Sign Idaho Banking Moving Checklist Now

Industry sign banking idaho moving checklist now

yes so welcome everybody so i'm jeff rosen i'm one of the lawyers here at the firm and you know 2020 has been a wild year and it is quickly or maybe for some of us slowly coming to an end right so we're going to discuss critical end-of-year tax and estate planning items that really should be on your checklist right now right as i go through these um you know six major things um you know sit there with your own checklist and say hey you know i've been paying attention to this stuff um you know is this something that would benefit me now some of this stuff is stuff that you don't necessarily have to do by the end of 2020 other things i'm going to talk about today are things that if you wait until year 2021 the opportunity to do some of this planning will be gone so we're kind of in the twilight window of this really unique tax planning period of time in america right we just had elect an election it was a wild election we still don't really know what all the results are right there are some senate races going on you know i think everybody knows what's going on with uh with the presidential race if you can still call it a race but um you know we will have some clarity shortly but here's the deal uh depending on who controls the senate um you know there could be a lot of tax changes coming our way in year 2021. so i'm glad you guys have joined us this is what we're going to be talking about today now as i go through this i'm going to be talking about legal stuff and i'm a lawyer but i don't want you to construe this as legal advice right so i'm talking about things from a very high up general level um i don't want you to hear something i said today and uh you know decide to gift away all your assets because of something you heard um so true legal advice is what happens when you sit down one-on-one with an attorney or have a phone call with an attorney and we have a chance to get to know your situation uh better and then we can give you some pinpoint advice so one opportunity you're going to have at the end of this is you can schedule a free phone call with me where we can go over some specific legal advice and i got to tell you folks this is probably the busiest fourth quarter since i've been at the firm that we've had there are a lot of changes abreast and uh you know if you're a savvy person who thinks ahead and wants to make sure that you and your family and your loved ones are protected from potential changes um you know which i imagine is one reason you're here today this is going to be a valuable webinar to watch we're probably going to go for about 30 to 45 minutes today so if you guys do have any questions zoom is really cool it has a chat window and a q a window and if you do have any questions feel free to type them in and submit them there i'll do my best to answer them throughout the presentation but i may have to hold them until the end where we'll do a few minutes of a q a so this is our team of attorneys here we have seven attorneys total that's me on the bottom middle we are all what you would consider trust lawyers so we all specialize in estate planning trust law and probate law and i would say a subset of all of those areas of practice is tax law right so we all understand the tax code and the potential changes that can occur to the tax code very well so this is our wheelhouse we're not doing you know divorce in the morning car accidents in the afternoon then a little bit of estate planning this is what we do day in and day out and when you are thinking about your estate plan when you're thinking about using a particular tax planning strategy for example you don't want to go to a generalist right you want to go to somebody who's a specialist so that's who we are you're in the right hands uh with our law firm now a couple of the things that i like about our firm that in my opinion kind of set us apart from some of the other firms that do this because we're not the only lawyers in town who are skilled in this area you know whenever we do a living trust we're going to try to do it on a flat fee basis so i've had to hire a lawyer before personally and i paid them on an hourly basis and it was really lousy because i never knew how much it was actually going to cost until the until the very end of it right and i was nervous to uh to call the lawyer i knew the meter would be running and uh it you know it kept me from calling in and asking questions that i actually really wanted answers to so we work on a flat fee basis whenever we can to eliminate that feeling that our clients might have uh we do a ton of webinars for our clients i think uh just this year uh you know i've probably done two or three dozen webinars um for our clients and i know our other attorneys here have as well uh ongoing education for our clients and our potential new clients is uh really at the core of what keeps us going right you know this is what gets me out of bed in the morning is the opportunity to do this and help people out right so i'm going to be reminding you throughout this 30 minute presentation that you know we want to make it as easy as possible to get a hold of us so at any point if you feel like this makes sense for you call in and schedule a free no obligation consultation or a free uh 50-minute phone call with me and then once you've scheduled that at a time that's convenient for you all you need to do is show up and i'll call you back and we will discuss what's on your mind we could talk about specific things from this webinar or we could talk about other things related to your estate planning as well there are two numbers that you can call for free to schedule an appointment so let's get into the material here um so this is really going to be a you know there are so many different things that you can do in the realm of tax and estate planning you know i couldn't possibly go over all of them and um you know we only have less than two months left in the year so you can't necessarily do um you know the most sophisticated planning possible but you can do a pretty good job at doing some really good planning before years end so if you're going to do something prior to the end of 2020 i would consider you focus on these six items now they may not all be applicable but here's what i think is worthy of focus at a time like this so the first thing is kind of a no-brainer have there been any changes in your life right now changes happen all the time tax laws change all the time right the probate code is kind of changing little by little every time there's uh an update and there are cases being published you know weekly and that changes the law little by little so it's always changing that doesn't necessarily mean that they've impacted your estate plan to the degree where you need to update them but here are some of the things that i'm seeing that are most common uh that really do require a change or they have an impact on your estate plan so first of all no-brainer here has anybody died right has one of the owners of the trust died have you lost your spouse and you had set up a joint trust with your spouse um this is really important have any of the beneficiaries you named in your trust passed away right i met with one of my clients yesterday and it was just a heartbreaking meeting because one of their children passed away right and they needed to rearrange their trust redistribute the wealth they wanted to make sure that grandchildren were included but their grandchildren were youngsters so they needed a plan in place for what happens if you know when they pass away if those grandkids are still underage right so we were able to update their trust it was a really sad story but you know folks sometimes people do die out of order right and you need to address that in your plan if anybody passes away another big one is marriage so if you've gotten married you definitely need to update your trust in fact in california there's a law that says if you have a trust before you get married and then later you get married and you never update your trust and you end up passing away well your your spouse probably isn't mentioned in your trust because you did that trust before you got married right and so california as the default rule they actually um say hey by by virtue of law your spouse is entitled to a big portion of the assets of your trust when you pass away if you've omitted them because there's a presumption that you know we all want to provide for our spouse we just never got around to updating our trust but that's not always what people want right sometimes you have a second marriage or a marriage later in life and perhaps your trust provides that your assets go to your kids and you never really intended for assets to go to your spouse but california reads that into your trust so as you've probably heard california is a community property state and if you have an omitted spouse in your trust and you die your spouse gets a hundred percent of the community property between you two right and you know that could be all the assets potentially it could be some of the assets but your spouse gets 100 of the community property if you haven't updated your trust to reflect your intent on whether you want to provide for them or not any separate property that you have so you know usually that's assets that you you came into the marriage with or something that somebody gifted you or you inherited while you were married that's usually still separate property um that goes a percentage to your surviving spouse and a percentage to your kids so even if you have a trust that says i leave everything to people other than this spouse right if uh if you get married and you don't update your trust that's california's default law and we're dealing with a case where that existed right now and uh you know quite frankly the surviving spouse is now fighting with their step kids and uh the litigation has become very expensive for both parties could have been avoided if the trust owner had updated her trust when she got married so you know i think marriages are probably down in 2020. um you know i have some friends who had to reschedule their wedding uh but if you fall into that category or you know someone that does this is a really important change that you need to pay attention to now in the same vein related to marriage if you have kids and your kids got married you got to pay extra close attention to that i have plenty of clients who say you know i i'm kind of concerned that you know my daughter made the wrong choice and she married someone who i think is a rotten apple and if i pass away and i leave her in inheritance you know i'm going to be rolling in my grave if they get divorced one day and uh you know my daughter has to give up a portion of what i worked hard to leave her to this lousy ex-son-in-law of mine and so if that is a concern of yours and frankly for a lot of my clients they like their son and daughter-in-law but you know i think what we all need to recognize is there's a 60 divorce rate nowadays right there is uh more likely than not chance that our loved ones are gonna get divorced and so when we're managing a plan for inherited assets we really need to be mindful of that um now on a happier note uh has anybody been born right have you had more grandchildren um have uh you know has anything changed as far as how many people there are who are meaningful to you that you would want to support uh with inherited assets um so this is a big life change that um you know frankly i meet with a lot of people who come in and they kind of casually will tell me you know yeah i've had some additional grandkids or i had more kids in the last few years um but you know i didn't really feel it was that important to update my trust and in some of these trust documents um you know they would be not included as a beneficiary unless an update to the trust was made so so that's a really big one as well um has anyone gotten divorced have you gotten divorced right have your kids gotten divorced has somebody who you intend to leave an inheritance to become divorced and i think you know some of the uh strains of living right now during you know coven 19 all the challenges that people have faced what we're seeing is an increase in divorces um we're seeing uh you know an increase in deaths arguably um and uh you know some of this stuff some of the specific things that people are going through in this unique year may have a really big impact on their estate plan right another big one is retirement um i i have about 20 clients this year who called me up and said jeff you know i wasn't really planning on retiring but you know it's become so hard to work right now and uh you know i i knew retirement was on the horizon and covet kind of forced me into retirement um i'm doing it a little prematurely but you know i'm just tired of getting up every day and having to work from home and i'm just going to do it now and of those 20 people um over half of them have told me that they're moving out of california right so um that's a very common thing people are moving to texas nevada idaho florida um a lot of these are states with uh low or no state income tax so those are you know attractive for a lot of californians when they retire but here's the deal when you retire you need to closely look at your estate plan right if you move to another state you may want to have a lawyer in that state look things over if you've recently moved to california from another state you got to have an attorney like me really look over the documents and make sure that they reflect the laws in california that you need to be in there and then finally a big change that i think unfortunately is going to be a reality for a lot of people maybe already perhaps in the next year is bankruptcy right if uh if you file for bankruptcy you need to um you know really think about how do i protect my assets right is there anything you can do right now to um protect your assets in the event you're going to file bankruptcy in the future so if you're undergoing a financial hardship right now uh as a result of kova 19 [Music] impact on the economy or for any reason you may want to meet with an estate planning lawyer and uh you know make sure things are protected to the degree you can now i'm not suggesting that you um you know hide your assets so you don't have to pay your creditors but um there are some asset protection strategies that can be used um you know in the event something happens it's not really your fault you may want your assets to be protected in that event so keeping up to date with the changes in your life um you know simple advice really and i think a lot of us intuitively know as our lives change our estate plans need to change alongside it but now is a really good time to evaluate these things because it's at year's end it's been you know kind of a wild ride of a year where i think a lot of life changes have occurred and you'd be doing yourself and your family and your loved ones you know a valuable service to have things reviewed by an attorney so that's number one on the checklist number two is another pretty obvious thing but i think because of 2020 with health and public health and you know a pandemic occurring healthcare has been on more people's minds and frankly if i get sick when i think about myself and i think about potentially being admitted to the hospital for an illness i want to make sure that if i lose the ability to communicate with my doctors as far as what my wishes are i've clearly spelled out who i want to be in charge next and i don't want there to be any question as to whether those are valid or whether they're going to look to another person to make those decisions for me and i'll tell you what i definitely don't want a physician who i've never met making all my health care decisions for me right i want somebody who i know and trust and i know what kind of judgment they exercise and i've had the opportunity to communicate with them what my wishes are and i think this is really on a lot of people's mind if you have a healthcare directive already that's great if you filled one out last time you visited the doctor or the hospital that's also great but they may be outdated right um a healthcare directive even though they most of them don't technically expire i would say they have a lifespan of about five to six years if you rely on healthcare documents that were signed longer than that there is a chance that the healthcare provider could look at that and say hey you know these are have either become outdated by virtue of changes in the law or we just feel like this represents your wishes from so long ago that we don't have the confidence that these reflect your your modern wishes right so um generally people's healthcare documents are going to consist of an advanced healthcare directive that's where you say hey this is who i want to be in charge and this is all the contact info of the people i've designated to be in charge so if i'm in a coma and the doctor needs to find my wife they know where to find her right her cell phone number is right there on my form our address is right there and if they need to send a sheriff out to our house they can get in contact with her and make sure that she's making my medical decisions you may have heard of something called hipaa before h-i-p-a-a that is a federal law passed years and years ago that protects the privacy of our medical records so if you ever need to obtain the medical records of another person like a family member unless they've specifically authorized you as a person that can gain access the health care provider is prohibited from releasing your records to them so you know i get in a mountain biking accident i'm unconscious they take me to the local hospital if my wife needs to obtain my medical records she cannot get them unless i've authorized her on a hipaa authorization form and folks medical providers take this very seriously i think the fine nowadays for a hipaa violation is uh up to 250 thousand dollars so you can bet they take that very seriously so how does this come into play today well if um you know if you test positive for covet 19 and you're receiving treatment at a hospital and the hospital is overbooked with patients and it's chaos and no one can really figure out what to do that's kind of what's happening nowadays i'm not saying this to scare you that's just you know what i hear is happening having an orderly set of documents that provides a level of organization during what is kind of a disorganized time um is a really valuable thing not only for you but for your family members who are going to have to make those difficult decisions one day right and frankly a health care directive deals with life-prolonging treatment right it indicates what your wishes are with respect to whether you want to stay on life support whether you would be okay under certain circumstances having it removed but it also covers just general healthcare issues right so i've become sick i'm in that temporary coma i broke my wrist in the mountain biking accident and i can't tell the doctor whether i want to have surgery because i'm in a coma someone needs the authority to tell the doctor what to do on my behalf right so a lot of people think healthcare directive well that's for these really heavy really serious medical decisions that need to be made and to a degree yes it is but it's also just for general healthcare decision making as well now one of the things that i think would be really valuable and this is kind of a nice time to do this this is why i put this on my checklist for the end of the year is to actually discuss with your loved ones what your wishes are when it comes to end of life treatment right with respect to whether you would want to be in an assisted living facility one day or whether you'd be okay being in a skilled nursing facility if you couldn't live at home anymore and a good time to discuss this is with your family when you all get together now i don't know if everybody's planning on getting together with their family this year it's such an anomaly of a year but that you know i know for us for thanksgiving we're doing a zoom thanksgiving with all my family members we're not actually getting together like we usually do um but when you have everybody together you know it's usually a happy time and if you start bringing up you know guys this is you know what i want you to do for mom and dad when when we're you know at the end of our life it's a taboo subject it's a lousy subject to talk about i know when i bring it up with or when my parents bring it up with me i'm like mom dad get out of here you i don't want to talk about this you're not going to die we don't need to discuss this but you do need to discuss it and around the holidays is actually a really good time because a lot of people have an opportunity with all their loved ones together at the same time to actually talk about this stuff and actually verbalize so a lot of people think you know my kids or my loved ones they kind of know what my wishes are they're going to know what to do if that time eventually comes but uh you know frankly they may not um if you haven't actually discussed it and that's what happened with my wife and her dad who passed away a few years ago he was a real tough guy real macho man never really expressed his feelings about this kind of uh sensitive stuff and when you know when he rapidly lost his battle with cancer and he was on life support and we walked in and we saw him in that bed and we could tell you know he was breathing on the machine but his soul had left it was really you know really heartbreaking to see but my wife who had to make the decision on whether to remove him she really had no idea what his wishes were right and so she kind of felt like she had to guess she would have really appreciated if he had discussed with her what his actual wishes were so that's the second topic here make sure your health care documents are up to date and make sure you express your wishes to your loved ones uh before years on this is a great time to be talking about this so the next uh items on the checklist are going to be a little bit more technical in nature a little bit more geared towards um actual strategies that can be utilized and uh added to an existing estate plan or or put into a new estate plan and here's the third thing on the checklist um being mindful that frankly our landscape as we know it is changing and what i mean by that is i think the impact of kovid 19 is at least in california where we're such a creditor-friendly state it is going to increase issues that people have with potential creditors all right here's what i mean by this um you know we have people who have lost their jobs they're on unemployment benefits they're not making the same amount of income as they were before people are retiring prematurely people are um you know not living with the same amount of social interaction that they used to and the result of that if you ask me is there's been a lot of strain on people's marriages there's been a strain on people's businesses on uh people's financial obligations uh about you know three or four times a week i get a call from somebody who's a business owner who says jeff you know it's just been so difficult operating my business under these circumstances this year you know i'm not making the money i need to to pay my lease and i'm in a five year lease can i get out of it can i break it right i've got reduced income i think we see people who are kind of prematurely selling real estate right they can't pay rent um and they've decided hey you know i'm going to sell this real estate like i mentioned earlier you have people moving out of state you have potential bankruptcies and this stuff can apply to you as the owner of a trust right it could apply to you and impact your assets it could also apply to your children or the people who you intend to leave an inheritance to so why is that relevant right well if um you know you're going to be leaving a substantial inheritance and you know i think any amount of wealth you could consider substantial right because i'm sure you worked really hard for it if you're going to be leaving that to a child who's a business owner and you can kind of forecast that they may have some challenges one thing that may be a mistake is to you know leave them as an inheritance if you pass away a big old lump of money or a lump of assets right if they end up going through bankruptcy or if they end up going through a divorce with their spouse because you know the strain on the marriage that has occurred as a result of this and frankly one of the strains of marriage and i i'm not saying my marriage is strained at all but me and my wife we're like with each other all the time now um because i you know half the time i'm working from home and she's working from home all the time so we're like with each other more than we ever have before and to a degree it's great right you know i love getting to see her but we are definitely getting under one another's skin more often than we used to right and i think i get under her skin a little bit more but um you know that's an example of a strain on a marriage right um i think you know you're in close proximity uh things just are abnormal and i think that's testing a lot of people right now right and if it results in a divorce you know i'm not saying that's where i'm heading at all but for some people i can see where that could come into play you may want to utilize a strategy in your trust so that when you eventually pass away and you pass on your assets to these people who are your loved ones you leave it to them in a manner where their inheritance is protected from any potential creditors they have in the future so if they have a divorcing spouse who's coming after their assets in the divorce if they have a bankruptcy uh trustee who's coming after their assets um any of these things you have this very unique opportunity to structure your living trust in a manner where after you pass away your trust can transform into what's called a continuing trust for your loved ones and a continuing trust is designed to hold the inheritance for the person you've made your beneficiary and if you want to structure it where that beneficiary is in complete control of that continuing trust where they can manage it they can reinvest the assets they can pull assets and distribute them uh to themselves so they can spend it you can do that but you can design it in a manner that any assets that are kept in that continuing trust during the lifetime of that loved one are protected from their potential creditors and that's something that isn't a new strategy in fact this is what i would consider modern estate planning probably 80 of my clients or more decide to incorporate this into their trust um and i think right now you know you're gonna see some of these um some of these things become a reality for a lot of families uh maybe going into next year or maybe by the end of this year and so this is a unique year where if you don't have this and you're the kind of person that says hey you know i've worked really hard for this wealth i would hate to see it just be taken away by a creditor of the person i leave it to you may want to consider adding a continuing trust to your estate plan for your loved ones right now this is a trust that kind of springs into existence after you pass away so you don't set up you know three trusts right now for each one of your three kids um you would put that language into your trust and it would kind of lie dormant in your trust until you pass away then those three trusts for each one of the kids spring into action and they exist to receive the inheritance you've left each one of those children for example so you know for me for instance uh with our uh kids um you know i certainly hope that they don't have you know a really nasty divorce one day or have creditor issues or get in a car accident and you know be held liable for a bunch of damages you know i hope i think most of us you know are hoping that that doesn't happen to our loved ones but you never know you don't have a crystal ball right and i think in this changing landscape especially in california so if your loved ones live in california we are the most creditor-friendly state there is what does that mean it means it is easier for a creditor in california than any other state to uh to extract assets from people right creditors get paid uh first in california so this is a really powerful strategy that you can employ now you can do this in year 2021 but you have to have set up this structure before the asset protection is actually needed right and it has to be set up before you pass away right so if you don't do this strategy you leave an inheritance to your loved ones and your loved ones say hey it would be great if we could put some asset protection over these inherited assets uh there are some options that exist uh you know they offshore bank accounts for example but uh this is a really unique uh and obtainable way to create protection from the creditors of our loved ones right so this is uh checklist item number three going on to number four i think all of us know that uh our country has undergone some pretty significant political change and we've had a huge election uh which will change the landscape of our country for uh years to come we've got a democratic president elect it is unclear at the moment whether we're going to have a democratic or a republican senate but here's the deal uh what a lot of analysts predict is in the coming years perhaps in the coming months we can have a significant change to our estate tax law and we also call the estate tax the inheritance tax right so here's the rule right now when we pass away this year each individual can pass on 11.58 million dollars free of inheritance tax and if you're married you double that because you each get one of those 11.58 million dollar coupon so married couples when they pass away can pass on 23 million dollars and change right and we call that the exemption now the exemption has never been as high as it is in american history as it is today right it's never been over 23 million in fact for a long time it was you know in the 90s for instance it was under a million dollars in 1996 that exemption amount was 600 000 right so we've gone undergone this enormous increase in the exemption from that tax now what do uh democratic-minded politicians seek to do they seek to lower that exemption so the bynum plan for instance is to lower the inheritance tax exemption from 11.58 million dollars to about three and a half million dollars so that is really slashing the law as we know it right and so for a lot of families having a three and a half million dollar exemption is still plenty that's going to cover all of their assets when they pass away but for a lot of families as well they are either over that threshold or they are flirting with that threshold right they have some properties and if the properties continue appreciating they're on the trajectory to exceed that so what does that mean it means you know when you pass away if you exceed those thresholds your family or your estate pays a 40 tax on any amount over that threshold and frankly that tax rate 40 may be changing as well it's been 55 uh years ago right right now it's 40 it could change so here's the deal this law could potentially change next year and it could be made retroactive back to january 1st of 2021 that's like a month and a half from now right even if the law is not changed right let's say there's a republican senate and they don't allow biden's plan to go through and we keep the law as we know it today that law is still scheduled to expire by the end of year 2025 so by 2026 even if the law hasn't been changed that 11 and a half million dollar threshold is going away and it's going to be reduced probably to half of that right so what do you do if you're a person who um has acquired a lot of wealth and you know you don't have any plans on dying by the end of this year and you're concerned about you know hey when i eventually die if these laws change as dramatically as they're projected to change or frankly as they're going to change um you know is there any strategy available to you right now to perhaps be able to take advantage of the preferential law today so that in the future when the law changes you've already taken advantage of this eleven and a half million ollars the government gives you today and the bottom line is there are several strategies that you can engage in to do that and you know i have a handful of clients right now who are engaging in just that so what are some of those strategies i mean there are a whole bunch of different strategies available one strategy is to gift away those assets right now so you know if you have 23 million dollars and you're concerned that half of that's going to be gone in taxes after you pass away you can potentially leave that to your kids or leave that to your loved ones right now now a lot of people hear that and they say that's outrageous that's crazy i would i would if if i had 23 million dollars to leave to anybody i'm not leaving that to my kids right now um and i understand that uh you could potentially use an irrevocable trust and you can transfer assets into that irrevocable trust it counts as a completed gift being made now so you can use up all that exemption that you have now under today's law and when you eventually pass away those assets pass tax free to your loved ones now that's a pretty cool strategy if you transfer those assets to an irrevocable trust you can potentially retain control of that trust you can potentially contain retain the ability to determine who pays taxes right income taxes while you're still alive on that trust um that's a strategic wealth transfer planning strategy that um you know a lot of people are are taking advantage of quite frankly who have acquired that much wealth because a lot of the people we work with say hey you know i've worked so hard for this i want to keep it within my family i don't um you know i don't particularly want my family to have to write you know a 10 million dollar check to the government when we pass away so you know i know a lot of you attending here may not have estates over 23 million dollars um if you do frankly if you have an estate of i don't know if you're married 10 million or more if you're single probably 4 million or more if you fall into that category but this may be something that makes sense to discuss with us before years end right now why before years end um you know frankly if you wait until 2021 to do these transfers the law could have changed by them right so what we know for sure is what the law is going to be for the remainder of 2020. let's see i have a question here does the estate tax exemption amount based on the year you give not the year you die that is a great question so the estate tax exemption we also refer to as the unified credit and unified refers to the fact that this credit applies to gifts we leave when we die but also to gifts we leave during our lifetime right so if i leave a gift if i leave a million dollars to my daughter this year my 11.58 million dollars is now reduced by a million dollars so i don't have to pay any tax on this million dollar gift that i gave my daughter while i'm alive but when i eventually pass away i'm not going to have you know and a half million anymore i'm gonna have to deduct a million dollars from that right now the estate tax exemption the unified credit changes every year so so it kind of depends on the year you pass away so if you make a gift during your lifetime that's going to offset your existing exemption when you eventually pass away we add up the value of any assets that are part of your estate and we deduct that from your existing exemption so here's the deal we might pass away five years from now potentially and the exemption isn't 11.5 million anymore let's say it's three million five years from now when we pass away wouldn't it be nice to have made a transfer now to use up that eleven and a half million dollar coupon we have rather than wait until we only have a three million dollar coupon and end up exceeding that and now our family's paying 40 percent on the excess so this is something that um you know you only have a very short window of time to address and uh you know i would suggest if you're sensitive to that make an appointment with us and usually what an engagement like this looks like is somebody will hire us to do an analysis where we'll look at all your assets we'll look at all your planning strategies available think of it as kind of like uh drawing up the architectural plans to build a house right and once we determine what the best strategy is and you decide hey this is what makes sense then we built that house right so first you kind of plan it out then you actually implement the plan um so uh this is a really cool strategy now frankly you might be saying i don't really care that much about what taxes exist when i pass away because frankly i'm not going to be here anymore and i'm not even going to know uh what you know taxes are being paid and you know that's a realistic way of looking at it as well but i think a lot of the people that i work with uh don't have that attitude they say look you know i've worked really hard for this i have um you know i have people who are very meaningful to me and i would prefer if i can to keep that wealth with them rather than just um you know write a check to the treasury nine months after my dad so being aware of the political change that's on the horizon um you know we've got this tiny opportunity um to take advantage of this right now last last bit on this topic is this is the type of strategic planning that you can't do in two days right this is something that requires that we really dive into existing assets we usually spend weeks doing the analysis another chunk of weeks determining what is right for your family so this is something that takes time to implement so if you need to implement this before the end of the year the time to get started on this planning is now right and i think there's a chance that we stop taking new cases uh of this variety um uh by the end of this month because we're going to just have too much work to do in december so if you're really sensitive to this now is the time to uh jump on it and you know get this going so let's see here going a little bit longer than i promised but i'm real passionate about this stuff so let's go to the fifth item on the checklist and that is prop 19 so if you're in california and you voted or if you're just the californian general even if you didn't vote you've probably heard of prop 19 this is one of the ballot measures that technically hasn't passed yet but all signs lead to it is uh going to pass they've tallied up i think 94 of the votes and uh you know it's going to be shocking if prop 19 does not officially pass i think a lot of people are treating it as if it has passed so what's prop 19 it it is a siege on property tax law as you know it in california it impacts prop 13 which you've pr which you probably know what prop 13 is right it limits the amount of increase the county can apply to your property for property tax purposes so you may have bought a property for 300 000 it may be worth a million dollars today but your property taxes still calculated based on the amount you paid for it with very small increases each year right so the property tax you're paying on a property now may be significantly lower than somebody who bought that property same property today right so what does prop 19 do well the old rule says when we pass away and we transfer real estate to our children if it's a parent to child transfer sometimes if it's a grandparent to grandchild transfer but that's not as common that transfer does not yield a reassessment of property tax on that piece of real estate and this applies to the primary resident residence of the parent no matter what the value of the residence is and up to one million dollars of other property okay so essentially under the existing regime that's existed for a long time you can pass on your property sometimes all of your properties and not result in an increase in the property tax when the kids inherit it and this was a tremendous advantage for people who inherited real estate from their parents right whether it be their house commercial real estate an industrial piece of real estate really valuable opportunity and prop 19 does away with that or they at least modify it so prop 19 now says when you inherit mom and dad's home if you're going to keep the property tax where it was while mom and dad owned it you got to live in the house it has to become your residence and that's the only exception that's going to exist so if you inherit the residence and you keep it as a rental that property gets reassessed to fair market value right so the property tax is usually increased significantly right sometimes it's an increase of ten thousand dollars on a residence we have one client who owns a commercial building where if it gets reassessed when she passes away um it's gonna be an increase of about 40 to 50 000 per year in property tax right so that's the impact of prop 19. big big deal folks so if you're sitting there and you're saying hey i own real estate and one day i plan on leaving it to my kids and i want to make sure i can take advantage of this now how do you eliminate the impact of prop 19 because prop 19 becomes effective february 21st i believe of 2021 and any transfers that take place have to be made before february 16th 2021 in order to be covered by the rule as it stands today so what does this mean well potentially what some of our clients who would be really harmed by this when they pass away right if you have a house that you know you don't believe your kids are going to want to keep as their own residents but they may want to keep it as a rental or if you own rental properties right now that you plan on passing on to your kids and they want to keep it as rentals right they can't do that without a reassessment occurring on the property tax so is there anything you can do today to take advantage of the law before it changes in february the answer is yes you can potentially do several things one idea and you know this is where we're getting into the realm of this is not legal advice folks these are just general ideas um you know i would encourage that you call us and uh uh you know discuss your particular circumstance and we can give you more pinpoint advice but one option is you can transfer that real estate to an irrevocable trust now and lock in uh those property taxes right so basically by transferring it to an irrevocable trust the county sees that as there's now been a change in ownership and the law today is what's going to govern whether it's been reassessed or not so a lot today would say no that doesn't qualify as a reassessment so the property taxes stay the same when you pass away and the assets in that trust are distributed to your kids what the tax code what the property tax scheme is at that time whatever year that is really doesn't matter anymore because you've already made that transfer this year or before february of next year right and this could be extraordinarily valuable for some families that have properties that have appreciated significantly right i mean you know if you've owned your house for five or more years it is most likely appreciated significantly in california right and i have a lot of clients who've owned their house for 40 years or 50 years my parents for example have owned their house for 35 years and you know as as much as i don't want them to die you know one nice thing would have been to be able to inherit their house and keep their prop 13 taxes right because their prop 13 taxes are you know after 35 years it's like nothing compared to what it would be if that house was sold today so um what i'm getting at folks is in order to take advantage of this you need to do something now and if you don't do anything and you wait until after february of 2021 and you end up passing away sometime after that um you may have left your kids with um you know a real big property tax problem that you could have eliminated by doing something now right so this is a year-end thing technically you know transfers have to be made by next february but here's the challenge when you record a deed transferring a property it takes time to record it right and during covid times la county and the counties with larger populations are taking way longer than usual to record a deed sometimes it takes up to you know six weeks to do that so um the time to do this planning is now to make sure it gets recorded prior to the change in the law now one other strategy that could be used potentially to take advantage of the laws today that don't involve transferring something to an irrevocable trust is you could potentially creatively structure a sale of the property to your kids now so we have a client who was planning on moving and they wanted to leave their house to their children and they decided hey why don't we sell the house to the children now and we can decide if we're going to gift them a portion of it or if they're going to actually pay us back for it but we're going to sell it we're going to memorialize the sale with a promissory note a promise to pay for the amount of the house and we'll structure it over a certain number of years or it will make it a cash sale whatever makes sense for your family but by selling it now you can still apply for that parent-to-child exclusion on the real estate so these are two really cool strategies that we're getting calls and basically you know every hour from people who are concerned about this um this is one particular thing where this requires such a detailed level of analysis by us that if you want to uh you know have a one-hour consultation about this we do charge a fee for the time it takes us to go over everything it usually involves us trying to do a quick valuation of the property we want to review the property tax bills and after that work is done we found that we need to charge a consultation fee for these types of phone calls so if this is on your mind call in schedule a time to talk with me or one of the other lawyers here and you know time is of the essence when it comes to this um so i'm going to go over a couple of the questions before we go over the last item on the checklist here let's see is there a specific name for the spring up type trust to children that i mentioned maybe 20 minutes ago a trust designed to protect from creditors and frankly um you know every employer that specializes in this has a different name for it we call it an inheritance protection trust uh some attorneys call it um you know something else but the concept is it's a continuing trust right so continuing trust is the the best way to describe it it's a trust that continues on after the original owner of the trust passes away so that's a very good question um see another question here is if my assets are less than the threshold or the potential changing threshold of three and a half million should i not worry about a state tax that's a really intriguing question you know it's tough to say because you know the great mystery in life is we don't know when we're going to pass away right so you know the law can be anything by the time we pass away all we know is what we know now and we can project into the future of what we think the law is going to be like right so for a lot of people you know we can look at this time right now in history and we can say look we have never had a time in history where the exemption has been as high as it is if there's going to be any change it's very unlikely to go up the change is likely to go down so just to illustrate this just a couple years ago the estate tax exemption was 5 million dollars right and then it jumped from five to about 10 million in one year right and we've never had a jump up that significant so that's why a lot of people predict that there's going to be a much lower exemption so i think even if you don't meet that you know 11.58 million dollar threshold or that three and a half million threshold you should still be mindful about the estate tax and you can use your trust to prepare a plan that has a very high degree of flexibility so that if you do pass away and you are exposed to that tax threshold uh you can use your trust to creatively protect those assets right from that tax so those are both really good questions so let's get into the last item on the checklist here and this is something that i've been talking about for all of 2020 and that is the secure act so this was a big change in the law that was made effective january 1st of this year right so 11 months ago this law became effective here's the problem with the secure act it has been overshadowed by the attention that kova 19 has received and i think uh most advisors and lawyers like me were really trying to communicate this to their clients at the beginning of this year and people's attention just shifted away from this but this is very very important that you are aware of this change to the law now the secure act has done several things the thing that i think is most impactful most worthy of paying attention to right now is the impact it's had on what happens to your retirement accounts when you pass away and other people inherit those retirement accounts okay so the way the law used to be before the secure act was when you would inherit an ira for instance you'd have to pay the tax on the ira right if the original owner never paid the tax on it eventually when someone inherits it that income tax still has to be paid right but you wouldn't have to pay it all up front you could do what's called a stretch up you could decide to keep those assets invested in the ira over the remainder of your life expectancy and pay those taxes periodically over your lifetime so you could stretch out your exposure to that tax get this compound growth on the ira and ultimately take an inherited ira and allow it to compound to an extraordinary value right deferring the taxes time goes on it was a fantastic opportunity the change the secure act has had is for most people now who inherit iras they can't elect to do that life expectancy stretch out anymore for most people the rule that's going to apply is a 10-year rule what that means is after 10 years of inheriting of the date you inherited that retirement account you have to pay the income tax on all of it right now you can pay it all up front if you want you can pay nothing until that tenth year is over and then pay all the income tax at once or you can spread out uh the payment of that tax throughout that in that ten year window whenever you want to right but when you take money out of an inherited ira you have to pay the income tax on it so this has been a substantial change to the rule that existed for you know frankly dozens of years um right ultimately um congress has said look we want to accelerate the income tax that we receive on inherited iras so there are some exceptions to this rule you can still leave a ira to a disabled person and then that disabled person can still qualify for the life expectancy stretch out you can leave it to your kids if you're minors and even though they won't receive a life expectancy stretch out they can still get some stretch out until they become an adult before that 10-year clock starts ticking right but here's the deal for most people when they leave their iris to their loved ones there's going to be a huge tax event somewhere in that 10-year window after you pass away so is there any planning you can do to eliminate the impact of that 10-year rule and the answer is yes you can do what i would consider a pretty sophisticated planning strategy to offset this impact it's what we call an ira legacy trust and this is something you can use for a 401k attack sheltered annuity um an ira a roth ira anything that you would consider a retirement account is usually eligible for what we call an ira legacy trust and here's what you can do you can structure that trust strategically to potentially give your beneficiaries the opportunity to defer the state income tax that has to be paid on that ira more than 10 years right you could potentially give them more than 10 years to pay the state income tax and that can be extraordinarily valuable to somebody so when i think of myself for instance i have my parents who have been really hard workers they're big savers they've put a bunch of money into their ira i tell them to start spending it but they're just not listening to me i know one day when they pass away uh they will be leaving me some type of money in an ira right and you know they're probably going to pass away when i'm in my peak earning years right when i'm in my 50s or 60s and i'm making the most money i have the highest income i've had in my lifetime now the last thing i'm going to want to do during those peak earning years is have to realize more income as i'm forced to take the money out of the ira that they left me right my preference would be to leave the money in that ira as long as i can and defer the tax out as long as i can so perhaps if i can i don't want to touch that ira money from mom and dad until i've retired and my income is lower than it used to be and then i want to take it out but if that window doesn't happen in 10 years i'm out of luck if my parents do what ira legacy trusts for me they can structure it in an artful way that potentially gives me the ability to defer the state income tax right not the federal income tax the state income tax so if i live in california i can defer my california state income tax on that inherited ira money past that 10-year deadline right the trust has to exist and it has to provide the flexibility with the language of the trust to provide that um i can't do it on my own without my parents setting up this ira legacy trust for me so if this is something if you're if you're a person who has uh you know contributed i would say over 200 250 000 in an ira and you plan on leaving this to somebody one day um this is a really great planning strategy to adapt to this new change in the law a great time to do this planning and focus on it is right now right before years out so folks that is the six items on the checklist that i really believe that you should be focusing on before years end we want to make it as easy as possible for you guys so call call in schedule a free 15 minute phone call with me and we can go over your individual situation and determine if a longer consultation should be scheduled to uh really discuss what's going on so i'm going to open it up for a q a i've got some really good questions coming in here feel free to um punch in any questions i'll spend a few minutes on these let's see here somebody asks uh if our daughter gets a continuing trust upon our death but then commingles any community property into that trust does that breach the divorce of creditor protection provided by the trust that's a great question so first of all a continuing trust is exclusively designed to hold inherited assets so so your kids for instance can't say well i've got this inherited trust great let me take all my other assets that i've earned on my own and put them into this trust so i can get asset protection it will only work to protect inherited assets and here's here's the big problem with when people get an inheritance they take that inheritance and they put it in a joint bank account with their spouse right they co-mingle it with their spouse they use it to pay off the mortgage and both of their names are on the mortgage and they've now converted that inherited asset to community property now if they get divorced what happens they split the community property 50 50. so the whole idea or one of the major ideas behind a continuing trust is it kind of prevents that from inadvertently happening right so if your daughter for instance receives her inheritance in a continuing trust she's not going to be commingling those assets with her spouse right she's going to be keeping those inherited assets within that continuing trust if they get divorced in the future ex-spouse doesn't have any uh you know they can't dip their hands into that inherited trust pot right uh that's the issue that exists so i hope that answers your question um my house is in a trust now and my only child is going to inherit it he intends to live in it what i have to do anything for him to keep my prop 13 uh somebody mentioned an inheritance from a trust the child is different so the distinction of whether it's inherited from a trust to a child or just directly from your name to a child is is not really relevant um and frankly if your child intends to live in it then that's probably not gonna frustrate prop 19 so in other words under prop 19 so long as he inherits it from you it's a parent to child transfer and your child decides to make it his or her residence that will not create a reassessment under the law now there is a caveat to that and this is something that we're still kind of waiting for clarification on and that is when it comes to prop 19 there's kind of a cap on a primary residence of how much value you can transfer before a reassessment occurs even if it's used as a residence so there's a million dollar threshold my reading of the statute or the proposition and you know i'll be looking at a little bit closer as the rules get rolled out a little bit more is that um if that reassessment yields um if the if the reassessed value would be a million dollars or more um on that prop on that residence then a percentage is still going to become reassessed right so they've basically said the value of the uh property now matters on a primary residence and there's this million-dollar buffer so for a lot of us uh you know we haven't seen a million dollars of increase in the assessed value so most people will be fine but if you you know if you have a house in west la that's gone up in value two million dollars or three million dollars um you know this would impact you so uh jessica this is one reason where where you know you probably still would want to schedule a consultation with a lawyer just so we can look into you know your specific properties and uh be able to tell you definitively uh whether this is something you need to be concerned about so it looks like the last question i have here is does the secure act 10-year withdrawal requirement apply to my spouse who's the beneficiary of my irs that's a really good question um it really depends on how old you are when you pass away and how old your spouse is so there's a chance that that 10-year rule does apply but for most people when you uh pass an ira onto a spouse usually that spouse will do what's called a rollover to their ira and that that restarts the age that requirement required minimum distributions begin at so for instance if you're 80 and your spouse is 79 and you pass away you've left your ira to your 79 year old spouse uh he or she is probably going to do a rollover and do an existing ira so that they can reduce at least for one year the amount of required minimum distribution that has to come out so that's a really good question the secure act has had more of an impact on when non-spouses inherit an ira as opposed to when a spouse inherits an ira so let's see i think i may have one other question here and a lot of these are related to prop 19 so you know most of us if we're homeowners in california have now been impacted by prop 18 so that's one reason that we encourage you to call in and let's talk about it so last question i have time to answer here is what if you inherit the family home along with your sibling and you want to buy them out and you plan to live in it does that affect your ability to benefit from prop 19. that is a fantastic question um there are complete books written on this subject um whenever you buy out a sibling when you inherit a house the issue is whether the county is going to see that as still being a parent to child transfer or whether a portion of that of which you've bought them out is now no longer considered a transfer between a parent and a child and now it's seen as what's called a sibling to sibling transfer so a lot of times those property tax benefits get blown if you don't structure that buyout properly so to answer your question there is still a way under prop 19 to accomplish this to keep the property tax for that one child who buys out the other but you have to do it very carefully so as not to violate the rules and so if you fall into this category and frankly guys if you're someone who owns a house and you plan on leaving it to multiple kids or if you're one of the kids and you know mom and dad have a house that they're going to leave to you and a sibling for instance and you know you know one of you wants to live there the time to focus on this is now before a death occurs right because there may need to be some things in your trust or your estate plan that you need to strategically set up so when you eventually do pass away or when you eventually do inherit that property uh you can still qualify for all these benefits right so if that's one thing i could convey it's the importance of focusing on this now uh rather than after someone passes away it's a whole lot harder and your options are much slimmer if you wait till after a person passes away to solve these potential problems so guys this has been a really great group of questions and it looks like all of you hung in there until the end so uh really glad you all invited us again i encourage you guys set up a free 15-minute phone call with me or another lawyer here at the firm we'd love to talk to you about this stuff and remember some of these strategies are time sensitive right the time to focus on it is now before a year is up so thank you so much everybody and we will see you all soon bye