# Estate Tax Planning Strategies Compared: 22 Techniques Side by Side

> 22 estate tax planning strategies in one table: what leaves the estate, exemption used, basis, California rules, risks, and the law and cases behind each one.

Source: https://ridleylawoffices.com/estate-planning-strategies-compared/

By Eric Ridley, attorney, Ridley Law. Updated October 2026.

**Who this page is for:** California families with estates above $15 million single or $30 million married, where federal estate tax is a real number, and families in the $100 million and up band. Under those amounts, read the basis and California columns. They matter at every size.

Estate tax planning strategies fall into four groups. Gifts move value out now and use your $15,000,000 exemption. Freezes (GRATs, sales to grantor trusts, installment sales, family loans) move only future growth and use little or none of it. Discount entities shrink the value of what you give. Charitable trusts trade part of the asset for a deduction. Most of them trade something away, usually the step-up in basis at death, and California adds its own costs through Prop 13 and Prop 19, a 13.3% top income tax rate, and community property rules.

**Cite this page:** Ridley Law, “Estate Tax Planning Strategies Compared,” ridleylawoffices.com/estate-planning-strategies-compared/, October 2026.

**$15,000,000**

Federal estate and gift tax basic exclusion per person, 2026 (Rev. Proc. 2025-32)

**$19,000**

Annual exclusion per recipient, 2026 (Rev. Proc. 2025-32)

**40%**

Top federal estate tax rate (IRC § 2001(c))

**5.6%**

Section 7520 rate for October 2026, the hurdle a GRAT has to beat (Rev. Rul. 2026-19)

**13.3%**

Top California income tax rate: 12.3% bracket plus the 1% tax on income over $1 million (FTB; R&TC § 17043)

**22**

Techniques compared on this page, each with its controlling authority

## What are the main estate tax planning strategies?

The main federal estate tax planning strategies are lifetime gifts that use the $15,000,000 exemption, freeze techniques such as GRATs and sales to grantor trusts, family entities that support valuation discounts, life insurance trusts, and charitable split-interest trusts (Rev. Proc. 2025-32; IRC §§ 2702, 2036, 664).

The estate tax is 40% at the top rate (IRC § 2001(c)), and the 2026 basic exclusion is $15,000,000 per person, indexed for inflation after 2026 (IRC § 2010(c)(3)). The same number is the generation-skipping transfer tax exemption (IRC § 2631(c)). For a married couple that’s $30,000,000 before any federal estate tax is due. California itself collects no estate tax: its estate tax equals a federal credit for state death taxes (R&TC § 13302), and Congress repealed that credit (26 U.S.C. § 2011, repealed by Pub. L. 113-295).

The matrix below compares 22 techniques on the questions a family asks. What leaves my estate? Do I use exemption? Can I still reach the money? What happens to income tax and basis? What does California do to it? What’s the risk, and which law and case control it? For the bigger picture of planning at this level, see [high-net-worth estate planning in California](https://ridleylawoffices.com/high-net-worth-estate-planning-california/).

## The matrix: 22 estate planning strategies side by side

Read across a row for one technique. Read down a column to compare one feature. Cells are short. The authority column tells you where each answer comes from, and the sources list at the bottom links every one.

| Technique | What leaves the estate | Uses exemption? | Keeps access or income? | Income tax and basis at death | California overlay | Main risk | Controlling authority | Leading case | Where it fits |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| [Gift using lifetime exemption](https://ridleylawoffices.com/gift-tax-2026-california/) | The asset and all later growth | Yes, full value ($15M per person in 2026) | No | Recipient keeps your basis (§ 1015); no step-up at your death | Real estate gifted to children is reassessed unless Prop 19’s home or farm exclusion applies (R&TC § 63.2) | Lost step-up on low-basis assets | IRC §§ 2010(c), 1015; Treas. Reg. § 20.2010-1(c) (no clawback if the exclusion later drops) | None on point (statute) | Above $15M single or $30M married |
| Annual exclusion gifts | The gift and its growth | No, up to $19,000 per recipient in 2026 | No | Carryover basis (§ 1015) | Same Prop 19 issue for real estate | Gifts in trust usually need a present-interest withdrawal right | IRC § 2503(b); Rev. Proc. 2025-32 | Crummey v. Commissioner (9th Cir. 1968) | Every band |
| [Spousal lifetime access trust (SLAT)](https://ridleylawoffices.com/slat-trust-2026-california/) | The asset and its growth | Yes | Indirectly, through your spouse | Grantor trust, so you pay its income tax (§ 677(a)); no step-up (Rev. Rul. 2023-2) | Fund with separate property; turning community property into separate property takes an express written transmutation (Fam. Code § 852) | Access depends on your spouse; mirror-image SLATs get unwound | IRC §§ 677, 2036 | United States v. Estate of Grace (1969) | $15M to $100M |
| Grantor retained annuity trust (GRAT) | Growth above the § 7520 rate (5.6% for October 2026) | Little or none when zeroed out | Annuity for the term | Grantor trust during the term; remainder takes your basis | Real estate: the Prop 13 exclusion lasts while you’re the present beneficiary (R&TC § 62(d)); the end-of-term transfer can be a change in ownership | Die during the term and part or all of the trust comes back in (Treas. Reg. § 20.2036-1(c)(2)) | IRC § 2702(b); Treas. Reg. § 25.2702-3 | Walton v. Commissioner (2000) | $15M and up, concentrated growth assets |
| [Sale to a grantor trust (IDGT)](https://ridleylawoffices.com/estate-planning-glossary-california/grantor-trust/) | Growth above the note rate (5.22% long-term AFR, October 2026) | Only a seed gift, sized by practice, not statute | Note payments | Your paying the trust’s income tax isn’t a gift (Rev. Rul. 2004-64); no step-up (Rev. Rul. 2023-2) | Selling entity interests: a change in control reassesses the entity’s real estate (R&TC § 64(c)) | A mandatory tax-reimbursement clause pulls the whole trust back into your estate (Rev. Rul. 2004-64) | IRC §§ 671, 1274(d); Rev. Rul. 2026-19 | None on point (rulings) | $15M and up |
| [Dynasty or GST trust](https://ridleylawoffices.com/generation-skipping-trust-california/) | The asset and its growth, across generations | Yes, gift and GST ($15M GST exemption in 2026) | No | No step-up for trust assets | Interests must vest within 90 years (Prob. Code § 21205); taxed by California if a trustee or noncontingent beneficiary lives here (R&TC § 17742) | GST exemption not allocated well, leaving an inclusion ratio above zero | IRC §§ 2631, 2642 | None on point (statute) | $15M and up |
| [Family limited partnership or LLC](https://ridleylawoffices.com/family-limited-partnership-california/) | A valuation discount on interests given away | Yes, for gifted interests | Your retained interest; too much control is the risk | Gifted interests carry over your basis | Moving real estate in at the same proportions is excluded (R&TC § 62(a)(2)); later transfers of more than 50% trigger reassessment (§ 64(d)) | § 2036 pulls the assets back into the estate | IRC §§ 2036(a), 2043 | Estate of Bongard (2005); Estate of Powell (2017) | $15M and up, assets with a real business purpose |
| [Irrevocable life insurance trust (ILIT)](https://ridleylawoffices.com/estate-planning-glossary-california/irrevocable-life-insurance-trust/) | The death benefit | Premium gifts; withdrawal rights can make them annual exclusion gifts | No | Death benefit generally income-tax-free (§ 101(a)) | Premiums paid with community property raise the § 852 transmutation question | An existing policy moved in within 3 years of death comes back in (§ 2035(a)) | IRC §§ 2042, 2035, 101(a) | Crummey v. Commissioner (9th Cir. 1968) | Any band needing liquidity |
| Split-dollar life insurance | Policy value above what’s owed back to you | Depends on the regime (economic benefit or loan) | Repayment when the arrangement ends | Governed by Treas. Reg. § 1.61-22 | Same community-property premium question | IRS argues the full cash value belongs in the estate | Treas. Reg. § 1.61-22 | Estate of Levine (2022, taxpayer win); Estate of Cahill (2018, summary judgment denied) | $15M and up |
| [Charitable remainder trust (CRT)](https://ridleylawoffices.com/charitable-remainder-trust-attorney-california/) | The asset; charity gets the remainder | No; income tax charitable deduction | Payments of 5% to 50% a year (§ 664(d)) | Trust itself pays no income tax; your payments are taxed by tier (§ 664(b), (c)) | California follows § 664 through R&TC § 17731 (FTB) | The SPIA version is a listed transaction (Treas. Reg. § 1.6011-15); skipped payments can disqualify the trust | IRC § 664 | Estate of Atkinson (2000) | Any band with a low-basis asset and charitable intent |
| [Charitable lead annuity trust (CLAT)](https://ridleylawoffices.com/charitable-trust-attorney/) | Growth above the § 7520 rate, after charity’s term | Little when zeroed out | No | Grantor version: deduction up front, then you’re taxed on its income (§ 170(f)(2)(B)) | Non-grantor version is a California taxpayer if a trustee or noncontingent beneficiary lives here (§ 17742) | Returns below the § 7520 rate leave the family nothing | IRC §§ 2522(c)(2)(B), 170(f)(2)(B), 7520 | None on point (statute) | $15M and up with a charitable budget |
| Private foundation | Assets given | No; charitable deduction | Family runs grantmaking; no personal benefit | 1.39% tax on net investment income (§ 4940); minimum payout rules (§ 4942) | No California estate tax to save (R&TC § 13302) | Self-dealing taxes on transactions with the family (§ 4941) | IRC §§ 4940, 4941, 4942 | None on point (statute) | $30M and up |
| [Donor-advised fund (DAF)](https://ridleylawoffices.com/guides/donor-advised-fund-reddit/) | Assets given | No; deduction in the year of the gift | Advisory privileges only | A more-than-incidental benefit from a grant triggers a 125% tax (§ 4967) | No California estate tax to save | Giving shares once a sale is locked in still taxes the gain to you | IRC §§ 4966, 4967 | Estate of Hoensheid (2023) | Every band |
| [QSBS planning (§ 1202)](https://ridleylawoffices.com/qsbs-section-1202-california/) | Nothing by itself; an income tax tool | Gifts of shares to trusts are taxable gifts (§ 2501) | Depends on the trust | Federal exclusion per issuer: the greater of a dollar limit or 10 times basis (§ 1202(b)) | California doesn’t follow § 1202 (FTB) | Multiple trusts can be treated as one (§ 643(f)) | IRC §§ 1202, 643(f) | Cutler v. Franchise Tax Bd. (2012) (California’s old QSBS rule) | Founders, any band |
| [Installment sale](https://ridleylawoffices.com/installment-sale-of-business-california/) | Freezes value at the sale price | No, if sold at full value | Note payments | Gain reported as paid (§ 453); interest charge on notes over $5M (§ 453A) | California taxes the gain as ordinary income | A related buyer who resells within 2 years accelerates your gain (§ 453(e)) | IRC §§ 453, 453A | None on point (statute) | Every band |
| Section 6166 deferral | Nothing; a way to pay the tax over time | No | Not applicable | Not applicable | No California estate tax | Selling or withdrawing too much accelerates the balance (§ 6166(g)) | IRC § 6166 | None on point (statute) | Closely held business over 35% of the adjusted gross estate |
| [Portability](https://ridleylawoffices.com/estate-tax-portability-california/) | Nothing; carries a spouse’s unused exclusion to the survivor | Preserves it | Not applicable | Survivor’s assets get a new basis at the second death (§ 1014(a)) | Community property already gets a full step-up at the first death (§ 1014(b)(6)) | Needs an estate tax return with the election; IRS can examine that return later | IRC § 2010(c)(4), (5); Rev. Proc. 2022-32 (5-year late filing relief) | Estate of Sower (2017) | Married couples |
| [QTIP trust with a Clayton election](https://ridleylawoffices.com/estate-planning-glossary-california/qtip-trust/) | Defers tax to the second death | No; marital deduction | Surviving spouse gets all income for life | Included in the survivor’s estate (§ 2044), so a second step-up | Pairs with portability; community property is stepped up at the first death anyway (§ 1014(b)(6)) | The election has to be made on the estate tax return | IRC §§ 2056(b)(7), 2044; Treas. Reg. § 20.2056(b)-7(d)(3) | Estate of Clayton (5th Cir. 1992) | Married, $15M and up |
| [Qualified personal residence trust (QPRT)](https://ridleylawoffices.com/qprt-california-2026/) | Your home, at a value reduced by your retained term | Yes, the remainder value | You live there for the term | Carryover basis (§ 1015) | Exclusion while you’re the present beneficiary (R&TC § 62(d)); at the end, children face reassessment unless Prop 19 applies (§ 63.2) | Die during the term and the home comes back in (Treas. Reg. § 20.2036-1(c)(2)) | IRC § 2702(a)(3); Treas. Reg. § 25.2702-5 | None on point (statute) | $15M and up, valuable home |
| [Intra-family loan](https://ridleylawoffices.com/understanding-inter-family-loans-and-estate-planning/) | Growth above the interest rate | No, if interest meets the AFR (§ 7872) | Repayment | Interest you receive is income (§ 61(a)) | California taxes the interest too | No real expectation of repayment turns the loan into a gift | IRC §§ 7872, 1274(d) | Estate of Bolles (2020) | Every band |
| [Swap power and upstream basis](https://ridleylawoffices.com/irrevocable-trust-step-up-in-basis-california/) | Nothing new; brings low-basis assets back for a step-up | No | Not applicable | Assets swapped back in get § 1014 basis; assets left in the trust don’t (Rev. Rul. 2023-2). A gift back from someone who dies within a year gets no step-up (§ 1014(e)) | Community property already gets the double step-up (§ 1014(b)(6)) | Swap must be for equal value, with the trustee checking (Rev. Rul. 2008-22) | IRC §§ 675(4)(C), 1014(e); Rev. Rul. 2008-22 | None on point (rulings) | Anyone with low-basis assets in grantor trusts |
| [Incomplete-gift non-grantor (ING) trust](https://ridleylawoffices.com/nevada-trust-california-taxes/) | Nothing; the gift is incomplete | No | Yes | Non-grantor trust for federal purposes | Since 2023, California taxes the trust’s income to you (R&TC § 17082, SB 131) | No California benefit left for residents | R&TC § 17082 | None on point (statute) | Not for California residents |

## How to read this matrix

Start with the second column. A technique that moves the asset itself (a gift, a SLAT, a dynasty trust) uses exemption on the full value today. A freeze (a GRAT, a sale to a grantor trust, an installment sale, a family loan) leaves the current value in your estate, usually as a note or annuity coming back to you, and moves only growth above an IRS interest rate. That’s why freezes use little exemption, and why they only work when the asset outgrows the rate.

Then look at basis. Property you still own at death generally gets a new basis equal to its value then (IRC § 1014(a)). Property you gave away keeps your old basis (IRC § 1015(a)). The IRS’s position is that assets in an irrevocable grantor trust that aren’t in your estate get no new basis at death (Rev. Rul. 2023-2). Every row that removes an asset gives up that step-up. In California the trade is sharper, because the state taxes capital gains as ordinary income (FTB) at a top rate of 13.3%.

The “Where it fits” column is our judgment, not a rule. It’s keyed to the $15,000,000 exemption and the bands this site uses: under $15 million single or $30 million married, where the issues are basis, Prop 19, California income tax and liability; $15 million to $100 million; and $100 million and up. A technique can fit outside its band for reasons that have nothing to do with estate tax.

“None on point” in the case column means the technique rests on a statute, regulation or IRS ruling, and we didn’t find a decided case that tests it directly. It doesn’t mean the technique is risk-free.

## Which estate planning strategy fits your estate size and goal?

For a single person under $15,000,000 or a married couple under $30,000,000, the best strategy is usually to keep appreciated assets until death for the step-up and plan around Prop 19 and California income tax, because no federal estate tax is due below the exclusion (IRC § 2010(c); Rev. Proc. 2025-32).

Above that line, the flow below is a starting map. Take one question at a time. The first “yes” points to the techniques to look at first.

## How much does a freeze move out of the estate?

On a hypothetical $10 million asset growing 8% a year for 10 years, an outright gift moves about $21.6 million out of the estate and uses $10 million of exemption, a zeroed-out GRAT at the October 2026 § 7520 rate of 5.6% moves about $2.3 million and uses almost none, and a sale to a grantor trust with a 10% seed gift moves about $5.8 million and uses $1 million.

This worked example is a hypothetical with stated assumptions, not a projection. The asset is worth $10,000,000 and earns 8% a year, reinvested, for 10 years. The GRAT pays a level annuity for 10 years, set so the gift is about zero at the 5.6% § 7520 rate for October 2026 (Rev. Rul. 2026-19). The grantor trust buys 90% of the asset for a 10-year interest-only note at the October 2026 long-term AFR of 5.22% (Rev. Rul. 2026-19; a note longer than 9 years uses the long-term rate under IRC § 1274(d)), with the other 10% given as a seed gift. The 10% seed is a common practice convention, not a legal requirement. Income taxes are ignored. In a grantor trust you’d pay them yourself, and that moves even more out of the estate (Rev. Rul. 2004-64). No discounts.

| Growth | Technique | Exemption used | Outside estate, year 10 | Moved beyond exemption used | How it's computed |
| --- | --- | --- | --- | --- | --- |
| 8% | Outright gift | $10,000,000 | $21,589,250 | $11,589,250 | $10,000,000 x 1.08^10 |
| 8% | 10-year GRAT | about $0 | $2,277,958 | $2,277,958 | Annuity $1,333,049 a year = $10,000,000 / 7.5016 (10-year factor at 5.6%); remainder after 10 payments |
| 8% | Sale to grantor trust | $1,000,000 | $5,783,463 | $4,783,463 | Trust holds $10,000,000, pays 5.22% interest on a $9,000,000 note each year, repays the note in year 10 |
| 4% | Outright gift | $10,000,000 | $14,802,443 | $4,802,443 | $10,000,000 x 1.04^10 |
| 4% | 10-year GRAT | about $0 | $0 | $0 | Annuity $1,333,049 a year = $10,000,000 / 7.5016 (10-year factor at 5.6%); remainder after 10 payments (trust exhausted) |
| 4% | Sale to grantor trust | $1,000,000 | $161,974 | minus $838,026 | Trust holds $10,000,000, pays 5.22% interest on a $9,000,000 note each year, repays the note in year 10 |

The outright gift moves the most because it moves everything, but it spends ten times the exemption the sale does. And the GRAT’s result depends entirely on beating 5.6%. At 4% growth the same GRAT pays its whole value back to you as annuity and leaves nothing for the family. The sale to the grantor trust keeps only about $162,000, less than the seed gift.

## What works and what fails

| Technique | Works when | Fails when | Authority |
| --- | --- | --- | --- |
| GRAT | The annuity runs for a fixed term to you or your estate, and the assets beat the § 7520 rate | You die during the term, or growth trails the § 7520 rate | Walton (2000); Treas. Reg. § 20.2036-1(c)(2) |
| Family partnership | There’s a legitimate and significant nontax reason and you get interests in proportion to what you put in | You keep using the money, or it’s formed days before death | Bongard (2005); Strangi (5th Cir. 2005); Fields (2024) |
| SLAT | The two trusts aren’t interrelated | Interrelated trusts leave both spouses in about the same economic position | Grace (1969) |
| Grantor trust tax reimbursement | The trustee has discretion to reimburse | Reimbursement is mandatory | Rev. Rul. 2004-64 |
| Family loan | There’s a real expectation of repayment | The borrower plainly can’t repay | Bolles (2020) |
| Redemption buy-sell funded by company-owned insurance | The owners use a cross-purchase agreement and own the policies on each other | The company owns the policies and you assume the redemption obligation offsets the proceeds | Connelly v. United States (2024) |

**Don’t do this:** form a family partnership in the last weeks of life and expect a discount. In *Estate of Powell*, 148 T.C. 392 (2017), cash and securities went into a partnership on August 8, 2008, and the decedent died on August 15. The Tax Court held her ability, acting with the other partners, to dissolve the partnership was a retained right under § 2036(a)(2). In *Estate of Fields*, T.C. Memo. 2024-90, about $17 million went in shortly before death. The Fifth Circuit affirmed inclusion of the assets and a 20% penalty in 2026.

## Cases won and lost

The matrix rests on these decisions, each read in full before it was summarized here.

- **Walton v. Commissioner, 115 T.C. 589 (2000), taxpayer win.** A two-year GRAT whose annuity went to the grantor’s estate if she died was a qualified annuity for a fixed term. The court held the contrary regulation example “an unreasonable interpretation and an invalid extension of section 2702” (115 T.C. at 604). The current regulation now follows that result.
- **United States v. Estate of Grace, 395 U.S. 316 (1969), IRS win.** The reciprocal trust doctrine “requires only that the trusts be interrelated” and leave the settlors “in approximately the same economic position” as if they’d named themselves (395 U.S. at 324).
- **Estate of Bongard, 124 T.C. 95 (2005), split.** A transfer to a holding company met the bona fide sale exception; a later transfer into a family limited partnership did not, and § 2036(a)(1) applied to it.
- **Strangi v. Commissioner, 417 F.3d 468 (5th Cir. 2005), IRS win.** Mr. Strangi put over 98% of his wealth into the partnership and kept using it, and the court affirmed inclusion under § 2036(a)(1).
- **Estate of Powell, 148 T.C. 392 (2017), IRS win.** A partnership formed one week before death was pulled back under § 2036(a)(2), reduced only by the value of the partnership interest received (§ 2043).
- **Estate of Fields, T.C. Memo. 2024-90, aff’d (5th Cir. 2026), IRS win.** The estate claimed 15% and 25% discounts on about $17 million. The court included the assets and imposed a 20% negligence penalty.
- **Estate of Levine, 158 T.C. No. 2 (2022), taxpayer win.** In an intergenerational split-dollar arrangement, §§ 2036(a)(2), 2038 and 2703 didn’t reach the policies. The estate held only a receivable.
- **Estate of Atkinson, 115 T.C. 26 (2000), IRS win.** A charitable remainder annuity trust that never paid the annuity didn’t qualify, and the estate lost the charitable deduction.
- **Estate of Clayton, 976 F.2d 1486 (5th Cir. 1992), taxpayer win.** A QTIP interest contingent on the executor’s election still qualified for the marital deduction.
- **Estate of Sower, 149 T.C. 279 (2017), IRS win.** The IRS may examine a predeceased spouse’s estate tax return to fix the unused exclusion passed to the survivor.
- **Estate of Bolles, T.C. Memo. 2020-71, split.** A mother’s advances to her son were loans through 1989 and gifts after that, once she realized he was very unlikely to repay.
- **Connelly v. United States, 602 U.S. 257 (2024), IRS win.** A corporation’s obligation to redeem a deceased owner’s shares didn’t offset the life insurance it collected to fund the redemption.

## What changes in California

California has no estate tax of its own to plan around (R&TC § 13302; 26 U.S.C. § 2011 repealed). Everything else in this section can change which row of the matrix is right for a California family.

- **Community property gets a double step-up.** When one spouse dies, both halves of community property get a new basis if at least half was in the decedent’s estate (IRC § 1014(b)(6)). Giving community property away during life gives that up. See [community property step-up vs. separate property](https://ridleylawoffices.com/community-property-step-up-vs-separate-property-california/).
- **Transmutation needs an express writing.** A change from community to separate property “is not valid unless made in writing by an express declaration” by the spouse giving up the interest (Fam. Code § 852(a)). *Estate of MacDonald* (1990) 51 Cal.3d 262, 272, construing the identical predecessor statute, held the writing must expressly state that ownership is being changed. SLATs and ILITs funded from community property need this. See [transmutation agreements](https://ridleylawoffices.com/transmutation-agreements-trust-california/).
- **Prop 13 and Prop 19.** A transfer into a trust is excluded from reassessment while you’re the present beneficiary or it’s revocable (R&TC § 62(d)). Moving real estate into an entity in the same proportions is excluded, but transfers of more than 50% of the interests later trigger reassessment (§§ 62(a)(2), 64(d)), and anyone who gets control triggers it too (§ 64(c)). Since February 16, 2021, the parent-child exclusion covers only a principal residence or family farm, and the residence has to become the child’s home (R&TC § 63.2). See [the Prop 19 parent-child exclusion](https://ridleylawoffices.com/prop-19-parent-child-exclusion-california/).
- **Trust income tax residency.** California taxes all of a trust’s income if a fiduciary or a beneficiary whose interest isn’t contingent is a resident (R&TC § 17742(a)).
- **ING trusts no longer work for residents.** For tax years beginning on or after January 1, 2023, California includes an ING trust’s income in the grantor’s income as if it were a grantor trust (R&TC § 17082(a)), enacted by SB 131 (Stats. 2023, ch. 55), per the Franchise Tax Board.
- **No QSBS exclusion.** California doesn’t conform to § 1202 (FTB).
- **High rate, no capital gains break.** The top bracket is 12.3% plus a 1% tax on taxable income over $1,000,000 (FTB 2025 rate schedules; R&TC § 17043), and California has no lower rate for capital gains (FTB).
- **Self-settled trusts.** A spendthrift clause in a trust you set up for yourself is invalid against your creditors (Prob. Code § 15304(a)), and a creditor can reach the most the trustee could pay you (§ 15304(b)).
- **Dynasty trusts and the 90-year rule.** A nonvested interest is valid if it vests or terminates within 90 years (Prob. Code § 21205(b)).

## What this matrix can’t tell you

It can’t value your assets. Every freeze and every discount turns on an appraisal, and the IRS litigates valuation more than doctrine. It can’t tell you your family’s dynamics, which decide whether a SLAT or a dynasty trust is wise. It can’t predict the § 7520 rate or growth. The October 2026 rate is 5.6%; it was 4.6% in January 2026 (IRS). It doesn’t cover income tax planning beyond the basics. That’s your CPA’s work, and Eric does these plans alongside your CPA. And it can’t account for a law change after October 2026; check the date at the top.

It also can’t tell you which techniques combine well. Most plans at this level use several rows at once, for example a SLAT for one spouse, a GRAT for a concentrated stock position, and portability as a backstop.

## Who this is for

This page is for California families who expect a federal estate tax bill, founders before a liquidity event, and families with appreciated real estate where Prop 19 and basis matter as much as the estate tax. Eric works alongside your CPA and, where the matter calls for it, co-counsel. Work at this level is built for each family and quoted in writing before any drafting starts. It isn’t the flat-fee estate plan.

## Guides in this series

Every page in our California high-net-worth and ultra-high-net-worth series, by topic.

### Freezing and transferring wealth

- [GRAT (Grantor Retained Annuity Trust): How It Works, With the California Rules](https://ridleylawoffices.com/grantor-retained-annuity-trust-grat/)
- [Intentionally Defective Grantor Trust (IDGT): How a Sale to a Grantor Trust Works in California](https://ridleylawoffices.com/intentionally-defective-grantor-trust-idgt/)
- [Do You Still Need a SLAT After the 2026 Tax Law? (California)](https://ridleylawoffices.com/slat-trust-2026-california/)
- [CA Dynasty Trusts: Benefits Guide 2026](https://ridleylawoffices.com/the-benefits-of-establishing-a-dynasty-trust-in-california/)
- [Generation-Skipping Trust in California: How It Works](https://ridleylawoffices.com/generation-skipping-trust-california/)
- [Family Limited Partnerships in California](https://ridleylawoffices.com/family-limited-partnership-california/)
- [Defined Value Clauses and the Wandry Clause: Formula Gifts That Survive an Audit](https://ridleylawoffices.com/defined-value-clause-wandry/)
- [Valuation Discounts, Qualified Appraisals and Adequate Disclosure for Family Entity Gifts](https://ridleylawoffices.com/valuation-discounts-adequate-disclosure/)
- [Swap Powers and Upstream Basis Planning: Getting a Step-Up After Rev. Rul. 2023-2](https://ridleylawoffices.com/swap-power-upstream-basis/)
- [Form 709: The Federal Gift Tax Return, Explained](https://ridleylawoffices.com/form-709-gift-tax-return/)

### Charitable planning

- [Charitable Remainder Trust Attorney in California](https://ridleylawoffices.com/charitable-remainder-trust-attorney-california/)
- [Charitable Remainder Annuity Trust (CRAT): Rules, 2026 Payout Math and the SPIA Listed Transaction](https://ridleylawoffices.com/charitable-remainder-annuity-trust-crat/)
- [Charitable Lead Annuity Trust (CLAT): Zeroed-Out CLATs, GST Traps and California Rules](https://ridleylawoffices.com/charitable-lead-annuity-trust-clat/)
- [Private Foundation vs. Donor Advised Fund: Control, Deductions, 2026 Rules and California](https://ridleylawoffices.com/private-foundation-vs-donor-advised-fund/)

### Life insurance and liquidity

- [Irrevocable Life Insurance Trust (ILIT): How It Works in California (2026)](https://ridleylawoffices.com/do-i-need-an-irrevocable-life-insurance-trust-in-my-estate-plan/)
- [Private Placement Life Insurance (PPLI): Investor Control, Webber and California Rules](https://ridleylawoffices.com/private-placement-life-insurance-ppli/)
- [Split-Dollar Life Insurance in Estate Planning: Levine, Morrissette, Cahill and Connelly](https://ridleylawoffices.com/split-dollar-life-insurance-estate-planning/)
- [Estate Tax Deferral Under Section 6166: Paying Estate Tax on a Family Business Over 14 Years](https://ridleylawoffices.com/estate-tax-deferral-section-6166/)
- [Buy-Sell Agreements for California Businesses](https://ridleylawoffices.com/buy-sell-agreement-california/)

### Business owners and founders

- [Estate Planning Before Selling a Business in California: Timing, Trusts and Taxes](https://ridleylawoffices.com/estate-planning-before-selling-a-business-california/)
- [QSBS, Section 1202, and California](https://ridleylawoffices.com/qsbs-section-1202-california/)
- [Installment Sales of a California Business](https://ridleylawoffices.com/installment-sale-of-business-california/)

### Spouses, trusts and administration

- [QTIP Trust Administration After the First Spouse Dies (CA)](https://ridleylawoffices.com/qtip-trust-administration-california/)
- [Estate Tax Portability in California: The 706 Most Families Skip](https://ridleylawoffices.com/estate-tax-portability-california/)
- [Non-Citizen Spouse and the Estate Tax: The QDOT Rule (California)](https://ridleylawoffices.com/non-citizen-spouse-estate-tax-qdot-california/)
- [What Does HEMS Mean in a Trust? Health, Education, Maintenance, Support](https://ridleylawoffices.com/hems-standard-trust-distributions/)
- [What Is a Trust Protector – and Do You Need One in California?](https://ridleylawoffices.com/trust-protector-california/)
- [Trust Decanting in California: A Trustee’s Guide](https://ridleylawoffices.com/trust-decanting-california/)
- [Private Trust Companies and Family Offices: A California Guide](https://ridleylawoffices.com/private-trust-company-family-office/)

### Residency, trusts and California tax

- [Leaving California: Is There an Exit Tax, and What Follows You](https://ridleylawoffices.com/leaving-california-taxes/)
- [Can a Nevada Trust Avoid California Income Taxes?](https://ridleylawoffices.com/nevada-trust-california-taxes/)
- [ING Trusts in California: How SB 131 and R&TC § 17082 Ended the NING](https://ridleylawoffices.com/ing-trust-california/)
- [Expatriation Tax and Estate Planning: Sections 877A and 2801](https://ridleylawoffices.com/expatriation-tax-estate-planning/)
- [California Billionaire Tax: What Prop 40 Would Do](https://ridleylawoffices.com/california-billionaire-tax-prop-40/)

### Asset protection

- [Asset Protection in California: What Actually Works (and What Is a Myth)](https://ridleylawoffices.com/asset-protection-california/)
- [Offshore and Domestic Asset Protection Trusts: Why They Fail Californians](https://ridleylawoffices.com/offshore-asset-protection-trust-california/)
- [Moving California Real Estate Into an LLC: The Prop 13 Reassessment Trap](https://ridleylawoffices.com/llc-transfer-prop-13-reassessment/)

### Strategies that backfire

- [Estate Planning Strategies That Backfire: Abusive Tax Shelters and Costly Mistakes](https://ridleylawoffices.com/estate-planning-strategies-that-backfire/)
- [Deathbed Family Limited Partnerships: Why Late FLPs Fail Under Section 2036](https://ridleylawoffices.com/deathbed-family-limited-partnership/)
- [Micro-Captive Insurance: Section 831(b), the Court Losses and Form 8886 in 2026](https://ridleylawoffices.com/micro-captive-insurance/)
- [Monetized Installment Sales: Why the IRS Says the Deferral Fails](https://ridleylawoffices.com/monetized-installment-sale/)
- [Gifting Appreciated Assets vs. the Step-Up in Basis: When a Lifetime Gift Costs More Tax](https://ridleylawoffices.com/gifting-appreciated-assets-vs-step-up/)

### Data, cases and examples

- [Estate Tax Cases Won and Lost: 34 Cases Scored](https://ridleylawoffices.com/estate-tax-cases-won-and-lost/)
- [Estate Tax Statistics (2026): 36 Verified Figures With Sources](https://ridleylawoffices.com/estate-tax-statistics/)
- [High Net Worth Estate Planning Examples: Four California Families by Net Worth](https://ridleylawoffices.com/estate-planning-examples-by-net-worth/)

## Working with Ridley Law

The first call is free and runs 30 minutes, by phone or Zoom. [Book my free call](https://ridley.click/eric-30) or call 805-244-5291. If you’d like to start with numbers, run the [estate tax calculator](https://ridleylawoffices.com/estate-tax-calculator/).

## Frequently asked questions

### What is the best estate tax planning strategy?

There isn’t one. Below $15 million single or $30 million married in 2026, keeping assets for the step-up usually beats any gift. Above it, the right mix depends on how fast your assets grow, whether you’re married, and whether you want access.

### How do wealthy families avoid estate tax legally?

They use the $15 million exemption early on assets likely to grow, freeze the rest with GRATs or sales to grantor trusts, hold insurance in an ILIT, and give to charity through split-interest trusts. Each choice gives up something, usually basis.

### What is an estate freeze?

An estate freeze caps the value of an asset in your estate at today’s value and shifts future growth to your heirs. GRATs, sales to grantor trusts, installment sales and family loans are the common freezes.

### Is a GRAT or a sale to a grantor trust better?

A GRAT uses almost no exemption but fails if you die during the term. A sale needs a seed gift and a valuation, but the note can run longer and the hurdle is the AFR. In October 2026 that’s 5.22% long-term against a 5.6% § 7520 rate.

### Does California have an estate tax?

No. California’s estate tax is tied to a federal credit that Congress repealed, so it collects nothing. California does tax trust income and capital gains at up to 13.3%, and Prop 19 can reassess real estate passed to children.

### Do I lose the step-up in basis if I give assets away?

Yes. A gift keeps your basis (IRC § 1015). Assets in an irrevocable grantor trust outside your estate don’t get a step-up either (Rev. Rul. 2023-2). A swap power lets you buy low-basis assets back before death.

### Can I still use an ING trust in California?

Not for state income tax. Since 2023, California taxes an ING trust’s income to the grantor as if it were a grantor trust (R&TC § 17082).

This page is general information about California and federal law as of its update date. It isn’t legal, tax, or investment advice for your situation, and reading it doesn’t create an attorney-client relationship.

**Related reading:** [high-net-worth estate planning in California](https://ridleylawoffices.com/high-net-worth-estate-planning-california/); [estate planning strategies that backfire](https://ridleylawoffices.com/estate-planning-strategies-that-backfire/); [ultra-high-net-worth estate planning](https://ridleylawoffices.com/ultra-high-net-worth-estate-planning-california/); [gift tax in 2026](https://ridleylawoffices.com/gift-tax-2026-california/); [SLATs](https://ridleylawoffices.com/slat-trust-2026-california/); [family limited partnerships](https://ridleylawoffices.com/family-limited-partnership-california/); [QSBS and California](https://ridleylawoffices.com/qsbs-section-1202-california/); [stepped-up basis](https://ridleylawoffices.com/stepped-up-basis-california-trust/); [buy-sell agreements](https://ridleylawoffices.com/buy-sell-agreement-california/); [money myths](https://ridleylawoffices.com/money-myths/).

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- [U.S. Tax Court, Estate of Powell v. Commissioner, 148 T.C. 392 (2017)](https://www.courtlistener.com/opinion/4563430/estate-of-powell-v-commr/) (2017-05-18)
- [U.S. Tax Court, Estate of Sower v. Commissioner, 149 T.C. 279 (2017)](https://www.courtlistener.com/opinion/4563577/estate-of-sower-v-commr/) (2017-09-11)
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- [U.S. Tax Court, Estate of Bolles v. Commissioner, T.C. Memo. 2020-71](https://www.courtlistener.com/opinion/4757811/estate-of-mary-p-bolles-john-t-bolles-v-commissioner/) (2020-06-01)
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- [U.S. Tax Court, Estate of Fields v. Commissioner, T.C. Memo. 2024-90](https://www.courtlistener.com/opinion/10258096/estate-of-anne-milner-fields-bryan-k-milner/) (2024-09-26)
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