For the first time in decades, California estate planners can give their clients a definitive answer on the estate tax: unless your estate exceeds $15 million, you won't owe one. The One Big Beautiful Bill made the exemption permanent. Here's what changed, what it means, and how you can plan.
In 2010, President Obama raised the estate tax exemption to $5 million, indexed for inflation - a big increase at the time. In 2017, Trump doubled it to $10 million, also indexed for inflation. This led to this year's exemption of $13.99 million.
Trump's tax cuts were set to expire at the end of this year, which would have dropped the estate tax exemption to $7 million in 2026.
The OBBB locks in the estate tax exemption in 2026 at $15 million per person ($30 million for married couples), indexed for inflation. And it does not sunset in a few years. This is a permanent change.
Less than 1% of Americans have an estate greater than $15 million, and less than 0.2% have an estate greater than $30 million.
Unless you are super rich, there won't be an estate tax.
This means when you design your estate plan to protect your family, you can focus on your unique planning goals without worrying about the estate tax.
But don't be lulled into complacency. Many people believe that if their estate doesn't have to pay an estate tax, they can avoid probate. Not true. The estate tax is completely separate from probate.
Estate Tax threshold: $15 million
California Probate threshold: $184,500 and/or own a home
If you own your home or have other assets worth more than $184.500, your estate will be subject to probate. California probate is very expensive and can take at least a year to grind through the probate court system.
But with a living trust estate plan, you can avoid probate.
The good news is that the OBBB eliminates the estate tax for almost everyone. And it's permanent.
But you still need an estate plan so you can:
If you're ready to finally set up your living trust estate plan or update your existing plan, let us know. We'd be glad to help.
COMPARE US WITH OTHER ATTORNEYS AND DIY ESTATE PLANNING
Estate planning doesn't have to be difficult. At Clark Allison, you will work exclusively with one of our smart, kind and responsive attorneys. The process typically takes two attorney meetings and can be completed in two weeks.
We serve families in person in our El Dorado Hills, Roseville, San Diego, and San Luis Obispo offices, and virtually from anywhere in California.