Estate Planning Guide: California

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    🌉 Estate Planning in California: Key Things Every Client Should Know

    California has unique probate rules, property laws, and tax considerations that make estate planning especially important. This guide explains what California residents should consider when planning their estates.

    1. No California Estate or Inheritance Tax

    California does not impose:

    • Estate tax

    • Inheritance tax

    • Gift tax

    Only the federal estate tax may apply—and only to very large estates.

    Even without state taxes, careful planning is essential due to California’s high property values, community-property laws, and expensive probate system.

    2. California Probate: Expensive and Time-Consuming

    California probate is known for being:

    • Lengthy (often 12–18 months or more)

    • Costly (attorney and executor fees are set by statute and based on the gross estate value)

    • Public (court filings become public record)

    Because of this, many CA residents choose to avoid probate using:

    • Revocable living trusts

    • Transfer-on-death deeds (TOD deeds) for real estate

    • Payable-on-death (POD) accounts

    • Joint ownership

    A trust is especially beneficial for homeowners given CA home values.

    3. California Community Property Rules

    California is a community property state, meaning:

    • Most property acquired during marriage belongs equally to both spouses.

    • Assets owned before marriage (or received individually as a gift/inheritance) are separate property.

    • Community property can receive a 100% step-up in basis at death—very important for tax planning.

    California also allows Community Property with Right of Survivorship, which avoids probate.

    4. Creating a Valid California Will

    A valid will in California must be:

    ✔️ In writing
    ✔️ Signed by the testator
    ✔️ Witnessed by two competent adults

    California also recognizes holographic (handwritten) wills, but they often cause confusion and probate delays.

    A will should specify:

    • Beneficiaries

    • Guardians for minor children

    • Executor (personal representative)

    • Specific gifts and instructions

    5. Revocable Living Trust (A Core Planning Tool in CA)

    A revocable living trust is the most common estate-planning tool in California because:

    • It avoids probate

    • It maintains privacy

    • It reduces cost and time after death

    • It manages assets during incapacity

    • It helps with blended-family planning

    • It makes it easier to manage real estate in multiple states

    Clients must also fund the trust by retitling assets or adding proper beneficiary designations.

    6. Durable Financial Power of Attorney

    This document allows someone to manage the client’s finances if they become incapacitated.

    A California POA can be:

    • Immediate or springing

    • Broad or limited

    • Customized to grant gifting authority, real estate authority, and trust powers

    Without a POA, families may need a court-ordered conservatorship, which is expensive and difficult.

    7. Advance Health Care Directive

    California uses one combined document that covers:

    • Healthcare power of attorney

    • Living will / end-of-life instructions

    • Organ donation choices

    Clients should name someone they trust to make medical decisions and document their wishes clearly.

    8. HIPAA Authorization

    Medical providers cannot release information without proper authorization.

    A separate HIPAA release ensures:

    • Agents

    • Trustees

    • Loved ones

    can obtain medical records when needed.

    9. California Real Estate Considerations

    California’s property rules deeply affect estate planning:

    • Prop 13: Limits property tax increases.

    • Prop 19 (New Rules): Impacts parent–child transfers; most transfers of property to children now do not keep the old tax base unless the child uses the home as a primary residence.

    • Transfer-on-death deeds: Useful for avoiding probate for real estate.

    • Trust ownership: Helps maintain control and avoid probate.

    For many families, planning around Prop 19 is critical.

    10. Planning for Long-Term Care & Medi-Cal

    Medi-Cal (California Medicaid) has:

    • A 30-month lookback period for assisted living waiver programs

    • A 5-year lookback for nursing home Medicaid

    • Strict asset rules

    • Recovery rules after death (estate recovery claims)

    Proper planning may include:

    • Irrevocable trusts

    • Spend-down strategies

    • Gifting with caution

    • Converting countable assets into exempt assets

    Avoiding probate with a living trust can help prevent Medi-Cal estate recovery in many situations.

    11. Beneficiary Designations

    Many assets pass outside the will or trust:

    • Retirement accounts (IRA, 401(k))

    • Life insurance

    • Annuities

    • Bank accounts with POD/TOD

    • Brokerage accounts with TOD

    These must be checked regularly—especially after major life changes.

    12. Digital Assets

    California law allows clients to grant fiduciaries access to:

    • Email and cloud storage

    • Digital photos and files

    • Cryptocurrency

    • Online banking

    • Social media

    • Subscription services

    These instructions should be placed in:

    • The will

    • Trust

    • Powers of attorney

    ✔️ Most California Clients Should Have:

    • Revocable Living Trust (highly recommended)

    • Pour-over Will

    • Durable Financial Power of Attorney

    • Advance Health Care Directive

    • HIPAA Authorization

    • Updated beneficiary designations

    • Trust funding documents

    • Additional trusts as needed (special needs, blended families, asset protection)