Estate taxes can significantly reduce the value of an estate. California has abolished its state-level estate tax. People who die while living in California are not subject to state-level estate taxes, and their beneficiaries do not need to worry about any California inheritance taxes.
However, federal estate taxes still apply in scenarios where the total value of the estate is greater than the exemption limit currently enforced at the federal level. Exemptions typically change annually, leaving some people without protection if they do not routinely review their resources and what they can exempt.
What is the current rule for estate tax exemption in 2026?
Only multi-million dollar estates are vulnerable
Federal estate taxes only apply to especially large estates. In 2026, the threshold for exemption is $15 million. Federal lawmakers tend to modify that figure frequently, if not annually.
In recent years, the trend has been upward, meaning that estates can protect a greater total value each year than the year prior. However, old policies expire, and economic fluctuations may motivate changes in federal estate tax regulations.
Therefore, people concerned about estate taxes typically need to review their resources regularly to ensure that they have adequate plans in place to protect their resources from federal estate taxes. Without appropriate planning, the estate could lose up to 40% of its total value to federal estate taxes.
Reviewing personal resources and any existing estate planning paperwork with an attorney can help people determine if they are vulnerable to estate taxes. A thorough estate plan can minimize tax liability and reduce the tax rate that ultimately applies to an estate.
