Major shifts were expected in federal estate and gift tax rules once the 2017 Tax Cuts and Jobs Act provisions sunset after 2025. Instead, a federal law signed on July 4, 2025 raised the exemption to $15,000,000 per person for 2026. For Southern California families - especially those with high-value homes, investment properties, or closely held businesses - now is a crucial time to understand how these changes may influence long-term planning.
Whether you’re reviewing options with a California estate tax planning professional or exploring your next steps through Orange County estate planning services, knowing the fundamentals helps you make informed decisions under the current law.
Federal Estate, Gift, and GST Tax Basics
The federal estate, gift, and generation-skipping transfer (GST) taxes follow the same exemption structure. The historically high exemption was scheduled to be cut roughly in half on January 1, 2026. That cut did not happen.
Key fundamentals to understand:
Unified Exemption Amount
Lifetime Gift Tax
Generation-Skipping Transfer (GST) Tax
For Southern California families with rising home values and diversified assets, the higher exemption may reduce estate exposure, but it is still worth checking where your estate stands.
Special Considerations for California Residents
While California does not impose a state estate tax, local realities make planning more important here than in many states.
High Real Estate Values
A single home in Orange County, Los Angeles, or San Diego is unlikely to push a family past the $15,000,000 exemption on its own, but larger estates can approach it - especially when combined with retirement accounts, life insurance payouts, and investment property.
Business Owners & Professionals
Southern California’s family-owned businesses, medical practices, real estate partnerships, and professional services firms often have substantial enterprise value that counts toward the taxable estate.
Community Property Rules
California’s community property laws grant:
Optimizing these benefits requires careful coordination between spouses.
Planning Moves to Consider
For families whose estates may approach the exemption, several strategies may help.
Utilize the Higher Exemption
Gifting significant assets - such as investment property interests, business ownership, or marketable securities - can make use of today’s larger exemption.
Use Spousal Lifetime Access Trusts (SLATs)
A SLAT can allow one spouse to gift assets outside the taxable estate while still retaining indirect access through the other spouse.
Review Living Trusts and Distribution Provisions
Ensuring your living trust accurately reflects your goals may prevent unintended tax outcomes - especially for blended families or those with multiple properties.
Leverage Valuation Discounts
Families with closely held businesses or rental property LLCs may benefit from valuation discounts when transferring interests, lowering the taxable value of gifts.
Update Beneficiary Designations & Retirement Planning
Coordinating IRAs, 401(k)s, and life insurance with your broader estate plan is essential to avoid tax inefficiencies. Beneficiary designations are part of that check.
Working with professionals who provide California estate tax planning guidance helps ensure no opportunities are missed.
Southern California Examples
High-Value Homeowners
A couple in Orange County with:
should still check their estate’s projected value against the exemption, which is $15,000,000 per person for 2026.
Blended Families
Coordinating inheritance, protecting children from prior relationships, and minimizing taxes all require intentional trust design.
Business Owners
Transferring business interests may reduce future estate taxes while securing continuity for successors.
Plan Ahead While Time Is Still On Your Side
With the new exemption in place, now is a good time to update your documents, assess your estate’s projected value, and consider gifting or trust strategies.
Contact us today to review your estate and gift tax strategy under the current rules. Call (714) 543-6829 or request a free consultation.