Congratulations to Karnopp Attorney, Kurt Barker who has been recognized by the Human Resources of Central Oregon (HRACO) as the 2020 HR Professional of the Year. Each year, the HRACO recognizes one of its members based on nominations by their peers.  The award represents the HR Professional’s contributions to the field of human resources through their outstanding record of involvement either through innovation, program, or best practice.

Nominees must meet the following eligibility criteria:

  • Outstanding contribution to the Central Oregon HR Community, i.e.:
  • Serves on the HRACO board
  • Speaker at HR-related events
  • Facilitator/Trainer/Teacher in the HR Community
  • Mentors other HR Professionals
  • An active member of SHRM or HRACO
  • Currently excelling in their position in the HR field

As the current Chair of Karnopp Petersen’s Employment Law department, Kurt’s practice continues to emphasize the counsel and defense of clients in most all employment-related matters including discrimination, harassment, wage and hour, tort, non-compete enforcement, and trade secret obligations.

He frequently lectures on employment law topics around the state and has been featured at Oregon’s Bureau of Labor and Industries’ Annual Conference in Portland. Kurt also thrives on conducting training for managers and employees, including anti-harassment, medical leave, and other topics.

Kurt is a board member and past President of the Human Resources Association of Central Oregon (HRACO), our local chapter of the Society of Human Resources Management (SHRM).  He serves on the board of the Oregon Employer Council – Central Oregon and volunteers as secretary of the board for Volunteers in Medicine Clinic of the Cascades. He has served on the Bend Chamber’s Leadership Bend Steering Committee, as well.

https://www.actec.org/estate-planning/how-the-secure-act-may-impact-your-retirement-plan/

The SECURE Act (Setting Every Community Up for Retirement Enhancement), enacted in December 2019, changes how we do estate planning with retirement benefits. Check out this video to learn more about the IRA age distribution requirement, the impact to beneficiaries, changes to the “stretch” and individuals exempt from the limitation.

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Free Webinar
This Thursday, April 16 at Noon – RSVP

Register to hear from local businesses representing different industries about how their bottom line has been recently impacted – and what this means for their ability to retain their workforce. We’ll discuss different approaches taken with respect to retention strategies and lay off and/or furloughs of employees, along with plans to return to regular staffing.

Cheri Helt, owner of Zydeco/Bistro 28, will share her experiences as a small business owner/employer, as well as her unique perspective and insight as a State Representative.

Dana Dunlap, Program Manager with COIC-WorkSource Oregon, will discuss the WorkShare program as an alternative to layoffs, and how local Rapid Response teams can help.

Kurt Barker, Attorney with Karnopp Peterson, will discuss what employers need to consider from a legal perspective when reducing a workforce.

Juliana Williams is the Executive Director for the Boys and Girls Club of Bend. Her team made the difficult decision to lay off a large portion of their workforce. Juliana will share lessons learned during those early days, and what actions they’re taking to ensure the team can return in the future.

Free to “attend” – REGISTER NOW

Current Gift and Estate Tax Exemption

  • Federal Estate Tax Exemption: $11.58 million per individual
  • Federal Gift Tax Exemption: $11.58 million per individual
  • Federal Generation-Skipping Tax Exemption: $11.58 million per individual
  • Federal Unlimited Marital Deduction for gifts and transfers to spouses
  • Annual Gift Exclusion Amount: $15,000 per individual, per donee, per year
  • Oregon Estate Tax Exemption: $1 million per individual
  • Oregon does not have a gift tax
  • Oregon Unlimited Marital Deduction for gifts and transfers to spouses

To the extent that you have available unused exclusion and are interested in gifting the full $11.58 million exemption currently available, please contact us sooner rather than later to take advantage of what is likely a temporarily increased exclusion. 

 

Clawback of Federal Estate and Gift Tax Exemption

On November 22, 2019, the IRS issued permanent regulations clarifying that there would be no “clawback” of large lifetime gifts. More specifically, the Tax Cuts and Jobs Act of 2017 increased the basic transfer tax exclusion amount from $5 million per person to $10 million per person, indexed for inflation.  For 2020, the inflation-adjusted basic exclusion amount is $11.58 million, meaning that an individual can gift a total of $11.58 million during lifetime or at death without paying federal gift or estate tax.  In 2026, absent a change in the law, the exclusion amount is set to revert to the original $5 million per person indexed for inflation.

There has been uncertainty as to what would happen if someone took advantage of the temporarily increased exclusion amount to avoid gift tax on transfers but then died when the exclusion amount was much lower.  Would the lifetime gifts be “clawed back” into the estate and taxed anyway in a post-2026 estate tax calculation?  The regulations issued in November provide that no such clawback will occur.  The rules allow the estate of a decedent to calculate the estate tax credit using the higher of the basic exclusion amount applicable to gifts actually made during lifetime or the basic exclusion amount applicable at death.

To the extent that you have available unused exclusion and are interested in gifting the full $11.58 million exemption currently available, please contact us sooner rather than later to take advantage of what is likely a temporarily increased exclusion. 

 

SECURE ACT: Changes Impacting Your Retirement Account Beneficiaries 

On December 20, 2019, the SECURE Act was signed into law, triggering potential implications for your estate planning.  In particular, the SECURE Act impacts retirement benefits and beneficiary designations in the following significant ways:

1.                The Good:  RMDs and Contributions.  The Act postpones the age at which a plan participant in an IRA or other qualified retirement account must begin taking required minimum distributions (“RMDs”) from age 70½ to the year in which a plan participant turns 72.  For those not yet taking RMDs, this change means that you will have a few more years without mandatory distributions.  For those already taking RMDs, this change will not impact you.  In addition, the Act has repealed the “age cap” on contributions to a traditional IRA so that participants can make tax-deductible IRA contributions without age restriction.

2.                The Bad:  Elimination of Stretch IRA for Non-Spouse Beneficiaries.  Under the prior law, when a non-spouse beneficiary inherited an IRA, the beneficiary had the option of stretching out the RMDs from the IRA, and the corresponding income tax burden, over the beneficiary’s life expectancy.  For example, a 50-year old beneficiary inheriting an IRA in 2019 had 34.2 years to stretch out RMDs.  Under the new law, the deferral is much more limited.  Now, non-spouse beneficiaries will have to withdraw IRA proceeds within just ten years, imposing potentially higher tax brackets and the loss of tax deferral.  A few comments about the RMD change:

  • Spouses. There is no change in the law for surviving spouses.  A surviving spouse still has the ability to roll the deceased spouse’s IRA into his or her own IRA, and treat the IRA as if it is the surviving spouse’s own for purposes of taking out RMDs.  A spousal trust will also continue to qualify for a lifetime stretch out so long as appropriately drafted.
  • Trusts. A non-spouse beneficiary includes any trust listed as a beneficiary, other than a trust for a surviving spouse or excepted beneficiary listed in (c) below. Under the previous version of the law, if a trust qualified as a “see-through trust,” then the life expectancy of the beneficiary could be used for purposes of stretching out the RMDs.  This once favorable strategy no longer works for all trusts.  RMDs have to be distributed to the trust within the 10- year time period unless an exception applies.  To the extent that the trust retains the distributions from the IRA, those distributions will be treated as ordinary income. Moreover, given a trust’s higher tax brackets, the trust will pay significantly more income tax on that income as compared to an individual beneficiary.  In sum, naming a trust as a beneficiary under the new law, particularly as a primary beneficiary, could have unintended, adverse outcomes.  You should review all your beneficiary designations, particularly if you named a trust as a beneficiary (often the case for younger beneficiaries or beneficiaries with financial management issues).
  • Exceptions to the Ten-Year Payout Rule.  There are exceptions to the 10-year payout rule for children who are minors and for disabled or chronically ill beneficiaries.  For minor children, the life expectancy payout rules apply until the child reaches the age of majority and then the 10-year rule begins.  The life expectancy payout rule applies to a disabled or chronically ill beneficiary (and an accumulation trust for their benefit, which is an important change for special needs beneficiaries). When the disabled or chronically ill beneficiary dies, the remainder of the account passes pursuant to the 10-year rule.
  • Timing of Distributions.  Under prior law (allowing lifetime stretch out), a beneficiary had to begin taking distributions in the year following the plan participant’s death. Under the new 10-year rule, a beneficiary can defer any and all distributions until the end of the period.  Such a deferral would allow for continued tax-deferred growth in the account but must be calculated with care as a larger, later distribution could increase the tax payable (depending on the amount of the distribution and the beneficiary’s tax brackets).

3.                Planning Strategies.  Naming a surviving spouse the primary beneficiary of a retirement account remains the most favorable income tax option (though other factors, such as a second marriage, could complicate the decision).  For contingent beneficiaries, the planning environment has become much more complex.  In some instances, conversion to a Roth might be advisable in order to soften the income tax consequences of the new rules.  For those who have named trusts as beneficiaries, the trust provisions will need to be altered to avoid unintended consequences and to maximize flexibility for the trustee and the beneficiaries.  For those who are charitably inclined, a retirement account could name a Charitable Remainder Trust as a “remainder” beneficiary in order to stretch out distribution for an individual beneficiary longer than the 10-year period (up to the lifetime of that beneficiary), with the understanding that the remainder of the account will be distributed to charity at the individual beneficiary’s death.

We recommend that you review your beneficiary designations and the provisions in your estate planning documents to confirm that your beneficiary designations are up-to-date and still the most appropriate option given the recent changes to the law.  If you would like us to assist you with this review, please contact us to schedule an appointment

Howard Arnett, Karnopp Petersen Of-Counsel Attorney recently presented at the two-day Oregon Water Law Conference on Tribal Water Law.   Howard drew on the firm’s water law expertise to present an explanation of Tribal Water Law principles and an update on the very recent Tribal Water law decision in Baley v. U.S.  from the Federal Circuit Court of Appeals to the Oregon Water Law Conference in Portland on November 14-15, 2019.  His opening Powerpoint slide below outlines his presentation.