Since we have spoken with so many clients over the years, we have a general idea about the different subjects that people have questions about. In this post, we will share a hypothetical question and answer session that will provide you with some basic inheritance planning and elder law information.
A last will is the right asset transfer document to use unless you are very wealthy, right?
If you have very simple and straightforward inheritance planning objectives, it is possible that a last will could be acceptable. However, a revocable living trust would be a better choice for most people that have a reasonably significant store of resources.
Plus, there are other types of trusts that can benefit people that are not in the financial stratosphere.
Will my heirs be forced to pay taxes on the income?
Many people are pleasantly surprised when they find out that inheritances are not subject to regular income taxes. Plus, a person that inherits appreciated assets would get a step up in basis. For capital gains purposes, the value of the assets would be equal to the value when the inheritor assumed ownership of them.
However, if the estate is extremely valuable, the federal estate tax can be a factor. The estate tax credit or exclusion is the amount that can be transferred before the tax would become applicable. At the time of this writing in 2019, the amount of the exclusion is $11.4 million and the maximum rate is 40%.
There are some states in the union that have state-level estate taxes, but California is not one of them. If you own valuable property in a state that does have an estate tax, you could face exposure, even if you are a resident of California. Since a lot of people in our area spend time in Hawaii, we should point out the fact that there is a state estate tax in the Aloha State.
The concept of estate planning is self-explanatory, but what exactly is elder law?
It is the area of the law that focuses on the financial and legal ramifications that go along with the eventualities of aging. Right around now, elder law attorneys are in great demand, because there is an unprecedented aging of the population underway due to the maturation of the baby boomers.
Is there any particular elder law issue that I should be concerned about?
There are a number of them, including elder financial abuse, which is a widespread problem that exists largely in the shadows because the vast majority of cases are never reported to authorities.
In large part, this is because of the fact that the perpetrators are often people that are close to the elders that are being abused. They do not report the abuse because they don’t want to get the abuser into trouble, and in many instances, they rely on the person for living assistance.
Another huge elder law issue that everyone should be aware about is the matter of long-term care and the costs that go along with it. Most seniors will need living assistance, and many will reside in nursing homes at some point in time. Medicare does not pay for the custodial care that you would receive in a nursing home. These facilities are charging over a hundred thousand dollars a year right now, and costs have been consistently rising.
How do you prepare for these expenses?
Medi-Cal does pay for long-term care, but since it is intended for people with sparse financial resources, there is a $2000 limit on countable assets. The good news is that some things that you own do not count, including your home.
You can give gifts to your loved ones before you apply, but you can’t find out that you need nursing home care today, give away the assets tomorrow, and qualify for Medi-Cal the next day. There is a 30 month look back period, so you have to complete the gift giving at least 30 months before you apply for the program to obtain immediate eligibility.
Californians actually get a break at the present time with the 30 month look back period. In other parts of the country, it is five years.
Attend a Free Seminar!
We scratched the surface with a little bit of information in this post, but you can learn much more if you attend one of our upcoming seminars. There is no admission charge, but we ask that you register in advance so that we can reserve your seat. To do just that, visit our seminar schedule page and follow the simple instructions.
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