Essential Estate Planning Strategies in the San Francisco Bay Area

In the vibrant San Francisco Bay Area, where innovation drives businesses, having a well-constructed estate plan can help prevent unnecessary taxes, unnecessary court delays, and damaging family disputes. This article provides practical advice with special considerations for business owners and tech founders. 

Navigating Estate and Gift Taxes: Key Rules and Updates for 2026 and Beyond

Estate and gift taxes can significantly impact how much of your wealth passes to your heirs, but thoughtful planning can minimize or eliminate them. Under federal law, estate taxes apply at a top rate of 40% on transfers exceeding the exemption amount. For 2026, the federal estate and gift tax exemption (known as the Applicable Exclusion Amount) is $15,000,000 per individual ($30,000,000 for married couples). The generation-skipping transfer (GST) tax exemption, which allows an individual to transfer wealth to beneficiaries who are two or more generations younger (such as grandchildren), aligns with this, also at $15,000,000 per individual in 2026. These amounts change yearly, which underscore the importance of planning now and revising regularly. 

Practical Strategies to Reduce Estate Taxes:

Lifetime gifting is one of the simplest ways to shrink your taxable estate while benefiting your family today. The annual gift tax exclusion for 2026 is $19,000 per recipient. For example, a married couple with three children can gift $114,000 annually ($19,000 x 2 spouses x 3 children) without triggering gift taxes or using up their lifetime exemption. Over five years, this could remove $570,000 from your estate, potentially saving up to $228,000 in taxes at the 40% rate—assuming no further appreciation on those assets.

Gifts don’t have to be cash; they can include company shares, real estate interests, or even direct payments for education and medical expenses, which are unlimited and tax-free. Business owners and founders in the Bay Area, where startups often see rapid value growth, should consider gifting low-basis stock or LLC interests early. This removes future appreciation from your estate—for instance, if you gift shares expected to skyrocket post-IPO, all that growth benefits your heirs tax-free.

Beyond annual gifts, leverage the unlimited marital deduction for transfers to a U.S. citizen spouse and the unlimited charitable deduction for donations to qualified organizations. For non-citizen spouses, gifts over $194,000 in 2026 may be taxable, so plan accordingly.

For married couples, a Bypass Trust (also called a credit-shelter or family trust) is a powerful tool to fully utilize both spouses’ exemptions. Upon the first spouse’s death, up to the exemption amount ($15,000,000 in 2026) goes into the trust for the survivor’s benefit—they can access income and principal for health, maintenance, support, and education—without being included in the survivor’s estate. This avoids estate taxes on the second death and shields appreciation. Consider a $30 million estate: Without planning, taxes could exceed $6 million on the second death; with a Bypass Trust, that drops to under $0 federal tax liability, a huge difference.

Portability offers an alternative solution. Portability is a federal tax rule that allows a surviving spouse to utilize their deceased spouse’s unused federal estate and gift tax exemption amounts. In the same $30 million scenario, portability could achieve similar tax savings with less complexity, plus a step-up in basis for appreciated assets like Bay Area real estate or tech stock. However, portability has drawbacks: It doesn’t protect generation-skipping transfer (GST) exemptions, can complicate remarriages, and gives the survivor full control, potentially diverting assets from your intended beneficiaries. Bypass Trusts provide more certainty, especially for blended families or business succession.

Taxable gifts (those exceeding annual exclusions) are often more efficient than bequests at death because gift tax is “tax-exclusive” – you pay tax only on the gift amount. Bequests at death are “tax-inclusive” – you pay tax on the gift amount as well as the money given to pay the tax. For example, to net $450,000 to a child via gift (after using exemptions), you’d need $630,000 total ($450,000 gift + $180,000 gift tax). At death, it requires $750,000 ($450,000 bequest + $300,000 estate tax on the full amount). Business owners: Integrate this with succession planning by gifting voting or non-voting shares, potentially qualifying for valuation discounts.

With the 2026 increase to $15 million, there’s more flexibility, but rising values in Bay Area real estate and company valuations can exceed this threshold.

Avoiding Probate in California: Protecting Your Family from Unnecessary Burdens

Probate is the court-supervised process of validating a will, paying debts, and distributing assets after death. In California, it’s required for estates over $184,500 or those with real property, and it can be a very drawn-out and expensive ordeal. Even straightforward cases take at least a year, often longer, with statutory fees adding up quickly—for a $3 million gross estate, expect over $100,000 in executor and attorney fees, plus potential “extraordinary” charges for complexity. Proceedings are public, exposing your family’s finances to scrutiny, which can be particularly unwelcome in the media-savvy Bay Area. Delays tie up assets, causing inconvenience and emotional strain during a difficult time.

For business owners, probate can disrupt operations if company interests or properties are frozen. Imagine your heirs waiting months to access funds needed for payroll or investments—avoidable with planning.

Effective Methods to Sidestep Probate:

Start with beneficiary designations on retirement accounts (like IRAs or 401(k)s), life insurance policies, and payable-on-death bank accounts. These assets pass directly to named beneficiaries, bypassing probate. For married individuals, name your spouse primarily, but consider designating a trust for tax efficiency.

Joint ownership, such as joint tenancy with right of survivorship for real estate or community property with right of survivorship (preferred), allows automatic transfer to the survivor without court involvement. It’s simple for couples but less ideal for non-spouses, as it doesn’t address estate taxes.

The best and most comprehensive approach is a living trust, discussed below, which keeps everything private and efficient.

 Establishing a Living Trust: A Cornerstone for Seamless Asset Management

A living trust (revocable trust) is a flexible entity that you create to hold your assets, allowing you full control during life while avoiding probate at death. You can think of it like a contract for the management of your assets —transfer assets to the trust, manage them as the trustee, and name successors to distribute them per your instructions.

How to Set It Up and Why It Matters:

1. Draft the Document: Consult an attorney to tailor it to your needs. Include tax-saving features like A-B provisions (for Bypass and Marital Trusts), successor trustees (family members or a corporate trustee for professional management), and distribution plans—outright to adults, in sub-trusts for minors until certain ages, or lifetime trusts for protection.

2. Fund the Trust: This is crucial—retitle assets like your home, bank accounts, brokerage portfolios, and business interests into the trust’s name. Unfunded assets may still require probate.

3. Appoint Trustees: You (and your spouse) serve initially. For incapacity, successors step in without a court conservatorship, managing assets for your benefit. Corporate trustees bring expertise, especially for complex holdings like tech IP or real estate.

Living trusts shine during incapacity, avoiding public court proceedings, and at death, enabling quick, private distributions. For business founders, they ensure seamless succession—your company doesn’t stall while heirs navigate probate.

Complement your trust with a “pour-over” will to allocate any overlooked assets (though it may trigger limited probate if over thresholds) and nominate guardians for minor children. Add powers of attorney for financial decisions and an advance healthcare directive for medical choices, empowering trusted agents if you’re unable.

For more information or help with estate planning, contact Stuart Tubis, Esq. at skt@jmbm.com or 415-984-9622.