When creating your unique estate plan, you’ll need to understand California estate taxes vs. federal estate taxes. Depending on the size of your estate, this tax can affect what your heirs receive after you pass away. An experienced attorney can help reduce the chance of this happening by carefully drafting your estate plan.

Work With Attorney Paul V. L. Campo on Your Estate Planning Case

Attorney Paul V. L. Campo has spent the last 30 years dedicating his life to helping his California neighbors and community members during their estate cases. He knows that the work he does makes a real impact on his local community and does not take that responsibility lightly.

Paul’s goal is to give you the legal knowledge you need to make informed decisions about your life and finances. He holds extensive experience advocating for clients within the San Diego County Superior Court.

California Estate Tax Laws

In 2023, 294,729 people in California passed away. With 17% of the state’s population over the age of 65 in 2024, understanding California estate laws is vital to protecting your assets and loved ones after you pass away. Luckily, California doesn’t have an estate tax that applies when a person passes away.

However, certain estates have to pay a federal estate tax. This tax applies to the entire estate’s value, not individual assets. In 2026, any estates over $15 million have to pay the federal estate tax, which can drastically lower the amount of assets your loved ones receive.

To value a deceased person’s estate, the fair market value is used, not what the deceased paid for the assets. This helps keep things as fair and neutral as possible.

Specific deductions, such as mortgages and debts, may be applied to lower the overall value of the estate.

Ways to Lower Your Estate’s Value and Avoid Probate Altogether

In 2024, the average household income in California was $99,122. The average home value was $734,700. When handling high-value assets, individuals can use certain estate planning strategies to lower their overall estate value and avoid the federal estate tax.

A common way to avoid probate and lower your estate value is to create a living trust. In California, there are two main types:

Revocable Living Trust

A revocable living trust allows you to place assets you want into it with a named beneficiary. You can edit or cancel a revocable living trust at any point during your lifetime.

However, once you die, the trust cannot be edited or canceled, and the assets placed in it will automatically transfer to the beneficiary you named. It can be helpful to periodically review your trust over the years to make sure it remains the way you want it.

This type of trust doesn’t lower your overall estate value. It’s primarily used as a way for loved ones to avoid probate after you die.

Irrevocable Living Trust

An irrevocable living trust operates similarly to a revocable living trust, but once created, an irrevocable living trust cannot be edited or canceled. This is because the assets placed in an irrevocable living trust legally belong to the trust, not you.

An irrevocable living trust is commonly used to lower a person’s overall income and estate value. This can be helpful to avoid the federal estate tax and is often used as a way to qualify for Medicaid.

If you want to apply for nursing home Medicaid, you’ll need to place assets into the trust 30 months before applying. If you apply too soon after creating an irrevocable living trust, those assets will count against you during your application process. However, in-home care doesn’t have a look-back period.

It’s essential to hire an estate planning lawyer to help explain what specific laws apply to your unique estate planning needs.

FAQs

Q: When Did California Eliminate Estate Taxes?

A: California eliminated estate taxes after the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001, phasing out estate taxes entirely by 2005. However, it’s still common for people to assume there are state inheritance taxes involved in the probate process. This law means that loved ones don’t have to pay any state taxes on the assets they inherit from their loved ones after they pass away.

Q: What Is the Process of Probate in California?

A: In California, the process of probate begins with the personal representative filing a probate case. They’ll then need to gather all of the estate’s assets, which can take a long time, depending on how many assets you have and where they are located. After gathering them, they’ll be in charge of paying off any outstanding taxes and debts with the assets, then distributing any remaining assets to the beneficiaries named in your will.

Q: Why Do You Want to Avoid Probate?

A: You may want to avoid probate to help save time, money, and the stress involved with probate. Probate can take a long time to finalize, and disputes may occur among your loved ones about what to do with your assets. Finding ways to avoid probate can help your loved ones start their grieving process earlier, avoiding the complexities of California probate law. An experienced attorney can offer their guidance on how to minimize the need for probate.

Q: What Estates in California Avoid Probate?

A: Certain small estates can avoid traditional probate in California, under the right conditions. If the estate is valued under $208,850, the people who have the legal right to inherit can file a small estate affidavit to transfer the property without going through the court. This can be filed 40 days after the person has passed, and can only be done if there isn’t already a probate case opened for the estate.

Hire an Estate Planning Lawyer to Help You Plan for the Future

No matter the size of your estate, you need a competent lawyer to help draft your unique estate plan. When clients work with Paul V. L. Campo Attorney at Law they trust that he will explore every option that meets their unique estate planning needs. Contact our office in Vista today to learn more about California estate taxes vs. federal estate taxes.