Federal Estate Tax Basics
The federal estate tax applies to the taxable estate of a U.S. citizen or resident at death. The top rate is 40% on the amount above the exemption. California has no state estate tax.
Current Exemption Amount
For 2024, the federal estate tax exemption is $13.61 million per individual, adjusted annually for inflation. Married couples can effectively shelter up to $27.22 million through portability or a bypass trust.
The 2025 Sunset: A Critical Planning Window
The elevated exemption was created by the Tax Cuts and Jobs Act of 2017 and is scheduled to sunset on December 31, 2025, reverting to approximately $7 million per individual (inflation-adjusted) unless Congress extends it. Families with estates in the $7M–$14M range should plan now while the elevated exemption is available.
What Is Included in the Taxable Estate
- All property owned at death — real estate, bank accounts, investments, business interests
- Life insurance proceeds (if the decedent owned the policy)
- Retirement accounts (IRAs, 401ks)
- Revocable trust assets
- Half of community property
Disclaimer: This glossary entry is for general educational purposes only and does not constitute legal or tax advice. Laws change frequently and vary by individual circumstances. Consult a licensed California attorney or CPA for guidance on your specific situation.