Insights on Preparing for the Federal 2026 Trust and Estate Tax Changes and California’s Proposition 19

On January 1, 2026 federal gift and estate tax exemptions are due to revert to 2017 levels of approximately $7 million for individuals and $14 million for couples. The current exemptions are $13.61 million for individuals and $27.22 million for couples so these pending changes may subject more estates to federal gift and estate tax.  Further, in California, Proposition 19 substantially limited the exclusion from property tax reassessment previously granted to transfers from parents to children.  These new and uncertain tax changes are fueling concerns about taxes, especially for high-net-worth individuals and for those nearing retirement. We checked in with Francesca Boyd, Director, Trusts and Estates, Fennemore Oakland for insights on how to prepare for the recent and upcoming tax changes. 

Should people nearing retirement especially high net worth individuals start gifting now to avoid the potential tax liability with the uncertainty surrounding the upcoming changes to the federal gift and estate tax exemptions?

In many cases- yes. Making gifts offer a couple major tax benefits for high-net-worth families: (1) maximizing the current exemption amounts that are due to decrease substantially in 2026, and (2) “freezing” asset values for transfer tax purposes so that they are not taxed later after they have appreciated.

Are there any cautions about gifting now?

Yes, I caution that these benefits are only through a transfer tax lens- there can be income tax and property tax detriments to making a gift now, which should be weighed against the transfer tax benefits, and considered in the context of each client’s individual case. Further, the laws setting the exemption amount are likely to continue to shift.

What are the typical obstacles you see counseling clients on making decisions around lifetime and death-time gifting?

For lifetime gifts, financially and emotionally, are you ready to part with the asset? I always prioritize my client’s wellbeing first. If so, are your children ready to receive wealth outright or is a trust an appropriate vehicle? Trusts allow us to design a structure customized to each client’s particular objectives. As we all know, without any need to pick favorites, each child is unique. Further, from a tax perspective, it is essential to consider all the different tax consequences of a gift- transfer tax, income tax and property tax. It can be challenging but exciting to negotiate all three as we find the best fit for the client.

Does transferring real estate into a trust help mitigate estate tax exposure? Can you advise on the primary advantages and disadvantages and what kind of trust makes the most sense?

That is a common misconception- transferring real estate, or any asset, into a trust does not in itself mitigate estate tax exposure. It’s removing the asset from your estate that will mitigate estate tax exposure, and that can be done in a variety of ways, including gifts to certain trusts. Trusts that are used to receive gifts are irrevocable which means the person who makes the gift to the trust (the “grantor”) cannot change their mind later and take the gift back, change the trust terms, or retain too much control over the gift without risking the gift being deemed returned to the grantor’s estate. The irrevocability and terms of such trusts are important factors for clients to consider.

Lots of emotions among families are tied to deciding what to do with properties as part of estate planning. What guidance can you give to help people navigate through the tax realities associated with the timing and transfer of real estate to heirs?

While educating clients about the tax consequences is essential, it is also not everything. The only thing inevitable about life- including tax laws, the economy and family dynamics- is change. I strive to prepare my clients and to build as much flexibility as possible into their estate plans so that they are empowered to do what’s best for their particular families given changed circumstances, whatever they may be.

Francesca K. Boyd advises clients in all areas of estate planning, estate administrative law, wealth management, and wealth transfer planning. She has experience in drafting complex wills and trust agreements, probating estates, administering trusts, analyzing estate and gift taxation matters, and advising fiduciaries and beneficiaries. Representing corporate clients, Francesca has provided legal services on business formation and succession, charitable transfers and tax compliance.Additionally, she served as Senior Project Manager of a real estate development company, overseeing design, entitlement, construction, and marketing, as well as managing outside legal counsel, financial advisors and lending institutions. In this role, she managed relationships with investors, partners, city officials and the community. Francesca is also experienced in navigating California’s complex property tax rules governing change of ownership and reassessment of real estate.

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