USA – CALIFORNIA Law and Practice Contributed by: Jennifer Jordan McCall, Ashley Huh and Matthew Perotti, Pillsbury Winthrop Shaw Pittman LLP
Parent–Child and Grandparent–Grandchild Exclusion California real property owners may avoid the prop - erty tax increases for certain transfers to children. However, after Proposition 19 passed in 2021, trans - fer exclusions between parents and family members became significantly limited. Following implementa - tion of Proposition 19, transfers of a primary residence between parents and children are exempt from reas - sessment, but only up to USD1 million of assessed value. In the case of transfers by trust qualify for the exclusion when beneficial ownership changes from parent to child. 2.6 Transfer of Assets: Vehicle and Planning Mechanisms California public policy is designed to prevent trusts from existing indefinitely to encourage money to be used and to circulate in commerce rather than remain in a trust. A California trust is subject to the Rule Against Perpetuities, and therefore exists for the lifespan of the youngest individual alive at the time the trust is established, plus an additional 21 years, which results in a trust duration of approximately 90 to 100 years. At the end of the period, the trust assets must be distributed and the trust ends. State laws differ regarding the permissible duration of an irrevocable trust, for example, Wyoming allows an irrevocable trust to last for 1,000 years, and in Delaware personal property may be held in trust indefinitely. California families often opt for Wyoming and Delaware trusts to take advantage of this, combined with zero state income tax rates there. 2.7 Transfer of Assets: Digital Assets Transfer of Digital Assets California and most states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) (2015), which applies to wills executed and trusts created before, on, or after 1 January 2017. Under the rules, a custodian of the digital asset may disclose information in a decedent’s (a “user’s”) account to the decedent’s fiduciary or settlor, in other words, the personal representative or trustee. The fiduciary has the right of access to any digital asset in which the decedent or settlor had an interest and is an authorised user. A digital assets is defined as an electronic record in which an individual has a right or
interest, and generally does not include the underlying asset or liability. The disclosure may include the con - tent or a catalogue of the user’s electronic commu - nications but does not include digital assets deleted by the user. A fiduciary, the custodian, or the ultimate recipient of the digital asset may obtain an order lim - iting the custodian from disclosing all or part of the decedent’s asset if the user directs it, or if it is pro - vided in a trust to limit disclosure. The fiduciary may request an in camera review of the digital asset. The fiduciary is subject to the same duties as are imposed on fiduciaries when they manage tangible property: the duty of care, duty of loyalty, and the duty of con - fidentiality. California does not explicitly address the transfer of cryptocurrency for purposes of succession. For detailed information see California Probate Code, Sections 870–884. 3. Trusts, Foundations and Similar Entities 3.1 Types of Trusts, Foundations or Similar Entities A wide variety of trusts are recognised and respected in California including revocable trusts, irrevocable trusts, and Foundations. In 2018, California enacted the California Uniform Trust Decanting Act (2018) (Cal - ifornia Probate Code, Section 19501), which allows trustees and authorised fiduciaries to modify the terms of certain California trusts without the consent of the beneficiaries, and of revocable trusts where revocation requires the consent of a trustee or third person with a right contrary to the interest of the sett - lor. Most California residents whose assets indicate the need for estate planning utilise a revocable trust, to avoid the need for probate which can be costly and burdensome. 3.2 Recognition of Trusts A wide variety of trusts are recognised and respected in California including revocable trusts, irrevocable trusts, and Foundations. In 2018, California enacted the California Uniform Trust Decanting Act (2018) (Cal - ifornia Probate Code, Section 19501), which allows trustees and authorised fiduciaries to modify the terms of certain California trusts without the consent of the beneficiaries (provided the beneficiaries receive
615 CHAMBERS.COM
Powered by FlippingBook