A Look at Legal Trends in Estate Planning

Jul 31, 2023

In response to upcoming federal and state law changes, estate planning is becoming more dynamic than ever. These laws affect estate planning tax, trust, and charitable strategies, and the higher your net worth, the more critical it is to re-evaluate your plan.

High Net Worth Individuals (HNWI) and Ultra High Net Worth Individuals (UHNWI) can make adjustments to maximize giving before the federal estate tax threshold rollback on January 1, 2026. Unless Congress intervenes, this historically high estate exemption limit of almost $13 million per individual will be reduced by approximately half. Clients with applicable net worth need to consider using exemptions as soon as possible. Changes to current tax laws seem unlikely in the near term.

The Secure Act and Secure Act 2.0

The SECURE Act (Setting Every Community Up for Retirement Enhancement Act) and SECURE Act 2.0 introduce several retirement planning changes that have implications for estate planning, including:

  • Changes to Required Minimum Distributions (RMDs) – The age when individuals must begin to take RMDs from retirement accounts will increase from 70 ½ to 72. This change may impact current retirement account distribution planning in estate plans.
  • Elimination of the “Stretch IRA” – Most non-spouse beneficiaries will no longer be able to “stretch” distributions from inherited retirement accounts over their lifetimes. Instead, these beneficiaries must typically withdraw the balance within ten years of the account owner’s death. This change may affect estate plans leaving retirement accounts to non-spouse beneficiaries.
  • Exceptions to the “Stretch IRA” Rule – Some eligible designated beneficiaries can still stretch distributions from inherited retirement accounts over their lifetimes. They include surviving spouses, minor children, individuals with disabilities, and individuals not more than ten years younger than the account owner. Estate plans can be modified or designed to take advantage of these exceptions and minimize the tax impact on beneficiaries.

Reviewing and updating beneficiary designations on retirement accounts is crucial to align with your estate planning goals and the new rules. These actions will ensure the desired individuals or entities receive the assets as intended and tax-efficiently.

Ongoing Market Fluctuations and Interest Rates

The current market environment is tricky regarding tax management issues in short-term investing and estate planning. Reducing losses by optimizing investment tax write-offs is a silver lining for many. Still, the monthly movement in the applicable federal rate (AFR) can affect estate planning strategies, particularly regarding the Section 7520 rate used to calculate the value of a certain annuity. Market movements and rising interest rates shift estate planning strategies to some long-overlooked strategies.

Incorporating Asset Protection Strategies

Asset protection is becoming an increasingly important aspect of estate planning. Individuals are exploring strategies incorporating new laws and regulations regarding trusts, limited liability companies (LLCs), and family limited partnerships (FLPs) to safeguard their assets from potential risks and creditors.

Some states have extended or eliminated the rule against perpetuities regarding trusts. States with these changes may allow a trust to last 100 years or some to last indefinitely. Some states allow “directed trusts,” which appoint a trustee for the legal title and property custody, while at the same time, an investment adviser is granted decision-making authority, and a distribution adviser makes decisions regarding distributions to beneficiaries.

States are competing for trust business and creating greater flexibility and additional options regarding the administration of trusts. For example, a New York resident may want to create a trust in perpetuity for their descendants. However, there is a law against NY trusts in perpetuity. Instead, they can create a trust using a Delaware trust company as trustee because, under current law, forming a trust in Delaware permits the trust to last forever.

International Estate Planning

As globalization, cross-border relationships, and increased mobility become more common, international estate planning is gaining importance. The unique challenges of planning for assets in different jurisdictions, its tax implications, and coordinating with legal systems in multiple jurisdictions and countries are key considerations in international estate planning.

Integrating Digital Estate Planning

As digital assets play a significant role in people’s lives, estate planning increasingly incorporates provisions for managing and distributing these assets. Cryptocurrencies, social media accounts, and online businesses place greater estate planning emphasis on addressing these assets. The plan may include creating digital inventories, designating digital asset trustees, and providing instructions for accessing and transferring digital assets.

Family Business Succession

Succession planning for family-owned businesses will remain an important aspect of estate planning. Ensuring a smooth transition of ownership and management to the next generation or other designated individuals can help preserve the family’s legacy and protect the value of the business.

Sustainable and Charitable Planning

The trend toward incorporating sustainable and philanthropic goals in estate plans will continue. Many individuals may include charitable bequests, establish family foundations, or incorporate environmentally-friendly strategies such as impact investing or funding renewable energy projects in their estate plans. Some trusts can support charities and provide assets to beneficiaries using a charitable lead or charitable remainder trust.

Long-term Care Planning

With the aging population and rising health care costs, there is a growing emphasis on long-term care planning in estate plans. Provisions include funding long-term care, selecting appropriate health care proxies or agents, and establishing trusts or insurance policies to cover potential expenses.

Special needs planning is a subset of long-term care for individuals with disabilities. Establishing a plan that can evolve to address the needs of these individuals using trusts, ABLE accounts, and other planning techniques can assure additional support while preserving eligibility for government benefits.

Privacy and Confidentiality

Privacy and confidentiality concerns lead individuals to explore strategies to protect their personal and financial information in their estate plans. The goals are to limit public disclosure of assets, utilize trusts and other entities for privacy, and incorporate digital security measures.

These trends reflect individuals evolving needs and priorities in estate planning relating to changes in federal and state inheritance and tax laws. It’s important to meet with an estate planning attorney to create or review an existing estate plan. Our attorneys explain how these trends may apply to your specific situation and jurisdiction and ensure compliance with current laws and regulations while looking to the future.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please do not hesitate to contact our Woodland Hills office at (818) 292-8160 or our Beverly Hills office at (310) 230-5686 to schedule a consultation. We look forward to the opportunity to work with you.

 

Everything You Need to Know About Hiring a Probate Attorney

08 May, 2024
The process of navigating probate court can be overwhelming and complex, especially during a time of grief. Hiring a probate attorney in California can make the process much easier and ensure that everything is handled correctly. In this blog post, we will discuss the importance of hiring a probate attorney, what to look for when choosing one, and how they can help you through the probate process.  Understanding Probate: Probate is the legal process through which a deceased person's assets are distributed to their heirs and beneficiaries. It involves validating the will, paying debts and taxes, and distributing assets according to the deceased person's wishes. The probate process can be lengthy and complicated, especially if there are disputes among family members or creditors. Why Hire a Probate Attorney: Hiring a probate attorney in California is crucial for ensuring that everything is done correctly and efficiently. They have the knowledge and experience to navigate the complexities of probate court, handle any disputes that may arise, and ensure that assets are distributed according to the deceased person's wishes. Without a probate attorney, you may risk making costly mistakes or delays in the distribution of assets. How a Probate Attorney Can Help: A probate attorney can handle all aspects of the probate process on your behalf, including filing necessary paperwork with the court, communicating with creditors and beneficiaries, valuing assets, preparing tax returns, and representing you in court if necessary. They can also provide guidance on estate planning strategies to minimize taxes and avoid future disputes among family members. The Benefits of Hiring a Probate Attorney: By hiring a probate attorney in California, you can have peace of mind knowing that everything will be handled correctly and efficiently during this difficult time. They can help you avoid costly mistakes or delays in the distribution of assets while ensuring that your loved one's final wishes are carried out. Navigating the probate process can be challenging without proper legal guidance. By hiring The Estate Planning & Elder Law Firm, you can ensure that everything is handled correctly while minimizing stress during an already difficult time. We can provide invaluable support throughout the entire process. Don't hesitate to reach out to us when dealing with matters as important as distributing your loved one's assets – it will save you time, money, and unnecessary headaches down the road.

The Importance of Hiring a Power of Attorney

08 May, 2024
As Californians, we often find ourselves navigating complex legal waters, whether it's dealing with estate planning, healthcare decisions, or financial matters. In these situations, having a power of attorney can be an invaluable asset. A power of attorney is a legal document that allows someone to make decisions on your behalf when you are unable to do so yourself. In this blog post, we will discuss the importance of hiring a power of attorney in California and how they can help protect your interests and ensure your wishes are carried out. One of the main reasons why you need to hire a power of attorney in California is for peace of mind. Life is unpredictable, and unexpected circumstances can arise where you may become incapacitated or unable to make decisions for yourself. By appointing a trusted individual as your power of attorney, you can rest assured knowing that there is someone who can step in and make important decisions on your behalf. This can include managing your finances, handling medical issues, or even making legal decisions if necessary. Another important reason to hire a power of attorney in California is for estate planning purposes. A power of attorney can help ensure that your assets are managed according to your wishes in the event that you become incapacitated or pass away. They can work closely with your estate planning attorney to ensure that your assets are distributed as you intended and that any outstanding debts or taxes are taken care of. Without a power of attorney in place, the court may have to appoint someone to handle these matters, which can lead to delays and additional costs. In addition to managing financial and legal matters, a power of attorney can also assist with healthcare decisions. If you were unable to communicate your wishes due to illness or injury, having a power of attorney for healthcare allows someone else to make medical decisions on your behalf. This includes deciding on treatment options, choosing healthcare providers, and even making end-of-life decisions if necessary. By appointing a power of attorney for healthcare, you can ensure that your wishes are respected and followed even when you cannot speak for yourself. Furthermore, hiring a power of attorney in California can help protect against potential abuse or exploitation. Unfortunately, vulnerable individuals such as the elderly or disabled may be targeted by unscrupulous individuals looking to take advantage of their situation for personal gain. By appointing a trustworthy individual as your power of attorney, you have an added layer of protection against financial exploitation or abuse. Your power of attorney has a legal duty to act in your best interests and must follow strict guidelines set forth by California law. Hiring a power of attorney in California is crucial for protecting yourself and ensuring that your wishes are carried out when you are unable to do so yourself. Whether it's managing finances, making healthcare decisions, or handling legal matters, having someone you trust appointed as your power of attorney provides peace of mind and security during uncertain times. Contact The Estate Planning & Elder Law Firm to speak about creating powers of attorney documents tailored to meet your specific needs and circumstances.

Hiring an Elder Law Attorney in California

08 May, 2024
As we age, it's essential to plan for the future and ensure that our legal affairs are in order. From creating a will to navigating long-term care options, an elder law attorney can provide invaluable guidance and support. If you're a California resident looking to hire an elder law attorney, this guide is for you. In this blog post, we'll explore the importance of hiring an elder law attorney, what services they offer, how to find the right attorney for your needs, and what questions to ask during the consultation process. Understanding the Role of an Elder Law Attorney: Elder law attorneys specialize in legal issues that affect older adults and their families. They can help with a wide range of matters, including estate planning, Medicare and Medicaid planning, guardianship and conservatorship, long-term care planning, and more. By working with an elder law attorney, you can ensure that your wishes are carried out effectively and protect your assets for future generations. Services Offered by Elder Law Attorneys: One of the key services offered by elder law attorneys is estate planning. This includes drafting wills, establishing trusts, and creating powers of attorney to appoint someone to make decisions on your behalf if you become incapacitated. They can also assist with long-term care planning, helping you navigate the complex world of Medicare and Medicaid eligibility requirements.  Questions to Ask During Consultations: During consultations with potential elder law attorneys, be sure to ask about their experience handling cases similar to yours, their fee structure, and how they communicate with clients. It's also important to inquire about their approach to problem-solving and how they plan to work with you to achieve your goals. Hiring The Estate Planning & Elder Law Firm is a crucial step in planning for your future and protecting your assets as you age. By understanding the role of an elder law attorney, the services we offer, and what questions to ask during consultations; you can make informed decisions about who will represent you in legal matters related to aging. Remember that finding the right attorney is essential for peace of mind knowing that your wishes will be respected and your assets protected. Contact us today for more information on our services.

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