A well constructed estate plan will include the implementation of tax efficiency strategies when estate tax exposure is present. You should certainly inventory your assets carefully when you are devising your estate plan so that you can determine whether or not you are exposed to death taxes.
As we all know, there are federal taxes, and there are state-level taxes. There is a federal estate tax that can potentially impact Californians.
This tax carries a $5.34 million exclusion until the end of this year. In 2015, the exclusion is going up to $5.43 million after an inflation adjustment is applied.
You can leave unlimited assets to your spouse tax-free, but the exclusion is the amount that you can leave to others free of taxation. If you are transferring more than the amount of the exclusion, the federal estate tax looms large. The maximum rate of the tax is a rather attention-getting 40 percent.
State-Level Estate Taxes
There are some states in the union that impose state-level estate taxes. In the states that have these taxes, the exclusions are typically lower than the federal exclusion. As a result, someone could be exposed to a state-level estate tax even if there was no federal estate tax exposure.
We practice law in the state of California. Fortunately, we have no state-level estate tax in California. However, if you own valuable property in a state that does have an estate tax, the tax could be applicable if that property was transferred after your passing.
While we are looking at state-level death taxes, we should touch upon inheritance taxes. An estate tax is levied on the entirety of the taxable portion of an estate, but an inheritance tax is imposed on asset transfers to each nonexempt inheritor.
There is no federal inheritance tax. However, there are six states that impose state-level inheritance taxes. California is not one of them, so this is another advantage that you gain as a resident of the Golden State.
Free Estate Tax Report
We have prepared a free special report that examines the ever changing federal estate tax. If you have been particularly successful from a financial standpoint, you should certainly understand the lay of the land, because there is a great deal at stake.
To access your copy of the free report, visit the Reports section of this website.
Schedule a Consultation
We can provide you with answers if you have questions about taxation or any other estate planning matter. Our firm serves people in northern California, and we would be glad to assist you.
If you would like to set up an appointment, simply call or email our office.
Latest posts by Timothy P. Murphy (see all)
- Can’t I Just Transfer My Assets to My Adult Child to Qualify for Medi-Cal? - August 19, 2019
- How Much is Too Much? - August 17, 2019
- The Importance of Communicating Your Plans - August 15, 2019