Trust Administration

The current (2018) estate tax exemption is $11.2 million per person.

No. California law allows for an exemption of real property tax reassessment only for transfers between parents and children or grandchildren. There is no exclusion for transfers between siblings.

Retirement plans were created specifically for retirement and are not the best vehicle for inheritance. That being said, a beneficiary may inherit a person’s retirement plan and under certain circumstances can stretch out those tax deferred benefits over the life of the beneficiary; however, annual distributions, based on the beneficiary’s actuarial life expectancy, must be taken and the beneficiary will pay income tax on the amount distributed.

Life insurance proceeds are paid to the designated beneficiaries without the beneficiary being subject to income tax on the money; however, those proceeds are counted as an asset of the insured and therefore are part of the insured’s estate for estate tax purposes.

First, putting your child’s name on title to your house means that you have actually made a gift to that child of an interest in your house. You should file a gift tax return for this transfer if the value of the interest transferred is more than $14,000. Second, you have just opened up your house to serve as a resource for the potential creditors of your child. Third, you have given your child your basis in the property for the interest transferred. This means that upon the sale of that property there will be a potential capital gains tax liability to your child for the portion that was transferred.

For all gifts over $14,000 per year per person, you must file a gift tax return. You do not have to send a check to the IRS for the gift tax amount, rather, your lifetime gift tax exclusion, available at your death, is reduced by the amount of the gift tax.

State law requires a person to have one power of attorney for his or her medical care and a separate power of attorney for financial or other matters.

Assuming that the agent meets the standards of care set forth under California law for fiduciaries, the agent will not be personally liable for the principal’s debts.

Once a student turns age 18, he or she is a legal adult in the State of California. The parents are no longer able to automatically make medical or financial decisions for their child. The child can give his or her parents the legal authority to make medical or financial decisions for him or her upon incapacity by signing an Advance Health Care Directive, for medical decisions and a Durable Power of Attorney for financial decisions. If the child has substantial assets of his or her own, then a Will is also needed.

An Advance Health Care Directive is the legal document that gives your named agents the ability to make medical decisions for you in the event that you are unable to make them for yourself. This can happen in emergencies in which you are unconscious or otherwise unable to communicate your wishes, or at the end of your life. The Advance Directive allows you to not only name the people you trust to make medical decisions for you, but it also provides a place for you to give your agent guidelines about what decisions you would make if you were able. Decisions such as resuscitation, life support, comfort or palliative care are all appropriately set forth in the Advance Directive.

A Durable Power of Attorney can be for any other decision or action you want someone else to be able to make on your behalf. Typical matters for a durable power of attorney are real estate transactions, transferring assets to your living trust, conducting banking activities, interacting with your long term care insurance carrier or retirement plan administrator.

The important feature of both the Advance Directive and the Durable Power of Attorney is the word “durable”. That word means that even if you are incapacitated, your agent still has the authority to make decisions for you. Without that word, an agent’s legal authority ends when you become incapacitated.