California does not have a death tax or inheritance tax
California abolished its inheritance tax in 1982 and has no state estate tax. When someone dies in California, their heirs do not owe state taxes on what they inherit. This is one of the most important facts to understand about California's tax system — and it differs sharply from federal rules.
However, the federal government does impose an estate tax on large estates, and that tax applies to California residents just as it applies everywhere else. The state itself takes nothing, but the federal government may. Understanding the difference between state and federal rules matters because it changes what your family actually owes.
Key Takeaways
- California has no state estate tax or inheritance tax, so the state collects nothing when you die.
- The federal estate tax applies to California estates larger than $13.61 million (as of 2024), and that threshold changes yearly.
- Federal estate tax is owed by the estate itself, not by individual heirs, and the estate's executor pays it before distributing money to beneficiaries.
- Proper planning — such as trusts, gifts during your lifetime, or life insurance — can reduce or eliminate federal estate tax for large estates.
- Most California families pay no estate tax at all because their estates fall below the federal threshold.
How the federal estate tax works for California residents
The federal estate tax is a tax on the total value of everything you own when you die — your house, bank accounts, investments, retirement accounts, life insurance, and personal property. The federal government taxes estates above a certain threshold. For 2024, that threshold is $13.61 million per person. If your estate is worth less than that, no federal estate tax is owed.
The threshold is adjusted each year for inflation. It was lower in previous years and will change again in 2025. Because the threshold is high, most people's estates never trigger federal tax. A typical California family home, a car, a retirement account, and some savings rarely add up to $13.61 million.
When an estate does exceed the threshold, the tax rate is 40 percent on the amount over the limit. That is a steep rate, which is why people with large estates often work with an estate planning attorney or tax professional to reduce the tax burden.
Who pays the estate tax and when
The estate itself pays federal estate tax, not the individual heirs. The person named as executor in the will — or the person appointed by the court if there is no will — is responsible for calculating the tax and paying it. This happens before the executor distributes money and property to the people who inherit.
The executor files a federal estate tax return (Form 706) with the IRS if the estate exceeds the threshold. The return is due nine months after the person's death, though an extension can be requested. The executor uses money from the estate to pay the tax bill, which reduces the amount left for heirs.
Because the estate pays the tax, heirs do not receive a bill from the IRS. They may receive less money than they expected, however, because the tax comes out of the estate first.
The difference between estate tax and inheritance tax
Estate tax and inheritance tax are not the same thing, though the terms are sometimes confused. An estate tax is paid by the estate itself before heirs receive their share. An inheritance tax is paid by the people who inherit. California has neither.
Some states have inheritance taxes that heirs must pay on what they receive. California does not. Even if your parent dies with a large estate subject to federal tax, you as the heir do not owe California state tax on your inheritance. The federal estate tax is paid by the estate, and that is the only death-related tax California residents face.
Planning strategies for large estates
If your estate is close to or above the federal threshold, several strategies can reduce the tax burden. One common approach is to give money or property to family members during your lifetime. The federal government allows you to give up to a certain amount per year per person without triggering gift tax. For 2024, that amount is $18,000 per recipient per year. Gifts above that count against your lifetime exemption, which is the same $13.61 million threshold that applies to estates.
Another strategy is to establish a trust. A revocable living trust lets you control your assets during your lifetime and transfer them to heirs outside of probate, which can reduce costs and delays. An irrevocable trust removes assets from your taxable estate, which can lower federal estate tax, though you give up control of those assets.
Life insurance is another tool. The death benefit from a life insurance policy can provide money to pay estate taxes without forcing the estate to sell property or investments. A life insurance trust can own the policy so that the death benefit itself is not counted as part of your taxable estate.
These strategies work best when planned years in advance. If you have a large estate or expect to, talking to an estate planning attorney or tax professional in California can help you understand your options.
What happens during probate in California
Probate is the court process that transfers property from a deceased person's name to their heirs. California probate is separate from estate tax. You can have probate without owing estate tax, and you can owe estate tax without going through probate (if assets are in a trust, for example).
California probate can be slow and expensive. Court fees, attorney fees, and executor fees all come out of the estate. For small estates — those under $166,250 in gross value as of 2024 — California offers a simplified process that costs less and moves faster. For larger estates, the full probate process can take six months to two years.
Using a revocable living trust is one way to avoid probate entirely. Assets held in a trust transfer directly to beneficiaries without court involvement. This does not reduce estate tax, but it does reduce probate costs and delays.
How to learn about your estate might owe federal tax
Start by adding up the value of everything you own: your house, bank accounts, investments, retirement accounts, life insurance death benefits, and personal property. If the total is less than $13.61 million, federal estate tax is unlikely to be an issue.
If you are close to that threshold or above it, or if you expect your estate to grow significantly, consider meeting with an estate planning attorney. They can review your situation, explain your options, and help you set up a plan that works for your family and your goals. Many attorneys offer a free initial consultation.
You can also use online estate tax calculators as a rough starting point, though they are not a substitute for professional information. The IRS website has information about federal estate tax, including current thresholds and forms.
Frequently Asked Questions
Does California tax money I inherit from a parent or relative?
No. California has no inheritance tax or estate tax. You do not owe the state anything on money or property you inherit. The federal government may tax the estate itself if it is very large, but that tax is paid by the estate, not by you as the heir.
What if I inherit property worth more than $13.61 million?
The federal estate tax applies to the estate as a whole, not to individual pieces of property. If the total estate exceeds $13.61 million, the estate owes federal tax on the amount over the threshold. The executor pays this tax from estate assets before distributing your inheritance. Your inheritance itself is not taxed by California.
Can I avoid federal estate tax by moving to another state?
No. Federal estate tax applies to all U.S. citizens and residents regardless of where they live. Moving to a state with no state income tax does not change your federal estate tax obligation. However, some states have lower estate taxes or none at all, which can matter if you own property in multiple states.
Is a living trust the same as avoiding taxes?
No. A revocable living trust avoids probate and its costs, but it does not reduce federal estate tax. A revocable trust is still counted as part of your taxable estate. An irrevocable trust can reduce estate tax, but you lose control of the assets inside it. Talk to an attorney about which type of trust fits your situation.
When does the federal estate tax threshold change?
The threshold is adjusted each year for inflation. It was $13.61 million in 2024 and will change in 2025. The threshold is set to drop significantly in 2026 unless Congress changes the law. If you have a large estate, it is worth checking the current threshold and planning accordingly.