The federal estate tax exemption is $15 million per person in 2026, made permanent by the 2025 tax act, which is roughly $30 million for a married couple using portability. California has no state estate tax at all.
If your estate is a house in Los Angeles, a retirement account, and some savings, you are not close, and anyone leading with estate tax to sell you something is selling you something.
The actual numbers
| Item | 2026 |
|---|---|
| Federal exemption per person | $15,000,000 |
| Married couple with portability | About $30,000,000 |
| California state estate tax | None |
| California inheritance tax | None |
| Share of American families who owe federal estate tax | A very small fraction of one percent |
A $2,000,000 estate is not a large estate for federal tax purposes. It is not even in the neighborhood. It is a house in Sherman Oaks and a decent 401(k), and it generates a federal estate tax bill of zero.
Why you keep hearing about it anyway
Estate tax is frightening and easy to explain, which makes it excellent marketing. It also carries a whiff of prestige, since the implication is that you are wealthy enough to have the problem. A seminar can build an entire pitch around a 40% tax rate without ever mentioning the exemption it applies above.
Watch for the tell. If a presentation spends fifteen minutes on estate tax and never puts the exemption figure on a slide, you are being worked.
The tax that actually matters to your family
Capital gains, and the step-up in basis that avoids it. When you die owning appreciated property, the income tax basis resets to market value at death. A house bought for $110,000 in 1987 and worth $1,500,000 now passes to your children with a basis of $1,500,000, and they can sell with essentially no capital gains. Give that house away during your lifetime and they take your original basis instead. This one mechanism is worth more to ordinary California families than every estate tax strategy on the market, and it is the reason lifetime gifts of real property are usually a mistake.
Who does need to think about it
- Owners of a closely held business with a real eight-figure valuation
- People holding large concentrated positions in a single appreciated stock
- Anyone with a substantial real estate portfolio, since gross values add up faster than owners expect
- Families with large personally owned life insurance policies, which count toward the taxable estate unless they are held correctly
- People with prior taxable gifts that reduced the remaining exemption
If you are on that list, you need a tax attorney or a firm that does high-net-worth planning, and that is not what this practice is. I will tell you so and give you names. We handle ordinary Los Angeles homeowners and their adult children, and doing that well means knowing where the line is.
The one filing worth knowing about
Portability, the mechanism that lets a surviving spouse use the deceased spouse's unused exemption, is not automatic. It requires a federal estate tax return to be filed after the first death, even when no tax is owed. Most families in the $15 to $30 million range never hear this and lose the benefit by default. Below that range it is generally not worth the cost of the filing, but you should know the rule exists rather than discovering it later.
“A man came in convinced he needed an irrevocable trust because a financial seminar told him his estate would be taxed at 40%. His estate was a condo in Westwood and an IRA. Total, under two million. He had been losing sleep over a tax he would never owe, and the fix was a forty-minute conversation and a normal revocable trust.”
Delia Vasquez-HartWhat to spend your planning attention on instead
- Avoiding probate, which for a Los Angeles homeowner is a real and quantifiable cost
- Prop 19 and what happens to the property tax base when a child inherits
- Preserving the step-up in basis by not giving property away during life
- Incapacity documents, since a power of attorney gets used far more often than a will
- Beneficiary designations, which quietly control more of your assets than your estate plan does
Questions we get asked
Does California tax inheritances?
No. California has no estate tax and no inheritance tax. Some other states do, which matters if you own property elsewhere.
Will the exemption drop again?
The 2025 act made the current figure permanent, which in tax law means it stays until Congress changes it. Planning for a family well under the threshold should not be driven by speculation about that.
Do I owe income tax on an inheritance?
Generally no on the inheritance itself. Inherited retirement accounts are the big exception, since distributions from a traditional IRA are taxable income to whoever receives them.
Is a revocable trust a tax shelter?
No, and be skeptical of anyone who implies otherwise. A revocable trust is neutral for income and estate tax. It exists to avoid probate and to manage assets during incapacity.
Next step
Add up what you own at market value, including retirement accounts and the face value of any life insurance you own personally. If the total is under eight figures, cross estate tax off your list permanently and spend the free 45-minute consultation on probate and Prop 19 instead. Call (310) 555-0219.