Short answer: California does not tax your estate or your heirs’ inheritance, and for 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 owe no estate tax at all. The planning that actually saves money for most people here has less to do with exemption limits and more to do with keeping the step-up in basis on inherited property, using the annual gift exclusion correctly if you are making lifetime gifts, and not letting a surviving spouse’s unused federal exemption go to waste.
Does California charge an estate or inheritance tax?
No. California has no state estate tax and no state inheritance tax, under Revenue and Taxation Code § 13301. Whatever your heirs owe on what you leave them will be a federal question, not a state one, and for most estates the federal exemption is high enough that the answer is nothing.
What is the federal estate tax exemption in 2026?
The federal estate and gift tax exemption for 2026 is $15,000,000 per individual, or $30,000,000 for a married couple, made permanent under Internal Revenue Code § 2010(c) by the One Big Beautiful Bill Act (P.L. 119-21, § 70106). An estate below that number owes no federal estate tax. If your combined estate is anywhere near that range, or you own a business or real estate that could appreciate into it, that is a conversation worth having with an attorney rather than assuming the number will stay put. These thresholds move by statute and by amendment, and what applies is whatever is in effect on the date of death, not the number you read this year.
Should I give assets away now, or let my heirs inherit them?
This is where most avoidable tax mistakes happen. Inherited property generally gets a step-up in basis to fair market value as of the date of death, under Internal Revenue Code § 1014. For California married couples who hold an asset as community property, both halves of that asset step up when the first spouse dies, not just the deceased spouse’s half, under § 1014(b)(6). If the same asset is instead held in joint tenancy, only the deceased spouse’s half gets the step-up.
Gifting an appreciated asset during your lifetime does not get the same treatment. The recipient takes your original cost basis, known as a carryover basis, and the built-in gain becomes taxable to them whenever they eventually sell. A stock or piece of real estate that has appreciated significantly is often better left for your heirs to inherit than given away while you are alive, purely from a basis standpoint. This does not mean lifetime gifting is a bad idea generally, it means the asset you choose to gift matters.
How much can I give away each year without tax consequences?
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 you to file IRS Form 709, but they generally trigger no tax owed until your cumulative lifetime gifts exceed the $15,000,000 exemption, under Internal Revenue Code §§ 2010(c) and 2503(b). Direct payments of tuition or medical expenses made straight to the school or provider are unlimited and do not count as gifts at all, under § 2503(e). A parent or grandparent funding a 529 plan can also front-load five years of annual exclusions at once, up to $95,000 per beneficiary in 2026, or $190,000 for a married couple, by electing to spread the gift over five years on Form 709.
Does a living trust lower my taxes?
No, and this is a common misunderstanding. A revocable living trust does not reduce income tax, property tax, or estate tax. What it does is keep your estate out of probate, which is a separate benefit worth having, but it is not a tax strategy on its own. Since California has no state estate or inheritance tax to begin with, the trust is not shielding you from something that would otherwise apply.
What happens to my exemption if my spouse dies first?
The unlimited marital deduction lets spouses transfer assets to each other tax free, under Internal Revenue Code § 2056(a), and a QTIP marital trust is one tool available under § 2056(b)(7) for spouses who want to provide for a surviving spouse while controlling where the assets go afterward, such as in a second marriage. Separately, portability lets a surviving spouse add the deceased spouse’s unused federal exemption to their own, but only if the first spouse’s executor files IRS Form 706 and affirmatively elects portability, even in estates where a 706 would not otherwise be required. If that filing gets missed, the executor generally has up to five years from the date of death to file a late Form 706 and make the election, under Revenue Procedure 2022-32. Missing that window permanently forfeits the unused exemption.
Figures verified July 2026.
What should I do next?
For most California families, the tax exposure here is smaller than the internet suggests, and the real risk is a basis mistake or a missed portability election rather than a giant estate tax bill. If your estate is approaching the federal exemption, you own appreciating property you are considering gifting, or your spouse has passed and no one has looked at whether a Form 706 needs to be filed, talk to an estate planning attorney before you act. Ridley Law can review your situation and tell you plainly whether any of this applies to you. Learn more about our estate planning services or see our fees for a trust-based plan.
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