Protect Your Wealth from Federal Estate Tax.
Secure your family’s financial future now. Strategic estate tax planning is crucial to protect your wealth from the IRS’s maximum 40% tax and preserve generational assets for those you love.
How Can Estate Tax Planning Prevent the IRS from Consuming Your Family’s Legacy?
Thomas died with assets just over $14 million. His wife, Grace, assumed everything would transfer without complication. No trust existed. No portability election filed. No consultation ever occurred. The IRS taxed the estate at 40%. Grace lost control of over $1.5 million overnight. His children received property tied up in probate, drained by legal fees and penalties. Generational wealth evaporated through inaction. One form could have protected millions. Thomas thought planning was for billionaires. The federal tax code disagreed, and his family paid the price.
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What Is the Federal Estate Tax and Who Must Pay It?
The federal estate tax applies to the transfer of wealth at death when the taxable estate exceeds the exemption threshold. Internal Revenue Code § 2001 authorizes this levy. In 2025, the federal exemption sits at $13.61 million per individual. Assets above that amount face a marginal tax rate up to 40%. Consequently, estates failing to structure transfers efficiently risk substantial erosion, making efficient wealth transfer a crucial consideration.
The taxable estate includes:
- Real estate
- Investment accounts
- Life insurance proceeds (if no irrevocable trust)
- Retirement plans
- Closely held business equity
Analysis of recent trends indicates nearly 7,100 federal estate tax returns were filed in the prior year, with over $18 billion collected (IRS Estate Tax Statistics, 2024). From my observations, many California estates underestimate real estate appreciation, triggering exposure far sooner than expected.
What Is the Estate Tax Exemption Threshold and How Can It Change?
The exemption threshold adjusts annually for inflation but faces a scheduled reversion. Under current law, the Tax Cuts and Jobs Act exemption sunsets in 2026, cutting it roughly in half. Accordingly, families near the threshold today may cross it in two years. Estate plans built under current exemptions may fail post-2025 without revision.
Consider the threshold a bridge. As long as assets remain under the structure, no toll applies. But once value spills over the edge, taxation begins. From our firm’s extensive case reviews, clients who took responsibility and updated their estate plans every three years maintained protection across shifting tax policy.
What Are the Current Federal Estate Tax Rates?
The federal estate tax operates on a progressive scale, with rates beginning at 18% and reaching 40% above $1 million of taxable value. Marginal brackets apply only to amounts over each threshold, not retroactively.
| Taxable Amount Over Exemption | Rate Applied |
|---|---|
| $0–$10,000 | 18% |
| $500,000–$750,000 | 39% |
| Over $1 million | 40% |
One client, Alan, misunderstood the bracket system and assumed his $15 million estate would face 40% on the full amount. The taxable estate was $1.39 million. His tax owed: roughly $556,000—not $6 million. Nevertheless, planning could have eliminated it.
How Does Portability Help Married Couples with Large Estates?
Portability allows the surviving spouse to inherit the deceased spouse’s unused estate tax exemption. This election must occur via a timely filed Form 706 with the IRS—within nine months of death. Probate Code § 10520 permits executors to make such filings under California procedure.
Failure to elect forfeits the unused exemption. Moreover, the surviving spouse’s future planning becomes more constrained. Think of portability as a parachute—available only if deployed before hitting the ground. Our firm’s extensive case reviews demonstrate that missed portability filings are the leading cause of unnecessary estate tax in dual-spouse households.
Are Californians Required to Pay a State Estate Tax?
No. California does not impose a state-level estate tax. However, other jurisdictions do. States like Massachusetts, Oregon, and New York maintain estate taxes with lower exemptions often below $3 million. California residents with out-of-state real property or business interests may incur liability under those laws.
From my years of experience, families owning a second home outside California often face surprise taxation. California’s lack of an estate tax does not immunize assets from decoupled jurisdictions. Interstate exposure complicates unstructured estate plans.
What Is a Decoupled State and Why Does It Matter for California Residents?
A decoupled state imposes its estate tax irrespective of federal law. Examples include:
- Oregon
- Massachusetts
- Washington
- Vermont
These states maintain separate exemption limits and tax structures. Assets located within their borders—regardless of residency—may trigger filing. For California residents, this includes:
- Vacation homes
- Commercial buildings
- Rental properties
Probate court findings underscore that decoupled taxation often begins with simple oversight. One California couple left a rental cabin in Oregon to their daughter. The estate faced $60,000 in Oregon estate tax. A proper titling and gifting strategy would have avoided liability.
Does California Have an Inheritance Tax?
No. California repealed its inheritance tax in 1982. Currently, no U.S. states impose inheritance taxes on California-based recipients. However, six other states, including Pennsylvania and Iowa still enforce an inheritance tax on the beneficiary, not the estate. The relationship between the decedent and the heir often determines the rate and exemption.
Nevertheless, indirect exposure occurs. If a California resident inherits from a relative who resided in an inheritance tax state, liability may arise. Accordingly, strategic disclaimers or pre-mortem relocation of accounts may assist.
What Are the Filing Requirements for Estates Above the Exemption Limit?
Federal estate tax returns (Form 706) must be filed for any estate exceeding the federal exemption or when electing portability. The filing deadline is nine months after the date of death. Extensions are available, but do not delay payment due.
Failure to file triggers:
- Penalties
- Interest
- IRS audits
- Delays in asset distribution
From my observations, even exempt estates benefit from filing when portability or valuation confirmation is involved. A missed deadline can negate years of planning.
How Did One Family Lose Millions Through Poor Tax Planning?
The Myers family inherited $22 million from their father, who died without a trust or portability election. A prior plan had expired. His new wife failed to file a federal return. The IRS taxed nearly $4 million. Real estate had appreciated far faster than anyone expected. His children lost property in a forced sale, a situation where assets are sold under pressure, often at a lower price, to cover the unexpected tax liability. The legal documents they assumed had been updated had not been updated.
How Did Another Family Preserve Their Estate Through Proper Filing?
The Guerrero family worked with Steve Bliss. They utilized an A-B trust structure, a common estate planning tool that allows couples to maximize their estate tax exemptions. They also implemented lifetime gifting strategies, which involve transferring assets to heirs during the grantor’s lifetime to reduce the size of the taxable estate. They sold property in a decoupled state and reinvested in California real estate. When the patriarch passed, no estate tax was owed. The full exemption transferred. Assets passed privately, rapidly, and efficiently.
Just Two of Our Awesome Client Reviews:
Estrellita Cadang:
⭐️⭐️⭐️⭐️⭐️
“Steve Bliss helped us see the landmines hiding in plain sight. We thought our home wouldn’t push us over the threshold—until Steve showed us the real valuation. He helped restructure everything. Local knowledge prevented federal pain.”
Zeveri Farrar:
⭐️⭐️⭐️⭐️⭐️
“Estate tax terrified my father. He never liked the IRS. Steve mapped it out so simply and thoroughly. When the time came, the plan did its job. No delays, no tax, no headaches.”
Every dollar lost to estate tax shrinks family potential.
Steve Bliss builds plans that withstand audit scrutiny, across borders, and through decades of policy shifts. From portability filings to decoupled state traps—Steve navigates the whole spectrum.
👉 Act locally.
👉 Preserve wealth. Schedule your estate tax planning review today.
Citations:
Internal Revenue Code § 2001, § 2010.
IRS Form: 706 Instructions, 2025 Edition.
California Probate Code §§ 10520, 6100.