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1520 6th Ave
San Diego, CA, 92103
United States

(619) 320.8780

San Diego law firm focusing on estate planning including preparation of trusts, wills, and powers of attorney, trust administration, probate, business formations including partnerships, limited liability companies, and corporations, business succession planning, bankruptcy, business litigation, employment law, and general civil litigation.



Current happenings and anecdotal information regarding estate planning, wills, trusts, business formations, partnerships, Limited Liability Companies, Corporations, business succession planning, and bankruptcy.

Good News: California Changes Medi-Cal Recovery Laws

Casey OConnell

Attention all, effective January 1, 2017, California SB 833 overhauls the Medi-Cal recovery laws in California. More specifically, for Medi-Cal recipients who die on or after January 1, 2017, there are significant changes in the law. The most significant impacts the limitations on recovery of funds by the state of California after the death of the Medi-Cal recipient.

The Good News: Under the new law, recovery of Medi-Cal claims against the estate of the recipient is limited to those estates that are subject to Probate under California law. As a result, assets owned by a Living Trust, or other non-probate transfers such as joint tenancy or survivorship arrangements will no longer be subject to recovery. The only problem with joint tenancy and survivorship arrangements, like pay on death accounts, is that if both joint tenants or the owner and named beneficiary die in the same occurrence, this protection is not available. Also, there is no Probate protection for a surviving joint tenant or surviving beneficiary of a pay on death account.

So what am I driving at here? Under this new law, a revocable trust is the purest and most flexible tool to use to avoid claims against a Medi-Cal recipient’s estate – especially if there is a home included in the recipient’s estate.

Besides Medi-Cal and Probate protection of the home, any other accounts, investments, cash, etc. in the name of the Trust will receive the same protection from Medi-Cal claims asserted by California. The Revocable Trust can also protect rental property from Medi-Cal recovery with proper planning. In essence, any and all assets properly transferred to the Revocable Trust will be protected under the NEW Medi-Cal Recovery laws.

Important Steps to Take: If you have a revocable trust, please carefully review your current assets to ensure they are properly titled in the name of your trust. Often, clients will sign a trust but neglect to fund the trust by changing title to assets. In order to receive the protections under the new law discussed here, your trust must be properly funded. If you’d like to go over your assets with us to ensure you’ve funded your trust properly, please call our office to schedule an appointment.

If you do not already have a revocable trust, the passing of this new law is yet another reason of the many to establish a revocable trust. Take a read of the example below to see how this new law and establishing a revocable trust may help you and your family:

Example #1 – No Revocable Trust: Julie owns a home worth $500,000.00. Julie has a Will that leaves her home to her three children in equal shares after her death. While she is living, Julie receives $125,000 worth of medical benefits through Medi-Cal. Upon her death, Julie’s Will must be probated. Without a revocable trust, the home would be included in Julie’s probate estate. Additionally, her probate estate is subject to California’s claim of $125,000 for recovery of the Medi-Cal benefits Julie received. If there are not sufficient liquid funds in the estate to covery this California claim, the home may need to be sold to satisfy the claim instead of Julie’s three children owning the home as Julie wished. Moreover, the cost of probate would further reduce the inheritance received by Julie’s children.

Example #2 – With a Revocable Trust:  Using the facts above, but Julie establishes the Julie Revocable Trust and transfers her home and bank accounts to the Trust. Julie receives $125,000 of Medi-Cal benefits and passes away on January 20, 2017. The assets in her Trust would be protected from California’s claim for Medi-Cal benefits and the home would be distributed to Julie’s children in three equal shares as she intended. That is an immediate savings of $125,000 to her beneficiaries. Also, and just as important, Julie’s Trust avoids the need for probate and the associated costs, which are exorbitant in California.

The opportunity to protect your assets resulting from this new law is obvious, but cannot be overstated. For those of you who do not have Revocable Trusts, I cannot emphasize the importance and opportunity these NEW laws provide in protecting your estate, especially your home, from Medi-Cal recovery claims should you incur long term care expenses paid for by California. This is especially true for those who do not have long term care insurance.

If you wish to discuss your existing trust, its funding, or establishing a new trust, please call our office at 858-792-0909 to set up a consultation. Take the time to protect your assets for the benefit of your loved ones.

2017 Estate and Gift Tax Update

Casey OConnell

Happy New Year! The IRS has announced the 2017 Estate and Gift Tax Exemption amounts. Recall, California does not have a state estate tax, thus, the Federal Estate Tax and exemptions from it are all we are discussing here.

Estate Tax Exemption: Any U.S. citizen who dies in 2017 has an exemption of up to $5,490,000 from Federal estate tax. This means that if you die with assets valued below this threshold, no Federal estate tax is owed (assuming you did not reduce your estate tax exemption with lifetime gifts or by other means). For married couples, the estate tax exemption has ballooned to $10,980,000 using portability. 

Annual Gift Tax Exclusion: For 2017, the annual gift tax exclusion amount remains at the 2016 level of $14,000 per donee. Married couples can "couple" their gifts to be $28,000 per donee. This means that you can give up to $14,000 to any individual in the calendar year while avoiding gift taxes and the reduction of your lifetime exemption amount.

Stay tuned for more updates from our firm and be on the lookout for our Quarterly Client Newsletters. Wishing you and your loved ones a healthy and happy new year! 

California's New Transfer on Death Deed and Why a Living Trust Remains Ideal

Casey OConnell

Effective January 1, 2016, those owning California real property may use the new "Transfer on Death Deed" ("TODD") to pass property to a beneficiary upon the property owner's death. I recently attended an educational course on the TODD and let me tell you, this thing scares me. The California legislature, in passing this law, was altruistically attempting to provide a less expensive vehicle than a living trust for property owners to pass property free of probate at death. I support that effort wholeheartedly, however, given the infancy of the law and the lack of settled case law to help interpret its provisions, a living trust remains far superior to the TODD alternative. 

Advantages of the TODD

The Cost: drafting and executing a TODD is significantly less expensive than establishing a living trust. Typically, preparation of a deed will cost only $300 to $400, plus the recording fee.

Power to Revoke: The property owner may revoke the TODD after recording it. Upon revocation, title would revert to how it was held before filing the TODD. If the property owner changes his or her mind about to whom the property should transfer at his or her death, revoking the deed or filing a new TODD with a different beneficiary is an option.

Believe it or not, those are the only advantages I see to using the TODD. Let's take a look at why.

Disadvantages of the TODD 

The TODD legislation is booby trapped with land mines of potential problems and litigation. Here are just a few of them:

No Conditional/Contingent Transfer: There is no way to make the transfer of the property conditional. In other words, you cannot restrict the transfer based on the age of the beneficiary, you cannot create a life estate in the property, and most importantly, you cannot name a contingent beneficiary if the primary beneficiary were to predecease the owner. If the beneficiary of the TODD were to pass away before the owner, the owner would be left in a scramble to create and record a new TODD before death. All of the above deficiencies of the TODD can be overcome with a living trust.

Executor's Restitution Demand: Potentially the most problematic issue with a TODD is the authority of the executor of the owner's estate to demand return of the property to the estate. This is called the "Restitution Demand." The executor's restitution demand right lasts for three years from the date of the owner's death. Three years! Accordingly, if the owner dies with debts or taxes or expenses owed that cannot be satisfied with other assets, the executor can, for three years after the death, demand return of the property to the estate to satisfy those obligations. Now, if the beneficiary had moved in to the property, improved it, or simply made it their home, the restitution demand could force the beneficiary to vacate and return any income earned from the property since it was transferred. The beneficiary could not feel settled and vested with full ownership until this period passed. Moreover, if the beneficiary sold the property within the three year period and the executor made the restitution demand after the sale, the beneficiary would be liable to return all proceeds from the sale to the executor. This disadvantage considered alone is reason to avoid using the TODD and could prevent familial issues, especially with blended families. 

Beneficiary's Personal Liability: Typically, unless stated otherwise in a property owner's trust or will, a beneficiary will inherit property subject to the existing debts secured by the property. For example, a daughter may inherit her parents' residence subject to the existing mortgage. However, the daughter would not become personally liable for that mortgage if she defaulted in the future. With the TODD, that is NOT the case. The beneficiary of the TODD not only accepts ownership subject to the existing encumbrances, but also becomes personally liable for those debts in the event of default. This, along with the restitution demand, pose significant risks if the owner is not certain that the owner's beneficiary can afford to maintain the property at the time of the owner's death. 

Equal Shares for Multiple Beneficiaries: If you intend to transfer the property to more than one beneficiary at death, you must provide each beneficiary an equal share in the property. This may be an issue if there are not sufficient other assets in the owner's estate to provide a more significant gift to one beneficiary. For instance, maybe the owner lent money to one of his children during his life, so he wanted to compensate his other child with more assets when he passed to equate the gifts. The owner cannot do this with the TODD.

No Class Gifts: Another negative of the TODD is the inability to name a class beneficiary. For instance, if a young couple only has one child now but intends to have more in the future, they cannot use the TODD to name their "living children" as beneficiaries. Another example is a grandmother who is not sure of the number of grandkids she may have at her death. She cannot name "all grandchildren then living" as her beneficiary in the TODD. As a result, there is significantly less flexibility in using the TODD than a living trust.

THE RUB: This law, intended to simplify the transfer of real property to a beneficiary without using a living trust, is rife with potential claims, lawsuits, court costs, and attorney fees. Balance these potential problems against the cost of a living trust which transfers real property without these legal ramifications and allows for a multitude of flexible transfer arrangements, and the TODD may end up costing much, much more than a trust. Simply put, a living trust reigns supreme, so use it.