High Net Worth Estate Planning California

High-Net-Worth Estate Planning Overview

High-net-worth California families — those with estates over $5 million — face a unique combination of challenges: federal estate tax exposure (for estates over $13.99 million), California's 13.3% income tax rate on investment income, Proposition 19's impact on inherited real estate, and the complexity of managing business interests, real estate portfolios, and investment accounts across generations. KDA coordinates with estate planning attorneys, financial advisors, and family offices to provide comprehensive tax planning for high-net-worth families.

Estate Tax Planning

For estates approaching or exceeding the $13.99 million exemption, KDA works with estate planning attorneys on: (1) Irrevocable trust strategies — GRATs, SLATs, IDGTs, and ILITs to transfer wealth out of the estate. (2) Annual gifting programs — systematic use of the $18,000 annual exclusion and direct tuition/medical payments. (3) Business interest discounts — using FLPs and LLCs to apply valuation discounts to business interests. (4) Charitable planning — CRTs, CLTs, and donor-advised funds to reduce the taxable estate while achieving philanthropic goals.

Income Tax Planning

California's 13.3% top income tax rate makes income tax planning as important as estate tax planning for high-net-worth families. KDA's income tax strategies: (1) PTET election — California's Pass-Through Entity Tax allows S corp and partnership owners to deduct California income taxes at the entity level, effectively circumventing the SALT cap. (2) Opportunity Zone investments — defer and potentially reduce capital gains by investing in Qualified Opportunity Zones. (3) Tax-loss harvesting — systematic realization of capital losses to offset gains. (4) Roth conversions — convert traditional IRA funds to Roth in lower-income years to reduce future RMDs and estate tax.

Asset Protection

High-net-worth individuals in high-liability professions (physicians, attorneys, real estate developers) need asset protection planning in addition to estate planning. KDA works with attorneys on: (1) Entity structuring — holding assets in LLCs and corporations to limit personal liability. (2) Irrevocable trusts — removing assets from the grantor's reach before creditor claims arise. (3) Retirement accounts — IRAs and qualified retirement plans have significant creditor protection under California law. (4) Homestead exemption — California's homestead exemption protects up to $626,400 of home equity from creditors.

Charitable Planning

High-net-worth families often have significant philanthropic goals. KDA's charitable planning strategies: (1) Donor-Advised Funds (DAFs) — contribute appreciated assets to a DAF for an immediate deduction; recommend grants to charities over time. (2) Charitable Remainder Trusts (CRTs) — receive income for life while making a charitable gift. (3) Charitable Lead Trusts (CLTs) — pay income to charity for a term, with the remainder passing to heirs. (4) Private foundations — for families with significant philanthropic goals who want control over grant-making. (5) Qualified Charitable Distributions (QCDs) — direct IRA distributions to charity, satisfying RMDs without income tax.

California-Specific Strategies

California-specific strategies for high-net-worth families: (1) PTET election — the California Pass-Through Entity Tax is one of the most valuable planning tools for California business owners. (2) Prop 19 planning — proactive planning to minimize property tax reassessment on inherited real estate. (3) Residency planning — for families considering leaving California, careful documentation of the residency change to avoid FTB residency audits. (4) California community property — proper titling of assets to preserve the double step-up in basis. KDA provides comprehensive California-specific tax planning as part of every high-net-worth engagement.