CA CLS Estate Planning cheat sheet

Estate planning goals: minimize transfer taxes, avoid probate, provide for dependents, manage incapacity, and implement charitable intent.

Client counseling steps: gather facts, identify goals, analyze alternatives, recommend a plan, document the plan, and review periodically.

Capacity to contract: client must understand nature and consequences of the estate planning documents; undue influence voids gifts.

Conflict of interest: attorney may not represent both spouses if their interests diverge; joint representation requires informed written consent.

Engagement letter should define scope, fees, responsibilities, and whether the attorney represents both spouses or a joint trust.

Common planning tools: wills, revocable living trusts, durable powers of attorney, advance health care directives, and beneficiary designations.

California probate threshold: estates valued over $184,500 (as of 2022) generally require probate; below that, small estate procedures may apply.

Community property presumption: all property acquired during marriage while domiciled in California is presumed community property; tracing can rebut.

Periodic review triggers: marriage, divorce, death, birth, significant asset changes, relocation, and changes in tax law.

Intestate succession order (Cal. Prob. Code §6400 et seq.): surviving spouse, then children and their descendants, then parents, then siblings and their descendants, then grandparents, then next of kin.

Surviving spouse share: if decedent leaves one child or descendants of one child, spouse takes one-half of separate property and all community property; if more than one child, spouse takes one-third of separate property.

Community property passes entirely to surviving spouse if no surviving issue; if issue, spouse keeps all community property plus share of separate property.

Advancement: lifetime gift to heir is treated as advancement only if declared in writing by decedent or acknowledged in writing by heir.

Probate administration steps: petition for probate, appointment of personal representative, notice to creditors, inventory and appraisal, payment of debts/taxes, distribution, final discharge.

Creditor claim period: four months after notice or 60 days after issuance of letters, whichever is later; claims must be filed or barred.

Small estate affidavit (Cal. Prob. Code §13100): allows transfer of personal property up to $184,500 without probate after 40 days from death.

Spousal property petition (Cal. Prob. Code §13500) confirms community property and surviving spouse's share without full probate.

Personal representative duties: fiduciary duty, loyalty, impartiality, accounting, and prudent management of estate assets.

California will formalities: must be in writing, signed by testator (or proxy), and witnessed by two competent witnesses who understand it is a will.

Holographic will: entirely in testator's handwriting, signed and dated; no witnesses required but must be proved by handwriting evidence.

Pour-over will: directs probate assets into an existing trust; valid if trust identified and executed before or concurrently with will.

Revocable living trust: avoids probate, provides incapacity planning, but does not avoid creditors or estate tax; must be funded.

Trust funding: retitle assets (real property, accounts) into trust name; beneficiary designations on life insurance/retirement accounts pass by contract, not will.

Will substitutes: joint tenancy, payable-on-death accounts, transfer-on-death deeds (California TOD deed for real property), and beneficiary designations.

No-contest clause (in terrorem): enforceable in California only if probable cause exists; court may enforce if contest brought without probable cause.

Revocation of will: by subsequent will, physical act with intent to revoke, or operation of law (divorce revokes provisions for former spouse).

Trust amendment/revocation: settlor may revoke or amend unless trust expressly makes it irrevocable; method must follow trust terms.

Trustee duties: loyalty, impartiality, prudence, accounting, inform and report, and duty to follow trust terms.

Duty of loyalty: trustee must not engage in self-dealing or conflicts of interest; transactions must be fair and in trust's best interest.

Prudent investor rule (Cal. Prob. Code §16045 et seq.): trustee must invest as a prudent investor would, considering risk/return and diversification.

Duty to account: trustee must provide annual accountings to beneficiaries unless waived; accountings show receipts, disbursements, and assets.

Duty to inform and report: trustee must keep beneficiaries reasonably informed of trust administration and material changes.

Trustee compensation: reasonable compensation for services; may be set by trust instrument or court.

Co-trustees: must act unanimously unless trust provides otherwise; liability for breach may be joint and several.

Removal of trustee: court may remove for breach of trust, unfitness, or persistent failure to administer; trust may provide removal mechanism.

Uniform Principal and Income Act (California): governs allocation between income and principal; trustee may adjust for fairness.

Federal estate tax: gross estate includes all property owned at death, plus certain lifetime transfers; less deductions for debts, expenses, marital and charitable bequests.

Federal unified credit: 2024 basic exclusion amount $13,610,000 per person; portability allows surviving spouse to use deceased spouse's unused exclusion (DSUE).

Federal gift tax annual exclusion: $18,000 per donee in 2024; gifts above exclusion use lifetime exemption; no gift tax on direct payments of tuition/medical.

Federal GST tax: applies to transfers to skip persons (grandchildren); GST exemption equal to basic exclusion; allocation on timely filed return.

California has no estate or inheritance tax; but California imposes property tax reassessment on change of ownership, with exceptions (parent-child exclusion, spouse).

California property tax reassessment: base year value transfers on change of ownership; parent-child exclusion for principal residence and up to $1 million of other property (inflation adjusted).

Marital deduction: unlimited for property passing to surviving spouse; requires property included in gross estate and passing in qualifying form.

Charitable deduction: unlimited for transfers to qualified charities; split-interest trusts require actuarial valuation.

Step-up in basis: inherited property generally receives fair market value basis at death (IRC §1014); community property gets full step-up for both halves.

Grantor trust rules (IRC §§671-679): settlor treated as owner for income tax purposes if retained powers or interests; trust income taxed to grantor.

Simple trust: must distribute all income annually, no charitable contributions, no corpus distributions; trust deducts distributions, beneficiaries report income.

Complex trust: may accumulate income, make charitable contributions, or distribute corpus; taxed on undistributed income at compressed rates.

Trust/estate income tax rates: compressed brackets; 2024 top rate 37% reached at $15,200 for estates and trusts (single filer equivalent much higher).

Distributable net income (DNI): limits deduction for distributions and determines beneficiary income; includes taxable income plus adjustments.

Separate share rule: if trust has multiple beneficiaries, distributions are allocated among separate shares; each share computes its own DNI.

Throwback rule: accumulated income distributed in later year may be taxed to beneficiary with credit for trust taxes paid (complex trusts).

Estate/trust termination: final return filed; unused deductions may pass to beneficiaries; basis of distributed property carries over (except death step-up).

Estimated tax: trusts and estates must pay estimated tax; safe harbor rules apply similar to individuals.

Community property: property acquired during marriage while domiciled in California is community; separate property is property owned before marriage, acquired by gift/inheritance, or traced.

Community property with right of survivorship: California allows spouses to hold title with survivorship, avoiding probate; full step-up in basis for both halves.

Creditors of estate: must file claims within statutory period; secured creditors may enforce liens; family allowance and homestead may protect surviving spouse.

Trust creditors: settlor's creditors may reach revocable trust assets; irrevocable trust may be protected if not fraudulent transfer and settlor retains no control.

Attorney-client privilege: survives death; personal representative holds privilege for estate; exceptions for breach of duty or will contest.

Confidentiality: attorney must protect client information; may disclose to successor fiduciary or as required by law.

Ethical conflicts: attorney representing trustee and beneficiaries must disclose conflicts; may not represent both if interests adverse.

Unauthorized practice of law: non-attorneys (including financial advisors) may not draft legal documents or give legal advice.

Fiduciary accounting: California requires trustee to provide accountings; attorney may prepare but trustee responsible for accuracy.