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Law Office of Emily J. Buchbinder • Jan 04, 2019

Does Your Trust Still Fit?

Many couples who had estate plans prepared prior to 2011 have trusts that require that the assets be divided into two separate trusts on the first death. Trusts were drafted this way to maximize the value of assets that could be passed down to children without estate tax. The tax law changed in 2011, and it is no longer necessary to divide trust assets on the first death to preserve the amount a couple can pass to their children free of the estate tax. If you have this type of trust, then you are legally required to divide your assets into two trusts when the first spouse dies. However, you can avoid this requirement by amending your trust during your joint lifetimes. This type of trust is still appropriate for some people, but you should discuss your situation with your attorney.

How Old Is Your Durable Power of Attorney?

A Durable Power of Attorney gives your agent (“attorney in fact”) the power to help you with financial aspects of your life that are unrelated to your trust assets (checking accounts, retirement plans, insurance, billing queries, etc.). Many financial institutions refuse to acknowledge the validity of “stale” documents. If your Durable Power of Attorney was executed more than four years ago, then you should have it updated.

Most Frequent Mistakes People With Trusts Make

If you have a trust, congratulations on planning to avoid having your estate probated. One common mistake people with trusts make, however, is that they do not properly fund their trusts. Your real property, investment accounts, money market accounts, savings accounts, and CDs should be titled in the name of your trust. If you die with more than $150,000 of assets outside of the trust, then your successor trustee will have to petition the court to gain access to those funds.

Remember that retirement accounts can never be titled in the name of a trust because only individuals can own them. Make sure you have beneficiaries named on your retirement accounts.

Another common mistake is having your documents prepared and putting them away forever. Laws change and circumstances change. It is important to have your trust reviewed every five years.

PROPOSITION 19 PRESENTATION FOR THE SANTA CRUZ COUNTY ESTATE PLANNING COUNCIL | JANUARY 13, 2021

By Emily J. Buchbinder • 15 Jan, 2021

WHAT IS THE ESTATE TAX EXEMPTION AMOUNT?

By Law Office of Emily J. Buchbinder • 06 Sep, 2018
In 2021, a U.S. citizen may transfer up to $11.7 million to a non-spouse without federal estate tax. This amount is indexed for inflation each year through 2025. On January 1, 2026, this law sunsets, unless Congress and the President make this law permanent. If the law sunsets, the estate tax exemption amount will revert to 2017 levels when the estate tax exemption was $5.49 million per person. However, this amount will be indexed for inflation from 2018 through 2025.

DOES YOUR TRUST STILL FIT UNDER THE NEW TAX CODE?

By Law Office of Emily J. Buchbinder • 31 Aug, 2018
If your trust requires a division of assets into two sub-trusts on the death of the first spouse, your current trust may no longer suit your needs. (Look to see if your trust mentions a Bypass Trust, “B” Trust, Exemption Trust, Marital Trust, or Family Trust). Many couples created their trusts before 2011 when there was a dramatic change in the tax code. In addition to higher exemption amounts (the amount of money individuals can gift their children and non-spouse beneficiaries during life and at death), the manner in which couples can transfer that wealth also changed.  Prior to 2011, married couples were required to divide assets into two separate trusts when the first spouse died to preserve the amount the deceased spouse could pass to his or her children without estate taxes. The downside to dividing assets on the first death is that it requires that the surviving spouse allocate assets between the two trusts and retitle all the assets. In addition, the surviving spouse must file an annual tax return for the trust that holds the deceased spouse’s property. The assets in the deceased spouse’s trust receive a new cost basis (fair market value). However, the assets in the deceased spouse’s trust do not receive another step-up in basis when the surviving spouse dies. Only the assets in the surviving spouse’s trust receive a stepped-up basis.
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