Tag: Asset Protection

San Diego Estate Tax Law

A Look at History:  The Estate Tax Exemption Really Has Increased

In a post earlier this year, we discussed that Americans can now transfer more than $5 million dollars in assets through the estate tax system without incurring a tax, while at the same time permitting their beneficiaries to receive those assets with a new and usually higher “stepped-up” basis.

Addressing the concept gave rise to the question:  Given inflation over the years, is the estate tax exemption really higher than it has been historically?  In order to answer that, we created a table showing the estate tax exemption over time, comparing it to the current buying power of the exemption amount in 2015 dollars.

While the comparisons are not perfect because the tax laws have changed over the years, the chart illustrates that the current exemptions are, indeed, historically high.

Throughout most of the twentieth century, the buying power of the exemption amount hovered at around $500,000 measured in 2015 dollars. The exemption’s 2015 equivalent started creeping up in 1990, but did not reach the $5,000,000 range until 2011. (The basic outline of the gift and estate tax laws has been consistent since the early 1980s.)

As noted in the earlier post, the exemption amount has been historically-high for several years.  There are no signs that it will be reduced in the near future.  It is clearly time to consider free basis when making estate planning decisions.

Tax Year                               Estate Tax Exemption                          2015 Equivalent

1920                                          $50,000                                                     $585,805

1930                                          $100,000                                                  $1,406,000

1940                                          $40,000                                                     $562,000

1950                                          $60,000                                                     $584,000

1960                                          $60,000                                                     $476,000

1970                                          $60,000                                                     $363,000

1980                                          $161,000                                                  $459,000

1990                                          $600,000                                                $1,078,000

2000                                          $675,000                                                  $920,000

2001                                          $675,000                                                  $895,000

2002                                          $1,000,000                                             $1,305,000

2003                                          $1,000,000                                             $1,276,000

2004                                          $1,500,000                                             $1,864,000

2005                                          $1,500,000                                             $1,803,000

2006                                          $2,000,000                                             $2,329,000

2007                                          $2,000,000                                             $2,264,000

2008                                          $2,000,000                                             $2,180,000

2009                                          $3,500,000                                             $3,829,000

2010                                          Unlimited

2011                                          $5,000,000                                             $5,217,000

2012                                          $5,120,000                                             $5,234,000

2013                                          $5,250,000                                             $5,290,000

2014                                          $5,340,000                                             $5,295,000

2015                                          $5,430,000                                             $5,430,000

 

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San Diego Real Estate Law

Are you ready for El Niño? More Importantly, is your home ready?

An El Niño continues to be predicted for California during this 2015-2016 winter storm season. This means the possibility of storms of major impact and far above-normal rainfall.

While there is no assurance that an El Niño will result in snow pack and rain far above “normal” levels, many in California will see the occurrence as positive, perhaps even an end to California’s prolonged drought, a condition that is having a major effect on the state’s commerce and economy.

How would an El Niño impact a San Diego County homeowner and what pre-planning steps should be undertaken . . . before our storm season arrives?

Homeowner’s Insurance:

Most homeowners have property damage insurance on their dwelling. Does your homeowner’s insurance provide coverage for water damage? Maybe yes, maybe no. Locating your insurance policy is usually the first hurdle to cross. Once your policy is in-hand, consider calling your insurance agent to discuss your coverage. Ask if you have coverage for damages caused by water intrusion resulting from rain.

If the answer is “no,” discuss the cost of adding such coverage.

If the answer is “yes,” your next question is: “Are there conditions to the coverage?” Insurance policies frequently require the storm to cause damage to the roof or structure first, thus allowing the rain into the home, before providing rain damage coverage.

Stated another way, if a home has a damaged roof prior to a damaging rain storm, insurance coverage will likely be denied. Make sure you understand your insurance policy. One method to do this is to explain your understanding of your policy coverage to your insurance agent, in your own words, so your agent can clarify any misunderstandings.

Roof Condition:

Water intrusion from a leaking roof is a major source of damage during periods of heavy rains. Water intrusion naturally leads to numerous consequential damages to both personal property and the residence. Warped dry wall, bulging ceilings and mold are just a few of the structural issues that may occur. Water damage to artwork, antiques, carpet and rugs can be devastating.

When did you last have your roof inspected? Now is a good time to schedule an inspection, including a written report and photographs. You will avoid worrisome stormy nights if you have your roof inspected and repaired before the storms arrive.

Roof Gutters and Drains:

Cleaning drains is a necessary fall chore, of greater importance with an El Niño predicted. Gutter seams should be visually inspected to be certain there is no evidence of water leakage, requiring repair.

Once the rain water goes into the gutter and down the drain, where does that fast moving water end up? Do your downspouts end at the foundation of your residence, allowing water to pool against the house, or worse, undermine the foundation?

Downspout extenders, to move water away from foundations, are readily available from hardware stores and online.

Windows and Doors:

Are your windows and doors watertight from wind-blown rain? Both can be easily checked with a garden hose spraying water on the doors and windows. If the current drought causes your conscience to not allow you to “waste” water to check for water tightness (perhaps not a waste in the long run), then visually inspect doors to be sure there are no gaps where daylight is showing.

With windows, be certain that windows shut tightly and look at the condition of the weather stripping. Replaced weather stripping on doors and windows will go a long way to keep rain out of the house, with the added benefit of keeping warm air in the house during colder weather.

El Niño could help California – just make sure you help your home stay ready.

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San Diego Estate Planning Law Preview

Three Reasons You Need an Estate Plan

Many people have the view that estate planning is mostly for high net worth individuals who require complicated estate tax planning.  However, there are many important reasons to do an estate plan other than tax planning, and these reasons apply to everyone, no matter the size of your estate.  Here are three reasons to consider doing an estate plan even if estate taxes are not your primary concern:

1. Planning for Incapacity

At some point in life, whether due to age, illness, injury, or other health conditions, many of us will become unable to independently manage our own finances.  If you become unable to manage your own finances, the agent you select in your estate plan can step in to make sure your bills continue to be paid and that your finances continue to be managed to provide for your financial needs.  Preparing an estate plan beforehand allows you to carefully choose people you trust to manage your property if you are no longer able to do so, and having the proper estate plan documents in place will give your agents the authority to act on your behalf quickly to provide for your needs without lengthy delays and in most cases without court involvement.

Planning for incapacity also involves planning for your health care in addition to your finances.  Preparing an estate plan gives you the opportunity to express your wishes relating to the treatment and care you would like to receive and allows you to choose people you trust to make important decisions relating to your health care, particularly difficult end of life decisions, if you are not able to do so yourself.

2. Nominate Guardians for Minor Children

If you have children under age 18, another important reason to do an estate plan is to nominate the legal guardians of your minor children.  For many parents, it is difficult to decide who will be responsible for raising and caring for their children after they are gone.  Nominating a guardian in your estate plan will give you assurance that the person you choose will be the person appointed as guardian of your children by the court.

3. Avoid Family Conflict

Dividing a bank account equally among several people is usually a matter of simple math, and there is not much reason to disagree as long as everyone gets the same amount.  However, it can be difficult for family members to agree when deciding who is to receive, for example, great-great-great-great-grandmother’s gold ring or the antique rocking chair that has been in the family for generations when there is only one of the item and several people interested in owning it.  Because of the high sentimental value these items sometimes have, deciding you will own it can become the source of deep family conflict.  The same principle applies to larger or more valuable items, such as the family home or other valuable real estate, where dividing it among several people might not be possible or practical.

Preparing an estate plan gives you the opportunity to specifically designate how you want your property distributed.  With a clear direction in your estate plan as to which family members should receive the property you specify, you can help avoid or reduce the possibility of a conflict over the distribution of your property among your family members after your death.

Depending on our circumstances and stage in life, some of the reasons discussed in this article will be more important or relevant to us than others.  These issues affect us and our families on a more personal level, and at some point most of us will be affected by one or more of the issues mentioned here no matter how much property we own or the value of your assets.  By preparing an estate plan before these issues arise, we can have confidence that that they will be managed effectively and efficiently.

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