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Restoring Sensation After a Mastectomy

Considering breast reconstructive surgery? Discover if Resensation® nerve repair surgery is right for you.

Having a mastectomy creates an immediate, noticeable impact on your life, both physically and emotionally. A significant impact is the loss of sensation to the chest area. During a mastectomy, the breast tissue is removed, cutting the nerves that supply feeling to the breast and nipple. When nerves are severed, nerve signals are disrupted. This can leave the breasts with a total or near-total loss of sensation.

Dr. Zeineh performs the proven surgical nerve repair technique, Resensation®, that can help women not only look, but potentially feel more like themselves again after a mastectomy.

Click here to see the introductory Resensation® video.

Why choose Resensation®?“

Resensation® is a surgical technique performed during breast reconstruction that allows surgeons to reconnect nerves cut during a mastectomy using allograft nerve tissue.

Over time, the nerve fibers regenerate, becoming a part of the woman’s own body. As the nerve fibers grow, they have the potential to gradually restore sensation to the breasts.

Are You a Candidate for Resensation®?“

You may be a candidate for breast nerve repair surgery with Resensation® if you are considering or undergoing breast reconstruction surgery after a mastectomy.

Each breast reconstruction journey is unique. Connecting with a plastic surgeon specializing in Resensation® can help you determine timing and candidacy based on your desires, medical condition and cancer treatment.

How to proceed

We invite you to schedule a consultation to discuss the best options for your personal goals.

About Linda L. Zeineh, M.D., FACS

Dr. Zeineh is an active member of the American Society of Plastic Surgeons and the American Society for Aesthetic Plastic Surgery. She combines over 20 years of experience with cosmetic and reconstructive surgery in private practice with new technology and techniques in the care of her patients. Her first priority is the satisfaction and well-being of her patients, providing compassionate and personalized care.

A complete range of non-surgical and minimally invasive rejuvenation procedures are personally performed by Dr. Zeineh on her patients to achieve and maintain a youthful, refreshed, and natural appearance, including facial injections, skin tightening and facial/body contouring. Surgical procedures that Dr. Zeineh performs include: facial rejuvenation, body contouring, reconstructive and cosmetic breast surgery, and reconstructive surgery.

Holiday Greetings! 2025

Holiday Greetings!

As we turn the page on another successful year, Mortensen & Reinheimer, PC would like to extend our best wishes and greetings for a happy holiday season, as well as peace and prosperity in the New Year!

Also, a special thank you to all of our clients for your patronage during 2025. We greatly appreciate your business and confidence in us.

Need Help?

We are always available to serve you with your estate planning, conservatorships and probate & litigation requirements. Please contact Mortensen & Reinheimer, PC at (714) 384-6053 to make an appointment, or use our online contact form. Our website is http://www.ocestateplanning.net.

Estate Plan Checkup: The Annual Review

What has changed for you this year?

A common question we hear from clients is “How often should I review my estate plan?” Many people review their estate plan on an annual basis, just to keep up with a busy life and changes in their family. This is the ideal approach for many trustees. At a minimum, we’d suggest reviewing your estate plan at least every three to five years, in order to ensure that any major changes in your personal and financial situation are reflected in your will.

Here are some of the life changes that indicate an estate plan review and meeting with your estate planning attorney are in order:

Significant increase/decrease in net worth, including inheritances
Major changes in real estate holdings, such as personal residence, vacation property, or rental properties
Significant alterations in investment portfolio allocations
New assets that need proper titling
New businesses, partnerships or major changes in profitability
Asset protection concerns
Changes in your final wishes
Rapidly diminishing personal health
Retirement of yourself or spouse
Change in Advance Health Care Directive wishes
Selection of new charitable organizations
The birth or adoption of a child or grandchild
Marriage or divorce, for yourself or beneficiaries
Death of a spouse or another family member
Death or change in circumstances of the those named as executor under a will, guardians, trustees under a trust, and agents under powers of attorney
Change in state of residence

End-of-Year Estate Planning Checklist

In addition to changes in your life, there are various documents and strategies that should be reviewed annually, including:

Consider all of the items from the above list, as to recent changes.
Consider revisions made necessary by recently enacted tax laws. Also, prepare for new tax laws in the coming year.
Review insurance policies.
Review and inventory your list of assets for tax and insurance purposes.
Review your beneficiary designations for 401K accounts, life insurance policies, etc., and make sure they are current and have the correct contact information.
Review the succession plan for your family-owned business.
Provide gifts as desired up to the annual gift tax exclusion.
Confirm that you are taking the required minimum distribution amounts from retirement accounts and other taxable income sources.

We hope you have a wonderful Thanksgiving filled with gratitude, happiness, and delicious moments with your loved ones. Thank you for being our valued client. Happy Thanksgiving!

Specialized Estate Planning Expertise

Taking the time and effort to create an estate plan is one of the most thoughtful steps you can take for your family and loved ones. At Mortensen & Reinheimer, PC we have decades of experience in helping clients to navigate through myriad issues in estate planning. If you need legal expertise in addressing your specific estate planning needs, please contact Mortensen & Reinheimer, PC at (714) 384-6053 to make an appointment, or use our online contact form. Our website is http://www.ocestateplanning.net.

About the author:
Tamsen R. Reinheimer, Attorney, is a Certified Specialist in Estate Planning, Trust & Probate Law (The State Bar of California Board of Legal Specialization). She has significant experience in all aspects of estate planning, trust administration, and probate. Contact Tamsen at tamsen@ocestateplanning.net.

The “Scary” Facts About Probate in California

You may know that the probate process can be time consuming and costly – you might even find it scary! While probate is a complex area of the law, we’d like to help demystify it and clarify a few facts for you.

The Probate Process in California

Probate is the process of dealing with a deceased person’s estate, which generally means clearing their debts and distributing their assets. After a person dies, unless they have a trust or transfer-on-death planning in place, the person’s estate will have to go through “Probate” in the Probate Court. The person in charge of the Trust or Probate estate (i.e., trustee, executor, administrator) is called a “fiduciary.”

Probate determines who the decedent’s rightful heirs are, whether by Will (in cases where the decedent has a Will) or the heirs-at-law (in cases where there is no Will). The Probate process generally takes about a year or more to complete. If you need to go to court, this is commonly called “going through probate.” In order for a party to start the probate process, they must file a petition along with other paperwork with the court.

Key Problems with Probate

Cost: The probate process can be expensive, both in terms of court fees and probate attorney fees.
Privacy: In probate, all personal information such as the identity of the executor and beneficiaries, and the decedent’s liabilities and assets, become open for public viewing as probate is a proceeding in state court. Anyone could access your personal and private information by accessing information at the local clerk’s office, or in some states, by a quick search online. For those who wish to keep personal information private, avoiding probate is the answer.
Time to settle: In probate, all decisions regarding the deceased’s affairs must be approved by a judge, which often takes long periods of time. In California, this can generally take anywhere between nine months and two years.
Lack of access to cash: When you file probate, beneficiaries will not receive the assets until the case is closed. In the meantime, bills for funerals, taxes, utilities, storage, and all other fees tied to the loved one’s passing must be paid. By avoiding probate, you will completely remove an entire category of expenses and avoid additional complexity in settling your loved one’s affairs.

Does an Entire Estate Always Have to Go Through Probate?

There are several situations where probate may be unnecessary. It is possible to avoid the probate process in California, most effectively accomplished by placing all your assets into a living trust. This is one of the key benefits of a living trust, along with greater control, saving money, privacy protection, contingency planning for incapacitation, and overall peace of mind.

In California, if the total value of an estate (personal and real property) is less than $208,250 (for deaths on or after April 1, 2025), the estate does not have to go through probate. Also, assets that are jointly owned will automatically transfer to the surviving owner and not go through probate. If real estate is held as community property, it generally does not have to go through probate. Additionally, a financial asset that names a beneficiary (e.g., bank or brokerage account) will also avoid probate if documented properly.

What if the Estate is Already in Probate?

At Mortensen & Reinheimer, PC, we can help with the probate process and, if necessary, probate and trust litigation. Our professional corporation has more than five decades of combined experience in the area of probate. We can handle anything from paying the outstanding debts of an estate to litigation for the fair distribution of a decedent’s property. Our probate attorneys have the insight, passion, and integrity to protect your rights at every step of the probate process.

Planning Your Estate Doesn’t Have to be Scary

If you need an estate plan and wish to avoid probate, please contact Mortensen & Reinheimer, PC at (714) 384-6053 to make an appointment, or use our online contact form. Our website is http://www.ocestateplanning.net.

Offspring Divorce? Strategies to Protect Your Child’s Inheritance

An often-unspoken issue in estate planning is how to handle a potential divorce for your children. Since divorce is unfortunately a reality in almost half of marriages, it is wise to consider how to keep your child’s future spouse from inheriting what you intend to leave your child.

Typical Scenarios

Why would you need to consider protection for your child’s inheritance in case of a divorce? The reasons vary greatly, including:

Disapproval and/or distrust in your in-law
Concerns about your child and their choices (such as a previous divorce)
Your child has current marital problems
Your children are newly married couples and/or young adults
Awareness of the high divorce rate
Assuring that your child has enough assets to survive and thrive
If your child dies in the short-term, your in-law may remarry and use your assets (especially a concern if there aren’t grandchildren)
Your child doesn’t have an estate plan

Don’t feel bad or embarrassed about it – you’re trying to do what is best for your child and your hard-earned assets.

Initial Steps to Consider

There are a few steps that you can do which don’t guarantee protection but are generally helpful, such as:

Make certain that your will and trust are up-to-date and reflect your desires. This would include providing written instructions on how to use the money and assets.
Discuss your wishes in advance at a family meeting.
Recommend a pre-nuptial agreement for your child.
Advise your child to keep inherited funds in a separate account, not to be used for family support or any comingling (note: in practice, this is difficult to achieve).
If your kid dies prematurely, the trust assets may, by default, be inherited by their spouse – unless you have planned for this possibility. Help your child to set-up an estate plan, so that your assets will be distributed properly in the event of your child’s death. Also, consider choosing a contingent beneficiary (such as another child/sibling, grandchild, charity, etc.) if your child hasn’t fully received their inheritance at the time of their demise.

Trust Management

So, what can you do to best protect your child’s inheritance against potential divorce? In general, it is preferable to establish a trust, which will specify your wishes. Below are some options (note: there are limitations and pros/cons to each structure, so seek legal counsel for your particular circumstances):

Name your child as both the beneficiary and trustee of the trust. While this may seem optimal, there are definite concerns and limitations; improper management can lead to negating the trust in the court’s view.
Select a co-trustee for your child. This must be handled very carefully, so as to avoid comingling of spousal assets and other management errors. There are several types of trustee responsibilities and obligations to consider, such as investment trustee and handling distributions to your child. A benefit is that in the event of a divorce or creditor issues, your child can resign as trustee, leaving the other trustee with sole discretion.
Naming a third-party trustee. A professional trustee, vs. a family friend, is often recommended because of the importance of complying with laws that protect the trust and avoid making it subject to division. While there is typically a trust management fee, this structure should result in proper distribution of trust assets. If the third-party trustee is carefully selected and does his/her job, this sole discretion over trust fund distributions affords maximum protection against asset commingling (although it obviously means limited flexibility over how children can spend their inheritance).

Specialized Estate Planning Expertise

This is a complex area of law, so it is important to consult an experienced estate planning attorney in order to ensure that even if your child’s marriage does not last, your assets will be protected and your wishes will be honored. Further, this is another reason to periodically review your existing estate plan to modify it as necessary, as your family’s circumstances change.

Mortensen & Reinheimer, PC understands and can help you. If you need legal expertise in addressing your specific estate planning needs, please contact Mortensen & Reinheimer, PC at (714) 384-6053 to make an appointment, or use our online contact form. Our website is http://www.ocestateplanning.net.

Estate Planning for Vacation Homes

(Note: This article is general in nature and is geared towards California properties. Seek professional legal and accounting advice before making any decisions.)

For generations, vacation homes have been cherished by family members. Since this property is quite often intended to pass on to the next generation, it might not be viewed as a wealth generator but simply has a family heirloom. If fact, many vacation homes generate negative cash flow, even on a tax basis. So, financially, vacation homes are typically thought of as a luxury asset whose primary value is enjoyment.

Importantly, in terms of estate planning, the property tax considerations of vacation homes have changed dramatically with the passage of Prop 19. This law has potentially severe financial consequences for children who inherit real property from their parents, because it considerably limits the availability of the parent-child exclusion for purposes of real estate tax assessments and resulting property-taxation.

Before and After Prop 19

Prior to Prop. 19, which took effect in 2021, parents could transfer a vacation property with up to $1 million of the assessed value being exempt from the increase in property taxes. This was regardless of the property’s use by the children. Now, under Prop 19, when a vacation home is inherited, it is reassessed at its current market value, which can lead to a significant increase in property taxes.

This can make it very difficult for children to keep these properties: the property might be running at a loss anyway (unless heavily rented), so the additional expense of increased property taxes might just be enough to force the sale of the property. This is especially sad for cherished family vacation homes that hold great memories and were hopefully going to be used for generations to come.

For example, if the parents purchased a vacation home in 2000 for $350,000, and the value of the rental property is more than $1 million when it is transferred upon the parents’ death to a child, the parents’ tax basis doesn’t pass on to the child. Since the child will now have to pay greatly increased property taxes based on the assessed fair market value, it can negatively impact the child’s decision to keep or sell.

It is important to note that from a capital gains tax perspective, current law still is unchanged by Prop 19. Estates of decedents who die during 2025 have a basic exclusion amount of $13,990,000, which generally means no capital gains will be applied if the estate is less than that amount. If the home is sold, capital gains taxes are only due on any gains made since it was inherited.

Potential Strategies

Given the impact of Prop. 19., there are several strategies to evaluate with your estate planning attorney, so that your estate plan can be optimally structured to meet your personal goals. Here are a few:

Sell your current home and move into the vacation home – This could make sense if, among other reasons, you find yourself spending a greater percentage of time at your vacation home and would actually prefer living there during retirement. Also, an analysis could show that your vacation property might be better suited to avoid any increase in taxes to heirs because it fits within the parameters of Prop 19’s exemption for primary residences (i.e., difference between assessed value and market value is less than $1 million, so no reassessment). On top of these considerations, in order for your child to take advantage of your property taxes (i.e., the primary residence exemption allowed under Prop 19’s Intergenerational Transfer Exclusion), your child would need to occupy the home as their primary residence within one year of inheritance.
Keep your current home as a rental and move into the vacation home as your primary residence. Logistically this might be difficult, and from a tax perspective it involves some layers of complications. For example, you can’t move back and forth frequently, claiming each as a primary residence. And selling can be complicated; if you eventually sell your second home, it is important to understand the taxable exclusion of $250,000 ($500,000 if married filing jointly) in gains from sales of primary residences, including treating your vacation home as a primary residence for at least two of the last five years prior to selling. (You might ask, “Can you have two residences in California?” The answer is no – an individual may only claim one domicile at a time.)
Sell the property. This might happen in any case, if heirs would rather have the cash (which might be excluded from capital gains). Further it might be the only viable option if heirs cannot afford any significant negative cash flow.
Keep it and pay the higher property taxes. As mentioned, this might not be a viable solution for many situations. But if your heirs have significant assets and cash flow, it might be doable.
Convert it to an LLC. The rules applicable to LLCs under the California Revenue & Taxation Code can provide a potential loophole for avoiding higher property taxes. However, the implementation of this strategy depends on when the property was acquired, appreciation, ownership structure of the LLC, rent control, and numerous other factors and rules that might apply.

Experts in Estate Planning for Real Estate

At Mortensen & Reinheimer, PC we’ve crafted estate plans that have involved literally thousands of real estate properties! Let us put that experience to work for you in simplifying what can be a very complex process. We look forward to helping you! Please contact Mortensen & Reinheimer, PC at (714) 384-6053 to make an appointment, or use our online contact form. Our website is http://www.ocestateplanning.net.

Estate Planning for Beneficiaries with Addictions

Estate Planning for
Beneficiaries with Addictions

Recovery from addiction can be a lifelong process – so how to handle this in your estate plan?

Is this your dilemma?

Your beneficiary suffers from addiction (e.g., drugs, alcohol, gambling, shopping, eating, sex, etc.). He/she may not fully acknowledge it and likely believes that the impact is far less than the reality, which you can clearly see. As part of your estate plan, you want to ensure that this loved one is cared for in the event of your passing.

Your concern is that an inheritance of cash or other assets can make the problem even worse. However, disinheriting the person doesn’t allow access to funds necessary for recovery. You’ve thought of doing a trust but aren’t sure how to structure it, much less finding the right person to burden with administration. What do you do?

What are typical options?

Lump sum cash inheritance: An addict’s decision-making can be impaired and irrational, so having a large inheritance can prove disastrous, actually contributing to an unhealthy lifestyle, relapse, or bad relationships that feed off the inheritance.
Disinheritance: While often discussed, this strategy can lead to hurt, shame, further addiction, and alienation from other family members.
Establishing a trust: Holding the inheritance in a trust, managed by a responsible trust, can be the best option. A trust can be used as a safety net while protecting assets from immediate access by an addicted beneficiary, as well as from creditors.

Recovery from an addiction is likely a lifelong healing process for your loved one. Further, as a disease, relapse from addiction is common, so remember that your long-term goals are likely to protect your loved one and to foster recovery.

How to select a trustee?

Managing a trust for an addicted person can be extremely difficult, both in time expenditure and the emotional toll. As such, careful consideration should be given to trustee selection. If financial resources allow, consider a professional fiduciary. It is easier for a third-party to make rational decisions, and he/she will is less likely to be unaffected by an addict’s manipulative or otherwise bad behavior. While family members may offer emotional and moral support, their history of dealing with the addict may affect them and hinder effective decision-making if selected as trustee.

How should the trust be structured?

There are numerous questions to be addressed with your estate planning attorney in designing the correct structure for your situation. Here are a few:

Timeframe: An ongoing trust may last for years, up to the entire lifetime(s) of your beneficiaries. It may be terminated upon full rehabilitation, death, or if the trust is no longer feasible to maintain.
What financial needs should the trust cover? Many trusts include provisions for basic needs, such as medical care, food and shelter. The trust might also provide for rehabilitation, counseling, and other forms of treatment. In some situations, no distributions are made to a beneficiary while an addict.
Who controls the funds? Usually, the trustee controls distribution of funds to creditors, rather than handing funds directly to the beneficiary. This can be a time-consuming activity and is another reason why a professional fiduciary trustee should be considered. Also, incentives can be provided to motivate the beneficiary to seek treatment or meet other “life skills” goals.

Other considerations?

Since every situation is unique, discuss your needs with a qualified estate planning attorney. In addition to the above, the attorney might discuss factors such as:

Should the trust be established while you are living or take effect upon your death?
How to explain the trust to the addict?
How can the trust be designed to not interfere with the beneficiary’s eligibility for government benefits?
How would the trustee evaluate a beneficiary’s addiction?
What control does the family have when a third-party acts as trustee?
Should there be both a trust advisor and a trust protector?

Obtaining Professional Guidance

Addictive behavior can impact every aspect of life, not just of the addict but those who love him or her the most. Our attorneys have extensive experience in estate planning involving beneficiaries with addictions. Please contact Mortensen & Reinheimer, PC at (714) 384-6053 or use our online contact form. Our website is http://www.ocestateplanning.net.

About the author:
Weily Yang is an attorney at Mortensen & Reinheimer, PC, an estate planning and probate law corporation in Irvine. Weily is a zealous advocate for individuals with special needs. His primary focus is special needs trusts and probate conservatorships together with estate planning, trust administration, and probate. He can be reached at weily@ocestateplanning.net.

Why Unmarried Couples Need Estate Planning – Especially in California

If you are in an unmarried relationship and have determined that you’d like to provide for your significant other in the event of death, there are a few items to address:

What is your situation and life stage?
What should be done with your assets?
How does California law apply?
What are the essential estate planning documents?

Let’s take a look at each of these.

Situation Analysis

Unmarried couples fall into a wide range of situations and life stages; some are in dire need of an estate plan, possibly without realizing it.

Here are a few typical scenarios, involving unmarried couples in different life stages and with varying assets to consider:

Rob and Samantha, ages 30 and 28, have been living together for three years and they recently bought a house. They are planning a big destination wedding, set for two years away. The couple have accumulated some assets together, including the down payment equity in their house, and each has small retirement plans. Both have substantial student loans.
Hector and Louise, ages 48 and 35, are awaiting marriage due to Louise’s messy divorce. They live together with her two teenage children. Hector has never been married and owns real estate and has retirement assets, while Louise expects to eventually get some assets from her previous marriage but it is unclear what it will be and when. Hector wants to provide for Louise in the event that he passes away.
Frank and Mary, ages 70 and 66, are both widowed. They knew each other in college and their relationship reignited a few years after both spouses passed away. At this point in life, they aren’t planning on getting married but would like to share each other’s companionship for their golden years. Both have children and grandchildren, and would like to provide for these family members in the event of death. Also, Frank and Mary want to make sure that each is provided for in terms of income needs, for the duration of life.

Each situation is different, of course, so talk with your estate planning attorney about your circumstances and specific wishes.

Asset Planning

As a basic estate planning principle, it is best for anyone with assets to have an estate plan. Without an estate plan, your estate might be subject to the probate process: If the total value of an estate (personal and real property) is more than $208,850 (in 2025), probate (court-supervised distribution of assets) may be required.

Of course, the necessity of an estate plan is magnified as asset values increases. Keep in mind that the goal of an estate plan is to ensure your wishes are honored, as well as to minimize stress for loved ones, so even small estates under the probate threshold should have an estate plan, it isn’t just for the wealthy.

California Law Specifics

A “common law marriage” is a legally recognized marriage where a couple is considered married without a formal ceremony or marriage license. However, California does not recognize common law marriages, regardless of how long a couple has lived together. This means that an estate plan is necessary in order for a surviving unmarried partner to legally inherit any assets. It is also needed for the right to make medical or financial decisions for each other in times of crisis. Further, without a valid estate plan in place, assets would typically pass to a deceased partner’s closest relatives, potentially leaving the surviving partner homeless or causing disputes.

Essential Estate Planning Documents

A basic estate plan includes a will, financial power of attorney, and advance healthcare directive, and in many cases a living or revocable trust is advisable, all of which address different aspects of your wishes. Your estate planning attorney should listen carefully to your unique situation and craft each of these documents, and others as necessary, to address your desires and life situation.

Find Someone Who Can Help

Certain situations in life should cause us to realize the importance of having an estate plan and if you are unmarried and wish to provide for your partner, your situation makes it a priority. Our estate planning lawyers can walk you through the process, helping to create an estate plan which reflects your wishes. Please contact Mortensen & Reinheimer, PC at (714) 384-6053 to make an appointment, or use our online contact form. Our website is http://www.ocestateplanning.net.

The Dangers of Undue
Influence in Trusts and Probate

Has this happened to someone you know? An elderly widowed father remarries to a much younger woman. Within a year, concerns about abuse arise (e.g., emotional, withholding sex/affection, etc.) and the children express their concerns to the father. Subsequently, the children are told the father doesn’t want to see them anymore. Later, the adult children find out the will has been changed and most assets are now being designated for the new wife, instead of equally spread to all the children as previously intended.

What is Undue Influence?

Undue influence is a form of abuse. It is a process of controlling another person’s free will by means of applying emotional, psychological or even physical persuasion, aimed at gaining a benefit that would not otherwise be given to the abuser. The abuse is often inflicted on someone with diminished mental capacity or physical abilities.

In estate planning, undue influence is typically employed to gain more than a fair share in a last will and testament or family trust, or increasing their trust fund distributions (thereby taking assets and monies away from intended heirs).

Indicators of Undue Influence include:

Change in behavior of the victim such as eating habits and everyday routines
Isolation from family or friends, discontinuing regular visits
Interference when communicating with the victim, or the abuser is always present when attempting to communicate
Injuries, often claimed to be accidental, such as bruising or broken bones
Abuser gains authority to access or control financial assets
Excessive gifting by the influenced person, or large amounts of time spent with one individual

Who Are the Abusers?

Abusers come in many forms, including: parents, children, spouses and step-spouses, beneficiaries, trustees, caregivers, family friends, neighbors, or service providers (health care workers, attorneys, spiritual advisors, contractors, counselors, etc.).

Given that the goal of abusers is financial gain, it is wise to not limit your perception of who might be a perpetrator. For example, why would a pastor calling on your elderly mother want to gain a part of her estate? Could the pastor have debt, gambling, infidelity or other financial motives? Similar to embezzlement, you don’t know the financial situation of the individual that would cause them to be willing to commit a crime.

When Should Legal Counsel be Involved?

As indicated, undue influence cases are common in estate disputes, trust contests, and will conflicts. If you suspect undue influence, seek the advice of a probate and trust litigation attorney, in order to help protect the victim and intended beneficiaries. Even if the victim has passed, undue influence can be a component of contesting a will. If you are falsely accused of undue influence, a probate and trust litigation attorney can help protect you.

For assistance, contact Mortensen & Reinheimer, PC at (714) 384-6053 or use our online contact form. You can also learn more about probate and trust litigation on our website.

About the author:
Noah B. Herbold, Attorney, is a Certified Specialist in Estate Planning, Trust & Probate Law (The State Bar of California Board of Legal Specialization). His primary focus is assisting clients with litigated matters such as: Trust Contests, Breach of Trust, Fiduciary Appointment and/or Removal, Asset Ownership, Beneficiary Rights, Determination of Heirship, Elder Financial Abuse, Property Disputes, and Conservatorships. Contact Noah at noah@ocestateplanning.net.

Estate Planning for Rental Properties

(Note: This article is general in nature and is geared towards California properties. Seek professional legal and accounting advice before making any decisions.)

It used to be that rental properties could be passed down for generations, as a wealth transfer technique. But now, our California government has changed the property tax aspect of that approach with the passage of Prop 19. This law has potentially severe financial consequences for children who inherit real property from their parents, because it considerably limits the availability of the parent-child exclusion for purposes of real estate tax assessments and resulting property-taxation.

Before and After Prop 19

Prior to Prop. 19, which took affect in 2021, parents could transfer a rental property with up to $1 million of the assessed value being exempt from the increase in property taxes. This was regardless of the property’s use by the children.

For generations, California families used this law to build family wealth that could be passed on to future generations. Apartment buildings, townhomes, and single family homes were often purchased, refinanced, and more properties acquired, generating rental income as well as increased net worth.

However, while these wealth building strategies can still effectively take place from a capital gains tax perspective, the impact of property taxation has changed dramatically. (Note: From a capital gains tax perspective, current law still is unchanged by Prop 19. Estates of decedents who die during 2025 have a basic exclusion amount of $13,990,000, which generally means no capital gains will be applied if the estate is less than that amount. If the home is sold, capital gains taxes are only due on any gains made since it was inherited.)

Property Tax Increase

While a primary residence might possibly be exempt from value reassessment due to the “Intergenerational Transfer Exclusion,” this does not apply to rental properties. When a rental property is inherited, it is reassessed at its current market value, which can lead to a significant increase in property taxes. This can make it difficult for children to keep inherited rental properties.

For example, if the parents purchased a rental property in 1990 for $150,000, and the value of the rental property is more than $1 million when it is transferred upon the parents’ death to a child, the parents’ tax basis doesn’t pass on to the child. Since the child will now have to pay property taxes based on the assessed fair market value, it can make cash flow negative and impact the child’s decision to keep or sell.

Potential Strategies

There have been efforts to repeal the Intergenerational Transfer Exclusion but so far with no success. So, what can be done?

Your heirs will likely decide upon one of these choices:

Keep it and pay the higher property taxes. Depending on the cash flow, your tax situation (i.e., depreciation and tax write offs), overall investment portfolio, and potential property value growth, it can make sense to keep the rental property. Of course, finances and taxes aren’t the sole reason to sell or keep property, but they typically are key drivers.
Sell the property. This might happen in any case, if heirs would rather have the cash (which might be excluded from capital gains). Further it might be the only viable option if heirs cannot afford any significant negative cash flow.
Convert it to an LLC. The rules applicable to LLCs under the California Revenue & Taxation Code can provide a potential loophole for avoiding higher property taxes. However, the implementation of this strategy depends on when the property was acquired, appreciation, ownership structure of the LLC, rent control, and numerous other factors and rules that might apply.
Make it your primary residence. This would be part of a fairly complex process, including evaluation of tax implications (especially for depreciation deductions), Section 121 exclusion (involving how long you’ve lived in a property and capital gains), what will be done with your existing primary residence, etc. However, this strategy can make sense in certain circumstances, such as downsizing, a more suitable location as you age, and if your rental property might be better suited to avoid any increase in taxes because it fits within the parameters of Prop 19’s exemption for primary residences. On top of all these considerations, in order for your child to take advantage of your property taxes (i.e., the primary residence exemption allowed under Prop 19’s Intergenerational Transfer Exclusion), your child would need to occupy the home as their primary residence within one year of inheritance.

Each of these strategies can be evaluated with your estate planning attorney, so that your estate plan can be optimally structured to meet your personal goals.

Experts in Estate Planning for Real Estate