High-Net-Worth Estate Planning in California

High-Net-Worth Estate Planning in California

Most people who ask about high-net-worth planning expect a conversation about estate tax. For the large majority it is the wrong conversation. California repealed its own estate tax, and the federal exemption stands at $15 million per person in 2026. An estate of five or ten million is not a federal estate tax problem.

What it usually is: an estate concentrated in a small number of assets that cannot be divided evenly, cannot be sold quickly, are held through entities with their own rules, and will become a public record if they go through probate. Those four problems are worth real money to solve, and none of them are tax.

Concentration, and why equal is not the same as fair

When most of the value sits in one house, one ranch or one business, equal shares among children is the arrangement that most reliably produces a dispute. They want different things. One wants to keep the property, one wants cash, one wants out of the business without feeling shortchanged.

Leaving undivided shares looks even-handed and pushes the decision onto people who have just lost a parent, at the moment they are least able to negotiate with each other. The structures that work make the decision in advance: one child takes the asset and the others are equalized out of other property or insurance, or the trust directs a sale by a stated date, or a named child holds a defined option to buy at appraised value on terms already written down.

The right answer varies. What does not vary is that the owner should make it while they can.

Liquidity, which is a deadline problem

An estate that is almost entirely real property or a closely held business has value but no cash. If a federal estate tax return is due, it is due nine months after death and payable in money. If there are debts, administration costs or an equalizing payment to a sibling, those need funding too.

Without a plan, the asset the family most wanted to keep is the one sold under time pressure in whatever market exists that year. Solving it usually means arranging liquidity outside the estate, most often life insurance held in a way that keeps it out of the taxable estate, or deciding in advance which asset is the one that goes.

Entities, which quietly outrank your estate plan

Where property and businesses are held in LLCs, family partnerships or corporations, those governing documents contain transfer restrictions, consent requirements and buy-sell provisions. On death, they generally control what happens to the interest, and they beat the trust.

Two failures recur across every county I work in. A trust directs a transfer the operating agreement prohibits, producing a deadlock nobody finds until the death that triggers it. Or a buy-sell carries a price set years ago, a fixed figure or an untested formula, that hands a co-owner a valuable interest for a fraction of its worth.

There is a third, quieter one: a buy-sell obliging survivors to purchase the deceased owner’s interest with no funding behind it. The obligation is only worth the money available to honor it, and without insurance or a reserve the family ends up negotiating instead of being paid.

The fix is to read the estate plan and the entity documents side by side and amend the agreement, rather than drafting a trust around a document that will win anyway.

Privacy, which is often the actual reason

Probate is a public court proceeding. The inventory, the appraisals and the record of who received what sit in a file anyone can request. For families with recognizable names, visible businesses, or simply a preference for their affairs staying private, that is frequently the deciding factor rather than the fee.

A properly funded revocable trust keeps administration private. Nothing is filed, nothing is published, and the family deals with a trustee rather than a courtroom. The operative word again is funded. A trust drafted and never completed delivers the public proceeding it was bought to prevent.

Where tax does become the issue

For estates genuinely approaching the federal exemption, a few things matter. Portability is not automatic: unused exemption transfers to a surviving spouse only if a federal estate tax return is filed at the first death to elect it, and families skip that filing constantly because nothing appears to be owed. The cost lands at the second death.

Valuation discipline matters more than clever structures, particularly where interests are held in entities. Discounts for lack of control and lack of marketability are legitimate and well established, and they depend on the operating agreement genuinely restricting control and transfer, and on an appraisal that will hold up.

Planning that moves future appreciation out of the estate is generally more effective than trying to reduce what is already there. And none of it is worth doing for an estate comfortably below the exemption, which is most of the people who ask me about it.

Protecting what the next generation receives

One step gets overlooked because it costs nothing extra. A share left to a child outright is exposed to that child’s divorce, creditors and judgments from the moment it lands. The same share left in a properly drafted trust for that child is not.

For families passing substantial property to the next generation, that drafting choice is frequently worth more than any tax planning in the same document, and it is available at the outset for no additional fee.

Questions clients ask

Do we have an estate tax problem? Probably not. California has no estate tax and the federal exemption is $15 million per person in 2026. Most estates that feel large are concentration, liquidity, governance and privacy problems instead.

Our property is in LLCs. Does the trust control it? Only as far as the operating agreements allow. Transfer restrictions, consent requirements and buy-sell provisions generally control over the trust, so the two documents have to be read together and the agreement is usually the one needing amendment.

Most of the estate is one property and three children want different things. What works? Deciding in advance rather than leaving it to them. One child takes the asset with the others equalized from other property or insurance, or the trust directs a sale by a stated date, or a named child holds a defined option to buy at appraisal. Undivided equal shares is the arrangement that most reliably ends in conflict.

How would the estate pay a tax bill if everything is land? That is the liquidity question, and it needs answering in advance because federal estate tax is due nine months after death and payable in cash. The usual answers are insurance held outside the estate or deciding ahead of time which asset is sold.

Will any of this be public? Not if the trust is funded. Probate creates a public file including the inventory and the distributions. Trust administration does not. A trust that was never funded gives you the public proceeding anyway.

Can I protect what my children inherit? Yes, and it costs nothing extra to draft it that way. A share left in a properly drafted trust rather than outright can be shielded from that child’s divorce, creditors and judgments.

Talk to Eric or call 805-244-5291. I serve Ventura, Santa Barbara and Los Angeles counties.

For the foundation this all sits on, see living trusts in California. If federal exposure is the specific concern, see estate tax planning. For liability rather than transfer, see asset protection in California. If a business is part of the estate, see business succession.