Estate Planning for High Net Worth

Short answer: Estate planning for a high net worth household comes down to three moving parts: using the current federal exemption before it changes, structuring ownership so a lawsuit or a creditor cannot reach everything at once, and documenting who takes over a business or a large portfolio if you cannot. The federal estate and gift tax exemption is $15,000,000 per person, or $30,000,000 for a married couple, in 2026, so most California families never owe a dollar of federal estate tax. California itself has no state estate tax and no state inheritance tax. For most wealthy households, the real risk is not the IRS. It is an unfunded trust, a business with no succession plan, or assets titled in a way that hands a lawsuit an easy target.

How much money actually triggers federal estate tax in 2026?

The federal exemption is $15,000,000 per person, or $30,000,000 for a married couple, made permanent under the One Big Beautiful Bill Act. This is codified at Internal Revenue Code § 2010(c). California has no state estate tax and no state inheritance tax, under Revenue and Taxation Code § 13301, so the federal number is the only threshold that matters here.

A surviving spouse can add the deceased spouse’s unused exemption to their own through portability, but only if the first spouse’s executor files IRS Form 706 and elects it, even when the estate is well under the exemption and would not otherwise have to file. If nobody files Form 706 at the time, the executor has up to five years from the date of death to file a late return and make the portability election. Separately, the unlimited marital deduction lets spouses transfer assets to each other free of estate tax, and a QTIP marital trust is one of the standard tools built on that deduction when a spouse wants to control where assets go after the surviving spouse dies.

How much can I give away each year, and does gifting always make sense?

The 2026 annual gift tax exclusion is $19,000 per recipient, per donor, or $38,000 for a married couple who elects to split gifts. Gifts to any one person above that amount require filing a Form 709, but they generally trigger no actual tax owed until your cumulative lifetime gifts exceed the $15,000,000 exemption. Direct payments of tuition or medical bills made straight to the school or provider are unlimited and do not count as gifts at all, under Internal Revenue Code § 2503(e). The annual exclusion for gifts to a non-citizen spouse is $194,000 for 2026.

Families funding education can also front-load a 529 plan: a donor can “superfund” up to $95,000 per beneficiary in 2026, or $190,000 for a married couple, by electing on Form 709 to treat five years of annual exclusions as used at once.

Gifting is not automatically the better move for an appreciated asset. Property you still own at death generally gets a step-up in basis to fair market value under Internal Revenue Code § 1014, which can wipe out the built-in capital gain for your heirs. Give that same asset away during your lifetime instead, and the recipient takes your original, lower basis and owes tax on the built-in gain when they eventually sell. Before gifting appreciated stock, real estate, or a business interest, run the basis math, not just the exemption math.

Do trusts and LLCs actually protect assets from a lawsuit?

It depends entirely on which kind of trust. A revocable living trust does not reduce income tax, property tax, or estate tax, and it does not shield assets from your own creditors, because you retain the power to revoke it and take the assets back at any time. That same revocability is why assets in a revocable trust stay fully countable if you ever apply for Medi-Cal, under federal law at 42 U.S.C. § 1396p(d)(3)(A).

Irrevocable trusts and entities like LLCs work differently: moving an asset out of your individual name and control can make it harder for a future creditor to reach, but you generally give up direct access to that asset in exchange. Liability insurance, umbrella coverage, and entity structures for a business or rental property are the more common first layer of protection for most families before anyone reaches for an irrevocable trust. None of these tools work retroactively. They only protect what you move before a claim arises, not after.

Living trust planning and asset protection planning are related but separate conversations, and a plan built only around avoiding probate will not necessarily do anything to protect assets from a lawsuit.

What about the business, or an heir who cannot manage money?

A family business without a written succession plan is one of the most common sources of conflict after an owner dies or becomes incapacitated. Deciding, in writing, who runs the business, who owns it, and how a family member who is not involved in the business gets treated fairly relative to one who is, heads off most of that conflict before it starts. The same is true for a beneficiary who cannot be trusted to manage a large inheritance directly, or a beneficiary with a disability who depends on government benefits. Trusts built for those situations hold and manage the inheritance on the beneficiary’s behalf rather than distributing it outright, which is a structural decision that belongs in the plan itself, not something to figure out after the fact.

Incapacity planning belongs in the same conversation. A power of attorney and a health care directive let you name, in advance, who makes financial and medical decisions if you cannot make them yourself, so those decisions do not default to a court proceeding. Every part of this, the business plan, the trust for a vulnerable beneficiary, and the incapacity documents, works only if it is actually signed, funded, and kept current as circumstances change.

Figures verified July 2026.

What to do next

If your estate is anywhere near the federal exemption, or you own a business, or you are worried about a lawsuit reaching assets you have spent decades building, a generic estate plan is not enough. Talk to an estate planning attorney who can look at your actual asset mix, your business structure, and your family situation before recommending specific trusts or entities, and revisit that plan whenever the exemption, your assets, or your family changes.