Author: Phillip Zagotti

Your mother died in the spring. Your brother is the trustee. By late summer nobody has sent you the trust or a single statement, and every question gets “I’m handling it.”

California does not leave that to the trustee’s mood. The Probate Code requires written notice within 60 days after a trust becomes irrevocable and a yearly account after that, with the trust terms available on request. A trustee who stonewalls can be ordered to comply or removed, and the same statutes tell a new successor trustee what to send and when.

What does a California trustee have to send beneficiaries, and by when?

The baseline is Cal. Prob. Code § 16060: the trustee “has a duty to keep the beneficiaries of the trust reasonably informed of the trust and its administration.” Section 16060.7 adds the trust terms on request and section 16061 adds information “relevant to the beneficiary’s interest” on reasonable request. A settlor cannot waive either one (section 16068).

Under section 16061.7, when a settlor’s death makes a trust irrevocable, or an irrevocable trust changes trustees, the trustee must serve a “notification by trustee” on each beneficiary and, after a death, each heir, usually by mail under section 1215. It identifies the settlor, the trust date, the trustees and their contact details, and where the trust is administered, and offers a copy of the terms.

The deadline is 60 days after the event, but if the event created a vacancy, the 60 days start when the new trustee begins serving. A death notice must also warn in boldface of the contest deadline in section 16061.8: 120 days after service, or 60 days after the terms are delivered within that window, if later. A trustee who fails to serve owes the resulting fees and damages under section 16061.9.

Do discretionary and remainder beneficiaries get the same information?

On information, mostly yes. Probate Code § 24 treats anyone with “any present or future interest, vested or contingent” as a beneficiary, so a contingent grandchild still gets notice and information. The annual account under section 16062(a) is narrower, running to beneficiaries to whom income or principal “is required or authorized in the trustee’s discretion to be currently distributed.” That includes a discretionary current beneficiary, but usually not a remainder beneficiary behind a spouse’s life interest.

While a trust is revocable and someone who can revoke it is competent, section 15800(a) gives the beneficiary’s rights to that person, and section 16069 excuses reporting to anyone else. Under the incapacity rule reworked by AB 1079 (Stats. 2021, ch. 749), once the last person able to revoke is shown incompetent, the trustee has 60 days to send the instrument to the beneficiaries who would take at death, and owes them accounts.

Estate of Giraldin, 55 Cal.4th 1058 (2012), held that after the settlor dies, beneficiaries may sue for breach of the duty the trustee owed the settlor, to the extent it harmed them. Babbitt v. Superior Court, 246 Cal.App.4th 1135 (2016), barred an order making a widow account for the years before her husband died, because the couple were themselves the settlors and trustees.

What does a California trust account have to show, and how does a CPA test it?

Section 16063 requires receipts and disbursements of principal and income, ending assets and liabilities, the trustee’s compensation, and the agents hired with their pay and any relationship to the trustee. It must also flag the right to court review under section 17200 and the three-year bar on breach claims, which section 16460 starts only when the account discloses the problem. Even if the instrument waives accounts, section 16064 lets a court compel one when a material breach is reasonably likely.

An irrevocable trust generally files a federal Form 1041 and, once gross income passes $10,000 or net income passes $100, a California Form 541, with a Schedule K-1 to each beneficiary receiving a distribution or allocation. Returns and account come from the same books. Dividends on the 1041 exceeding income on the account mean something is missing, and a K-1 allocating income to you that never reached your bank raises the question of where it went.

I also match the fiduciary fee deduction to the account’s compensation line, then read the general ledger, where checks to the trustee’s own business surface long before they distort a total.

How does a trustee change happen correctly in California?

Section 15640 allows resignation only as the instrument provides, with consent of whoever can revoke, with consent of all adult current and termination beneficiaries once irrevocable, or by court order. Section 15641 keeps the resigning trustee liable for earlier acts.

Section 15643 defines vacancies. Section 15660 fills one from the instrument, then with a trust company those same beneficiaries all accept, then by the court. Removal for cause runs through section 15642. The departing trustee must deliver the property and stays responsible until delivery (section 15644), and section 16062(a) requires an account “upon a change of trustee.”

An incoming trustee’s first 90 days: serve the 16061.7 notice if triggered. Get a new EIN if a revocable trust just became irrevocable; a change of trustee alone does not need one. File Form 56 for each person you act for. Give banks a certification of trust under section 18100.5 instead of the instrument. Unfunded assets are a separate problem, covered in our post on Heggstad petitions.

What does the timeline look like for a Sacramento family?

Carol, a Land Park widow in Sacramento, dies March 12, 2026. Her revocable trust holds her house (about $780,000), a brokerage account (about $410,000), and $65,000 in savings, split equally between her son and her daughter in Roseville. The son accepts as successor trustee on March 23. All names, dates, and figures are illustrative.

Carol was her own trustee, so his 60 days ran from March 23 and the notice was due May 22, 2026. By August his sister has nothing, and on August 10 she sends a written request for the trust terms, asset information, and an account from March 12 forward.

If he mails the notice September 1 and delivers the terms November 20, her last day to contest is January 19, 2027, because 60 days from delivery beats 120 days from service (December 30, 2026). If nothing arrives by October 9, 2026, section 17200(b)(7) is satisfied: 60 days of silence, and nothing provided in the prior six months.

He administers the trust from his Sacramento home, so under section 17005 her section 17200 petition goes to Sacramento County Superior Court, where she can add section 16420 remedies such as reduced compensation or removal. If the account is later contested, section 17211 can shift fees against a bad faith contest or opposition.

Her letter aside, his first annual account comes due after the trust’s first fiscal year, on no fixed day. The account should start from March 12 values and show every dividend, check, and transfer, his fee, the realtor he hired, and closing balances. I would tie it to the brokerage 1099s and Carol’s final Form 1040, and in 2027 to the trust’s first 1041, Form 541, and her K-1.

What is a California beneficiary not entitled to see?

Beneficiaries get information, not a vote on when to list the house. Legal advice is protected: Wells Fargo Bank v. Superior Court, 22 Cal.4th 201 (2000), lets a trustee assert the attorney-client privilege against beneficiaries even for administration advice paid from trust funds, though the fees paid are still a disbursement.

Section 16061 reaches only information relevant to the requester’s interest, so a cousin need not see another branch’s separate share, and a competent living settlor’s affairs stay private. A confidentiality clause cannot justify withholding the terms.

Frequently Asked Questions

How long does a California trustee have to send notice after a death?

Sixty days. Probate Code section 16061.7 requires notice to every beneficiary and heir within 60 days after a death makes the trust irrevocable. If the settlor was also the trustee, the 60 days start when the successor begins serving. Missing it can cost the trustee damages and fees.

Can I see my parent’s trust while my parent is alive?

Usually not. While the trust is revocable and the person who can revoke it is competent, Probate Code sections 15800 and 16069 give the rights to that person, not the children. If that person is shown incompetent, the trustee has 60 days to send the trust to the beneficiaries who would take at death.

What if the trust says the trustee does not have to account?

A waiver in the instrument can excuse the annual account, but under Probate Code section 16064 a court can still order one when a material breach is reasonably likely, and the waiver is void for certain sole trustees, such as the drafter.

How long do I have to contest a California trust?

Under Probate Code section 16061.8, a person served with the trustee’s notice after a death has 120 days from service, or 60 days from delivery of the trust terms within that window, whichever is later. The period runs from service, not from the date of death.

Does a successor trustee need a new EIN?

It depends. The IRS requires a new EIN when a revocable trust becomes irrevocable, the usual case after a settlor dies. A change of trustee alone does not require one. The new trustee should also file Form 56 to notify the IRS of the fiduciary relationship.

Who pays the fees if I have to petition for an account?

Often each side pays its own. Probate Code section 17211 lets the court shift litigation costs when a contest of an account, or the trustee’s opposition to it, lacks reasonable cause and is in bad faith. A trustee who never served the required notice can owe resulting fees under section 16061.9.

How North Star Law Firm Can Help

North Star Law Firm represents beneficiaries and successor trustees in the Sacramento area and the Inland Empire in trust administration, from the 16061.7 notice and first account to a petition to compel one. We also draft revocable living trusts and prepare the trust and estate tax returns that must reconcile with the account. Phillip Zagotti is a California attorney licensed by the State Bar of California and a CPA, so one person does the law and the accounting.

If you are a beneficiary waiting on answers or a successor trustee who just took over, contact North Star Law Firm or schedule a consultation.

Years ago you deeded a rental and a brokerage account into a trust for the kids, and page one says “irrevocable.” Now there is a judgment against you and Chapter 7 is on the table. Will a bankruptcy trustee call that trust yours?

The label matters less than whether you kept a route back to the money and how you treated the property afterward. A July 2026 Arizona bankruptcy ruling, from inside our own Ninth Circuit, pulled a children’s trust into the parents’ estate. California’s Probate Code adds tools of its own.

What happened in Kittrell, and why does it matter here?

In October 2014 the Kittrells, as settlors and trustees, moved their LLC interests into a children’s trust while more than $1.5 million in judgments sat unpaid and another suit was pending. Their son could, acting outside any fiduciary duty, add beneficiaries or revoke in favor of descendants of the grantor’s parents, a class the parents understood included them.

The trust never had a bank account or filed a return, and in 2017 its assets secured a personal loan. After filing Chapter 7 on February 25, 2022, they scheduled the trust as “No value to debtors,” which cost them their discharge under 11 U.S.C. § 727(a)(4)(A) in a September 2025 decision. On July 24, 2026, in Linscott v. Kittrell, Adv. No. 4:22-ap-00206-BMW (Bankr. D. Ariz. July 24, 2026), the court ruled for the Chapter 7 trustee on both theories. The parents were contingent beneficiaries, and the transfer was avoidable under § 548(e) because they admitted forming the trust partly to evade creditors. Even without avoidance, the assets were estate property under § 541, since the couple had “retained absolute control.” The court valued the trust at no less than $15 million as of the petition date and entered the $6.5 million judgment the trustee had requested, enough to pay every claim in full with interest.

Which California rules decide whether a family trust belongs to the settlor?

Bankruptcy borrows state law. 11 U.S.C. § 541(a)(1) brings in “all legal or equitable interests of the debtor in property,” and § 541(c)(2) honors a transfer restriction only if it is “enforceable under applicable nonbankruptcy law.” (When the debtor is the trustee instead, § 541(d) controls, as our Fantasia v. Diodato post explains.)

California’s default surprises people. Under Probate Code § 15400, a trust is revocable unless expressly made irrevocable, and § 18200 exposes revocable trust property to the settlor’s creditors during life. Section 19001 extends that past death when the probate estate falls short.

Spendthrift clauses shield a beneficiary until paid under §§ 15300 and 15301, subject to the 25 percent reach in § 15306.5. None of it helps a settlor-beneficiary. Section 15304(a) voids the restraint, and § 15304(b) lets creditors reach “the maximum amount that the trustee could pay” the settlor, capped at the settlor’s contribution.

The Ninth Circuit applied that rule through § 541(c)(2) in In re Moses, 167 F.3d 470 (9th Cir. 1999). In Cutter v. Seror (In re Cutter), 398 B.R. 6 (9th Cir. BAP 2008), a debtor-trustee who could pay himself support lost the entire corpus to his estate.

Can a creditor argue the trust is the settlor’s alter ego?

Yes. In In re Schwarzkopf, 626 F.3d 1032 (9th Cir. 2010), where the assets included a Temecula house, one trust bought a home the debtor occupied rent-free and paid him at least $105,000 in unexplained fees while its trustee wrote checks on demand. That trust was his alter ego, because “equitable ownership in a trust is sufficient” under California law.

A second trust, formed to defeat creditors, was invalid, so the property sat on a resulting trust and limitations ran only from the trustee’s repudiation. Torrey Pines Bank v. Hoffman, 231 Cal.App.3d 308 (1991), treated settlor-trustee-beneficiaries as the real obligors on their trust’s loan. Greenspan v. LADT, LLC, 191 Cal.App.4th 486 (2010), adds that a trust is not an entity, so the question is whether the trustee is the debtor’s alter ego.

How far back can a trustee or creditor reach the transfer into the trust?

Keep two theories apart. “The trust is estate property” under § 541 has no lookback. “The transfer was avoidable” runs on a clock. California’s Uniform Voidable Transactions Act reaches actual-intent transfers under Civil Code § 3439.04(a)(1), whose listed badges include a transfer to an insider and retained control. Section 3439.05 covers gifts made while insolvent.

Section 3439.09 allows four years from the transfer, or one year from discovery for intent claims, and extinguishes every claim after seven years. A bankruptcy trustee borrows a live claim through § 544(b) and gets two years after the order for relief under § 546(a).

Then comes § 548(e): ten years for a transfer “to a self-settled trust or similar device” where the debtor is a beneficiary and acted “with actual intent to hinder, delay, or defraud.” Kittrell’s October 2014 transfer was more than seven years old at filing. California’s seven-year cap would have killed a UVTA claim; § 548(e) did not.

What do the trust’s tax returns and bank records prove?

A swap power under IRC § 675(4)(C), the kind Mr. Kittrell held, makes a trust a grantor trust for income tax. Treas. Reg. § 1.671-4 then lets a wholly owned grantor trust skip Form 1041, and the FTB’s Form 541 instructions accept those methods.

As a CPA, I read the paper trail as evidence of control. Does the trust have its own EIN and account, and do the rents land there or in the account paying the parents’ mortgage? Then I look for a Form 709 for the funding year; a gift in trust is often a future interest, which requires a 709 at any amount. A signed 709 says the parents treated the gift as complete. A missing one, plus a loan application listing the building as theirs, says otherwise. The Kittrells never filed one.

How would this play out for a Redlands couple facing a judgment?

Assume a Redlands couple put a $920,000 fourplex and a $360,000 brokerage account into a children’s trust on June 14, 2019. The husband is trustee, and the trust lets him pay the settlors for “health and support.” A supplier had sued them on a guaranty that March; a $610,000 judgment followed in April 2026. The $5,800 monthly rents still go to their joint account. All figures are illustrative.

The UVTA claims are dead: four years ran in June 2023, and despite a May 2026 discovery, the seven-year bar fell June 14, 2026, leaving § 544(b) nothing to borrow. But the support clause makes this self-settled, so § 15304(b) lets the creditor reach up to everything the couple contributed, by petition under Code of Civil Procedure § 709.010.

If they file Chapter 7 in the Central District’s Riverside Division before June 14, 2029, expect a complaint pleading estate property under § 541 and Cutter, turnover under § 542, § 548(e) avoidance, and alter ego of the trustee. The 2019 fix was an independent trustee, no settlor distribution clause, a filed 709, and a trust bank account. Today they should stop taking the rents and schedule the trust completely.

How should a California irrevocable trust be set up and run so it holds up?

An independent trustee, not the settlor or a child who takes direction, avoids the Schwarzkopf problem. Draft out every path back to the settlor, including any power that could add the settlor as a beneficiary. Then run it as someone else’s property, because it is: its own account and books, and market rent if the family uses trust property.

One limit no drafting fixes: if the settlor is a beneficiary, § 15304 lets creditors reach what the trustee could pay the settlor.

Frequently Asked Questions

Can a bankruptcy trustee take assets in my irrevocable trust in California?

It can if you kept a beneficial interest or real control. Under 11 U.S.C. section 541, a spendthrift clause protects you only if California law enforces it. Probate Code section 15304 will not enforce it for a settlor who is also a beneficiary. Rent-free use of trust property invites alter ego claims too.

Is a trust for my children self-settled if I am not named as a beneficiary?

Not automatically. In the 2026 Kittrell ruling, parents became contingent beneficiaries because their son could add beneficiaries from a class that included them. Discretion to pay your support has the same effect. Discretion to reimburse your income tax on trust income does not, under section 15304(c).

How long does a creditor have to undo a transfer into a trust in California?

Under Civil Code section 3439.09, an actual-intent claim must be brought within four years of the transfer or one year after it was or reasonably could have been discovered. Every claim dies seven years after the transfer. In bankruptcy, section 548(e) reaches back ten years for transfers to self-settled trusts made with actual intent.

Does reporting a trust as a grantor trust mean it is not really separate?

No. Grantor trust status is an income tax rule, often created on purpose. Treasury Regulation section 1.671-4 lets many grantor trusts report under the grantor’s number without a Form 1041. Courts look instead at control evidence, such as whether the trust had its own account and whether a gift tax return reported the funding.

Can a revocable living trust protect me from creditors in California?

No. Probate Code section 18200 makes revocable trust property subject to the settlor’s creditors during life, and section 19001 keeps it available after death if the probate estate cannot cover the debts. Section 15400 treats a California trust as revocable unless the document expressly makes it irrevocable, so silence leaves the property reachable.

What should we do now if our family trust may be challenged?

Stop any personal use of trust income, make no new transfers, and gather the records showing how the trust was run. If bankruptcy is likely, disclose your roles and interests in the trust completely. The Kittrell debtors lost their discharge because their schedules described the trust as having no value to them.

How North Star Law Firm Can Help

North Star Law Firm represents families, trustees, and creditors across the Inland Empire and the Sacramento area when a trust’s independence is disputed, from trust administration to Chapter 7 adversary proceedings, and we reconstruct the trust and gift tax returns that become the evidence. Phillip Zagotti is a California attorney and a CPA admitted to the U.S. Bankruptcy Court for the Central District of California.

If a creditor or bankruptcy trustee is questioning your family’s trust, or you are trying to reach one, contact North Star Law Firm or schedule a consultation.

A citizen husband in Ontario, a wife from Michoacán who has held a green card since 2012, a trucking company, and a 2015 living trust leaving all to the survivor. The plan is broken in one place: 26 U.S.C. § 2056(d) shuts off the unlimited marital deduction when the surviving spouse is not a United States citizen, and a green card does not cure it.

California softens that. Under Cal. Fam. Code § 760 and Fam. Code § 751 each spouse owns a present, existing, and equal half of the community, and Cal. Prob. Code § 100 puts only the decedent’s half in his estate. Her half was always hers, so it never needs a marital deduction. The answer is usually a qualified domestic trust drafted as a dormant sub-trust inside the living trust, with an off switch if she naturalizes in time.

Why does the marital deduction disappear when a spouse is not a citizen?

Section 2056(a) lets a decedent pass an unlimited amount to a surviving spouse tax free. Section 2056(d)(1)(A) then says that if the spouse is not a citizen, “no deduction shall be allowed under subsection (a).” Section 2056(d)(1)(B) adds, more quietly, that “section 2040(b) shall not apply.” What counts is the recipient’s citizenship, so being a citizen himself does the husband no good.

Lifetime gifts run the same way. 26 U.S.C. § 2523(i)(1) denies the gift tax marital deduction, and § 2523(i)(2) substitutes a bigger annual exclusion, $194,000 for 2026 under Rev. Proc. 2025-32, up from $190,000, against $19,000 for everyone else. Section 2056(d)(4) turns the disallowance off if the survivor becomes a citizen before the return is made and was “a resident of the United States at all times after the date of the death of the decedent.” The return is due nine months after death, § 6075(a).

What does a QDOT require, and who can be trustee?

A qualified domestic trust defers the tax rather than forgiving it. 26 U.S.C. § 2056A(a)(1)(A) requires at least one trustee to be a U.S. citizen or a domestic corporation with the right to withhold the tax from distributions. Under § 2056A(b)(1) the tax lands on principal distributed during the survivor’s life and on what remains at her death, computed at the first decedent’s rates. Income distributions escape it, and § 2056A(b)(3)(B) exempts distributions made “on account of hardship.”

Security is where homemade plans fail. Under Treas. Reg. § 20.2056A-2(d)(1)(i), a QDOT holding more than $2,000,000 must name a bank as defined in section 581 as U.S. trustee, post a 65 percent bond in favor of the IRS, or furnish an irrevocable letter of credit for the same amount. Below that line, § 20.2056A-2(d)(1)(ii) caps foreign real property at 35 percent, measured annually. Section 2056(d)(2)(B) does let property be irrevocably assigned to a QDOT until the return is filed, and the trustee then files Form 706-QDT under § 2056A(b)(5)(A).

How do community property and the deed change the math?

Family Code § 760 makes property “acquired by a married person during the marriage while domiciled in this state” community property, and Fam. Code § 751 calls the spouses’ interests “present, existing, and equal.” Probate Code § 100(a) carries that through death. In a common-law state the business he founded would sit entirely in his gross estate; in Ontario or Elk Grove half is hers, and only his half reaches Schedule F. Section 1014(b)(6) then gives her half a date-of-death basis too, if at least half of the community interest was includible in his estate. Citizenship is nowhere in that test, so the double step-up survives a noncitizen survivor and a QDOT alike.

Titling can undo all of it. 26 U.S.C. § 2040(a) pulls the full value of joint tenancy property into the decedent’s estate except the part “shown to have originally belonged to such other person.” Section 2040(b) normally rescues spouses with a flat fifty percent, and § 2056(d)(1)(B) takes the rescue away. A Fontana duplex deeded in 2007 to “husband and wife as joint tenants” and paid for with community earnings therefore turns on tracing. Half the consideration was hers under Family Code § 751, but she carries the burden of proving it with records from 2007, and a joint tenancy deed is not community property, so whichever half she keeps out of his estate also misses the § 1014(b)(6) step-up.

Community property with right of survivorship, authorized by Cal. Civ. Code § 682.1, fixes that. It takes an express declaration in the transfer document, and the right can be severed the way a joint tenancy is. The asset stays community property, so § 100 halves it and § 1014(b)(6) steps up both halves, and probate is still avoided. Joint tenancy gives survivorship without either benefit; tenancy in common gives neither.

Is a green-card spouse a resident for estate tax purposes?

For estate tax the test is domicile. Treas. Reg. § 20.0-1(b)(1) defines a resident as a decedent who at death “had his domicile in the United States,” acquired by living somewhere “with no definite present intention of later removing therefrom.” That is not the green card and substantial presence test in 26 U.S.C. § 7701(b) that governs income tax residency, and the two can diverge.

A green-card holder whose house and grandchildren are in Corona is a resident decedent: worldwide estate, full exclusion under § 2010, $15,000,000 in 2026. A spouse who is neither citizen nor domiciliary is taxed only on U.S.-situs property under §§ 2104 and 2105, with the $13,000 credit in § 2102(b) sheltering about $60,000. Immigration status and estate tax residency are separate questions. We give no immigration advice, but naturalization timing belongs on the planning calendar, because § 2056(d)(4) turns on it.

Can portability still work when the surviving spouse is not a citizen?

You often read that portability is unavailable in a mixed-citizenship marriage. The regulation is narrower. Treas. Reg. § 20.2010-3(e) denies the deceased spousal unused exclusion amount to a surviving spouse who is a nonresident and not a citizen at death, except as a treaty allows. A green-card spouse domiciled in California is not in that paragraph.

What applies to her is timing. Under § 20.2010-3(c)(3), when property passes to a QDOT the DSUE is redetermined under Treas. Reg. § 20.2010-2(c)(4) and is not included in her exclusion until the final QDOT distribution or other § 2056A event, or on the date she becomes a citizen if § 2056A(b)(12) is met. The exclusion is parked, not lost, and cannot fund lifetime gifts meanwhile. None of it happens without the election on a return filed for the first decedent, § 2010(c)(5)(A).

What does this look like for an Ontario couple with a trucking company?

He is a U.S. citizen; she is a Mexican national with a green card since 2012. All figures are illustrative. Community property of about $10,000,000: a trucking company worth $6,000,000, rentals in Fontana and Rialto worth $2,400,000, a home and accounts worth $1,600,000. He also holds $1,500,000 inherited in 2019, never commingled, so it stays separate. He dies in March 2026, and his gross estate is his $5,000,000 half plus the $1,500,000 account, or $6,500,000. Her half is not in it.

Section 2056(d) therefore bites on $6,500,000 rather than $11,500,000, and against a $15,000,000 exclusion the estate owes nothing either way. The QDOT here is about the deduction line, the portability election, and the exclusion when she dies. If she takes the oath before the 706 is filed and stayed resident throughout, § 2056(d)(4) makes the structure unnecessary.

Change one fact: say the rentals were deeded as joint tenants in 2007. Now the outcome depends on paperwork. If she cannot trace her contribution, section 2040(a) puts the whole $2,400,000 in his estate, which happens to give the entire property a new basis but throws the full value against the § 2056(d) problem instead of half. If she traces half, only $1,200,000 is included, and because a joint tenancy is not community property her half keeps its 2007 basis. On $900,000 of built-in gain that is a lost step-up on roughly $450,000, real money on a later sale even though the estate tax was zero.

What happens to the property in Mexico, and what has to get filed?

There is no estate or gift tax treaty between the United States and Mexico. The IRS lists estate or gift tax treaties with fifteen countries, among them Canada, France, Germany, Japan and the United Kingdom. Mexico is absent, as are the Philippines and Vietnam, which matters for families in Stockton and Modesto. A resident spouse’s worldwide estate is taxed here while Mexico applies its own rules. Coastal and border-zone property is usually held through a fideicomiso, the bank trust foreign buyers must use there, and that interest counts against the 35 percent ceiling if it lands in the QDOT.

California itself takes nothing: Rev. & Tax. Code § 13302 imposes only a pick-up tax measured by the federal credit for state death taxes, which has not existed for two decades. Gifts above $194,000 a year go on Form 709, and couples shuffling money between accounts to even things out make reportable gifts without meaning to. Used on purpose it is a sound equalization tool, though in California it is usually separate property you are moving.

Frequently Asked Questions

Does my spouse’s green card solve the marital deduction problem?

No. Under 26 U.S.C. 2056(d) the marital deduction is denied whenever the surviving spouse is not a United States citizen, and permanent residence is not citizenship. The card matters elsewhere, but only citizenship or a qualified domestic trust closes this gap.

What is a QDOT, and do we need one under $15 million?

A qualified domestic trust under 26 U.S.C. 2056A lets property passing to a noncitizen spouse qualify for the marital deduction, deferring tax until principal is distributed or the survivor dies. Below the exclusion no tax is due either way, so most California couples draft it as a dormant sub-trust.

Does community property help?

Yes, and it is why the problem is smaller here. Cal. Fam. Code 751 gives each spouse a present, existing, and equal interest in community property, and Cal. Prob. Code 100 confirms one half already belongs to the survivor at death. Only the decedent’s half enters the gross estate.

Can we fix it after death?

Often, if you move fast. Section 2056(d)(2)(B) treats property as passing to a qualified domestic trust if it is transferred, or irrevocably assigned under an assignment enforceable under local law, before the estate tax return is filed. That return is due nine months after death under 26 U.S.C. 6075(a).

What is the annual gift limit to a noncitizen spouse in 2026?

For 2026 it is $194,000 under 26 U.S.C. 2523(i)(2), set in Rev. Proc. 2025-32, up from $190,000. The ordinary annual exclusion is $19,000. Larger gifts are reportable on Form 709, and informal transfers between spousal accounts can create one nobody intended.

What happens to property in Mexico?

There is no estate or gift tax treaty between the United States and Mexico, so nothing stops both systems from reaching the same property. A surviving spouse who is a U.S. resident for estate tax purposes has her worldwide estate inside the federal system, and coastal property held through a fideicomiso still has to be valued and reported.

How North Star Law Firm Can Help

North Star Law Firm drafts and repairs estate plans for mixed-citizenship couples across the Inland Empire and Sacramento area, including revocable living trusts with a dormant QDOT sub-trust, titling corrections, and estate and trust tax returns plus trust administration when the § 2056(d)(2)(B) window is all that stands between a family and a lost deduction. Phillip Zagotti is a California attorney and a CPA admitted to the U.S. Tax Court, so the drafting and the returns get reviewed together.

If one of you is not a U.S. citizen and your trust has not been reviewed since the $15,000,000 exclusion took effect, contact North Star Law Firm or schedule a consultation.