If you’re planning your estate and wondering whether your children will owe inheritance tax in California, the short answer is no. California does not impose an inheritance tax or estate tax, making it one of the more tax-friendly states for passing on wealth. However, there are still important considerations, including federal estate taxes and other financial implications. No Inheritance Tax in California Unlike some states, California does not require heirs to pay taxes on inherited assets. Regardless of the amount, your children will not face any state-imposed inheritance tax when they receive their inheritance. Federal Estate Tax Considerations While California does not have its own estate tax, federal estate taxes can apply to large estates. In 2025, the federal estate tax exemption is $13.99 million per person ($27.98 for married couples). This means: If your estate is valued below this amount, no federal estate tax will be owed. If your estate is valued above this threshold, the excess amount is taxed at rates up to 40% before assets are distributed to heirs. Since this tax is imposed on the estate itself, your children will not be responsible for paying it directly—but a significant portion of the estate could be reduced before they receive their inheritance. Other Financial Implications for Heirs While inheritance tax is not an issue in California, there are other financial aspects to consider: Capital Gains Tax : If your children inherit assets like real estate or stocks, they likely will benefit from a step-up in basis to the asset’s value at the time of your passing. This can reduce capital gains taxes if they sell the asset later. Income Tax on Certain Assets : Inherited retirement accounts (like IRAs or 401(k)s) may be subject to income tax when withdrawn. Non-spouse beneficiaries typically must withdraw the full balance within 10 years, which can create a significant tax burden. Planning for the Future Even though California does not have an inheritance tax, estate planning is essential to ensure a smooth wealth transfer and minimize federal tax exposure. Consulting with an estate planning attorney or financial advisor can help you develop the best strategy for your family’s financial future. If you have a sizable estate or complex assets, take proactive steps now to ensure your beneficiaries receive the maximum benefit from their inheritance. Please contact me with any questions.

When planning your estate in California, you’ve likely heard of two options: a will and a trust. While both serve to distribute assets after death, they work in significantly different ways. Choosing the right one depends on your personal circumstances, financial goals, and family needs. What is a Will? A will is a legal document that outlines how your assets should be distributed after your death. It also allows you to: Name an executor to manage your estate. Designate guardians for minor children. Specify funeral arrangements or other wishes. Pros of a Will: ✔ Simplicity – Easier and cheaper to create than a trust. ✔ Flexibility – Can be updated as life circumstances change. ✔ Guardianship – Essential if you have minor children. Cons of a Will: ✖ Probate Required – Your estate must go through probate, a court-supervised process that can be time-consuming and costly. ✖ Public Record – Probate is a public process, meaning your estate details become part of the court record. What is a Trust? A trust is a legal document that allows you to manage your assets during your lifetime and distributes them to your beneficiaries after you pass away. In California, the most common type is a revocable living trust. You maintain control over your assets during your lifetime and name a trustee to manage them after your death. Pros of a Trust: ✔ Avoids Probate – Assets in a trust pass directly to beneficiaries, saving time and legal costs. ✔ Privacy – Unlike a will, trusts are not public records. ✔ Incapacity Protection – If you become incapacitated, your successor trustee can manage your assets without court intervention. ✔ Control Over Distributions – You can set rules for how and when beneficiaries receive their inheritance (e.g., staggered payments, specific conditions). Cons of a Trust: ✖ More Expensive to Set Up – Creating a trust typically costs more than a standalone will.  ✖ Ongoing Maintenance – You must transfer assets (like real estate and bank accounts) into the trust, or they won’t be covered. Which One is Right for You? If you own real estate or have a significant estate, a trust helps avoid probate. If you want privacy and control, a trust is better. If your estate is small ($184,500 or less in California), probate may be avoided without a trust. Please contact me to discuss whether a trust or will is best for your situation. About the Author Kendra Hampton has nearly 20 years of legal experience. She manages her own estate planning practice and has helped hundreds of clients create and update their trust, will, and powers of attorney. Kendra is committed to educating clients on the importance of estate planning and crafting personalized planning strategies.

Transferring assets like your home into a trust is a smart way to protect them and plan for the future. But if you don’t update your insurance policies, you could face serious risks—like denied claims, legal trouble, or financial loss. Here’s why adding your trust as an additional insured on your insurance policy is vital and how to do it the right way. 1. Protects Your Home and Property When you transfer your home into a trust, the trust becomes the legal owner—not you. That means your homeowners insurance needs to cover the trust, too. If the trust isn’t listed as an additional insured on the policy, your insurance company could deny your claim, leaving you to pay for damages or legal fees. Example : If a storm destroys your trust-owned home, but your homeowners’ insurance only lists your name as an individual, the insurance company might refuse to pay for repairs. 2. Prevents Insurance Gaps and Denied Claims Insurance only covers the people or entities listed in the policy. If your trust owns the property but isn’t listed, your insurance company may not cover damages or lawsuits. Example : If a guest gets hurt at your rental property, which is held in a trust, but your homeowners’ insurance still lists only your name, the insurance company could deny the claim, leaving you personally responsible for medical bills or lawsuits. 3. Ensures Claims Get Paid Smoothly When you file an insurance claim, the right name needs to be on the policy. If your trust isn’t listed, the insurance company may delay or deny payments - even if you’ve paid your premiums. Example : If a tree falls on your trust-owned home, but your insurance only has your name, the company may refuse to pay, claiming the property belongs to the trust—not you. How to Add Your Trust to your Insurance Policies Check your existing policies – Identify all insurance policies covering assets held by the trust. Contact your insurance company – Request that the trust be added as an additional insured or named insured, depending on the policy. Update documents – Make sure your policy clearly lists the trust (in addition to your name).  If you have any questions, please contact me.  About the Author Kendra Hampton has nearly 20 years of legal experience. She manages her own estate planning practice and has helped hundreds of clients create and update their trust, will, and powers of attorney. Kendra is committed to educating clients on the importance of estate planning and crafting personalized planning strategies.