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Living Trust Taxation FAQs

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During your life, you do not have to file an income tax return for your CalDocs living trust. You will continue to file all tax returns in the same manner you did prior to executing your living trust. When you die or if you become incapacitated, your successor trustee(s) will need to obtain a tax identification number for the trust and file tax returns, if applicable. Until then, the trust will use your social security number for banking purposes. In the case of a married couple, the husband's social security number is customarily used for the trust.

There are no estate or gift tax benefits available to a single person with a CalDocs trust package. The primary benefits of a CalDocs Living Trust Package for unmarried individuals are probate avoidance, guardianship planning, conservatorship avoidance, continuity of estate management, etc.

For married couples, we build-in provisions to allow a surviving spouse to elect a qualified disclaimer within nine (9) months after the death of the first spouse to die. If made properly, with the advice and consultation of a California estate planning attorney and CPA, this election can delay, reduce or eliminate estate taxes.

For more information on this subject, click on the FAQ's below. Show all answers

  • What are the estate tax considerations for married couples with a CalDocs living trust?

    For married couples, our "Declaration of Trust" has built-in provisions to allow a surviving spouse to elect a qualified disclaimer within nine (9) months after the death of the first spouse to die (the "Deceased Spouse"). If made properly, with the advice and consultation of a California estate planning attorney and CPA, this election can delay, reduce or eliminate estate taxes.

    Disclaimer Trust provisions provide a Surviving Spouse with the flexibility to analyze, with advice of counsel, the tax implications of executing a qualified disclaimer after the death of the first spouse. If necessary, the Surviving Spouse can create a Disclaimer Trust to utilize all or a portion of the Deceased Spouse's estate and gift tax exemption amount. The Surviving Spouse should make this decision with the advice of counsel, as the decision to elect or not elect to make a qualified disclaimer involves consideration of estate tax, gift tax, income tax and property tax issues as well as Medi-Cal planning and other personal considerations.

  • Is the CalDocs trust a so-called "A-B Trust"?

    We do not prepare an A-B Trust. While our "Disclaimer Trust" gives the Surviving Spouse an option to create a second trust to delay, reduce or eliminate estate taxes, a typical A-B Trust requires a predetermined mandatory split immediately upon the death of the first spouse to die. While the A-B Trust might be right for some families, we believe our customers are best served with the flexibility that our CalDocs disclaimer trust affords since there may be situations where splitting trust assets would not be desirable. For example, if a married couple has assets that are too small to warrant the creation of a second trust upon the death of the first spouse, an A-B Trust could result in additional and unnecessary administration and expense. Since California is a community property state and is also subject to Proposition 13 property tax rules, an A-B Trust might also create unintended negative property tax or income tax consequences that could be avoided with the use of our disclaimer trust.

  • What is the disadvantage of a Disclaimer Trust versus an A-B Trust?

    While disclaimer trust provisions provide a lot of flexibility, the primary disadvantage of a disclaimer trust versus an A-B Trust is that the surviving spouse MUST consult with an estate planning attorney or CPA and analyze the financial picture within a few months after the death of the first spouse since a "qualified disclaimer" MUST be executed within nine (9) months after the death of the first spouse. Failure to execute a qualified disclaimer within such nine (9) month time frame will result in a complete loss in the ability to make such disclaimer. This could result in catastrophic tax consequences to your heirs, particularly if you have a large estate.

    If you or your spouse are not responsible enough to seek tax advice from a professional after the death of one of you, a CalDocs trust package is not for you.

    In any case, the review of your estate plan and tax situation is a good idea after the death of a spouse. The cost of such a review should be minimal.

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