The New $15M Federal Estate Tax Exemption: What Orange County Families Should Know in 2026

The federal estate and gift tax exemption rose to $15 million per individual (—$30 million for married couples) —on January 1, 2026, under the One Big Beautiful Bill Act signed in July 2025. The new exemption is permanent, with annual inflation adjustments beginning in 2027. California has no state estate tax or inheritance tax, so the federal threshold is the only one that applies to estates of Orange County residents

For most of 2024 and 2025, California families with significant assets were preparing for what many tax advisors called the “estate tax cliff.” Under the Tax Cuts and Jobs Act of 2017, the federal estate and gift tax exemption was scheduled to drop by roughly half on January 1, 2026, from nearly $14 million per individual in 2025 down to about $7 million.

For most of 2024 and 2025, California families with significant assets were preparing for what many tax advisors called the “estate tax cliff.” Under the Tax Cuts and Jobs Act of 2017, the federal estate and gift tax exemption was scheduled to drop by roughly half on January 1, 2026, from nearly $14 million per individual in 2025 down to about $7 million.

For Orange County residents, where real estate, business interests, and retirement accounts can quickly push an estate into the multi-million-dollar range, this change reshaped the planning landscape almost overnight.

The most important provisions for estate planning are straightforward:

• The federal estate and gift tax exemption is $15 million per individual for deaths and gifts occurring on or after January 1, 2026.
• Married couples may transfer up to $30 million combined, with proper planning and elections
• The exemption is now permanent. There is no scheduled sunset, though Congress retains authority to change the law in the future.
• Annual inflation adjustments begin in 2027, so the threshold should continue to rise modestly each year.
• The annual gift tax exclusion remains $19,000 per recipient in 2026.
• The top federal estate, gift, and generation-skipping transfer (GST) tax rate stays at 40% on amounts above the exemption.

These figures apply at the federal level only. California maintains its long-standing position of imposing no state-level estate, inheritance, or gift tax.

The California Picture

California eliminated its state estate tax in 2005. There is also no California inheritance tax and no California gift tax. That means an Orange County resident with an estate valued below $15 million (or $30 million, for a married couple) generally faces no transfer tax at death.

Several California-specific considerations still shape planning, however:

• Proposition 19 property tax reassessment. When real estate passes from parent to child, the inherited property can be reassessed at current market value unless the child uses the home as their primary residence (and even then, the exclusion is limited). This is a separate issue from estate tax, and it remains one of the most consequential planning topics for Orange County families.
• Capital gains and step-up in basis. Inherited assets continue to receive a step-up in basis to fair market value as of the date of death. For California community property, the entire assetgenerally receives a step-up when the first spouse dies, which can sharply reduce capital gains exposure if the property is later sold by the surviving spouse.
• Probate avoidance. Even when no estate tax is owed, California’s probate process can be lengthy and expensive. A properly structured living trust still offers meaningful benefits regardless of estate value.

Who Still Needs to Plan for Federal Estate Tax

While the higher exemption removes federal estate tax exposure for the vast majority of families, some Orange County residents will still benefit from active tax planning:

• Individuals with estates approaching or exceeding $15 million, or couples approaching $30 million.
• Business owners whose company value, combined with personal assets, may push them above the threshold.
• Families with significant real estate portfolios, where appreciation can push values higher over time.
• Anyone who made large lifetime gifts under the prior exemption and now has additional unused exemption available.
• Individuals concerned about the possibility of future legislative changes that could reduce the exemption again.

For these families, strategies such as spousal lifetime access trusts (SLATs), grantor retained annuity trusts (GRATs), irrevocable life insurance trusts (ILITs), and charitable planning vehicles remain relevant. Each carries its own trade-offs, and the right structure depends on the specific facts of the family’s situation.

Even families well below the $15 million threshold often have plans that need updating after the OBBBA:

• Older trust documents may contain formula clauses tied to the federal exemption. Under a $15 million exemption, those formulas can allocate assets differently than the family originally intended, sometimes directing too much, or too little, into a credit shelter or bypass trust.
• Plans drafted during periods of lower exemption amounts may include irrevocable structures that no longer match the family’s current needs.
• Beneficiary designations on retirement accounts, life insurance, and transfer-on-death accounts may have grown out of alignment with the broader plan.
• The successor trustee or executor named years ago may no longer be the right person for the role today.

A plan review every three to five years, and after any major law change or life event, is a reliable rule of thumb.

The OBBBA gives Orange County families room to plan with less urgency than the previous “use it or lose it” environment created. That said, “permanent” in tax law means “until Congress changes it.” Flexibility built into your plan—through trust protector provisions, powers of appointment, and decanting authority—remains one of the most valuable features a well-drafted plan can offer.

When a Pre-Travel Phone Call Is Worth It

Estate planning is not a topic anyone wants to spend their last weekend before vacation on. The honest answer is that you do not need to. The point of this checklist is to surface anything that genuinely needs attention before you leave, not to add new items to your plate. For the families that have already done the foundational estate planning work — trust, will, healthcare directive, financial power of attorney —, a pre-travel review usually confirms that the plan is doing exactly what it was built to do.

If you have not reviewed your estate plan since the OBBBA was enacted, or if it has been more than a few years since your last review, a consultation can help confirm that your documents still reflect both your wishes and the current law.

Goodman Estate Law

Brett J. Goodman is the founder and lead attorney at Goodman Estate Law, based in Laguna Hills, CA. The firm specializes in Estate Planning, Trust Administration, and Probate, helping individuals and families create or update wills and trusts. With a focus on personalized, compassionate, and professional guidance, Goodman Estate Law ensures clients’ assets and futures are protected during every stage of estate planning.