Protecting Estates.
Protecting Legacies.

Understanding estate tax laws

Estate tax laws can be complex, and they vary from state to state.

In California, understanding how these laws work is important for those with significant assets.

Estate tax basics

Estate taxes apply to the transfer of property after a person’s passing. However, it is important to recognize that not everyone is subject to estate taxes. Only estates that exceed a specific threshold, known as the exemption amount, are subject to taxation.

Federal estate tax

Federal estate tax, though distinct from California’s state tax laws, can impact Californians with large estates. Under federal law, only estates exceeding $12,920,000 in 2023 are subject to taxation.

Property valuation

When determining the value of an estate, the state uses the fair market value of the property. This includes assets like real estate, bank accounts, investments and personal property. The fair market value is the price a willing buyer would pay a willing seller, with neither under compulsion to buy or sell.

Gift tax

California has gift tax laws in place that might affect the overall estate tax picture. Gifts made during a person’s lifetime could be subject to gift taxes. However, there are annual and lifetime exemptions in place that allow individuals to make certain gifts without incurring tax liability.

Inheritance tax

California does not impose an inheritance tax, which differs from an estate tax. The estate pays the estate tax before the distribution of assets, whereas individuals inheriting the assets pay the inheritance tax.

Proper estate planning and financial guidance can help individuals navigate these complex laws, preserving their assets for their intended beneficiaries.

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