Multigenerational Wealth Planning for South Valley Families

In the South Valley and across the South Bay, family wealth often doesn't look like a single brokerage account.

It might be a Morgan Hill home bought decades ago that has grown a lot in value. It might be a family business in Gilroy, or farmland and a ranching operation in San Benito County. Often it's some combination of all three, plus retirement accounts built up over a career.

Passing that on to the next generation involves more than a will. It touches federal tax law, California property tax rules, retirement account regulations, and, maybe most importantly, family relationships.

Think of it like a relay race. Every runner can be fast, but races are often decided at the handoff. Multigenerational planning is about making that handoff as smooth as possible.

Let's walk through the pieces that tend to matter most for California families.

1) Federal estate and gift tax: higher limits, same rules

For 2026, the federal basic exclusion amount is $15,000,000 per person, up from $13,990,000 in 2025.¹ Estates below that level generally won't owe federal estate tax, and married couples can effectively double the exemption with planning.²

That means most families won't face a federal estate tax bill. But that doesn't make planning unnecessary. The exemption has changed many times over the years and could change again, and taxes are only one part of a smooth transfer.

Annual gifts are a separate piece. For 2026, the annual exclusion for gifts is $19,000 per recipient.¹ If your gifts to any one person (other than your spouse) go over that amount in a year, you generally need to file a federal gift tax return, Form 709.³

What about California? California does not currently have its own estate tax. For deaths on or after January 1, 2005, a California estate tax return is no longer required. The state's inheritance tax and gift tax only apply to deaths and gifts before June 8, 1982.⁴

2) The family home and Proposition 19

For many South Valley families, the most important California rule isn't an income or estate tax at all. It's property tax.

Under Proposition 19, which applies to transfers on or after February 16, 2021, the parent-to-child property tax exclusion is limited to two kinds of property:⁵

A family home that was the parent's principal residence and becomes the child's principal residence
A family farm

To qualify, the child generally needs to file for the homeowners' exemption within one year of the transfer. There's also a value limit: the exclusion covers the property's current taxable value plus $1,000,000, an amount adjusted every two years.⁵

Rental homes, vacation homes, and other real estate no longer qualify for the parent-child exclusion.⁵

What that can mean in practice:

In Morgan Hill, a home bought decades ago may have a taxable value far below today's market value. If a child inherits it but doesn't move in, the property may be reassessed at current market value, which can sharply raise the property tax bill.
In Gilroy and Hollister, farmland may qualify under the family farm rules, but the value limit still applies. Families with larger operations may want to work through that math with a property tax professional well before a transfer.

3) Cost basis and California's community property rules

When someone inherits property, its cost basis is generally reset to its fair market value on the date of the owner's death.⁶ If the heir later sells, capital gains are usually measured from that new value instead of the original purchase price.

California is a community property state, and that can make a real difference for married couples.⁷ When one spouse dies, the total fair market value of the couple's community property generally becomes the basis for the entire property, including the surviving spouse's half. For that rule to apply, at least half of the community property interest has to be included in the deceased spouse's gross estate.⁷

How assets are titled (for example, community property versus joint tenancy) can affect whether this applies. That's a conversation to have with your estate attorney and CPA.

4) Retirement accounts follow their own rules

Retirement accounts don't pass through your will. Personal property and taxable investment accounts generally transfer through a will or trust, but retirement accounts pass directly to the beneficiaries you've named.⁸ That means an outdated beneficiary form, not your will, can decide who receives the account.

Inherited IRAs also come with a timeline. Many non-spouse beneficiaries who inherit an IRA or workplace plan must empty the account by the end of the 10th year after the owner's death.⁹ There are exceptions for "eligible designated beneficiaries," including a surviving spouse, a minor child of the account owner, a disabled or chronically ill person, and anyone not more than 10 years younger than the owner.⁹

Why that matters: an adult child who inherits a large traditional IRA during their own peak earning years generally has to withdraw all of it within 10 years, and those withdrawals are taxed on top of their salary. Who inherits which type of account (traditional, Roth, or taxable) can make a meaningful difference in how much the family keeps after taxes.

5) Probate in California

Assets that don't pass by beneficiary designation, joint ownership, or a trust may have to go through probate court.

California offers simpler options for smaller estates. For deaths on or after April 1, 2025, if the assets that would otherwise go through probate total $208,850 or less, heirs can generally use an affidavit to transfer personal property instead.¹⁰ Assets held in a trust, owned in joint tenancy, passing directly to a surviving spouse, or paid to a named beneficiary don't count toward that limit. There's also a separate, simpler court process for a main home worth up to $750,000.¹⁰ Estates that don't fit these options generally go through full probate.

That's one reason many California families use a revocable living trust. A trust can help assets pass without probate, but it has trade-offs: there are upfront legal costs, and assets have to actually be retitled into the trust to be covered.

6) The human side of the handoff

The technical pieces matter. But the family conversation often matters just as much.

Talk early. Heirs who understand what's coming, and why, may be better prepared to handle it.
Plan for the business or land, not just the money. If a family operation is involved, who will run it? Do the siblings who aren't involved get an equal share, a different asset, or a buyout?
Revisit regularly. Marriages, divorces, births, deaths, and moves can all make an old plan outdated.

The bottom line

Multigenerational planning in the South Valley usually comes down to coordination. That means estate documents, beneficiary forms, account titling, property tax rules, and family conversations all working together.

None of it calls for drastic moves. It does call for looking at the whole picture before a transfer happens, not after.

To learn more about how we approach this, see Estate & Legacy. For a local view, visit Multi-Generational Planning in Morgan Hill, CA, Multi-Generational Planning in Gilroy, CA, or Multi-Generational Planning in Hollister, CA. Families focused on protecting a business or land may also find Wealth Preservation Planning in Gilroy, CA and Wealth Preservation Planning in Hollister, CA helpful.

If you'd like to talk through your own family's situation, let's talk.

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This article is for general educational purposes only. It was developed from sources believed to be accurate as of its publication date, and tax laws and figures can change. The information herein is not intended as individual investment, tax or legal advice. Please consult with your personal advisor, legal or tax professionals for specific information regarding your individual situation. See our Terms & Disclosures.