This event is FREE; however, RESERVATIONS ARE REQUIRED as space is limited. YOU NEED A TICKET TO GET IN.

The event begins January 20 at 7:30 a.m. PDST at the Lesher Center for the Arts, located in Walnut Creek at 2602 Civic Drive. Call the Chamber of Commerce at 925-934-2007 if website is unavailable.

Janet Rivera, 46, has been in a coma since she had a heart attack in February 2006. For more than two years, Rivera’s husband, Jesus Rivera, made all of his wife’s medical decisions while Rivera was under the care of the DeWitt Community Subacute Center in Fresno. In June, apparently because Jesus Rivera was no longer taking the necessary actions for his wife’s care, a judge appointed the Fresno County public guardian to act as conservator of Janet Rivera.

Shortly thereafter, Mrs. Rivera’s condition deteriorated and she had to be hospitalized. At that point the public guardian decided, after consulting with Mrs. Rivera’s physicians, to remove her from life support. Mrs. Rivera, like Terry Schiavo, had not executed an Advance Health Care Directive, which is a document, part of a complete estate plan, wherein you name someone to make medical decisions for you and also indicate your end-of-life wishes. This case is somewhat remarkable in that Mrs. Rivera had not indicated, as far as we can tell, either in writing or in conversation with family members, what her end-of-life preferences were, and yet her conservator, who was not a family member, made a decision to discontinue life support.

Apparently, Mrs. Rivera’s family did not disagree with the public guardian’s decision to discontinue life support at the time, but once the support was discontinued on July 14, at least some of them changed their minds. Mrs. Rivera’s brother, Michael Dancoff, said that he was told Mrs. Rivera would die shortly after life support was removed. He said he doesn’t want to watch his sister die of starvation and is now fighting to have her placed back on life support. He asked the probate court to step in and one of Mrs. Rivera’s cousins has petitioned to be named her conservator. As a result, Fresno County Superior Court Judge Debra Kazanjian ordered, nine days after the tubes were withdrawn, that Janet Rivera’s feeding tubes are to be reinserted pending a hearing about her long-term care.

If Mrs. Rivera had executed an Advance Health Care Directive before her incapacitating heart attack her family would have known what her wishes were and would have been able to act accordingly. Instead, they are now involved in a court case to determine what will happen to her. I strongly encourage all of my clients to execute such a document and make an Advance Health Care Directive a part of every estate plan I prepare.

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Kirsten Howe practices estate planning law in Walnut Creek. Send your estate planning questions to Kirsten by e-mail.

Serving Walnut Creek, Pleasant Hill, Concord, Clayton and Martinez, the Diablo Valley Democratic Club is a grassroots organization supporting progressive values and causes. Monthly meetings include candidates’ forums, and presentations on healthcare, taxation, voting accuracy, the environment, the war in Iraq and other timely topics. Members get regular updates on related community activities and resources. Local, state and national issues are explored. Information: 925-335-2647 or www.dvdems.org.

Assume Henry and Wilma are married, Wilma has three children from her first marriage, Henry has no children. Wilma came to the marriage with a lot of money. Henry is comfortable but not nearly as affluent as his wife. Wilma would like to make annual gifts to her three children, both to help them out and to begin reducing the size of her taxable estate. As regular readers already know, Wilma can give each of her three children up to $12,000 per year without any gift tax consequences. These gifts will not require her to file a gift tax return, nor will they count toward her lifetime exclusion from gift tax which is currently $1 million.

Because Wilma and Henry are married, though, Wilma can give each of her children an additional $12,000 per year by splitting her gifts with her husband. Even though the gifts are made from her money and not Henry’s, for gift tax purposes they can be considered to be made half from Wilma and half from Henry.

Additionally, Henry and Wilma can do gift splitting with respect to gifts in excess of their annual exclusion amount. Wilma could choose to give each child $100,000 in one year, so that they can each make a down payment on a home. The first $24,000 of each gift will be gift tax free because Henry and Wilma will split that gift and they each are allowed to give $12,000 per year. The remaining $76,000 of each gift will have to be reported on gift tax returns. If Henry and Wilma split those gifts they will each report three taxable gifts of $38,000. This means that each of their lifetime exclusions from gift tax will be reduced by $114,000 (3 times $38,000), leaving them with $886,000 in taxable gifts that they may make over the course of their lives without incurring gift tax. If Wilma was not married, She would have to use up $264,000 of her lifetime gift tax exclusion in order to give each child $100,000.

Kirsten Howe practices estate planning law in Walnut Creek. Send your estate planning questions to Kirsten by e-mail.

The unlimited estate and gift tax marital deduction that is available to U.S. citizens is not available for lifetime gifts to noncitizen spouses or to estates where the surviving spouse is not a U.S. citizen. For lifetime transfers, the annual exclusion from gift tax for transfers to a noncitizen spouse is $100,000. In order to obtain the marital deduction on transfers to a surviving spouse who is a noncitizen, the deceased spouse must establish a trust known as a qualified domestic trust, or QDOT.

It is important to remember that the citizenship of the spouse who is the beneficiary/recipient of the marital trust makes a difference for tax planning purposes—not the citizenship of the donor spouse. For example, if a husband is a U.S. citizen and his wife is not a U.S. citizen, the husband’s will or living trust should contain QDOT provisions, whereas the wife’s will or living trust can provide for a typical marital trust, known as a qualified terminable interest property trust, or QTIP, to qualify for the unlimited marital deduction.

Requirements for a QDOT. A QDOT must have at least one U.S. trustee (a U.S. individual or a U.S. corporation) and must also satisfy the general marital deduction requirements of U.S. estate tax law under Internal Revenue Code section 2056, which covers qualified terminal interest in property (QTIP) trusts, the more conventional marital deduction trust. The main requirements of section 2056 for a typical QTIP trust are the following:

(1) The surviving spouse must be the sole income beneficiary of the trust during her life;
(2) All the trust assets must have been included in the decedent spouse’s gross estate before passing to the surviving spouse;
(3) The surviving spouse must have a qualifying income interest for his/her lifetime; and
(4) The trust property cannot be appointed to any person other than the surviving spouse.

Income distributions to the surviving spouse from the QDOT trust will not be subject to the U.S. federal estate tax, but distributions of principal to the surviving spouse will be subject to estate tax when the distributions are made, unless the distributions are made on account of hardship. Hardship is defined as a distribution to meet an immediate financial need for the health, maintenance, education or support of the spouse or his/her legal dependents, if the spouse does not have other liquid assets available to meet the need.

In addition, as with typical marital trusts, the QDOT assets must be included in the surviving spouse’s taxable estate upon his/her death. If the value of the QDOT assets exceeds $2 million, it is considered a large QDOT and the trust must name a U.S. bank or trust company to act as trustee, or must provide that the U.S. trustee must furnish a bond or letter of credit security arrangement in the amount of 65% of the value of the QDOT.

QDOT Qualification After Death. If the noncitizen spouse becomes a U.S. citizen before the date that the deceased spouse’s federal estate tax return is due (nine months after the date of death) the spouse can be treated as a U.S. citizen for estate tax purposes and qualify for the unlimited marital deduction.

If the estate plan of a married couple does not include any QDOT provisions, the surviving spouse can still assign the assets that must qualify for the marital deduction in order to delay the imposition of estate tax to a QDOT that is created after the first spouse’s death. Again, this must be done within nine months of the first spouse’s death.

Kirsten Howe practices estate planning law in Walnut Creek.

The exemption from federal estate and generation skipping transfer (GST) taxes will increase, for the year 2009 only, from $2 million to $3.5 million. This amount is the amount that each individual can transfer at death free of those taxes. Of course, transfers to spouses and to charities have an unlimited exemption under the law as currently written.

In addition, the annual gift tax exclusion amount will increase from $12,000 to $13,000. This is the amount that each person can give each year (during life) to as many other persons as he wishes free from gift tax. Again, the gift tax currently does not apply to transfers to gifts to spouses or charities. Finally, the annual exclusion from gift tax for gifts to non-citizen spouses will increase from $125,000 to $133,000.

For most clients, the increase in the personal exemption from estate tax will not affect the fundamentals of the estate plan. Most married couples have designed their estate plans to eliminate federal estate tax completely on the death of the first spouse and to minimize the estate tax on the death of the second spouse by means of a bypass trust funded with the personal exemption amount that benefits the surviving spouse during his or her lifetime then passes to children on the death of the surviving spouse.

If, however, the bypass trust does not benefit the surviving spouse during his or her lifetime but rather benefits the children or grandchildren, the increase in the personal exemption amount may leave insufficient assets for the support of the surviving spouse. Clients with this type of estate plan should review both their plan and their financial situation in light of this change.

Kirsten Howe practices estate planning law in Walnut Creek. Send your estate planning questions to Kirsten by e-mail.