estate planning tips

Do you have an Estate Plan and/or a Living Trust? Have you put plans in place for who controls your assets after you pass? Do you know what a Durable Power of Attorney for Asset Management is? Do you have one? Is it up to date? If you do, are the documents current?

Do you have an Advance care directive? It is recommended you do. It names an agent to make medical decisions for you in the event of incapacity. And sets in place your wishes about certain health care issues. Such as nutrition and hydration as life sustaining treatment, pain relief, nursing home care and organ donation just to name a few. You may also have heard this called the five wishes.

Below, you will find helpful information that can help guide you as you take the first steps to create these things.


Durable Power of Attorney for Asset Management
Names an agent to manage your financial affairs.

  • What assets can an agent under a DPOA control?
  • Should the document be effective immediately or only on incapacity (springing)? If effective only on incapacity, how is incapacity determined?
  • How is the agent to be compensated? What does the document say?
  • In choosing an agent, consider the person's ability to manage - paperwork and tax reporting.

Living Trust
Akin to a business entity which owns the assets and includes terms governing their management.

  • Who should be the trustee? Are cotrustees advisable? How is capacity determined?
  • The trustee only has authority over trust assets; the agent under the power of attorney has authority over non-trust assets.

Advance Health Care Directive
Names an agent to make medical decisions for you in the event of incapacity, and allows you to specify how you feel about certain health care issues.

  • Personalize your Directive.
  • Issues to think about:
    • nutrition and hydration as life sustaining treatment
    • pain relief
    • nursing home care
    • organ donation
    • pick an agent whose attitudes are similar to yours

Process by which the court appoints a person to manage the financial and/or personal affairs of an incapacitated individual.

  • Usually only needed if no estate planning documents are in place or there is physical or financial abuse
  • Court supervised
  • Expensive
  • Intestacy - if no estate planning documents, assets without a surviving joint tenant or designated beneficiary go to next of kin per state statute
  • Wills - court supervised probate proceedings required if a decedent's assets exceed $184,500 in value ( excluding assets passing by beneficiary designations; assets held in joint tenancy with right of survivorship; anything held in trust; and anything registered with the Department of Motor Vehicles)
  • Living Trust - if properly funded, avoids probate, but not administration Living Trusts are not self executing.
  • Beneficiary Designations - supersede the provisions in a will or trust.
  • Usually best not to name a trust as the beneficiary on tax deferred accounts.
  • Who should Inherit and Bow - Special Considerations
    • At what age should young beneficiaries inherit?
    • Are there any beneficiaries with special needs? You may jeopardize their public benefits.
    • Blended families: Do your estate planning documents allow the surviving spouse to change the ultimate distribution of your estate? Is that desired?
    • Do your designated fiduciaries (agents, trustees, executors) get along with all interested persons?
    • Is separate property adequately identified?
    • Are there items of tangible personal property with sentimental significance to specifically address?
  • Estate Taxes
    • Applicable Exclusion Amount - currently, there is a $10 million per person estate tax exclusion amount, indexed for inflation, resulting in an exclusion of $12.06 million for those dying in 2022. There is a sunset provision in the tax act which may result in a reduction of the exemption to about $6.S million in 2026.
    • Unlimited Marital Deduction - there is no gift or estate tax on outright transfers between spouses.
    • Bypass/Exemption Trust - vehicle included in the estate plan of a married couple which makes use of the estate tax exclusion of the first spouse to die, and protects that person's intended beneficiaries. Often no longer be necessary with the ''portability'' rules, now about ten years old. A Bypass Trust (also known as an Exemption Trust, Tax Shelter Trust, etc.) is irrevocable and a separate tax paying entity. The remainder beneficiaries are entitled to monitor how the funds are invested and spent. The Bypass Trust can be mandatory or elective. An elective Bypass Trust is typically called a Disclaimer Trust. Bypass Trusts which are no longer needed can sometimes be terminated by court order.
    • Gifting to Reduce the Taxable Estate - a maximum of $16,000 per person, per recipient, per calendar year may be gifted free of estate and gift tax, and without having to file a federal gift tax return. The recipient need not be a family member. Non-cash gifts are allowed.
  • Income Taxes
  • Stepped Up Income Tax Basis on Death - any inheritance of appreciated property ( e.g. real estate, stock) will receive a new income tax basis equal to its date of death value.
  • Tax on Deferred Income - a surviving spouse is the only one who can "roll-over'' an IRA or qualified retirement plan. The general rule is that a non-spouse beneficiary of an Individual Retirement Account or qualified retirement plan can withdraw the balance over ten years.
  • Life Insurance is not subject to income taxes (but is part of your taxable estate for estate tax purposes). Annuities typically do have a taxable component.
  • Court supervised administration of your estate which results in a court order dictating distribution.
  • In California, required for all estates of decedents exceeding $184,500, excluding the value of assets with beneficiary designations, assets held in joint tenancy with right of survivorship, assets held in trust, motor vehicles registered with the DMV, and assets passing to a surviving spouse.
  • Cost - attorney's fees and executor's commission are based on the value of the probate estate
    • 4% of the first $100,000
    • 3% of the next $100,000
    • 2% of the next $800,000
    • 1% of the next $9,000,000
    • .5% of the next $15,000,000
  • Time (in Alameda County) - typically twelve to fifteen months for a simple estate; longer where tax issues must be resolved, property must be sold, etc.


  • Lifetime Gifts to Non-Profit Organizations
    • The deductibility of a gift to charity will depend on your personal situation
    • As a general rule, gifts of property with unrealized capital gain are deductible at their fair market value at the date of contribution, so best to donate in kind and let the charity sell to avoid capital gains tax.
    • Individuals age 70 ½ and older can transfer up to $100,000 each year tax free from their IRAs to certain charitable organizations (not including Donor Advised Funds) without including the distribution in gross income. That is, an IRA owner can avoid paying income tax on distributions made directly to charity, in effect a 100% charitable deduction. One of the key benefits of the direct charitable contribution from your IRA is that the distribution counts towards your Required Minimum Distribution (RMD).
  • Charitable Gifts Made at Death
    • Charitable gifts made pursuant to the tenns of a Will or Living Trust do not entitle the decedent's estate to an income tax deduction.
    • An unlimited estate and gift tax charitable deduction is available for transfers to federal, state, and local governmental entities; charitable organizations; fraternal societies; and veterans' organizations.
    • *Gifts to charities may be provided for in Wills and Living Trusts, and using beneficiary designations. It is advisable to contact the charity directly to determine the formal name of the charity, its taxpayer identification number, whether the charity will accept the proposed gift, and in what form.
    • Gifts to charity typically take one of the following forms: (a) a percentage of the estate; (b) a dollar amount; or ( c) specific property.
    • When charities are designated as beneficiaries of tax deferred retirement accounts, the payment of income taxes is avoided.
  • Charitable Gift Annuity - A charitable gift annuity is a contractual arrangement whereby an asset ( e.g. low basis stock to avoid capital gains tax) is given to charity in exchange for the charity's promise to pay a beneficiary .XU/o per year for life or a term of years. The donor receives a charitable income tax deduction for the difference between the value of the property given and the present value of the annuity received.
  • Charitable Remainder Trust - A charitable remainder trust is an irrevocable split interest trust (i.e. benefits are split between individuals and charities) which pays a percentage of trust principal to named individuals and then distributes what is left when the trust terminates, the "remainder," to charity. CRTs are typically funded with appreciated assets to avoid the payment of capital gains tax on sale. The donor receives a tax deduction at the time the trust is funded as an irrevocable gift to charity has been made. That is, there is a double tax leverage in the avoidance of the recognition of capital gain and creation of an immediate charitable income tax deduction. The deduction is not for the full value transferred to the trust given the individuals' retained interest.
  • Donor Advised Funds - Donor Advised Funds are charitable subaccounts that donors establish within a larger community foundation or other public charity. A DAF allows a donor to make contributions now and to take a charitable income tax deduction in the year of the contribution even though the actual distribution to the charities may be made in future years. Usually, the donor directs how the monies are to be donated each year. The OAF constitutes a completed gift for estate and income tax purposes.

CAVEAT: The above outline is based on today's tax laws and is most definitely subject to change.




The information on this page was provided by Elizabeth (Beth) E. Trutner who is Certified Specialist, Estate Planning, Trust and Probate Law, the State Bar of California Board of Legal Specialization since 1995.

Click here if you would like to contact Beth