The 2025 Federal Estate Tax Hike: What it Means for High-Net-Worth Ventura County Residents

Explore the 2025 federal estate tax threshold increase and its implications for your estate plan

For high-net-worth individuals in Ventura County, 2025 brings significant changes to federal estate tax planning. The federal estate tax exemption has increased to $13.99 million per person (or $27.98 million for married couples), up from $13.61 million in 2024. While this increase might seem like good news—allowing more wealth to pass to heirs tax-free—it masks a more complex and concerning reality. This higher exemption is temporary, set to expire on December 31, 2025, after which the exemption will revert to approximately $7 million per person (adjusted for inflation). For Camarillo and Ventura County residents with substantial estates, understanding these changes and taking action now is critical.

Understanding the Federal Estate Tax Exemption

The federal estate tax is a tax on the transfer of wealth when someone dies. It applies to the total value of a person’s estate—including real estate, investments, business interests, and other assets. The federal government allows each person an exemption from this tax, meaning a certain amount of wealth can pass to heirs without federal estate tax. In 2025, this exemption is $13.99 million per person.

For married couples, the exemption is doubled to $27.98 million. This means a married couple can pass up to $27.98 million to their heirs without paying any federal estate tax. Any amount above this exemption is subject to federal estate tax at a rate of 40%—one of the highest tax rates in the federal tax code.

$13.99M

2025 Federal Estate Tax Exemption (Per Person)

The Sunset Provision: What Happens After 2025

The current high exemption amount is the result of the Tax Cuts and Jobs Act (TCJA), passed in 2017. This law temporarily doubled the federal estate tax exemption, but included a “sunset provision”—meaning the exemption would revert to pre-2017 levels (adjusted for inflation) on January 1, 2026. As currently written, the exemption will drop to approximately $7 million per person (or $14 million for married couples) starting in 2026.

This sunset creates a unique planning opportunity for high-net-worth Ventura County residents. Between now and the end of 2025, individuals can take advantage of the higher exemption to transfer wealth to heirs with minimal federal estate tax consequences. After 2025, the exemption drops by more than half, making the same transfers significantly more expensive from a tax perspective.

Camarillo Context: With median home prices exceeding $750,000 and many Ventura County residents holding significant investment portfolios and business interests, many families in the area have estates that exceed or approach the $7 million threshold. For these families, the 2025 sunset provision creates urgency for estate planning action.

Who Needs to Worry About Federal Estate Tax?

Federal estate tax only applies to estates exceeding the exemption amount. For 2025, only estates valued above $13.99 million (or $27.98 million for married couples) are subject to federal estate tax. However, this doesn’t mean smaller estates don’t need estate planning—they do, for other reasons including probate avoidance, asset protection, and ensuring your wishes are carried out.

For high-net-worth Ventura County residents, determining whether your estate exceeds the exemption threshold is an important first step. Your estate includes not just your home and bank accounts, but also:

• Investment accounts and securities
• Business interests and ownership stakes
• Life insurance proceeds
• Retirement accounts (IRAs, 401(k)s)
• Real estate holdings
• Valuable personal property (art, collectibles, etc.)

Many high-net-worth individuals are surprised to learn their estate exceeds the exemption threshold when all assets are totaled.

The 2025 Planning Opportunity: Exemption Portability

One of the most valuable strategies for high-net-worth couples is “exemption portability.” This provision allows a surviving spouse to use any unused portion of the deceased spouse’s estate tax exemption. In practical terms, this means a married couple can effectively double their exemption by properly planning.

For example, if one spouse dies in 2025 and has an unused exemption of $13.99 million, the surviving spouse can use that exemption in addition to their own $13.99 million exemption, for a combined $27.98 million exemption. This portability provision is automatic for married couples who file the appropriate tax return after the first spouse’s death, but it requires proper planning and documentation.

Key Strategy: For married couples with estates exceeding $27.98 million, exemption portability alone is insufficient. Additional strategies such as irrevocable life insurance trusts (ILITs), grantor retained annuity trusts (GRATs), and charitable remainder trusts may be necessary to minimize federal estate tax.

Strategies for High-Net-Worth Ventura County Residents

Strategy 1: Maximize Exemption Use Before 2026

The most straightforward strategy is to use your full exemption before it sunsets at the end of 2025. This can be done through direct gifts to heirs, transfers to trusts, or other mechanisms. By transferring wealth now while the exemption is high, you lock in the tax benefit before the exemption drops.

For married couples, this means potentially transferring up to $27.98 million in 2025 without federal estate tax consequences. Any wealth transferred above this amount would be subject to 40% federal estate tax, but wealth transferred within the exemption is protected.

Strategy 2: Irrevocable Life Insurance Trusts (ILITs)

Life insurance proceeds are included in your taxable estate. For high-net-worth individuals, life insurance can create a significant estate tax liability. An Irrevocable Life Insurance Trust (ILIT) is a trust that owns life insurance on your life. When you die, the insurance proceeds pass to the trust and are distributed to your heirs outside of your taxable estate, avoiding federal estate tax.

ILITs are particularly valuable for business owners and high-net-worth individuals in Ventura County who carry significant life insurance as part of their financial plan.

Strategy 3: Grantor Retained Annuity Trusts (GRATs)

A Grantor Retained Annuity Trust (GRAT) is an irrevocable trust where you transfer assets to the trust and receive annuity payments for a specified term. At the end of the term, remaining assets pass to your heirs. GRATs are particularly effective for transferring appreciating assets to heirs with minimal gift tax consequences.

Strategy 4: Charitable Remainder Trusts (CRTs)

If you’re charitably inclined, a Charitable Remainder Trust can provide both estate tax benefits and income during your lifetime. You transfer assets to the trust, receive income for life (or a specified term), and remaining assets pass to your chosen charity. This strategy reduces your taxable estate while supporting causes you care about.

Ventura County Charitable Planning: Many Camarillo and Ventura County residents are passionate about supporting local nonprofits and community organizations. Charitable planning strategies can help you support these organizations while achieving significant estate tax savings.

The Importance of Timing

The 2025 sunset provision creates a time-sensitive planning opportunity. Strategies implemented before the end of 2025 can take advantage of the higher exemption. Strategies implemented in 2026 or later will operate under the lower exemption, making them less effective.

For high-net-worth individuals, this means the time to act is now. Waiting until 2026 to implement estate tax planning could cost your heirs hundreds of thousands of dollars in unnecessary federal estate taxes.

Coordination with California Estate Planning

Federal estate tax planning must be coordinated with California estate planning considerations. California does not have a state estate tax, but it does have Proposition 19 property tax implications (discussed in our separate article). Your comprehensive estate plan should address both federal estate tax and California property tax considerations.

Additionally, federal estate tax planning should be coordinated with probate avoidance strategies. Many high-net-worth individuals use living trusts to avoid probate; these trusts can also be structured to provide federal estate tax benefits.

Taking Action: Your 2025 Estate Tax Plan

For high-net-worth Ventura County residents, 2025 is a critical year for estate planning. The combination of the higher exemption and the impending sunset creates both opportunity and urgency. Taking action now—before the end of 2025—allows you to implement strategies that can save your heirs hundreds of thousands of dollars in federal estate taxes.

The investment in professional estate planning guidance is well worth the tax savings achieved. Whether you’re just beginning your estate planning journey or updating an existing plan, understanding the 2025 federal estate tax landscape is essential.

Don’t Miss the 2025 Planning Window

The federal estate tax exemption sunset creates a unique planning opportunity that expires at the end of 2025. Let us help you develop a strategy that protects your wealth and achieves your family goals.

Schedule Your Consultation

© 2025 Ridley Law Offices. All rights reserved. This article is for informational purposes only and does not constitute legal advice.