Tax Planning

Serving Families and Individuals in Thousand Oaks and Conejo Valley, CA


Taxation should always be a consideration when planning for your estate or any personal financial or business transactions. Some of the taxes which may need to be addressed (there may be others) are as follows:

Income Tax

We all pay personal income taxes based on income received. Income taxation may also occur upon a sale of an asset. During your lifetime, you report your income on a Federal form 1040 and California State form 540. After a death, income is generally reported on a Federal form 1041 and California State form 541.

Gift Tax

Generally, when you transfer an asset or assets to another and receive nothing in return, a gift is deemed to have occurred. This gift may or may not be subject to a Federal Gift Tax. Gifts up to a certain value amount made to a person during a calendar year are exempt from any gift tax. This is called the “Annual Gift Tax Exclusion”. There is also a lifetime gift tax exclusion that can apply to the aggregate of all lifetime taxable gifts thereby eliminating or reducing the gift tax payable.

Estate Tax

When you die, the assets you transfer to beneficiaries or heirs may be subject to a Federal Estate Tax. The good news is through recent laws there is now more than a $5 million exemption allowed per decedent. This is the highest exemption we have ever had. There is even more good news with the recent concept of “Portability”. Portability allows a surviving spouse to elect to use any of a deceased spouse’s unused Federal Estate Tax Exemption. This means that in many situations where one spouse predeceases the other, the surviving spouse can wind up with an Estate Tax Exemption of more than $10 Million!
Contact our office so we can meet to discuss this important issue.

What the above also means is that people who presently have an A-B Trust or A-B-C Trust can now rethink whether the mandate of a trust division is still necessary. Many A-B and A-B-C Trusts were drafted to make sure that each spouse’s Federal Estate Tax Exemption was used to its maximum extent. To accomplish this objective, a division into sub-trusts (creation of Trust A,B, or C) after the death of the first spouse was required. With the new law, the same estate tax savings may result but without the need for a complicated division of the trust. This can make life much simpler and easier for a surviving spouse.

Presently there is no California Estate or Inheritance Tax.

Property Tax

Each county assess a tax on the ownership of real property called a Property Tax. Further, transfers of an interest in real estate can trigger a reassessment of the property tax associated with that property. However, there are also exemptions from property tax reassessment for certain transfers of real property between or among certain persons or entities. If an exemption is applicable, generally there is not reassessment of the property for property tax purposes and the property tax base remains the same.

Sometimes people think it’s a great idea to add another person on the title to their house. Sometimes people think it’s a great idea to remove their name from title in favor of someone else. In reality, these “great ideas” with their simplicity, may turn out to be just the opposite with unintended results, such as loss of control and management, gifting and gift tax issues, property tax issues, and unexpected liability to potential creditors. There are a multitude of ramifications that can come into play in what seems to be a simple transfer and objective. We strongly suggest that you call us before entering into such title transfers.

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