Estate Planning

Don’t Neglect your Estate Planning

Discussions around estate planning often begin with taxes and how to avoid paying estate. In reality, only a small percentage of estates are subject to federal estate taxes. The new federal tax law enacted by congress earlier this year greatly reduced the number of estates subject to such taxes by essentially doubling the amount of money that is automatically exempt from federal estate tax – to approximately $11 million or  $22 million per married couple.


Digital Assets and Estate Planning

It is important to recognize and identify digital assets in your estate planning.  Digital assets include digital files (stored through a cloud service or stored locally), websites, email, social media and other online accounts. You should consider preparing a current list of your online accounts and other digital assets to include with your estate planning documents. You should also consider providing your personal representatives (successor trustee, executor, DPOA agent) access to your passwords or the location of your passwords.


End of Life Option Act

The California Legislature recently passed Assembly Bill X215, commonly called the End of Life Option Act. Governor Brown signed the new law on October 5, 2015. It will become effective 91 days after the adjournment of the 2015-2016 second extraordinary session.  The act authorizes an adult who meets certain qualifications, and who has been determined by his or her attending physician to be suffering from a terminal disease, to make a request for a drug prescribed for the purpose of ending his or her life.


Is the Stepped-Up Basis at Death Going Away?

President Obama in his press release in advance of his annual State of the Union address in January of this year recommended elimination of the stepped-up basis at death. If this were to incur, it would impose a capital gains tax at death.  In order to avoid this alleged loophole, the President’s proposal was to treat bequests and gifts (other than to charitable organizations) as realization events. In other words, an event that would cause a recognition of gain.


Tis the Revocable Trust Season

The holiday season is upon us! It is finally looking like winter should look in Humboldt County, with major winter storms forecasted for the rest of the week. It's a time for hunkering down with friends and family, for eating great food, spreading good cheer, and exchanging gifts.

One of the best gifts you can give both yourself and your family is a revocable trust. A revocable trust gives you peace of mind and has a number of advantages over more traditional estate plans, such as a will, including:


Durable Powers of Attorney

Planning for a client’s incapacity is an important part of estate planning. Every estate planning client should have a Durable Power of Attorney if they have someone they trust enough to name as an agent. The main purpose of a Durable Power of Attorney is to ensure that an agent is ready to act if needed. Having a Durable Power of Attorney will normally avoid the expense and potential conflict of a conservatorship of a person’s estate.


Inherited IRAs - No Bankruptcy Exemption

Under current bankruptcy rules, “retirement funds” are exempt property in bankruptcy, and cannot be reached by a debtor’s creditors.

In a recent case, In Re: Clark, an appellate court held that the federal exemption for retirement funds does not apply to inherited IRAs.

Inherited IRAs are retirement funds of a decedent that are inherited by a decedent’s beneficiary.


How to Include Pets in Your Estate Planning

Humboldt County residents who value their pets should make plans to care for them in their estate plan.  If you should become incompetent before you die, a properly prepared durable power of attorney and revocable living trust can be used to provide care for your pets. Upon your death, your revocable living trust or will can provide for your pets’ long term care.


Property Tax Impacts of Revocable Trust Transfers

What impact is there on your property tax when your Humboldt County real property is transferred into or out of a revocable trust?  There are two general rules that apply; however, there are a number of exceptions to these general rules.  The two general rules are:

1. The transfer by the Trustor, or any other person, of real property into a trust is a change in ownership in such property at the time of the transfer;
2. The termination of a trust, or portion thereof, constitutes a change in ownership at the time of the termination of the trust.


Recent Developments in Estate Planning

There were relatively few pieces of legislation passed by the legislature or cases decided by the California courts in 2011 that are important to estate planning.  The piece of legislation with the greatest impact was Assembly Bill 1305 which will allow small estates with probatable assets with values up to $150,000 to avoid the probate process. The bill increases the values in the succession and transfer provisions under sections 13100 and 13151 of the Probate Code from $100,000 to $150,000.


AFR Rates and Beneficiary Business Purchases

The Applicable Federal Rate (AFR) is a rate published monthly by the IRS for federal income tax purposes.

The IRS will treat any “loan” with a below market interest rate (below the AFR) as a gift of the foregone interest from the lender to the borrower.  The amount of the foregone interest will be treated as though it was transferred from the lender to the borrower as a gift and retransferred from the borrower to lender as income on the last day of the calendar year.

How may this apply to the purchase of your Humboldt County business by your beneficiaries?


Business Succession Planning in Humboldt County

Do you own a family business in Humboldt County?   Be it in Eureka, Arcata or Southern Humboldt, succession planning for a family business raises a number of issues.

You should plan for the succession to your business over a long period.   Primary concerns include determining your children’s interest in the business and their ability to run a business.

You may want to transfer an interest in the business during your lifetime.  This strategy may be particularly useful if you believe your business is substantially undervalued at the time of your transfer.


Income Taxation of Trusts and Estates

Please remember if you are the successor trustee of a decedent’s estate you will have the responsibility of filing the decedent’s final federal income tax return for the tax year ended on the date of the decedent’s death.  If the decedent was married at the time of death, the successor trustee may file a joint return with the surviving spouse for the decedent and the surviving spouse.  If the surviving spouse remarries before the end of the year of the decedent’s death, a joint final return may not be filed.


IRS Improving Domestic Partner Status

In late May, the Internal Revenue Service adopted a new position regarding taxation of registered domestic partners in its Private Letter Ruling 201021048 (the “PLR”).   See Pender, Kathleen, “IRS adopts state domestic-partner property law,” San Francisco Chronicle (June 3, 2010) available at   Previously, the IRS did not apply California community property principles to registered domestic partnerships in terms of federal tax law since “[t]he relationship between registered domestic partners under the California Act is not marriage under California la



For years estate planners have been extolling the virtues of a revocable trust primarily to avoid the need for a probate of a decedent’s estate.   Now we have another reason to recommend a revocable trust to our client: the number of probate filing fees have significantly increased.

A provision of 2008’s Filing Fees legislation has significantly increased the number of probate filing fees for many probate proceedings.


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