The COVID 19 pandemic, along with government’s response to it, have caused Americans of all ages to give more thought to their estate plans. Following are some topics that should be included in that kind of review.

The due date for all Federal and California income tax returns, as well as gift and estate tax returns, has been extended to July 15, 2020, from the original date of April 15.

The CARES (Coronavirus Aid, Relief and Security) Act, which became effective on March 27, was primarily focused on providing economic stimulus to individuals and businesses, but also included some estate planning benefits.

The CARES Act eliminated the limit on deductions from taxable income for cash gifts this year to public charities. You can now deduct 100% of such gifts on your 2020 income tax returns, rather than the previous limit of 60%. (Gifts to donor-advised funds are not included.)

If you have an Individual Retirement Account (IRA) and would normally have to take a required minimum distribution, or RMD, that requirement is waived for 2020. You can still make a charitable gift via your RMD this year if you qualify to do so.

Another new law, the SECURE (Setting Every Community Up for Retirement Enhancement) Act, also made changes to the rules for IRAs and qualified retirement plans, including 401(k) plans.

As of January 1, the age at which you must begin taking an RMD is 72, rather than 70½. In addition, the former age limit of 70½ for contributing to an IRA has been removed, so you may continue to make contributions at any age.

The Act also limited to 10 years the time that most non-spouse beneficiaries of an inherited IRA can let the assets remain in the account. A five-year limit still applies to charities and some other beneficiaries.

The estate and gift tax lifetime exemption increased in 2020 to $11,580,000 from $11,400,000. The new figure is also now the lifetime tax exemption for a Generation Skipping Transfer. (The tax rate on transfers above the new exemption remains at 40%.)

There are several ways you can pass assets to others without gift or estate tax consequences.

You can make a gift of up to $15,000 to any person each year with no reporting or tax obligation.

If you pay tuition for another directly to an educational institution (pre-school to graduate school), this does not count toward the annual exclusion or lifetime exemption on gift taxes. The same is true for medical bills paid directly to physicians or hospitals. (However, this does not apply if someone else pays these bills and you reimburse him or her.)

Other options are an Intentionally Defective Grantor Trust (IDGT) or a Grantor Retained Annuity Trust (GRAT).

An IDGT allows you to give away assets (typically ones that produce income or are likely to increase in value.) You continue to pay tax on any income or capital gains, making what amounts to an untaxed gift to the trust’s beneficiary of those income tax payments.

With a GRAT, you can make a tax-free gift of any appreciation of the assets placed in the GRAT in excess of the interest rate set by the IRS, which as of May, 2020, is 0.8%.

Another useful option may be making a loan to your child, or to a trust you create for that child, using an interest rate the IRS sets for the month in which the loan is made. For May of 2020, that is 0.25% for loans up to three years, rising to 1.18% for loans longer than nine years. Those funds can be invested in ways that are likely to produce higher yields than the IRS-mandated interest rates, thus benefitting the child.

There have also been changes to California law that can affect your estate planning. As of January 1, 2020, an estate with a value of $166,250 can pass without probate, up from the previous limit of $150,000.

These are just some of the topics you should consider when reviewing your estate plans. The coronavirus has caused upheaval in many areas of our lives, but less unusal  events – divorce, retirement, changes in a beneficiary’s circumstances or the suitability of a trustee, executor of your will, guardians for your children, or agent for financial powers or advance health care directive, and other happenings – also are good reasons to make sure your plans still reflect your needs and wishes. This would also be an important time to check your beneficiary designations to make sure all is in order.

While working remotely, we are fully available to discuss your needs and assist in creating or updating your estate plans.

By Susan Sabry