How Estate Planning Attorneys Can Help with Tax Planning

Short answer: An estate planning attorney lowers the tax bill your family eventually pays by structuring how and when assets move, using tools like the marital deduction, lifetime gifting, and portability elections. In 2026 the federal estate and gift tax exemption is $15,000,000 per person, or $30,000,000 for a married couple, so most California families never owe federal estate tax at all. For most of my clients the real tax planning work is about income tax basis on inherited property, not estate tax, because California has no state estate tax and no inheritance tax.

How much can I pass on tax free in 2026?

The federal estate and gift tax exemption is $15,000,000 per individual for 2026, or $30,000,000 for a married couple, under Internal Revenue Code (IRC) § 2010(c) as set by the One Big Beautiful Bill Act. That number covers lifetime gifts and what you leave at death, combined, not separately. California does not add anything on top of the federal number: the state has no separate estate tax and no inheritance tax, under Revenue and Taxation Code § 13301. For the large majority of Ventura County families, federal estate tax is not the exposure. The exposure is usually income tax on what heirs inherit, which is where a lot of the actual planning happens.

How does lifetime gifting reduce estate and gift tax exposure?

You can give up to $19,000 per recipient per year in 2026 without filing anything or touching your lifetime exemption. A married couple who elects to split gifts can give $38,000 to the same person in the same year. Give more than that to one person in one year and you generally owe no tax, but you do have to file a Form 709, and the amount above the exclusion reduces your $15,000,000 lifetime exemption under IRC §§ 2010(c) and 2503(b). Two kinds of transfers are exempt entirely and do not use up any exclusion: tuition and medical expenses paid directly to the school or provider, under IRC § 2503(e). A parent or grandparent can also front load five years of annual exclusions into a 529 plan at once, up to $95,000 per beneficiary in 2026, or $190,000 for a married couple, by electing on Form 709 to spread the gift over five years.

What happens to the exemption if my spouse dies first?

Property left outright to a surviving spouse passes free of estate tax under the unlimited marital deduction, IRC § 2056(a). A QTIP marital trust, authorized under IRC § 2056(b)(7), gets you the same marital deduction while still controlling where the assets go after the second spouse dies, which matters in blended families. Separately, if the first spouse’s exemption goes unused, the survivor can add it to their own through portability, under IRC § 2010(c). Portability is not automatic. The first spouse’s executor has to file a federal Form 706 and affirmatively elect it, even when the estate owes no tax and would not otherwise be required to file. Skip that election and the unused exemption is gone. If no Form 706 was filed because none was otherwise required, there is a window of up to five years from the date of death to file a late return and still make the portability election, under Rev. Proc. 2022-32.

Is inherited property taxed differently than a gift?

Yes, and the difference is often the most valuable thing in the plan. Property you inherit generally receives a step up in basis to fair market value as of the date of death, under IRC § 1014, which can erase decades of built-in capital gain for income tax purposes. Property someone gives you during their lifetime keeps the giver’s original basis, known as carryover basis, so that built-in gain becomes your problem when you eventually sell. For a married couple holding property as California community property, both halves of the asset step up in basis when the first spouse dies, not just the deceased spouse’s half, under IRC § 1014(b)(6). Under joint tenancy, only the deceased spouse’s half receives the step up. That single distinction is worth real money and is one of the more common issues I find when a couple already holds title the wrong way for what they actually want.

Does a living trust reduce my taxes?

No. A revocable living trust does not reduce income tax, property tax, or estate tax while you are alive, because you retain full control and can revoke it at any time. What it does is keep the assets you actually retitle into it out of probate. If the trust continues after your death and holds income producing assets, it becomes its own taxpayer: a trust generally must file a federal Form 1041 and a California Form 541 for any year its gross income exceeds $10,000 or its net income exceeds $100. That filing obligation catches a lot of trustees who assumed the trust’s tax life ended once assets were distributed.

Figures verified July 2026.

What to do next

Tax planning inside an estate plan is not a one time exercise. Exemption amounts, gift limits, and portability deadlines change on scheduled dates, and a plan built around old numbers can leave money on the table or miss a filing window entirely. If you have not reviewed your plan since these figures last changed, or if you and your spouse hold property in a way that might not get the full basis step up, talk to an estate planning attorney about what your specific numbers look like now.