A Snapshot of California’s Estate Tax

This is the second and final post in our estate tax series. To read part one on federal estate tax, click here.

Since 1982, estate taxes have been prohibited in the state of California. However, in March of last year, our state senate introduced SB 378. It failed to pass during floor vote the following May. SB 378 proposed the reinstatement of a state estate tax and new gift/generation-skipping transfer taxes beginning in 2021. The proceeds from these new policies would have added between $500 million and $1 billion to our state revenue annually.

SB 378 was modeled after the federal estate tax in its rate and “portability,” which we discussed in our last blog post. The only essential difference was the proposed exemption level of $3.5 million for an individual and $7 million for a married couple, compared to the federal levels of $11.4 million and $22.8 million. The tax rate of 40% was set to remain the same. Basically, state lawmakers were attempting to base CA estate taxes after federal estate tax policies in place ten years ago. Exemptions were promised to “phase out” at the federal levels ($11.4 mil) to avoid double taxation on an individual’s estate and act as a credit on taxes already paid.

Although SB 378 will not appear on the 2020 ballot for Californians to vote on, it’s important to keep in mind that estate tax laws could change at any time and may warrant an estate plan review. Keeping informed about potential policy proposals and checking in with your trust attorney about the impacts that certain laws would have on your estate plan is a great way to be proactive for yourself and your family in the long run.

B.B.

The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship. Brittany Britton is licensed to practice law in the state of California only.

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