A Committee of The Lake Arrowhead Communities Chamber of Commerce
LakeArrowheadGovernmentAffairs.org
JANUARY 2025
LEGISLATIVE CHANGES TO IMPACT ESTATE PLANNING IN CALIFORNIA IN 2025
Understanding these developments is crucial for individuals aiming to preserve their assets and ensure their estate plans remain effective.
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FEDERAL ESTATE TAX EXEMPTION REDUCTION
The Tax Cuts and Jobs Act (TCJA) of 2017 significantly increased the federal estate tax exemption, allowing individuals to exclude up to $13.61 million in 2024 from estate taxes. However, this provision is set to expire on December 31, 2025. Absent legislative action, the exemption will revert to pre-TCJA levels, estimated to be around $7 million per individual, adjusted for inflation. This reduction means that estates exceeding the lower exemption amount will be subject to federal estate taxes, potentially at rates up to 45%.
While California does not impose a state estate tax, the federal exemption reduction could significantly affect residents with substantial estates.
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CHANGES IN PROBATE THRESHOLDS
In California, significant changes are coming to probate rules, with a new law set to take effect on April 1, 2025. This legislation raises the probate threshold for primary residences, allowing properties valued up to $750,000 to be transferred to heirs through a simplified process without the need for formal probate proceedings.
The new law aims to streamline the transfer of assets, reducing the time, expense, and complexity associated with probate court. By increasing the threshold, more families will benefit from expedited access to inherited properties, avoiding lengthy delays that can disrupt financial stability and create stress during an already difficult time.
This adjustment reflects California's recognition of the state's escalating real estate market values, ensuring that more families can take advantage of the simplified transfer process. It represents a significant step toward modernizing estate planning and asset distribution practices, making them more accessible and efficient for residents.
The upcoming changes to California's probate thresholds are outlined in Assembly Bill 2016 (AB 2016), which amends several sections of the California Probate Code. Specifically, the bill modifies Sections 13100–13101, 13150–13152, and 13154, and repeals Section 13158.