Thinking about what happens after you pass away is something many people put off. However, planning for the future is one of the most significant things you can do for your family. A primary concern for many is how to protect the assets they have worked so hard to build. Seeking professional guidance for estate tax planning allows you to make informed decisions and build a solid plan that reflects your wishes and provides for your loved ones.
At Silverman & Jaffe, PC, we provide thoughtful estate planning services to individuals and families in California, including Walnut Creek, Concord, Pleasant Hill, Lafayette, and Orinda. With years of dedicated experience, we focus on creating personalized strategies that can protect your assets and help you minimize estate taxes for your loved ones and heirs.
Understanding Federal Estate Taxes
The federal estate tax, often called the "death tax," is a tax on your right to transfer property at your death. Your gross estate includes everything you own or have certain interests in at the time of your death. This can include cash, securities, real estate, insurance, trusts, annuities, and other assets.
However, very few people actually pay federal estate taxes due to the substantial exemption amount. For 2025, the federal estate tax exemption was $13.99 million per individual. This means a person can pass on up to $13.99 million in assets without being subject to the federal estate tax.
For a married couple, this amount effectively doubles to $27.98 million through portability, which allows a surviving spouse to use any unused exemption of the deceased spouse.
If your estate's value is below this threshold, you likely will not owe any federal estate tax. However, it is important to know that this exemption amount is not permanent. Under current law, the exemption is scheduled to be cut roughly in half at the end of 2025. This change could bring many more estates into the taxable range. Planning ahead can help prepare your estate for this possibility.
California's Position on Estate and Inheritance Taxes
Fortunately, California is one of the few states without a state-level estate tax. This means that regardless of the size of your estate, California will not impose a separate tax on the assets you pass to your beneficiaries.
The state also does not have an inheritance tax. An inheritance tax is different from an estate tax; it is paid by the person who receives the inheritance, rather than by the estate itself. The absence of both taxes in California simplifies the estate planning process for residents.
While this is positive news for Californians, it does not mean you can ignore estate planning. The federal estate tax still applies to residents of California if their estate's value exceeds the federal exemption amount. Therefore, high-net-worth individuals and families still need to consider strategies for managing their federal estate tax liability.
Key Strategies to Help Reduce Your Taxable Estate
Even with the high federal exemption, strategic estate planning can prepare you for potential changes in tax law. Our goal is to help you structure your estate to minimize potential taxes and maximize the assets passed on to your beneficiaries. Some common methods our attorneys are experienced in exploring include the following.
Make Lifetime Gifts
One straightforward way to reduce your taxable estate is to give away assets during your lifetime. The IRS allows you to give a certain amount to any individual each year without incurring a gift tax. This is known as the annual gift tax exclusion. For 2025, this amount is $19,000 per recipient.
This means you can give up to $19,000 to as many people as you wish, and that money is removed from your taxable estate. If you are married, you and your spouse can combine your exclusions to give up to $38,000 per recipient annually. Over several years, a consistent gifting strategy can significantly lower the value of your estate.
Establish an Irrevocable Life Insurance Trust
Life insurance proceeds are generally included in your taxable estate if you own the policy. An irrevocable life insurance trust (ILIT) is designed to remove these proceeds from your estate.
To set up an ILIT, you will need to first create a trust and purchase a life insurance policy with it. You can then make annual gifts to the trust to cover the premium payments. Upon your death, the death benefit will be paid directly to the trust. The trustee will then manage and distribute the funds to your beneficiaries in accordance with the terms you set.
Since you do not personally own the policy, the proceeds are not part of your estate and are not subject to estate taxes.
Use a Qualified Personal Residence Trust
For many people, their home is their most valuable asset. A qualified personal residence trust (QPRT) allows you to transfer your primary or secondary residence into a trust, effectively removing its value from your estate.
When you create a QPRT, you retain the right to live in the home for a specified number of years. During this term, you continue to be responsible for all expenses, such as maintenance and property taxes. Once the term ends, the ownership of the home passes to your beneficiaries, either outright or held in a continuing trust. This strategy can transfer a significant asset to your heirs at a reduced gift tax cost.
Charitable Giving
If you are philanthropically inclined, making charitable donations can be a rewarding way to reduce your taxable estate. You can make direct donations to qualified charities during your lifetime or include them in your estate plan.
A popular tool for this is a charitable remainder trust (CRT). A CRT allows you to transfer assets into an irrevocable trust. The trust then pays you or other named beneficiaries an income for a set term or for life. When the trust terminates, the remaining assets are distributed to the charity or charities you designated. This not only supports a cause you care about but also provides you with an income stream and removes the assets from your estate.
Contact an Estate Planning Attorney in Walnut Creek, California
Effective estate planning is about creating a thoughtful strategy that protects your assets, honors your wishes, and provides security for those you love. At Silverman & Jaffe, PC, we are committed to working closely with you to design trusts, wills, and other planning tools that safeguard your legacy and give you confidence in the future.
We believe that by securing your legacy and protecting your assets, we can help make sure your wishes are carried out with confidence and clarity. Call our office today for estate planning services in Walnut Creek, California, and the surrounding areas.
