2026 Federal Estate Tax Exemption Limits

I recently met with Emily, a successful business owner, who was understandably distraught. She’d meticulously crafted her estate plan years ago, including a codicil to her Trust updating beneficiaries. But the codicil, witnessed during a Zoom call with family members, was deemed invalid by the court. The reason? California law, even post-pandemic, demands strict simultaneous presence for Will and Trust executions. This oversight cost Emily’s heirs tens of thousands in legal fees and prolonged the probate process by over a year. It’s a painful reminder that even seemingly minor details can have catastrophic consequences when it comes to estate planning.

What is the current federal estate tax exemption, and what changes are expected in 2026?

As of 2024, the federal estate tax exemption is exceptionally high – $13.61 million per individual. This means an individual can transfer that amount of assets during their lifetime or upon death without incurring federal estate tax. However, this generous exemption is scheduled to revert to approximately $7.12 million (indexed for inflation) on January 1, 2026. This “sunset provision” was part of the 2017 Tax Cuts and Jobs Act, and unless Congress acts, it will dramatically increase the number of estates subject to federal estate tax. For married couples, this means potentially double the assets exposed to taxation.

How does the step-up in basis impact my estate tax liability as a CPA?

One of the significant benefits of proper estate planning, and a key advantage I bring to my clients as both an Estate Planning Attorney and a Certified Public Accountant, is maximizing the step-up in basis for inherited assets. When assets are transferred at death, the beneficiaries receive a stepped-up basis equal to the fair market value of the assets on the date of death. This means that when the beneficiary eventually sells those assets, they only pay capital gains tax on the appreciation that occurred after the date of death – not over the decedent’s entire lifetime. Proper planning ensures this benefit is fully realized, minimizing capital gains exposure. For example, if a client held stock purchased for $100,000 that was worth $500,000 at death, the beneficiary’s basis is $500,000. If they sell it immediately, there’s no gain, and therefore no capital gains tax. Valuation is critical here; accurate appraisals are often necessary, especially for closely held businesses or unique assets.

What happens if my Will is invalidated, and how does this affect assets under a certain amount?

If a Will is invalidated – due to improper execution, lack of testamentary capacity, or undue influence – assets fall under intestacy; however, for deaths on or after April 1, 2025, estates with personal property under $208,850 (per CPC § 13100) may still bypass full probate via affidavit. This simplified process avoids the lengthy and costly court supervision of traditional probate. But, depending on the circumstances, even using the affidavit process might not be possible or fully protect heirs. A flawed Will can also lead to disputes among beneficiaries, further increasing legal expenses and causing family conflict.

What if a beneficiary also serves as a witness to my Will?

In California, California Probate Code § 6112 states that an ‘interested witness’ (a beneficiary) triggers a legal presumption of duress or fraud. Unless there are two other disinterested witnesses, the beneficiary may lose their gift, taking only what they would have received under intestacy rules. This is a surprisingly common issue. While it’s not automatically invalidating, it creates a significant legal hurdle that heirs may have to overcome through expensive litigation.

What about mistakes made during the execution of a Will? Can they be fixed?

Even minor errors – a missing signature, an incorrect date – can cast doubt on the validity of a Will. Probate Code § 6110(c)(2) (Harmless Error) allows the court to validate a signature-defective Will if there is ‘clear and convincing evidence’ of the testator’s intent; however, this requires a costly court petition and is not a guaranteed safety net. Prevention is far better than cure. A properly drafted and meticulously executed Will minimizes the risk of these challenges.

How do I ensure my digital assets are handled according to my wishes?

In today’s digital world, digital assets – online accounts, cryptocurrencies, photos, videos – represent a significant portion of a person’s estate. RUFADAA 2.0 (SB 1458), effective 2025, California law (CPC § 871) was expanded to grant fiduciaries power over digital accounts; however, you must still grant explicit RUFADAA powers in your Will or Trust to bypass federal privacy blocks. Without these specific provisions, accessing and managing these assets can become incredibly difficult for your heirs.

With over 35 years of experience as both an Estate Planning Attorney and a CPA, I understand the complexities of wealth transfer and tax minimization. I help clients navigate these challenges, ensuring their wishes are honored and their legacies protected. Don’t wait until it’s too late to review and update your estate plan, especially in light of the impending changes to the federal estate tax exemption.

How do California courts decide whether a will reflects true intent or creates ambiguity?

In California, a last will and testament is reviewed under probate standards that focus on intent, capacity, and execution. Clear drafting reduces ambiguity, limits misinterpretation, and helps families avoid unnecessary conflict during estate administration.

When a will is drafted with California probate review in mind, it becomes a stabilizing roadmap rather than a source of conflict. Clear intent, proper authority, and compliant execution protect both families and estates.

Resources for Legal Standards & Probate Procedure

• Escondido Local Rules: San Diego Superior Court – Probate Division
  Access the essential “Local Rules” (Division IV) effective January 1, 2026. This includes mandatory e-filing procedures, current Probate Examiner notes, and Local Rule 4.4.5 regarding remote appearance requirements (via MS Teams) for non-evidentiary hearings.
• Attorney Verification: State Bar of California
  The official regulatory body for California attorneys. Use this to verify a lawyer’s “Certified Specialist” status in Estate Planning or to access 2026 guidelines on the ethical handling of Client Trust Accounts (IOLTA).
• Self-Help & Forms: California Courts – Wills, Estates, and Probate
  The Judicial Council’s official portal. It includes the updated 2026 forms for the $208,850 personal property threshold and the $750,000 “Primary Residence” simplified transfer procedure (AB 2016).
• Federal Estate Tax: IRS Estate Tax Guidelines
  The authoritative federal resource for estate and gift tax filing. It reflects the 2026 “OBBBA” permanent exemption of $15 million per individual, replacing the previously scheduled Tax Cuts and Jobs Act (TCJA) sunset.