2022 was pretty eventful for me: I saw my son off to college (Go Gauchos!), completed 345 Wordle puzzles (99% wins), finally got Covid (mild case), and finished my 6-year term on the Executive Committee of the Trusts and Estates Section of the California Lawyer’s Association.  I hope you all had a fruitful 2022 and are looking forward to what’s to come in 2023.  Happy Holidays!

The estate tax exclusion for 2023 is $13.61 million; and

The annual gift tax exclusion is $17,000. 

Keep in mind that on January 1, 2026, the estate tax exclusion will drop in half to $5 million, inflation adjusted (so at least $6.5 million), unless Congress affirmatively acts to retain the higher exclusion.  Given the recent election, it’s not likely that Congress will be able to agree on new tax measures, but we’ll have to see what happens in the next 3 years. 

I don’t have much to report on changes in California law in the field of trusts & estates.  There is one case before the California Supreme Court which will clarify how a person can amend his trust (must he use the method specified in his trust document, or can he use a simpler method allowed in the Probate Code?), but that case is not likely to be decided for months. 

I don’t want to leave you all empty-handed, however, so I’m going to encourage you to go back to my earlier newsletters on the following topics:

• Proposition 19 is the law in California and there’s no sign that it’s going away.  In most cases, this means if a child inherits your property (and doesn’t live there), the property taxes will go up to the current fair market value, which will likely be significantly more than what you’re paying in tax.
• I’m still finding clients who haven’t fully funded their trusts during their lifetimes.  This year, I’ve had to initiate probates and other court procedures to transfer property into trusts after a death, even though the trusts themselves are completely valid.  Please take a look at your assets and how they’re titled.  If you have funding questions, you may find the answer in your estate planning binder, or else give me a call!
• The SECURE Act is in force.  So in most cases if your child inherits your IRA, they won’t enjoy a lifetime stretch-out, and will have to pay income taxes as the IRA is distributed.  This year, the IRS sent out proposed regulations and decided that under the SECURE Act most beneficiaries of an IRA must take out RMDs equal to their parent’s RMD for the first 9 years after the parent’s death, with the balance distributed in the 10^th year.  So, we can’t even back-load the distributions anymore and wait until the 10^th year for one large distribution.  It’s very important that a child inheriting a parent’s IRA talk with their financial advisor as soon as possible to ensure that their parent took out a distribution in the year of death, and that the appropriate distribution is made on the child’s behalf in the year following the parent’s death.  It’s also important to note that Congress has been working on SECURE Act 2.0 for a while now, so it’s possible we’ll get additional guidance in the coming year. 

Unfortunately, as much as I hate to contribute to the “wage-price spiral”, my costs have been going up along with inflation, and I need to raise my rates accordingly.  This will not affect any existing clients with current work, but for new clients (and for existing clients with new projects that begin in 2023), my rates will increase by about 8%. 

I will be on vacation from December 24 to January 9.  During my break, I will be returning emergency messages and scheduling appointments for later in January.  Have a wonderful Holiday, and I’ll look forward to speaking with many of you in the New Year.