Estate Tax Planning Attorney in Tarzana

Estate Tax Planning Attorney in Tarzana

Almost nobody in Tarzana has a federal estate tax problem. California has no estate tax, and the federal exemption is $15 million per person in 2026. If you are one of the exceptions, the statewide page covers it.

The tax question that does affect Tarzana households, and affects a lot of them, is capital gains on property held for decades.

Basis is the number that matters

If you bought a Tarzana property in 1978 for $95,000 and it is worth $1,300,000 now, the gain is enormous. What happens to that gain depends entirely on how the property passes.

Assets generally receive a stepped-up basis at death, meaning the new basis is the value at the date of death. A child who inherits and sells shortly afterward may owe little or no capital gains tax, because the built-in gain effectively disappears at death.

If you instead give the property to your child during your lifetime, they generally take your basis. The 1978 number follows the property. When they sell, they owe tax on the entire gain since 1978. On a Tarzana property held since the seventies that difference can run into hundreds of thousands of dollars.

The well-meant transfer that costs the most

An expensive mistake is a parent adding a child to title, or deeding the house outright, to keep it simple or to avoid probate. It does avoid probate. It also transfers basis, forfeits part or all of the step-up, and can trigger a property tax reassessment.

A funded trust achieves the probate goal without any of that, because the transfer happens at death rather than during life. If someone has already suggested putting a child on title, get advice before doing it. It is one of the few estate planning mistakes that is close to impossible to unwind.

This interacts with property tax as well, so the deed you sign to solve one problem can create two others. That is why the sequence matters more than the paperwork.

	Deed or add a child to title now	Funded revocable trust, passes at death
Child’s basis	Your basis follows the property (the 1978 price of $95,000 in the example)	Value at the date of death
Capital gains if the child sells	Tax on the entire gain since 1978	Little or no tax if sold shortly after
Probate	Avoided	Avoided
Property tax	Can trigger a reassessment	Reassessed unless the Prop 19 exclusion applies and the child claims it
Can it be undone?	Close to impossible to unwind	Yes, a revocable trust transfer can be undone

Where portability still applies

For the small number of households near the federal exemption, unused exemption transfers to a surviving spouse only if a federal estate tax return is filed at the first death to elect it, even where nothing is owed. Families skip it because nothing appears due and lose it permanently.

The typical Tarzana home next to the federal exemption

The typical home in ZIP 91356 is worth $1,317,209 (Zillow Home Value Index, August 2026). The 2026 federal estate tax exemption is $15,000,000 per person, more than eleven times that. California has no estate or inheritance tax.

Measure	Amount	Comparison
Typical Tarzana home	$1,317,209	Starting point
Federal exemption, 2026, per person	$15,000,000	The home is 8.8% of it
Small estate affidavit limit, § 13100 (deaths on or after April 1, 2025)	$208,850	Home is about 6.3 times the limit
Primary residence petition cap, § 13151	$750,000	Home is about 1.8 times the cap
Executor’s or attorney’s statutory fee, each	$26,172	2.0% of the home’s value

The house alone isn’t a federal estate tax problem. The bill that does reach a Tarzana house is the probate schedule. In one person’s name it goes to formal probate at the Stanley Mosk Courthouse, and Prob. Code §§ 10800 and 10810 allow the executor and the attorney each $26,172, or $52,344 together, figured on gross value. That’s a court cost, and no estate tax is involved.

The Prop 19 reassessment that a stepped-up basis doesn’t fix

A stepped-up basis wipes out the capital gain. It does nothing for property tax. The two run on separate rules, so a child can inherit a Tarzana house with no capital gain at all and still face a reassessment.

For property acquired from a decedent, basis is generally the fair market value at the date of death (26 U.S.C. § 1014(a)(1)). Property tax turns on Rev. & Tax. Code § 63.2: a parent’s home passing to a child is excluded from reassessment only up to a cap, and only if the child uses it as a principal residence and files the claim. For transfers from February 16, 2025 through February 15, 2027 the cap is the home’s taxable value plus $1,044,586.

Here’s an illustration. Say a parent bought a Tarzana house decades ago and its taxable value is now $250,000 (my assumption). The cap is $1,294,586. If the house is worth the ZIP 91356 typical $1,317,209 at transfer, the market value is $22,623 over the cap, and that excess is added to the taxable value, for $272,623. At the 1% base rate in Article XIII A, that’s about $2,726 a year, against about $13,172 on a full $1,317,209 reassessment. Voter-approved debt and special assessments come on top of both.

The same house can be a great outcome on one tax and an expensive one on the other, which is why Prop 19 planning belongs in the same conversation as basis.

A revocable trust keeps the step-up

Some Tarzana owners worry that moving the house into a trust costs them the stepped-up basis. It doesn’t. Under 26 U.S.C. § 1014(b)(2), property a decedent transferred during life into a trust, with the right reserved to revoke it at all times before death, is treated as acquired from the decedent. It takes the date-of-death basis under subsection (a). A revocable trust that holds a Tarzana house gets the same step-up as a house held in your own name.

That’s the contrast with the deed to a child described earlier on this page. A revocable trust transfer can be undone, and it keeps the step-up. A completed gift to a child is hard to undo, and the child takes your basis.

The step-up has a limit. Section 1014(c) excludes a right to receive income in respect of a decedent, and pre-tax retirement account balances are the usual example. A child who inherits an IRA doesn’t get a new basis in it, so the income tax on distributions is a separate planning question. See the inherited IRA calculator and living trusts in Tarzana for how the two fit together.

Questions Tarzana clients ask

Do we owe estate tax?

Almost certainly not. California has no estate tax and the federal exemption is $15 million per person in 2026. Very few Tarzana households come near it.

Should I put my daughter on the deed now?

Usually not, and it is one of the more expensive mistakes available. It transfers your basis to her, forfeits part or all of the step-up at death, and can trigger a property tax reassessment. A funded trust achieves the probate goal without any of that.

What is a stepped-up basis?

Assets generally get a new basis equal to their value at the date of death. A child inheriting a long-held Tarzana property and selling soon after may owe little or no capital gains tax. A child who received it as a lifetime gift takes your original basis and owes tax on the whole gain.

We already added a child to title. Can it be undone?

Sometimes partially, and it depends on when and how it was done. It is worth looking at rather than assuming, but this is one of the few mistakes that is close to irreversible, so get advice quickly.

What about portability?

It only matters near the federal exemption, and it requires a federal estate tax return at the first death to elect it, even where nothing is owed. Families skip that filing and lose it.

What is the change in ownership statement after a death, and when is it due?

It’s the filing that tells the county assessor that a property changed hands at death. When the property passed through a trust, the trustee files it with the county recorder or assessor within 150 days after the date of death (Rev. & Tax. Code § 480(b)). For a Tarzana house that’s the Los Angeles County Assessor, and the state’s form, BOE-502-D, warns of a penalty for not filing.

Does a stepped-up basis also stop a property tax reassessment?

No. Basis controls capital gains when the heir sells. Property tax is a separate system, and a house that passes to a child is reassessed to market value unless the Prop 19 exclusion applies and the child claims it.

Is a typical Tarzana home anywhere near the federal exemption?

No. At $1,317,209, the typical ZIP 91356 home is about 8.8% of the $15,000,000 per-person exemption for 2026. The exemption becomes a question when the home is one asset among many large ones.