Q.  My late Uncle set up a safety deposit box at a local bank and named me as both executor under his Will and trustee under his Trust. In order to follow his wishes, I need access to his original estate planning documents, which I understand are held in his safety deposit box. How can I do that?

A. Assuming that the safety deposit box was held in your Uncle’s name, alone, here is what you would need: (a) a key to the safety deposit box, (b) proof of his death (either a certified copy of his death certificate or a written statement of death from the coroner, his treating physician or hospital where he died), ( c) proof of your own identity, such as by a California drivers license, and (d) a signed Affidavit attesting to your right to access the safety box on your Uncle’s behalf, which may need to be notarized; the bank should have a form.

Access to the box will be under the supervision of a bank representative, who will make and retain a copy of the Will and/or Trust found in the box, while allowing you to remove the originals so that you can begin administering your Uncle’s estate. The bank will also let you remove any written instructions for the disposition of his remains, so that you can handle his final wishes in a timely manner.

If you do not have a key, access will likely be more difficult. At a minimum, you will need to persuade the bank to have a locksmith drill the lock to open the box, most likely at your own expense, in addition to providing the other items mentioned above.  The bank may also require that you first initiate a court probate proceeding to secure Letters of Administration or Letters Testamentary before permitting access.

If there were another co-owner on his safety box, designated as a joint tenant, then the joint tenant would have access so long as he or she had a key.  If not, then again the box would require drilling and the bank would likely need the other items listed above.

Sometimes a person will designate his or her Trust, itself, as the owner of the box. If this is the case, then the Successor Trustee under your Uncle’s Trust could access the box, again assuming that he has a key and can provide the other requirements noted above.

In order to entirely avoid the bank access issue after death, I generally advise clients to retain their original Wills and Trusts in readily accessible places in their own home or other safe place, and to so advise the person(s) whom they have named as Executor or Successor Trustee. This can facilitate swift access following death. Even if one has a cooperating bank, remember that banks are not open after hours or on major holidays, and have limited hours on weekends.  Swift access can be essential, especially if one needs immediate access to burial instructions following death. Delays and obstacles in accessing these important items after death can be upsetting to next of kin following the death of their loved one, so give them a little assist and keep them in a safe place that is both known to, and accessible by, your designated successor(s).

Q, I know that Congress and President Biden recently approved a new law that adds significant money into improving vaccinations and other COVID-19 outreach, but I wonder what other provisions are in the new law that might help seniors.

A. Good question. The AMERICAN RESCUE PLAN ACT of 2021 (“ARPA”), R. 1319, was narrowly passed on party lines in Congress and then signed into law by President Biden on March 11, 2021. It directs a massive $1.9 Trillion Dollars into the economy to fund these stimulus payments and to provide other much needed help. It is a massive document that runs into hundreds of pages, and provides benefits covering families, employers, health care, education, and housing.

Here are some selected provisions that may be of interest to seniors:

Stimulus Payments. The ARPA provides $1,400 direct payments to individuals with up to $75,000 in annual income, and couples with incomes up to $150,000, with phase outs for higher earners. These payments will not affect eligibility for Medicaid or Supplemental Security Income as long as any amount that pushes recipients above the program=s asset limits is spent within 12 months.  Many of these payments have already been direct-deposited into tax-payer accounts.

Medi-Cal (Medicaid) Home Care. The Act provides more than $12 billion in funding to expand Medicaid Home and Community‑Based Waivers for one year. This funding will allow states to provide additional home‑based long‑term care services, which will help seniors from being forced into nursing homes. The additional money will also allow states to set up programs to increase care-givers- pay.

Nursing homes.. The Act supports the deployment of strike teams to help nursing homes that have COVID‑19 outbreaks. It also provides funds to improve infection control in those facilities.

Pensions. Many multi‑employer pension plans are on the verge of collapse due to under-funding. The law creates a system to allow plans that are insolvent to apply for grants in order to keep paying full benefits.

Medical Deductions. The law permanently lowers the threshold for deducting medical expenses. Taxpayers can now deduct unreimbursed medical expenses that exceed 7.5 percent of their income. The threshold was otherwise set to increase to 10 percent under the 2017 tax law.

Older Americans Act. The ARPA provides funding to programs authorized under the Older Americans Act, including vaccine outreach, caregiver support, and the long‑term care ombudsman program. It also directs funding for the Elder Justice Act and to improve transportation for older Americans and people with disabilities.

Housing Assistance: It increases funding for housing assistance, with targeted assistance to low-income communities. Notably, it provides homeowner assistance to prevent foreclosures.

Utility Assistance: The law provides energy assistance through the Low-Income Home Energy Assistance Program (LIHEAP), and water subsidies through a related program.

SNAP: It provides a 15% increase in SNAP food assistance benefits through September 30, 2021. 

Child Tax Credit: The law expands the child tax credit so that qualifying families will receive a tax credit of up to $3,000 per child aged 6B17, and $3,600 for children under 6. This will benefit Agrand-parent@ families who are raising their grandchildren. 

COBRA Health Insurance: The ARPA provides a new 60 day enrollment period and 100% coverage of COBRA premiums for individuals who lost (or lose) employment through September 30, 2021.

HCBS: It increases Medi-Cal (Medicaid) funding for Home and Community-based Services to enable more seniors in need to receive care at home.

Unemployment: It makes the first $10,200 of unemployment insurance received in year 2020 tax free for households with an adjusted gross income under $150,000.

COVID-19:  It provides vaccines and treatment under Medicaid and CHIP without cost-sharing.

References:  Here is the full text of the “American Rescue Plan Act of 2021” (H.R. 1319);

Kaiser Family Foundation. “Medicaid Provisions in the American Rescue Plan Act”

Q. My wife and I were wondering whether we would need more than a Last Will for each of us to cover what happens upon death. Is a Will usually enough?

A. Good question.  The simple answer is “No”. Usually more planning documents are necessary, or at least strongly advisable.

While a Will is an important estate planning document, there are things that it won’t cover or cannot do. Consider the following:

Wills Do Not Cover All Property:  Although a Will is one way to direct who gets your property on death, it does not cover everything. The following are examples of property you cannot distribute by Will:

Jointly held property. Property that is co-owned with another person is usually not distributed through your Will. If held in Joint Tenancy, then upon the death of a joint tenant, his or her interest goes to the other joint tenant(s) and not according to the deceased joint tenant’s Will.

Property in Trust. If you place property into a trust, the property passes to the beneficiaries named in the trust, not according to your Will. Sometimes there may be a dispute as to whether the property is in your Trust or in your Will, and this may have to be decided by a probate judge.

Pay on Death accounts. With Pay on Death, or “Transfer upon Death” accounts, the account owner names a beneficiary (or beneficiaries) to whom the account assets pass automatically upon the death of the original owner, and are not governed by your Will.

Life insurance. Life insurance passes to the beneficiary you name in your life insurance policy and is not controlled by your Will.

Retirement plan. Similar to life insurance, assets in a retirement account (e.g., an IRA or 401(k)) pass to the named beneficiar(ies). Under federal law, a surviving spouse is usually the automatic beneficiary of a 401(k), although there are some exceptions. With an IRA, you may be able to name your preferred beneficiary, but subject to your spouse’s consent if the assets are community property.


A Will is also not well suited to address these other matters:

Funeral instructions. A Will is not the best place to put your funeral instructions. Wills are often not found until days or weeks after death. It is better to leave a separate letter of instruction that is located in an easily accessible location.

Management Of Assets During Incapacity: A Will only “speaks” at death, so if you wish someone whom you trust to take charge of assets if you become incapacitated, you will need other estate planning documents, e.g. a Trust and/or Durable Power Of Attorney.

Facilitating Eligibility for Care Subsidy: Many elders need long term care in their later years, which is usually expensive. To help with that expense, their family may seek a public benefits subsidy under the Medi-Cal program. However, doing so often requires that certain steps be taken with assets in order to qualify. To facilitate qualification, the elder must have delegated certain legal powers over assets to a trusted child or other family. Wills, which only take effect at death, do not address this need.

Probate Usually Required. Property distributed via a Will usually requires a probate, which is the formal process by which the court supervises the distribution of your property as instructed in your Will. Many people prefer to avoid probate, and hence their reliance upon Trusts or other devices.

Food for thought?

Q.  My father was discharged from the hospital into a nursing home, has been there only about 2 weeks under MediCARE, and now they are pressing us to bring him home. But, he’s not ready and still needs care. Is this right?

A.  No, it is not. Unfortunately, many nursing homes are concerned about whether MediCARE will continue to pay for care after the initial 20 days, and so often pressure the family to bring their loved one home, or move to another facility for further care. This is not right and is not in compliance with either the federal Nursing Home Reform Act (“NHRA”), nor California State law.  Assuming the facility is licensed as a “Skilled Nursing Facility” (fancy name for Nursing Home, and often abbreviated as “SNF”), it cannot force your loved one out if he or she still needs care.

Under the NHRA and later Regulations, there are only six (6) reasons that a SNF may use to discharge patients. If none apply, it cannot discharge the patient so long as that continued stay is paid for, whether by MediCARE, Private Pay, Private Insurance, or Medi-CAL. Those reasons are:

(1) The transfer or discharge is necessary for the resident’s welfare and the resident’s needs cannot be met in the facility;

(2) The transfer or discharge is appropriate because the resident’s health has improved sufficiently so the resident no longer needs the services provided by the facility;

(3) The safety of individuals in the facility is endangered due to the clinical or behavioral status of the resident;

(4) The health of individuals in the facility would otherwise be endangered;

(5) The resident has failed, after reasonable and appropriate notice, to pay for (or to have paid under Medicare or Medicaid) a stay at the facility; or

(6) The facility ceases to operate.

Further, as part of any discharge, the SNF must make suitable arrangements in writing for care elsewhere.

If a resident has applied for a Medi-CAL subsidy, and that application is pending, the SNF may not transfer or discharge a resident while that application (or any  appeal therefrom) is pending.

Still further, the resident has a right to appeal a Notice of Transfer or Discharge, and may request an actual hearing before a judicial officer, to be held at the SNF, itself, or another place convenient to the resident. At the hearing, the resident has the right to be represented by a family member or an attorney, the right to review documents ahead of time, the right to cross examine witnesses and/or to bring his own to the hearing.

If your loved one is not ready to be discharged, or even transferred within the facility to another room, I would suggest the following:

1) Advise the Administrator that continued care is needed and that your loved one does not intend to leave. Confirm that advice by a follow up letter;

2) Request a formal hearing by contacting the “Transfer Discharge and Refusal to Readmit Unit” of the Department of Health Care Services at 916-445-9775;

3) Arrange to review all of your loved one’s medical records and any additional records that the SNF intends to offer at the hearing;

4) Contact the Long Term Care Ombudsman for assistance. The Phone # should be conspicuously posted in the lobby of the SNF. If not, call 1-800-231-4024 or 510-638-6878 for Alameda, Contra Costa and Solano Counties;

5) Consider arranging for your loved one’s doctor to write a letter affirming your father’s continued need for care or, better yet, ask the doctor to appear at the hearing in person or by telephone;

6) Consider engaging an attorney for assistance.

Good wishes to you and your loved one.


References:  CANHR’s “The Epidemic In Nursing Home Evictions“; and “Transfer and Discharge Rights”;

List of discharge reasons per Federal Law in 42 CFR § 483.15(c)(1)


Q.   My father is in a nursing home and could really use a Medi-Cal subsidy to help with the cost, which is running about $9,500 per month.  He has dementia and cannot manage his own finances.  Years ago he signed a Power Of Attorney naming me as his agent.  Can I use it to make gifts of his excess assets to his family in order to help him qualify for Medi-Cal?                                                      

A. Whoa!  Not so fast.  There are a couple of real concerns here: (1) whether the Power Of Attorney legally authorizes gifts, and (2) whether making gifts of excess assets will help or hurt his eligibility for Medi-Cal. 

The POA: in California, a Power Of Attorney (“POA”) must expressly authorize the agent to make gifts.  Gifting powers cannot be implied from other clauses, no matter how comprehensive they appear.  This requirement often comes as a surprise to clients, as many assume – especially if the POA was prepared by an attorney – that the POA authorizes virtually any action that the agent desires to take, including the making of gifts.  Quite the contrary: an agent under a POA is a fiduciary and cannot just give away the principal’s assets, no matter how well intended the act, unless the power to do so is expressly authorized in the POA document.

A companion concern is that you, as agent, cannot include yourself as a gift recipient unless the POA expressly authorizes you to “self deal”.  The phrase “self deal” means acting in your own self-interest.  In the absence of the right to “self deal, the making of gifts to yourself would be viewed as acting in your own self- interest and breaching the higher duty you owe to your father, the maker of the POA.  Further, those unauthorized gifts to yourself could be viewed as theft and/or as elder financial abuse. 

Of course the POA must also be “durable”, meaning that it survives your father’s incapacity and remains valid even though he is no longer competent.

The Medi-Cal issue: as you apparently know, in order to qualify for a Medi-Cal nursing him subsidy, an applicant’s countable resources must be under certain limits.  For a single individual, the resource ceiling is $2,000, and for a married couple it is $130,380 (for 2021).  Against that backdrop, many clients believe that the way to help a loved one qualify for Medi-Cal is to simply help them transfer away excess assets to other family members.  However, unless handled in a very special way, gifting away a loved one’s excess assets could backfire: the transfers could potentially disqualify them from a Medi-Cal subsidy, perhaps for a lengthy period going forward. 

In summary: your father’s POA must first be evaluated to determine if it includes broad gifting powers and self-dealing powers, and next whether it is a “durable” power. Note: Many POA’s impose limitations on gifting, sometimes by reference to a tax code section, a limitation which is not usually obvious except to an attorney or tax professional.

If gifting otherwise appears appropriate under the POA to accelerate your father’s eligibility for a Medi-Cal subsidy, then you should seek professional guidance from an attorney skilled in Medi-Cal Planning to develop an appropriate divestment plan that is compliant with the Medi-Cal rules.  If those rules are not strictly observed, the making of gifts could result in a long period of ineligibility from the very Medi-Cal subsidy that you seek.

To Our Clients and Friends:

Below are updated numbers for 2021 that are frequently used in our Elder Law practice and which may be of interest to clients:

Medi-Cal Spousal Impoverishment Numbers for 2021

The new Community Spouse Resource Allowance (“CSRA”) is $130,380.

The Minimum Monthly Maintenance Needs Allowance (“MMMNA”) for the “At- Home” Spouse is $3,259.50.

The “CSRA” is the amount of savings or other countable resources, and the “MMMNA” is the amount of monthly income, which the At-Home spouse can retain when the Ill Spouse needs a Medi-Cal subsidy to help with the cost of nursing home care. The goal of Congress in setting these “safe harbors” was to avoid the spousal impoverishment of the At-Home spouse when the other needed care.

Aged & Disabled Federal Poverty Level Program: These are the monthly income thresholds; persons whose income is below these thresholds may qualify for No Share of Cost Medi-Cal when receiving Medi-Cal benefits at home:

Single Individual:  $1,468 (up from $1,294);

Couple:  $1,983 (up from $1,747).

Gift and estate tax figures

Federal estate tax exemption: $11.7 million for individuals, $23.4 million for married couples;

Lifetime tax exclusion for gifts: $11.7 million;

Generation-skipping transfer tax exemption: $11.7 million;

Annual gift tax exclusion: $15,000 (unchanged).

Long-Term Care Premium Deductibility Limits for 2021

The Internal Revenue Service has announced the 2021 limitations on the deductibility of long-term care insurance premiums from income. Any premium amounts above these limits are not considered to be a medical expense and hence are not deductible. The deductibility increases with age:


Attained age before the close of the taxable year Maximum deduction
40 or less $450
More than 40 but not more than 50 $850
More than 50 but not more than 60 $1,690
More than 60 but not more than 70 $4,520
More than 70 $5,640


Veterans Benefits To Qualify for Pension:

Asset limit: $130,773 (effective 12/1/2020)

Penalty Period Rate for Prior Gift Transfers: $2,295. This number is divided into the value of any disqualifying gifts made within 3 years of application and the result is the number of months of disqualification from eligibility to receive a pension.

Maximum Monthly Pension Rates for Veterans or their surviving spouses who need the highest level of care in their care setting, i.e. Aid and Attendance:

Single veteran $1,936
Married veteran $2,295
Surviving spouse of Veteran $1,244
Vet married to Vet (both with A&A) $3,071.75


Medicare Premiums, Deductibles and Copayments for 2021

  • Part B premium: $148.50/month (was $144.60)
  • Part B deductible: $203 (was $198)
  • Part A deductible: $1,484 (was $1,408)
  • Co-payment for hospital stay days 61-90: $371/day (was $352)
  • Co-payment for hospital stay days 91 and beyond: $742/day (was $704)
  • Skilled nursing facility co-payment, days 21-100: $185.50/day (was $176)

Part B premiums for higher-income beneficiaries:  Individuals with annual incomes above   $88,000 and married couples with annual incomes above $176,000 will pay more, beginning at a monthly premium of $207.80, and increasing to as much at $504.90 per month for those with annual incomes above $500K for singles and above $750K for married couples

Supplemental Security Income (“SSI”) Benefits for 2021

The new monthly Supplemental Security Income (SSI) payment benefit in California is:

For a single person: $954.72; For a married couple: $1,598.14

For beneficiaries who are blind: a single  person’s monthly benefit is $1,011.23 and a married  couple’s (where both are blind)  is $1,751. Where one is blind and one spouse is aged or disabled, the benefit is $1,691.65.

Q. My wife and I are both on SSI and Medi-Cal and we just received $1,200 under the federal stimulus program, and hope to receive another round if Congress and the new administration approve more. Will these payments mess up our public benefits, which we depend upon?

A. The short answer is “No”. Some background may be helpful:  As you may know, the basic Medi-Cal and Supplemental Security Income (“SSI”) rules are  that both income and assets are considered in terms of eligibility. If the stimulus payments were considered income, they would potentially undermine that eligibility or at least increase the Medi-Cal recipient’s Co-Pay (“Share of Cost”) for health care services. Also, since the value of countable assets of recipients on SSI and/or Medi-Cal must be under the permissible resource ceilings, there was also concern that these stimulus payments would put many over these ceilings and result in their termination from these vital public benefit programs.

Because of these concerns, immediately after the last round of stimulus payments in April, 2020, the Commissioner of Social Security issued an important statement  which recited, in part, as follows:

“Please note that we will not consider economic impact payments as income for SSI recipients, and the payments are excluded from resources for 12 months”. [Emphasis added]

Because federal public benefits law provides that state Medicaid (Medi-CAL) programs cannot impose eligibility requirements that are stricter than SSI requirements, the Commissioner’s pronouncement of favorable treatment for the SSI program essentially resulted in the extension of the same treatment to the Medi-Cal program. Thus, the stimulus payments will not count as income, nor will they count as resources for at least 12 months after receipt. This should give you and your wife some measure of comfort.

In accord with federal law, the Medi-Cal folks in Sacramento then issued a statewide directive to all counties further clarifying this matter, essentially affirming the Secretary’s statement of ‘no effect’. While they have not yet issued another statewide directive with regard to the last round of stimulus payments a few weeks ago, my contacts at the Department of Health Care Services in Sacramento assure me that the same treatment will apply, again, and that a further written directive to that effect will issue soon.

There is one caution, however: if the stimulus payments are saved, and not spent within the 12 month grace period, then they will thereafter count as resources, and that circumstance could then undermine a beneficiary’s ongoing eligibility.  However, if the stimulus payments are spent in the interim, or used to purchase exempt resources (e.g. funeral plan, clothing, automobile, home repair, etc.), then there would be no adverse effect even after that 12 month grace period.

Further, these stimulus payments will not be counted as income for purposes of the various subsidies available to qualify for health insurance under plans available through Covered California. However, Pandemic Unemployment Benefits will count.  See the resource listed below for further detail.

Lastly, for folks reading this article, please do not confuse economic stimulus payments with unemployment assistance payments. The latter will count as income in the month received, and if not spent in the month of receipt will count as an asset as of the next following month. So be careful to distinguish these subsidies.


For readers wishing more information, please see the resources listed below, along with hyper-links to the articles:

References:  Medi-Cal ‘All County Welfare Directors’ Letter’, ACWDL 20-09 (04/27/2020);

Treatment of Stimulus Payments by Covered California; Treatment by IRS;

Q & A’s prepared by Neighborhood Legal Services of LA County;

Statement by Commissioner of Social Security (04/03/2020);

Health Affairs Blog entitled “Coverage Provisions in the 2021 Appropriations & COVID 19 Stimulus Package”, (01/04/2021);

Nursing Home Residents, Medicaid, and Stimulus Checks: What You Need to Know, by National Center on Law & Elder Rights (“NCLER”);

Summary prepared by the Social Security Administration (5/14/2020), “Economic Impact Payments for Social Security and SSI Recipients—Steps to Take and Schedule of Payments”

Q.  In talking with friends, I discovered a lot of misunderstanding about how the Medi-Cal program works if one needs help with the high cost of nursing home care. I wonder if you would clarify matters.

A. Sure. I have also discovered much misunderstanding, even among care professionals. Here are the most common “myths” regarding the Medi-Cal program for those needing help with the cost of care:

Myth #1Nursing home Medi-Cal is just for persons at or near the poverty level.

Fact: Not necessarily. Persons with substantial assets can often qualify for a Medi-Cal subsidy, providing planning is in place and that proper steps are taken at the time of need.  This is especially true in the case of married couples, where both federal and state law include Spousal Impoverishment provisions designed to subsidize the cost of care for the Ill Spouse, while preserving a “nest egg” of income and marital resources for the At Home spouse.

Myth #2The state can force you to sell your home in order to qualify for a nursing home Medi-Cal subsidy.

Fact: False. Your home is an exempt asset during your lifetime and the state will not force you to sell your home in order to qualify for a Medi-Cal nursing home subsidy. However, the home exemption usually expires on death (or upon the later death of the surviving spouse or disabled child), and Medi-Cal may then seek to recover benefits paid out on your behalf, often by placing a lien on the home.  Good news:   By taking appropriate steps during your lifetime, you can fully protect your home from a post-death Medi-Cal payback claim. One option is to place the home in a Living Trust.

Myth #3If you give all of your savings to your children, you can immediately qualify for Medi-Cal.

Fact: False.  Medi-Cal has a “look back” period, which is currently 30 months in California, and which will ultimately be extended to 5 years. Significant gifts made within that “look back” will usually result in a period of disqualification.  However, if gifts are handled in a very special way, they can still be made in a manner which is both compliant with the Medi-Cal rules and which will not result in disqualification.  However, to avoid running afoul of the gifting rules proper guidance from an Elder Law attorney is essential.

Myth #4If you put all of your assets into a Living Trust, they do not count when applying for a Medi-Cal subsidy.

Fact: False. Placing assets into a Living Trust does not shield them from being considered at qualification, as you normally retain the right to revoke the trust. The Living Trust is therefore disregarded when Medi-Cal considers your resources. However, it can shield those same assets from post-death Medi-Cal “recovery” claims (“pay-back”), and hence is often a recommended option for Medi-Cal beneficiaries.

Myth #5If you convert from private pay to Medi-Cal, the nursing home can ask you to leave.

Fact: False. If the nursing home is Medi-Cal certified, it is illegal to evict you when you seek a Medi-Cal subsidy.

Myth #6Medi-Cal planning is illegal or unethical.

Fact: False. Medi-Cal planning is perfectly legal and ethical. In our view, it is akin to tax planning in which the wealthy engage. Both types of planning do impact the public treasury. To be sure, tax avoidance planning has a far greater impact than Medi-Cal planning.

Q.  I understand that the recently passed Proposition 19 on the California Ballot will make major changes in the property tax structure.  Is that true?

A. Yes, indeed. California voters just narrowly approved Proposition 19, overhauling our property tax rules originally stemming from the passage of Proposition 13 in 1978. Most notable are the new restrictions to the parent-child exclusion established by “Prop 58” in 1986.

Here are some of the features of the new law, with the corresponding “winners” and “losers”:

The “Winners”:

Seniors over age 55, persons who are severely disabled, and victims of wildfires or natural disasters, are the “winners”, as the new law allows them to transfer their home’s low property tax rate to the purchase of a replacement home anywhere in the state, albeit with only modest adjustment in property tax if the replacement home’s taxable value is more than the original residence. Under existing law, seniors could only opt to do so if they purchased a replacement home within their own county (or within nine (9) designated other counties who opted into the program), and then only once in a lifetime.  After April 1, 2021, this new right may be exercised up to three (3) times during lifetime by seniors’ and the disabled, and unlimited times by victims of natural disasters, all so long as the re-purchase occurs within two (2) years of the sale of their original residence.

The “Losers”:

Children, who had hoped to inherit their parents’ home and up to $ One Million of other property, along with their parents’ low property tax rate, are the losers.  Since the passage of Prop 58 in 1986, children have been able to retain their parent’s low tax rate when property passed from parents to children via sale, gift or inheritance. That blanket rule has now been substantially modified: Under newly enacted Prop 19, a child will not be able to assume his parents’ low property tax rate for their home, unless the child actually moves into the parents’ home and claims it as his own principal residence within a year of the transfer. This will pose problems for children who already have their own homes. Further, even if the child moves in, the carry over tax rate will still be increased if the value of the home upon transfer to the child is greater than $One Million more than the parent’s taxable value. Still further, there will be no carry over tax benefit at all for the transfer of non-residential property.

This move-in requirement and the prospect of some property tax increase even then, will make it more difficult for children to inherit and keep their parent’s home and other real property.  Many will be forced to sell.

Window of Opportunity:  The effective date of the new rules regarding the Parent–Child Exclusion is 02/16/2021. This delayed effective date creates a short window of opportunity for those parents who wish to pass their homes and other property, along with their low property tax rate, to their children under existing law.  But before any parent does so, he or she should first consider the “downside” of doing so, including the following:

(1) Capital Gains Taxes:  A present transfer surrenders the adjustment to the property’s cost basis at the parent’s death, which would otherwise eliminate all taxable appreciation from the time of the parent’s original acquisition to the time of the parent’s death. This loss would substantially increase the capital gains tax payable when the child later sells the property;

(2) Long Term Care Needs:  The possible effect of such a transfer on the parent’s eligibility for a Medi-Cal subsidy to help finance long term care.

Need for Amendment to Estate Plans? Given the looming disparity in property tax treatment of residential versus non-residential (investment) properties after 2/16/2021, there may also be need for parents — who own both kinds of properties — to reconsider their existing estate plans, so as to preserve fairness among their children who wish to retain their inherited properties, thus “burdened” with increased property taxes.  Alternatively, in order to discourage post-death challenges by disgruntled children, parents may wish to include recitals in their trust and related documents that they have at least considered these potential disparities in making their bequests to their children.

Q.  My wife and I are considering making large gifts to our two children and four grandchildren, and we would like to do so in a way that is “tax wise”. Do you have any advice for us?

 A. Yes. Many people mistakenly believe that one cannot gift more than $15,000 per year/person without incurring a gift tax. Not so. In fact, an individual can actually currently gift more than $11 million during lifetime without incurring a gift tax. Here is the way gift taxes work:

Annual Exclusion Gifts: No Gift Tax Return Required:

1) $15,000 Per Year:  You and your spouse can each gift up to $15,000 per year per recipient without the need to file a Gift Tax Return. Such gifts are called Annual Exclusion Gifts and you can make such gifts to as many individual persons as you wish each year, provided that you make only one such annual gift to each recipient.

2) “Doubling Up”:  If you and your wife are in a position to do so, together you can actually double that amount for each gift recipient. So, together, you could gift a total of $30,000 to each recipient for a total of $180,000 to your loved ones ($15,000 x 2 donors x 6 recipients), again without the need to file a Gift Tax Return or incur any actual gift tax.

3) Year End Straddle: On or after January 1, 2021, you and your wife could do the same thing once again, as you would then be in a different tax year.  So, over the course of a period as short as a calendar week – provided that the week straddles both the last days of this year and the early days of next year — the two of you could gift a total of $360,000 ($180,000 x 2 Donors) to your 6 recipients without the need to file a Gift Tax Return or use any of your lifetime exemptions. I call this strategy the Year-End Gift Straddle. 

Gifts Above the Annual Exclusion: Gift Tax Return Required

1) Lifetime Exemption: If you choose to make gifts above the Annual Exclusion Amount (“AEA”), then you can still make them gift tax free by using a portion of your Lifetime Exemption (also called the “Unified Credit”). That Lifetime Exemption is currently $11.58 million per person for U.S. citizens, and increases to $11.7 million per person next year. AEA gifts do not count against this exemption, and they can be made in addition to Lifetime Exemption gifts.  Also, by making a timely election after the death of a spouse, the surviving spouse can opt to preserve the deceased spouse’s unused Lifetime Exemption for the survivor’s own later use, thereby effectively doubling it. This is called “portability”.

2) Gift Tax Return:  To the extent that your gifts exceed the Annual Exclusion Amount, you must file a Gift Tax Return even though no actual gift tax would be due, so long as less than the Lifetime Exemption. Reason: the IRS wants to track your use of your lifetime exemption, so that it knows how much you have left to use upon death. Example: if you used $1 million of your lifetime exemption to make excess gifts during life, then your remaining exemption to apply against estate taxes upon death would be $1 million less.

Cautions:  Before making large gifts, be sure that you can afford to do so. Lastly, if there is a possibility that either of you may need to apply for a Medi-Cal subsidy for nursing home care in the near future, you should consult a professional with special knowledge about the Medi-Cal program before making those gifts: Gift transfers may adversely affect your ability to qualify for a Medi-Cal subsidy unless those gifts are handled in a very special manner.