Not every trust fits every situation. The interests of older folks are usually different than those of younger generations. And couples with adult children often have different concerns than those with little ones and college years still ahead. That’s why it’s always good to revisit your estate plan and make sure it still fits your circumstances. As time goes on, your family situation may shift along with tax laws that could affect your choices on how best to plan for your estate. If you created a plan when the tax thresholds were relatively low ($1 million) then it may be time to take a second look. The Tax Cuts and Jobs Act signed into law by President Donald Trump in December 2017, made significant changes to the Tax Code by greatly increasing the amount a person can give tax free. As of 2020, the estate tax limit is now $11.58 million per individual; up from $11.4 million in 2019. And with existing “portability” laws, a deceased spouse’s unused exemption amount can be added to the survivor’s exemption so married couples can transfer a combined estate tax exclusion of over $23 million! Now, with the current high estate tax threshold, the bypass trust model may be work like an outdated phone: still functional but not necessarily the best option. A Closer Look at the Bypass Trust Most married couples want the surviving spouse to be able to have access to the couple’s full wealth for their support during widowhood. Depending on personal circumstances this may, or may not, be a good idea. In any event, before estate tax increases in recent years, the best way for a married couple to continue to provide for the surviving spouse and avoid estate taxes at the first death was to create a bypass trust. Bypass trusts are funded with as much of the deceased spouse’s property that can pass tax-free using his or her exclusion which, nowadays, is typically the entire share of decedent spouse’s community property. Bypass trusts benefit the survivor during life but “bypass” the survivor’s estate at death with any remaining amount going to named beneficiaries. If your trust was created to bypass estate taxes and your estate is now well below the current threshold, then the main purpose of your bypass trust is lost. The high estate tax exclusion makes the bypass trust unnecessary in most instances because most people don’t have estates large enough to qualify for payment of estate taxes in the first place. The need to divide assets at the first death and associated costs with administering separate trusts for the surviving spouse’s lifetime, including the preparation of a separate income tax returns for beneficiaries, is more costly than leaving all assets to a spouse and relying on portability to use both spouses’ exclusion. And assets in a bypass trust may be taxed at compressed trust income tax brackets which subject any undistributed income over a certain amount to be subject to the top marginal income tax rate. These trusts are still relevant to protect the intentions of the first spouse to die and provide some creditor protection for the survivor so all is not lost. But if these protections don’t interest you, consider that bypass trusts require more significant administration. Many married couples will keep their existing bypass trust even if they don’t need it for tax purposes because it still provides some desired benefits, but there are better options out there. Others simply don’t want the hassle and expense of a bypass trust if there is no real threat of estate taxes, which is usually the case. What to Do? We recommend that you review your estate plan with your attorney every five years or after any major life changing event. Even if the potential benefits associated with losing the bypass trust don’t spur you to take action today, think about reviewing your options next time you update your estate plan. You can take advantage of a similar structure without losing income tax-basis step up at the death of the surviving spouse. Call today and learn more about updating your current plan! (714) 619-4145 Disclaimer: This article is not intended to provide tax advice. You must consult your accountant or other tax advisor for any specific income tax guidance.

As grim as it might seem, the coronavirus pandemic should remind everyone to have important healthcare documents in order and accessible to those close to you. Here is some helpful information relating to basic healthcare documents that, once prepared and properly executed, will give you peace of mind through this crisis: Necessary documents include a healthcare directive (or “living will”) appointing a healthcare proxy (or “agent”), HIPAA release, and Do Not Resuscitate (DNR) order. A healthcare directive is a statement of your healthcare wishes and appoints a health care proxy to make healthcare decisions should you be unable to speak for yourself. A HIPAA release authorizes that named individual to communicate with your client’s medical providers and access your medical records so that the best decision can be made regarding your healthcare. And finally, a DNR is a document providing whether you want heroic end of life measures. It is a good idea to place those executed documents in an obvious location so that you can grab them at a moment’s notice. It’s also wise to include information regarding any prescriptions that you may use and along with any recent over-the-counter medications. This could speed the hospital admission process. Lastly, it’s wise to provide a scanned copy of your healthcare documents to the person named as your agent. Keep a scanned copy for your own records too. If you don’t have a scanner but have an iPhone, click on the icon that looks like a pad of paper called “Notes” then create a new document (bottom right) then click on the camera icon and up will come an option to “scan.” This will create a PDF instead of a photo, which is much better than just a photo when transmitting documents. You also can get a free app for your phone to convert phone photos into PDFs to save. If you have any questions or would like to prepare these documents for yourself or help a loved one get started, please call. We are working remotely to get clients what they need through this time of crisis. Call (714) 619-4145!

There are ways of transferring title to your home without the use of a Revocable Trust. A Transfer on Death deed (“TOD”) allows a property owner to execute a deed that names a beneficiary who will obtain the property at the owner’s death. This tool allows property to be distributed without the hassle of probate; but there are risks. First, the beneficiary must be living at the time of the title holder’s death, and second, the beneficiary cannot be a minor. The main problem with using a TOD is if the beneficiary dies before the property owner and the owner either forgets or is otherwise unable to change the TOD beneficiary, the property will end up going through probate. There is no “Plan B” for distribution of the property. The better solution for a property owner is to create a Revocable Trust. Here, the property owner can provide for different possibilities if a named beneficiary is unable to receive the property. For instance, if your named beneficiary passes away before you and you want that property to go to someone else, you can provide those details in your trust document. In addition, if you want the property to be distributed to a minor, you can provide for a trustee to manage that property until the minor becomes an adult. And lastly, a Revocable Trust provides benefits both during and after the property owners death. A Revocable Trust is simply a better estate planning tool. Transfer on Death Deeds serve a purpose for people who don’t have time or cannot afford to create a more comprehensive estate plan. A Transfer on Death Deed offers none of these protections and has inherent problems that are typically not discovered until after the property owner’s death when it is too late to fix. Every family situation is unique. We walk you through all the best options and create a solution that is just right for you. Call me today to talk about your options! (714) 619-4145

Saving for retirement is an important part of being able to ultimately enjoy it when you get there. Fortunately, the IRS gives you some incentives to save for retirement by getting up-front tax breaks that reward you now for contributing to your future financial security. Until now, investors in retirement plans have been able to give unused funds to their heirs which has been a huge benefit because the beneficiaries of those accounts could “stretch out” Required Minimum Distributions over his or her life expectancy. Wealthy IRA owners certain that their spouses, and often their children, wouldn’t need the money, could leave the IRA to grandchildren. A 20-year-old beneficiary could, for instance, stretch out the period of withdrawal for another 63 years with the obvious benefit of compounding interest. In recent years, Congress took notice that retirement accounts intended to benefit retirees were being used as estate planning vehicles for the wealthy. In December 2019, Trump quietly signed the Secure Act into law, effective on January 1, 2020, which changed the way beneficiaries will receive money from inherited retirement accounts. The new rules require that non-spouse beneficiaries of qualified retirement accounts must withdraw all the money out of those accounts within 10 years of the death of the original account owner. There are no required minimum distributions within that time frame, but the account balance must be zero by the ten-year mark. Here are some answers to common questions about retirement savings: What is a “Required Minimum Distribution”? Required Minimum Distributions (“RMD’s”) are yearly minimum amounts that must be withdrawn from the retirement account and they're based on your account balance and life expectancy. See IRS.gov for specific information. Why do RMDs exist? The reason the law forces you to take required minimum distributions has to do with the tax benefits that retirement accounts offer. With a traditional IRA, 401(k), or similar account, you get an up-front tax deduction for the amount that you contribute toward retirement. You also get tax-deferred treatment of any income and gains that the assets in your retirement account generate. That means no tax is due until you start making withdrawals. In other words, without RMDs, you could let your savings sit untaxed, for your entire life. You could then pass those savings on to your heirs, who could pass it on to their heirs, and so on. Lawmakers didn't like the idea of letting our investments go un-taxed for generations, so they implemented RMDs, essentially putting a time limit on how long retirement savers can defer taxation. By forcing withdrawals, the RMD rules make retirement savers eventually pay taxes on their savings -- even if they don't really need the money at that point. What is a “Qualified Retirement Plan?” A qualified retirement plan is a retirement plan recognized by the IRS where investment income accumulates tax-deferred. Common examples include individual retirement accounts (IRAs), pension plans, and Keogh plans. At what age do RMD’s kick in? If you're the original account holder, then the new law states that you'll need to start taking withdrawals in the year in which you turn 72 years old. Those who've just turned 72 in a given year have until April 1 of the following year to start taking their required minimum distributions. After that one-time extension, withdrawals in subsequent years must be complete by the end of the calendar year. Before the Secure Act the law required distributions at 70 1/2. Are there exceptions to the 10-year withdrawal requirement? The rule does not apply to spousal beneficiaries, as well as disabled beneficiaries and those who are not more than 10 years younger than the account holder (such as a slightly younger sibling, for example). Minor children are also exempt, but only until they reach majority age. After that, they will have 10 years to withdraw the assets in an inherited account. Spouses, disabled beneficiaries, and others under the exception will still be allowed to take distributions over their life expectancy. Another Option! If part of your estate planning includes giving your retirement plan to younger family members then you should probably think again. No longer can your grandchildren stretch out this gift for the maximum benefit of lifetime interest accrual. Some planners are rethinking how to deal with this asset and one option is to purchase life insurance with your distribution amounts. For those that are not intending to use their retirement accounts as part of an overall retirement financial plan, it is something to consider. Call me today to learn more! (714) 619-4145 This article is not intended as tax or financial planning advice.

Do you have a student going off to college for the first time or already living away at school? If so, your child will need certain important documents that will let you help them in the event of a medical emergency. Those documents include a Medical Power of Attorney (“Advance Health Care Directive”), HIPAA Release, and Durable Power of Attorney. Our College Care Package© includes all three important documents at a reasonable price. Feel good knowing that your child is covered in case of an emergency. Medical Power of Attorney A healthcare power of attorney is a legal document naming you the parent a “medical agent” for your college student. If your child becomes medically incapacitated, you can make informed medical decisions on their behalf based on the information provided on that form. You can be the decision maker if your adult child is unable to do so. It will allow you to decide the best course of action with the doctors. What happens if you don’t have a healthcare power of attorney in place? The doctors will be the ones who make the decisions about care. While this may not always be a bad thing, it may go against the wishes of your child. And a healthcare provider may not take a specific course of action for liability reasons. A Medical Power of Attorney allows your child to make those informed decisions before any need arises. HIPAA Release Have you ever tried to get an update about a loved one who is at the hospital? As you know, it can be difficult, if not nearly impossible, to find out how someone is doing. Ever since the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which requires that information relating to a person’s health be kept confidential, parents can be blocked from learning about the personal healthcare details of their adult child. What you need to cut through the red tape is a HIPAA form naming you as an authorized agent to receive private information. This document lets a patient (your college student) designate certain family members, friends and others who can be updated about their medical information during treatment. Obviously, your student should fill this out before they need it during a medical emergency. The HIPAA form becomes extremely important if your child is living away at school and gets involved in an accident. That’s because you’re not getting any info over the phone even though you’re their parent — unless you fill out this form. Durable Power of Attorney A medical power of attorney form is strictly for health care choices should your son or daughter become incapacitated. A general durable power of attorney, however, covers financial decisions. This document allows a college student to give authority to another person (the parents) to make financial/legal decisions. It also allows the parents to make the following financial transactions on the student’s behalf, including: Manage bank accounts Pay bills File taxes, if necessary Apply for government benefits Break a lease Conclusion For each of the forms listed, parents should keep the original and the student should have copies. It may be a good idea for a roommate or fellow student to know where the copies are. In addition, the family may want to see if a copy can be filed at the school with student medical records. Because we’re so intimately involved with raising our children, it’s tempting to see them as just that — children. But in the eyes of the law, the apron strings get cut the minute they turn 18. Once they cross that threshold into adulthood, they are no longer under your agency. That applies to matters both big and small, particularly issues related to emergency health care.

Revocable trusts have become a popular part of estate plans but for many the idea is still mysterious. One common misconception is that trusts are only for wealthy people but now with the current tax environment, wealth has very little to do with why trusts are created. Here are a few reasons why trusts have become so popular: Substitute for Conservatorship. A Revocable Trust can serve as a substitute for conservatorship, avoiding the necessity of court proceeding and annual accountings if you become disabled. Your property can be handled by the person of your choosing and without the supervision (or protection) of the court. Privacy. Unlike a Will, which is a public document, Trusts are private. Transition Planning and Distribution of Assets. Revocable Trusts provide uninterrupted trust administration after your death. You have more control over how and when your assets will be distributed. Unlike other probate-avoidance devices, such as titling property jointly with right of survivorship or establishing payable on death accounts (insurance, IRAs, pensions, bank accounts), a Trust, like a Will, is more likely to preserve your intended plan of distribution. Estate and Income Taxes. As a rule, Revocable Trusts are tax neutral and provide no tax savings over using a Will. If you are married however, any taxes owed at the first death can be deferred until after the death of the surviving spouse. With a Revocable Trust, the Settlor is taxed as if the Trust were not in existence. There is no requirement to obtain a taxpayer identification number or file a separate return for your trust. So why not get started on planning for your family so you relax and enjoy the view! If you are interested in setting up an estate plan, call me today and set up an appointment! (714) 619-4145

If you are considering putting your estate plan together you may want a little background as to what role fiduciaries play. Different documents do different things and you may be asked about who you will name as your successor trustee, executor, or agent for health care. Each role has unique responsibilities so here I will provide a brief summary: Executor An executor is a person named in your Will to steer your assets through probate court and ultimately distribute those assets to your named beneficiaries. Your executor will use probate estate funds to pay debts, taxes, and funeral and burial expenses. This position takes effect only after your death. Trustee If you have a Trust, you have named a trustee to manage, invest, and distribute those assets in your Trust. These duties take effect if you become incapacitated and continue after your death. A trustee’s powers are limited to those assets held in your Trust with no power over assets outside of the Trust. A trustee's specific duties are unique to the terms of your Trust and are dictated by the type of assets being held in trust such as real estate or equities in a brokerage account. Agent for Power of Attorney As part of a comprehensive estate plan, most estate planners include a Power of Attorney for finances. The person you name as your agent, or “attorney-in-fact,” is charged with making financial decisions on your behalf. The attorney-in-fact’s powers control non-Trust assets and are effective only during your lifetime. Where the attorney-in-fact’s power stops, the executor’s power begin. How They Operate Together If you become incapacitated, the authority granted to your attorney-in-fact will be activated under your Power of Attorney, and the power granted to your successor trustee will be activated in your Trust. The scope of their respective decision-making authority will depend on the extent to which you have provided authority in each document. Your trustee has exclusive jurisdiction and control over the assets in your Trust and your attorney-in-fact has jurisdiction, subject to any limiting terms in the Power of Attorney, over everything else. If you have a trust and have funded it with all of your assets, your attorney-in-fact is going to thank you for making life relatively easy. Agent for Health Care An Advance Health Care Directive gives another person authority to make medical decisions for you if you are unable to speak for yourself. You can state exact healthcare preferences and make specific limitations on that authority. Most people name their spouse, partner, a relative, or a close friend as their health care agent. What's most important is that you trust the person absolutely -- and that you feel confident discussing your wishes for medical care with him or her. Your agent need not agree with your wishes but must completely respect your right to get the kind of treatment you want. If you would like to learn more about choosing a fiduciary click here to schedule a phone call today! #EstatePlanning #WillsandTrusts #AttorneyinFact #PowerofAttorney

The term trust fund kid can conjure up some undesirable images: entitlement; laziness; and pastel plaid shorts. Even though trust fund kids currently account for only around 1% of the population they aren’t just for the extra-wealthy anymore. More and more middle-class families are seeing the benefit of avoiding probate and planning for specific distribution of their assets at their death. Anyone whose assets include real estate, stocks, or bank accounts should consider a revocable trust as part of a sensible and complete estate plan. Some Advantages There are many advantages. You are able to ensure that your hard-earned assets are distributed as you wish and that they are protected (to a certain degree) after your death. Another advantage is that you can provide an incentive for your children to do well. Rather than give your child money all at once or even at specified intervals, restrictions can be imposed requiring that certain goals be met in order for a distribution to take place. For example, you might require that a certain grade point average be achieved or graduation from a 4-year university be attained before a specific distribution is made. Or you can reward your child if specific requirements are met. Include Incentives in Your Document Incentive trusts have become increasingly common but they do have drawbacks. You can’t always foresee all future problems or roadblocks such as medical emergencies, family demands or financial hardships. Effectively creating an incentive trust requires much thought and deliberation over how your hopes and goals for each individual child could play out. But regardless of your financial circumstances, it is wise to consider crafting your trust to encourage education, hard work or other desirable behavior. If you want to learn more about Incentive Trusts, click here to schedule a phone call or in-person consultation! #EstatePlanning #WillsandTrusts #RevocableLivingTrust

Estate plans are effective when they accurately reflect your wishes based on your most current life circumstances. Too often I hear about estate plans that were prepared before major life events have rendered them outdated which can create conflict for your loved ones. Children are born. Divorces happen. Beloved family members pass on. Any number of things can make a once-current estate plan no longer reflective of your true intent. Below are three considerations that may warrant a rehashing of your estate plan: Personal or Family Triggering Event A life triggering event can come in many forms such as those noted above, but it also may be something as simple as your child turning 18 or the birth of a grandchild. These changes could cause you to rethink whether you need a different kind of Trust, whether you want to rename your successor Trustees or add a specific gift for a special person. Adult children can be named as successor Trustees and agents for health care in place of friends or older family members. Changes to a Job or Real Estate Ownership Have you recently moved to a new state or acquired an investment property? Maybe you are now a business partner or have stock that has shot up in value. Any of these situations call for you to take a fresh look at your estate planning documents to see if there are any precautions you should be taking to make sure you avoid probate and ensure that you are properly planning for your family. New Tax Considerations Federal tax laws have changed significantly since January 2017 and the new laws allow for more flexible planning options for nearly everyone. Outdated estate plans may require needless paperwork and tax consequences because they were designed based on a lower federal estate tax threshold. Newer Trust models provide for simplified planning after a spouse passes away. Depending on your situation you may just need a simple Amendment or for those with older documents or several changes, a complete Restatement may be necessary. Also, there is a trend toward having an open dialogue with your family about your estate plan so that at your death your true intent is known. I can guide you through the entire process! Please call me if you would like to chat at (949) 387-8707 or email me at lynn@lynngirvinlaw.com. #EstatePlanning #Trusts #RevocableTrust #EstateTax #FederalEstateTax #TaxPlanning

A Physician’s Order for Life-Sustaining Treatment (“POLST”) is a medical order that tells emergency health care professionals what to do in case of a medical crisis when you cannot speak for yourself. No agent (or surrogate) is named. The document is prepared by a medical professional and communicates orders for any person who is seriously ill or frail and near the end of life. It gives specific orders for specific circumstances and is designed for use by emergency personnel. Because the POLST form is completed when someone is seriously ill or frail, their diagnosis and prognosis is known so more specific treatment decisions can be chosen and documented. A copy of the signed POLST order is a legally valid medical order. How is it Different from a Health Care Directive? An Advance Health Care Directive (“AHCD”), on the other hand, is a legal document created by an individual and not a medical order. It names an agent who is authorized to speak on your behalf regarding your medical wishes. It is used to provide guidance about what types of treatments you may want to receive in case of a future, unknown medical emergency. When you can't speak for yourself, your health care team will review your advance directive and talk to your agent to develop a treatment plan. All adults should have an advance directive but not everyone needs a POLST. My Forms are Complete, Now What do I do with Them? I am always asked about what to do with completed documents. How are health care professionals supposed to access them and treat you accordingly? My usual advice is to provide a copy to your named agent and any close friends or family. You can also maintain a copy in plain sight in your home so that an emergency responder can see it if you are unable to produce it yourself while some clients choose to carry a physical copy but these options are not always foolproof. Fortunately, California is working on a pilot project in Contra Costa County and the City of San Diego to test the development and implementation of electronic registries (“eRegistries”). The registries will enable the submission, storage, and retrieval of POLST forms in various healthcare settings. If the project is successful, California could implement an electronic access point for health care professionals statewide thus safeguarding that your wishes are met. Please call me if you would like to learn more about health care planning at (949) 387-8707 or email me at lynn@lynngirvinlaw.com. I’d love to hear from you! For more information about the eRegistry pilot program check out https://www.chcf.org/project/polst-eregistry-pilot-initiative/ For more information about POLST forms please check out https://emsa.ca.gov/dnr_and_polst_forms/ #EstatePlanning #WillsandTrusts #HealthCareDirective #LynnKGirvin #EstatePlan