The $15 Million Estate Tax Exemption: What It Means for Silicon Valley Families
Updated: Sep 21
The 2025 tax law removed the scheduled cut to the federal exemption, but for many Bay Area households, estate planning remains as relevant as ever.
For several years, estate planners warned clients that the federal estate and gift tax exemption was scheduled to fall by roughly half at the end of 2025. The One Big Beautiful Bill Act, signed July 4, 2025, eliminated that cliff. Instead of a reduction, the exemption rose. According to Morgan Lewis, the 2026 exemption is $15 million per person, or $30 million for a married couple, and the law contains no sunset provision, so the amount is expected to continue adjusting for inflation. The annual gift tax exclusion for 2026 is $19,000 per recipient.
Who is still affected
Fifteen million dollars is a high threshold, and most American families will never approach it. In Silicon Valley, however, it is not unusual for a household to combine a home worth two to four million dollars, retirement accounts, a substantial concentrated stock position, and private company equity that could be worth far more after a liquidity event. Life insurance death benefits are also included in the taxable estate if the insured owns the policy. Appreciation over the next twenty or thirty years can turn a comfortable estate into a taxable one. Under Section 2001(c) of the Internal Revenue Code, the federal estate tax rate on amounts above the exemption is 40%.
California does not impose a state estate or inheritance tax, which simplifies planning compared with states such as New York, Massachusetts, or Oregon, each of which levies its own estate tax, according to the Tax Foundation. But it does mean that federal planning is the only game in town.
Less urgency, not less importance
The permanence of the higher exemption changes the tone of planning conversations. Before the law passed, some families rushed to make large gifts to lock in the higher exemption before it expired. That pressure is gone. What remains is the ordinary work of a thoughtful estate plan:
A revocable living trust. In California, probate is public, slow, and expensive, with statutory fees based on the gross value of the estate. A funded revocable trust avoids probate for the assets it holds. This has nothing to do with estate tax and applies to families of nearly any size.
Beneficiary designations. Retirement accounts, life insurance, and transfer-on-death accounts pass by designation, not by will or trust. Outdated designations are among the most common and most damaging estate planning errors.
Powers of attorney and health care directives. These documents matter during life, not after death, and are especially important for younger families.
Guardianship nominations for minor children.
Strategies for larger estates
For families whose net worth is likely to exceed the exemption, several tools remain relevant:
Annual exclusion gifts. A married couple can give $38,000 per recipient per year without using any lifetime exemption. Direct payments of tuition and medical expenses are excluded without limit.
Lifetime gifts of appreciating assets. Giving pre-IPO stock or other assets expected to grow removes future appreciation from the estate. The trade-off is that gifted assets do not receive a step-up in basis at death, while inherited assets generally do.
Irrevocable trusts. Grantor retained annuity trusts, spousal lifetime access trusts, and intentionally defective grantor trusts are commonly used to transfer growth while retaining some flexibility. Each has technical requirements and should be drafted by qualified counsel.
Portability. A surviving spouse can use the deceased spouse's unused exemption if a timely estate tax return is filed, even when no tax is due. Many families overlook this filing.
Charitable planning. Bequests to charity are fully deductible for estate tax purposes, and lifetime charitable vehicles can serve both philanthropic and tax goals.
Coordinate income tax and estate tax
With a high exemption, income tax considerations often dominate. The step-up in basis at death can eliminate the capital gain on highly appreciated stock, which argues against gifting low-basis assets during life for families comfortably under the exemption. Conversely, families above the exemption may still benefit from moving growth out of the estate even at the cost of the step-up. The right answer depends on the numbers.
A note on state property taxes
For California families, real property transfers carry their own consideration under Proposition 19, which limited the parent-child reassessment exclusion, as explained by the California State Board of Equalization. We address this in a separate article.
This article is educational and does not constitute legal or tax advice. Estate planning documents should be prepared by a qualified attorney licensed in your state.
Important Disclosures
Important Disclosures: Propulsion Capital Management is an investment adviser registered with the State of California Department of Financial Protection and Innovation. Registration does not imply a certain level of skill or training. This article is provided for general informational and educational purposes only and does not constitute investment, tax, legal, or accounting advice, nor an offer or solicitation to buy or sell any security or to adopt any particular investment strategy. The information is believed to be accurate as of the date of publication but is subject to change without notice; tax laws and regulations change frequently and their application depends on individual facts and circumstances. Nothing herein should be relied upon as a substitute for personalized advice from a qualified professional. Investing involves risk, including the possible loss of principal, and past performance is no guarantee of future results. Diversification does not ensure a profit or protect against loss. Any examples are hypothetical, are for illustrative purposes only, and do not reflect the experience of any client. Links to third-party websites are provided for convenience; Propulsion Capital Management does not endorse, and is not responsible for, the content of third-party sites. Propulsion Capital Management does not provide tax or legal advice; please consult your tax adviser or attorney regarding your specific situation.
