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Goralka Law Firm, PC • Serving the Sacramento, California Area


Topics: Estate Planning | Asset Protection | Tax | Prenuptial Agreements | Probate | IRA Planning | Business/Corporate

Estate Planning

Jeff Galvin Discusses Avoiding Estate Plan Disputes with John Goralka


Jeff Galvin, a highly rated trust litigation attorney, discusses how to avoid family disputes during trust administration with John in this interview. Mr. Galvin is a partner at Downey Brand, LLP and represents clients in trust and estate litigation throughout Northern California. He advises trustees and executors who find themselves in conflict with beneficiaries, and he helps beneficiaries assert their rights in trust and probate estates.
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How a Trump Presidency Could Affect Your Estate Plan

After the November election, the estate planning world was faced with more than just a new president. Possible changes in 2017 could affect estate tax, individual income tax, taxation of capital gains, business taxation, continued viability of the stretch IRA and even elder law. The uncertainty of these potential changes has led many advisers to encourage their clients to wait before planning for their estate.

In his Kiplinger article "How Trump's Presidency Could Affect Your Estate Plan," John Goralka discusses the importance of drafting an estate plan that provides distribution and administrative alternatives addressing both how the plan should be given current tax laws and also if certain laws change once you die.

"Waiting to implement or update an estate plan may result in a death or incapacity without any estate plan, or with a plan that is inconsistent with your hopes, desires, dreams and goals for your family," said Goralka. "The commonnotion or belief is that your plan should be designed to work under the laws in effect when the plan is drafted. However, your estate plan is actually tested based on the laws in effect when you die."
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Trump and Changes to Taxation: Should You Wait to Plan Your Estate?

With a new administration, comes a great deal of uncertainty surrounding the future of the overall economy, along with the potential for change and even, the repeal of specific tax laws. Estate tax repeal is far more likely than ever before. Overall tax rates are expected to fall. Not surprisingly, the possible changes to estate tax, individual income tax, capital gains tax and business taxes have left many uncertain and, therefore, delaying planning their estate. A common misconception is that estate plans ultimately adhere to laws in effect at the time the plans are drafted.

In his Born2Invest.com article “What Trump’s Presidency Means for the Real Estate Industry,” John Goralka points out that estate plans are ultimately tested and governed by the laws in effect at the time of death.

People who are delaying planning in hopes that the estate tax will be repealed under the Trump administration need to know that prolonging planning unnecessarily exposes your estate to greater risk in the event of incapacity or death. Moreover, with the potential continuation or return of the estate tax again in just four years with a different administration, Mr. Goralka indicates that planning should now address appropriate alternatives if the estate tax is repealed and provide alternatives that work under the estate tax rules.
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Transfer Business Ownership or Remain Boss?

For family business owners, estate planning can be a challenge. Often, most if not all of their wealth is tied up in their companies, which creates a conflict between the desire to transfer ownership to the next generation and the desire to stay in control. One potential solution is to recapitalize the business into voting and nonvoting shares. It allows you to separate ownership succession from management succession.
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Estate Planning for an Aging Population

In the United States, we're all living longer – at least, I plan to do so if at all possible. Today, men live an average of 76 years, while women typically live for 82 years. For comparison, life expectancy in 1950 was just 65 years.
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Estate Planning Considerations in Divorce

A California dissolution of marriage cannot be final until at least six (6) months after the date of service of a copy of the summons and petition, or the date of respondent's appearance, whichever occurs first (Family Code Section 2339). A judgment of dissolution must first be entered specifying the date on which the dissolution will be final or stating that it will be final on a date to be determined on noticed motion or stipulation (Family Code Sections 2340 and 2343).
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Everything That You Wanted to Know About California's End of Life Option Act but Were Afraid to Ask

On October 5, 2015, Governor Brown signed California's End of Life Option Act (the "Act"). The Act can be found at Part 1.85 (commencing with Section 443) of the Health and Safety Code. While signed by the Governor, the Act actually does not go into effect until 91 days after the Legislature adjourns its special session on health care financing. The Legislature remains in session with no set date to adjourn.
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You Have An Estate Plan, But Will Your Kids Be Ready To Inherit?

A truly effective estate plan does not simply move money and assets from one generation to the next.
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A Special Trust for Special Needs

Bequeathing assets to a disabled loved one is a benevolent gesture, but in some cases, it can cause problems that were never intended.
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Will Employees Outlive Retirement Funds? Here's a Possible Solution

"Making predictions is hard, especially about the future." Those were the words of Yogi Berra, known to many as the best catcher in history. Berra also gained fame for his tendency to state the obvious. When it comes to retirement planning, without a crystal ball to tell how long an employee will live, there's no way to predict how long his or her money will have to last. One way for employees to hold some of their money in reserve for their later years is known as a Qualifying Longevity Annuity Contract (QLAC). This type of annuity isn't new, but last year the rules changed, making the QLAC more attractive to employer-sponsored retirement accounts and IRAs.
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Fixing Existing "B" or Bypass Trusts

Yesterday, I met with a Client whose parents had a trust prepared by another firm. Her dad died years ago and his trust included a formula clause that required funding a "B" or Bypass Trust on his death. My Client's mom just died and she is learning that the "B" Trust will result in additional capital gains income taxes of about $60,000 when the kids sell the stock held in the "B" Trust.
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Lessons To Be Learned From Robin Williams' Estate

Robin Williams was one of our most beloved actors. Williams utilized a trust based estate plan to avoid all of the costs and delays associated with probate court. A properly drafted and funded trust will avoid probate court unless there is a dispute. Robin's surviving spouse, Susan Schneider, is now embroiled in a dispute with Robin's children from a prior marriage.
Click here to learn more.

Lessons to Learn From Philip Seymour Hoffman!

Philip Seymour Hoffman was one of my favorite actors. He starred in Moneyball, Charlie Wilson's War, Hunger Games, Doubt, Ides of March, Pirate Radio and many more major productions. His roles covered a very wide range from the priest in Doubt, to a coach of the Oakland A's in Moneyball which evidence his unique ability as an actor.

Philip was a talented actor, but not a good estate planner. He recently died and was survived by a girlfriend and 3 young children ages 10, 7 and 5. He did not want "trust fund kids" so he used a will prepared by his CPA to leave his 35 million dollar estate to his girlfriend who is the mother of his 3 children.
Click here to learn more.

Planning for Parents

The majority of American's die today with no Will, Trust or estate plan whatsoever. An "estate plan" should include at least a Will and durable powers of attorney for both financial purposes and an Advance Health Care Directive. The Will should include your preferences for the Guardians of your minor children. A Trust may also be an important part of the estate plan.
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Providing for Troubled Heirs

Many are familiar with trust fund babies, those young adults who have never worked a day in their lives and have millions of dollars at their disposal. Paris Hilton and Nicole Ritchie are popular examples of what can happened when children are given everything they ever wanted or needed through the proceeds of trusts.
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Preventing Family Feuds

It's tough enough for some people to think about death and what will happen to their belongings afterward. It can get even dicier when parents consider how money, sentiment and unresolved tensions might come into play. Estate planning attorneys are the ones who try to sort it all out before a problem arises.
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Beware of the Marital Formula/Funding Trap!

The AB Trust format was perhaps the easiest and most common way to minimize estate tax for a married couple. An AB Trust allocates a portion of the estate to a "B" Trust to minimize estate tax. A "formula" approach operates like a light switch transferring a preset portion of the estate to the B Trust on the first spouse's death. Often, the formula provides for the deceased spouse's one-half of the community property and all of the deceased spouse's community property to be allocated to the B Trust. The problem is that the surviving spouse has limited access to the B Trust principal. The surviving spouse cannot change the terms of the B Trust. You should control your Trust and not let the Trust control you. To learn more, click below for the full article.
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Transferring Guns and Other Firearms

Gifting a firearm is not as easy as making a provision in your will or trust to distribute that firearm to your beneficiary. Failure to comply with California and federal laws can expose your Trustee or Executor to personal liability, civil penalties and even criminal offenses.
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Asset Protection


Captive Insurance - Lessons to be learned from the Avrahami Case

A Captive Insurance Company is a privately owned, legally formed insurance company created to insure the risks of one or more companies owned by the Captive's founder. The Captive's objective is to generate a profit by insuring specific risks not typically covered under existing insurance coverage. The founder may be able to substantially reduce property and casualty insurance costs, control premiums and provide an excess cash flow. A Captive Insurance Company can have significant tax effects. The increased popularity and use of Captives has caused greater IRS scrutiny regarding the use, misuse or abuse of Captive Insurance Companies.
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The Private Retirement Plan
A Unique Asset Protection Alternative for the Business Owner.

California is not usually viewed as a debtor-friendly state, especially compared to Nevada. In fact, California has some of the worst laws for asset protection in the United States. The California Homestead exemption is a meager $50,000 for an individual, $75,000 for a couple and $150,000 for the elderly and handicapped. Life insurance is exempt only to $9,700 and most annuities have no meaningful protection in California.
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Avoid California State Income Tax with the NING Trust

The unique benefits of the NING Trust can be significant. However, this should be considered as part of your overall estate and tax planning strategy. Please call our office to learn if the NING Trust would effectively minimize your California State income taxes.
Click here to learn more.

The $18 Billion Divorce!

A premarital agreement is an agreement between two people that addresses the financial consequences of a marriage. Most people view a premarital agreement as a must needed financial instrument particularly with a marriage later in life when one or both persons have accumulated significant assets or debt prior to the marriage.
Click here to learn more.

Considerations on Dissolution of Marriage

A California dissolution of marriage cannot be final until at least six (6) months after the date of service of a copy of the summons and petition, or the date of respondent's appearance, whichever occurs first.Until that six month period has passed, the spouses are still legally married and each party retains their rights as a surviving spouse
Click here to learn more.

Getting Married? Should You Consider a Prenuptial Agreement?

Congratulations on your engagement! Getting married creates a number of possible issues with respect to property rights, income entitlement and allocation creditor liability, and other issues. One of the best ways to bring certainty or clarity to these issues is to evidence both partners' wishes in a prenuptial or premarital agreement. A premarital agreement has a number of requirements under the California Family Code and the related case law. California developed strict requirements for the drafting and execution of a premarital agreement. This article provides an overview of the married couples who most need such an agreement and a discussion of the requirements for an enforceable premarital agreement that will hold up if tested in the Courts.
Click here to learn more.

Tax


IRS to Use Private Debt Collectors

Beginning in April, 2017 (this month) the Internal Revenue Services ("IRS") plans to begin utilizing private debt collection agencies to collect past due taxes. This is a dramatic change to the IRS’s long-term collection process.
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Estate Tax Repeal? Perhaps Not in California!

Both President Trump and the Republican party's separate tax proposals recommend the repeal of the federal estate tax. California State Senator Scott Wiener sponsored Senate Bill (SB)726 which would create a California estate tax in the event that the federal estate tax is repealed.
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Advantages of a Two-Year Sale Strategy

Capital gains taxes can be a huge drain on proceeds from asset sales. However, if time permits, two-year installment sales can be a great strategy for reducing tax bills. In an article published by Kiplinger, John Goralka discusses the advantages using a two-year installment sale when selling a substantially appreciated asset, property or business.
This strategy creates a taxation timing gap between when the asset sale proceeds and when it's taxed. Mr. Goralka addresses several advantages to this strategy, including gains being taxed at a reduced rate as a long-term capital gain; beneficiaries still receiving all cash proceeds in the year of the second sale; avoiding the net investment income tax; and achieving a far greater overall return.
"Without careful planning, capital gains can be substantial. This is just one alternative to minimizing capital gains on assets that are sold," explains Mr. Goralka.
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The Charitable Lead Annuity Trust (CLAT) - A Useful Tool for Tax Savings

A properly structured Charitable Lead Annuity Trust (CLAT) can be a useful tool for those seeking an income tax deduction before December 31st. A CLAT may provide a deduction of up to 100% of the value of assets or cash contributed. The CLAT also provides an opportunity to transfer assets to your children or other beneficiaries free of gift and estate tax at the end of the term specified in the CLAT.
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1031 Exchange Rules and Requirements

The primary 1031 exchange rules and requirements include: 1) same taxpayer: the taxpayer who sells is the taxpayer who buys, 2) property identification within 45 calendar days post-closing of the first property, 3) purchase of the replacement property within 180 calendar days, 4) trading up: the price of the replacement property is equal to or greater than the old or relinquished property, 5) hold time supports the intent to hold for investment, and 6) related party transaction regulations.
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News on Social Security Benefits: Read All About It

The Social Security Administration (SSA) recently announced some important news. Rumors about a benefits freeze had surfaced in the summer. Finally, on October 15, the SSA formally announced that the consumer price index it uses to gauge inflation wasn't high enough to trigger cost-of-living adjustments (COLAs) for the upcoming year. Although the announcement is generally good news for higher income individuals in the workforce, it's bad news for retirees and others who receive Social Security benefits.
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2015 Year-End Tax Planning Tips for Small Businesses

Virtually all small business owners are frustrated with our current tax system. In fact, five out of today's Top 10 small business concerns relate to state and federal tax issues, according to the Small Business Problems and Priorities survey released by the National Federation of Independent Business (NFIB), a small business advocacy group. Small businesses are most frustrated by the complexity of the tax code and the disparity between effective tax rates of small vs. large businesses. Tax reform will undoubtedly be a hot button during the 2016 presidential race.
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2015 Year-End Tax Planning Tips for Individuals

As 2015 winds down, it's a good idea to budget for your 2015 personal income tax bill, in the event that you'll owe the IRS money. Taxpayers who review their situations before year end have many more tax-reduction strategies at their disposal than those who wait until after the start of the tax filing season. Here's an overview of several ways to lower taxes that require you to act before December 31.
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Important Tax Figures for 2015

The following table provides some important federal tax information for 2015, as compared with 2014. Some of the dollar amounts changed due to inflation. Other amounts changed due to legislation.
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IRS and Social Security Announce Increased Benefits for 2015

With the 2015 tax year right around the corner, there is good news coming from the IRS. According to a recent announcement, the tax agency has increased several tax breaks due to inflation adjustments.
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Avoid California State Income Tax with the NING Trust

The unique benefits of the NING Trust can be significant. However, this should be considered as part of your overall estate and tax planning strategy. Please call our office to learn if the NING Trust would effectively minimize your California State income taxes.
Click here to learn more.

Estate Planning Opportunities May Be Lost in December

Proposed Regulations Just Issued: The United States Treasury (IRS) just issued Proposed Regulations that could have a dramatic impact on your estate planning by eliminating valuation discounts. For wealthy people looking to minimize their future estate tax, this is critical. Planning can also be essential for others as well.
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The Optimal Basis and Income Tax Efficiency Trust: Adapting “A/B” Trusts for Better Income Tax Advantages

Most taxpayers are no longer directly impacted by federal estate taxes, which now only affect those with taxable estates over $5.45 million ($10.90 million for couples). These numbers are even adjusted for inflation.  
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Prenuptial Agreements


From Prenuptials Agreements to Asset Protection: What High-Net-Worth Couples Should Consider Before Saying I Do

Prenuptial agreements protect much more than financial assets. They help to protect clients with children from a previous relationship, older couples, clients with significant assets prior to marriage and clients who are public figures. Prenuptial agreements also help clients who are seeking to keep such matters private, and clients seeking to protect their partner from his or her debts or liabilities.

In the article, "Celeb divorces show power of prenuptials," published in The Daily Journal, John Goralka compares the celebrity divorces of Johnny Depp and Amber Heard to Kelly Cuoco and Ryan Sweeting to illustrate the power of properly structured prenuptial agreements.

Last year Heard filed for divorce from Depp and sought spousal support; however they didn't have a prenuptial agreement. After several highly public and emotionally charged court proceedings, Heard is receiving a reported $7 million settlement, which she is donating to charity. On the other hand, Cuoco and Sweeting signed a binding prenuptial agreement, which governed how the assets and finances would be handled in the event of a divorce. The agreement gave Cuoco, whose estimated net worth is significantly larger than that of her ex-husband, full control and protection from claims for greater support or assets.

Agreements such as this help to avoid drawn out financial battles when marriages fall apart. "Clearly establishing the boundaries for divorce in a prenuptial agreement can prevent a great deal of financial and emotional pain for couples later on in the process," Goralka said.
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Considerations on Dissolution of Marriage

A California dissolution of marriage cannot be final until at least six (6) months after the date of service of a copy of the summons and petition, or the date of respondent's appearance, whichever occurs first.Until that six month period has passed, the spouses are still legally married and each party retains their rights as a surviving spouse
Click here to learn more.

Getting Married? Should You Consider a Prenuptial Agreement?

Congratulations on your engagement! Getting married creates a number of possible issues with respect to property rights, income entitlement and allocation creditor liability, and other issues. One of the best ways to bring certainty or clarity to these issues is to evidence both partners' wishes in a prenuptial or premarital agreement. A premarital agreement has a number of requirements under the California Family Code and the related case law. California developed strict requirements for the drafting and execution of a premarital agreement. This article provides an overview of the married couples who most need such an agreement and a discussion of the requirements for an enforceable premarital agreement that will hold up if tested in the Courts.
Click here to learn more.

The $18 Billion Divorce!

A premarital agreement is an agreement between two people that addresses the financial consequences of a marriage. Most people view a premarital agreement as a must needed financial instrument particularly with a marriage later in life when one or both persons have accumulated significant assets or debt prior to the marriage.
Click here to learn more.

Probate


Lessons To Be Learned From Robin Williams' Estate

Robin Williams was one of our most beloved actors. Williams utilized a trust based estate plan to avoid all of the costs and delays associated with probate court. A properly drafted and funded trust will avoid probate court unless there is a dispute. Robin's surviving spouse, Susan Schneider, is now embroiled in a dispute with Robin's children from a prior marriage.
Click here to learn more.

Contesting Wills & Trust

People spend their lives accumulating property, wealth and items of sentimental value, hoping to one day leave them behind to their family and loved ones. However, many estates struggle through years of probate or litigation because a valid estate plan was not in place. Without a properly executed estate plan, wills and trusts are vulnerable to challenges of their enforceability.
Click here to learn more.

Lessons to Learn From Philip Seymour Hoffman!

Philip Seymour Hoffman was one of my favorite actors. He starred in Moneyball, Charlie Wilson's War, Hunger Games, Doubt, Ides of March, Pirate Radio and many more major productions. His roles covered a very wide range from the priest in Doubt, to a coach of the Oakland A's in Moneyball which evidence his unique ability as an actor.

Philip was a talented actor, but not a good estate planner. He recently died and was survived by a girlfriend and 3 young children ages 10, 7 and 5. He did not want "trust fund kids" so he used a will prepared by his CPA to leave his 35 million dollar estate to his girlfriend who is the mother of his 3 children.
Click here to learn more.

IRA Planning


Supreme Court Decision on Inherited IRA Case

Last week, the U.S. Supreme Court unanimously determined in Clark v. Raemaker that an inherited IRA was not entitled to protection from creditors under the U.S. Bankruptcy Code. The stakes are high as IRAs and retirement accounts represent many of our clients' largest assets. These accounts often provide the greatest potential for growth and value increases due to the tax deferred nature of these accounts. Click below to learn how this recent Supreme Court decision may affect your estate plan.
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Closing the Loophole?

If the government is thinking of closing a planning opportunity, that typically means it is an effective strategy. In this case, the Obama Administration is proposing to close the so-called "Backdoor Roth IRA."
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Business/Corporate


Factoring Uncertainty into the Value of Your Business

How will the current political environment affect the value of your business? Through the end of 2016, the public markets responded positively to GOP plans to cut taxes and reduce government regulations, which would boost economic returns. But investors can't predict the future with absolute certainty. There's always some element of uncertainty when operating a business and experienced valuation professionals understand how to factor it into their analyses.

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Spotlight on Tax Fee Gains from the Sale of Qualified Small Business Stock

Whether you're thinking about starting your own business or investing in a start-up, there's an exciting tax break that could sweeten the deal: Gains from selling qualified small business stock (QSBS) that you acquire on or after September 28, 2010, are potentially eligible for a 0% federal income tax rate.
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Spotlight on Gains from Qualified Small Business Stock

Whether you're thinking about starting your own business or investing in a start-up, there's an exciting tax break that could sweeten the deal: Gains from selling qualified small business stock (QSBS) that you acquire on or after September 28, 2010, are potentially eligible for a 0% federal income tax rate.
Click here to learn more.

Planning for S Corporation Stock

Many small business owners establish S corporations because they provide the benefits of avoiding double taxation and protecting the owners against personal liability for the corporation. S corporation shareholders should be aware that establishing a family trust and funding the trust with the shares of the S corporation could cause the S Election to fail. S corporation shareholders need to use special care in drafting a trust that will hold shares in the S corporation.
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Issuing Shares for Services

Many corporations seek to transfer shares to key employees or family members without requiring the recipient to pay for the shares. One way to accomplish this goal is to transfer the shares as compensation for labor or services actually rendered by the family member or key employee. The benefit to the Corporation is that the value of the share transfer is a deductible expense, similar to salaries and wages, but the employee or contractor must report the value of the stock transferred as ordinary income.
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Mr. Goralka is an outstanding attorney who is very competent in various areas. We have received professional services from Mr. Goralka for many years. He is local to the Sacramento area where his roots lie, however, he doesn't stop there. Just recently, he prepared Living Trust Fund where he doesn't leave any rock unturned, and gives us real peace of mind. We are privileged to endorse Mr. Goralka in every way possible.

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Goralka Law Firm serves clients throughout Sacramento, Roseville, Folsom and Elk Grove, California and the Surrounding Areas. Services provided include legal consultation and the preparation of: Revocable Living Trusts, Wills, Powers of Attorney, Living Wills, Healthcare Power of Attorney, Life Insurance Trusts, Family Limited Partnerships, Limited Liability Companies, Corporations, Charitable Trusts, Medi-Cal Planning, and Other Estate Planning and Tax Planning Strategies

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