CA CLS Estate Planning common mistakes
CA CLS Estate Planning · Understand the traps and how to avoid them.
Applying the federal estate tax exclusion amount to California probate matters and telling a client a small estate owes 'estate tax' when the question turns on the California probate threshold or the $184,500 small estate affidavit limit rather than the federal exclusion.
Candidates memorize the large federal exclusion figure and reflexively apply it to every 'estate tax' question, conflating federal transfer tax with California probate administration thresholds and the separate California-only filing requirements.
What to do instead
Before computing any tax, classify the question: is it federal transfer tax (IRC chapter 11/12/13), California probate administration (Probate Code thresholds and the small estate affidavit), or California income tax? Write the governing authority next to the number before doing arithmetic.
Treating all property titled in the decedent's name as probate property, ignoring will substitutes such as revocable trust funding, POD/TOD designations, joint tenancy, and beneficiary designations, and thereby overstating the probate estate and misidentifying who takes.
The fact pattern lists assets in a schedule and candidates default to 'everything in the schedule goes through probate,' forgetting that the question tests nonprobate transfer mechanics and the pour-over will.
What to do instead
For each asset, ask three questions in order: how is it titled, who is the named beneficiary, and does a governing instrument control? Build a two-column table (probate vs. nonprobate) before answering any distribution or tax question.
Misapplying California intestate succession by giving the entire estate to the surviving spouse, or by ignoring the community property/separate property split and the one-half-plus-one-half rules for parents, siblings, and issue of different relationships.
Candidates carry over the 'spouse takes all' intuition from other states or from simplified summaries, and California's Probate Code shares the estate between spouse and other heirs depending on the property's character and which relatives survive.
What to do instead
Memorize the structure: identify the character of the property first (community vs. quasi-community vs. separate), then the surviving relatives, then apply the statutory share. Practice with fact patterns where parents survive, where there are children from different relationships, and where there is no issue.
Conflating the fiduciary duties of loyalty, impartiality, and prudent administration, and failing to spot a breach when a trustee favors one beneficiary, self-deals, or fails to diversify, instead answering only that the trustee 'acted reasonably.'
The duty labels sound interchangeable, and candidates answer at the level of general fairness rather than naming the specific duty breached, the standard applied, and the remedy (surcharge, removal, accountings).
What to do instead
For trust administration questions, run a checklist: duty of loyalty (no self-dealing, no conflicts), duty of impartiality (balance income vs. remainder), duty of prudence (portfolio as a whole, diversification, costs), duty to inform and account. Name the duty, the conduct, and the consequence in that order.
Ignoring the community property presumption and tracing rules, and treating property acquired during marriage as automatically separate or automatically community without addressing title, source of funds, and the effect of a valid transmutation agreement.
Candidates know the general community property rule but skip the presumption analysis and the tracing of separate funds, which is where most of the points in these questions sit.
What to do instead
Apply the sequence: presumption from date of acquisition and title, then tracing of separate source funds, then any written transmutation under the Family Code. State which presumption applies and who bears the burden before concluding.
Missing the income taxation layer of estates and trusts, such as the separate taxable entity rules, distributable net income, the distribution deduction, and the tier system, and instead analyzing only transfer tax consequences.
Candidates compartmentalize transfer tax and income tax and, once they see a death or a trust, stop looking for the income tax question embedded in the same facts.
What to do instead
After resolving the transfer tax issue, ask whether the estate or trust is a separate taxpayer, what its distributable net income is, which distributions carry out income, and who reports it. Practice computing DNI and the distribution deduction on small fact patterns.
Drafting or evaluating a will without checking execution formalities and the interaction with a later instrument, such as failing to note the two-witness requirement, the effect of a subsequent codicil, or the doctrine of dependent relative revocation.
Candidates focus on the dispositive scheme and skip the formalities and revocation analysis, which are frequently the actual tested issue.
What to do instead
For every wills question, verify: testamentary capacity, intent, signature, two witnesses present at the same time, and no interested-witness problem. Then check for revocation by later instrument, physical act, or operation of law, and whether revival applies.
Treating the client counseling phase as a formality and failing to identify conflicts of interest, joint representation problems, capacity concerns, or the need for engagement letters and confidentiality protections when spouses or multiple family members are involved.
Candidates see counseling questions as soft and answer with generalities about 'good communication' rather than applying the rules on conflicts, informed consent, and diminished capacity.
What to do instead
Frame counseling questions around the specific rule: who is the client, is there a current or potential conflict, has informed consent been obtained, and what documentation is required. Address capacity with the legal standard and contemporaneous evidence.
Overlooking creditor and ethics issues in planning, such as fraudulent transfer exposure when assets are retitled, the limits of spendthrift protection, the effect of a beneficiary's bankruptcy, and the prohibition on assisting a client in a fraud or drafting an instrument that defeats a known creditor.
Candidates focus on tax minimization and forget that the same transfer can be attacked by creditors or run afoul of professional responsibility rules.
What to do instead
For every transfer or trust design, ask: who are the known creditors, is the transfer for less than fair value, is the settlor retaining beneficial enjoyment, and does the arrangement depend on a misrepresentation? Flag the ethics rule implicated before recommending the structure.
Answering probate administration questions without addressing the procedural sequence, such as the difference between formal and summary administration, the role and priority of the personal representative, creditor claim periods, and the final distribution and accounting steps.
Candidates know the substantive distribution rules but not the procedural machinery, so they give a correct-sounding but incomplete answer that misses the tested step.
What to do instead
Memorize the probate timeline as a sequence: petition and appointment, notice to creditors and the claim period, inventory and appraisals, allowance and accountings, final distribution, and discharge. When a question asks 'what happens next,' locate the fact pattern on that timeline before answering.