Estate Planning Video

Leslie Yarnes Sugai and Sheri Sudweeks were recently interviewed for a local real estate television program, Kapowich on Real Estate. In this episode, which is the first of a two part series, they discuss estate and incapacity planning issues.
Topics covered include:
The documents that constitute an estate plan. Trusts, Wills, Advance Health Care Directives, and Powers of Attorneys. How estate planning affects the title to real estate.
Special Needs planning for persons with disabilities to enhance the lives and health of those who are dependent on public benefits.
The facts and myths behind Medi-Cal and Long Term Care Planning. Understanding what is meant by the home being an exempt asset, how the home is valued and recovery issues.
The difference between amending a trust and modifying a trust. In California the law allows for the modification of trusts by the Court, even those that are irrevocable under certain circumstances.

To view the program, click here.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

Should It Stay or Should It Go

We get a lot of questions about how long and where clients should retain records. We recommend that clients keep their original trusts and wills in a safe deposit box for their lifetime. We recommend that they keep the originals of their Advance Health Care Directives and Powers of Attorney for Finances in a safe place, where it can be easily accessed when needed.
For Trustees of Special Needs Trusts, whose beneficiaries receive Supplemental Security Income (SSI), we recommend that all records, receipts and bank statements be retained indefinitely.
For more information on what you should retain and what you should shred, we recommend the Federal Trade Commission’s recently published article to serve as a guideline. For the full article go to, A Pack Rat’s Guide to Shredding.

 

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

2016 Tax Update

As many seniors will attest, it was very disappointing to learn that there will be no cost of living increase for social security recipients in 2016. The lack of cost of living adjustments has also impacted the various tax rates and retirement contribution rates, most of which are remaining the same as the 2015 rates.

For 2016 the estate and gift tax limits have been slightly adjusted with an increase in the federal estate and gift tax exemption amount to $5,450,000 per person. This is an increase of $20,000 from the 2015 exemption amount. Thus, for a married couple, a proper estate plan can protect a total estate of $10,900,000 in 2016.

Unfortunately, like last year, the annual gift tax exclusion amount remains at $14,000 per person. A donor can gift $14,000 to any number of donees with no tax consequence, but larger gifts would need to be reported on a gift tax return (form 709).

For 2016 the annual contribution limits for retirement plans remain the same. The annual limit for 401(k), 402(b) and 457 plans is $18,000. For employees that are over age 50, a catch-up contribution in the amount of $6,000 per year is allowed. Thus, those employees over 50 can contribute up to a total of $24,000 into their 401(k). For IRA contributions, the annual limit remains at $5,500.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

California Revocable Transfer on Death Deed

Effective January 1, 2016, but only effective until January 1, 2021, there will be a new option for the transfer of real property without a probate proceeding in California. A Revocable Transfer on Death Deed (RTODD) will now be authorized. A transferor, who has the capacity to contract, may deed property to a clearly identified beneficiary. The RTODD must be signed, dated, notarized and recorded within sixty (60) days of signing to be valid. If recorded, and not revoked, the deed will be effective upon death to transfer the property to the named beneficiary. As this is a revocable transfer, the transferor can always change his or her mind and either name new beneficiaries or simple revoke the prior transfer. The property transferred via the RTODD would remain includable in the transferor’s estate, including for Medi-Cal eligibility and recovery purposes and for the transferor’s creditors.

Although this law is touted as a simple way for a non-probate transfer of a residence, which is used in many other states, there are concerns this law will encourage elder abuse and fraud. As this is a revocable transfer, it is easy to see how lawsuits could emerge if multiple deeds were recorded, or if the transfer conflicted with set estate planning documents. In addition, it would seemingly be very easy for an abuser to have an elder sign such a document.

Consider the following fact pattern. A single widowed gentleman consults his attorney and sets up a general estate plan, including a trust, which leaves all assets equally between the transferor’s son and daughter. He later decides he wants his son to receive the house, so without consulting his attorney, he executes and records a RTODD. After he passes, while the RTODD will now give the house to the son, the trust indicates that all property should be divided 50/50. The son would thus receive 50% of the assets in the trust as well, giving him a windfall, and not giving the daughter an overall equal share of all of the assets. Unless this was the goal, that the son should receive the house in addition to his 50% share, the RTODD has created a potential estate distribution issue that may push the estate into litigation.

Thus, while we do feel that the RTODD is a good option to utilize along with other estate planning options, there can easily be abuses of this new deed option. In order to ensure that the RTODD is utilized properly, and that all requirements are met, a consultation with an attorney is still in order. Please contact our office if you have questions about this deed and whether it is appropriate to utilize it in your planning.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

Federal Tax Updates

 

Qualified Charitable Distributions from an IRA:

The prior, expired tax law allowing for qualified charitable distributions from IRA’s has been revived. This law allows individuals over 70 ½ to exclude from gross income up to $100,000 in Qualified Charitable Distributions from an IRA. This requires a distribution from an IRA directly to a public charity. If done correctly, the individual can exclude the IRA withdrawal from gross income, although no further charitable deduction is allowed. This is a better tax result than claiming the withdrawal as ordinary income and then taking the charitable deduction, as given some other tax limitations the deduction never completely offsets the amount claimed in income even though the whole amount was donated to charity. This change is beneficial for those individuals who would like to donate their required minimum distributions for instance.

 
Portability Regulations:

We have been reporting in the past few years of changes in the estate tax law and the increase in the estate tax exemption amount to $5,000,000 as of 2011, which is indexed for inflation, and stands now at $5,430,000. For many clients, this larger exemption amount has lessened the concern for estate taxes and often can allow for a less complex trust. One tax planning option is the use of Portability, which is the ability of the surviving spouse to utilize the unused estate tax exclusion amount of the deceased spouse. The IRS has now issued final regulations which apply to decedents dying after June 12, 2015. The regulations confirm that to claim the deceased spouse’s unused exclusion amount (DSUE amount) an executor (not necessarily the surviving spouse) must timely file an estate tax return. As an estate tax return would typically not otherwise be required, this can place a burden on families and the executor to prepare and file a rather complex return. Unfortunately the IRS has not opted to issue a more simplified estate tax return form to claim the election. Whether to file the estate tax return and claim the DSUE amount is a complex discussion that should be part of the trust administration process at the death of the first spouse. Please feel free to contact Sugai & Sudweeks if you have questions about estate taxes or the impact of portability options on your estate planning.

 

Same Sex Couples – Right to Marry and Tax Implications:

With the Supreme Court ruling that the Fourteenth Amendment requires a state to issue marriage licenses and recognize marriages performed in other states for same-sex individuals, these couples now have tax planning options to consider that were not previously available. All provisions in the code that previously only applied to husband, wife or heterosexual spouses, will now apply to all individuals lawfully married under state law to someone of the same sex. This may necessitate the filing of amended income tax, estate tax and gift tax returns depending on the year of marriage. Property taxes should also be examined to determine if refunds are applicable.

 

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

2015 Estate and Gift Tax Update

The 2015 estate and gift tax limits, as well as retirement plan contribution limits have been released by the IRS. For estate taxes, the top tax rate remains unchanged at 40%. However the federal estate and gift tax exemption amount has increased to $5,430,000 per person. This is an increase of $90,000 based on the annual increases for inflation. Thus, for a married couple, a proper estate plan can protect a total estate of $10,860,000 in 2015.

With estate tax limits so high, many clients no longer need to be concerned about estate taxes and can opt for trusts and estate plans that are no longer as complex. Many want to now revise their plans for simplification purposes and are pleased that estate taxes are no longer such a large concern.

Annual gift tax exclusion amounts remain at $14,000 per person. A donor can gift $14,000 to any number of donees with no tax consequence. Gifts in excess of $14,000 in 2015 would have to be reported on a gift tax return (form 709). In addition, a 529 college savings plan can be funded, and up to five (5) years worth of annual gifts may be made at one time ($70,000) without reducing the lifetime gift tax exemption, although a gift tax return would have to be filed to report the gift. To avoid reporting requirements, gifts can be paid directly to providers for medical, dental or tuition and do not count towards the annual limits.

For 2015 the IRS has increased the annual contribution limits for retirement plans. The annual limit for 401(k), 402(b) and 457 plans is $18,000, an increase of $500. For employees that are over age 50, a catch-up contribution amount has also increased by $500 to a maximum of $6,000 per year. This catch-up contribution can be made in the year you turn 50, no matter your birthdate. For IRA contributions, the annual limit remains at $5,500, and the catch-up contribution limit remains at $1,000.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

National Health Care Decisions Day

Today is National Health Care Decisions Day. All adults can benefit from thinking about what their healthcare choices would be if they are unable to speak for themselves.  These decisions can be written down in an advance directive so that others know what they are.

In California we refer to this as an Advance Health Care Directive. With this document you can choose an agent and alternative agent(s) to make health care decisions for you in the event that you are not able to do so or if you want your agent to be involved with your health care immediately.  You are able to state the types of treatments that you want and do not want. These can include: whether you agree or disagree to diagnostic tests, surgical procedures, and medication plans. Whether or not you would permit the providing, withholding, or withdrawal of artificial feeding and fluids and all other forms of health care, including cardiopulmonary resuscitation (CPR). You can also plan for your funeral, the disposition of your remains, and state your wishes in regards to pain management, religious practices, and anatomical gifts/organ donation and autopsy.

In my experience of advising clients when making difficult decisions for their incapacitated loved ones, the burden and stress is lessened when their family member or friend has clearly stated their wishes. Both parties benefit in that the patient gets the treatment that they wanted without the treatment that they do not want and the agent can feel confident in the decisions that they are making.

There are a number of resources available to you to help you make these decisions. Depending on your specific concerns you may want to talk with your doctor, with an attorney, or use a fill in the blank form. To learn more about advance directives in general you can visit the National Health Care Decision website.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

When a Good Estate Plan Goes Bad!

We recently hosted a client seminar to discuss things that can go wrong with even a well drafted estate plan.  Most often things go wrong with an estate plan as a result of lack of communication between the parties (i.e. our clients, their successor trustees, and the beneficiaries).  While documents are drafted to follow the clients’ wishes, many times the clients do not consider the impact the documents may have on their beneficiaries after they have passed away.

Communication about the estate plan can help alleviate some of the difficulties which can occur following a death.  If the family is aware of the parents’ intent regarding the distribution of personal property for instance, the arguments regarding the jewelry, piano or grandfather clock might be eliminated.  If the parents have carefully considered their choice of trustee, the administration of the estate will be smoother and there will be less potential for conflict, even if this means that a non family member should serve as trustee.

A new legal practice method is being utilized to help with some of these areas.  A collaborative practice is designed to involve the whole family in the estate planning process.  The goal is to avoid family conflict following the passing of the parents.  The hope is that if everyone is involved and aware of the provisions in the documents, the conflicts will be minimized after the death of the parents.  While not every family can have meaningful and useful discussions about these areas, for those that can, having a discussion regarding the estate plan can make the administration much easier.  These meetings can be held with the attorney, a mediator or professional facilitator to review and discuss the issues that are presented in the plan.

If you would like to learn more, please click here to view our slide presentation from the program.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.