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Understanding California Estate Taxes

Estate taxes apply to a decedent’s estate after their death. These taxes are divided into two types: federal estate tax and state inheritance tax. Currently, California does not levy an inheritance tax.

At Norton Basu LLP, we understand that you want to leave as much as you can to your heirs. We also know that asset distribution can be a confusing process. It takes skill, experience and knowledge to plan in a way that allows you to avoid paying 41% to 50% in federal estate taxes. This high percentage rate applies to every dollar over the exemption amount.

The Federal Estate Tax Exemption

As of 2021, the estate and gift tax exemption is $11.7 million for an individual, up from $11.58 million in 2020. That means an individual can transfer up to $11.7 million through lifetime gifting, or upon death, to beneficiaries and pay no federal estate or gift tax. A married couple will be able to transfer to their beneficiaries $23.4 million free of federal taxes.

What Happens When One Spouse Dies?

The Uniform Marital Deduction allows for the transfer of property between US citizen spouses with no federal estate tax. Property left to a surviving spouse, no matter what the amount, is completely exempt from state and federal taxes. However, if the surviving spouse’s estate is large and exceeds the individual exclusion amount of $11.7 million at the time of their death, it could be subject to significant federal estate taxes in the absence of proper planning

How Creating A Trust Can Help

By creating a revocable living trust you can put your assets into a trust that protects them from the probate process. If estate taxes are a concern for your family, creating an irrevocable trust can help. Creating an irrevocable trust can protect your assets from both creditors and estate tax. Speak with us about your specific financial situation to see which plan makes the most sense given your goals.