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Estate Taxes in California

Estate taxes are paid by a decedent’s estate, which means heirs to the estate lose out of benefits. There are ways to reduce or avoid estate taxes, but they do not always apply. Speaking to an experienced estate planning attorney in California is the best way to create a plan that benefits you today and protects your loved ones tomorrow.

Estate law can get pretty complex and undergoes changes relatively often, making it hard for clients to stay current. At LA | Estate Plans, our estate planning lawyer in Los Angeles will thoroughly review your estate and advise you accordingly. We know that informed clients make the best decisions about their finances. Schedule Your Peace of Mind Planning Session to learn more.

Estate Taxes in California

Some states have an estate tax that must be paid when a person dies. This tax applies regardless of who inherits. Typically, the executor files a single estate tax return and pays the tax out of the funds of the estate.
An estate tax differs from an inheritance tax in that the beneficiary (or person inheriting from the decedent) is responsible for paying an inheritance tax. An estate tax and an inheritance tax are both different from a gift tax, which only applies to transfers that are made during the giver’s lifetime.

Understanding Estates: State versus Federal Estate Taxes

Some states have an estate tax while others have an inheritance tax, and still others have neither. However, there is a federal estate tax that is applicable to all states. If you meet or exceed the filing threshold, you must pay taxes. If your estate is below the threshold, you are exempt.
Fortunately, the exemption amount is so high that most estates do not qualify. The filing threshold is in the millions, with it increasing significantly over the years. In 2011, it was $5,000,000. By 2022, the federal exemption for an individual was $12,060,000, and in 2023, it is $12,920,000. This means that beneficiaries of an estate valued less than $12,920,000 will not have to pay a federal estate tax.

Who Pays the Estate Tax in California?

When someone dies, there is a person that is appointed in the decedent’s Will, or by the court if there is no Will, that is in charge of administering the estate of the deceased. In some states, this person is known as the personal representative while in others they are known as the executor.
No matter what they are called, this is generally the person that is responsible for handling the payment of the estate tax. It is paid from the estate prior to its being distributed among the beneficiaries.

How to Avoid Estate Taxes

There are different ways to avoid having to pay an estate tax, including:

  • Gifting property to family members — there are limits
  • Creating a trust — there are different types, including revocable trusts, irrevocable trusts, spendthrift trusts, special needs trust, charitable trusts, gun trusts, and more
  • Donating property to a charity

Which of these ways, if any, can apply will depend on the state and circumstances of each individual situation.

Benefits of Hiring an Estate Planning Lawyer in California

An estate planning attorney is a lawyer that focuses their practice on helping clients create comprehensive estate plans that meet their short- and long-term goals. Benefits of having an estate planning lawyer on your side include:

  • You have the peace of mind in knowing that your plans are compliant with local, state, and federal law.
  • Your initial thoughts on what you desire in your estate plan may not be the best for your situation, and an estate planning lawyer will know this and explain better options to you.
  • When you hire an estate planning attorney, your estate plan will be customized to address your unique needs.

Spending some money up-front on an estate planning lawyer can end up saving significant time and money down the road.

Contact an Estate Planning Lawyer in California Today

It is always to your advantage to speak with an estate planning attorney in California about your estate and what documents should be included in an estate plan. Our goals at LA | Estate Plans are to make sure you benefit from an estate plan today and your family (and other loved ones) benefit when you die. Schedule Your Peace of Mind Planning Session to get started on a smart estate plan.

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