When it comes to estate planning and inheritance, understanding the tax implications is crucial. In California, residents may wonder if there is an estate tax or an inheritance tax in the state. The good news is there isn’t a state estate tax or an inheritance tax in California. There is however a Federal Estate Tax that you may be subject to if you have a large estate.
- In states with an estate tax, an estate tax is a tax charged on the transfer of a deceased person’s assets after their passing, paid to the state from the assets of the estate.
- Inheritance tax is a tax paid by the beneficiaries who receive property or assets from a deceased person’s estate. In states with an inheritance tax, the tax liability falls on the recipient, not the estate itself.
- Federal Estate Tax is a tax imposed by our federal government (think IRS) on the transfer of assets exceeding a certain threshold value. California residents may still be subject to the federal estate tax.
Estate Tax in California
Currently, California does not have an estate tax. While several states impose estate taxes, California is not one of them. Therefore, individuals who inherit property or assets in California do not have to worry about the state of California imposing an estate tax.
Inheritance Tax in California
Like estate tax, California does not impose a state-level inheritance tax either. California does not have an inheritance tax, which means beneficiaries do not have to pay taxes on the assets they receive from the state.
If you are getting money or property from a deceased relative who lived in another state, though, make sure you check out that state’s laws. They may apply to you and your inheritance. For example, Kentucky has an inheritance tax that may apply if you inherit property located in the state.
Federal Estate Tax for California Residents
While California does not have its own estate tax, it’s important to note that residents may still be subject to the federal estate tax. The federal estate tax is a tax imposed on the transfer of assets exceeding a certain threshold value. The federal estate tax for 2022 was for estates valued at $12.06 million and up. This went to $12.92 million in 2023. For estates that exceed this amount, the top tax rate is 40%.
Estate Planning for Small and Large Estates – Consult Attorney Andrew Fesler
Seeking advice from professionals in the field of estate planning and tax law is crucial to ensure compliance and to develop appropriate strategies to protect and transfer wealth efficiently. Carlsbad estate planning attorney Andrew Fesler knows the various reasons clients need an experienced and caring estate planning attorney. There is a certain peace of mind you will have knowing you have done all you can to protect your family and assets and provide for your loved ones when you pass.