Estate Tax Planning in Simi Valley

Estate Tax Planning in Simi Valley

California has no estate tax. The federal estate tax applies, and at current exemption levels, most Simi Valley families are not exposed. I will be honest about that rather than invent a problem that does not exist for you. For most residents, what matters is making sure assets transfer correctly through a funded trust and that beneficiary designations are up to date, not advanced estate tax strategies.

I am an estate planning attorney serving Simi Valley and all of Ventura County. I do this work over Zoom or phone and sign in person. For the full estate planning overview, see estate planning in Simi Valley.

When combined assets add up faster than expected

A Simi Valley family with a $750,000 home, combined retirement account balances of $1.5 million, $250,000 in a brokerage account, and $500,000 in life insurance has a $3 million estate. Against the 2026 federal exemption of $15,000,000 per person, or $30,000,000 for a married couple under IRC §2010(c), permanent under the One Big Beautiful Bill Act, that family is nowhere close to a federal tax problem. Where it gets more complicated is for single individuals with larger estates, and for business owners whose company has significant and growing value. For those people, planning now still makes sense.

The marital deduction and what it does and does not solve

For married Simi Valley couples, IRC §2056 allows an unlimited marital deduction: assets passing to a surviving spouse, outright or through a properly drafted marital trust, pass free of federal estate tax regardless of amount. This is why the tax exposure for a married couple typically does not arise until the second spouse’s death, and why the estate tax planning conversation for most couples is really about what happens after both spouses are gone, not before. It is also why a plan drafted for a couple needs the marital deduction provisions written correctly if there is any chance the combined estate could approach the exemption over time.

Stepped-up basis matters more than the estate tax for most families

For the overwhelming majority of Simi Valley families, IRC §1014’s stepped-up basis rule is more relevant day to day than the estate tax exemption. When an asset like a home or brokerage account passes through your estate at death, your heirs’ basis resets to the fair market value on the date of death, erasing the capital gain that built up during your lifetime. This is why holding appreciated property until death, rather than gifting it during life or selling it, is often the more tax-efficient path for a family whose estate is nowhere near the federal exemption. It is a bigger, more practical benefit for most people than any estate tax strategy would be.

What makes sense for Simi Valley families right now

The most important estate-tax-related move for most Simi Valley families is making sure life insurance is owned correctly, because life insurance death benefits are included in the taxable estate if you own the policy. An irrevocable life insurance trust can take the policy out of your estate. Beyond that, correct beneficiary designations and a funded revocable trust handle most situations. For families with business interests pushing the estate total higher, high-net-worth estate planning and asset protection connect to the same conversation.

Annual gifting and why most Simi Valley families do not need it

Some clients come to me having read about the annual gift tax exclusion and assume they need to start an aggressive gifting program to reduce a future estate tax bill. For the typical Simi Valley family with an estate well under the $15 million federal exemption, this is solving a problem that does not exist, and it can create a real cost: gifted assets carry over the giver’s original cost basis instead of receiving the stepped-up basis they would get under IRC §1014 if held until death. That means a parent who gifts an appreciated rental property to a child during life can hand that child a much larger capital gains tax bill than if the same property simply passed through the estate. Where lifetime gifting still makes sense is for families who are genuinely approaching the federal exemption, or for non-tax reasons like helping a child with a down payment. I look at the actual numbers before recommending it either way.

Questions Simi Valley clients ask

If I set up an irrevocable trust and the estate tax never applies to me, was it wasted? Irrevocable trusts also provide asset protection and can serve other estate planning goals. Whether the estate tax applies or not, the structure may still be worth having. But I will not recommend it if the only justification is a tax problem that does not exist for you.

Does my 401(k) count toward my taxable estate? Yes. Retirement accounts are part of your taxable estate for estate tax purposes, even though they pass income-tax-free to your estate. The income tax on the inherited retirement account is a separate obligation that your heirs pay as they withdraw.

Could the federal exemption drop back down and catch my estate later? It is possible. Exemption amounts have changed with legislation before and could again. This is exactly why I revisit the numbers with long-term clients periodically rather than doing a one-time estimate and assuming it holds forever. A plan built with some flexibility, rather than one that assumes today’s exemption is permanent, ages better.

What is portability and does it affect me? Portability allows a surviving spouse to use the deceased spouse’s unused estate tax exemption under IRC §2010(c). It requires filing an estate tax return at the first spouse’s death to elect portability, even if no tax is owed. It is worth doing in most married couples’ situations as insurance in case the estate grows substantially in the years after the first death.

My spouse and I have separate assets. Does the marital deduction cover both our estates? IRC §2056’s unlimited marital deduction covers what passes to the surviving spouse at the first death. It does not eliminate tax at the second spouse’s death; it defers it. Planning for the second death is where the exemption amount actually matters.

Should I gift appreciated property to my kids now instead of waiting? Often not, if avoiding estate tax is the only goal. Because of IRC §1014’s stepped-up basis at death, gifting an appreciated asset during life can leave your heirs with your original low basis and a bigger capital gains bill later, while holding it until death resets that basis. I look at the full picture before recommending lifetime gifts.

Talk to Eric or call 805-244-5291. I serve Simi Valley and all of Ventura County.

For families transferring a home between generations, the Proposition 19 reassessment calculator can estimate the property-tax impact of a parent-child or grandparent-grandchild transfer.