11001 O’Malley Centre Drive, Suite 201

Anchorage, Alaska 99515

Phone: (907) 522-2272

Fax: (907) 522-6893

E-mail: generations@foleyfoley.com

Generations

Page 4

Attorneys Susan Foley & Nikki Martin volunteer-ing at the 2nd Annual Elizabeth Peratrovich Legal Clinic as part of the Alaska Federation of Natives Convention on October 18, 2012.

Photo credit: Erin Hooley,

courtesy of the Alaska Bar

Association.

A Newsletter from Foley & Foley, A Professional Corp.

Winter 2012 Bridging Generations

Generations For our clients and our professional estate planning partners

As we wrote in the Autumn 2012 news-letter, we strive to keep things simple for our clients. Some complications can be avoided and some cannot. Just knowing that these conditions exist can help your estate planning go more smoothly. Ten things that tend to make estate planning more complicated are: 1. Greater Wealth. Larger estates tend to be more complicated because of es-tate and gift tax issues and the desire of clients to establish a plan that avoids or reduces taxes. 2. Greater Number and Types of Assets. Every asset adds complexity to planning and estate administration. A client who has one bank account that holds $5 mil-lion has a simpler situation than a client who has $5 million spread throughout

multiple accounts, real estate, business interests, airplanes, stocks, bonds, IRAs, and gold coins. 3. Real Estate in Multiple States or Countries. Planning for a second home in another state or country increases estate plan complexity. 4. Blended Families. When the family includes “my” children, “your” children, and “our” children, the nature of the plan can become more complicated to assure that everyone receives the "right inheritance." 5. Unmarried Couples. State and federal laws provide certain protections to mar-ried couples. These laws can be planned around when unmarried couples do their planning together, but such plans tend to be a little more complicated. 6. Non-US Citizen. Federal tax law may complicate planning when a client is married to a non-US citizen. 7. IRAs and 401(k)s. Large IRAs and 401(k)s are special assets because they are taxed deferred and subject to special regulations that can restrict client flexi-bility. 8. Other Regulated Property. Certain types of property are highly regulated by

Ten Things That Can Complicate an Estate Plan

In This Issue: Ten Things That Complicate Planning… Limit on Tax Free Gifts Set to Increase… Estate Planning with Gold … and Bill’s Sheep Hunting Adventure…

Continued on Page 2

Annual Successor Trustee

Workshop

Don’t Miss It!

When: December 27, 2012

Where: Crowne Plaza Hotel

Aurora II Conference Room 109 W. Int’l Airport Road

Time: 1:00 p.m.

Who: For Generations clients, their

families, successor trustees, and beneficiaries.

Why: Celebrate the holidays.

Teach your family, friends, and loved ones about your

estate plan. Allow us to get to know your

family better.

RSVP at 522-2272

Page 2

Generations

state or federal law, which adds complexity to an estate plan. Highly regulated property includes restrict-ed stock in native corporations, na-tive land allotments, fishing permits, timeshares, and others. 9. Operating Businesses. Operating businesses should (but rarely do) have an effective succession plan in place in the event the owner passes away. This problem is magnified when the business is a professional practice requiring a special license. 10. Significant Philanthropic Plan-ning. Structuring a charitable gift in the right way to the right charities can increase complexity and require special effort and focus on the part of the client.

Some people believe that the best way to protect wealth from the gov-ernment is to bury gold in the gar-den and keep lots of cash in the mattress. A recent story reported by NBC News illustrates why this strate-gy might not be the best estate plan.

W hen Walter Samasko, Jr., passed away in May 2012 in

Carson City, Nevada, he was not dis-covered until at least a month later. At 69 years of age, Mr. Samasko died from heart problems without a will or any immediate family. The city clerk's office undertook wrapping up the estate and selling the house under the assumption that Mr. Samasko had died broke

T he IRS recently gave taxpayers certainty about one part of the

estate and gift tax law. In October, an increase in the annual exclusion for gifts was announced. That amount will increase from $13,000 to $14,000 per recipient in 2014. The annual exclusion is the total amount you can give away to one person in a calendar year without triggering a requirement to file a gift tax return. Annual exclusion gifts may result in a lower estate tax, as gifts made prior to death are not part of the taxable estate. Married couples can make gifts of twice the exclusion amount per year, per re-cipient.

A gift tax return will need to be filed for gifts above the annual exclusion amount, although these gifts may not be taxed. In 2012, tax won't be due until you've given $5.12 million (total) in gifts reported on gift tax returns. All bets are off, though, for 2013. Currently, the law for 2013 is that taxes will be due on all reporta-ble gifts above $1 million. If you want to gift more than the annual exclusion amount to any re-cipient in one calendar year, it's a good idea to contact Foley & Foley first. We can give you ideas about how to reduce or eliminate the gift tax on those large gifts.

Ten Complications Continued from Page 1

with only $200 in his bank account. But when cleanup crews arrived at the home, they discovered boxes of gold, including gold coins, gold bul-lion, $20 gold pieces, Austrian duc-

ats, South African Krugerrands, and English Sovereigns dated to the 1840's. The $7 million estimated value of the gold was based on the weight of the gold alone. The value could be much higher considering

the rarity of some of the coins dis-covered. The gold had to be re-moved in two wheelbarrow loads. After investigating potential heirs, the city clerk determined that the closest next of kin was a first cousin, Arelene Magdanz, a substitute teacher who lives in San Rafael, Cali-fornia, and who had not seen her cousin in over a year. When contact-ed by a lawyer regarding the estate and her newly found inheritance, Ms. Magdanz was shocked. Mr. Samasko was described as being "anti-government, paranoid, and a reclusive hoarder.” Evidently, Mr. Samasko believed that he could avoid taxes and government inter-

Limit on Tax Free Gifts Set to Increase

Estate Planning with Gold

Continued on Page 3 Page 3

Generations

O n a Friday morning late this August, Bill Pearson and his

hunting partner flew out from Wil-low in a Cessna 206 to a remote air-strip in the Alaska Range. After re-loading their gear into a Super Cub, they made their final landing on a small glacier. There, in the midst of a clear and crisp day, they made the 2000 foot descent to base camp. For the next week, Bill and his hunting partner hiked, scouted, and spike camped while enjoying long days of challenging terrain. Through-out most of the hunting trip they were blessed with good weather in a region that is known for fluctuating weather patterns.

At midweek, they spotted a band of rams on a far ridge. The two hunters decided to overnight on a glacier and wake up early the next morning to stalk the rams. After a successful stalk, they next faced the task of packing the animal back along the glacier they had tenderly negotiated just hours earlier, now weighted by their heavy packs. They made it back to camp by midnight. On Thursday, the inclement weather came down from the mountains. Luckily, it cleared for a Friday depar-ture. With their 100 pound packs, they raced back up the glacier they had descended a week earlier and were greeted by the welcome smile

of their pilot. Bill’s hunting partner was the first out, while Bill watched the Super Cub disappear and experi-enced true isolation until his pilot returned an hour later. The two hunters were then picked up by the air taxi and returned to civilization, where they were enjoying hamburg-ers by evening.

Bill’s Sheep Hunting Adventure

vention in his estate by holding eve-rything in gold. But things didn't work out that way. The Internal Rev-enue Service will collect at least $750,000 in estate taxes from Mr. Samasko's estate. We have a number of clients who hold a substantial amount of gold and cash in safety deposit boxes or in their homes. These clients often fail to tell their estate planning attorney and CPA about the gold or cash on the assumption that it will be passed to the next generation without anyone discovering it. But this is a risky plan for two reasons.

First, the next of kin have a legal ob-ligation to report the transfer of wealth to the IRS if the entire estate is over the estate tax threshold amount ($5.12 million in 2012 and, if the current law expires, $1 million in

2013). Failure to report the transfer of wealth is considered tax evasion, a serious federal criminal offense.

There are

legitimate ways

to avoid estate

taxes with these

assets.

Second, next of kin who are willing to be dishonest with the IRS are like-ly to be dishonest with other family members, too. In such cases, the first family member to find the gold and cash simply carts it away and doesn't report it to other family members who were intended to share the inheritance. Gold has recently been a very good investment. But when raw gold is held in an estate, the transfer of the gold should be properly handled. There are legitimate ways to avoid estate taxes with these assets; hoarding and hiding is not the best plan. Call us to discuss the best way to pass your gold on to your loved ones.

Estate Planning with Gold Continued from Page 2