The 2025 California Estate Tax Rate: What High-Net-Worth Families Must Do Now

Most California wealth holders believe they’re safe from state estate taxes—but that could be a costly misconception in 2025. Here’s the real story: while California currently does not impose a standalone state estate tax, federal law still puts significant tax burdens on estates exceeding IRS thresholds. With so much “talk” in Sacramento and Washington about closing perceived loopholes, those with seven-figure assets must prepare for both current rules and the threat of new state estate levies at any moment.

Quick Answer: California Estate Tax Rate and Federal Risk in 2025

California does
NOT have its own estate tax in 2025. However, wealthy families face a federal estate tax of up to 40% on assets above the IRS exemption ($13.61M per individual/$27.22M per married couple in 2025). Proposals to add a California estate tax resurface repeatedly, so every affluent family should act as if such a tax could be implemented retroactively. Read our in-depth California estate & legacy tax planning guide.

The real risk isn’t just the current federal 40% levy—it’s the possibility of a dual layer if lawmakers impose a California estate tax. If a 16% estate tax rate California were added on top of the federal rate, the effective burden could push families into a 50–55% loss of wealth at death. High-net-worth families should plan as though that law could arrive with little notice, using structures like GRATs or dynasty trusts to preemptively shelter wealth.

How the 2025 Federal Estate Tax Impacts California Residents

If your estate exceeds the federal exemption, tax on the overage is up to 40%. A $30M estate, for example, would owe federal estate tax on $2.78M (if married), resulting in $1.11M to the IRS. Complexities involving trusts, insurance, and business entities can either mitigate or worsen this exposure. According to IRS estate tax guidance, certain deductions and charitable strategies can reduce exposure.

Common Traps: Why High-Net-Worth Californians Overpay Estate Tax

We routinely see these million-dollar mistakes:

• Sole reliance on outdated trusts from pre-2010 estate laws
• Failure to update asset titling after major life events (second marriage, business exit)
• Did not use annual gift exclusion ($18K per donee for 2025, see IRS Gift Tax FAQ)
• Family business structured incorrectly for succession tax breaks
• Assuming a “no estate tax” state status shields from complicated IRS audits or recapture events

Red Flag Alert: Many estates hit by surprise taxes during audit—often due to poor recordkeeping or outdated entity structures. Compliance mistakes can also trigger audits for several years of returns.

Pro Tip: Integrate State and Federal Planning Now

Even if California has no estate tax for 2025, strategic moves—like spousal lifetime access trusts (SLATs), irrevocable life insurance trusts, gifting plans, and asset valuation freezes—are essential for large estates. An HNW family with $25M in real estate and $5M in securities, using sophisticated trusts, could reduce taxable estate by $7M, saving $2.8M at 40% tax rate.

Learn how advanced strategies align with today’s laws in our premium advisory services.

IRS Forms and Publications Every High-Net-Worth Family Should Know

Don’t just “set and forget” when it comes to documentation. For estates at or above the threshold, these forms and guides are required reading:

• Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return
• Publication 559, Survivors, Executors, and Administrators
• Estate asset appraisals and updated asset inventories (critical in audit defense)

KDA Case Study: High-Net-Worth Tech Executive Avoids $2.9 Million Tax Bill

Our client, a Silicon Valley founder with $38M of stock, real estate, and private equity, thought her estate plan was airtight. But outdated AB trusts and a lack of gifting meant $10M in her plan was exposed past 2025 federal exemption. We implemented SLATs, a GRAT, and charitable lead trusts, repositioning $11M outside her estate and shielding nearly $2.9M in taxes. Total professional fee? $46,000—an astonishing 63:1 first-year ROI. The plan also left her children with clean audit trails through proactive recordkeeping, trust amendments, and business recapitalizations.

What If California Passes a State Estate Tax?

Legislation surfaces almost every Budget season. If a 16% California estate tax were enacted—mirroring Oregon or Washington—an additional $4.35M could hit a $27M estate above the state threshold. Families without advanced planning would see effective rates close to—and in some cases over—50%. Those already positioned with multi-jurisdictional trusts, family partnerships, and life insurance can act swiftly if the law changes. Those who wait could lose strategic windows to “grandfather in” tax-advantaged setups.

FAQ: Fast Answers for 2025 Estate Tax Questions

What is the estate tax exemption for 2025?
It is $13.61M per person federally. California offers no exemption because there is no state estate tax (as of 2025).

If I move, will I escape state estate tax?
It depends. Some states (Oregon, Washington, NY) have their own tax—with lower exemptions. Other states (Texas, Nevada, Florida) have none. Domicile planning is complex and requires more than just changing your driver’s license.

What steps should I take now?
Review your entire estate plan every year; add trusts, gifting, and succession provisions. Don’t forget to document every move for audit defense.

Red Flag Alert: Misunderstandings That Lead to Audit Disaster

Misconception: “My estate is under $30 million, so it’s not a target.”
Truth: Large stock fluctuations, aggressive real estate appraisals, or IRS enforcement actions can put even $12 million estates under the microscope. IRS Publication 559 offers essential executor guidance. Audit risk is especially high when mixing illiquid business holdings and personal investments.

Pro Tip: Annual Record Review Beats Any Lawyer’s Desk Drawer Plan

We recommend every HNW family conduct a full asset review annually—updating titling, trust terms, and contingent beneficiaries. Get new professional appraisals for real estate, business interests, and collectibles every 2–4 years, or whenever major asset changes occur. Use IRS forms and keep every document ready for scrutiny for at least 7 years after the transfer. See advanced legacy planning strategies here.

Book Your Wealth Legacy Session

California’s estate tax environment may shift, but those who act now will sleep easier. Book a session with our estate tax team to see if you’re exposed—or ready to pass millions tax-efficiently to the next generation. Click here to secure your spot.