You should educate yourself about taxation when you are devising your estate plan. People sometimes have misconceptions, and we will provide clarity in this blog post.
Federal Estate Tax
There is an estate tax on the federal level. We practice law in California. Some states have state-level estate taxes, but there is no estate estate tax in California. However, if you own valuable property in a state that does have a state-level estate tax, the tax in that state could be a factor for you.
At the present time, the federal estate tax exclusion is $5.43 million. This is the amount that you can transfer before the estate tax would become applicable. There can be annual adjustments to account for inflation, so you will probably see a slightly higher figure year-by-year.
We should point out the fact that there is an unlimited marital estate tax deduction. You can transfer any amount of property to your spouse free of the estate tax, as long as your spouse is an American citizen. You would be using your exclusion to leave tax-free bequests to anyone other than your spouse.
When the estate tax is applied, it is applied to the entire taxable portion of the estate in question.
Inheritance Tax
An inheritance tax is an entirely different type of tax.
This type of tax would not be levied on the entire taxable portion of an estate. An inheritance tax would be levied on asset transfers to each individual inheritor who is not exempt. As a result, there could be multiple impositions of this tax when one estate is being administered.
There is no inheritance tax on the federal level, but there are a handful of states that levy inheritance taxes on the state level. California is not one of these states. The states that have inheritance taxes are Nebraska, Kentucky, Iowa, Maryland, New Jersey and Pennsylvania.
Learn More About the Estate Tax
If you would like to obtain detailed information about the federal estate tax, download our special report. This in-depth report breaks down a rather complicated subject, and we are offering the report to our readers free of charge.
To obtain your copy of the special report, visit this page: Free Estate Tax Report.
Take Direct Action
Written information is very useful, but there is no substitute for a one-on-one meeting with an experienced and qualified estate planning attorney. If you are exposed to the estate tax, there are various different things that you can do to ease the burden so that you can preserve a maximum store of wealth for the benefit of your loved ones.
Our firm offers consultations, and you can send us a message through this page if you would like to discuss taxation or any other estate planning matter: Sacramento CA Estate Planning Attorneys.
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