By Vincent Birardi, CFP®, AIF®, Senior Wealth Advisor
California Wealth Tax Updates
Regarding the proposed California wealth tax, here’s a summary of the latest updates:
- No wealth tax has been enacted: As of June 5, 2025, California does not have a wealth tax in place.
- Previous wealth tax proposals remain stalled: Proposed wealth tax legislation, such as AB 259 in 2024, did not pass the legislature. This bill aimed to impose an annual tax on the net worth of the wealthiest Californians.
- Wealth tax discussion continues: Despite the failure of previous bills, the concept of a wealth tax continues to be debated in California and could be reintroduced in the future.
- Federal estate tax changes: While there’s no state wealth tax, it’s important to be aware of the federal estate tax, which affects estates valued at $13.99 million or higher in 2025. This exemption is set to decrease in 2026 unless new legislation is enacted by the end of 2025.
California Wealth Tax Q&A
How do you see California’s wealth tax impacting high-net-worth individuals’ strategies for charitable giving and long-term wealth preservation?
There was quite a stir caused at the beginning of 2023 when legislation – Assembly Bill 259 – was introduced in California to implement a new taxation system targeted at each state taxpayer’s overall wealth in an attempt to plug the state’s considerable budget shortfall. This proposed measure stalled in January 2024 when Governor Newsom and others in the state legislature formally disapproved of the measure and so it’s currently in limbo.
Assembly Bill 259 would have imposed an annual tax beginning on or after January 1, 2024, and before January 1, 2026 at a rate of 1.5% of a resident’s worldwide net worth in excess of $1 billion or in excess of $500 million in the case of a married taxpayer filing separately. After January 1, 2026, the taxable net worth level would fall to a net worth in excess of $25 million (for married taxpayers filing separately) or $50 million for all other taxpayers. The California Franchise Tax Board (FTB) would be authorized to adopt regulations to prevent the avoidance or evasion of the wealth tax.[1]
Preparing for Potential California Wealth Tax Implications
The same or a similar measure in spirit could be reintroduced in the future – conceivably under different statewide leadership not to mention political climate & fiscal situation.
Such a significant change, if implemented, may have a meaningful effect on both the levels and methods of charitable gifting. It would also force a re-examination of current methods of preserving long-term i.e. inter-generation wealth.
With respect to charitable gifting for the Ultra High Net Worth (people with a net worth of at least $30 million), several options should exist:
- Private foundations
- Donor-advised funds and/or
- Charitable trusts that can benefit charities and select beneficiaries
Insofar as ways to adhere with a possible wealth tax while attempting to preserve one’s personal wealth for the long-term, one approach may be to utilize Irrevocable trusts. One example of an Irrevocable trust is the spousal lifetime access trust which is created by a grantor for the benefit of the grantor’s spouse. This type of trust can transfer value out of the grantor’s estate for estate tax purposes while maintaining some limited access to the wealth for the grantor’s spouse.
What are the most effective tax planning strategies designed to mitigate the effects of a potential wealth tax on investment portfolios in California?
This issue may be simple to understand but challenging to devise a clear strategy to combat at the present time as one would need to know the exact definition of the presupposed wealth tax and its specific impacts, if any, on investment assets.
So, until such details are clearly known, the same methods mentioned above should be considered to help reduce the size of one’s overall taxable estate (i.e. the measure of wealth exposed to this supposed new tax). Before making any changes, it is prudent to consult with your financial advisor, CPA, and estate planning attorney to understand how the potential wealth tax may affect you.
[1] California Wealth Tax Bill Stalls Out – California Land Title Association (clta.org)
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