Estate Planning Essentials: What Texans and Californians Need to Know
Estate planning is not just for the wealthy or elderly—it’s a critical process for anyone who wants to protect their family, assets, and wishes. Whether you live in Texas or California, estate planning ensures that your property is distributed according to your intentions, helps minimize taxes and legal complications, and can provide peace of mind for you and your loved ones.
Yet estate laws are not uniform across the United States. Texas and California, two of the largest and most economically important states, differ significantly in their rules, procedures, and tax considerations. Understanding these differences is crucial if you live, own property, or do business in either—or both—states.
This article explores the essentials of estate planning with a special focus on the key contrasts between Texas and California law.
1. Why Estate Planning Matters
At its core, estate planning is about control and clarity. Without a proper plan, the state will decide how your assets are distributed under “intestacy” laws. That can mean unintended heirs, costly probate, and unnecessary stress for surviving family members.
A good estate plan typically includes:
A last will and testament
A living trust (especially important in California)
Powers of attorney for financial and healthcare decisions
An advance healthcare directive
Guardianship provisions for minor children
Beneficiary designations on retirement accounts and insurance policies
2. Probate: Texas vs. California
Probate—the court process that validates a will and oversees distribution of assets—is one of the most important areas where Texas and California diverge.
Texas Probate:
Texas is widely regarded as having one of the most streamlined probate systems in the country.
“Independent administration” allows executors to handle most tasks without constant court supervision, saving time and money.
For small estates (currently under $75,000, excluding the homestead), simplified procedures may apply.
California Probate:
California probate is notoriously lengthy and expensive.
Statutory fees for attorneys and executors are based on the estate’s value (e.g., 4% of the first $100,000, 3% of the next $100,000, etc.). On a $1 million estate, probate costs can easily exceed $20,000.
Court supervision is extensive, meaning delays and added stress for heirs.
Takeaway: In California, avoiding probate through a revocable living trust is almost essential. In Texas, probate is less burdensome, but planning can still minimize delays.
3. Community Property and Marital Assets
Both Texas and California are community property states, but with important distinctions.
Community Property Basics: Assets acquired during marriage are generally considered jointly owned by both spouses. This affects inheritance, tax planning, and even asset protection.
Texas:
Community property rules apply, but Texas offers unique survivorship agreements, allowing spouses to agree in writing that community property will automatically pass to the surviving spouse without probate.
Texas also recognizes certain property as separate property (acquired before marriage, gifts, or inheritances).
California:
Similar community property principles apply, but California courts are often stricter in interpreting these rules.
Property characterization can be complex, particularly with mixed funds or real estate purchased in one spouse’s name.
California does not have the same survivorship agreements as Texas, making trusts and careful titling more important.
Takeaway: Married couples in both states must pay close attention to how assets are titled and whether agreements are in place to ensure smooth transfers.
4. Estate Taxes and Property Considerations
Another key distinction between Texas and California is taxation.
Estate Taxes:
Neither Texas nor California currently imposes a state-level estate or inheritance tax.
However, federal estate taxes apply to estates above the exemption threshold ($13.61 million per individual in 2024, scheduled to decrease after 2025).
Property Taxes:
In California, property taxes are governed by Proposition 13, which generally limits increases but has unique implications for inherited property. Proposition 19 (passed in 2020) further restricted parent-to-child property tax transfers, making careful planning essential.
Texas property taxes are locally assessed and can be high, but there are no special transfer restrictions like California’s Prop 19.
Takeaway: Families in California must carefully plan around property tax rules to avoid surprises when passing down real estate. Texans should focus on managing high property tax burdens but face fewer inheritance restrictions.
5. Advance Directives and Powers of Attorney
Healthcare and financial decision-making in case of incapacity is another core component of estate planning.
Texas:
Recognizes the Medical Power of Attorney and Directive to Physicians and Family (Living Will).
Durable powers of attorney allow trusted agents to manage financial matters.
California:
Uses the Advance Health Care Directive, which combines a living will and medical power of attorney in one document.
California statutory forms are widely recognized and straightforward for residents.
Takeaway: Both states emphasize advance planning for incapacity, but the form names and requirements differ. Using the state-specific documents is always best.
6. Special Considerations for Multi-State Families
Many families today straddle state lines—owning property in Texas and California, or having children and relatives in both places. This raises special concerns:
Multiple Probate Risks: If you die owning real estate in both states, your heirs may face two probate proceedings. A revocable living trust can prevent this.
Conflicting Laws: Documents drafted in one state are generally valid in another, but subtle differences may create problems. For example, a California advance directive may not perfectly align with Texas law.
Residency Questions: Establishing your legal domicile affects which state’s probate and tax laws apply. Carefully documenting residency can save complications.
7. Practical Steps to Get Started
Take Inventory: List all assets, including real estate, investments, retirement accounts, and life insurance.
Choose Decision-Makers: Identify trusted individuals to act as executor, trustee, or agent under powers of attorney.
Consult Professionals: Work with an estate planning attorney familiar with both Texas and California law if you have ties to both states.
Update Regularly: Review your plan every few years, and especially after major life events like marriage, divorce, births, or property purchases.
Focus on Trusts in California: Given probate costs, most Californians benefit from a revocable living trust. Texans may find a simple will sufficient, depending on circumstances.
Conclusion
Estate planning is not one-size-fits-all, and the contrasts between Texas and California law illustrate why tailored planning matters. Texans benefit from a streamlined probate system and survivorship agreements, while Californians must navigate costly probate and complex property tax rules. Both states share community property principles, but subtle differences in procedure and enforcement can have major impacts.
The bottom line: a thoughtful estate plan is essential no matter where you live. For those with ties to both Texas and California, careful, customized planning can ensure that your legacy is preserved, your family is protected, and your wishes are honored without unnecessary legal or financial headaches.
