Getting Ready for 2027: What’s Changed for Your Estate Plan and Your Business

Recent changes in estate planning, public benefits and business reporting have given California families and business owners plenty to review. As 2027 approaches, here are the developments worth knowing—and a few practical steps to take before year-end.

For your estate plan

The federal estate and gift tax exemption increased, with no scheduled expiration. Federal legislation enacted in 2025 increased the exemption to $15 million per person for 2026, with annual inflation adjustments beginning in 2027. Married couples may potentially protect $30 million in 2026 with proper planning, but their exemptions do not automatically combine. Preserving a deceased spouse’s unused exemption generally requires filing a federal estate tax return, even when no estate tax is due.

The higher exemption also makes this a good time to review an older trust. Provisions written around much lower exemptions may create restrictions or administrative burdens that no longer serve your goals.

Review annual gifts before December 31. In 2026, each person can make qualifying gifts of up to $19,000 to each recipient under the federal annual gift tax exclusion. Two spouses can potentially give $38,000 to the same recipient. These gifts generally do not use your lifetime exemption, although gift splitting and certain trust gifts may require a gift tax return.

The annual exclusion is not a limit on how much you may give. Larger gifts may require reporting without creating an immediate tax bill. Unused annual exclusions do not carry forward, so complete any planned 2026 gifts before year-end.

Medi-Cal’s asset rules are changing again. California reinstated an asset test for certain Medi-Cal programs on January 1, 2026, including programs serving many older adults, people with disabilities and people needing long-term care. The current limit is $130,000 in countable assets for one person, with an additional $65,000 for each additional qualifying household member, up to ten people. Some assets are excluded, and additional protections may apply when one spouse needs care.

Legislation enacted in 2026 schedules a reduction to $21,000 for one person and $31,000 for two people, beginning no sooner than July 1, 2027, subject to required approvals and implementation. For existing beneficiaries, the lower limits apply beginning with the first annual renewal after implementation.

If a parent may need long-term care, get advice before transferring assets. A gift that qualifies for the federal gift tax exclusion can still delay eligibility for Medi-Cal long-term-care coverage.

More families can use simplified estate-transfer procedures. For deaths on or after April 1, 2025, California’s small-estate affidavit threshold increased to $208,850, subject to the applicable valuation and exclusion rules. A separate court petition may allow transfer of a deceased person’s California primary residence with a gross value of $750,000 or less without full probate administration.

The residence procedure still requires a court order and other eligibility requirements. A properly funded living trust remains an important way to avoid probate, but if a loved one died without one, ask whether a simplified procedure is available.

Proposition 19’s property-tax exclusion adjusts again in February 2027. Proposition 19 can help preserve a parent’s property-tax assessment when a qualifying family home passes to a child who makes it a principal residence and meets the filing requirements.

For qualifying transfers through February 15, 2027, the inflation-adjusted exclusion amount is $1,044,586 above the property’s existing taxable value. This is not a maximum home value eligible for relief; more valuable homes may qualify for partial relief. The next adjustment applies beginning February 16, 2027. Review the property-tax consequences before making a transfer.

For your business

U.S.-formed companies are exempt from federal beneficial ownership reporting. FinCEN exempted U.S.-formed entities from Corporate Transparency Act beneficial ownership reporting in 2025 and finalized that exemption effective August 14, 2026. Under the current rules, domestic LLCs and corporations no longer have to file these reports. Certain foreign-formed entities registered to do business in the United States remain subject to reporting.

Keep your entity in good standing. California LLCs generally owe an $800 annual tax, while corporations generally face an $800 minimum franchise tax, subject to exceptions. Your business must also file its Statement of Information on schedule—generally annually for stock corporations and every two years for LLCs.

Suspension can prevent an entity from suing or defending itself in court. An FTB suspension can also make contracts entered into during suspension voidable. Check both tax compliance and Secretary of State filings before a sale, financing or other major transaction.

Review your buy-sell and operating agreements. If an owner dies, becomes disabled or wants to leave, these agreements can determine who controls the business, whether an ownership interest must be purchased and how the price is calculated. Review valuation methods, payment terms and insurance funding to make sure they still fit the business.

If passing the business to family is part of your estate plan, coordinate that plan with the company’s transfer restrictions and ownership records.

Bring your business records up to date. Review required meetings, elections and approvals, and document major decisions in minutes or written consents as appropriate. Corporate requirements depend on applicable law and the bylaws. LLCs generally do not have a statutory annual-meeting requirement, but their operating agreements may require meetings or particular approvals. December 31 is a useful housekeeping target, not a universal legal deadline.

New California laws for 2027

Special needs trusts and property taxes. Effective January 1, 2027, SB 974 expressly recognizes special needs trusts established under Probate Code section 3604 as an eligible means of transferring property for Proposition 19’s intergenerational exclusion. Other eligibility requirements still apply. Families planning housing for a loved one with a disability should coordinate the trust, benefits and property-tax issues.

Child-support notices in probate. For estates in which letters are first issued on or after January 1, 2027, SB 1264 requires notice to the Department of Child Support Services when the personal representative or estate attorney actually knows that the decedent, an heir or a beneficiary has a court-ordered child-support obligation. Notice is due within 90 days after letters first issue. The law does not impose a duty to investigate whether such an obligation exists.

Your year-end checklist

• Complete any planned annual-exclusion gifts before December 31.

• Review your trust and confirm that assets are properly titled.

• Check that retirement-account and life-insurance beneficiaries match your plan.

• Confirm your business is current on taxes and Statements of Information.

• Review your buy-sell or operating agreement and update required business records.

• Seek advice before making gifts if you or a parent may need Medi-Cal long-term-care coverage.

• Review property-tax consequences before transferring a family home.

Our attorneys have helped families and business owners since 1973. To start the new year with a plan that fits the new rules, call our Modesto office at 209.521.6260 or our Sonora office at 209.533.2233.

This post is general information, not legal or tax advice. Reading it does not create an attorney-client relationship. Laws change often, so please talk with an attorney about your situation.