How to Create a Wealth Transfer Plan in 5 Steps: A Guide for California and Washington Families

By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.

Asset transfer planning means deciding, in writing, who receives each thing you own, when they receive it, through which legal channel, and at what tax cost. For a high-income California or Washington family with children under 12, a workable plan comes down to five steps: map how every asset actually passes, name guardians and a trust for the kids, fix the beneficiary designations, check the estate and gift tax exposure for your state, and write down the reasoning your children will need later.

Most families earning $750,000 to $3 million already have the money. What they usually lack is the paperwork that controls where it goes, and any record of how they think about it. Below is each step, with two worked examples at this income level.

Step 1: Map how each asset passes today

Your will controls less than most people assume. Many assets pass outside it, by contract or by title, and the will never touches them. Before anything else, list every account and note which channel it uses:

• Beneficiary designation: 401(k), 403(b), IRA, life insurance, HSA, deferred compensation. The form on file with the plan wins, even over a newer will.
• Title: the house, joint brokerage accounts, bank accounts. Joint tenancy or community property with right of survivorship passes to the surviving spouse automatically.
• Transfer-on-death registration: brokerage accounts holding vested RSU and ESPP shares can name a TOD beneficiary or a trust.
• Revocable living trust: anything retitled into the trust passes under its terms, privately and without court.
• Will: whatever is left. In California, assets that pass only by will typically go through probate, which is public and slow.

Unvested RSUs deserve their own line. What happens to them at death is set by your employer’s equity plan, not by your will, so read the plan’s death and disability terms and note them in the inventory.

Both California and Washington are community property states (IRS Publication 555). That matters for taxes at the first death, as Example A below shows.

Step 2: Name guardians and put a trust between your kids and the money

With children under 12, this is the most important step and the one most often missing. Two separate decisions are involved.

Who raises the children. You nominate a guardian in your will. Without one, a court decides. Name a first choice and a backup, and talk to both before you sign.

Who controls the money, and until what age. A minor cannot own a 401(k) payout or a life insurance check outright. If you leave assets to a child directly, the money may end up in a court-supervised guardianship of the estate or a custodial account that the child controls at a fixed age. In California, a custodial (UTMA) account transfers to the child at 18 by default; a lifetime gift can delay that to no later than 21, and a transfer under a will or trust can delay it to no later than 25 (Cal. Probate Code §3920.5). In Washington, gift and will or trust transfers end at 21, extendable to 25 if written into the original nomination (RCW 11.114.200). For more on that hand-off, see what happens to a UTMA when the child turns 21.

A trust for the children (often a sub-trust inside your revocable trust) lets you choose a trustee, set staged distribution ages, and say what the money is for: education, a first home, a business. For a family with several million dollars plus life insurance, that is usually a better fit than a lump sum at 18 or 21.

Step 3: Make the beneficiary forms match the plan

This is where good plans break. The most common problems we see in families with equity compensation:

• A 401(k) from a previous employer still names a parent or an ex-partner.
• Life insurance names “my children” directly, which sends money to minors (see Step 2).
• The brokerage account holding RSU shares has no TOD beneficiary, so it falls into probate even though a trust exists.
• A trust was signed but never funded: the house and brokerage account were never retitled into it.

The usual pattern is spouse as primary beneficiary and the children’s trust as contingent. Retirement accounts left to a trust have their own payout rules, so ask the drafting attorney to review those forms specifically. Our guide to naming a trust as beneficiary of a brokerage account walks through the brokerage side.

Step 4: Check estate and gift tax for your state

For 2026 the federal estate and gift tax basic exclusion is $15,000,000 per person, made permanent by the 2025 tax law and indexed from 2027 (IRS). The generation-skipping transfer exemption is also $15,000,000. A married couple can shelter up to $30,000,000 federally if the first spouse’s executor elects portability on a timely filed estate tax return (Form 706). The often-repeated claim that the exemption “drops to about $7 million in 2026” is obsolete.

So for most families in this income range, federal estate tax is not the main issue. State law is.

Washington figures and rules are from the WA Department of Revenue tables and estate tax FAQ. California has no state estate or inheritance tax (State Controller).

Lifetime gifts. For 2026 each parent can give $19,000 per recipient without using any lifetime exclusion, so a couple can give $38,000 per child per year (Rev. Proc. 2025-32). A 529 plan allows a five-year election: up to $95,000 per child from each parent, or $190,000 from a couple, treated as spread over five years and reported on Form 709 (Form 709 instructions). There is no separate “UTMA contribution limit”; the same $19,000 exclusion applies whether the gift goes to a UTMA, a 529, or directly to the child. A gift to a trust qualifies only if the trust is drafted so the gift counts as a present interest, so ask the attorney before funding one with annual gifts (Form 709 instructions, “Annual Exclusion”).

Example A: a Palo Alto family where the issue is title, not tax

Assumptions (illustrative): a Genentech scientist and an Apple engineer, $950,000 household income, children aged 2 and 6. Net worth $4.5 million: home worth $3.2 million (bought for $1.6 million), $700,000 in 401(k)s, $600,000 in vested RSU shares. They have wills from before the kids were born and no trust.

• Estate tax: none. California has no estate tax and $4.5 million is far below the $15,000,000 federal exclusion for 2026.
• Probate: joint title passes the home to the surviving spouse, but at the second death, or if both parents die together, the home and brokerage account would go through California probate because neither has a TOD or trust channel. A revocable living trust, funded, avoids that.
• Basis at the first death: under IRC §1014(b)(6), community property can get a new cost basis on both halves when the first spouse dies. If the home is held as community property, the survivor’s basis can reset to the full $3.2 million. If it is held as plain joint tenancy, generally only the deceased spouse’s half steps up: $800,000 (survivor’s original half) plus $1.6 million (stepped-up half) = $2.4 million. That is $800,000 more capital gain if the survivor later sells at that value. How the deed reads matters, so have the attorney confirm the title.
• Kids: name guardians, create a children’s trust inside the revocable trust, and make it the contingent beneficiary on both 401(k)s.

Example B: a Bellevue family where Washington estate tax is real

Assumptions (illustrative): an Amazon director and a physician, $1.4 million household income, children aged 3 and 7. Net worth $6 million: $2.4 million home equity, $2.2 million in vested RSU shares and brokerage, $1.1 million in 401(k)s, $300,000 cash. Each spouse owns a $4 million term life policy on their own life. Simple wills leave everything to the surviving spouse.

• First death (after July 1, 2026): everything passes to the spouse under the marital deduction, so no Washington tax is due. But Washington has no portability, so the first spouse’s $3,000,000 exclusion goes unused.
• Second death: the survivor’s estate is roughly $6 million plus the $4 million paid on the first spouse’s policy = $10 million, plus another $4 million if the survivor’s own policy is still in force, for up to $14 million. Even at $10 million, the amount above the $3,000,000 exclusion is $7 million. At graduated rates starting at 10%, the Washington bill is at least $700,000 before deductions (derived: 10% x $7,000,000), and higher in practice because part of it falls in the upper brackets (at least $1,100,000 at $14 million, derived: 10% x $11,000,000). Federal tax is zero in both cases, since $14 million is under the $15,000,000 exclusion for 2026.
• Common fixes to discuss with a Washington estate attorney: a credit shelter (bypass) trust that uses the first spouse’s $3,000,000 exclusion, and an irrevocable life insurance trust that owns the policies so the death benefit stays outside both estates. Timing rules apply when moving an existing policy.

The same family moving from Bellevue to the Bay Area would trade this estate tax exposure for California’s income tax (and Washington has enacted a 9.9% income tax on AGI over $1,000,000 starting in 2028), which is why state of residence belongs in the plan, not only in the tax return.

Step 5: Write down the reasoning, not just the instructions

Legal documents say who gets what. They do not say why, or what you hoped the money would do. A trustee deciding whether to fund your 22-year-old’s startup, or your children reading the trust at 30, will have only the documents to go on unless you add more.

A family education plan for wealth transfer can be short. A one-page letter of intent stored with the trust, a list of your values about money and work, and a record of the big decisions you made and why: the house, the job change, the RSU sales. As Kevin Luu puts it: “Your kids don’t need to inherit your portfolio. They need to inherit your decision-making process.”

With children under 12, this is the part you can start now. The Age Five Family Office™ builds this record into the FamilyKnowledge® Library alongside the legal plan, and the Age Five Wealth Education program covers how to involve kids at each age. See also family governance.

Common mistakes in high-income families

• Updating the will but not the beneficiary forms or account titles.
• Signing a trust and never funding it.
• Leaving life insurance to minor children directly.
• In Washington, using “all to spouse” wills that waste the first exclusion.
• Forgetting to review the plan after a move between states, a new child, or a large RSU grant.

Frequently asked questions

What is the best way to pass on wealth to young children?

For most families with children under 12, the most practical structure is a funded revocable living trust with a sub-trust for the children, a named trustee, and staged distribution ages. Beneficiary forms on retirement accounts and life insurance then point to that trust as contingent beneficiary. Lifetime gifts, such as 529 contributions within the $19,000 annual exclusion for 2026, can add to it.

How often should a wealth transfer plan be reviewed?

Review it after any major change: a birth, a move between California and Washington, a new employer equity plan, a large liquidity event, or a change in guardians. Otherwise, a quick check of beneficiary forms and account titles every two to three years catches most problems. Tax law changes, such as the 2025 law that set the federal exclusion at $15,000,000 for 2026, are another reason to look again.

Do I need a trust if my estate is under the federal exemption?

Often yes, but not for federal tax. In California a funded trust mainly avoids probate and controls how money reaches minor children. In Washington, the state estate tax exclusion is $3,000,000 for deaths in the second half of 2026, so many families above that level use trusts for state tax planning as well as control.

Next step

Start with Step 1: list every account, how it is titled, and who the beneficiary is. Bring that list to your estate attorney, or to a Tax & Wealth Assessment with us. Our list of questions to ask an attorney can help you prepare.

This is general education, and the right move depends on the family’s full picture.

Written by

Kevin Luu

Co-Founder and Chief Learning Officer, Bright Advisers

Kevin has advised high-income W-2 tech and biotech families since 2015, and leads the education-first Age Five Family Office from Brea, California.

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