December 2019 Update
The California Supreme Court revised and renumbered the California Rules of Professional Conduct, effective November 1, 2018. All the rule changes have been highlighted and updated throughout this publication. See chap 2. See also §§4.7–4.8, 4.18, 4.21, 11B.2, 11B.4, 12.2, 12.64.
The Tax Cuts and Jobs Act (Pub L 115–97, 131 Stat 2054) was signed into law on December 22, 2017, and has sweeping changes relating to income taxes, but only affects the estate, gift, and generation-skipping transfer tax by an increase in the applicable exclusion amount (AEA) to $11.4 million for the year 2019. The estate tax reduction under IRC §2032A is $1.16 million for the year 2019. See Rev Proc 2018–57, 2018–49 Int Rev Bull 827. The AEA will continue to be adjusted through 2025, but in 2026, it will revert to the provisions under the American Taxpayer Relief Act of 2012. The maximum estate and gift tax rate remains at 40 percent. Chapter 3 highlights the changes made under the Act. See also §§5.22, 5.33, 5.57, 6.1–6.30, 11.6, 11A.7, 11B.15.
The annual gift tax exclusion under IRC §2503(b) has increased to $15,000 for 2018 and is adjusted annually for inflation. Rev Proc 2018–18, 2018–10 Int Rev Bull 392. See §§3.13, 3.20, 3.58, 6.3, 6.55A, 7.40, 11B.16. The annual gift tax exclusion available for lifetime gifts to a noncitizen spouse is $155,000 in 2019. IRC §2523(i)(2). See §§6.5–6.17 and 8.13 for tax information regarding noncitizen spouses.
For receiving a donative transfer, the presumption of fraud or undue influence does not apply if the recipient of the transfer is related by blood or affinity to the transferor, or the instrument is drafted or transcribed by a person who is related by blood or affinity or is the cohabitant of the transferor. However, the transfer will be presumed to be the product of fraud or undue influence if the transfer is to a care custodian who commenced a marriage, cohabitation, or domestic partnership with a transferor who is a dependent adult while providing services to that dependent adult, or within 90 days after those services were last provided to the dependent adult, if the donative transfer occurred, or the instrument was executed, less than 6 months after the marriage, cohabitation, or domestic partnership commenced. Prob C §§21382(a) and 21380(a)(4). See §6.33A.
Effective June 25, 2019, SSA released new rules regarding attorney fees for drafting special needs trusts. POMS GN 03920.007. The penalties for noncompliance can be severe, including conviction of a misdemeanor, fines, and even imprisonment. 42 USC §406(a)(5). See §6.48.
A special needs trust management team should include a care manager or advocate, who will ensure that the disabled beneficiary is receiving services under an appropriate care plan. For special needs trust advice, see §§6.50–6.55.
California’s ABLE program opened on December 18, 2018, and is called CalABLE, accessible at https://calable.ca.gov. Californians interested in utilizing an ABLE account may use programs in other states if those states allow out-of-state residents to join, which nearly all of them do. In addition, California residents who already have an account opened in another state can have their out-of-state ABLE account balance transferred to the CalABLE program if they wish to do so. See §6.55A for information regarding the proposed ABLE Age Adjustment Act, which is being considered in Congress and would increase the qualifying age threshold from 26 to 46.
In Marriage of Begian & Srajian (2019) 31 CA5th 506, a husband executed a “Trust Transfer Deed” granting certain real property to his wife as a gift. The court concluded that without an express statement specifying what interest in the property was to be granted, the document was ambiguous and rendered the purported transmutation invalid under Fam C §852(a). See §§8.2, 12.50.
In Dudek v Dudek (2019) 34 CA5th 154, the trustor’s execution of an irrevocable life insurance trust showing the trustor’s intention to immediately transfer ownership of the policy to the trustee was effective to transfer ownership of the life insurance policy to the trustee despite the trustor’s failure to complete forms required by the life insurance company to change ownership and beneficiary designation. See §§8.2, 9.2.
In Marriage of Kushesh & Kushesh-Kaviani (2018) 27 CA5th 449, during a dissolution proceeding, both spouses claimed ownership of a condominium. The wife based her claim on an interspousal grant deed by which the husband granted the condominium to the wife “as her sole and separate property.” Nevertheless, recognizing the legislative bias against transmutation, the trial court found no transmutation of community property. The court ordered the condominium sold and the proceeds distributed to both parties. When the wife appealed, the appellate court reversed and remanded to the trial court. See §12.50.
Forms, samples, websites, and Medi-Cal limits have been updated to reflect recent legislation and trends. See §§6.39, 7.33, 8.10, 11.28–11.29, 11.32, 12.60, 12.75.