Ultra-High-Net-Worth Estate Planning in California: Above the $15 Million Exemption

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

Estate size this page covers: $15 million and up for one person, $30 million and up for a married couple, including families at $100 million and above. For California estates under that line, where the federal estate tax usually never applies, see high-net-worth estate planning in California.

What the estate tax costs a family at this level

Take a California couple with $80 million today. If their assets grow 6% a year and the second spouse dies in 20 years, the estate will be worth about $256.6 million, and the federal estate tax on it comes to about $90.6 million. More than three-quarters of that tax falls on growth that hasn’t happened yet.

The 2026 exemption is $15 million per person for estate and gift tax together, with a separate $15 million exemption from generation-skipping transfer tax (Rev. Proc. 2025-32). Pub. L. 119-21, enacted July 4, 2025, amended IRC § 2010(c)(3) to set the $15 million figure and index it for inflation, and the statute as amended has no sunset date. A married couple can shelter about $30 million, by each using an exemption or through the portability election at the first death, which takes a timely filed estate tax return. See the portability election and gift tax in 2026.

California adds nothing to the bill. Its statute bars a state estate or gift tax except a pick-up tax tied to the federal credit for state death taxes (R&TC §§ 13301, 13302), and Congress has since repealed that credit (former IRC § 2011).

A spouse who isn’t a U.S. citizen changes the federal math. The unlimited marital deduction at death then requires a qualified domestic trust (IRC § 2056(d)), and lifetime gifts to that spouse get a $194,000 annual exclusion in place of the marital deduction, with anything above it using up the donor’s exemption (IRC § 2523(i)). See the QDOT rule.

Moving the growth out while values are low

Once the exemption is used up, each dollar of growth left in the estate costs 40 cents at death, and each dollar of growth sitting in a trust outside the estate costs no estate tax at all. So the planning moves assets out early, by gift or by sale, at today’s value. The owner’s estate keeps, at most, a fixed amount, and everything the asset earns or gains after that builds up for the next generation. Planners call this an estate freeze. The hypothetical below isn’t a projection for any real family.

Assumptions: a married couple with $80 million in 2026, all assets growing 6% a year, the second death in year 20, and a flat 40% on everything over a combined $30 million exemption held at its 2026 amount. In the second row the couple gives $30 million to a grantor trust in 2026, using both exemptions. In the third row they also sell $40 million of assets to the same trust for a 20-year note paying a hypothetical 4.5% interest, which they reinvest. Indexing the exemption would lower the tax in every row by the same amount, so the gaps between rows hold. The model leaves out the income tax the couple pays on the trust’s income, which moves still more value out of the estate (Rev. Rul. 2004-64), and it leaves out valuation discounts.

On those numbers, giving $30 million to a grantor trust in 2026 cuts the tax by $26.5 million. Adding a $40 million sale to the same trust for a note cuts it by $35.3 million, and the family ends up with $201.3 million instead of $165.9 million.

The price is basis. Assets in a grantor trust that stays out of the estate don’t get a stepped-up basis at death (Rev. Rul. 2023-2), so the heirs pay capital gains tax on that growth when they sell, at a combined 37.1% federal and California rate. A freeze earns its keep on assets expected to grow fast or to be held a long time. On a low-basis asset the family will sell soon after death, the step-up can be worth more than the estate tax saved. See gifting appreciated assets versus the step-up.

Choosing among the tools

Each technique below makes that move a different way. Which ones a family uses depends on what they can live without, what they own, and where the cash for the tax will come from at death. Each one has its own page in the series below.

Gifts the family can do without

The plainest version is a gift of the exemption itself to a trust for children and grandchildren. Allocating the GST exemption to the same trust (IRC § 2631) lets it pass down more than one generation without generation-skipping transfer tax, for as long as California allows: an interest has to vest or end within 21 years after a life in being or within 90 years (Prob. Code, § 21205). See dynasty trusts in California and generation-skipping trusts.

When the gift is an interest in a closely held company or a real estate LLC, the risk is that the IRS later values it higher and the gift runs past the exemption. A defined value clause gives a dollar amount of interests instead of a fixed number of units. In Wandry v. Commissioner, T.C. Memo. 2012-88, parents gave each child $261,000 of LLC units under a formula, the IRS revalued the company, and the Tax Court held the clause valid and reallocated the units to match the dollar amount. Estate of Petter v. Commissioner (9th Cir. 2011) 653 F.3d 1012, from the circuit that covers California, approved a version that sends any excess value to charity. See defined value clauses.

Gifts that keep a door open through a spouse

A couple who may someday need the money can still use the exemption. A spousal lifetime access trust uses one spouse’s exemption to fund a trust for the other, so the couple keeps indirect access through the beneficiary spouse. When each spouse creates one for the other, the two trusts have to differ in real terms and in timing. In United States v. Estate of Grace (1969) 395 U.S. 316, the Supreme Court applied the reciprocal trust doctrine to interrelated trusts that left each settlor in about the same economic position as before, with no need to prove a tax motive. In California a SLAT is usually funded with the donor’s separate property, so community assets need a written transmutation first. See SLATs after the 2026 tax law.

Moving growth without spending the exemption

A grantor retained annuity trust pays the grantor a fixed annuity for a term of years, and whatever the assets earn above the IRS’s assumed rate under IRC § 7520 passes to the remainder beneficiaries with little or no gift tax. Walton v. Commissioner (2000) 115 T.C. 589 is why short GRATs work. The Tax Court held that a 2-year annuity payable to the grantor or her estate is a qualified interest, which is what lets a short GRAT carry a very small taxable gift. A GRAT fails when its assets don’t outgrow the § 7520 rate, so it works best with volatile assets. See GRATs.

A sale to an intentionally defective grantor trust does the same work on a larger scale, as the $40 million sale in the chart shows. The trust buys assets for a note, growth above the note rate stays in the trust, and the grantor keeps paying income tax on the trust’s income (IRC § 671), which moves still more value out. The IRS has ruled that paying that tax isn’t a gift and that a trustee’s discretion to reimburse it doesn’t by itself pull the trust into the estate, while a mandatory reimbursement does (Rev. Rul. 2004-64). See sales to grantor trusts and installment sales of a California business.

When the wealth is a family business or real estate

Interests in a family limited partnership or LLC can be valued at a discount for lack of control and marketability The risk is IRC § 2036(a), which pulls the entity’s assets back into the estate when the person who funded it kept the enjoyment of them, or the right, alone or with others, to decide who enjoys them, unless the transfer was a bona fide sale for full consideration.

In Strangi v. Commissioner (5th Cir. 2005) 417 F.3d 468, the decedent put about 98% of his wealth into a partnership, kept living in his house and had his expenses paid from it. In Estate of Powell v. Commissioner (2017) 148 T.C. 392, a California case, a son acting under a power of attorney moved his mother’s assets into a partnership a week before she died, and her ability to dissolve it with the other partners brought the assets back under § 2036(a)(2). The entity that held up in Estate of Bongard v. Commissioner (2005) 124 T.C. 95 was a holding company formed to position the business for a sale. The family partnership in the same case did nothing after it was formed, and it failed. See family limited partnerships in California and the deathbed partnership.

California adds a property tax question. When any person or entity obtains more than 50% of an entity, its California real estate is reassessed (R&TC § 64, subd. (c)). Property that went in under the proportional-interest exclusion is reassessed once more than 50% has moved from the original coowners, counted cumulatively (§ 64, subd. (d)). The Prop 19 parent-child exclusion doesn’t apply to entity interests (R&TC § 63.2, subd. (e)(8)). A freeze built on LLC interests has to track every transfer against those lines. See LLC transfers and Prop 13 and Prop 19 planning.

When the family is charitable

A charitable remainder annuity trust pays a fixed amount of 5% to 50% of its starting value to individuals for life or up to 20 years, then passes to charity (IRC § 664(d)). A charitable lead trust reverses the order, paying charity first and the individuals at the end. See charitable remainder trusts in California and charitable lead annuity trusts.

Paying the tax when the estate isn’t liquid

The couple in the example above would owe about $90.6 million in cash, due nine months after the second death (IRC § 6075(a)), and an estate built on a company or real estate may not have it. Life insurance owned by an irrevocable life insurance trust supplies that cash without being taxed itself, as long as the insured held no incident of ownership at death (IRC § 2042(2)) and the trust bought the policy from the start, because a policy transferred within three years of death is pulled back in (IRC § 2035(a)).

Split-dollar lets a wealthy family member pay the premiums in exchange for a right to be repaid. In Estate of Levine v. Commissioner (2022) 158 T.C. No. 2, only the ILIT could end the arrangement, so the estate included the right to repayment and not the policies’ larger cash value. See irrevocable life insurance trusts, split-dollar, life insurance in estate planning and premium-financed life insurance.

Where a closely held business is more than 35% of the adjusted gross estate, the executor can elect to pay the tax on it in up to 10 annual installments, the first due up to five years after the normal due date (IRC § 6166(a)). Part of the deferred tax carries a 2% interest rate. A buy-sell agreement funded with insurance is the other source of cash, and its structure matters. In Connelly v. United States (2024) 602 U.S. 257, insurance the company held to redeem a deceased owner’s shares counted in the company’s value, and the estate owed $889,914 more. See § 6166 deferral and buy-sell agreements.

Founders holding company stock

For stock in a qualifying C corporation acquired after Pub. L. 119-21 was enacted, IRC § 1202 now excludes up to 100% of the federal gain on qualifying stock held five years, capped per company at $15 million or ten times basis. Someone who receives the stock by gift takes it the way the donor acquired it, with the donor’s holding period (§ 1202(h)), so the recipient can still qualify. California doesn’t conform and taxes the full gain (FTB Publication 1001). See QSBS, Section 1202 and California and planning before a business sale.

Where California changes the plan

California’s income tax makes the basis trade-off sharper. It taxes capital gains as ordinary income, at a top rate of 12.3% plus 1% on income over $1 million (R&TC § 17043; FTB Publication 1001), so the step-up a freeze gives up is worth more here than the federal rate alone suggests.

Community property raises the stakes again. Both halves get a new basis at the first spouse’s death (IRC § 1014(b)(6)), so freezing a community asset gives up a double step-up. Moving community property into a SLAT or an ILIT funded by one spouse needs a written transmutation first, and the writing has to state expressly that ownership is changing (Fam. Code, § 852; Estate of MacDonald (1990) 51 Cal.3d 262). See transmutation agreements and the community property step-up.

Moving a trust out of California doesn’t by itself move its income out of California tax. A trust is taxed on all its income if a trustee or a noncontingent beneficiary lives in California (R&TC § 17742). In Steuer v. Franchise Tax Bd. (2020) 51 Cal.App.5th 417, the court held California-source income is taxed wherever the trustees live. And since 2023 an incomplete-gift nongrantor trust is taxed to its California grantor as if it were a grantor trust, unless it elects resident treatment and distributes at least 90% of its distributable net income to charity (R&TC § 17082). See whether a Nevada trust avoids California tax, ING trusts and leaving California.

A trust you create for your own benefit won’t keep your creditors out. California doesn’t honor a spendthrift clause in that trust, and creditors can reach the most the trustee could pay you, up to what you contributed (Prob. Code, § 15304, subds. (a), (b)). Subdivision (c) adds a rule that matches Rev. Rul. 2004-64: a trustee’s discretion to reimburse the grantor’s income tax on trust income doesn’t make the grantor a beneficiary or give creditors a claim. Any transfer made with actual intent to hinder, delay or defraud a creditor can be undone (Civ. Code, § 3439.04). See asset protection in California.

A trust that needs changing later can sometimes be decanted. Under the Uniform Trust Decanting Act (Prob. Code, § 19501 et seq.) a trustee can move a trust into a new one, acting within its fiduciary duties and the purposes of the first trust (§ 19504). See trust decanting in California and trust protectors.

An agent under a California power of attorney can make gifts or fund trusts only if the document expressly grants that authority (Prob. Code, § 4264). In Powell, the Tax Court applied that rule to the California decedent and held the son’s transfer to a charitable lead trust void or revocable, which put the partnership interest back in her estate. A plan that may need to keep gifting after the client loses capacity has to say so in the power of attorney.

How these plans fail

The taxpayers who won in court won on drafting: an annuity payable to the grantor or her estate in Walton, a gift defined in dollars in Wandry, excess value routed to charity in Petter, the termination right held by the ILIT in Levine. The IRS won where the family kept control or benefit of what it said it had given away, in Strangi, Powell and Grace. Connelly is the other kind of loss: a buy-sell whose structure didn’t account for the estate tax. The case-by-case record is on estate tax cases won and lost, and every technique’s working and failing conditions sit side by side on estate planning strategies compared.

Other failures arrive packaged as products. The pure trust and “constitutional trust” pitch, syndicated conservation easements and the buy, borrow, die pitch each get their own page, and strategies that backfire collects the rest.

At $1 billion and above

Families worth $1 billion or more face one more question this year. Proposition 40 on the November 3, 2026 ballot would impose a one-time state tax equal to 5% of net worth on billionaires who were California residents on January 1, 2026, with real estate, pensions and retirement accounts generally excluded, according to the Legislative Analyst’s Office. The LAO also notes that if Proposition 41 or 42 gets more yes votes, Proposition 40 could be stopped even with majority support. Ridley Law takes no position on any of the three. What affected families are weighing, and how the measure would work, is on Proposition 40, the California billionaire tax.

How engagements work

Planning at this size is never one document. I work alongside your CPA and, where the matter calls for it, co-counsel, for example on a business sale or a cross-border question. Will and trust contests and anything headed to trial I refer out. Work at this level is built for each family and quoted in writing before any drafting starts. Nothing on this page is investment advice, and insurance and investment products come up here only as legal and tax structures.

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
• Intentionally Defective Grantor Trust (IDGT): How a Sale to a Grantor Trust Works in California
• Do You Still Need a SLAT After the 2026 Tax Law? (California)
• CA Dynasty Trusts: Benefits Guide 2026
• Generation-Skipping Trust in California: How It Works
• Family Limited Partnerships in California
• Defined Value Clauses and the Wandry Clause: Formula Gifts That Survive an Audit
• Valuation Discounts, Qualified Appraisals and Adequate Disclosure for Family Entity Gifts
• Swap Powers and Upstream Basis Planning: Getting a Step-Up After Rev. Rul. 2023-2
• Form 709: The Federal Gift Tax Return, Explained

Charitable planning

• Charitable Remainder Trust Attorney in California
• Charitable Remainder Annuity Trust (CRAT): Rules, 2026 Payout Math and the SPIA Listed Transaction
• Charitable Lead Annuity Trust (CLAT): Zeroed-Out CLATs, GST Traps and California Rules
• Private Foundation vs. Donor Advised Fund: Control, Deductions, 2026 Rules and California

Life insurance and liquidity

• Irrevocable Life Insurance Trust (ILIT): How It Works in California (2026)
• Private Placement Life Insurance (PPLI): Investor Control, Webber and California Rules
• Split-Dollar Life Insurance in Estate Planning: Levine, Morrissette, Cahill and Connelly
• Estate Tax Deferral Under Section 6166: Paying Estate Tax on a Family Business Over 14 Years
• Buy-Sell Agreements for California Businesses

Business owners and founders

• Estate Planning Before Selling a Business in California: Timing, Trusts and Taxes
• QSBS, Section 1202, and California
• Installment Sales of a California Business

Spouses, trusts and administration

• QTIP Trust Administration After the First Spouse Dies (CA)
• Estate Tax Portability in California: The 706 Most Families Skip
• Non-Citizen Spouse and the Estate Tax: The QDOT Rule (California)
• What Does HEMS Mean in a Trust? Health, Education, Maintenance, Support
• What Is a Trust Protector – and Do You Need One in California?
• Trust Decanting in California: A Trustee’s Guide
• Private Trust Companies and Family Offices: A California Guide

Residency, trusts and California tax

• Leaving California: Is There an Exit Tax, and What Follows You
• Can a Nevada Trust Avoid California Income Taxes?
• ING Trusts in California: How SB 131 and R&TC § 17082 Ended the NING
• Expatriation Tax and Estate Planning: Sections 877A and 2801
• California Billionaire Tax: What Prop 40 Would Do

Asset protection

• Asset Protection in California: What Actually Works (and What Is a Myth)
• Offshore and Domestic Asset Protection Trusts: Why They Fail Californians
• Moving California Real Estate Into an LLC: The Prop 13 Reassessment Trap

Strategies that backfire

• Estate Planning Strategies That Backfire: Abusive Tax Shelters and Costly Mistakes
• Deathbed Family Limited Partnerships: Why Late FLPs Fail Under Section 2036
• Micro-Captive Insurance: Section 831(b), the Court Losses and Form 8886 in 2026
• Monetized Installment Sales: Why the IRS Says the Deferral Fails
• Gifting Appreciated Assets vs. the Step-Up in Basis: When a Lifetime Gift Costs More Tax

Data, cases and examples

• Estate Tax Planning Strategies Compared: 22 Techniques Side by Side
• Estate Tax Cases Won and Lost: 34 Cases Scored
• Estate Tax Statistics (2026): 36 Verified Figures With Sources
• High Net Worth Estate Planning Examples: Four California Families by Net Worth

Working with Ridley Law

The call is for California families over the federal exemption, or headed there, who are weighing which of these tools fits, what it would save on their own numbers and what it would cost in basis and control. The first call is free and runs 30 minutes, by phone or Zoom.

Book my 30-minute call or call 805-244-5291. To see your own exposure first, try the estate tax exposure calculator.

Frequently asked questions

What is ultra high net worth estate planning?

It’s estate planning for families above the federal exemption, $15 million per person or about $30 million for a married couple in 2026, where the 40% estate tax applies and the planning centers on moving future growth out of the taxable estate.

Is the $15 million exemption permanent?

Pub. L. 119-21 set it at $15 million for 2026 and indexed it for inflation after that, with no sunset date in the statute (IRC § 2010(c)(3)). Congress can still change it, as it has before.

What is an estate freeze?

A gift or sale that fixes the value of an asset in the owner’s estate today, so the asset’s later growth builds up in a trust or with the next generation instead of in the taxable estate.

Can a SLAT be funded with community property in California?

Not safely. Community property belongs to both spouses, so it usually has to be converted to the donor spouse’s separate property by a written transmutation that meets Fam. Code § 852 before it goes into the trust.

Does California follow the federal QSBS exclusion?

No. California taxes the full gain on qualified small business stock (FTB Publication 1001), even when IRC § 1202 excludes some or all of it federally.

Can the estate tax be paid over time?

Yes, for the part tied to a closely held business that is more than 35% of the adjusted gross estate. IRC § 6166 allows up to 10 annual installments, with the first one deferred up to five years.

What did Walton v. Commissioner decide about GRATs?

Walton v. Commissioner (2000) 115 T.C. 589 held that an annuity payable to the grantor or the grantor’s estate for a fixed term is a qualified interest, which is what lets a short GRAT carry a very small taxable gift.