Anyone who is engaging in estate planning in Sonoma County or elsewhere in California should be aware of newly proposed legislation that aims to introduce an estate tax in California.

According to a news release from the office of Senator Scott Wiener (D-San Francisco), the proposed legislation is modeled on the federal estate tax. Importantly, it would lower exemption rate to $3.5 million. Which is lower than the federal estate tax exemption. Senator Wiener introduced Senate Bill 378 at the end of March. Importantly, if the bill passes, it would result in a special fund designed to improve socioeconomic equality in the state.

With the lowered exemption rate of $3.5 million, or $7 million for a married couple; the proposed estate tax would phase out at $11.4 million for an individual or $22.8 million for a married couple.

This is the current federal estate tax exemption rate. By phasing out at the federal estate tax exemption, the bill would prevent California residents from being double-taxed. In other words, taxes would apply to California estates if they range from $3.5 million to $11.4 million. In addition, similar to the federal estate tax, SB 378 has exemptions. This includes transfers to a surviving spouse, and for family farms.

The proposed legislation is designed in part to help produce socioeconomic equality in California.

For example, the proceeds from the tax would go toward the creation of a special fund known as the Children’s Wealth and Opportunity Building Fund. The Fund would provide money to a variety of programs and services for California residents, particularly low-income children. One of the specific programs would include helping lower income children to develop savings accounts. This would help them build wealth. In total, those in support of the bill anticipate that it would be able to result in anywhere from $500 million to $1 billion each year.

According to Sonoma County estate planning lawyer Charles D. Stark:

“It is important for families in California to pay attention to the ballot measure. Given that, if it passes, an estate tax would change the way that many individuals and couples engage in estate planning. ”

If the California legislature passes SB 378, it will appear on the ballot in November 2020. However, this would not be the first time that an estate tax measure appeared on the California ballot. California residents approved a ballot measure in 1982 that prohibited an estate tax. Accordingly, in order to put an estate tax in place in California, voters in the state need to approve it in a ballot measure.