The One Big Beautiful Bill passed last year, gave us, for the first time in a long time, certainty with the estate and gift tax. The law is permanent - well, at least until they change it again.
Under the current law, each person can die with and gift up to $15 million without an estate or gift tax, and this amount will be adjusted each year for inflation.
This means for individuals, there will be no estate tax unless your estate is worth more than $15 million. And for married couples, there will be no estate tax unless your estate is worth more than $30 million. The new law eliminates the estate and gift tax for almost everyone.
As has been the case for some time, the estate tax exemption is connected to the gift tax exemption - gifts and estates draw from the same amount. If you gift $5 million this year you will use $5 million of your gift tax exemption, which means you will have $10 million left of your estate tax exemption.
Here is a table showing how the estate and gift tax exemption has changed over the years. These are not small changes. When I started as an estate planning attorney in 1996, the gift and estate tax exemption was $600,000. Now it's $15 million.
| Year | Lifetime Estate/Gift Tax Exemption (per individual) | Top Estate Tax Rate (%) | Annual Gift Tax Exclusion (per recipient) |
|---|---|---|---|
| 1996 | $600,000 | 55 | $10,000 |
| 1997 | $600,000 | 55 | $10,000 |
| 1998 | $625,000 | 55 | $10,000 |
| 1999 | $650,000 | 55 | $10,000 |
| 2000 | $675,000 | 55 | $10,000 |
| 2001 | $675,000 | 55 | $10,000 |
| 2002 | $1,000,000 | 50 | $11,000 |
| 2003 | $1,000,000 | 49 | $11,000 |
| 2004 | $1,500,000 | 48 | $11,000 |
| 2005 | $1,500,000 | 47 | $11,000 |
| 2006 | $2,000,000 | 46 | $12,000 |
| 2007 | $2,000,000 | 45 | $12,000 |
| 2008 | $2,000,000 | 45 | $12,000 |
| 2009 | $3,500,000 | 45 | $13,000 |
| 2010 | $5,000,000 (or carryover basis election) | 0 (temporary repeal) | $13,000 |
| 2011 | $5,000,000 | 35 | $13,000 |
| 2012 | $5,120,000 | 35 | $13,000 |
| 2013 | $5,250,000 | 40 | $14,000 |
| 2014 | $5,340,000 | 40 | $14,000 |
| 2015 | $5,430,000 | 40 | $14,000 |
| 2016 | $5,450,000 | 40 | $14,000 |
| 2017 | $5,490,000 | 40 | $15,000 |
| 2018 | $11,180,000 | 40 | $15,000 |
| 2019 | $11,400,000 | 40 | $15,000 |
| 2020 | $11,580,000 | 40 | $15,000 |
| 2021 | $11,700,000 | 40 | $15,000 |
| 2022 | $12,060,000 | 40 | $16,000 |
| 2023 | $12,920,000 | 40 | $17,000 |
| 2024 | $13,610,000 | 40 | $18,000 |
| 2025 | $13,990,000 | 40 | $19,000 |
| 2026 | $15,000,000 | 40 | $19,000 |
BTW, don't confuse estate tax with probate—it's a very common mix-up!
Many people assume that if their estate is below the threshold for federal estate tax (the $15 million exemption in 2026), they won't have to deal with probate at all. That's not correct.
Estate tax is a tax on the transfer of a deceased person's assets, calculated on the value of the gross estate (including both probate and non-probate assets). It only applies to very large estates which excede the exemption amount.
Probate, on the other hand, is the separate court-supervised legal process for validating a will (if there is one), identifying and inventorying assets, paying debts and taxes, and distributing property to heirs. It applies to assets that are solely in the deceased person's name and don't have built-in transfer mechanisms like joint ownership with right of survivorship, beneficiary designations, or a living trust.
The key point: Estate tax liability has no bearing on whether probate is required. Even if your estate is well under the estate tax threshold and owes zero estate tax, any probate assets will still go through the probate process, with its associated time, costs, public record, and potential delays, unless you've planned ahead to avoid it with a living trust.
Avoiding estate tax doesn't mean avoiding probate, and vice versa. These are two entirely separate issues.
California periodically updates the probate threshold. It was increased effective April 2025, to $208,850. Previously, it was $184,500.
If your estate is worth more than $208,850, it may be subject to probate when you pass away. The easiest way to avoid probate is to set up a living trust.
California has introduced two new ways to transfer your home at death without probate: transfer-on-death deeds and AB 2016. Both methods have limitations, are complicated and may involve a court hearing. Will they replace the living trust as the best way to avoid probate for your home? Short answer: No. The tried-and-true living trust is simpler, more reliable, and it works.
Read more here on How to Avoid California Probate Without a Living Trust
As of January 1, 2026, California’s Medi-Cal program has reinstated asset limits for long-term care eligibility, rolling back to the rules in place in 2023. This shift ends a brief period of expanded access and brings back familiar challenges for families planning for skilled nursing or other long-term care needs.
For more on these changes, the difference between Medi-Cal and Medicare, and eligibility strategies, click here.
The increased and permanent nature of the estate and gift tax exemption is big. It brings certainty and, for almost everyone, it eliminates the fear of an estate tax. When you design your estate plan, you can now focus on the planning aspect: how you want your assets managed and distributed to best protect your family, and not worry so much about estate taxes.
The California transfer on death deeds and AB 2016, show us that the tried and true living trust is still the most efficient and reliable way to avoid probate.
However, the reinstatement of Medi-Cal asset limits for long-term care eligibility as of January 1, 2026, reintroduces important considerations for those planning for potential skilled nursing or extended care needs.
As it has always been, estate planning is still very important. The tax laws will change from time to time, but the need to have an up-to-date and comprehensive estate plan to protect your family is as important now as ever.