Estate tax laws don’t stay still for long, and recent changes are worth paying attention to. If you have an estate plan in place, or if you’re thinking about starting one, understanding how these updates affect you is more important than ever. We’re seeing adjustments to the federal estate tax exemption and changes in California property tax rules that could directly impact how your wealth is passed on. Whether your estate is modest or substantial, we’ll help you make sure your plan keeps up.
Federal Estate Tax Exemption Adjustments
Right now, the federal estate tax exemption is at an all-time high—$13.99 million per person in 2025. This means most estates won’t owe federal estate taxes unless their total value exceeds that amount.
Technically, the current exemption is scheduled to drop by about half at the end of 2025, returning to roughly $7 million per person (adjusted for inflation). That reduction was built into the Tax Cuts and Jobs Act, which expires in 2026. However, it’s worth noting that the current administration has signaled interest in extending the higher exemption. Whether that happens depends on future legislative action, and nothing is guaranteed yet.
Given the uncertainty, it’s a good time to:
- Revisit your estate plan if your net worth is near or above the expected lower threshold.
- Consider whether making gifts now could lock in the higher exemption.
- Talk with a planning professional about how best to prepare for either scenario.
We’ll keep a close eye on any developments and help you adjust your strategy as needed.
California’s Estate Tax Position
Unlike some other states, California does not currently impose a separate estate tax. That’s good news for many families here. But don’t let that lull you into thinking you’re in the clear. Federal estate taxes still apply, and they can hit hard if your estate crosses the threshold. In a state where real estate values alone can push up your net worth, more people are finding themselves close to the limit than ever before.
Even without a state estate tax, the need for a well-thought-out estate plan hasn’t gone away—it’s only become more important.
Implications of Proposition 19 on Property Transfers
Proposition 19, passed in 2020, changed how property transfers between parents and children work in California. It used to be that parents could transfer a home to their kids—whether during life or after death—without triggering a reassessment of the property’s tax value. That’s no longer guaranteed.
Now, for your children to avoid a tax reassessment:
- The property must become their primary residence within a year of the transfer.
- Even then, there’s a cap on how much of the tax value can be excluded from reassessment.
This can lead to dramatically higher property taxes for inherited homes, which could force some heirs to sell.
If you plan to pass real estate to your children, it’s worth rethinking how that will happen. We’ve helped many clients explore alternatives—like holding real estate in a trust—to preserve more of the property’s value and manage tax exposure.
Strategies to Adapt Your Estate Plan
With these changes in play, reviewing and updating your estate plan is a smart idea. A few strategies we often suggest include:
- Making lifetime gifts now to use the higher federal exemption before it’s reduced.
- Setting up irrevocable trusts, which can move assets out of your taxable estate while still providing benefits to your loved ones.
- Reviewing beneficiary designations on retirement accounts and life insurance policies to make sure they still align with your wishes and current tax considerations.
Every family’s situation is different, and the right solution for you depends on your goals, your assets, and the people you want to protect.
Importance of Regular Estate Plan Reviews
Estate plans aren’t something you set and forget. Laws change. So do families, finances, and future goals. That’s why we recommend reviewing your estate plan every few years—or sooner if there’s a major life event like a marriage, divorce, or significant financial change. Checking in regularly ensures your plan still works the way you want it to. If updates are needed, we’ll guide you through them with straightforward advice and practical options.
Keep Your Estate Plan One Step Ahead
Estate tax laws are shifting, and what worked a few years ago might not work tomorrow. We’re here to help you stay ahead of those changes and make sure your plan reflects your goals.
If you haven’t reviewed your estate plan recently—or if you don’t have one yet—now is a good time to take action. Reach out to OC Wills & Trust Attorneys, and let’s make sure your plan still works for you and the people you care about.
