What Happened
As 2026 winds down, estate planners across California are urging families to take a careful look at their plans before December 31. According to reports from an Oceanside estate planning firm, three issues deserve priority attention this year: the annual federal gift tax exclusion (which resets at midnight on New Year’s Eve), the funding status of existing living trusts, and the Medi-Cal asset limit that returned on January 1, 2026 and is now being enforced at renewal.
The gift tax exclusion for 2026 is reportedly $19,000 per recipient, or $38,000 for married couples who elect to split gifts. Unused exclusion does not roll into 2027. On the Medi-Cal side, Assembly Bill 116 reinstated an asset test of $130,000 for an individual, $195,000 for a couple, and $65,000 for each additional household member. Seniors enrolled in asset-tested Medi-Cal programs are being evaluated at their first renewal on or after January 1, 2026, and those over the limit may lose coverage. These developments can quietly undo years of careful planning if families do not act before year-end.
For California residents who have been relying on an estate plan drafted years ago, these shifts may create real financial exposure that could have been prevented with a timely review.
Who May Be Liable
Unlike a personal injury case, estate planning harm usually falls on the family itself rather than a wrongdoer. However, several parties could be liable or financially responsible when plans fail:
- Trustees and successor trustees who may be liable for breach of fiduciary duty if they fail to properly administer, fund, or account for trust assets.
- Agents under a power of attorney who could be liable for self-dealing, mismanagement, or ignoring the principal’s directions.
- Drafting attorneys who may be liable for professional negligence if an estate plan was prepared incompetently or without proper funding instructions.
- Financial institutions that may be liable for improperly refusing to retitle accounts, mishandling beneficiary designations, or disregarding valid trust documents.
- Family members who could be liable for undue influence, elder financial abuse, or converting assets intended for other heirs.
In the Medi-Cal context, the state is not a defendant in the traditional sense, but families who transferred assets improperly in the 30-month look-back window may face penalty periods or denial of benefits.
Legal Theories That May Apply
Several legal frameworks commonly come into play when year-end estate issues go unresolved:
- Breach of fiduciary duty — a trustee, executor, or agent who fails to act with loyalty and prudence may be liable to beneficiaries.
- Legal malpractice — a drafting attorney who allegedly failed to counsel the client on funding a trust or on tax exposure could be liable in a professional negligence claim.
- Trust contests and will contests — grounds may include lack of capacity, undue influence, fraud, or improper execution.
- Elder financial abuse under California Welfare & Institutions Code § 15610.30 — a statute that may allow enhanced damages and attorney’s fees when an elder’s assets are wrongfully taken or retained.
- Petitions under Probate Code § 850 (sometimes called Heggstad petitions) — a procedural vehicle that may allow assets left outside a trust to be brought back in.
- Medi-Cal fair hearings and appeals — the administrative pathway for challenging an alleged improper denial or termination of benefits.
Damages Victims May Recover
When an estate plan fails or a fiduciary breaches a duty, California law may allow recovery of several categories of loss:
- Statutory probate fees that could have been avoided. California sets probate attorney and executor fees as a percentage of the gross estate — reportedly 4% of the first $100,000, 3% of the next $100,000, 2% of the next $800,000, and smaller tiers above. For a $1 million gross estate, that may mean $23,000 in attorney fees and the same amount for the executor.
- Lost Medi-Cal benefits, including the cost of long-term care that would otherwise have been covered.
- Avoidable federal estate and gift taxes, where applicable (California has no state estate tax).
- Lost or diminished inheritances when assets are misappropriated.
- Enhanced damages and attorney’s fees under the Elder Abuse Act for proven financial abuse of a vulnerable adult.
- Restoration of assets through a Probate Code § 850 petition or constructive trust.
Evidence That Strengthens a Case
Whether the issue is a disputed trust, a Medi-Cal denial, or a trustee who will not account, documentation is everything. Helpful evidence may include:
- The signed estate plan — will, trust, powers of attorney, and advance health care directive — along with any amendments.
- Deeds, grant deeds, and title records showing whether real property was transferred into the trust.
- Bank, brokerage, and retirement account statements, plus beneficiary designation forms.
- Correspondence with the drafting attorney, including engagement letters and funding instructions.
- Medical records relevant to capacity at the time a document was signed.
- Communications showing alleged pressure, isolation, or undue influence by a family member or caregiver.
- Medi-Cal notices of action, renewal paperwork, and the applicant’s financial snapshot as of the review date.
- Trustee accountings, tax returns, and ledgers showing how trust assets have been managed.
What to Do Next
If you are a California resident worried about any of these year-end issues, a few conservative steps can protect your position:
- Pull your trust binder and confirm funding. Make sure your home, accounts, and business interests are actually titled in the name of the trust. A trust that was never funded may still send assets through probate.
- Review beneficiary designations on life insurance, IRAs, 401(k)s, annuities, and transfer-on-death accounts. These override your will or trust.
- Document any gifts made in 2026 before December 31, including check numbers, dates, and recipients.
- If a parent or spouse receives Medi-Cal, locate the renewal notice and calculate household assets against the current AB 116 thresholds before the renewal date.
- Preserve evidence of any suspected elder financial abuse, trustee misconduct, or undue influence. Do not confront the alleged wrongdoer before speaking with counsel.
- Be cautious with insurers, banks, and benefits agencies. Written communication is almost always better than a phone call you cannot verify.
- Watch the calendar. Deadlines for trust contests, creditor claims, fiduciary accountings, and Medi-Cal appeals are strict in California, and missing one may permanently bar a claim.
If you or a loved one are facing a year-end estate planning concern — a trust that may not be properly funded, a Medi-Cal renewal that could jeopardize long-term care, or a suspected breach by a trustee or agent — the attorneys at LA | Estate Plans are available to help you understand your options. Visit laestateplans.com to request a confidential consultation.
Frequently Asked Questions
Does the annual gift tax exclusion really disappear if I don’t use it by December 31?
Yes. According to reports, the 2026 federal gift tax exclusion is $19,000 per recipient and does not carry over to the following year. If you intended to make year-end gifts to children or grandchildren, the transfer generally needs to be completed and the check cashed before January 1 to count toward the current year.
My parent has a living trust — isn’t that enough to avoid probate in California?
Not necessarily. A revocable living trust only controls assets that have been retitled into the trust’s name. If a home, bank account, or business interest was left in an individual’s name, it may still be subject to California probate, where attorney and executor fees are set by statute as a percentage of the gross estate.
What is the Medi-Cal asset limit for 2026?
Under AB 116, the limit returned on January 1, 2026 at a reported $130,000 for an individual, $195,000 for a couple, and $65,000 for each additional household member. Current enrollees are allegedly being tested at their first annual renewal on or after that date, and someone over the limit at renewal may lose coverage.
Can putting assets in a revocable living trust protect them from Medi-Cal?
Generally, no. A revocable living trust is treated as the grantor’s own property for Medi-Cal eligibility purposes, so the assets inside it typically still count toward the limit. Irrevocable trusts and other asset protection tools may apply in some situations, but they usually must be set up well before a care need arises because of the 30-month look-back for certain transfers.
How much can probate actually cost in California?
California sets statutory fees based on the gross value of the estate, not the equity. Reported tiers include 4% of the first $100,000, 3% of the next $100,000, and 2% of the next $800,000, with the executor entitled to the same fee. A home with a large mortgage can still generate substantial probate fees because the calculation ignores the loan balance.
What if my sibling is the trustee and won’t give me information about the trust?
A California trustee owes beneficiaries duties of loyalty, impartiality, and reasonable disclosure, and may be liable for breach of fiduciary duty if those duties are ignored. Beneficiaries generally have the right to request an accounting and, if necessary, to petition the probate court to compel one or to remove the trustee.
How long do I have to contest a trust or will in California?
Deadlines vary, but the window can be very short. For example, once a trustee serves a formal notice under Probate Code § 16061.7, a beneficiary typically has 120 days to file a contest. Because missing the deadline may permanently bar the claim, anyone considering a challenge should consult counsel quickly.
My estate plan is more than ten years old. Do I really need to update it?
Probably yes. Life changes — marriage, divorce, births, deaths, a move, a new business, or a new property — can all affect whether your current plan still reflects your wishes. On top of that, tax thresholds, probate shortcuts, and benefits rules like the Medi-Cal asset test change over time, and an outdated plan may no longer achieve what you intended.
Original reporting: financialcontent.com.