USA – CALIFORNIA Law and Practice Contributed by: Jennifer J. McCall, Matthew Perotti and Ashley E. Huh, Pillsbury Winthrop Shaw Pittman LLP
Interest‑Rate “Hurdles” Tied to the Section 7520 Rate These rates influence whether certain planning tech- niques – such as Grantor Retained Annuity Trusts (GRATs) – are advantageous. A favourable Section 7520 rate can make these structures more appealing. Basis Rules Affecting Lifetime Gifts A donee of a lifetime gift generally receives a carryover basis, whereas assets transferred at death typically receive a step‑up in basis. These income‑tax implica- tions may influence whether individuals prefer making lifetime gifts or relying on testamentary transfers. State‑Level Estate or Inheritance Taxes A minority of states impose their own estate or inherit- ance taxes, often with exemptions far lower than the federal exclusion. This can significantly affect both the timing and structure of transfers, as well as the use of trusts to manage exposure to state‑level “death taxes”. The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) governs access to digital assets. Most states have enacted RUFADAA, which establishes default rules specifying when a fiduciary may access the digital assets of an account holder. In general, if the account holder grants authorisation within their estate‑planning documents, the fiduciary is permitted to access the account. Cryptocurrency presents unique challenges due to its reliance on private keys. Access to these assets is typically governed by the custodian’s account terms and internal security procedures, rather than by tradi- tional mechanisms alone. 7.2 Planning Considerations The holder of the account should identify all relevant accounts and devices where digital assets are stored, along with the practical steps needed to access them. The platform’s online tools should be used whenever possible and co-ordinated with the overall estate plan. Estate planning documents should also clearly specify 7. Succession of Digital Assets 7.1 Legal Framework
the individual who is granted the authority to access and manage these digital assets. For cryptocurrency, the estate plan should include detailed instructions for key recovery and secure stor- age solutions. Most states have adopted RUFADAA‑style statutes, or are currently in the process of doing so. As a result, fiduciary access to digital assets has become more uniform under RUFADAA.
8. Family Business Succession Planning 8.1 Succession Strategies
A common strategy for family business succession planning is to form a closely held entity (eg, a limited liability company, family limited partnership, or an S corporation) as a means of separating control from economic ownership. Interests in a family company can also be owned by a trust rather than by individual family members. The trust may be a living (revocable) trust or an irrevocable trust. Depending on how the trust is structured, the owner of the family business can retain complete or limited control over the trust during their lifetime. The primary advantage of holding family business interests in one or more trusts is that the trust struc- ture governs how the company will be passed on upon the owner’s death and typically helps ensure that ownership remains within the family. Additionally, trusts can provide substantial protection from credi- tors, since the trust – not the individual who transfers property into it – legally owns the assets. Valuation discounts may also be available when trans- ferring non-voting interests, because such interests lack control and are not readily marketable. This can reduce the taxable value of the transferred interests for transfer tax purposes. 8.2 Legal and Tax Considerations LLCs, limited partnerships, and corporations are organised and governed under state law, and their
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