The 2025 estate tax exemption amount is $13,990,000. This is the amount each person can own at the time of death with no estate tax. Married couples have double this amount, $27,980,000. There is no estate tax unless you have more than this amount. To the extent your estate exceeds this amount, it will be taxed at 40%. The annual gift exemption is $19,000. Click here to see how the estate tax exemption has changed over the years.
In 2010, Obama raised the estate tax exemption to $5,000,000 per person, indexed for inflation. In 2017, Trump doubled the estate tax exemption to $10,000,000 per person, also indexed for inflation. But Trump's exemption is scheduled to sunset at the end of this year, which would decrease the exemption to around $7,000,000 per person.
However, now that Trump has won and has a majority in the House and Senate, there is a good chance the estate tax exemption will not sunset at the end of this year and will remain indexed each year for inflation. Trump says he would like eliminate the estate tax altogether.
If you are concerned the exemption will drop to $7,000,000 at the end of this year, you are not out of the woods yet, but it is looking positive.
I don't have to tell you that the California homeowner's insurance market is a mess. If you were smart enough to have titled your home in the name of your living trust to avoid probate, we recommend you name your living trust as an additional insured on your homeowner's policy.
Your living trust is a grantor trust, which means you are the owner of the trust assets. If you are considered the owner of your living trust assets, then you shouldn't need to add your living trust as an additional insured. However, in this unstable market, we recommend you ask your insurance company to add your living trust as an additional insured, just in case.
Your insurance company may need a copy of your Certification of Trust to confirm the name of your trust.
Last year, we handled several trust administrations where the person who died failed to name beneficiaries on his IRA and life insurance policies. As a result, the children had to either go through probate or use a Small Estates Declaration and wade through the bureaucracy of the financial institution and insurance company.
Why did this happen? When you open an IRA or buy an insurance policy, your financial advisor and insurance agent will require you to name beneficiaries. However, in these cases, the husband named his wife as primary beneficiary and did not name contingent beneficiaries. After his wife died, he didn't update his beneficiaries. When he died a few years later, he had no named beneficiary, so the IRA and the life insurance death benefits fell to the default provisions of the IRA plan document and life insurance policy. In most cases, the default beneficiary is the estate. If the value is less than the California Probate threshold of $184,500, the children could use a Small Estates Declaration. But if the value is greater than that, they have to go through probate. Either way, it's a hassle, and in the case of probate, a very expensive one, all because the surviving spouse did not update his beneficiaries.
If you made your estate plan more than ten years ago, you should have it reviewed and updated. Why would you need to update it?
If your family dynamics will allow it, ask your parents if their estate plan is up-to-date. Not because you are greedy but because you genuinely care. Your parents worked very hard to leave you and your siblings a legacy, and they don't want it wasted in probate. They want the best for you, and they will need their estate plan documents up-to-date to allow you to help them with their finances and medical decisions as they get older.
One of the main problems we see when a client's parent dies is that her living trust has not been funded. Recently, one of our clients asked us to help him administer the trust of his father, who had just died. He owned several properties in the Bay Area. Unfortunately, when we researched the properties' titles, we discovered they were titled in his name - not his living trust. As a result, he will have to take the estate through probate. This drives home the very important point that having a living trust is not enough to avoid probate. You need to fund the trust with your probatable assets, including real property and large bank and investment accounts.
Another mistake we see is that after a spouse dies, the surviving spouse neglects to do any trust administration or update her estate plan.
Things that need to be done when the first spouse dies include:
Estate planning is not a one-and-done event. It's up to you to make sure it works for your current life, not your life from ten years ago.