Client: “How does my California family trust work?”

Estate size: ~$40M, all community property

Me: “Your CA family trust sets up 3 trusts after first spouse dies. Here’s how each trust would be funded under current tax law:

Trust A: gets ~$20M. That’s 1/2 of your ~$40M worth of community property.

Trust B: gets ~$11.7M. That’s the maximum amount you can pass free of estate tax to your heirs in 2021 under current tax law. This is referred to as the estate tax exemption or estate tax ‘coupon.’

Trust C: gets what’s left. $40M minus $20M minus $11.7M = ~$8.3M.

That’s the math of a (very) typical A-B-C trust set-up.

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Disclaimer: For information purposes only and should not be interpreted as legal, tax or financial advice. Always consult your CPA/tax advisor/attorney (or reach out to us;) to discuss your specific situation.