This year brought plenty of new law changes with the amount of cases litigated in our state court system. Below are just a few that we feel would be of most interest to our clients:
Pena v. Dey: This case held that handwritten interlineations on the decedent’s estate plan which unequivocally indicated the decedent’s intent are ineffective because they are not compliant with the trust requirements to make a modification. This case serves as a great reminder to not attempt to draft homemade amendments. Not following the strict requirements of modification led to a failed estate plan.
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 and rest assured it is not presumed they forced you into doing it! We all know that our spouses never force us to do anything we don’t want to. Glad to know it is black letter law now.
Small Estate Transfers: The threshold amount to trigger an estate being required to pass through probate increased from $150,000 to $166,250, for estates with no real property. The amount for an estate with real property 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 the title to your assets to ensure they are all properly titled to avoid probate when you eventually don’t wake up.
Increased Exemption Amounts: The Federal Estate Tax exemption increased this year to $11,580,000. Therefore, if you have $11,580,000 to leave to your loved ones, charity, dog, or cat, it will pass estate tax free! The annual gift exclusion remained unchanged at $15,000. So your kids still on your “payroll” will not be getting a raise this year, at least not tax-free.
SECURE ACT and Stretch IRA: The stretch IRA has largely been eliminated. 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 this law changed last year, we want to remind our clients that have an allocated A/B type trust (meaning that the trust was split after the first spouse passed) to contact our office about the benefits of decanting your trust. Unless you like paying more taxes than is legally required of you, in that case you don’t have to worry about keeping your old plan. 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.