Navigating California Estate Planning Laws: What You Need to Know
Explain my estate planning in terms of the recent laws in California that I should be aware of.
Here are some recent California laws that may be relevant to estate planning:
Digital asset planning: Effective January 2021, California enacted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which allows an individual to grant fiduciary access to digital assets. This law is important for estate planning because it enables you to appoint an executor to manage your digital assets after you pass away, such as social media accounts, online banking, and digital photos.
Proposition 19: Passed in the November 2020 election, Proposition 19 took effect on February 16, 2021, and includes changes to California's property tax transfer rules. Among other things, this proposition limits the ability of parents or grandparents to transfer their property tax base to their children and grandchildren, which could have significant implications for estate planning.
Proposition 19 is a new California law that restructures the state's property tax rules and is relevant to estate planning.
Before Proposition 19, under California law, parents and grandparents could transfer their primary residence to their children or grandchildren without triggering property tax reassessment, regardless of the value or location of the property. This meant that the children or grandchildren could potentially inherit the parent or grandparent's low property tax rate for the rest of their lives.
After Proposition 19, this parent-to-child or grandparent-to-grandchild exemption has been significantly restricted. The new law allows for a property tax reassessment when a primary residence is transferred to one's children or grandchildren unless certain requirements are met. For example, a reassessment exclusion is available if a child or grandchild uses the transferred property as their primary residence and if the fair market value does not exceed a specified limit. This limit is typically adjusted for inflation each year.
Proposition 19 also includes new provisions for intergenerational family transfers of other real estate assets, such as rental properties and second homes. These types of transfers may also be subject to property tax reassessment, though exemptions may be available under certain circumstances.
Overall, Proposition 19 is a significant change to California's property tax transfer rules, and it's important to consult with an estate planning attorney to understand the implications for your particular situation.
Secure Choice Retirement Program: California passed the Secure Choice Retirement Program in 2016 to help millions of workers without access to retirement savings plans to save for their retirement. Employers with five or more employees must now participate in the program or offer their own qualified retirement plan. This law may impact your estate planning if you plan to leave retirement benefits to your heirs.
Uniform Powers of Appointment Act: California adopted the Uniform Powers of Appointment Act (UPAA) in 2019, which provides clarity on how powers of appointment (the power to appoint assets to particular individuals or entities) are to be interpreted and defined under California law. This law may be relevant to your estate planning if you have a trust or other estate planning document that includes powers of appointment.
These are just a few examples of recent California laws that may affect estate planning. It's important to consult with an experienced estate planning attorney who can advise you on the most relevant laws and regulations that impact your particular situation and objectives.