Estate Planning Concepts

Advance Health Care Directive

The California Advance Health Care Directive authorizes a named person to make medical decisions in the event of mental incapacity, and can include, if desired, the direction to terminate treatment in certain circumstances. It is also advisable to execute an authorization under HIPAA for release of medical information to your named health care agent.

Durable Power Of Attorney For Financial Matters

A durable power of attorney for financial matters gives a designated person the authority to manage financial affairs either immediately, if you desire, or in the event of incapacity.

Manner Of Holding Title

The manner of holding title (such as joint tenancy, tenancy in common, community property, individual name alone) has tax and legal repercussions. For example, there may be tax advantages in certain situations in holding marital property as community property rather than as joint tenancy. In addition, if you hold title to your property as the trustees of your revocable living trust and have recently refinanced your property, you should review title. Oftentimes, banks will deed a property out of a trust to refinance it and fail to deed it back in.

Beneficiary Designations Of Life Insurance, Pension, 401(k), IRA And Other Retirement Plans

These named assets pass under beneficiary designations rather than under the terms of your will or trust. Thus, it is important that the beneficiary designations are consistent with your estate plan and achieve the desired results. In particular, please note that if the beneficiary of your retirement plan account is a trust rather than your spouse, there may be unanticipated income tax consequences.

Planning To Eliminate Estate Tax For The Surviving Spouse

By properly qualifying for the federal estate tax marital deduction, federal estate tax on the death of the first spouse to die may be eliminated.

Increase In Estate And Gift Tax Exemption Amount

The unified credit that can be applied against estate tax is equivalent to an exemption. By the tax act passed December 17, 2010, for 2011 and 2012, that exemption has been increased to $5,000,000 and any unused portion of the exemption on the death of the first spouse may be added to the exemption of the surviving spouse. Unfortunately, we do not know what the law will be starting 2013. We hope that Congress will act to make a more consistent and understandable law.

Planning For The Non-United States Citizen Spouse

Changes have been made to the tax laws regarding the treatment of gifts and bequests to non-United States citizen spouses. If you or your spouse is not a United States citizen, your estate planning documents should be reviewed.

Revocable Living Trust

A revocable living trust can allow the creator to have complete control during lifetime, but transfer assets without probate on death, and, in addition, allow management without court supervision in the event of mental incapacity. If you have a revocable trust, a review should be made as to whether assets have been properly titled in the name of the trust.


Lifetime gifts may be used to reduce estate tax liability on death and benefit intended beneficiaries. Gifts of $13,000 or less per year per donee (the “annual exclusion”) can be made without the payment of gift tax or the filing of a return. The “annual exclusion” will be indexed for inflation.

Life Insurance And Life Insurance Trusts

The ownership of life insurance policies can be structured in such a way that the proceeds are not subject to estate tax.

Charitable Deduction Planning

Use of a “split interest” trust that benefits both charitable and non-charitable beneficiaries can reduce federal estate taxes.

Generation Skipping Tax Planning

A generation skipping tax has been enacted imposing a tax on transfers that “skip a generation” for example, transfers to grandchildren. There are exceptions and exemptions and your documents can be drafted to take advantage of these.

Valuation Planning

Transfer of property to family partnerships or limited liability companies can lower the “value” of the property for estate and gift tax purposes (and therefore lower potential taxes) while at the same time providing an effective lifetime management structure.

Changes In Family Status

Under California law, failure to provide by will or trust for a surviving spouse who marries the testator after execution of the will or trust can result in revocation of the will or trust in whole or in part. There is a similar protection for afterborn children omitted from a will or trust. If you have married after signing your will or trust, or if you have had children who are not provided for in your will or trust, your documents should be reviewed.

In addition, you should consider the potential effect on your estate plan of any of the following events that might have occurred in the last ten years to determine whether your documents should be amended or revised. Please note that this list is not all-inclusive.

  • Change in your health
  • Changes regarding a child, grandchild or other beneficiary
  • Changes in marriage status
  • Death of spouse or child
  • Death of named executor, trustee, attorney in fact, or guardian, or others named in your documents
  • Financial irresponsibility of a beneficiary
  • Substantially increase or decrease of asset values
  • Change in business interests (e.g. new corporations or new partnerships)
  • Property acquired in a different state
  • Retirement from business or profession
  • Refinance of home
  • Change of residence to a different state

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