Monitoring tax thresholds

California does not have a state-level estate tax. However, the federal government does. While the Internal Revenue Service allows families to exempt up to $12.06 million, this figure could be altered in 2025 to account for inflation.

Taking preemptive action

If your estate’s value is approaching the threshold for federal estate taxation, a California estate planning attorney could help you explore and implement strategies to reduce your obligations. You could, for example, transfer assets to a trust, or make use of the Gift Tax Exclusion to begin reducing your liabilities while you are still alive. 

Giving gifts

You can make annual, tax-free gifts of up to $16,000. Since these annual gifts do not count against your lifetime gift tax exclusion, you could seize the opportunity presented by inflation to gift low-value stock with rapid appreciating value.

Exploiting market volatility

If you have a traditional Investment Retirement Account (IRA), you could benefit from a Roth conversion. Since the income tax on a Roth conversion is calculated on the value of the marketable securities in the account, today’s weak market could help you maximize your future retirement savings.

Substituting trust assets

You could review the value and basis of assets you have deposited into an irrevocable living trust. If your trust includes the power to substitute assets, you should consider transferring out low-basis with higher-basis assets in your current taxable estate. Substituting trust assets could help the lower-basis assets receive a “step up” after you have passed away.

Reviewing your estate plan regularly

Even if you do not believe that your estate plan could be jeopardized by inflation, you should still review your will, trust, and other arrangements regularly. You should, for instance, review your estate plan after any major life event such as a marriage, a birth, or the purchase of a new real property.


Philip J. Kavesh
Nationally recognized attorney helping clients with customized estate planning guidance for over 40 years.