Content updated October 14, 2026. Proposition 40 is a proposal on the November 3, 2026 ballot, not an enacted tax as of this update. Original attorney-review date: August 1, 2026.

Before changing an estate plan in response to a ballot measure, establish whether the family and its trusts could be affected. The proposed tax, existing trust income-tax rules, federal transfer tax, and creditor protection require separate analysis.

What the official voter guide says

The Legislative Analyst describes Proposition 40 as a one-time tax equal to 5% of net worth for billionaires who were California residents on January 1, 2026. It would be due in 2027, with an option to spread payments over five years at an additional cost. Real estate, pensions, and retirement accounts generally would be excluded, subject to the proposed law's detailed rules.

The earlier version of this article incorrectly called the proposal an annual tax. It also suggested that exposure would inevitably extend to households with $25 million to $100 million. The official summary does not establish such a lower threshold. A family's existing tax or planning concerns should not be confused with this proposal's coverage.

The voter guide also identifies possible conflicts with Propositions 41 and 42. Their outcomes and any relevant court decisions could affect whether Proposition 40 becomes law even if a majority votes for it.

Trusts and transfers require a close reading

The proposed text defines January 1, 2026 as the tax-obligation date and December 31, 2026 as the valuation date. It includes rules for grantor trusts, other transferred trust property, beneficiaries, and “applicable trusts.” Those provisions must be read together with the threshold, valuation, exclusions, and anti-avoidance rules.

Do not assume that changing a trustee, moving administration, making a gift, buying insurance, or creating an entity removes property from the proposal. The proposed trust and transfer rules can look beyond the name or address on an account. Request a written analysis of the actual ownership and transaction before acting.

Keep existing taxes in view

California fiduciary income tax remains a separate question from a proposed wealth tax. Our corrected trust-migration article explains why California-source income and the relevant trustee and beneficiary apportionment rules matter. An out-of-state trustee does not supply a general tax exemption.

Federal estate and gift tax require their own review. See our 2026 estate-tax guide for exclusion amounts, prior gifts, portability, basis, and liquidity. A federal exclusion does not resolve a separate state tax question.

What to assemble before a planning meeting

• A current ownership chart showing individuals, entities, trusts, and beneficiaries.
• Trust instruments, amendments, trustee appointments, prior returns, and transfer records.
• Support for asset values, liabilities, liquidity, and any claimed exclusions.
• A timeline of residence, gifts, entity changes, and trust funding.
• A written comparison of keeping the present arrangement and making a proposed change, including costs, taxes, access, and administration.

These records help the advisory team distinguish an actual exposure from a sales claim. No trust, retirement arrangement, insurance policy, or entity should be described as an impenetrable shield or a guaranteed response to this measure. Changes should serve the family's documented objectives and comply with the applicable law and fiduciary duties.

Primary sources

• Official Proposition 40 analysis, California Secretary of State voter guide.
• Official text of the proposed law, including the trust, transfer, valuation, and payment provisions.

For a fuller discussion of the measure, see our updated Proposition 40 overview. Confirm the law and status again before implementing a transaction.

Arrange an advanced-planning consultation

Contact the office to arrange a billable consultation about advanced tax, trust, or asset-protection planning. We will confirm the scope and fee before scheduling.

James G. Burns, Esq., LL.M., is a California estate-planning and asset-protection attorney and a Trust and Estate Practitioner (TEP), member of STEP.

General educational information, not individualized legal, tax, investment, or financial advice. No tax, legislative, or creditor-protection outcome is guaranteed. Reading this article does not establish an attorney-client relationship. Obtain coordinated advice based on current law and the family's facts before transferring property.

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