Estate Planning for Your Primary Residence

How does Prop 19 Affect Your Plans?

(Editor’s note: This article is general in nature and is geared towards California properties. Seek professional legal and accounting advice before making any decisions).

Your primary residence is typically your most valuable possession. In Orange County, the median home price is currently around $1.3 million, and for many older homeowners their mortgage is paid off, meaning there is typically substantial equity in the property. So, what are some considerations in estate planning for this key asset?

WHO GETS WHAT?

A key aspect of estate planning is identifying assets, specifying who will get them, and achieving your goals in distributing each asset to specific heirs. See our articles on “Key Steps in Asset Distribution” and “Unequal Distribution of Your Estate.”

DEBTS AND LIABILITIES

Does your home have an outstanding mortgage? Is there a home equity line of credit with a balance tied to it? See “How To Handle Debts and Mortgages In Your Estate Plan” for more information.

TAXATION

A major part of estate planning for real estate involves potential taxation for your heirs. Of course, you’d like more of your hard-earned assets to get passed on to loved ones vs. the government taking a larger share.

Tax-wise, it is important to distinguish between capital gains tax and property taxes.

Capital gains tax:

Estates of those who pass on during 2025 have a basic exclusion amount of $13,990,000 per decedent, which generally means no capital gains will be applied if the estate is less than that amount. If the home is sold, capital gains taxes are only due on any gains made since it was inherited. This involves what is called a “double step-up” in basis in a community property state: when one spouse dies, the surviving spouse receives a step-up in cost basis on the asset. After the surviving spouse passes, the asset is stepped up again. This offers great potential to reduce the amount of capital gains tax paid by the beneficiary.

Example: You decide to pass your primary home equally to your three children. Your home was purchased in 2000 for $100,000, and it was worth $900,000 on the day in 2025 that the surviving spouse died. Your heirs’ cost basis will be raised, or stepped-up, to $900,000, and capital gain taxes will only be applied to the difference between $900,000 and the sales price. Of course, the final distribution amount will be determined after closing costs.

Property taxes:

Proposition 19, which took effect in 2021, has potentially severe financial consequences for children inheriting property from their parents. While this law helps eligible homeowners in transferring their tax basis, it considerably limits the availability of the parent-child exclusion for purposes of real estate tax assessments and the resulting property-taxation.

Prior to Prop. 19, parents could transfer a primary residence to children without any new fair-market reassessment, regardless of how the children chose to use the real property. So, children could have the same property tax basis that their parents enjoyed. However, with Prop 19, children who inherit real property from their parents will have to factor in increased property taxes in the decision to keep or sell the property. They may also need to use the property as their primary residence.

There are several complicated aspects involved in calculation of the reassessed value that can be excluded from the new property-tax basis, so seek professional advice.

Prop 19 now leaves heirs with just a few options, typically including:

Sell it. This is the most common choice by heirs, especially when multiple children inherit the property.
Live in the home. One of the caveats to avoid reassessment of value upon inheritance is the intergeneration transfer exclusion. “At least one eligible transferee must continually live in the property as their family home for the property to maintain the exclusion …”
Use an LLC. It might be possible to transfer real estate to children without incurring a property tax reassessment by using a strategy that relies on family LLCs. However, this option has limitations and definite pros and cons (such as Change in Control Rules or the Change in Ownership Rules), so talk with a lawyer about the specifics of your situation.

WE UNDERSTAND THE IMPORTANCE OF YOUR ASSETS

At Mortensen & Reinheimer, PC we realize that your assets represent years of hard work and can hold not only financial but also sentimental value. We know that our clients may have specific goals for certain assets and beneficiaries and need legal guidance in how to best achieve these objectives. Please contact Mortensen & Reinheimer, PC at (714) 384-6053 to make an appointment, or use our online contact form. Our website is http://www.ocestateplanning.net.

About the author:
Tamsen R. Reinheimer, Attorney, is a Certified Specialist in Estate Planning, Trust & Probate Law (The State Bar of California Board of Legal Specialization). She has significant experience in all aspects of estate planning, trust administration, and probate. Contact Tamsen at tamsen@ocestateplanning.net.

Holiday Special: Botox Treatments

Get Ready for the Holidays and New Year!

To help our clients achieve their best look for the holidays, we are offering a December Special on BOTOX® Treatments!

We’ve worked closely with our supplier to offer a 20% discount: when you come in for 40 units of BOTOX® treatment, receive an additional 10 units free of charge!

Book Now to Fit Your Schedule!

We invite you to come explore your options for your best look. Book now for your appointment – the special runs through December 31^st, so contact us now at 657.722.1400 to lock-in a time that is convenient for you.

To accommodate your schedule, Saturdays are also being offered in December!

We look forward to seeing you.

About Linda L. Zeineh, M.D., FACS

Dr. Zeineh is an active member of the American Society of Plastic Surgeons and the American Society for Aesthetic Plastic Surgery. She combines over 18 years of experience with cosmetic and reconstructive surgery in private practice with new technology and techniques in the care of her patients. Her first priority is the satisfaction and well-being of her patients, providing compassionate and personalized care.

A complete range of non-surgical and minimally invasive rejuvenation procedures are personally performed by Dr. Zeineh on her patients to achieve and maintain a youthful, refreshed, and natural appearance, including facial injections, skin tightening and facial/body contouring. Surgical procedures that Dr. Zeineh performs include: facial rejuvenation, body contouring, reconstructive and cosmetic breast surgery, and reconstructive surgery.

Holiday Greetings – 2024

Holiday Greetings!

As we approach the end of another successful year, Mortensen & Reinheimer, PC would like to take this opportunity to thank all of our clients for their patronage during 2024. We truly appreciate your business and confidence in us.

To each of you, please accept our warmest holiday greetings and best wishes for a healthy 2025!

Need Help?

We are always available to serve you with your estate planning, conservatorships and probate & litigation requirements. Please contact Mortensen & Reinheimer, PC at (714) 384-6053 to make an appointment, or use our online contact form. Our website is http://www.ocestateplanning.net.

Introducing Our Newest Probate & Trust Litigation Attorney – Brian J. Wheat

Mortensen & Reinheimer, PC is pleased to announce the addition of Brian J. Wheat to our Probate & Trust Litigation team.

Mr. Wheat brings a wealth of experience in civil litigation to our clients, ensuring that they receive knowledgeable and effective representation with case management.

Focus Areas

Trust/Will Contests
Trust & Estate Litigation
Breach of Trust
Fiduciary Appointment and/or Removal
Elder Financial Abuse
Conservatorships

Mr. Wheat earned his Juris Doctor degree from Chapman Dale E. Fowler School of Law and a Bachelor of Arts degree (Cum Laude) in Political Philosophy from UC Santa Barbara.

In his free time, Mr. Wheat enjoys golf, board games, and pickleball. He also enjoys hiking and camping whenever possible.

Please contact Brian at bwheat@ocestateplanning.net.

Trust Disputes: Accounting and Financial Red Flags

Catching a fraudulent trustee in the act can be tricky

Those who know how to manipulate numbers and practice financial fraud actually find it easy to fool others who don’t have an in-depth comprehension of accounting and finance. Let’s take a closer look at how this happens.

Setting the Stage
In a previous article, “Breach of Fiduciary Duty,” we explained that a trustee “is required to act in the highest good faith towards his/her beneficiary and may not obtain any advantage by the slightest misrepresentation.” However, malfeasance is unfortunately somewhat common when family members are put in charge as trustees of relatively large estates, especially in terms of unjust appropriation of property (i.e., real estate, cash, stocks/bonds, personal property, etc.) from a trust.

When accounting and finance are not areas of personal strength for certain beneficiaries, it is easier for a trustee to get away with it. Or the trustee might play the “just trust me, I’m doing what’s right for everyone” song, and it’s easier for beneficiaries to go with the flow and not disrupt family dynamics. These are all-too-common scenarios that unfortunately get played out time-and-again.

Sometimes beneficiaries get a sneaky suspicion that “something just doesn’t smell right” and start asking questions. They might talk to a trusted friend to see if their concerns are justified, or approach other beneficiaries to see if they feel the same way. Again, the family undercurrents can play a huge role in this process, because the unethical trustee knows that everyone is dealing with a lot of stress and are just trying to get along, especially in the midst of the recent loss of the trustor.

Why would a trustee essentially steal from the family? Typically, the driving force is money (they are hurting for funds), or may feel that they deserve more or others do not, or perhaps there is long-seated jealousy or envy.

Whatever the cause, in such situations trust beneficiaries may find it necessary to sue a trustee if they believe their inheritance is being mismanaged or improperly disbursed, since the key issue of trust has been breached – they can no longer believe that the trustee is acting in a fiduciary capacity for all beneficiaries.

Real-World Examples
Take a look at the list of examples below and ask yourself “Is that happening to me?” If yes, it is likely time to talk with an attorney about possible litigation.

Difficulty obtaining financial information from the trustee – Is the trustee reluctant to respond to your reasonable requests? Does he/she seem to be hiding something? Are there delays or incomplete information provided?

Providing written account of all financial transactions – The trustee is actually required by state law to provide full accounting, but since most beneficiaries don’t know this and usually rely on the trustee to do what is right, the trustee often is not asked to provide full accounting. If asked, the trustee might give partial information or try to avoid putting anything in writing.

Suspicion of fraud/embezzlement of trust assets – Embezzlement is a form of fraud in which a person intentionally misappropriates assets for personal use. When it is suspected, professionals use investigative techniques to catch the perpetrator, including: reconciling bank accounts; examining processed checks, payments, and direct deposits; tracking electronic transfers and payments; tracing schemes that move money through third parties; and detecting vendor kickbacks or identifying fictitious vendors. This might seem very sophisticated – and it is, since such elaborate schemes can be hatched when large sums of money are involved.

Misuse of trust funds, such as personal expenses – This can be difficult to catch, especially if the trustee practices any of the examples above. But even if the trustee is providing proper documentation, he/she can be abusing the position, such as lavish meals and hotel bills, unwarranted travel expenses, or paying for other people to help with the trust who actually have not offered any services that benefit the trust.

Inappropriate trustee fees – The trust documentation should normally include a stipulation for trustee fees, which are typically a small percentage of the total trust assets. If the trustee wants or automatically takes more, it should be addressed.

Incorrect distribution of trust assets/proceeds – A beneficiary typically expects to receive a certain amount or share of a trust, especially when it is clearly laid out in the trust documents. The trustee is responsible for clearly demonstrating that the trust proceeds have been distributed exactly as the trustor intended. Sometimes a trustee handles distribution in a “I’m doing what I think is right” manner or even maliciously trying to steer proceeds incorrectly; regardless, if the end result is incorrect, it should be contested.

Decades of Trust Litigation Expertise
If you have concerns about your trust, our attorneys have the expertise and experience to handle your trust matter skillfully and efficiently. Please contact Mortensen & Reinheimer, PC at (714) 384-6053 to make an appointment, or use our online contact form. Our website is https://www.ocestateplanning.net.

About the author:
Noah B. Herbold, Attorney, is a Certified Specialist in Estate Planning, Trust & Probate Law (The State Bar of California Board of Legal Specialization). His primary focus is assisting clients with litigated matters such as: Trust Contests, Breach of Trust, Fiduciary Appointment and/or Removal, Asset Ownership, Beneficiary Rights, Determination of Heirship, Elder Financial Abuse, Property Disputes, and Conservatorships. Contact Noah at noah@ocestateplanning.net.

Maximize Business Growth Potential with Section 179 Deductions – REFS

Maximize Business Growth Potential
with Section 179 Deductions

CONSTRUCTION EQUIPMENT

With end of year approaching, would your customers benefit from purchasing new or used equipment, technology or software in 2024? Would this help to facilitate growth and increase profits?

If so, now is a good time to evaluate how Section 179 deduction can factor into your customers’ business and tax strategy for 2024.

In a nutshell, Section 179 deductions can reduce current year taxation, accelerate business growth, and build a foundation for years of success through capital investment.

Reach out to MyCFO to determine whether to act quickly to take advantage of Section 179 this year or whether to make it part of your customers’ tax strategy for 2025 (Note: This article provides an overview of Section 179; see MyCFO for professional guidance).

Below are some FAQ on Section 179:

What is Section 179?

As a part of the IRS tax code, Section 179 allows businesses to deduct the full purchase price of qualifying equipment bought or financed during the current tax year.

This significant tax incentive is designed to encourage businesses to invest in purchasing the equipment they need to grow, thereby helping the overall economy. Section 179 offers much-needed tax relief for small businesses.

Why Use it?

While depreciating assets can be a useful tax strategy, many business owners find that it is better to write off the entire equipment purchase price for the year they buy it, using the Section 179 deduction.

Some of the key benefits include:

Instead of depreciating an asset over several years, the option to fully deduct the entire purchase price allows reduced taxation for the current year. If your customers are having a banner year and looking for end-of-year deductions, this is a straightforward technique.
The option of using Section 179 causes many businesses to purchase assets immediately vs. waiting, purely due to the tax incentives, allowing them to benefit quickly from these capital investments.
For most small businesses, the entire cost of qualifying equipment can be written-off on the 2024 tax return (up to the deduction limit of $1,220,000 with a capital purchase limit of $3,050,000).
Beyond immediate tax savings, the goal of this acquisition of capital equipment is to enhance operations and boosts revenue.

Who Qualifies for Section 179?

All businesses that purchase, finance, and/or lease new or used business equipment during tax year 2024 should qualify for the Section 179 Deduction (assuming they spend less than the limit). This equipment is generally limited to tangible, depreciable, personal property which is acquired for use in the active conduct of a trade or business, and can include upgrading/replacing upgraded equipment, vehicles, and software. The equipment must be used for business purposes more than 50% of the time to qualify for the Section 179 Deduction.

To take the deduction for tax year 2024, the equipment must be financed or purchased and put into service (not just ordered and/or deposit paid) between January 1 and December 31, 2024.

What’s the difference between Section 179 and Bonus Depreciation?

Bonus depreciation is generally taken after the Section 179 spending cap is reached, so it is typically used by larger businesses. Bonus depreciation is at 60% in 2024 under current law, decreasing to 40% in 2025.

Get Strategic Advice

MyCFO can be helpful in calculating the cost/benefit of taking advantage of Section 179 in 2024, given the particular financial and tax situation of a business. Other situations should be discussed with MyCFO, such as if a business has a net loss and whether it makes senses to purchase equipment and carry-forward the loss.

The tax professionals at MyCFO offer invaluable expertise, so have your customer contact us today for a free initial consultation!

Maximize Your Business Growth Potential with Section 179 Deductions – PROSPECTS

Maximize Your Business Growth Potential
with Section 179 Deductions

CONSTRUCTION EQUIPMENT

With end of year approaching, would your business benefit from purchasing new or used equipment, technology or software in 2024? Would this help to facilitate growth and increase profits? But are you unsure how this may impact your finances and taxes?

If so, now is a good time to evaluate how Section 179 deduction can factor into your business and tax strategy for 2024.

In a nutshell, Section 179 deductions can reduce current year taxation, accelerate business growth, and build a foundation for years of success through capital investment.

Reach out to MyCFO to determine whether to act quickly to take advantage of Section 179 this year or whether to make it part of your tax strategy for 2025 (Note: This article provides an overview of Section 179; see MyCFO for professional guidance).

Below are some FAQ on Section 179:

What is Section 179?

As a part of the IRS tax code, Section 179 allows businesses to deduct the full purchase price of qualifying equipment bought or financed during the current tax year.

Why Use it?

Some of the key benefits include:

Instead of depreciating an asset over several years, the option to fully deduct the entire purchase price allows reduced taxation for the current year. If you are having a banner year and looking for end-of-year deductions, this is a straightforward technique.
The option of using Section 179 causes many businesses to purchase assets immediately vs. waiting, purely due to the tax incentives, allowing them to benefit quickly from these capital investments.
For most small businesses, the entire cost of qualifying equipment can be written-off on the 2024 tax return (up to the deduction limit of $1,220,000 with a capital purchase limit of $3,050,000).
Beyond immediate tax savings, the goal of this acquisition of capital equipment is to enhance operations and boosts revenue.

Who Qualifies for Section 179?

All businesses that purchase, finance, and/or lease new or used business equipment during tax year 2024 should qualify for the Section 179 Deduction (assuming they spend less than the limit). This equipment is generally limited to tangible, depreciable, personal property which is acquired for use in the active conduct of a trade or business, and can include upgrading/replacing upgraded equipment, vehicles, and software (see your CPA for a complete list of qualifying equipment). The equipment must be used for business purposes more than 50% of the time to qualify for the Section 179 Deduction.

To take the deduction for tax year 2024, the equipment must be financed or purchased and put into service (not just ordered and/or deposit paid) between January 1 and December 31, 2024.

What’s the difference between Section 179 and Bonus Depreciation?

Get Strategic Advice

MyCFO can be helpful in calculating the cost/benefit of taking advantage of Section 179 in 2024, given the particular financial and tax situation of your business. Other situations should be discussed with MyCFO, such as if your business has a net loss and whether it makes senses to purchase equipment and carry-forward the loss.

The tax professionals at MyCFO offer invaluable expertise, so contact us today for a free initial consultation!

Maximize Your Business Growth Potential with Section 179 Deductions – CLIENTS

Maximize Your Business Growth Potential
with Section 179 Deductions

CONSTRUCTION EQUIPMENT

If so, now is a good time to evaluate how Section 179 deduction can factor into your business and tax strategy for 2024.

In a nutshell, Section 179 deductions can reduce current year taxation, accelerate business growth, and build a foundation for years of success through capital investment.

Below are some FAQ on Section 179:

What is Section 179?

As a part of the IRS tax code, Section 179 allows businesses to deduct the full purchase price of qualifying equipment bought or financed during the current tax year.

Why Use it?

Some of the key benefits include:

Instead of depreciating an asset over several years, the option to fully deduct the entire purchase price allows reduced taxation for the current year. If you are having a banner year and looking for end-of-year deductions, this is a straightforward technique.
The option of using Section 179 causes many businesses to purchase assets immediately vs. waiting, purely due to the tax incentives, allowing them to benefit quickly from these capital investments.
For most small businesses, the entire cost of qualifying equipment can be written-off on the 2024 tax return (up to the deduction limit of $1,220,000 with a capital purchase limit of $3,050,000).
Beyond immediate tax savings, the goal of this acquisition of capital equipment is to enhance operations and boosts revenue.

Who Qualifies for Section 179?

All businesses that purchase, finance, and/or lease new or used business equipment during tax year 2024 should qualify for the Section 179 Deduction (assuming they spend less than the limit). This equipment is generally limited to tangible, depreciable, personal property which is acquired for use in the active conduct of a trade or business, and can include upgrading/replacing upgraded equipment, vehicles, and software (see your CPA for a complete list of qualifying equipment). The equipment must be used for business purposes more than 50% of the time to qualify for the Section 179 Deduction.

To take the deduction for tax year 2024, the equipment must be financed or purchased and put into service (not just ordered and/or deposit paid) between January 1 and December 31, 2024.

What’s the difference between Section 179 and Bonus Depreciation?

Get Strategic Advice

The tax professionals at MyCFO offer invaluable expertise, so contact us today for a free initial consultation!

“Current Trends in Plastic Surgery”

I want to extend a heartfelt thank you for attending the WDOC event –
Current Trends in Plastic Surgery.

I hope that you gained valuable insights and connections from the event.

If you have any further questions about the procedures we discussed, please feel free to call my office at 657-722-1400. Also my website
drzeinehplasticsurgery.com.

Thank you for being a part of the event.

Sincerely,

Linda L. Zeineh, M.D., FACS

About Linda L. Zeineh, M.D., FACS

College Bound Student? Legal Documents for a Young Adult Child

College Bound Student?
Legal Documents for a Young Adult Child

Through your years of parenting, has the phrase “Be careful, accidents happen” been a common instruction? And now that your child is over 18 and a legal adult, doesn’t this guidance apply just as much? Yes! Unfortunately, tens of thousands of Americans between the ages of 18-25 are hospitalized from non-lethal injuries each year. Further, accidents are one of the leading causes of death in young adults.

Why Do You Need Special Documentation?

Due to “age of majority” laws, when your child hits age 18 years he/she is considered an adult in the eyes of the law and gains certain rights – in certain respects, your child is essentially a stranger to you from a legal perspective. For example, under the Health Insurance Portability and Accountability Act you have no rights to obtain medical information (Note: This article is limited to medical issues, since these are of essence in estate planning matters). Therefore, to help care for your child in the event of medical emergencies, it is important to be prepared. In the event of a medical emergency, there are several forms you need when your child turns 18 (and whether your child is at home, living away, working part-time, or not yet doing any further education; essentially any situation in which your child still relies upon you).

Recently, a child away at college was taken by ambulance to a hospital due to a severe accident on-campus. When the parent called the hospital and asked to speak to the doctor, she was asked if the child was 18 and did she have power of attorney. When she said “no” the hospital’s response was “we can’t talk any further with you.” This highlights the necessity of related legal documents. This documentation is certainly something parents or children don’t want to think about before college, but as with insurance and other areas of life, it is important to be prepared for unforeseen circumstances. Here are four documents to consider:

HIPAA Authorization

A HIPAA release/authorization allows healthcare providers to disclose personal information for the person being treated to specified individuals. Limitations can apply – it does not have to encompass everything, so this is a personal decision that your child can make and you can discuss possible ramifications; an unlimited release allows the most flexibility in dire situations, which is ideal. As with the broader advance health care directive, a HIPAA release can include a Living Will.

Advance Health Care Directive

No one expects life or death situations to happen to young adults, yet if it does happen it is best to be prepared. In the unfortunate circumstance that your child is incapacitated and unable to make healthcare decisions, an advance health care directive appoints an agent to make these decisions. By creating an advance health care directive, your child can let your physicians and family members know how he/she would like to be treated in these dire medical situations.

General Power of Attorney

A general power of attorney (POA) allows the person your child appoints to act on his/her behalf and is often included in an estate plan to ensure that someone is present to handle your child’s financial matters (e.g., tuition, student loans, banking and investment accounts, insurance, settling claims, landlord issues, and even social security identify theft). Without a POA, parents may not be able to provide necessary help.

FERPA Release Form

The Family Educational Rights and Privacy Act (FERPA) is a federal law that affords parents the right to have access to their children’s education records, the right to seek to have the records amended, and the right to have some control over the disclosure of personally identifiable information from the education records. When a student turns 18 years old, or enters a postsecondary institution at any age, the rights under FERPA transfer from the parents to the student (“eligible student”). Consider having your child sign a “Disclosure and Consent Form” which can include both access to the educational and medical records (be sure to contact the college directly to find out the specific options and forms for that school, since policies differ). Your intervention may be necessary if, for example, your child is injured and forced to have an extended leave from education, thereby impacting grades and records.

Finally, keep in mind that if your child attends an out-of-state school, it is important to sign specific forms for the school’s state as well as your home state. Finally, maintain scanned copies of these documents on your phone, your child’s phone, the cloud and your computer.

Specialized Estate Planning for Families

Estate planning is multi-faceted and requires adaptations as people move through life phases. The attorneys at Mortensen & Reinheimer, PC thoroughly understand the estate planning needs of families. Please contact Mortensen & Reinheimer, PC at (714) 384-6053 to make an appointment, or use our online contact form. Our website is http://www.ocestateplanning.net.