USA – CALIFORNIA Law and Practice Contributed by: Jennifer Jordan McCall, Matthew Perotti, Maria Williams and Alexandria Marx, Pillsbury Winthrop Shaw Pittman LLP
3.2 Recognition of Trusts Trusts often used in California for estate and tax plan - ning purposes include intentionally defective grantor trusts (IDGT), a qualified personal residence trust (QPRT), a grantor retained annuity trust (GRAT) and a spousal lifetime access trust (SLAT). 3.3 Taxation of Trusts, Foundations and Similar Entities Located in Other Jurisdictions California imposes an income tax on a trust where a trustee or non-contingent beneficiary is a resident of California. (Cal. Code Regs Tit. 18, Section 17744.) Thus, for settlors who do not reside in California, care is often taken to ensure the fiduciary is not a resident of California. Conversely, California resident settlors often establish non-grantor trusts in other states, such as Wyoming or Delaware, to take advantage of the zero income tax rate in those states on the income of the trust. Similarly, planning may be done, with an experienced California tax advice, for a business owner to relocate to another state prior to the sale of a business. 3.4 Tax Consequences of Fiduciary and Beneficiary Roles California does not currently impose a separate estate tax filing requirement for decedents dying on or after 1 January 2005, and its GST tax does not apply to trans - fers after 31 December 2004, so the state’s planning generally focuses on federal transfer tax and income tax consequences. Trust income used to satisfy a sett - lor’s legal support obligation can be taxable to the settlor to that extent under the federal grantor trust rules. A beneficiary may serve as trustee, but tax issues arise if the beneficiary can make distributions to him - self or herself. Such unlimited distribution power may subject the beneficiary to estate tax (while California has no estate tax, the threshold under the One Big Beautiful Bill is USD15 million per individual, or USD30 million per married couple). This is commonly avoided by limiting distributions to health, education, mainte - nance and support, or by requiring an independent co-trustee to make discretionary distributions to the beneficiary.
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 asset 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 (provided the beneficiaries receive notice of the decanting and have an opportunity to object), and of revocable trusts where revocation requires the consent of a trustee or third person with a right contrary to the interest of the settlor. 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.
728 CHAMBERS.COM
Powered by FlippingBook