Inflation at a 40-year high has forced many Americans to change how they prioritize their spending. In reaction to the increased cost of every day living, the IRS, Medicare, Social Security and DHCS have thankfully made favorable adjustments to help Americans in 2023.

The new year offers greater relief when it comes to transfer taxes and estate planning, Medicare, Social Security, & Medi-Cal in California.

Transfer Tax Exclusions Increase for Estate & Gift Taxes

While California does not have a state-level estate or inheritance tax, per se, the federal government does. Generally speaking, the amount of transfer tax owed by decedents is based on the value of their estate when they pass away. This is confusing to most people since we are all used to owing taxes when we “earn” money. But the transfer tax system is the opposite as it taxes people when they want to give away money! In California, there's also a pick-up tax, meaning if you owe estate taxes to the IRS at the federal level, you'll also owe it to the Franchise Tax Board in California. Still, fears of the “death” tax are overblown since they do not affect over 99.9% of society.

For those who do worry about “death” taxes, in 2023, Congress and the Internal Revenue Service (IRS) have increased the amount of which a taxable estate may be subject to transfer taxes. Many will remember that the transfer tax exclusion for decedents who died in 2022 was $12,060,000. That exclusion increased to $12,920,000 in 2023. This means only estates (or people who have more than $13 million in assets in reality) who have greater than the estate tax exclusion will need to address and possibly face estate taxes.

Also, the increase in the estate tax exclusion is not the only adjustment. That is, the IRS in 2023 increased the annual gift tax exclusion (which will go up by $1,000) to $17,000 in 2023. That means everyone in the US can give away $17,000 to anyone they want (and to as many people they want) without any tax ramifications whatsoever.

Medicare Part B Premiums & Deductibles Decrease

Beyond tax relief, Medicare Part B enrollees will be happy to hear that their premiums are going to go down in 2023. You read that correctly. The Centers for Medicare and Medicaid Services announced that the standard monthly premium will be reduced by $5.20 in 2023. So in 2023, Medicare Part B enrollees will pay $164.90 monthly, versus the $170.10/month which was payable in 2022. This is not the end all, be all, but every little bit helps.

Out-of-pocket medical expenses will also drop in 2023. The annual deductible, currently set at $233, will be reduced to $226 in the new year.

Cost-of-Living Adjustments for Social Security Benefits

A high inflation rate is a hidden tax as it means that our purchasing power is reduced. Those who rely on Social Security Benefits or Supplemental Security Income (SSI) are especially feeling the financial pinch in 2022 because the US saw a 40 year high in inflation.

But now, the 70 million Americans who receive “Old Age” Social Security and/or Supplemental Security Income (SSI) will receive a Social Security benefit increase of 8.7% in 2023. The Social Security cost-of-living adjustment (COLA) took effect in January 2023. SSI beneficiaries began receiving increased payments on Dec. 30, 2022. Incidentally, some Americans receive both benefits and this COLA adjustment is the biggest benefit increase since 1981. All of this is truly good news for senior citizens.

Medi-Cal Lowers Premiums

Benefit changes also happened at the state level. Senate Bill 184 made several Medi-Cal adjustments that went into effect on July 1, 2022. Medi-Cal is a need-based benefit program funded jointly with California state and federal Medicaid funds.

Monthly premiums are reduced to zero dollars for the following beneficiaries:

• 250 Percent Working Disabled Program (250 Percent WDP)
• Optional Targeted Low-Income Children's Program (OTLICP)
• Medi-Cal Access Program (MCAP)
• Medi-Cal Access Infant Program (MCAIP)
• County Children's Health Initiative Program (CCHIP)

Beneficiaries in these programs with a positive credit balance will receive refunds for overpaid premiums.

Family Member Base Allocation Goes Up

But wait, there's more, as federal and state laws allow Medi-Cal recipients to allocate additional income to support a dependent family member (biological or adopted minor or adopted children, parents, or siblings) when there is a spouse at home.

Effective July 1, 2022, the family member base allocation (FMBA) increased to $2,289. In fiscal year 2021/22, the allocation was capped at $2,178. Plus, new spousal impoverishment rules have really changed the Medi-Cal game by allowing many, if not most, to qualify for In Home Supportive Services!

Helping Seniors Through Effective Estate & Elder Law Planning

Elder law and estate planning are complex areas. Without the thoughtful help of an experienced elder law attorney, you may not be taking full advantage of the benefits and protections available to you.

At Kaiden Elder Law Group, PC, our firm is dedicated to helping people of all ages and income brackets safeguard their assets and decision-making authority throughout their lives. We have helped thousands over more than 25 years deal with complex estate planning, probate, trust administration, taxes, and litigation matters and we also uniquely focus on public benefits.

We can help you create or revise an estate plan to ensure that it's tailored to you and your family. Contact us online or call (661) 306-2500.