California has no estate tax and no inheritance tax. The state banned both in 1982, and nothing a California heir receives is taxed by Sacramento on account of the death. The only death-related tax Californians need to think about is the federal estate tax, which in 2026 applies only to estates above $15 million per person, or up to $30 million for a married couple using portability. Most families will never owe a dollar of it. The costs that actually bite California estates are different ones: property tax reassessment under Proposition 19, and statutory probate fees.
Why California Has No Estate or Inheritance Tax
California voters passed Proposition 6 in June 1982, repealing the state’s inheritance tax and replacing it with a flat prohibition. Revenue and Taxation Code Section 13301 bars the state and every local government from collecting any tax triggered by a death or a gift.1California Legislative Information. California Code Revenue and Taxation Code 13301 – Imposition of Tax That covers estate taxes, inheritance taxes, succession taxes, and legacy taxes alike. The two are often confused: an estate tax is levied on the total value of a deceased person’s assets before distribution, while an inheritance tax falls on individual recipients. California imposes neither, no matter how large the estate or how distant the heir.
Some states have decoupled from the federal system and run their own estate or inheritance taxes with lower exemptions. California is not among them.
When the Federal Estate Tax Applies in 2026
The federal estate tax exemption for 2026 is $15 million per individual. A married couple using portability can shield up to $30 million. This is a permanent figure enacted through the One Big Beautiful Bill Act, which replaced the temporary doubling under the 2017 Tax Cuts and Jobs Act that had been scheduled to expire. Starting in 2027, the $15 million threshold will be adjusted annually for inflation.2Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax
The rate table technically starts at 18% on the first $10,000 of taxable estate value, but because the unified credit eliminates tax on everything below the exemption, the effective rate on any dollar actually subject to tax is 40%.3Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax
The gross estate includes the fair market value at the date of death of everything the decedent owned or held certain interests in: real estate, bank accounts, investment portfolios, business interests, annuities, and personal property.4Internal Revenue Service. Estate Tax Life insurance is the asset that most often surprises families. If the decedent held any “incidents of ownership” over a policy at death, such as the power to change beneficiaries, borrow against it, or cancel it, the full proceeds are included in the gross estate even when the money is paid directly to someone else.5Office of the Law Revision Counsel. 26 USC 2042 – Proceeds of Life Insurance A $2 million policy owned by the decedent adds $2 million to the gross estate.
How Community Property Changes the Math
California’s community property regime quietly does two helpful things for married couples at death.
First, it reduces the gross estate. Property acquired during the marriage is generally owned equally by both spouses, so only the decedent’s half of community property is counted for federal purposes. A couple with $20 million in community property has a gross estate of roughly $10 million when the first spouse dies, comfortably under the 2026 exemption.
Second, and less well known, is the double step-up in basis. Under federal law, inherited property receives a new income-tax basis equal to its fair market value at the date of death. In common law states, only the deceased spouse’s half of jointly owned property gets that adjustment. Under Section 1014(b)(6), community property is treated differently: the entire asset gets a new basis, including the surviving spouse’s half.6Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent
Consider a California couple who bought a home decades ago for $200,000, now worth $1.5 million when one spouse dies. In a common law state, the survivor’s half keeps its $100,000 basis and only the decedent’s half steps up to $750,000, leaving $650,000 of built-in gain on a future sale. In California, both halves step up to the full $1.5 million. The surviving spouse can sell with no capital gains tax at all. On high-value California real estate, this quietly saves families hundreds of thousands of dollars.
Spousal Protections: Marital Deduction and Portability
Two federal provisions protect surviving spouses. The unlimited marital deduction allows the entire estate to pass to a surviving spouse who is a U.S. citizen without triggering any federal estate tax, no matter the size.7Office of the Law Revision Counsel. 26 USC 2056 – Bequests to Surviving Spouse If the surviving spouse is not a U.S. citizen, the deduction is denied unless assets pass through a qualified domestic trust.
Portability lets a surviving spouse inherit the deceased spouse’s unused exemption. If the first spouse to die used only $3 million of their $15 million exemption, the survivor can claim the remaining $12 million on top of their own, sheltering $27 million total. But portability is not automatic. The estate must file Form 706 and affirmatively elect it, even when no tax is owed.8Internal Revenue Service. Form 706 – United States Estate and Generation-Skipping Transfer Tax Return Skip that step and the unused exemption is lost permanently.
Estates not otherwise required to file have a longer window to make the election. Revenue Procedure 2022-32 gives them five years from the date of death to submit a portability-only Form 706, with a specific statement at the top of page one. Estates above the normal filing threshold do not qualify for this extended window.
Form 706 Deadline and Penalties
When Form 706 is required, it is due nine months after the decedent’s date of death.9Internal Revenue Service. Instructions for Form 4768 – Application for Extension of Time to File a Return and/or Pay U.S. Estate Taxes Form 4768 secures an automatic six-month extension to file, pushing the filing deadline to 15 months.10Internal Revenue Service. About Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate Taxes The extension does not postpone payment. Any estate tax owed is still due at nine months, and interest accrues from that date on anything unpaid.
Filing late without a valid extension carries a penalty of 5% of the unpaid tax per month, capped at 25%.11Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax A separate 0.5% monthly failure-to-pay penalty, also capped at 25%, applies to the unpaid balance, and interest compounds on top. For a large estate owing several million in tax, missed deadlines are expensive quickly.
The California Cost Most Families Actually Face: Proposition 19
No estate tax does not mean no tax consequences. When California real estate changes hands at death, the county assessor reassesses the property at current market value, which can sharply increase the heir’s annual property tax bill. Proposition 19, which took effect in February 2021, narrowed the parent-child exclusion that previously shielded inherited property from reassessment.
A child who inherits a parent’s home can keep the parent’s low tax base only if the child uses the property as their own primary residence and files for the homeowner’s exemption within one year of the transfer. Even then there is a cap: the exclusion covers the property’s existing taxable value plus an adjusted amount of roughly $1,044,586 for transfers through February 2027.12California State Board of Equalization. Proposition 19 Fact Sheet Any market value above that combined figure gets added to the tax base. Investment properties and second homes inherited from parents get no exclusion at all and are reassessed to full market value.
A home with a Proposition 13 tax base of $80,000, now assessed at $1.5 million, could see annual property tax jump from around $1,000 to over $15,000 in the heir’s hands. Over a decade, that is a six-figure cost. For most California families this is a much larger and more certain hit than federal estate tax.
The Other California Cost: Statutory Probate Fees
If assets pass through probate, California sets attorney and personal representative fees by statute as a percentage of the estate’s appraised value, not the net equity. A $1.5 million home with a $1 million mortgage counts as $1.5 million for the fee calculation.
The statutory fee schedule, which both the attorney and the personal representative are each entitled to collect, is:
- 4% on the first $100,000
- 3% on the next $100,000
- 2% on the next $800,000
- 1% on the next $9,000,000
- 0.5% on the next $15,000,000
Because both the attorney and the personal representative are each entitled to that fee, the total statutory cost is roughly double.13California Legislative Information. California Probate Code 10810 – Compensation Based on Value of Estate A $1 million estate generates about $23,000 for each, or $46,000 combined. A $2 million estate generates close to $66,000 combined. The court may approve additional “extraordinary” fees in complex cases. All of it comes out of the estate.
Assets held in a properly funded revocable living trust avoid probate entirely and sidestep these fees. For most California families, that is the single biggest planning decision at death, well ahead of anything to do with the federal estate tax.