Your 2025 Guide to the Estate Tax Rate in California: What High-Net-Worth Individuals Need to Know

Most wealthy Californians think estate taxes won’t touch them—but that belief can cost families millions if they’re not ready for subtle changes in tax law and federal exemptions. As the state and federal landscape continues evolving for 2025, understanding the estate tax rate California can make or break your multigenerational wealth plan.

This is not about theory: we’ve seen clients lose seven-figure value due to outdated structures or poor timing on gifts, while others have used targeted strategies to save $500,000+ on estate taxes at transfer. The difference often comes down to clarity—on both the law and your options.

Quick Answer: California has no estate tax as of 2025. However, federal estate taxes still apply, and potential ballot measures or new legislation could change the picture rapidly. Proactive planning is critical for high-net-worth families who want to lock in current exemptions and cement intergenerational wealth.

This information is current as of 9/3/2025. Tax laws change frequently. Verify updates with IRS or FTB if reading this later.

Unpacking the Estate Tax Rate in California for 2025

Many assume California, given its progressive taxation policies, must have its own estate tax. This isn’t true—for now. With proposals to reintroduce a California estate tax on the table in recent legislative sessions, understanding the estate tax rate California is crucial for anyone exceeding federal exemption thresholds.

For the 2025 tax year, there is no separate California estate tax. Your estate may, however, be subject to the federal estate tax. For estates exceeding the federal exemption ($13.61 million per individual for 2025), the top federal estate tax rate is 40% (IRS Estate Tax Overview).

Given the size of many asset portfolios in California—a $10M home in Palo Alto, for example, is hardly rare—this means wealthy families could face multi-million dollar federal liabilities if they don’t plan ahead.

How High-Net-Worth Californians Can Protect Their Estate

The lack of a California-specific estate tax doesn’t relieve the need for an active, custom strategy. The risks come from federal changes and California’s potential to enact an estate tax in the future (several proposals have appeared on ballots, though none have passed).

• Federal estate tax exemption (2025): $13.61 million per individual ($27.22M per couple with portability).
• Top federal estate tax rate: 40% on excess over the exemption.
• Gift tax tie-in: Unified with estate tax; large gifts count against this exemption.

Ignoring these numbers? A $30M estate could lose nearly $2.7M to estate tax just by exceeding the federal limit. That’s before fees and court costs.

Why You Shouldn’t Wait for New Legislation

If a California estate tax law passes, it could go into effect quickly. Recent proposals have mimicked Washington state’s regime, which starts at 10% on estates as low as $2.2 million, climbing to 20%. If California follows suit, many families with substantial real estate or business assets could be caught off guard.

Now is the time to document assets, consult your advisory team, and consider trust arrangements or charitable giving tailored for rapid law changes. See the California Guide to Estate & Legacy Tax Planning (2025 Edition) for an in-depth breakdown and legislative history.

Advanced Strategies to Reduce or Eliminate Federal Estate Taxes

For high-net-worth individuals, the focus must be on controlling federal estate tax exposure, plus future-proofing for California-specific rules. Here’s how sophisticated clients are doing it in 2025:

• Spousal Lifetime Access Trusts (SLATs): Shift assets out of taxable estate while maintaining benefit access through a spouse.
• Dynasty Trusts: Protect wealth for multiple generations, often leveraging states with favorable rules.
• Grantor Retained Annuity Trusts (GRATs): Pass asset appreciation to heirs with zero or minimal tax if structured well.
• Annual and Lifetime Gifting: Use current $18,000 per person per year gift tax exclusion and lifetime exemption before possible reductions in 2026.
• Charitable Lead Trusts: Lower estate value while supporting philanthropic goals and potentially eliminating tax on retained assets.

Not sure where you stand? Our premium advisory services are designed for high-net-worth clients who need more than cookie-cutter advice.

Pros, Cons, and Red Flags: Estate Tax Mistakes High-Net-Worth Families Make

Even the most sophisticated clients get burned by misinformation or inaction. Here are traps we see—and the fixes to avoid IRS pain:

• Procrastinating Major Gifts: Waiting until 2026 or after, when the federal exemption might drop by half, shrinks your options and increases tax risk.
• Poor Asset Documentation: Estates with missing paperwork or title ambiguities face delays, higher fees, and often court intervention.
• Outdated Trust Structures: Laws change, especially in high-tax states. Revise trust language regularly with legal and tax teams.

Red Flag Alert: Funding a trust with business interests or real property after a major valuation spike—rather than before—can be a million-dollar mistake. Start valuation/appraisal efforts before the next bull market.

Pro Tip: Annual gifting to multiple heirs—while leveraging $18,000 per recipient—can quietly transfer $180,000/year if you have 10 heirs, with no forms and no reduction in lifetime exemption. See IRS estate tax rules for more.

Will a California Estate Tax Ever Return? Your Plan If It Does

Ballot measures for a California estate or “death tax” have surfaced repeatedly. While none have passed, political pressures could make the measure more attractive to lawmakers looking to fill state budget gaps. If enacted, these taxes would likely target estates above $3M–$5M and could apply retroactively to deaths after a certain date.

The key: Build a versatile plan with contingency trusts, maintain portfolio liquidity, and keep real estate assets appropriately titled for flexibility. Aggressive life insurance strategies are another popular tool to offset future state tax liabilities that might arise.

Stay on top of current tax planning strategies and review your estate annually—especially in election years or following legislative shifts.

KDA Case Study: High-Net-Worth Individual—$36M Silicon Valley Estate

Persona: HNW client, age 68, $36M in real estate and tech equity, three adult children

Problem: Major portion of estate tied up in illiquid Silicon Valley property and privately held business; exposure to $9M+ federal estate tax if exemption reverted to pre-2017 levels

KDA Solution: Designed a two-tier trust structure with accelerated gifting, funded SLATs pre-2026 sunset, transferred $7.9M in company stock at discount, leveraged out-of-state dynasty trust, regular legal reviews

Result: Effective taxable estate now $18M, with projected federal estate tax liability below $1.8M. Estate plan anticipated to save nearly $7.5M in estate taxes if exemption is cut by 50% in 2026.

Fees Paid: $58,000 total across 3 years

ROI: 129x first-year return against fees

Follow-Up Questions and FAQs

What should I do if my estate exceeds the federal exemption?

Engage with a tax strategist and estate attorney. Use trusts, lifetime gifting, and advanced planning strategies. Investigate additional tools such as family limited partnerships or charitable lead trusts.

Can I plan for future California estate taxes now?

Yes. Establish contingency trusts and maintain flexibility in your estate structure. Use states with favorable dynasty trust laws or portability features when possible. Always review your plan annually with a specialist.

Do non-residents with California property need to worry?

Potentially, yes. If you own real property in California but reside elsewhere, future state-level changes could affect your portfolio. Stay in contact with an advisor experienced in both state and federal estate law.

Where can I read the specific IRS rules?

See IRS guidance on estate taxes and examine Form 706 (required federal estate tax return for estates exceeding the federal exemption).

Book Your Wealth Strategy Session

If you want a tailored estate tax and legacy plan that preserves family wealth across generations, book your custom session with our senior advisory team. We cut through legal complexity and deliver integrated, multi-year strategies—whether you’re defending an inherited estate or planning your own legacy. Click here to book your estate planning and tax consultation now.