Taxes can be one of life’s most obtrusive burdens. It’s only natural for that worry to carry over to estate planning.
For many people, an estate plan is about preserving their legacy by providing support to loved ones. This might include prized heirlooms, the establishment of a trust or even a straight financial gift. But if you’re not careful, taxes could quickly create a hole in your carefully laid plans.
There is no estate tax or gift tax in CA
First, some good news: California does not have its own estate tax, nor does it have its own gift tax. This means, when estate planning, the only estate tax and gift tax rules you need to consider are those outlined in federal law.
As of 2020, the federal estate tax applies to estates worth more than $11.58 million for individuals, with the tax rate shifting based on the taxable amount. The federal gift tax, meanwhile, applies only to annual gifts that exceed $15,000 per person per year, only if the total value of those overages exceed the lifetime exclusion.
However, this does not tell the whole story.
Other tax considerations
Although California does not have its own estate or gift tax, there will likely be other taxes to take into consideration. Which ones might apply to your situation – and how to best minimize their impact – will depend on your specific circumstances, as well as your estate planning goals. This might include:
- Property taxes
- Capital gains taxes
- GST taxes
- Other states’ tax laws
The best way to reduce your estate’s tax burden, including any laws that may apply to heirs, is to plan ahead. By taking full stock of your assets and detailing your goals, an estate planning attorney can provide a suite of possible options to protect your legacy and ensure your loved ones are cared for.