Recap of Important 2022 Estate Planning Issues

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This past year our law corporation has seen a number of recurring issues come up in client discussions and plans, as well as some new areas of concern. We sat down with Tamsen Reinheimer for her thoughts and guidance:

Q. How does Prop. 19 (the Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act) impact estate planning for inherited property? 

A. Proposition 19 is a major issue for inheriting. It imposes limits on property tax benefits for inherited family property. The changes became effective in 2021 but many Trustors still need to review and update their estate plans for provisions under it. Under Prop. 19, a child or children may keep the lower property tax base of the parent(s) ONLY if the property is the principal residence of the parent(s) and the child or children make it their principal residence within one year. 

Q. How does the SECURE Act impact estate planning and your beneficiaries?

A. A key aspect of the SECURE Act is that payments to most beneficiaries have been reduced to a 10-year term. No withdrawals have to be made during the 10-year period, but at the end of 10-years from the date of the plan holder's death, the entire balance in the plan must be withdrawn and all of the income tax paid by the beneficiary. If you have designated a trust as the beneficiary of your retirement accounts, you should review the drafting of that trust with your estate planning attorney to understand the implications of the SECURE Act. For example, some smart clients update their estate plans so that older retirement-age beneficiaries get the IRA accounts, and younger beneficiaries receive the cash/savings accounts (so that they aren't subject to the 10 year rule).

Q. What is "proper titling" and why does it always seem to be problematic? Also, the same for beneficiary designations?

A. It is very important to ensure that all assets are properly titled and that beneficiaries are correctly designated, depending upon the type of asset (e.g., real estate, bank accounts, retirement accounts, investments, etc.). The titling (or ownership structure) will impact how your assets are distributed, whether or not they need to go through probate, and estate taxes required. If these steps aren't done, your intentions as stated in your will may actually be voided! As such, a key task of your estate planning attorney is to establish the correct title for all properties held by your trust and that the correct beneficiaries and percentages are selected.

Q. Most of us don't like to think about a traumatic event when we can't make decisions for ourselves anymore, such as a major accident or late-stage Alzheimer's. How can we make it easier for our loved ones?

A. In California, a Power of Attorney gives someone authority act in your name, including managing your financial affairs in the event that you become incapacitated or otherwise unable to do so yourself. An Advance Healthcare Directive allows you to choose a person you trust to make medical decisions upon your incapacitation (e.g., in the event of a do-not-resuscitate order, the hospital will ask for it). Also, your trust should state such directives because both your money person and your medical person need to take over based on mechanisms in your documents. Both of these documents are an essential part of estate planning, yet many people do not have them in place. 

Q. What happens if you don't want to leave your estate equally to your heirs?

A. Remember that inheritance if a gift. You don't deserve it, you didn't earn it. It's a gift that someone generously gave to you out of the kindness of their own hearts. With that as a premise, then it is easier to decide it what circumstances everyone shouldn't get the same amount. For instance, if you have a child or grandchild with special needs, you absolutely need to plan for such a child who might be receiving government benefits, and who might need extra care over their lifetime. Other scenarios for unequal distributions may include: previous support, caregivers, grandchildren support, blended families, and destructive addictions. A key note for such situations: Make sure that you review your estate plan and that it is airtight with no room for challenges.

Q. When it comes to "who gets what," are some assets better held by one heir vs. another? 

A. If your estate is simply an even sell-and-split of all assets, this is a simple task. Yet quite often assets are distributed differently. Is it best for a certain child to own your business? Should another child be given illiquid assets because he/she would spend cash to quickly? How to designate real estate if your heirs live across the country and may not want it? Do certain assets hold sentimental value? Work these situations over with your attorney and develop the appropriate plan.

Q. Grandparents are increasingly seeking methods to directly help their grandkids. What are some popular tools?

A. There are several ways to leave assets to grandchildren, with selection depending on your circumstances and the size of your estate. Consult with a lawyer for the proper strategy for any of these methods, which may include: conservatorship, custodial accounts, educational savings accounts, retirement accounts, investments, and bank accounts. 

Experts in Estate Planning

At Mortensen & Reinheimer, PC we recognize that some of the most important decisions involve protecting what you have earned, and planning to provide for your loved ones. If you need legal expertise in addressing your specific estate planning needs, please contact Mortensen & Reinheimer, PC at (714) 384-6053 to make an appointment, or use our online contact form. Our website is www.ocestateplanning.net.

About the author: 

Tamsen R. Reinheimer, Attorney, is a Certified Specialist in Estate Planning, Trust & Probate Law (The State Bar of California Board of Legal Specialization). She has significant experience in all aspects of estate planning, trust administration, and probate. Contact Tamsen at tamsen@ocestateplanning.net.

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