Estate Taxation - Where we are today
Estate Taxation — Where We Are Today
Recent tax legislation has increased federal estate and gift tax exemptions to historically high levels.
In 2026, we have a permanent new law setting the federal exemption at $15 million per person. Using the portabilityprovision, a surviving spouse may use the unused exemption of the first spouse to die, without the need to implement trust planning solely for this purpose. That said, trusts continue to offer important benefits, particularly for couples who want to ensure assets are ultimately distributed as intended, protected for children, or managed over time rather than outright.*
The generation-skipping transfer (GST) tax exemption remains aligned with the federal gift and estate tax exemption. The GST tax, which is imposed in addition to the federal estate tax, applies to transfers made during life or at death to grandchildren or others more than 37.5 years younger than the transferor — in other words, transfers that “skip” a generation. Having this exemption now be permanent allows for long-term planning that can benefit children, grandchildren, and future generations.*
With proper planning, married couples may transfer up to $30 million during life and at death without incurring federal estate or gift tax.* Estates exceeding the exempt amounts continue to be taxed at 40%.* Separately, the annual exclusion for tax-free gifts is $19,000 per recipient.
Why Estate Planning Still Matters in California
California does not currently impose a state estate or inheritance tax. However, the absence of a California estate tax does not mean estate planning is unnecessary. For most Californians, higher federal exemptions have shifted the focus away from estate tax avoidance and back to the real reasons people engage in estate planning: protecting themselves, their families, and their assets.
Even individuals and families with estates well below the federal exemption should consider estate planning to:
Avoid California probate, which can be time-consuming, expensive, and public;
Ensure assets are distributed according to personal wishes, not default state law;
Provide for minor children or grandchildren;
Protect inheritances from irresponsible spending, creditors, and divorce proceedings;
Provide for loved ones with special needs without jeopardizing government benefits;
Maintain control over who manages assets and under what conditions;
Plan for incapacity through powers of attorney and health care directives;
Help protect assets from creditors and lawsuits (particularly important for professionals and business owners); and
Create meaningful charitable gifts, if desired.
For Californians with larger estates, opportunities remain to transfer substantial assets to future generations in a tax-efficient manner. At the same time, income tax planning is often just as important as estate tax planning, given California’s high income tax rates.
Finally, while current exemptions are historically generous, tax laws can and do change. As Congress continues to look for ways to increase revenue, some long-standing estate planning strategies may be restricted or eliminated. Implementing planning strategies sooner rather than later increases the likelihood that they will be preserved, or “grandfathered,” under future law changes.
* Estate, gift, and GST tax laws are complex and subject to change. Planning strategies should be reviewed periodically and tailored to individual circumstances, family dynamics, and applicable federal and California law.