Federal Estate Tax Exemption and Gift Tax
Effective January 1, 2017 an individual’s federal gift, estate, and generation-skipping transfer tax exemption amounts will remain at $5 million, subject to an annual inflation adjustment, so the basic exclusion amount for 2017 has increased to $5.49 million per person. The tax rate for amounts above the exemption is 40%. The capital gains tax basis of assets acquired from a decedent will continue to be the fair market value of the property at the date of the decedent’s death. Estate tax exemption “portability” continues to be an option for the surviving spouse, where the surviving spouse can transfer any unused portion of the predeceased spouse’s estate tax exclusion, thus allowing married couples to shield up to $10.98 million from estate tax without the use of the traditional A-B Trust. However, the surviving spouse must file a timely 706 death tax return and elect portability to preserve it. Thus, 706 returns will become more common. The gift tax annual exclusion is $14,000 per year per donee.
Increased Maximum Values for Transferring Small Estates Without Probate
- The size of an estate that can be collected by affidavit or by court order without formal probate increased from $100,000 to $150,000.
- The maximum value of real property that can be transferred by affidavit increased from $20,000 to $50,000.
- The amount of salary that a surviving spouse can collect by affidavit immediately after death increased from $5,000 to $15,000.
Double Damages for Elder or Dependent Adult Financial Abuse
Probate Code Section 859 was amended to allow double damages in actions against persons exercising undue influence or gaining property through elder or dependent adult financial abuse.
FDIC Insurance Limits
The FDIC insurance limits will remain at $250,000; however, revocable trusts may qualify for up to $500,000 coverage (or $100,000,000 if two settlors) based on the number of trust beneficiaries.
New no-contest clause legislation greatly restricts the enforcement of such clauses. Under current law, such clauses only will be enforced against a “direct contest” brought without “probable cause” and under other very limited circumstances. Furthermore, contestants of a trust or a will can no longer file a “safe harbor” petition to determine if a particular action constitutes a “contest.”
Under current California case law, a no contest clause contained in a trust document does not apply to trust amendments. Those amendments should contain their own no contest clause. This same reasoning will apply to a codicil or to a will. You should check your estate planning documents to determine whether any of them need to be revised.
Spousal impoverishment transfer protections for Medi-Cal nursing home care benefits have been extended to same-sex spouses and registered domestic partners.
Under the Deficit Reduction Act, several important changes are pending, which will affect Medi-Cal eligibility, including the extension of the previous 30-month "look back" period to 60 months, and the change of the ineligibility period from the application date, instead of from the transfer/gift date. The Department of Health Care Services, however, still has not finalized regulations to implement such changes, and if and when such regulations are implemented, they will not be retroactive.
2017 Medi-Cal Rates
- Community Spouse Resource Allowance (CSRA) has increased to $120,900
- Minimum Monthly Maintenance Needs Allowance (MMMNA) has increased to $3,023
- Average Private Pay Rate has increased to $8,515
- Resource Allowance: $2,000
- Personal Needs Allowance: $35