The federal estate tax exemption increased to $15 million per person as of January 1, 2026, and up to $30 million for married couples. This shift is now permanent. This is a major jump from the $13.99 million tax exemption that existed before. It changes how high-net-worth individuals and families should think about their estate planning under both California and federal law.
At Filippi Law Firm, P.C., our California estate law attorneys are ready to help you. We help families like yours manage large estates and the potential tax burdens of your assets.
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1. The 2026 Federal Estate Tax Exemption: $15M Per Person / $30M Per Couple
Beginning in 2026:
- Individuals can pass $15 million free of federal estate tax
- Married couples can pass $30 million free of federal estate tax
- The exemption is permanent under the 2025 federal tax act
- The annual gift tax exclusion continues separately
For most California families, including many in Granite Bay, Rocklin, and the broader Sacramento region, this means the federal estate tax is no longer a realistic threat. If your estate is under $15 million (or $30 million for married couples), you will not owe federal estate tax.
2. California Has No Estate Tax
California does not impose a state estate tax or inheritance tax. That means:
- The only estate tax California families face is federal
- The new $15M / $30M exemption eliminates estate tax exposure for nearly all families
- Planning can shift away from tax-avoidance structures and toward simplicity, flexibility, and basis step-up optimization
This is a major change from the era when the federal exemption was $5 million or less. Many California families created A/B trusts, bypass trusts, and other tax-driven structures to avoid federal estate tax.
3. Portability Still Matters
Even with the higher exemption, portability remains essential for married couples.
Portability allows a surviving spouse to “inherit” the deceased spouse’s unused exemption. But portability is not automatic. To secure it:
- The surviving spouse must file Form 706
- The filing must occur within the IRS election window (typically 9–15 months after death)
- Even estates well below the exemption should file to preserve the full $30M combined exemption
Many California families skip Form 706 because they believe their estate is too small. With the exemption now permanently high, filing Form 706 is a simple way to lock in future protection.
4. Why Many Older A/B Trusts and Bypass Trusts Should Be Reviewed or Unwound
Thousands of California families, especially in high-value areas like Granite Bay, Rocklin, Folsom, and coastal counties, still have A/B trusts or bypass trusts drafted when the exemption was $5 million or less.
Under today’s rules, these trusts often:
- Provide no tax benefit
- Complicate administration
- Prevent a full step-up in basis at the second spouse’s death
- Increase capital gains tax for heirs
- Lock assets into restrictive structures that no longer serve a purpose
With the exemption now at $15M per person, most families no longer need bypass structures for tax avoidance. A modernized trust can:
- Preserve full step-up in basis
- Simplify administration
- Reduce long-term tax exposure
- Improve flexibility for the surviving spouse
This is one of the most important updates California families should consider.
5. Prop 19: The Tax That Actually Bites California Families
While the federal estate tax is now a non-issue for most families, Prop 19 remains a major concern.
Under Prop 19:
- Children inheriting a home or rental property may face full property tax reassessment
- Reassessment can increase annual property taxes by tens of thousands of dollars
- Many inherited homes become unaffordable to keep
- Trust structures must be carefully drafted to avoid triggering reassessment
For California families, Prop 19, not the estate tax, is now the primary tax planning challenge.
Estate plans should focus on:
- Protecting low property tax bases
- Structuring transfers to avoid reassessment
- Coordinating trust terms with Prop 19 rules
- Evaluating whether to hold, sell, or gift real estate
Determine How the 2026 Federal Estate Tax Exemption May Impact Your Estate Plan
Whether you need to consider an update to your existing estate plan, or need to create one in the first place, our attorneys help high-net-worth individuals account for federal and state tax issues as part of that plan.
Let the dedicated estate planning attorneys at Filippi Law Firm, P.C. review your case. Contact us today for a consultation.
