Law is living and ever-changing, which means changes and updates are regularly made. To keep up with all of these changes, we attend legal education seminars multiple times per year to keep our skills fresh and knowledge up to date. 2020 Brought a handful of changes to Estate Planning law.
In 2019, there was a high volume of cases litigated in the California court system, which resulted in plenty of new state laws. Here are our top 6 Estate Planning law changes to consider in 2020.
Handwritten Amendments Are Not Valid
Pena v. Dey demonstrates why you should never attempt to draft a “homemade” amendment. In this case, a Settlor named James Anderson wrote the name of an additional beneficiary (Gary Dey) on the First Amendment to his Trust and sent it to his attorney to draft a second amendment.
Before the drafting could occur, Anderson died. The successor trustee (Pena) felt that the handwritten interlineations did NOT constitute a valid amendment; the would-be beneficiary (Dey) asserted that it did and that he should inherit.
The court decided that the handwritten interlineations did not constitute a valid amendment because the trust specifically required amendments “be made by written instrument signed by the settlor and delivered to the trustee. [ ] While the law considers the interlineations a separate written instrument, and while there can be no doubt Anderson delivered them to himself as trustee, he did not sign them.”
Moral of the story: Never attempt to modify your Estate Plan on your own without the help of an experienced Estate Planning attorney.
Fiduciary Duties Between Spouses
New Probate Code §21385 holds that at death, spousal transfers by will, revocable trust, beneficiary form, or other testamentary document are not subject to a presumption of undue influence.
Therefore, go ahead and leave whatever you want to your spouse. Rest assured that no one will assume they forced you into doing it.
Small Estate Transfers
Previously, the threshold amount for an estate to trigger probate was $150,000 for estates with no real property. That amount increased to $166,250 for estates with no real property. For estates that include real property, the amount also increased from $50,000 to $55,425.
Although this is good news to avoid Probate, we never recommend testing these limits with your own estate. Check your asset titles to ensure they are all properly transferred in your revocable trust to avoid Probate when you pass.
Increased Exemption Amounts
The Federal Estate Tax exemption increased in 2020 to $11.58 million per person. Therefore, if you have less than $11.58 million to leave to your loved ones, a charity, dog, or cat, it will pass estate tax-free!
The annual gift exclusion remained unchanged at $15,000. So any kids or family still on your “payroll” will not be getting a tax-free raise this year.
Secure Act and Stretch IRAs
The stretch IRA has largely been eliminated due to the SECURE ACT . You can still leave your IRA to your spouse and they will be able to establish a spousal rollover and continue deferring withdrawals and tax payments over their lifetime, but almost everyone else is now limited to 10 years.
Like most everything that comes from Washington, D.C., it is extremely complicated to determine all of the exceptions to this general rule. Please consult someone who likes to read laws for a living before you start changing around your IRA beneficiaries.
Trust Decanting
Although trust decanting came about last year, we want to remind you that if you’re a surviving spouse with an allocated A/B trust (meaning the trust was split after the first spouse passed), you may want to explore trust decanting. That is unless you like paying more taxes than is legally required of you. For everyone else, trust decanting can completely wipe out all Capital Gains Tax on your estate. Contact an experienced Estate Planning attorney to discuss your options.
That’s our update for 2020!
Feel free to contact our experienced estate planning attornies if you have any questions or would like to schedule a trust review appointment.