2025 Newsletter

Best wishes to clients and friends as we enter 2025.

We enter 2025 aware that many of our friends and clients face uncertainty about the road ahead. We especially express our deepest concern and condolence to those affected by the Southern California wildfires. In case helpful, some Los Angeles County resource links are provided below.

Our office meanwhile enters 2025 maintaining continuity in our work within a new formal structure. After 28 years of sole proprietorship, Laurie Shigekuni has entered a business partnership with two attorney colleagues: Kevin (Kao Wei) Mo and Sako (Sakurako) Yasuda. Sako is a graduate of Santa Clara University School of Law and is fluent in Japanese. Kevin is a graduate of UC College of the Law, San Francisco (formerly UC Hastings), and is fluent in Mandarin Chinese. The new firm is Cal Estate Planning, PC. Our staff and contacts are the same as before. We invite clients to continue working with the new business under the same terms as before, but it is each client’s choice whether to do so. In a spirit of wrapping unfinished business and making fresh starts, we especially would be glad to hear from clients who began estate plans but have put them on hold to consider their decisions. Please contact us for an appointment if you are ready to move forward on an existing project.

Tax & benefits numbers for 2025:

• The federal lifetime combined estate and gift tax threshold for taxpayers who die in 2025 will be $13,990,000. The gift tax exclusion in 2025 will be $19,000 per year, per donor, per recipient. Unless Congress changes the law (which it may), the estate and gift tax exclusion amount is scheduled to drop in 2026. The currently scheduled 2026 reduction would be to a level still well above $5 million that is unlikely to affect most taxpayers, though more fortunate households may want to plan accordingly.

• Since the start of 2024, Medi-Cal has been evaluating Californians’ eligibility for long-term care coverage without imposing any limit on the assets that a consumer may have – although the old strict limits do still apply to consumers’ monthly income. Federal health programs face uncertain futures under the new administration, but as of this writing we are not aware of any change to the asset cap rules.

• Some significant California health and retirement benefit numbers for 2025 are posted in state ACWDL letters 24-12, 24-14, 24-15, 25-01 and 25-02. A key income eligibility threshold for many (not all) public health care programs is 138% of the federal poverty level. For Medi-Cal, that amount is set for 2025 at $1801/month for a single person or $2433/month for a couple. The “Minimum Monthly Maintenance Needs Allowance" (MMMNA) will rise to $3,948 per month in 2025 for spouses of Medi-Cal long-term care consumers. Although California as of 2024 stopped counting assets such as savings for Medi-Cal long-term care eligibility, the MMMNA still matters because it affects how married couples' monthly incomes (not assets) are counted.

CTA compliance is voluntary for now.

Federal "beneficial ownership" reporting deadlines for small businesses under the Corporate Transparency Act (CTA) are suspended due to current court injunctions, according to alerts posted by the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) at FinCEN.gov/boi. As of this writing, the most recently posted alert on the site, dated January 24, 2025, said the Supreme Court had granted a stay against one of the injunctions holding back this requirement, but it said a second injunction "still remains in place". The posted update still began with this text:

"In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports."

Prior to the court orders, people who have “substantial control,” or who own or control at least 25%, of a company operating in the U.S., including an LLC, would have faced a January 1, 2025 deadline to place personal identity and contact information on file with FinCEN. That January 1, 2025 deadline would have applied to businesses created before 2024. Deadlines would have been 90 days past the effective date of creation or registration for businesses created during 2024, or 30 days past creation or registration for businesses created in 2025 or after. It remains uncertain what registrations and deadlines will be definitely required. Notices are posted extending the deadlines for some businesses affected by specified hurricanes.

AB 2016 revives a quicker succession process for some family residences.

California’s new Assembly Bill 2016, effective for deaths that occur on or after April 1, 2025, will allow heirs and beneficiaries to transfer a deceased person’s primary residence by a relatively simple court petition, not a full probate proceeding, if its value was no more than $750,000. Otherwise, probate will still be required to settle a deceased person’s estate if $184,500 or more in value remains to transfer to heirs or beneficiaries under intestate succession or a will, only if this value is not instead transferred by non-probate mechanisms such as a trust, beneficiary listings, or joint tenancy or community property survivorship rights. The new law could reduce administration costs where a decedent had few assets other than a house. However, the California Probate Referee Association has suggested it might lead to more frequent disputes among families or with creditors. A few questions about the new law’s application remain to be sorted out, including how it may affect small-value properties that are not primary residences.

Property tax news & reminders:

• The Board of Equalization (BOE) posted new FAQ guidance in December on rules allowing over-55, disabled or disaster-harmed Californians to transfer the advantage of an existing low property tax assessment to a new primary residence. The guidance is in Letter to Assessors 2024/044.

• In May 2024, the State Supreme Court’s ruling in Prang v. LA County AAB tightened the definition in Rev. & Taxation Code § 62(a)(2) of a transfer exempted from reassessment because proportions of ownership remained the same. Families creating LLCs or updating family partnership structures may want to review the BOE’s LTA 2024/038.

• Reminder: To qualify for an exclusion from reassessment under Proposition 19, it isn't enough to fit the general description of a person who receives a principal residence from a parent or child (or grandparent or grandchild, in some cases), who also plans to live in the property. To avoid potentially heavy charges for back taxes, the eligible transferee must submit a homeowner’s tax exemption form within one year after the transfer. For an inheritance, this means within a year after the death.

• SB 520, effective October 11, 2023, defines circumstances (including misfortune or calamity) where a property can still count as the personal residence of a homeowner who is physically absent. The law offers some protections for elders who live away from home to receive care but who intend to return home. An important caution, however, is that an absent homeowner can lose "personal residence" status for property tax purposes if the property is rented to a tenant who does not meet the definition of a close family member in 26 U.S.C. 267(c)(4). See LTA 2024/007.

Southern CA recovery links:

Many state and federal resources relevant to the Southern California fires are linked from www.ca.gov/LAfires/. See also the disaster Web pages of the City of Los Angeles and LA County (includes maps assessing damage to many individual properties affected by the Palisades and Eaton fires), and, on property tax relief, the LA County Assessor. (More details in the LA Assessor's Jan. 13 email announcement on relief measures. Future Assessor announcements may be available here.) The state Board of Equalization has posted its own broadly applicable disaster relief information page regarding property tax relief. As of January 10, 2025 the IRS posted an opening summary of federal disaster tax relief resources for Southern Californians, including an announcement pushing back some deadlines for certain affected taxpayers. The Governor's office announced some corresponding state-level postponements and other relief. Medi-Cal applicants and consumers may want to refer to the state-level MEDIL 25-02 notice reminding county Medi-Cal programs of several existing disaster relief protections and MEDIL 25-03 with more reminders plus limited relief from benefit discontinuances in Los Angeles and Ventura counties. Since disaster relief measures are often changeable, it's best to keep checking for new announcements.

The firm of Cal Estate Planning, PC, formed by partners Laurie Shigekuni, Sako Yasuda and Kevin Mo in 2024, focuses on estate planning, probate, and trust administration matters. Ms. Shigekuni has been in estate planning practice since 1996. Ms. Yasuda and Mr. Mo are attorneys previously with Ms. Shigekuni's firm. Our team includes three more staff attorneys, a JD graduate, and other skilled staff.

This material is general information, not legal advice. It is not a substitute for consultation with an attorney. No attorney-client relationship is created by this newsletter. Any writing about tax law above is not intended to be used, nor can it be used, to avoid penalties that may be imposed under the Internal Revenue Code. ©2024-2025.

2024 Newsletter

Federal Estate and Gift Taxes for 2024

IRS gift and estate tax announcements for the 2024 calendar year include an increase in the federal gift tax annual exclusion amount to $18,000 per donor per recipient for the year, and a further increase in the estate tax exemption, which is now at $13,610,000 for assets of people who die during 2024.

This record-high threshold makes federal estate tax avoidance a merely hypothetical problem for most households. Most of the trusts that we write are therefore designed mainly for other purposes – including, as discussed below, reducing the risk of Medi-Cal collections claims against estates.

Improved Eligibility for Medi-Cal for Long-Term Care

As of January 2024, it became easier for Californians to claim full traditional Medi-Cal benefits that include long-term care coverage. A major new difference is that, as of January 1, 2024, California will no longer impose asset limits on eligibility for such benefits.

Where the old asset limits were $2000 per individual and $3000 for a couple, Phase 1 of the new rules, starting July 1, 2022,  increased the asset limit to $130,000 per individual plus $65,000 per additional household member. In Phase 2, which began January 1, 2024, Medi-Cal asset limits were abolished for traditional ("non-MAGI")  Medi-Cal in California.

Because of this change, some people who have substantial assets may newly be able to qualify for full traditional Medi-Cal on the basis of disability or age as long as their current income is relatively low. This combination of rules is still disappointing for many people with disabilities who would like to earn more income without losing their Medi-Cal supportive services. People who receive Supplemental Security Income (SSI) disability benefits are also still subject to the strict federal asset limits. However, for some retirees, the end of the Medi-Cal asset cap represents a major opportunity.

California was able to drop the asset limit under its AB 133 law, passed in the 2021 legislative session, because the federal Medicaid program granted waivers allowing federal subsidies to continue for this modified approach to the program. The state Department of Health Care Services (DHCS) is still adjusting to the new rules, so it is a good idea to continue watching for Medi-Cal rule announcements on the ACWDL/MEDIL regulatory letters page. For example, the recent ACWDL 23-29 regulatory letter, posted in the ACWDL list for 2023, provided helpful cross-reference links to previous official guidance on the new rules as context for an announcement that the Asset Verification Program will reduce operations because there is now less need to verify assets.

Because of these changes, Medi-Cal is more widely available to fund long-term care in nursing facilities. Medi-Cal can also help some people to receive nursing care and/or support services while remaining in their homes under the programs broadly known as Home and Community-Based Services (HCBS). Retirees who could not previously consider Medi-Cal because of their property and/or savings may now be able to apply for services such as In-Home Support Services (IHSS), Program for All-Inclusive Care for the Elderly (PACE), and other HCBS services.

IHSS and PACE are two of the programs that help fragile seniors to remain at home.

Two of the key California programs that enable seniors to age in place are In-Home Support Services (IHSS) and the Program for All-Inclusive Care for the Elderly (PACE).

IHSS provides in-home care for eligible elders who are blind or disabled and require assistance for everyday living activities. Subject to a county IHSS office application, review by a county social worker, and a determination of IHSS needs, approval for the program allows elders to employ an individual caregiver with public funds. The caregiver is hired either directly by the client, with employment screening and paperwork handled via the local county Public Authority, or sometimes through a contractor that hires and supervises caregivers. IHSS assistance can provide respite for family/household caregivers, or in some cases can employ caregivers to do work that they otherwise might do without pay. The types of care provided include, but are not limited to, housecleaning, laundry, grocery shopping, cooking, and bathing.

PACE is a collection of local medical and social service programs subsidized by both Medicare and Medicaid (Medi-Cal in California). It helps people 55 or older to “age in place” who might otherwise have to move to nursing homes to receive care. PACE assesses the participant’s needs in an initial consultation and curates a care plan to provide multiple services for enrollees. Alongside usual Medi-Cal and Medicare-covered services, or as a means of providing such services, PACE programs often include benefits offered at local adult health day care centers that are supplemented by in-home services. DHCS maintains a California statewide list of PACE center services’ availability by Zip code. The federal Medicare website provides a nationwide lookup site for PACE programs.

More long-term care programs and other subsidized health care programs are available to Californians.

References on subsidized long-term care programs available in California include this DHCS introductory page on long-term care and this additional page on seniors’ health programs. Medi-Cal long-term care eligibility is the key to Federal and California subsidies for all of these programs. Important additional programs of this type include the Multipurpose Senior Services Program (MSSP) and other long-term care alternatives.

The automated calculator on the Covered California website is a helpful way to estimate potential eligibility for state-administered health plans and subsidies, including various types of Medi-Cal coverage and the Covered California program. The program also posts an annual chart for eligibility by income, linked from this reference page.

For Californians who do not qualify for traditional Medi-Cal, public subsidies are available for health care at many income levels, from “MAGI Medi-Cal,” for Californians with household modified adjusted gross income (MAGI) below 138% of the official federal poverty level, to full Covered California health care subsidies under the Affordable Care Act for Californians with modest incomes, up to partial Covered California assistance for incomes up to $58,320 for a single-person household or $78,880 for a household of two.

Continuing cautions under the new rules:

Caution must still be exercised in applying for Medi-Cal, whether for long-term care or otherwise. Eligibility will be easier under the new law, but the income limits still apply, and there are other risks – including the risk of Medi-Cal recovery against deceased participants’ estates.

Under the Medi-Cal estate recovery program, which still exists, Medi-Cal may seek repayment from the estate of a deceased participant who received benefits on or after their 55th birthday.

For Medi-Cal participants deceased on or after January 1, 2017, Medi-Cal may make collections claims against assets that are in the probate estate of the deceased Medi-Cal recipient at the time of death. DHCS may claim reimbursement for Medi-Cal expenses that include “payments made, including managed care premiums paid, for nursing facility services, home and community-based services, and related hospital and prescription drug services received when the beneficiary was an inpatient in a nursing facility or received home and community-based services.” (Medi-Cal collections rules were formerly stricter, before the effective date of SB 833 on January 1, 2017.)

Surviving family or other fiduciaries who are responsible for the affairs of a deceased Medi-Cal beneficiary must act within 90 days from the date of death to provide the DHCS Director with a “Notice of Death” and a copy of the death certificate. An estate recovery claim from DHCS may then follow. Financial hardship waivers may be sought in some circumstances within 60 days of the date of the DHCS letter presenting the estate recovery claim.

Trusts may still help to insulate against Medi-Cal collections claims.

Probate assets are assets that were in the name of the deceased person or payable to the deceased person’s own estate, that are inherited under a will or, if there is no valid will, then by next of kin under state inheritance laws. (Confusingly, a person can have a “probate estate” in this sense even if their “probate assets” are not valuable enough to reach the threshold of value that requires a court probate proceeding.)

Probate assets do not include assets of a deceased person that are transferred to others through mechanisms such as a trust, “pay on death” beneficiary listings, or survivorship rights under joint tenancy ownership or the rights of a surviving spouse. For this reason, beneficiary listings or joint tenancy ownership can often help insulate financial assets from probate. However, survivorship arrangements are only sometimes appropriate as ways to transfer real estate. The gaps left by these approaches are where trusts become useful.

For many homeowners, a helpful way to reduce the risk of Medi-Cal asset recovery claims is to place assets into a trust. The possibility of more favorable treatment under Medi-Cal collections rules is one of the ways in which trusts help to pass down assets to beneficiaries, preserving generational wealth.

For details on Medi-Cal treatment of trusts under the new asset rules – what changes, and what stays the same – see the updated November 17, 2023 guidance at ACWDL 23-22E on the ACWDL 2023 regulatory letters page.

2023 Estate Planning Newsletter

“What is the soul of America?” – President Biden, January 16, 2023[1]

Dear friends, family, colleagues,

The powerful direction of Rev. Martin Luther King Jr. and activists before him inspired our President to say in recent remarks that “our job is to redeem the soul of America.” He invoked Dr. King’s “dream in which we’re all entitled to be treated with — my father’s favorite word — dignity and respect. A dream in which we all deserve liberty and justice.” The news we have to offer here is undramatic detail about tax and estate planning choices, but we hope it will enable you and yours to work toward justice, fairness, and much-needed community healing.

As we’ll discuss below, California took a substantial step toward justice for disabled and senior Californians with Medi-Cal eligibility reforms in 2022. The federal government raised the gifting limit and again increased the lifetime federal estate and gift tax exclusion amount. We also have a reminder for you about the importance of the homeowner’s exemption form.

Lastly, the SECURE Act 2.0 was signed into law on December 29, 2022 which mandated changes to employer-sponsored contribution plans and provided for increasing the required minimum distribution age etc. starting January 2023 and in the coming years.  While we will not be breaking down the details below, please view a helpful publication by The CPA Journal regarding the SECURE Act 2.0 for more information.[2]

We wish you a fortuitous start to the 2023 Year of the Rabbit.

Federal Gifting Limit Increase

The annual federal gift tax exemption allows you to make limited gifts of assets without filing a Form 709 gift tax report that would count against your lifetime gift and estate tax exemption total. Beginning in 2023, the annual gift tax exemption increases from $16,000 to $17,000.[3] This amount applies separately to each giver (whether or not the giver’s spouse also makes gifts) and, for each giver, it applies individually to each person who receives gifts in 2023.

A friendly reminder to fill out an IRS Form 709[4] “United States Gift (and Generation-Skipping Transfer) Tax Return” during tax season if you made gifts to the same person during 2022 that added up to the $16,000 limit for 2022, or if your 2023 gifts to one person exceed $17,000.

Annual Federal Estate Exemption Threshold Increase

The IRS has announced an increase in the lifetime gift and estate tax exclusion amount for gifts made during your lifetime and assets transferred at your death. Beginning in 2023, the “Basic Exclusion Amount” gift and estate tax threshold increases from $12,060,000 to $12,920,000.[5] The limit will be increasing every year until 2026, when the limit will then drop to an inflation-adjusted amount above $5.49 million.

Medi-Cal Asset Limit Increase

Beginning July 1, 2022, Medi-Cal increased the asset limit for Non-Modified Adjusted Gross Income (Non-MAGI) Medi-Cal programs eligibility to $130,000 for single persons, with an additional $65,000 asset limit increase per household member, up to 10 household members maximum.[6] This limit applies to non-exempt assets such as cash savings in addition to exempt assets such as the covered person’s car or house. “Community spouses” of people who receive non-MAGI Medi-Cal care may keep the 2023 Community Spouse Resource Allowance amount of $148,620 in non-exempt assets in addition to the Medi-Cal spouse’s $130,000 limit.[7]

In the year 2024, if current California laws and federal permissions hold, the asset limit will be removed altogether – cause for celebration if it truly takes effect.[8]

However, these changes are to the asset limit only. Medi-Cal income limits remain unchanged.

Homeowner’s Exemption Form

If you live in a property that you own in California, you likely qualify for a $7,000 reduction in taxable value for your home, or possibly more if you are a disabled veteran. To qualify, the home must have been the owner’s principal place of residence on the lien date, January 1st.[9] For property tax reasons it is especially important for this claim to be made both before and promptly after any gift of a parent’s home to a child who will also reside in the home. You may want to file an exemption claim either if the $7,000 exemption doesn’t appear on your home’s property tax bill, or if the name(s) of the eligible person(s) might need updating – for example, after a death or a changed family arrangement about who lives at a property. Your county assessor’s website should provide its own version of the BOE-266 “Claim for Homeowners’ Property Tax Exemption.”[10] The deadline to file the claim form for first-time claimants is February 15 for that year. The deadline to notify the assessor that the exemption no longer applies is December 10.

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We encourage everyone to share this news with friends and family. A warm thank you to all for being in touch with our office.

Sincerely,

Laurie Shigekuni, and all of us at Laurie Shigekuni & Associates.

This newsletter is general information only; it is not legal advice for any particular situation. Links are included as information only without any claim of affiliation or endorsement

[1] https://www.whitehouse.gov/briefing-room/speeches-remarks/2023/01/16/remarks-by-president-biden-honoring-dr-martin-luther-king-jr/

[2] https://www.cpajournal.com/2023/01/27/first-look-at-the-secure-2-0-act-of-2022/

[3] https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax

[4] https://www.irs.gov/pub/irs-pdf/f709.pdf

[5] https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax

[6] https://www.dhcs.ca.gov/services/medi-cal/eligibility/Pages/Asset-Limit-Changes-for-Non-MAGI-Medi-Cal.aspx; https://www.dhcs.ca.gov/services/medi-cal/eligibility/letters/Documents/21-31.pdf

[7] https://www.dhcs.ca.gov/services/medi-cal/eligibility/letters/Documents/23-01.pdf

[8] https://www.dhcs.ca.gov/services/medi-cal/eligibility/letters/Documents/22-25.pdf

[9] https://www.boe.ca.gov/proptaxes/homeowners_exemption.htm

[10] https://www.boe.ca.gov/proptaxes/countycontacts.htm