For some time now, most Californians have enjoyed freedom from estate, gift and inheritance taxes.  Back in 1982, Californian voters approved Proposition 6, which amended the state constitution to prohibit such gift and “death” taxes.  Recently, the federal government increased the “exemption” (the amount then can pass gift and estate tax free) to over $11 million for a single person and over $22 million for a married couple.

Maybe That Was Too Good To Be True

Proposed State Senate Bill Number 378 now threatens to bring back California gift and estate taxes!  Introduced on February 20, 2019 and recently amended on March 25th, this Bill would impose a 40% tax rate against estates, to the extent they exceed $3.5 million. Although you may not think your estate is greater than $3.5 million, when you add up the values of all your assets, including your home, cash accounts, investments, retirement accounts and IRAs, and life insurance – and factor in inflation between today and when you pass, you and your loved ones may, indeed, face this tax, that could force them to liquidate assets! (The State Bill exemption of $3.5 million will not be adjusted for future inflation!)

Don’t Over-React But Do React

The new estate tax bill is still lodged a in State Senate Committee. It still needs to pass through both the State Senate and Assembly. 

In addition, in order for the new law to become effective, it must be approved by voters in a statewide election (Nov. 2020).  Furthermore, the new law won’t be effective until a later date specified, January 1, 2021.  So you probably don’t need to change anything in your estate plan immediately (although you should come in for a checkup if we haven’t reviewed your plan within the past 3 years).

What you can do right away is contact your State Senator and Assemblyman and let them know you are opposed to Senate Bill 378!

Stay Tuned

Of course, we will do own best to keep you apprised of any important future developments regarding state (or federal) estate taxes. Check this space!

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