Proposition 19 changes the way real estate may be passed down from parents to children in California. Here are 6 key things you should know about this new law:
Prop 19 eliminates the ability for children to receive property from their parents without a property tax reassessment unless (adult) children use the property as their own primary residence andthe property has gained less than one million in value over the original assessed value.
Previously, a parent could transfer their primary residence and up to one million of assessed value of other real estate (residential and commercial) to their children without reassessment. Please note that Prop 19 does notimpact capital gains taxes or eliminate the step up in basis for inherited properties – it only affects property tax reassessments.
Prop 19 goes into effect on February 16, 2021 and will impact properties transferred after that date. Because of holidays, however, the transfers must be recorded by February 11, 2021 to meet the deadline.
There is special Prop 19 planning available to avoid the consequences of Prop 19. This Special Prop 19 planning consists of transferring the property to an irrevocable trust before the deadline to preserve the lower property tax basis.
This special Prop 19 planning is best suited for those (a) who own a property with a high current market value and a low property tax assessed value, and (b) who plan to gift that property to their children upon death, and (c) whose children intend to keep the property for a rental, vacation home, or commercial building.
This special Prop 19 planning is not for everyone. There are many drawbacks and unknowns (the legislature has yet to write the details so there is much yet still to be determined) with this planning. For example, it would require you to give up all rights and use of your primary residence from now on, meaning your children could potentially kick you out of the home. For commercial properties, you would have to give up all rights to the rental income and principal now, meaning your children would receive it from this point forward. Also, please be aware, properties with a mortgage generally will not qualify for this special Prop 19 planning because lenders often legally prohibit these types of property transfers. Finally, if the transfer is allowed, there is added expense in creating the irrevocable trust now and administering it into the future.
If you would like to discuss whether Prop 19 planning is appropriate for you, please call CaliLaw at 626.355.4000 to schedule a phone call with a member of our team.
Since you’ll be discussing topics like death, incapacity, and other frightening life events, hiring an estate planning lawyer may feel intimidating or even morbid. But it doesn’t have to be that way. Instead, it can be the most empowering decision you ever make for yourself and your loved ones. The key to transforming the experience of hiring a lawyer from one that you dread into one that empowers you is to educate yourself first. This is the person who is going to be there for your family when you can’t be, so you want to really understand who the lawyer is as a human, not just an attorney. Of course, you’ll also want to find out the kind of services your potential lawyer offers and how they run their business. To this end, here are five questions to ask to ensure you don’t end up paying for legal services that you don’t need, expect, or want. Once you know exactly what you should be looking for when choosing a planning professional, you’ll be much better positioned to hire an attorney who will provide the kind of love, attention, care, and trust your family deserves.
1. How do you bill for your services?
There’s no reason you should be afraid to ask a lawyer how he or she bills for the work they do on your behalf. In fact, questions about billing and payment should be thoroughly discussed before you engage any lawyer to represent you. No one wants surprises, especially when it comes to legal fees.
Find an estate planning lawyer who bills for their services on a flat-fee, no surprises, basis—and not on an hourly basis—unless it’s required for limited purposes. And ideally, you want a lawyer who will guide you through a process of discovery in which they learn about your family dynamics, your assets, and they educate you about what would happen for your family and to your assets if and when something happens to you, and then support you in choosing the right plan for you that meets your budget and your desired outcomes.
How will you respond to my needs on an ongoing basis?
One of the biggest complaints people have about working with lawyers is that they are notoriously unresponsive. Indeed, I’ve heard of cases in which clients went weeks without getting a call back from their lawyer. This is all too common, but totally unacceptable, especially when you’re paying them big bucks.
That said, in most cases, these lawyers aren’t blowing you off—they simply don’t have enough support or the systems in place to be able to be responsive. Far too many lawyers believe they can take care of everything themselves. From paperwork and client meetings to scheduling and returning phone calls to connecting their clients with other advisors, there are just too many responsibilities for one person to manage all on their own.
Ask them how quickly calls are typically returned in their office, ask them if there will be someone on-hand to answer quick questions, and ask them how they will support you to keep your plan up to date on an ongoing basis and be there for your loved one’s when you can’t be.
A great way to test this is to call your prospective lawyer’s office and ask for him or her. If you get put through right away—or even worse, your call gets sent to a full voicemail—think twice about hiring this lawyer. This means they don’t have effective systems in place for managing and responding to calls or answering quick questions.
Instead, what you want is for the person who answers the phone—or another team member—to offer to help you. And if that individual cannot help you, then he or she should schedule a call for you to talk with your lawyer at a future date and time. Ideally, all calls with your lawyer should be pre-scheduled with a clear agenda, so you both can be ready to focus on your specific needs.
Next week in part two, we’ll talk more about the ways in which your attorney should communicate with you and list the remaining three questions to ask before hiring your estate planning lawyer.
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In response to a series of wildfires that ravaged Southern California in 2017, I wrote a previous article explaining https://www.calilaw.com/saving-matters-12-must-items-pack-go-bag/ ready in the event a natural disaster or other emergency strikes your home. Go-bags originated with the US military, which requires its personnel to always keep one on-hand packed with the essential items needed to survive for at least three days following a disaster.When you have just minutes to evacuate, you won’t have time to think about what you should pack to survive the days—or weeks—to come, so the time to prepare for your family’s safety is now.
In 2020, we’re not only dealing with deadly wildfires again in California, we’re still in the middle of the COVID-19 pandemic, which has already killed more than 180,000 Americans and seems unlikely to disappear anytime soon.
In light of the increased dangers posed by the pandemic, I decided to update my previous go-bag article. Although most of the items you should have in your go-bag remain the same, here we’ll cover the supplies and documents you should pack to deal with COVID-19. Whether you are forced to temporarily relocate somewhere other than your home, require hospitalization, or are subject to quarantine, the pandemic comes with unique risks that call for additional preparation.
The go-bag revisited Before we discuss the estate planning and other key documents you should include in your go bag, we need to mention some general supplies to include to help protect your family from contracting COVID-19. Along with the personal sanitary items listed in the previous article, you should add the following items:
Face masks and/or face coverings
Hand sanitizer containing at least 60% alcohol
Lysol or other disinfectant sprays
Now, when it comes to your estate plan, even if you have all of the necessary planning documents in place and updated, they won’t do you any good if your loved ones don’t know about them or can’t quickly locate them during an emergency. Without immediate access to your plan, if you become seriously ill or injured, medical and financial decisions can be dangerously delayed or be made by someone other than the people you would want.
And the need for your plan to be easily accessible is particularly urgent during the pandemic. Due to the highly contagious nature of COVID, there’s a good chance your family members will not be allowed to accompany you if you are hospitalized or forced to quarantine. For these reasons, adding your estate plan and other important documents to your go-bag is a must.
While all of your estate planning documents should be included in your go-bag, be sure to include your up-to-date medical power of attorney and living will along with copies of your health insurance or Medicare card and a summary of your medical history. In your medical history, you’ll want to mention any chronic underlying medical conditions and illnesses, as well as list all prescriptions drugs, over-the-counter medications, and/or supplements you are currently taking—and don’t forget to list any known allergies.
Make sure your loved ones know about your go-bag, and where to find it. To make it as portable as possible, download your plan and other essential documents to a thumb drive you can carry in your go-bag and upload additional copies to the cloud.
Safeguard your belongings—and memories While protecting your family’s health, safety, and well-being is the primary purpose of packing a go-bag, you should also take steps to prevent the financial devastation that can result from having your home and other property destroyed in a disaster. Obviously, having the appropriate levels of insurance coverage in place is your first task. But to make sure the insurance companies fully reimburse you for what you stand to lose, you should also take video and photos of all your belongings. Such visual documentation can not only ensure you are able to replace your assets, but that your insurance claim is processed as quickly and smoothly as possible.
Finally, if you own your home, it should be titled in your living trust and your living trust MUST be identified as an “additional named insured” on your homeowner’s policy. Pull out your policy and check for that now. This often-overlooked detail can cause big problems in the event a claim must be made.
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beginning of the month, and bills are coming due. If you are stressed out, it’s
important that you know where and how to get access to financial relief. Please
consider this not only for yourself, but for your adult children and elderly
parents, too, even if you do not need it for yourself.
On March 27,
President Trump signed a $2.2 trillion stimulus bill into law that will
hopefully provide some relief for many, perhaps including you. The CARES Act
(Coronavirus Aid, Relief, and Economic Security Act) sends money directly to
Americans, expands unemployment coverage, and funds loans and grants for small
businesses. So, let’s look at how you can access these funds.
Who gets direct stimulus money and how much do they get? All eligible adults who have a Social Security Number, filed tax returns in 2018 and/or 2019 will automatically get a $1,200 direct stimulus deposit from the government within a particular income bracket. This is true whether you have been laid off, are currently employed, or are currently self-employed or an independent contractor.
To get the full amount:
A single adult must have an adjusted gross
income of $75,000 or less.
Married couples with no children must earn
$150,000 or less for a combined total stimulus of $2,400.
Every qualifying child 16 or under adds $500
to a family’s direct stimulus.
If you have filed as head of household, have
dependents, and earned $112,500 when you last filed, you will get the full
is not considered income—it’s essentially free money from the government.
Therefore, it will not be taxed. It also is not a loan, so if you are eligible,
you will not be charged interest or expected to pay it back. As of right now,
the stimulus is a one-time payment.
Are there exceptions? Payment decreases and eventually stops for single people earning $99,000 or more or married people who have no children and earn $198,000 annually. Additionally, a family with two children will no longer be eligible for payments if their income is over $218,000.
If you are an
adult claimed on your parent’s tax return, you do not get the $1,200.
What do I need to do to get my stimulus money? For most people, no action is necessary. If the IRS has your bank account information already, it will transfer the money to you via direct deposit. If, however, you need to update your bank account information, the IRS has posted on their website that they are in the process of building an online portal where you can do so.
note: if you have not filed a tax return in the past couple of years, or you
don’t usually need to file one, you should file a “simple tax return” showing
whatever income you did have, so you can qualify for these benefits.
You can continue to check for updates on how
to make sure you get your payment by regularly checking for updates on their
Coronavirus Tax Relief page. https://www.irs.gov/coronavirus
When will that money come through? Treasury secretary Steven Mnuchin says that he expects most people will get their payments by Friday, April 17th, though other sources say that it could take up to 4–8 weeks.
Loans (and Grant Money) for Independent Contractors If you have a business, are an independent contractor or are self-employed, you can apply for loans, and get a $10,000 grant from the government via the CARES Act.
Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program (PPP)
loans. Please note that there are still elements of these loans that are not
fully understood, and we are giving our best legal interpretation based on
information from the Small Business Administration and the US Chamber of
VERY IMPORTANT: If you apply for EIDL right now, you can claim
a $10,000 advance that does not need to be repaid. It’s essentially a grant
that can be used to keep your business alive. You can apply for it right here: https://covid19relief.sba.gov/ Do it, now. This is applicable if you are an
independent contractor, or a self-employed business owner. Basically, if you
file a separate tax return for your business or a Schedule C on your personal
tax return, you SHOULD qualify. But please see note above that we don’t really
know how all of this will be implemented. What we do believe is that you should
get your application in for the EIDL grant money.
The PPP applications will be made through your bank, so contact your banker, if
you believe you will need the PPP loan, which will be forgiven if used for
payroll specifically in the weeks after receiving the loan funds.
have the following information on hand to fill out either of the two loan
IRS Form 4506T—Tax Information
Authorization—completed and signed by each principal or owner,
Recent federal income tax returns,
SBA Form 413—Personal Financial Statement,
SBA Form 2202—Schedule of Liabilities listing
all fixed debts,
Any profit and loss statements, recent tax
returns, and balance sheets.
Here’s a bit
more information about both loan programs.
Economic Injury Disaster Loans (Above and Beyond the $10,000 Grant) Every state has been declared a disaster area due to COVID-19, and therefore your business may be eligible for an SBA economic injury disaster loan (EIDL). This is a low-interest loan that has terms that can last as long as 30 years, and can provide you with capital loans of up to $2 million and an advance of up to $10,000.
Injury Disaster Loans (EIDL) can be used to cover:
Paid sick leave to employees unable to work
due to the direct effects of COVID-19,
Rent or mortgage payments,
Maintaining payroll (to help prevent layoffs
and pay cuts),
Increased costs due to supply chain
Payment obligations that could not be met due
to revenue loss.
application used to take hours, it now only takes about 10 minutes to fill out.
A couple of important notes, however:
SBA loan reps have said that they are focusing
on processing applications filed after March 30th, so if you have a
confirmation number starting with 2000, you should probably reapply.
Be sure to check the box toward the end of the
application if you want to be considered for an advance up to $10,000 (as I
mentioned at the top of the article, this amount does not need to be repaid and
so is essentially a grant!).
Coronavirus Emergency Paycheck Protection Loan The CARES Act’s $350 billion allocation to small businesses is specifically called the Paycheck Protection Program (PPP). It specifically incentivizes borrowers who maintain their payrolls, i.e., don’t lay off their employees. This program will fully forgive loans where at least 75% of the forgiven amount is used to pay employees for the eight weeks following the loan. If you lay off employees or cut salaries and wages, your loan forgiveness will also be reduced.
PPP loans can
be used to cover:
Group health care benefits during periods of
paid, sick, medical, or family leave, and insurance premiums;
Interest on a mortgage obligation,
Rent, under lease agreements in force before
February 15, 2020,
Utilities, for which service began before
February 15, 2020,
Interest on any debt incurred before February
businesses with less than 500 employees (including sole proprietorships,
independent contractors, and those who are self employed) are eligible. You can
apply through SBA 7(a) lenders, federally insured credit unions, or
participating Farm Credit Systems (ie your bank). Other lenders might be on the
scene soon as well, but a lot of them are currently being reviewed for approval
to the program.
What if I am not eligible or need more money? If you don’t qualify for stimulus money, all is not lost. There are several other ways that the CARES Act has made it easier for you to get a short term financial boost.
Unemployment The CARES Act has also legally expanded unemployment benefits, expanding them for 13 more weeks and adding an additional $600 per week. Some self-employed, freelance, and independent contractors may be eligible, too. These benefits vary from state to state, and you can find how to apply at the Unemployment Benefits Finder site: https://www.careeronestop.org/LocalHelp/UnemploymentBenefits/find-unemployment-benefits.aspx?newsearch=true. Be sure to have your Social Security number, the Social Security numbers for dependents you are claiming, and your driver’s license or state ID handy while you apply.
Private Loans If you’re in good standing with your bank, you may be able to get a “bridge loan” extended to you in order to cover your bills. Several major banks have set aside money specifically for the purpose of supplying these loans to customers that they deem eligible for them.
Retirement Account If you don’t have another rainy-day savings account, the CARES Act waives the 10% penalty tax that you would normally get for withdrawing money early. The criteria is pretty open-ended, and applies to people who experience financial hardship because of COVID-19 in some way.
If you are experiencing fear about
affording to pay your bills, remember that you do have options for accessing
savings, loans, and stimulus money. Stay up to date on the above resources, and
if you need any help navigating your way through this uncertain period, we are
here to help.
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I’m dealing with working from home, managing my business and my team remotely, operating in shifts with my wife to take care of my children during the day, homeschool them, all while keeping a nervous eye on our stockpile of toilet paper. But perhaps my biggest challenge is feeling like my parents and in-laws are taking COVID-19 as seriously as I wish they would.
As of March 25th, the number of confirmed cases of COVID-19 across the United States was 54,453 cases across the United States with 737 confirmed deaths from the virus. And these numbers are still rising exponentially.
When we first became aware of the novel coronavirus, there were several TV pundits and other authority figures saying that the virus was just another version of the flu. But in other parts of the world, we’ve seen COVID-19 overwhelm healthcare systems in a way the flu virus just hasn’t.
It seems, though, that many people of the older generation may still not be taking this seriously. And hey, they are the most battle tested of all of us. They’ve seen it all and survived it all and aren’t generally the types to give in to panic and stress.
That said, they are also among the most vulnerable to the effects of COVID-19. And even with the stay at home order in place, I still feel like my parents are taking too many unnecessary risks. Here’s how I’m trying to express my concerns to them:
Listening to them and determining the worries they have. I want to know what they have heard, what they are frustrated about, and what they are skeptical about. Everyone is frustrated with lines at the grocery store, toilet paper hoarding, and the hysteria of the crowds around them. I’m sure my parents do not want to feel like they are one of “those people.” I know I don’t. So I’m just trying to assure them that taking some precautions, especially staying home, is completely reasonable and can be done in a non-panicked way. I’m also trying to support them to make alternative arrangements during this time so they don’t have to go out.
Emphasizing the risk in practical terms. I’m sharing articles and news with them that state the facts, soberly, like this one. My parents are bright and already have a good understanding about how viruses spread in general and they already know the basics of how important it is for them to wash their hands. But I want to ensure that is at the top of mind for them every day right now.
Showing them I’m taking it seriously. I’m not getting together with my parents unless absolutely necessary, and when I do, I’m wearing a mask and keeping my distance as much as possible. I also shared the video created by Max Brooks, son of legendary comedian Mel Brooks, with them. Max created a PSA to convince younger people to be cognizant of how they might spread the virus to people who are the most vulnerable to it. It presents the situation in a succinct, somewhat lighthearted way.
If you’re experiencing something similar with your loved ones, I’d love to hear your thoughts. Together, we can get through this. Let’s make sure our parents come through this with us.
Be well and stay safe.
Dedicated to empowering your family, building your wealth and defining your legacy,
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