As we move into 2025, several important changes in estate planning laws at both the federal and California state level could impact your current plan. Staying up to date can help ensure your assets are protected and passed on according to your wishes. Here’s what you need to know.
Federal estate tax exemption is set to drop: The current federal estate tax exemption – $13.9 million per person or $27.8 million for married couples – is expected to drop significantly on Jan. 1, 2026, when the Tax Cuts and Jobs Act (TCJA) sunsets. The exemption could fall to approximately $6.5 million per person, adjusted for inflation. High net worth individuals may want to consider making substantial gifts in 2025 to take advantage of the higher exemption while it’s still available.
Gift tax exclusion increases: In 2025, the annual gift tax exclusion has risen to $19,000 per individual or $38,000 per married couple. You can give up to this amount to as many people as you like without reducing your lifetime exemption.
Anticipated federal tax law changes: In addition to estate tax adjustments, income tax brackets and standard deductions may change if the TCJA expires at the end of 2025. The TCJA is a major piece of federal tax legislation that was signed into law in December 2017 and took effect starting in 2018. It made sweeping changes to both individual and business taxes. Most of its provisions for individuals are temporary and are set to expire at the end of 2025, unless Congress acts to extend them. Consider speaking with a tax professional about strategies like Roth conversions or income acceleration in preparation.
Simplified trust termination: As of Jan. 1, 2025, California law now allows a trustee to terminate a trust without court approval if the estate is valued at less than $100,000, streamlining administration for smaller estates.
Easier transfer of primary residences: Starting April 1, 2025, California will allow primary residences valued up to $750,000 to be transferred without probate. This applies only to decedents who pass away on or after the law’s effective date and only covers their primary residence.
While this is good news for some homeowners, it doesn’t eliminate the need for a revocable living trust. If you have multiple beneficiaries, a trust can provide clearer direction and avoid potential disputes. It also allows for easier management of your affairs in case of incapacity and enables you to name guardians for minor children.
To make the most of these legal changes:
- Review your estate plan with a qualified attorney.
- Consider gifting strategies before the 2026 tax exemption reduction.
- Evaluate the need for a trust to manage complexity, especially if your estate includes multiple beneficiaries or real estate.
- Stay informed as laws continue to evolve.
Thoughtful planning today can help reduce future stress for your loved ones and preserve your legacy for generations to come.
Send your questions to ccolan@colanlegal.com and use “Alpine Mountaineer estate planning question” as the subject. We’ll answer your questions in our upcoming issues. This article is provided by your local estate planning attorney, Corina Colan. The Law Office of Corina I. Colan / (909) 265-3315 / www.colanlegal.com
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