May 2020 Update
Chapter 1: Overview of Estate Planning Practice
The sample forms for the schedules of assets and liabilities have been updated. See §§1.63, 1.64.
Chapter 4: Additional Property Transfer Obstacles for Married Persons and Registered Domestic Partners
Under Prob C §§6600–6615, estates worth less than $85,900 can be set aside to the decedent’s surviving spouse or minor children. The amount will be adjusted for inflation on April 1, 2022, and at each 3-year interval ending on April 1 thereafter. Prob C §890; Stats 2019, ch 122. See §4.25.
The limitation that opposite sex couples must have at least one partner over the age of 62 to register as domestic partners has been eliminated. See §§4.47, 4.77.
Chapter 5: Wills
Effective January 1, 2020, the affidavit procedure provided in Prob C §§13100–13116 can be used to collect the decedent’s personal property when the gross value of the decedent’s real and personal property in California does not exceed $166,250 (adjusted periodically for inflation; see Prob C §890). Stats 2019, ch 122. See §§5.24, 5.25, 7.5–7.7.
Chapter 6: Revocable Trusts
In Blech v Blech (2019) 38 CA5th 941, the court addressed when a judgment creditor may file a petition to enforce a judgment under Prob C §15301(b) in a nonbankruptcy setting. The Blech court held that a creditor may file such a petition against a nondiscretionary future principal distribution even before the distribution is due and payable from the trust to the beneficiary. See §6.20.
In Key v Tyler (2019) 34 CA5th 505, the court held that a beneficiary’s defense of a trust amendment that the trial court found was procured through undue influence was a direct contest triggering the no-contest clause set forth in the trust and her subsequent disinheritance, regardless of the fact that she was the respondent. The court noted that a direct contest under Prob C §21310 or §21311 is not limited to an action that a beneficiary initiates. In addition, although the court found that the anti-SLAPP statute applied to the petition to enforce the trust’s no-contest clause, it held that the litigation privilege does not apply to actions to enforce no-contest provisions and that the petitioning beneficiary met her burden of showing a likelihood of success on the merits. See §6.21A.
In Han v Hallberg (review granted Aug. 21, 2019, S256659: superseded opinion at 35 CA5th 621), the court of appeal held that a revocable trust may be considered a “person” that could associate in a partnership under Corp C §16101(13). The Han court determined that the partner’s assignment of his partnership interest to his revocable trust substituted the trustee of his trust as the partner, and therefore there was no trigger of the partnership buyout provisions as set forth in the partnership agreement on that partner’s death. See §6.46.
In Dudek v Dudek (2019) 34 CA5th 154, the court included the transfer of a life insurance policy to a trustee of an irrevocable trust. The court held that the trial court erred in sustaining a demurrer to a petition under Prob C §850 because it sufficiently alleged facts that could support a finding that the settlor’s execution of an irrevocable life insurance trust that stated the settlor’s intention to immediately transfer ownership of a life insurance policy to the trustee was effective to transfer ownership of such policy to the trustee despite the settlor’s failure to complete certain forms required by the life insurance company to make such changes. See §6.49.
Chapter 7: Nonprobate and Nontrust Transfers at Death
In Marriage of Begian & Sarajian (2018) 31 CA5th 506, the court concluded that a trust transfer deed transferring a residence from husband to wife was insufficient to transmute the property to wife’s separate property. The court found that the trust transfer deed did not unambiguously indicate husband’s intent to change the residence’s character and, therefore, held that it did not meet the express declaration requirement of Fam C §852(a). See §7.14.
Chapter 10: Estate and Gift Taxes
The aggregate decrease in the value of qualified real property may not exceed $750,000, plus cost-of-living adjustments. IRC §2032A(a)(2)–(3). For estates of decedents dying in 2020, the aggregate decrease may not exceed $1,180,000. Rev Proc 2019–44, 201–47 Int Rev Bull 1093. See §10.46.
A special 2 percent interest rate applies to the estate tax attributable to the first $1 million (plus cost-of-living adjustments) in value of closely held business interests in excess of the applicable exclusion amount. IRC §6601(j). The amount for estates of decedents dying in 2020 is $1,570,000. Rev Proc 2019–44, 2019–47 Int Rev Bull 1093. See §10.73.
In 2020, the first $157,000 of gifts to a spouse who is not a U.S. citizen are excluded from gift tax. Rev Proc 2019–44, 2019–47 Int Rev Bull 1093. See §10.119.
Chapter 13: Taxing Income of Estates and Trusts
In 2020, the “exemption amount” for estates and trusts is $25,400 (IRC §55(d)(1)(D) (including cost-of-living adjustments)), reduced by 25 percent of the amount by which the alternative minimum taxable income (AMTI) exceeds $84,800 (IRC §55(d)(3)(C) (including cost-of-living adjustments)). The phase-out of the exemption amount is completed when AMTI exceeds $186,400 ($84,800 + (4 x $25,400)). Any remaining AMTI is taxed at a rate of 26 percent of the first $197,900 (in 2020) over the exemption amount, and 28 percent of the amount over $197,900. Thus, for estates or trusts that have AMTI in excess of $186,400, the tentative minimum tax is simply 26 percent of the first $197,900 of AMTI, plus 28 percent of the balance. See §13.20.