Many of you probably are hearing that a new tax law called the SECURE Act was passed this year. From an estate planning perspective the main thing to be aware of in this law is the provision regarding Accelerated Distribution Requirements After Death.

What this provision does is force an accelerated distribution timeline of an IRA and other defined contribution plans balances to certain beneficiaries. Before this law was passed any inheriting person either named directly as a beneficiary or via a revocable living trust being named as a beneficiary could slowly over their lifetime take ‘stretched’ distributions from these tax-deferred retirement accounts.

As a revenue raising measure, to offset the cost of other provisions, the SECURE Act greatly shortens the period over which some beneficiaries of IRAs and defined contribution plans must receive distributions of their inherited account balances. The types of beneficiaries who are considered “eligible designated beneficiaries” and therefore able to take distributions over a longer time period still are as follows:

1. surviving spouses,
2. children younger than the age of majority (who cease to be “eligible designated beneficiaries” when they reach that age),
3. beneficiaries who are totally and permanently disabled or who are chronically ill and are medically certified as reasonably expected to remain so for a “lengthy” period, and
4. beneficiaries who are no more than ten years younger than the account owner.

A natural person who is identified as a beneficiary by the terms of the plan or IRA (either by name or by relationship to the decedent) is a “designated beneficiary.”

Non-eligible “designated beneficiaries,” such as grandchildren, formerly followed the same distribution rules as “eligible” beneficiaries. Now they are required to receive the entire balances of their inherited accounts no later than the end of the tenth calendar year after the account owner’s date of death. Minor children have ten years after reaching their majority to empty their accounts.

Multi-beneficiary trusts with only natural persons as beneficiaries are generally not “eligible” beneficiaries, even if all of the trust beneficiaries meet the criteria for “eligible” status. To avoid the 10-year rule, the trust must be divided into separate trusts no later than the account owner’s death.

The distribution rule for each of the successor trusts is then the same as if the trust beneficiary were directly named as the beneficiary of the account. There is an exception for multi-beneficiary trusts whose beneficiaries are all disabled or chronically ill. Because these rules are already effective, estate planners will want to revisit their clients’ trust structures at the earliest feasible opportunity.

I recommend reaching out to me if you would like an appointment to better understand how this new law may or may not affect you or not. It is always best to reach out to me when things like this change so that I can do a case by case analysis of your individual situation in order to determine what, if any, steps need to be taken to protect your estate planning goals.

End-of-life care is essential for maintaining the dignity and respect of people during their final days. Living wills and health care powers of attorney play an important roll in ensuring that a person’s final wishes are truly upheld. Without these documents, California residents might not receive the care they envisioned.

Unlike wills used to distribute assets, living wills focus on medical care and interventions. If someone becomes incapacitated, cannot communicate their wishes or is otherwise unable to make health care decisions on their own behalf, their living will can provide guidance. These documents are especially important for those with strong feelings regarding certain medical interventions or life-sustaining care, although virtually everyone can benefit from outlining even basic care wishes.

A living will alone might not be sufficient. In most cases, a durable health care power of attorney is necessary to fully realize a person’s wishes. This power of attorney gives a designated individual the power to make decisions both according to and outside of a living will. A financial power of attorney should also be included with these documents, which gives someone the ability to handle a person’s finances if they are incapacitated. Due to potential conflict of interests, it is a good idea to name separate individuals in these powers of attorney.

Most people in California focus on the “after” part of estate planning — after death. However, it usually falls on family members to seek medical care on another person’s behalf during their final days, which can be a tremendous burden to bear without any guidance. Living wills and accompanying powers of attorney help round out estate plans and provide clear and concise instructions regarding a person’s final wishes.

Source: FindLaw, “The Power of Attorney, Living Will and Your Healthcare“, Accessed on Jan. 21, 2018

Discussing end of life matters can be uncomfortable for everyone involved. However, failing to deal with and address that discomfort can lead to a serious problem — no legacy to leave behind. Tackling this difficult topic and delving into estate planning can ensure that a person’s final wishes are respected, and one’s legacy preserved.

Leaving behind the right legacy is important, especially for those in California who are charitable-minded. These individuals can use wills and trusts to carry on charitable giving and donations even after their death. This important aspect of estate planning is often overlooked, and many people who make regular charitable donations forget to include it in their estate or wrongly assume that their loved ones will carry on the tradition.

Legacy can also involve how people remember you. For some, this includes their final days of life. No estate plan is complete without an advanced health care directive —  also called a living will — which outlines a person’s wishes regarding medical care and interventions. A health care power of attorney should also be included, which will give another person the legal right to make those decisions on the maker’s behalf, in specified circumstances.

Estate planning is more than just dictating how much inheritance children should get. California residents can use their estate plans to create an ongoing legacy that reflects their values and what was most important to them during their lives. It is important to consider what role charitable giving, health care directives and other planning documents can contribute to a comprehensive estate plan.

Source: investopedia.com, “Leaving a Legacy: Why You Need An Estate Plan“, Kay Kramer, Jan. 5, 2018

The start of a new year means different things to many people. For some in California it is a time to forge ahead with different goals, while others find it a time of peace and reflection. No matter how you ring in the start of another year, it is usually a good idea for people to carefully consider the contents of their estate plans and whether any updates to their wills are required. Failing to regularly update estate plans can cause considerable amounts of grief for loved ones.

When reviewing a will for possible areas of attention, many overlook beneficiary designations. A will might dictate that Person A should receive life insurance benefits in the event of the policy owner’s death, but if the policy’s designated beneficiary lists Person B, this trumps the will. This is the same for retirement plans and insurance policies that pay out to a beneficiary upon a person’s death. Estate planners should be vigorous when updating their plans, and change any listed beneficiaries on their accounts as necessary.

It is also smart to reconsider the named executor, heirs and other beneficiaries of any given estate. Decisions made years ago might have been appropriate for the time, but no longer reflect current situations. A named executor might have once been a trusted friend that an individual has since had a falling out with, or an heir might have passed away. These issues can be fixed quickly enough, but if not, can cause serious issues during probate.

An annual review of estate plans is usually well-advised for most people in California. A thorough check of wills, trusts and other important documents can prevent wrong designations or incomplete documents from hampering estate plans and their creator’s intentions. Otherwise, families might have to deal with the consequences during lengthy probate proceedings that can use up valuable resources.

Source: wmur.com, “Money Matters: Estate planning mistakes“, Marc Hebert, Dec. 28, 2017

Most people keep their passwords stored in the safest spot they can think of — their own minds. However, what happens to the often dozens of online accounts after that person passes away? Suddenly Facebook, Twitter, Instagram and email accounts are inaccessible, leaving families confused and overwhelmed with how to handle a loved one’s internet footprint. However, digital assets consume much more than just social media. Many California residents now deal with banking and other important financial commitments exclusively online, making it important to include relevant information in wills.

Long gone are the days of finding a loved one’s bank records, upcoming bills and business transactions in convenient paper format in their home. Individuals acting as legally recognized fiduciaries must now attempt to find these important records and other relevant assets online rather than in a physical folder in someone’s dresser drawer. With the ease of storage in the cloud and other online accounts, this process might not be so difficult if it were not for federal laws that do not allow unauthorized access to internet accounts and computers.

Also, many service providers strictly prohibit the sharing of data with anyone outside of the account. This is usually addressed in the terms of service agreements that most people agree to before signing up for online accounts. This means that simply including log-in information in a will might not be enough, and the person accessing the account in such a manner could still be acting illegally.

Many services now offer legacy options, giving users the ability to choose how their account should handled after their death, and by whom. In such instances, it is still a good idea to use wills to provide information regarding accounts and relevant log-in information. However, in the event that a loved one failed to take digital assets into account during estate planning, a 2015 law — the Uniform Fiduciary Access to Digital Assets Act — can give estate executors the legal right to access these accounts. However, since California estate law can be understandably confusing, it might be a good idea to consult with experienced legal counsel before accessing any online accounts.

Source: Slate, “The Digital Afterlife Is a Mess“, Naomi Cahn, Nov. 29, 2017