, and a deed of trust secures the note.

Lease with Purchase Option: Buyer rents the property and can Buy it during the lease term for an agreed price. Part of the rent may or may not apply to the purchase price.

Contract for Deed: Seller enters into a contract with Buyer to deliver the deed to the property once the Buyer has paid the property completely. This can have disastrous results if the letter of the law (which changed recently) is not followed.

For more information on owner financing look for the next DickersonLaw Newsletter coming to your inbox soon or access a copy here or read my book The Road Map to Rich, available at www.theroadmaptorich.com

Add comment July 31st, 2008

Texas Franchise (Margins) Tax

This is the first year that many of us have dealt with the new Texas Franchise Tax, a.k.a. the Margins Tax. The tax on its face sounds innocent enough, just 1%. The reality as many of you have come to know is that this 1% is of your gross revenue with very few deductions (employee costs or cost of goods sold). As a result, it is possible to have a loss in the business and still have to pay the franchise tax. It has happened in certain service industries like transportation and forwarding. Some industries received some breaks, including retain, physicians and lawyers. The original purpose of the change was to bring all business entities under the tax. (Limited Partnerships and others we excluded under the prior law.)

Unfortunately as with most things the pendulum has swung to far and will need to adjust (hopefully sooner than later). I have some ideas on fixing this problem but I would like your input and comments. I intend to put together a simple plan provide revenue for the government that is equitable, without becoming an burden unfair burden on businesses.

As for my thoughts I suggest that the tax focus on the net income for the business for federal tax purposes. By doing this we can simplify preparation of the tax returns for the included businesses and allow all industries to be treated on equal footing. This will remove any bias for one industry or another, because the net amount is what is being taxed. I would also recommend a flat tax rate that would start after the first $300,000 of net income for federal tax purposes.

These are just some of my preliminary thoughts, I welcome and encourage you to comment on this blog. Your feedback is important to me. I may include your ideas or thoughts in my letter to Governor Rick Perry and the Texas Legislature. (Your anonymity can be assured is you like.) You can email me at jmd@dickersonlaw.com.

Until Next Time.

1 comment July 30th, 2008

Business Pre Nup

I was in Austin meeting with clients yesterday. As we discussed setting up an new business entity we talked about the importance of a Buy-Sell Agreement between the owners. This agreement is like a business pre-nuptual agreement. It lays down the rules for what happens with the 4Ds, at the begining when everyone is happy and getting along. The 4Ds I am talking about are:

Death
Divorce
Disability
Disagreement

It is important to establish how these items will be handled if one of these 4Ds should occur.
Death and Disability can often be handled with insurance. Divorce and Disagreement require coming up with a way to buy out the partner is a way that would be acceptable to either party.

This is a very important document to put in place early on with any partnership.

Add comment July 29th, 2008

Welcome to DickersonLaw Blog!

This is the first DickersonLaw blog. My business involves helping clients build and preserve wealth through estate and business planning.
Throughout the month of July I am offering a promotion for my book The Road Map to Rich. For every book purchased on my website, I will donate a portion of the profits to the Boy Scouts of America, South Texas Council, Aztec District. You can purchase your copy at www.theroadmaptorich.com.
I look forward to continuing this blog and keeping you up to date on what is going on. Before that I encourage you to look at my latest newsletter at my website dickersonlaw.com. Until Next Time.

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1 comment July 18th, 2008


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