Real Life
Elaine's husband died twenty-five years ago. They had a living trust with an A/B provision. After he died, she followed the terms of the trust and split the assets between the bypass trust and the survivor's trust. She put $20k of Apple stock in the bypass trust.
When Elaine died last year, that Apple stock was worth over $5 million. Her kids needed cash, so they sold it. And they were hit with roughly a 35% combined federal and California capital gains tax.
When the estate tax law changed, Elaine may have been able to transfer the Apple stock from the bypass trust to the survivor's trust, and it would have received a full step-up in basis at her death. Her kids could have sold it for zero capital gain.
She didn't know this was an option. The bypass trust was designed to save estate taxes under the old law. But with today's $15 million estate tax exemption, most families don't need it. And keeping assets locked in the bypass trust can cost your kids a fortune in capital gains taxes.
Quick Hits
If your estate is under $10 million and you don't have a complicated family or complicated assets, you probably don't need a complicated estate plan. Unless, of course, you want to complicate it.
Sullivan & Cromwell, one of the most prestigious law firms in the country, recently apologized to a bankruptcy court for AI hallucinations in a filing for Prince Global Holdings. Fabricated citations. Misquoted laws. Nonexistent sources. Opposing counsel found them. The firm filed a corrected motion and a letter to the judge acknowledging the errors. Sullivan & Cromwell partners charge over $2,000 an hour.
Yikes. And you were nervous about AI rewriting your email.
If you can afford it, paying off your kids' student loans or helping them with a down payment will help them more than an inheritance when they are in their 60s.
A few weeks ago, it rained so hard, I had Claude Cowork walk my dogs.
California's new law, AB 2016, is not a good alternative to a living trust. It may cost more money and will certainly cause more stress than getting a living trust.
Get rich quick by estate planning rarely works, but sometimes ... If you leave your estate to your girlfriend instead of your kids, you'd better tell her to be ready for a lawsuit.
The sun looks down on nothing half so good as a household laughing together over a meal, or two friends talking over a pint of beer, or a man alone reading a book that interests him.
C.S. Lewis, The Weight of Glory
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