Archives for January 2024

 Psychological Evaluation in a California Divorce, Part 1

If a divorce involves children, then a court or a parent may request a Child Custody Evaluation, which is also known as a 730 Evaluation. A custody evaluation can consist of interviews with the parent and the children, psychological testing of the parents of the children, interviews with interested third parties such a teachers or babysitters, and a review of relevant documents, such as court records or criminal history.  The evaluator makes recommendations to the court about what is in the best interest of the children based on the totality of the data collected and reviewed. 

There are a variety of psychological tests that can be administered, but the MMPI-2 is commonly used in California.  This article will focus on the psychological testing portion, in particular the commonly used test, the MMPI-2. It is a true/false paper test that is used to assess a parent’s mental fitness and ability to parent effectively.  

Thus, this article gives information on some of the factors that are tested, but for most people, the best practice is to answer all questions as honestly as possible and not try to “beat the test,” since the test is trying to measure for people who are gaming it. This article is a very generalized summary of a complex test, so the information is not legal advice and should be used only for general educational purposes and not as a guide on how to take the test. 

What is the MMPI-2?

  • MMPI-2 stands for Minnesota Multiphasic Personality Inventory-2. 
  • It is a 500+ questionnaire of true and false questions that individuals answer for themselves, and the responses help mental health professionals evaluate symptoms of mental illness or personality disorders. 

Answer all of the questions. 

  • If you do not answer all of the questions, this is a red flag for this type of test. If you fail to answer a substantial number, then the test may not even be valid. 

 Do not be surprised to see health related questions. 

  • This test is not used exclusively for divorce, and it is also commonly used for personal injury or disability claims. For that reason, there are a number of health-related questions that may seem irrelevant to a divorce but be sure to answer them. 

 Do not try to trick the test by answering all false or all true. 

  • For other types of tests, a strategy might be to answer all the questions as true of all the questions as false. This strategy will not work for the MMPI-2, and answering all the questions one way is a big red flag for this test that you are trying to game the system. 

 Be consistent throughout the test in your answers. 

  • The test measures consistency, so do not be surprised to see the same or similar questions early in the test and later on. The purpose of this is to see whether you are consistent in your answers. Be aware that inconsistency may be measured as dishonesty. 

Contact an Experienced Divorce Attorney

At the Law Office of David Knecht, we are very familiar with the custody evaluation process and the psychological testing aspect of the 730 Evaluation. We have extensive experience in family law. We can help you feel confident in achieving your goals in a California divorce. Contact us today at 707-451-4502. 

Filed Under: Divorce Advice, General

Medicaid Asset Protection Trusts

A Medicaid Asset Protection Trust (MAPT) can be a useful estate planning tool. The decision to transfer assets to this time of trust is a complex one. The purpose of this article is to provide an overview of what a MAPT is and why you might consider one, to help provide a foundation for further discussion with your estate planning attorney or financial advisor. This article summarizes a recent Yahoo Finance article on this topic. 

 

What is a Medicaid Asset Protection Trust?

  • It is a trust that you might set up if you believe you or your spouse may need long term care at some point in the future.
  • In order for Medicaid to pay for your care, you have to qualify, which in general requires certain requirements for income and assets.
  • Transferring assets to a MAPT may allow you to preserve your savings and qualify for Medicaid to pay for long-term care. 

 

 How does a Medicaid Trust work? 

  • A Medicaid Trust is an irrevocable trust. 
  • This means that once you transfer assets in, you cannot transfer them back out. 
  • You can transfer assets such as a qualified retirement account, vehicles, personal assets, certain life insurance policies and even your home. 
  • A trustee is named to manage trust assets and the trust can have on eor more beneficiaries. 
  • The purpose of transferring the assets is to help you to avoid the spend-down requirements to qualify for coverage.

 

What are some concerns to keep in mind when considering a Medicaid Trust?

 

  • Medicaid has a look-back period. 
  • If you transfer withing the look-back period, the purpose of the trust may be frustrated.
  • Because the trust is irrevocable, you need to be very certain that the transfer of assets is the right decision for you. 
  • Establishing the trust takes some amount of cost and time and another estate planning tool may be better suited to accomplish your financial planning goals.  

Contact an Experienced Estate Planning Firm

If you have questions about planning for long-term care of any estate planning issue, we are here to help. At the Law Office of David Knecht, we have extensive experience with estate planning and look forward to exploring all your options with you to create the best plan for you and your loved ones.  Contact us at 707-451-4502. 



Filed Under: Medicaid

Will Terminating an Irrevocable Trust Affect my Taxes?

A common question relating to trusts is whether terminating the trust will affect taxes.  The termination of irrevocable trusts can be a complex legal topic.

When does an irrevocable trust automatically terminate in California?

  • There are some circumstances where the trust terminates by law:
  • The term of the trust expires.
  • The purpose of the trust is fulfilled.
  • The purpose of the trust becomes unlawful or is impossible to fulfill. 

When can an irrevocable trust be dissolved?

  • When all beneficiaries consent to termination. 
  • If continuing the trust is necessary to carry out a material purpose of the trust, it can’t be terminated unless a court determines that the reason for doing so outweighs the interest in accomplishing the purpose of the trust. 
  • When the Fair market value of the principal of the trust has become so low in relation to cost of administration that continuation under the existing terms defeats accomplishment of its purposes.  
  • For other reasons beyond the scope of this article. 

What are the potential tax consequences of terminating an irrevocable trust?

  • When trust assets are liquidated and distributed those transactions may trigger taxes. 
  • If the trust is a grantor trust, then the person who created the trust is considered the owner of the assets and is responsible for taxes. 
  • If the trust is a non-grantor trust, it gets taxes as a separate entity, and the trust itself and beneficiaries are the ones who will pay the tax bill on distributions. 

What are some general principles for trusts and income taxes, capital gains and estate taxes?

  • An irrevocable trust may hold assets such as stocks or bank accounts that generate income and these gains are taxed as ordinary income. This tax applies to the profits, not the principal. 
  • Assets in the trust that increase in value are subject to capital gains taxes when the profits are distributed, and the beneficiaries will pay the tax rate that equates with their income level. 
  • When assets are transferred to an irrevocable trust, they lower the person’s estate tax liability when they die, but keep in mind that this is something most people do not need to consider since only large estates are subject to the federal estate tax in 2023. 

Contact an Experienced Estate Planning Attorney

This article contains general information about the tax consequences of terminating an irrevocable trust, but consulting a professional about the specific tax liabilities and strategies involved is highly recommended. At the Law Office of David Knecht, we can help you understand the tax consequences of the various tools available for estate planning, and we can customize a plan that is perfect for your goals and your family. Contact us today at 707-451-4502. 

Filed Under: Estates

Will My Roth IRA Heirs Have to Take Annual Distributions?

A Roth IRA is one of the many estate planning tools because of some of the tax advantages that apply. This article summarizes information about how Roth IRA’s can be a powerful investment tool both while you are alive and as a mechanism to transfer assets after you pass on. 

What is a Roth IRA?

  • A Roth IRA is an Individual Retirement Account to which you contribute after-tax dollars. While there are no current-year tax benefits, your contributions and earnings can grow tax-free, and you can withdraw them tax-free and penalty free after age 59½ and once the account has been open for five years. 

Why is a Roth IRA beneficial for heirs?

  • Many are happy to find out that heirs get to inherit your Roth IRA tax-free. This is quite the advantage compared to a traditional IRA or 401(k) where withdrawals made by heirs are taxed. In other words, you get to pass your Roth IRA benefits directly down to your heirs. 

Are there specific benefits for a spouse beneficiary of a Roth IRA?

  • Yes, spouses who inherit a Roth IRA have several advantageous options. 
    • If they are the sole beneficiary, they can be the account owner and avoid required minimum distributions (RMD’s) during their lifetime. 
    • If they are not the sole beneficiary, they can roll over their portion of the assets into an inherited or beneficiary IRA and stretch RMD’s out over their life expectancy. 
    • Roth distributions are tax free if the account has been open for at least five years.

 Will my non-spouse IRA heirs have to take RMD’s?

  • This question was asked and answered on nj.com, and the answer was “A non-spousal beneficiary must begin taking RMDs on the basis of his/her life expectancy by Dec. 31 of the year after the owner’s death.

Contact an Experienced Estate Planning Lawyer

There are many estate planning tools such as the Roth IRA to effectuate beneficial growth and tax treatment in life and for the heirs after your death. At the Law Office of David Knecht, we have extensive experience helping clients with estate planning and can help you make a plan that is just right for you and your loved ones. Contact us at 707-451-4502. 



Filed Under: Legal Advice, Living Trust , Living Will