California Estate Planning Blog by Kevin Staker

January 16, 2019

Consider Modifying a “Bypass” Trust So It No Longer Bypasses the Estate Tax and So Get a Step Up in Income Tax Basis by Kevin Staker

Filed under: estate tax,Kevin Staker,Uncategorized — Kevin Staker @ 8:47 am

A “Bypass Trust” is commonly set up at the death of the first spouse to receive the share of the trust assets of the deceased spouse to pass away.  Such trusts are also called such names as Exemption, Decedent’s, or Credit Shelter Trust.  Many of these trusts were set up when the estate tax exemption was much lower than our present $11,140,000 and made a lot of sense then.  The assets were held in trust usually for the benefit of the surviving spouse but then escaped estate tax at his or her passing because the surviving did not have any power of the trust that would make it includible in his or her estate for estate tax purposes.

The surviving spouse could even be the trustee if he or she could only take out what he or she need for “health, education, maintenance and support”.  This is the so called “ascertainable standard” of Internal Revenue Code Section 2041(b)(1)(A).  This restriction paired with the restriction also in Section 2041(b)(1) that the surviving spouse not have the power to appoint trust assets in favor of himself/herself, his or her estate, his creditors, or the creditors of his or her estate make the bypass trust escape not includible in the taxable estate of the surviving spouse for estate tax purposes.  

That exclusion make a lot of sense when the estate tax exemption was only $600,000 or even $1,000,000.  The assets of many couples exceeds such amounts today.  However, it does not make sense when their assets total less than $5,600,000, the eventual estate tax exemption when the exemption goes back down under the present law in 2026 or if Congress and the President lower it before then.

The reason for the estate taxation exclusion not making sense for most surviving spouses is that the escape from estate tax also makes the assets not receive the typical step up in income tax basis at the passing of the surviving spouse.  See IRC Section 1014(b).  Many of these trusts have highly appreciated assets.  The remainder beneficiaries will be taxed on such capital gain if the trust or they sell any of such assets after the passing of the surviving spouse.

The typical amendment is to give the surviving spouse the power to appoint bypass trust assets to the creditors of his or her estate.  This power would then qualify as a “general power of appointment” under IRC section 2041(b)(1) and so would make the bypass trust assets included in the taxable estate of the surviving spouse.

Notwithstanding, a bypass trust can be amended in all states.  It will likely require court approval, but the expense of such will likely pale in comparison to the income from capital gain to be saved by the remainder beneficiaries.

Another advantage of going to court is the court may allow the termination of such trust.  Hence, the surviving spouse will no longer need to file an annual income tax return for such trust.  The surviving spouse also would no longer  need to worry about getting the bulk of the income out of such trust each year.  Such trust gets into the highest 37 percent income tax bracket at only $12,000 of taxable income.  The surviving spouse gets into the top bracket at $500,000 of taxable income.  Most surviving spouses are in a lower bracket and so has to remember distribute the income out of the trust each year to shift taxation to herself/himself.

In conclusion, all surviving spouses with a bypass trust should take a look at their situation to see if terminating or at least modifying the trust.  StakerLaw would be honored to assist if the surviving spouse resides in California.

By Kevin Staker

December 26, 2018

Ventura County Star Recognizes Camarillo Living Trust Attorney Staker receives countywide honor

Camarillo attorney receives countywide honor

The article states:

Camarillo attorney Kevin G. Staker received the Ventura County Bar Association’s Ben E. Nordman Public Service Award on Nov. 17.

The honor goes to highly regarded attorneys who value service not only to their clients but also to the community.

Staker is a three-time member of the board of the Ventura County Bar Association and was chairman of its annual dinner for 14 years. He has served as a past president of Ventura County Legal Aid and serves as a judge pro tem in Ventura County Probate Court.

He has volunteered with the Boy Scouts of America for more than 30 years and chaired Helping Hands, an organization of volunteers dedicated to improving their local community.

He has practiced trust and probate law in Ventura County for 37 years and is the principal attorney at StakerLaw Tax and Estate Planning. He is also a mediator in probate and trust disputes.

The Ventura County Star Article is found at :


November 30, 2018

Kevin Staker is Recipient of 2018 Ben E. Nordman Award for Public Service

Filed under: Kevin Staker — Kevin Staker @ 1:17 pm

Local Lawyer Selected for Public Service Award


Ventura, California.  Camarillo attorney Kevin G. Staker has been named by the Ventura County Bar Association as this year’s recipient of the Ben E. Nordman Public Service Award.    This award is bestowed on highly regarded attorneys in Ventura County who value service not only to their clients but also to the community as a whole.  The award has been given since 1986 and each and every recipient has improved the quality of life in Ventura County@ said Steve Henderson, the association=s CEO.

The honor recognizes Staker’s 30-plus years commitment to public service in Ventura County.  Staker is a three-time member of the Board of the Ventura County Bar Association and was the chairman of its annual dinner for 14 years.  He has served as a past President of Ventura County Legal Aid, Inc. a volunteer organization that provides free legal services to low-income individuals.

In addition to his work within the legal community, Staker has volunteered with the Boy Scouts of America for over 30 years, serving as a scout leader and merit badge counselor.  As part of his service with the Church of Jesus Christ of Latter Day Saints, he was chairman of Helping Hands, an organization of volunteers dedicated to improving their local community.  During his three years as chairman, Staker coordinated over 450 volunteers in completing service projects  benefitting local charities such as R.A.I.N, Casa Pacifica, FoodShare, The Boys and Girls Club, and Pleasant Valley Recreation and Park District.

Staker has practiced trust and probate law in Ventura County for 37 years.  He is the principal attorney at StakerLaw Tax and Estate Planning Law Corporation in Camarillo.  He is also a mediator in probate and trust disputes.

Said Bar President Mark Kirwin, “Kevin has been an important and critical reason for the success of the bar association and its affiliated organizations.”  Staker received the award on November 17 at the bar association’s annual installation and awards dinner.

April 9, 2018

How Home Can Go to One Child and Keep Proposition 13 Low Property Taxes by Kevin Staker

Filed under: Kevin Staker — Kevin Staker @ 2:47 pm

One way to have home to one child and buy out another is for trust to borrow money secured against the home.  One child gets cash and other child gets home subject to the loan.  Difficult because the third party loan is expensive (at least 4 points).

Two other methods, which involve a right of first refusal.

  1.  Trust gives one child a “right of first refusal”.  In California State Board of Equalization Letter 625.0233 dated August 19, 2013, the BOE states if the Trust gives one child the right to buy the home from the Trust, the purchase qualifies as a parent to child transfer.  Hence, the property taxes remain the same because of Propostion 58.  This occurs even if though it is a purchase and sale.
  2. The trust instrument gives one child the right to include the trust property as part of his or her share, if he or she provides enough cash and assets to the other child(ren) to equalize the distribution distributions from the trust.  See California State Board of Equalization Letter 625.0235.025 dated February 22, 2010.

Hence, we have some alternatives to the expensive loan to the trust option.

By Kevin Staker

March 7, 2018

IRS Announces Estate and Gift Tax Exemptions for 2018 by Kevin Staker

Filed under: Uncategorized — Kevin Staker @ 9:24 am

IRS Announces Estate and Gift Tax Exemptions for 2018

The IRS has announced the estate and gift tax exemptions for 2018.  In Revenue Procedure 2018-18, the IRS announced the exemptions will be $11,180,000.  The Revenue Procedure is part of Internal Revenue Bulletin 2018-10, released on March 5, 2018.  Kevin Staker states that the IRB may be found at

Therefore, Kevin Staker shares that a married couple can now shelter at least $22,360,000 from estate tax through the use of bypass trusts, estate tax exemption portability, gifts, and other estate tax planning devices.

However, if the law does not change, in 2025, we will go back to a $5,600,000 exemption adjusted for inflation.

You are advised to see your estate planning attorney to get proper advice on this issue.  In particular, if you are a married couple, all your children are of this marriage, and your total estate between the two of you is under $5,600,000, you should have a “simple” trust.   A simple trust remains as one trust at the death of the deceased spouse.

By Kevin Staker


January 16, 2018

Divorce and Estate Planning by Kevin Staker

Filed under: Uncategorized — Kevin Staker @ 1:17 pm

If you or spouse file for divorce, your assets will still likely go to your estranged spouse.  You likely would not want this.  The follow are the alternatives.

Do Nothing

Your estranged spouse likely get all .  The spouse likely gets all under joint tenancy, beneficiary designatons or your living trust.

Few divorcing individuals would want such a result in their case. What to do?

What Should You Do Instead?

First – Write a new Will and revoke any living trust.

Write a new Will.  Cut out the spouse by name.

If you have a living trust, revoke it. In California you must file notice with the court and then deliver it to your spouse.  Then you can sign a revocation and deliver that to your spouse.  Your Will will then control to whom you share of trust will go.

Second – Sign a new living trust

You can and should sign a new revocable living trust. Make sure you say nothing goes to your estranged spouse.

The problem is you cannot fund the trust until the divorce is final. California law provides for an automatic temporary restraining order (“ATRO”) on both parties. Neither party can transfer any asset. However, your pour over Will will then get your trust share to the new trust.

Third – Sign new durable powers of attorney

Immediately sign new powers of attorney for finance and health care. Of course, name someone other than the spouse. The ATRO does not prevent signing new durable powers.

Fourth: Sever joint tenancies

Next, sever any joint tenancies with the spouse, especially real property. Use the same type of procedure as revoking the living trust. Your Will will then control where your interest will go.

Fifth: Revoke IRA and other beneficiary designations

Use the same notice procedure to revoke all beneficiary designations.  Your Will will then likely control where the account or plan will go (except for the community property interest of your spouse).


In summary, a divorce is usually very emotionally troubling. In the midst of the maelstrom do not forget to do what you can to make sure your assets do not go to your estranged spouse and will go to whom you really want them to go. Take action now.

For more details on the above go to the Linkedin article by Kevin Staker found at

January 4, 2018

Medi-Cal for Long Term Care 2018 Adjustments for Inflation by Kevin Staker

Filed under: Kevin Staker,Medi-Cal Planning — Kevin Staker @ 1:41 pm

The Social Security Administration, the Centers for Medicare & Medicaid Services, and the California Department of Health Care Services have announced the cost of living adjustments for 2018.  They will be based on a 2 percent increase for inflation.

2018 Medi-Cal Resources Rates:
Community Spouse Resource Allowance (CSRA):
Minimum Monthly Maintenance Needs Allowance (MMMNA):
Average Private Pay Rate (APPR):
$8,515 (will be changed in April 2018).
The State of California continues to fail to finalize regulations to implement the United States Deficit Reduction Act of 2006.  Hence a gift of $8,514 will not result in any period of ineligibility from Medi-Cal paying for long term care in a nursing home.
A discussion which is more in depth can be found at the Kevin Staker professional biography website at

By Kevin Staker

December 18, 2017

Personal Biography Website of Kevin Staker,, Is Back Up by Kevin Staker

Filed under: Uncategorized — Kevin Staker @ 11:25 am

Personal Biography Website of Kevin Staker,, Is Back Up

The personal biography website of Kevin Staker,, was down for several weeks.  It is now back up.  It is found at

The site has many interesting facts regarding the law and mediation practice of Kevin Staker.

Kevin Staker  is the president of his law firm, Staker Law Tax and Estate Planning Law Corporation.

He has a bachelor’s degree in Economics from Brigham Young University and law degree from the University of Utah. He also has a Master of Laws in Taxation degree from New York University.

Kevin Staker is admitted to the State Bars in California and Utah.  He is certified as a specialist in both Taxation as well as Estate Planning, Probate and Trust Law by the California Board of Legal Specialization.   He is one of the few attorneys in the State of California with such a dual specialization.

By Kevin Staker


December 17, 2017

Humorous Insights in the Tax Cuts and Jobs Act by Kevin Staker

Filed under: Uncategorized — Kevin Staker @ 3:17 pm

We now have the conference committee report.  A few humorous insights:

Qualified Business Income

The corporate rate is being cut.  This is a disadvantage to small business owners.  The final bill has a great item for the poorer business folk.

This is great if you do not make too much money, like the donut shop owner or shoe repair guy.  They get a 20% deduction on the lesser of taxable income or “qualified business income (“QBI”).”  However, if you are in a service profession, such as attorney (me), CPA or physician, the deduction starts to phase out as taxable income exceeds $157,500 for single taxpayers, $315,000 for joint filers.

In the past we worried about ordinary income versus capital gain.  Now we have a third category to worry about, QBI.  Surely we will find ways to game the system.  Even complying will be challenging.  This is real complex stuff, for example if you are a CPA and own a restaurant, these two businesses will be treated separately.  This is not tax simplification, no filing on a postcard as President Trump promised.  This actually should be called “The Tax Preparers Full Employment Act of 2017”.

So the message for most people: self employment is better than employment.  This flies in the fact of Thomas Jefferson’s  Declaration of the Rights of Man and of the Citizen.  The Declaration says this about taxes:

A common contribution is essential for the maintenance of the public forces and for the cost of administration. This should be equitably distributed among all the citizens in proportion to their means.


State Income Taxes

Limiting the total deduction for state and local property, income and sales tax to $10,000 is a very big deal.  Many fewer people will be able to itemize deductions.  This does away with the prior great idea of prepaying income taxes for several years.  Oh Well.

However, the law says nothing about prepaying property taxes.

Kevin Staker will continue his quest to find some humor in the 2017 tax act.

By Kevin Staker

December 14, 2017

The Conference Committee of Congress on Tax Reform Reaches Agreement

Filed under: Uncategorized — Kevin Staker @ 7:38 am

Senate-House Conferees Reach Agreement on the Tax Cuts and Jobs Act of 2017, the Republican Version of Tax Reform

Top individual tax rate is lowered from 39.6 percent to 37 percent.

Corporate tax rate is lowered from 35 percent to 21 percent — this rate is 1 percentage point higher than the 20 percent rate initially passed by the Senate and House.

Deduction for pass-through businesses is set at 20 percent.  This deduction when combined with the decreased top rate for individuals makes a top marginal tax rate of 29.6 percent.

Mortgage interest deduction is lowered to $750,000.  This amount is a compromise.  This is half way between the $500,000 limit passed by the House and the prior $1 million limit of the law favored by the Senate.

Estate tax exemption is doubled.  This was the Senate position. Hence for 2018, the exemption will be $11.2 million.  This rate is indexed for inflation from 2010 from $5 m

Income tax exclusion for tuition waivers are preserved for grad students.  This was the Senate position.

Deduction for student loan interest is preserved.

Deduction for medical expenses is preserved.  The House wanted to eliminate the deduction.  However, the floor is actually lowered for two years from 10 percent to 7.5 percent of adjusted gross income. Senator Collins of Maine, a Republican moderate, insisted on this change to assure her vote.

Corporate alternative minimum tax is repealed.

Exemption for the personal alternative minimum tax is raised from $54,300 to $500,000 for individuals and from $84,500 to $1 million for families.

Penalty for not having health insurance is repealed.   This effectively eliminates ObamaCare’s individual mandate.

The Arctic National Wildlife Refuge is opened to energy exploration. This was required to get the vote of Senator Murkowski, another Republican moderate. Adding a non-tax provision was required for it to be a reconciliation bill, so only a majority vote is required in the Senate. Otherwise the Senate filibuster rule of 60 votes would required. This is how Democrats in 2010 got the Affordable Care Act, Obamacare, passed.

Note, not all of the bill has been drafted. They are still working on other details, such as how many tax brackets to have. We shall see.

This article has been written by Kevin Staker. Kevin Staker is found on Twitter at The Superlawyer profile of Kevin Staker is found at Kevin Staker is also on Facebook at Finally, please note the probate and trust mediation practice of Kevin Staker has completed its first, very successful year. The website is found at

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