Contact AACSC to stay informed on legal updates affecting property owners and estate planning strategies. Start with the basics: Power of Attorney, Health Care Directive, and a properly funded trust.
Planning Ahead or Paying the Price
For many property owners, estate and tax planning sit at the bottom of a long to-do list. But as attorneys Catalina Reynoso and Veronica Maldonado Usher reminded AACSC members in their recent seminar, procrastination in this area can carry staggering costs.
Without a plan in place, property owners expose themselves to two of the most burdensome legal processes in California: conservatorship during life and probate after death. Conservatorships — which take effect if you lose capacity without naming agents — are expensive, intrusive, and ongoing. A typical case might begin with $12,000 to $15,000 in fees, followed by mandatory court accountings every year or two that add thousands more. Probate, meanwhile, drags surviving families through a public and expensive court process. On a $2 million estate, statutory fees alone could reach $33,000 each for the attorney and the administrator — before factoring in court costs.
The good news? These outcomes are avoidable. And the first line of defense comes from two simple but powerful documents: a Durable Power of Attorney and an Advance Health Care Directive. By appointing trusted agents ahead of time, you can keep financial and medical decisions out of the courtroom.
Wills, Trusts, and the Problem of “Funding”
Many property owners assume a will is enough to settle their affairs, but wills go through probate and become public record. A revocable trust, on the other hand, can bypass probate entirely, preserve privacy, and allow owners to dictate how and when heirs receive their inheritance.
The catch? Trusts only work if they’re funded. That means re-titling deeds, transferring accounts, and making sure assets are actually governed by the trust. Without proper funding, a trust is, as the attorneys put it, “just an expensive piece of paper.”
For housing providers, trusts also offer an added layer of protection: California law since 2017 has sharply limited Medi-Cal recovery against assets in properly structured trusts.
Beyond the Basics: Entities and Advanced Tools
For those who own multiple buildings, limited liability companies (LLCs) can be powerful risk-management tools. By holding each property in a separate LLC, you can ring-fence liability — ensuring that a claim arising at one property doesn’t jeopardize the rest of your portfolio. Properly drafted operating agreements can also streamline succession planning and provide heirs with a roadmap for administration.
California’s Proposition 19 has made parent-child property tax exclusions far more limited, but entity planning remains an area where careful structuring can minimize reassessment risks. For larger estates, irrevocable trusts offer advanced solutions to remove appreciating assets from the taxable estate while safeguarding beneficiaries from creditors or divorce. These vehicles are powerful, but they are also permanent — requiring upfront design and careful consideration.
Coordination is Key
Every planning move has tax implications. Moving property into or out of an entity or trust can affect basis, depreciation, and capital gains. Gifts can be a smart way to reduce future estate tax exposure, but only if coordinated with legal and tax advisors to avoid triggering reassessments or losing step-up benefits.
Practical Lessons for Owners
The attorneys closed their session with a straightforward message: start with the living documents, fund your trust, consider entities where appropriate, and revisit your plan regularly. Major life events, new legislation, or property acquisitions should all trigger a review. Estate planning isn’t a one-time task — it’s an ongoing process that keeps your legacy secure.
