Last Minute Tax Planning

This is the time of year that many people start last-minute tax planning. This year, because the estate tax was repealed for 2010 and the gift tax was reduced to 35%, last minute planning is even more important, and may really be last minute. There is a lot of uncertainty about whether Congress will retroactively reinstate the estate tax for 2010 and retroactively increase the gift tax to the scheduled 55% that will be imposed on January 1, 2011. While we don't recommend that anyone die before December 31 just to take advantage of the lack of an estate tax in 2010, gift planning should be considered.

Everyone can give up to $13,000 tax free to any other person, and the number of people to whom you can give $13,000 is not limited. Beyond that, if you want to give more to a single person, you have a $1 million lifetime exemption that was formerly tied to the estate tax exemption. To the extent you use the lifetime exemption for gifts, it isn't available to reduce the estate tax. If you choose not to use the lifetime exemption, gifts in excess of $13,000 are taxed at 35%. However, if the gift tax bumps up to 55% as scheduled on January 1, and especially if the estate tax exemption is lowered to $1 million, also as scheduled, it might make sense to give gifts this year and pay the 35% tax as opposed to using any part of the lifetime exemption or paying the 55% tax rate next year.

The prudent thing seems to be to plan for some gifts, but not actually make them until late December when Congress has adjourned for the year and any retroactive legislation might be a little clearer. Then consult with your tax professional.

Estate Tax Status

We are fast approaching the end of 2010, and the end of the no-death-tax year. The estate tax went away on December 31, 2009, and hasn't been in effect since then. It is scheduled to return in 2011, with a higher rate and a lower exemption. Most observers don't believe that will happen, but Congressional gridlock might rule the day.

According to the Wall Street Journal, the most likely scenario is that Congress will enact a stop-gap measure that will reinstate the estate tax at 2009 levels. That means $3.5 million in exemption and a top rate of 45%, rather than the $1 million exemption and 55% rate now scheduled if Congress doesn't act. One thing that does seem certain is the estate tax will be back in 2011 in one form or another.

Debt Settlement Companies Prohibited from Collecting Advance Fees

Under amendments to the Telemarketing Sales Act that took effect October 27, 2010, debt settlement agencies that offer to renegotiate or settle consumer debts for a fee are now prohibited from collecting advance fees from consumers. Before such an agency can collect a fee, three things must happen:

The company has settled, reduced, renegotiated or otherwise changed at least one of the consumer's debts.
There is a written agreement between the consumer and the debt settlement agency.
The consumer has made at least one payment under the terms of the negotiated or changed agreement with her creditor.

This law applies to credit card or other unsecured debt, and is not applicable to companies that claim to renegotiate mortgage loans.

What is Elder Law?

Elder law is a special area of the law that deals with the needs of the elderly or disabled. It encompasses several areas of law, including estate planning (wills, trusts, etc.); so-called "end of life" issues such as living wills, durable powers of attorney and guardianships; estate and gift tax planning; Medicare and Medicaid; nursing home abuse; fraud against the elderly; long term care financing; retirement benefits; age discrimination; and disability planning and insurance, among others. Elder law attorneys are not specialists in all of these areas, but generally focus on two or three of the areas. Typically elder law attorneys approach a client from a holistic viewpoint, addressing legal, medical, social, financial and family needs at once.

Lindsay Lohan Settles E-Trade Lawsuit

Lindsay Lohan sued E-Trade, an online brokerage company, over a Super Bowl ad that featured talking babies. In the ad, one of the babies, a male, apologizes to a female baby for not calling her the night before. Suspicious, the female asks if he had been with that "milkaholic Lindsay."

Ms. Lohan claimed that she had attained "one name recognition" like Madonna or Oprah, and that the use of the name Lindsay in the E-Trade ad used her celebrity status for its own profit. E-Trade responded that Lindsay is a popular name and happened to be the name of one of the ad team's members. It moved to dismiss the lawsuit as meritless.

Under the terms of the settlement, which is confidential, Ms. Lohan dismissed her lawsuit with prejudice. The settlement of the $100 million action came the same day a judge issued a bench warrant for her arrest. Settlement leaves her free to focus on her other legal problems, including the current probation-violation claim for failing multiple drug tests.

Bankruptcies Reach 5-Year High

With data through the second quarter of 2010, bankruptcies have reached highs not seen since the fourth quarter of 2005, just before the dreaded BAPCPA, which was designed to halt a perceived flood of bankruptcies, became effective.

In the three month period ended June 30, there were over 422,000 filings in the United States, the highest since the October-December, 2005, period when 667,431 bankruptcies were filed. For the fiscal year ended June 30, 2010, consumer bankruptcies were up 20% while business bankruptcies rose 9% over 2008-2009 levels.

The obvious reasons are the prolonged financial crises, poor job market, rising mortgage foreclosures and ever-present medical emergencies, according to Deborah Thorne, an associate professor of sociology at Ohio State University. Until the economy improves, she expects bankruptcies to continue to rise.

For the year ended June 30, 2010, Utah ranks 12th in the nation, with 6.12 filings per 1,000 people. Nevada is first with 11.74 filings per 1,000 people.

Unbundled Legal Services

The term "unbundled legal services" or "limited scope representation" as it's sometimes called is one of the hot new buzzwords in the legal profession. Simply put, unbundled legal services means that a client hires an attorney for a specific task and pays only for those services. For example, rather than retain an attorney to prosecute a lawsuit all the way from start to finish, the attorney might be retained only to draft the complaint. Later on, the client might ask the attorney for help with a procedural matter, or for some legal research. In between, the litigation is solely under the direction and control of the client, not the lawyer.

With the costs of litigation so high these days that only where hundreds of thousands of dollars are at stake, unbundled legal services might make sense. In Utah, the rules of civil procedure specifically allow for limited scope representation, so if your attorney tells you he ethically can't only represent you in part of a case, look for another lawyer.