Estate and Inheritance Taxes: What You Need to Know to Protect Your Family’s Legacy in 2025

Estate and Inheritance Taxes in California: What You Need to Know to Protect Your Family’s Legacy in 2025

If you’re a California resident managing family assets or planning for the future, understanding how estate and inheritance taxes work—both federally and across state lines—is critical to protecting what you’ve built and ensuring your loved ones aren’t blindsided by unexpected tax burdens.

While California itself does not impose a state-level estate or inheritance tax, many families with out-of-state property, multi-state assets, or beneficiaries living in other states may still face significant tax exposure. Here’s what California families need to know about estate and inheritance taxes in 2025.

How Do Estate and Inheritance Taxes Work?

Estate and inheritance taxes are two different mechanisms that states use to tax wealth transfers at death:

Estate taxes are paid by the decedent’s estate before assets are distributed to heirs. They are imposed on the overall value of the estate and typically apply to residents who die while domiciled in the taxing state, as well as nonresidents who own taxable property there.

Inheritance taxes are paid by the person who receives the bequest. These taxes are based on the amount each beneficiary inherits and are owed to the state where the decedent was domiciled or owned taxable property—regardless of where the heir lives.

Which States Have Estate or Inheritance Taxes in 2025?

As of 2025, 12 states and the District of Columbia impose estate taxes, while 5 states levy inheritance taxes. Maryland is the only state that imposes both.

Here’s what California families managing assets in these states should know:

Washington has the highest estate tax rate at 35%, assessed on estates valued at $9 million or more.

Hawaii follows with a top rate of 20% on estates exceeding $10 million.

Connecticut levies a flat 12% estate tax, paired with a high exemption threshold of $13.99 million, making it less burdensome than many other states.

Kentucky and New Jersey have the highest inheritance tax rates at 16%, while Maryland has the lowest at a flat 10%.

All five states with inheritance taxes—Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania—structure their rates based on the relationship between the beneficiary and the decedent. Close relatives typically face lower rates and higher exemptions, while distant relatives or non-family members are taxed more heavily.

State Estate & Inheritance Tax Rates and Exemptions (as of October 1, 2025)

Notes:

Connecticut’s exclusion matches the federal threshold as of January 1, 2023. Estate tax currently capped at $15 million.

In Kentucky, Nebraska, and New Jersey, the inheritance tax exemption varies by class of beneficiary. Maximum exemption amount is shown.

In Maryland, no inheritance tax is imposed if the estate’s total value does not exceed $50,000.

Source: Bloomberg Tax; state statutes. Data compiled by Katherine Loughead, Tax Foundation.

What About the Federal Estate Tax?

In addition to state-level taxes, the federal estate tax imposes a top marginal rate of 40% on estates that exceed the federal exemption threshold.For California families with significant wealth, this can represent a substantial tax liability—even if California itself doesn’t impose an estate tax.

Real-World Scenarios: When Do California Families Face Estate or Inheritance Taxes?

You might face estate or inheritance tax exposure if:

You own a vacation home, rental property, or investment real estate in a state with estate or inheritance taxes

You’ve recently moved to California from a state with these taxes, or you’re planning to relocate

Your beneficiaries live in states with inheritance taxes

You have family members who own property in multiple states

You’re managing an estate for a loved one who passed away while owning property in a taxing state

How Can You Protect Your Family from Unexpected Tax Burdens?

The key to avoiding estate and inheritance tax surprises is proactive planning. Here’s how California families can take control:

Understand where you own property. If you have assets in states with estate or inheritance taxes, your estate plan needs to account for this.

Use trusts strategically. Revocable and irrevocable trusts can help minimize tax exposure and ensure assets pass to your heirs according to your wishes.

Review beneficiary designations. Make sure your estate plan reflects current tax laws and family dynamics.

Work with experienced estate planning professionals. Navigating multi-state tax issues requires specialized knowledge and careful coordination.

Why California Families Trust California Probate and Trust, PC

At California Probate and Trust, PC, we understand that estate planning isn’t just about paperwork—it’s about protecting the people you love and the legacy you’ve worked so hard to build. Our team has helped thousands of California families navigate complex estate and probate matters with transparency, compassion, and personalized guidance.

Whether you’re concerned about multi-state tax exposure, need to update an outdated estate plan, or want to ensure your family is protected no matter what the future holds, we’re here to help.

Schedule Your Free Consultation Today

Don’t leave your family’s future to chance. Contact California Probate and Trust, PC today to schedule a free, no-obligation consultation. We’ll walk you through your options, answer your questions, and help you create a plan that gives you peace of mind.

Visit cpt.law or call (866) 674-1130 to get started.

Source: Tax Foundation – Estate and Inheritance Taxes by State, 2025

Legal Disclaimer: This article is provided for informational purposes only and does not constitute legal advice. Estate planning laws vary by state and are subject to change. For personalized guidance tailored to your specific situation, please consult with a qualified estate planning attorney.