Do you currently have an estate plan? Do you have a will and would like to explore your other options for structuring your estate? Or maybe you don’t have an estate plan and are considering having one because of recent life changes.
First of all, you may be wondering what estate planning means?
Estate planning is a dynamic and constantly evolving process by which you manage your assets. Yes, it is true that a lot of people actively engage in estate planning as a way to plan for their last years, but it is really so much more than that.
It is a way of taking care of your family, minimizing liabilities, planning for the unexpected, and ensuring that your intentions for your assets are followed even after you are no longer able to make these kinds of decisions for yourself.
On the other hand, estate planning is also something that evolves with the external legal landscape. California has, in recent years, come out with some important legislative updates that can significantly impact any existing estate plans.
Below we take a look at some of these recent changes.
A New Small Estate Threshold
As of April 1, 2025, the small estate threshold has increased.
But it is important to note that these values are based on the date of death.
So if a person died between April 1, 2022 and March 31, 2025, the small estate threshold for real and personal property is $184,500. If, however, the person died on or after April 1, 2025, the small estate threshold is $208,850.
These values are based on the gross value of both real and personal property at the time of death. If the total values do not exceed the small estate threshold, the estate is eligible to avoid probate and instead use the simplified affidavit method for transferring property.
But this brings us up against the dilemma of an estate where the personal property values are small, but the inclusion of real estate can drive the gross value past the small estate threshold.
The $750,000 Primary Residence Rule
If the gross value of a person’s estate exceeds the small estate thresholds, the general rule is that the estate is not eligible as a small estate and must go through probate.
However, Assembly Bill 2016 revised Probate Code 13154 so that families are given a shortcut when it comes to the transfer of primary residences, provided the following requirements are met:
- 40 days have passed since the death of the decedent;
- No proceeding has been initiated or is being conducted for the administration of the decedent’s estate; and
- The property does not exceed the threshold values
Then the successor or successors can file a petition to determine succession to primary residence. A court order granting this petition will allow the transfer of the primary residence to the petitioners without the necessity of going through probate.
If the date of death is between April 1, 2022 and march 31, 2026, the threshold value for the primary residence must not exceed $184,500, which is similar to the threshold value of small estates for the same time period.
But if the date of death was on or after April 1, 2025, the gross value of the primary residence was increased significantly – to $750,000.
This change in values is significant because the threshold for real estate that may qualify as a primary residence under this rule is no longer constrained by the previously lower limit.
So even if the gross value of an estate exceeds the small estate threshold because of the decedent’s primary residence, the decedent’s successors can still avoid probate and facilitate an easier transfer when it comes to the primary residence.
Of course, court involvement is still required, but the process may be less burdensome than a full probate proceeding when transferring a family residence to heirs.
Proposition 19
Proposition 19 is an amendment to the California Constitution in 2020, and is incredibly significant for estate planning purposes.
For California property owners who are 55 years of age or over, disabled persons, or victims of wildfire or natural disasters, they are allowed to transfer their primary residence’s taxable value to a replacement residence of equal or lesser value. If the replacement residence has a higher value than the original residence, then the taxable value of the replacement property is increased by the difference.
On the other hand, limits have been set on the transfer between parents and children. Prior to Proposition 19, regardless of the value of the property, parents were allowed to transfer their real property to their children without a reassessment in property taxes. The type of property also did not matter – it could be the primary residence, a vacation home, or even rental property.
Under Proposition 19, however, if the child wishes to claim the reassessment exemption, they are required to use the property as their primary residence or farm within one year from the date of transfer and then file for the exemption. Otherwise, the property will be subject to immediate reassessment, which can mean a massive tax increase for the heirs.
The property’s value also becomes relevant. Proposition 19 now sets a cap on the value on eligible properties – based on a factored base year value plus inflation adjustments. If the value of the property exceeds this amount, and the transfer took place between February 2025 and February 2027, the difference is added to the taxable value, which means that even if the child moves in within one year, there might still be a partial reassessment for tax purposes.
2026 Medi-Cal Asset Limits
Another change that must be examined that is relevant to updating your estate plan are the new asset limits set for Medi-Cal eligibility.
Effective January 1, 2026, applicants and beneficiaries should expect verification of their eligibility based on these asset limits, especially when it comes to eligibility for long-term care services. For individuals, the limit is $130,000 and $65,000 for each additional household member. Different limits have been set for married couples and registered domestic partners.
If you exceed these limits, note that it is not as simple as transferring or letting go of certain assets to become or retain eligibility. There are “look-back” rules in place to asset transfers, particularly if made for less than the property’s fair market value.
For persons looking at utilizing Medi-Cal as part of their long-term care strategy, we highly recommend consulting with a lawyer to examine your eligibility and qualifications and weighing your options when it comes to healthcare
Update Your Estate Plan
Bottom line is, if you have an existing estate plan, it is now time to update it. If you don’t have one yet, you should start one.
Property transfers that take place after a person’s death, changing tax exposures under these new laws, transfers of family homes, and even eligibility for Medi-Cal’s healthcare programs – a lot of things are changing. We can no longer proceed on assumptions that worked as recently as 2023.
Consulting with an estate planning attorney will help ensure your plan reflects current California law, accounts for recent changes in property transfer rules, tax thresholds, and public benefit eligibility, and is structured in a way that reduces avoidable risks. More importantly, it provides clarity and confidence that your assets will be transferred according to your wishes, without unnecessary delays, costs, or legal complications for your heirs.