“Estate Planning Updates for 2009"
Published in the Hokubei Mainichi, Jan. 24, 2009
Greetings to the readers of the Hokubei Mainichi. Although 2009 is beginning with terrible news about the economy and war in the Middle East, I hope that this year can also be one of hope and renewal.
I think it’s a great Japanese tradition to clean house before the beginning of the new year. At the start of each new year I always feel a great desire for order in my life. One way to get a fresh start on the new year is to make sure your estate planning documents are complete and up to date.
Estate planning has a language and structure of its own: trusts, wills, and powers of attorney are some of the basic building blocks of our work.
If you own a home, you should consider the advantages of a trust, which may reduce taxes and avoid probate court involvement after a death in the family. Powers of attorney are powerful documents that allow you to let a trusted family member or friend make financial or health-care decisions for you in case of emergency.
Even if you do have these documents written, it is a good idea to refresh them periodically because laws change, and because financial companies can be reluctant to honor older documents.
My website at www.calestateplanning.com has a number of pages introducing key concepts in the estate planning process. You are also welcome to call my office and ask for a brochure called “Trusts and Wills in Plain Language.”
Here are a few updates on changes in the law of estate planning:
2009 Estate Tax Exemption
The federal exemption amount for estate tax purposes is $3.5 million for 2009, up from $2 million in 2008. This is the maximum value of assets that may remain in one person’s estate at the time of death without causing the estate to owe inheritance taxes. (That is, unless the person has made large gifts while living.)
In 2010 the exemption will be unlimited, then it will decline unless Congress changes the law.
If you are members of a living married couple and your trust was written prior to 2001, you should strongly consider speaking to a lawyer about having your trust rewritten.
The estate tax exemption has increased dramatically since 2001, and some of the marital trust structures used in pre-2001 trusts have become not just unnecessary but cumbersome.
Particularly if you are a married person with an estate worth less than $4 million or $5 million, you may benefit from a simpler trust that will allow more flexibility and control after the first spouse passes away.
Health Insurance Portability and Accountability Act (HIPAA)
Older estate plans may suffer an unintended consequence of the HIPAA state and federal privacy laws. These restrictions are making doctors reluctant to disclose whether they find a patient incapacitated.
Consequently, our current provisions about incapacity in trusts and powers of attorney now provide for including family and friends in the incapacity decision process.
Charitable Rollovers Extended
The HR 1424 financial rescue package that became law in October 2008 extended the IRA charitable rollover provision from the Pension Protection Act of 2006. It allows people past age 701/2 to give a charity up to $100,000 in distributions from a traditional or Roth IRA without counting those distributions as income.
Additionally, the Worker, Retiree and Employer Recovery Act of 2008 waives 2009 required minimum distributions for people over age 701/2 with certain tax-deferred retirement accounts. (The IRS warns this does not include the 2008 minimum distributions that must be taken before April 2009.)
For details, see IRS Notice 2009-09, available at www.irs.gov/pub/irs-drop/n-09-09.pdf.
Exempt Gift Amount Rises to $13,000
The amount an individual may give away per recipient in 2009 without having to file a gift tax return will increase to $13,000 per individual, from $12,000 in 2008.
The Deficit Reduction Act for Medi-Cal
In September 2008, Gov. Schwarzenegger signed SB 483, California’s state-level response to the federal Deficit Reduction Act (DRA) of 2005. It chooses $750,000 — the most the DRA allows — as the maximum home equity a patient may keep while receiving Medi-Cal long term care benefits.
Exceptions to the cap include when the patient’s spouse or minor or disabled child still lives in the home and other “hardship” cases.
The law does not take effect until its interpreting regulations are ready. The cap will not apply retroactively.
To read more about Medi-Cal for long term care, see the website for California Advocates for Nursing Home Reform at www.canhr.org.
The material on my own website includes a description of ways estate planning documents can take concerns about Medi-Cal eligibility into consideration.
I hope these updates will be helpful to your New Year’s financial housekeeping.
The Law Offices of Laurie Shigekuni
San Francisco Office
2555 Ocean Avenue
San Francisco, CA 94132