Estate Tax Rate California: What High-Net-Worth Families Must Know for 2025

Most affluent Californians believe they’re insulated from estate tax trains barreling down—until legacy mistakes cost their heirs tens of millions. Estate planning conversations often focus on federal rates and exemptions, but in a rapidly changing landscape, overlooking California’s own estate tax nuances can jeopardize entire generational wealth plans. Savvy high-net-worth families are rewriting their own playbooks for 2025—locking in superior transfer strategies right now while politicians argue over what comes next.

This deep dive is for HNW individuals building legacies of $10M, $25M, or $100M+. We’ll break down current California estate tax realities, the complex federal overlay, and the exact moves that separate lasting dynasties from families who lose half of what they built. Estate tax rate California isn’t just a headline—if you’re holding real wealth, understanding its calculation, loopholes, and the latest tactical pivots is non-negotiable for 2025.

Fast Tax Fact: Does California Have an Estate Tax?

As of 2025, California does not have its own estate tax. Only federal estate tax applies to California residents’ wealth transfers at death. However, that bill may change: Sacramento lawmakers have repeatedly introduced bills to impose a state estate tax on high-net-worth estates, and future legislation could land quickly. Federal estate tax rates run up to 40%. Complete estate and legacy tax guide for California

While estate tax rate California is currently zero, the federal system alone can strip away 40% of everything above exemption. That means a $50M estate in 2025 could lose $9M–$15M instantly if not properly structured. Smart families stress-test their estate plans against both current law and a potential California overlay, because legislation can move faster than wealth preservation strategies if you wait.

Bottom Line: Currently, the IRS takes the first and only estate tax bite on California estates—if (and only if) your estate exceeds the annual exemption, which is $13.61 million per person ($27.22 million for married couples) in 2025. (See IRS estate tax instructions.)

How the Federal Estate Tax Rate Impacts CA Families Exposed to Wealth Transfer Taxes

If your estate is valued above $13.61M (single) or $27.22M (married), your heirs face federal estate tax liability. Here’s what high-net-worth Californians must know for 2025:

• The estate tax is paid by the estate before assets are distributed.
• Tax is assessed on all worldwide assets (real estate, investments, business interests, collectibles, etc.).
• Marginal tax rate: 18%–40% (estate tax is progressive, quickly escalating above exemption).
• The exemption is temporarily high, but drops to ~$6M per person in 2026, barring new federal legislation.

If you delay planning, your family could lose $10M–$40M in tax on a $75M estate that outgrows the exemption window.

Breaking Down the Numbers: Estate Tax Calculation Example

Meet Gina, a Bay Area tech founder with a $33M net worth and a spouse. Their estate exceeds the 2025 federal exemption by $5.78M:

• Total estate: $33,000,000
• Exemption (joint): $27,220,000
• Amount subject to tax: $5,780,000
• Estimated federal tax due: $2,312,000 (assuming blended 40% rate)

If the exemption drops after 2025: Her family might owe $10.8M or more—over four times more tax.

Legacy Preservation Shortcuts: Irrevocable Trusts, Discounts, and Philanthropy

With stakes this high, the HNW playbook gets creative. These core strategies protect millions:

1. Advanced Grantor Trusts (SLATs, IDGTs, GRATs)

• SLAT (Spousal Lifetime Access Trust): Move $13M+ outside your estate, maintain indirect family access, shelter future appreciation from estate tax.
• IDGT (Intentionally Defective Grantor Trust): Sell assets to a trust at a discount, freeze value for estate tax, shift growth to heirs.
• GRAT (Grantor Retained Annuity Trust): Pass future business or stock appreciation with near-zero gift/estate tax if structured right.

2. Valuation Discounts and Family Partnerships

• Appraise business interests/minority stakes for less than pro-rata value—can reduce estate tax by 20–40%.
• Family LLCs and partnerships give structure for tax-efficient generational transfers (see our premium advisory services for implementing).

3. Philanthropic Tools (Charitable Remainder Trusts, Foundations)

• Direct large parts of estate to charity (outright or via trusts) for major tax breaks and legacy impact.
• Private foundations give families ongoing control over charitable impact while reducing taxable estate.

Case Study ROI: These tools routinely save KDA clients $7M–$18M in federal estate tax on $30M–$60M estates.

Pro Tip: Use Lifetime Exemption Now—‘Use It or Lose It’ Before 2026

The most overlooked estate tax trap for California HNW families: not taking advantage of the current “super-sized” exemption, which is scheduled to get cut roughly in half in 2026. Transfers made using today’s high exemption are grandfathered in—no clawback. If you don’t plan until after the law is set to change, your window may close forever.

Red Flag Alert: Failing to harness the $13.61M exemption by year-end could create $2M–$4M+ higher tax bills in 2026 for every $10M of additional wealth.

Why High-Net-Worth Californians Overlook the Coming Tax Cliff

We see many HNW families wait until a triggering event—sale, liquidity, or a health scare—to address estate planning. That’s a mistake. The 2026 reduction will arrive, and IRS won’t grant exceptions retroactively. The sooner you act, the more you keep—period.

For detailed year-to-year strategies, see our complete California Guide to Estate & Legacy Tax Planning.

KDA Case Study: HNW Entrepreneur Avoids $8M Estate Tax in Silicon Valley

Meet Thomas, a retired founder and KDA client, with $42M in tech company stock and Bay Area real estate, married, no existing trusts.

• Problem: Facing $6.7M federal tax bill if exemption plummets post-2025, plus likely additional state risk if California enacts its own estate tax.
• What KDA Did: Designed and funded A/B SLAT trusts, moved discounted business interests into LLC, created family foundation, layered in annual exclusion gifting ($34K/year per child, per spouse).
• Result: Entire post-2025 wealth transfer protected, family maintained access, $8.4M in estimated tax avoided.
• ROI: Client paid $42,000 over two years—19.9x first-year return by legacy value preserved.

What If California Passes Its Own Estate Tax?

At least three bills in the last decade have proposed a California-specific estate tax with a $3.5M or $5M exemption (mirroring New York and other high-tax states). If passed, this could add a 10-20% additional tax on top of federal rates—meaning families over those limits pay state and federal estate taxes.

• Example: $20M CA estate could lose $4M+ to state plus $2.5M+ to federal tax.
• If you aren’t proactively structuring for state-level risk, you’re exposed.

Current guidance: Plan now as if exemption drops, and maintain flexibility for trust situs (location) outside California if laws shift.

FAQ: What Every HNW Californian Asks About Estate Tax

How Do Annual Gift Exclusions Work?

For 2025, you can give up to $18,000 per person per year (married: $36,000) without using lifetime exemption. This is separate from the estate tax exemption. (See IRS gift tax page.)

What If I Already Used Most of My Exemption?

Transfers made before the exemption drops are locked in. KDA frequently recommends use-it-or-lose-it gifting or trust moves before law sunsets.

Does My Real Estate Count Toward My Taxable Estate?

Yes—all personal and investment real estate, including property held in trusts or entities, is included in estate tax calculation. Special rules apply to family businesses and farms.

Can I Move to Nevada or Texas to Avoid Estate Tax?

Relocating can help avoid future California estate taxation, but federal estate tax still applies based on U.S. citizenship/residency.

What IRS Forms and Publications Do I Need?

• Form 706, U.S. Estate Tax Return
• Form 709, Gift Tax Return
• Publication 559, Survivors, Executors, and Administrators

Myth-Busting: “If I Have No California Estate Tax, I’m Off the Hook”

The greatest myth in California estate planning? That lack of a state tax equals safety. Federal estate tax alone can vaporize 40% of value above exemption. Even a new state bill would strike rapidly—today’s complacency is tomorrow’s regret.

IRS isn’t hiding the loopholes—you just weren’t taught where to look. If you hold significant wealth or want clarity about your estate exposure, proactive action in 2025 could be the difference between generational growth and a multi-million dollar loss.

This information is current as of 9/1/2025. Tax laws change frequently. Verify updates with IRS or FTB if reading this later.

Book Your Legacy and Estate Tax Strategy Session

Protecting a multi-generational fortune demands a playbook built for change. If your estate could be hit with $3M, $8M, or $20M+ in taxes, it’s time for precision—not generic “planning.” Book a confidential KDA consult and receive a custom roadmap for trust creation, gifting, and risk-proofing. Click here to book your consultation now.