By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.
Advanced estate planning for wealthy families means three things beyond a basic will: moving assets into trusts so the plan works without probate, reducing estate tax where it actually applies, and deciding how and when children receive money. For 2026, the federal estate and gift tax exclusion is $15,000,000 per person, so a married couple can pass about $30,000,000 before federal estate tax if the first spouse’s unused exclusion is preserved. California has no estate tax of its own, but Washington taxes estates above about $3,000,000, which changes the plan for many Seattle-area families.
This guide is written for W-2 households earning $750,000 to $3 million in California or Washington, with young children and a net worth that is growing quickly through RSUs, 401(k)s and home equity. It covers which strategies matter at $5 million, $10 million and $30 million, with worked numbers for one family in each state.
Where the estate tax lines sit for 2026
Most “ultra high net worth” advice assumes you are near the federal line. Most of our families are not, at least not yet. Here is what applies for 2026:
- Federal basic exclusion: $15,000,000 per person for 2026, made permanent by the One Big Beautiful Bill Act and indexed for inflation from 2027 (IRS, What’s new, estate and gift tax). The old claim that the exemption drops to about $7 million in 2026 is obsolete.
- Generation-skipping transfer (GST) exemption: also $15,000,000 per person for 2026 (Rev. Proc. 2025-32).
- Gift tax annual exclusion: $19,000 per recipient for 2026, or $38,000 per recipient for a married couple who split gifts.
- Portability: a surviving spouse can use the first spouse’s unused federal exclusion, but only if an estate tax return (Form 706) is filed to elect it (Form 706 instructions).
- California: no estate, inheritance or gift tax, and no California estate tax return is required for deaths after 2004 (California State Controller).
- Washington: an estate tax filing is required when the gross estate exceeds $3,076,000 for deaths from January 1 to June 30, 2026, and $3,000,000 for deaths from July 1, 2026. Rates for deaths on or after July 1, 2026 run from 10% to 20% of the Washington taxable estate (WA DOR estate tax tables). Washington does not allow portability, so each spouse’s $3,000,000 is lost if it is not used (WA DOR estate tax FAQ).
So the federal estate tax is a planning topic for families on track to pass $30 million. The Washington estate tax is a live issue for a Bellevue family at $4 million. And for a California family at $6 million, the big wins are probate, income tax basis and the way children inherit, not estate tax.
Worked example 1: a Washington family at $9 million
Assumptions (illustrative): a Bellevue couple, one an Amazon director and one a physician, household W-2 income $1.4 million, two children ages 4 and 7. Net worth $9,000,000: a $2,500,000 home, $3,500,000 in vested Amazon shares and a taxable brokerage account, and $3,000,000 in retirement accounts. Everything is community property. We assume no growth, and that the second death happens on or after July 1, 2026 with the exclusion still at $3,000,000.
| Simple wills (“all to my spouse”) | Bypass trust at first death | |
|---|---|---|
| First death | Everything passes to the survivor, no Washington tax | $3,000,000 goes into a bypass (credit shelter) trust for the survivor and kids; the rest passes to the survivor |
| Survivor’s estate at second death | $9,000,000 | $6,000,000 (the trust is not part of it) |
| Washington taxable estate (minus $3,000,000 exclusion) | $6,000,000 | $3,000,000 |
| Washington estate tax | $910,000 ($550,000 + 18% of $2,000,000) | $390,000 ($240,000 + 15% of $1,000,000) |
The difference is $520,000, before any growth. In real life the gap is usually larger, because anything the bypass trust earns after the first death also stays outside the survivor’s estate. The trust can still pay for the survivor’s health, support and the children’s education, so the survivor gives up very little day-to-day control.
Two details catch Washington families out. First, Washington’s gross estate follows the federal definition (RCW 83.100.020), and a life insurance policy you own on your own life is part of your federal gross estate (IRC §2042). A $4,000,000 term policy owned by the insured spouse could push this family’s estate to $13,000,000. Holding the policy in an irrevocable life insurance trust (ILIT) generally keeps the payout out of the estate, but an existing policy moved into the trust within three years of death is still included (IRC §2035(a)). Second, the bypass trust only works if assets are titled so it can be funded. If most of the $9,000,000 sits in retirement accounts and joint accounts with automatic survivor designations, there may be nothing left to put in the trust.
Worked example 2: a California family at $6 million
Assumptions (illustrative): a Palo Alto couple, a Genentech scientist and an Apple engineer, household W-2 income $1.1 million, children ages 2 and 6. Net worth $6,000,000: a $2,400,000 home bought for $1,200,000, $1,800,000 in a brokerage account holding RSU shares with $800,000 of unrealized gain, and $1,800,000 in 401(k)s.
No federal or state estate tax applies. The planning is about three other things:
- Probate. Assets titled in one or both names without a trust go through California probate, which is public, slow and carries statutory fees set by the Probate Code (Cal. Probate Code §10810). A funded revocable living trust avoids it for the home and brokerage account.
- Basis at death. Under IRC §1014(b)(6), when one spouse dies, both halves of community property get a new basis equal to market value, not just the half that belonged to the deceased spouse. If the home and brokerage account are held as community property, the surviving spouse could sell and owe no tax on the $2,000,000 of built-up gain ($1,200,000 on the home, $800,000 on the shares). California taxes capital gains as ordinary income at rates up to 13.3% (2025 rates, the latest published) (FTB), so the California tax alone on that gain could reach about $266,000 at the top rate, before federal tax and before any home-sale exclusion. Title matters: ask your attorney whether your deed and brokerage account say “community property” or something else.
- How the kids inherit. Without a trust, money for minors can end up in a custodial account that the child controls outright at 18 to 25 depending on how it was set up (Cal. Probate Code §3920.5). A trust can instead pay for education and health, then release money in stages, for example a third at 25, 30 and 35. The will should also name guardians for both children.
This family should also check every beneficiary form. The $1,800,000 in 401(k)s passes by designation, not by the will or trust, so an out-of-date form can override the whole plan. Our guide on naming a trust as beneficiary of a brokerage account walks through the paperwork.
Advanced estate planning strategies and who they fit
Once the basics are in place, the tools below are what “advanced” usually means. The right ones depend on your net worth trajectory and state.
| Strategy | What it does | Usually fits | Main trade-off |
|---|---|---|---|
| Funded revocable living trust | Avoids probate, names successor trustees, holds money for minors | Every CA and WA family with a home or taxable account | Only works if assets are retitled into it |
| Bypass (credit shelter) trust | Uses the first spouse’s Washington exclusion | WA families above about $3,000,000 | More complex administration after the first death |
| Irrevocable life insurance trust (ILIT) | Keeps policy payouts out of the taxable estate | WA families with large policies; anyone near the federal line | You give up ownership of the policy |
| Annual exclusion gifts and 529 superfunding | Moves $19,000 per child per parent each year, or up to $95,000 per child per parent at once into a 529 using the five-year election | Families who want education money out of the estate early | Requires Form 709 for the five-year election; money is committed to the child |
| Spousal lifetime access trust (SLAT) | Uses lifetime exclusion now while the other spouse can still benefit | Families expected to exceed $30,000,000, or WA families wanting growth out of the estate | Irrevocable; divorce and community property issues need careful drafting |
| Grantor retained annuity trust (GRAT) | Shifts growth above an IRS interest rate to children with little gift tax | Concentrated stock expected to grow fast | If the grantor dies during the term, some or all of the assets come back into the estate |
| Intentionally defective grantor trust (IDGT) | Grantor pays the trust’s income tax, which moves more wealth out without counting as an extra gift | Families well above the exclusion | The income tax bill can be large; see the disadvantages of IDGTs |
| Dynasty trust with GST exemption | Keeps assets out of estate tax for grandchildren and beyond | Families planning for multiple generations | Long-lived trust; trustee choice matters for decades |
| Donor-advised fund | Gives appreciated shares held more than a year to charity, generally deductible at fair market value within AGI limits, with no capital gains tax on the gain | Families who already give each year | Irrevocable gift to charity |
A California-specific note on the home: Proposition 19 limits the parent-to-child property tax exclusion to a family home the child moves into as a primary residence, with a value cap (California BOE, Prop 19). Inheriting the Palo Alto house no longer means inheriting its low property tax bill by default.
How income tax and estate planning interact for high earners
At $750,000 to $3 million of W-2 income, income tax is a bigger annual cost than estate tax will ever be for most families. A few points link the two:
- Gift high-basis assets, keep low-basis ones. Gifts carry over your basis, while assets held until death get a new basis. Giving away RSU shares with a large gain can cost your children the step-up.
- Use appreciated shares for charity. Giving long-held shares instead of cash avoids tax on the gain: federal tax and California’s up to 13.3% (2025 rates), or Washington’s 7% capital gains tax (9.9% on gains above $1,000,000) (WA DOR).
- Plan for Washington’s 2028 income tax. Washington has no wage income tax in 2026, but a 9.9% tax on individuals and joint filers with AGI over $1,000,000 takes effect January 1, 2028 (WA DOR). Some trust and gifting decisions made now should allow for it.
Our tax management work covers the income tax side in detail.
Choosing who coordinates the plan
An estate attorney drafts the documents. Someone still has to retitle accounts, update beneficiary forms after every job change, and revisit the plan when RSUs vest or a child is born. For a busy two-career household, the useful questions to ask any adviser are:
- Are you a fiduciary on every account, and are you paid only by us (fee-only)? You can check registration and disciplinary history on the SEC’s Investment Adviser Public Disclosure site.
- Will you work directly with our estate attorney and CPA, and confirm that the trust is actually funded?
- How often will you review the plan, and what triggers an off-cycle review?
- Do you sell insurance or products that pay you a commission?
If you are also deciding who should settle the estate, see whether your financial advisor can be the executor of your will, and bring these questions to your attorney meeting.
Common mistakes we see in otherwise strong plans
- A trust is signed but the home and brokerage account were never moved into it.
- Washington couples use simple “all to my spouse” wills and waste the first spouse’s $3,000,000 exclusion.
- Beneficiary forms still name a parent or an ex-spouse, or name the children directly while they are minors.
- Large term policies are owned by the insured spouse in Washington.
- Planning around a federal “sunset” to $7 million that is no longer law, and making irrevocable gifts that were not needed.
- The documents say who gets the money but nothing about why, or how the parents hope it will be used.
What to document for your children
Trusts decide when children receive money. They cannot teach judgment. Alongside the legal documents, write a short letter of wishes for your trustee and your future adult children: why you chose staged distributions, what you hope the education money covers, how you think about work and giving. As Kevin Luu puts it: “Your kids don’t need to inherit your portfolio. They need to inherit your decision-making process.” Our family governance work and the FamilyKnowledge® Library are built for exactly this record.
FAQ
Do we need advanced estate planning if our net worth is under $15 million?
In California, usually not for estate tax, since the federal exclusion is $15,000,000 per person for 2026 and there is no state estate tax. You still need a funded revocable trust, guardians, trusts for minors and current beneficiary forms. In Washington, estate tax planning starts much lower, at about $3,000,000 per person.
Is the $15 million federal exemption going to drop again?
Under current law, no. The One Big Beautiful Bill Act set the basic exclusion at $15,000,000 per person for 2026 and indexes it for inflation from 2027, with no scheduled sunset. Congress can always change the law, which is why irrevocable strategies should be judged on their own merits, not on fear of a cut.
Does moving from Washington to California change our estate plan?
Yes. A move out of Washington generally removes Washington estate tax on your investments, though Washington real estate you still own can keep you in its filing system. Community property rules apply in both states, but documents drafted around the Washington exclusion should be reviewed after the move.
Your next step
Pull your current will or trust, your deed, and the beneficiary forms for every retirement account and life insurance policy, and check whether they match what you want today. If you would like a second set of eyes, our Tax & Wealth Assessment reviews your estate documents alongside your equity compensation and tax picture, and our estate planning page explains how Age Five Family Office™ coordinates with your attorney.
This is general education, not legal or tax advice, and the right move depends on your family’s full picture.
Kevin has advised high-income W-2 tech and biotech families since 2015, and leads the education-first Age Five Family Office from Brea, California.
Connect on LinkedIn → · About KevinThis is part of how we approach Estate Planning for high-income W-2 families at Bright Advisers.
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