Benefits for Escondido Small Businesses

I recently had a call with Vincent, the owner of a thriving local landscaping company. He’d meticulously crafted his estate plan five years ago, including a Living Trust. Unfortunately, his original documents were damaged in a recent flood, and his hastily scribbled codicil—attempting to add a new beneficiary—was deemed invalid due to improper witnessing. This oversight could cost his family tens of thousands in probate fees and significant delays. It’s a heartbreaking scenario, and one I see far too often, even among incredibly successful business owners.

What Happens If Your Trust Isn’t Properly Funded?

As an Estate Planning Attorney and CPA with over 35 years of experience here in Escondido, I’ve seen firsthand how critical proper trust funding is. Many people believe simply signing a trust document is enough. It’s not. Under California Probate Code § 15200, a trust is not valid unless it holds identifiable property; signing the trust document is only step one—you must legally transfer assets (funding) to the trustee for the trust to exist. This means retitling bank accounts, investment accounts, and—crucially—real estate into the name of the trust. We often find small business owners especially struggle with this because business assets require extra attention.

How Does a Revocable Trust Protect My Business?

A properly funded revocable trust allows for a seamless transition of ownership if you become incapacitated or pass away. Without it, your business could face significant disruption. Your successor trustee, named in the trust, can continue operations without court intervention. More importantly, the trust provides a private mechanism for transferring ownership, avoiding the public record of probate. This is a huge benefit for businesses that value discretion. It’s also important to understand that, unless the trust instrument expressly states otherwise, Probate Code § 15400 presumes that all California trusts are revocable by the settlor, allowing you to amend, revoke, or restate the trust at any time while you have capacity. This flexibility is vital in a dynamic business environment.

What About My LLC and Reporting Requirements?

Many of my clients are forming or already operate as Limited Liability Companies. There’s been a lot of confusion regarding Beneficial Ownership Information (BOI) reporting requirements. Thankfully, as of March 2025, domestic U.S. LLCs held in a living trust are exempt from mandatory BOI reporting; however, trustees managing foreign-registered entities must still file updates with FinCEN within 30 days. We help our clients navigate these complexities, ensuring compliance and minimizing potential penalties.

What Happens to My Business Assets Upon My Death?

Let’s consider a scenario where a business owner unexpectedly passes away without proper planning. Their business assets become subject to probate. This can freeze accounts, disrupt operations, and potentially lead to the forced sale of the business to satisfy debts or distribute assets to heirs. A trust, however, allows for a pre-determined succession plan, ensuring the business continues operating smoothly. The trust document can specify exactly how ownership will be transferred, whether to family members, existing partners, or a designated successor.

What if I Forget to Transfer an Asset Into My Trust?

It happens. Life gets busy, and sometimes assets slip through the cracks. For deaths on or after April 1, 2025, if a primary residence intended for the trust was accidentally left out (valued up to $750,000), it qualifies for a ‘Petition for Succession’ under AB 2016 (Probate Code § 13151). It’s essential to distinguish between the Small Estate Affidavit and AB 2016. We refer to this as a “Petition” (Judge’s Order), NOT an “Affidavit.” This provides a streamlined, court-supervised process to transfer the asset without a full probate. We always recommend a “safety net” review to identify any potential missed assets.

How Can My CPA Background Benefit My Business Estate Planning?

As a CPA, I bring a unique perspective to estate planning. I understand the tax implications of asset transfers, business valuations, and the importance of maximizing the step-up in basis for inherited assets. This can significantly reduce capital gains taxes for your heirs. Furthermore, the OBBBA permanently set the Federal Estate Tax Exemption to $15 million per person, effective Jan 1, 2026, meaning the primary focus of most Living Trusts is now avoiding probate and protecting privacy, rather than minimizing federal taxes. We help business owners structure their trusts to minimize tax liabilities and maximize the value of their legacy.

What About Digital Assets – Email, Websites, Social Media?

In today’s digital world, businesses often have significant value tied to their online presence. Without specific RUFADAA language (Probate Code § 870) in your trust, service providers like Apple, Google, and Coinbase can legally deny your successor trustee access to your digital photos, emails, and cryptocurrency. We help clients draft provisions that grant access to these critical digital assets, ensuring business continuity.

What About Transferring My Business Real Estate?

Transferring your commercial property into your revocable trust does not trigger reassessment under Proposition 13. However, the eventual distribution to your children will trigger a Prop 19 reassessment to current market value unless the child moves in as their primary residence within one year. We carefully analyze these implications and advise clients on strategies to minimize property tax burdens.

What failures trigger court intervention and contests in California trust administration?

California trusts are designed to bypass probate and maintain privacy, yet they often fail when assets are not properly funded, trustee duties are ignored, or ambiguous terms trigger disputes. Even with a signed trust document, families can face court battles if the “operations manual” of the trust isn’t followed strictly under the Probate Code.

Ultimately, the success of a trust depends on the details—proper funding, clear terms, and a trustee willing to follow the rules. By anticipating friction points and documenting every step of the administration, fiduciaries can protect the estate and themselves from liability.

Verified Authority on California Trust Law

• Trust Validity (Probate Code § 15200): California Probate Code § 15200
  The foundational statute confirming that a trust requires property to be valid. This is the legal basis for the “funding” requirement—without transferring assets (deeds, accounts) into the trust, the document is legally empty.
• Revocability Presumption (Probate Code § 15400): California Probate Code § 15400
  Confirms that California trusts are presumed revocable unless stated otherwise. This grants the settlor the flexibility to change beneficiaries, trustees, or terms as life circumstances evolve.
• Primary Residence Succession (AB 2016): California Probate Code § 13151 (Petition for Succession)
  Effective April 1, 2025, this statute acts as a backup for funding errors. If a home (up to $750,000) is left out of the trust, this Petition avoids a full probate administration.
• Property Tax Reassessment (Prop 19): California State Board of Equalization (Prop 19)
  Essential for all trust creators. While the trust avoids probate, it does not automatically avoid property tax increases for heirs. Specific planning is required to navigate the “primary residence” requirement for children.
• Estate Tax Exemption (OBBBA): IRS Estate Tax Guidelines
  Reflects the OBBBA permanent increase to a $15 million per person exemption (effective Jan 1, 2026). This shifts the planning focus for most Californians from tax avoidance to asset protection and probate avoidance.
• Digital Asset Access (RUFADAA): California Probate Code § 870 (RUFADAA)
  Without this statutory authority included in your trust, your digital legacy (crypto, social media, cloud storage) may be permanently locked away from your family by service providers.