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California estate outcome underscores tax benefit for children

We have chronicled a few estate-planning-gone-wrong stories linked with celebrities over the years in our blog posts at the Bay Area Law Offices of Connie Yi. Those tales underscore that fame and wealth don’t necessarily translate to seamlessly tailored and optimally effective planning outcomes.

Occasionally, though, the details spotlighted in a well-known individual’s estate plan prominently do convey a “things done right” approach. That is certainly true concerning news that is currently being reported concerning the estate plan crafted by actor Luke Perry.

Perry died unexpectedly at 52 earlier this year. A recent in-depth Forbes piece notes the “financially savvy” decision he made concerning the disposition of his home and related benefit he bestowed on his children through careful tax planning.

For starters, Perry placed his realty property into a revocable trust during his lifetime. When he passed, the estimated $2 million home transferred directly from the trust to his two kids outside of probate.

And then there was this: Perry’s children likely benefited materially from what Forbes describes as “a unique tax loophole in California.”

Namely, that benefit -- which was established back in 1986 via a state constitutional amendment -- provides for a distinct tax advantage conferred upon children who inherit real property from their parents.

In most cases, a person inheriting such property does so with a stepped-up basis pegged on that realty’s current tax value. So-called Proposition 58 sets forth a parent-child property tax exemption that enables children to inherit the parent’s property tax base. That provides for considerable savings in a case where a property has markedly increased its worth since it was purchased.

The Forbes writer lauds the exemption’s clear benefit. She also notes, though, that the rules surrounding it are complex and that “working with an attorney experienced with California property tax planning is the best way to ensure that this benefit is preserved [and] used to maximum benefit.”

A proven estate planning attorney with an integrated tax background can help ensure that it is.

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