Will your heirs have to pay estate tax on their inheritances?

Will your heirs have to pay estate tax on their inheritances?

| Jun 26, 2020 | Estate Planning

When you make money, whether you earn it as a wage or as interest on an investment, you pay taxes on that income. You will also pay taxes on the interest it accrues or other income you derive from investing part of your earnings.

If you save your wealth in order to support yourself as you grow older and eventually leave a legacy for your loved ones, you may resent the idea that you could have to pay taxes on that income twice the good news is that California residents can potentially avoid most estate-tax-related liabilities with careful estate planning practices.

Does California assess an estate or inheritance tax?

California is one of many states that does not directly tax and estate. Additionally, the state does not tax inheritances received by beneficiaries or gifts people receive. That means that you do not have to worry about state estate taxes when planning to pass your wealth on to the people that you love.

You may still have to consider federal estate taxes

If your estate will have a value of $11,580,000 or higher, you could very well end up paying federal estate taxes. The higher the value of your estate, the higher the tax rate the federal government will apply to it.

Careful planning, including gifts made prior to your death or the placement of assets, such as real estate, into a trust, can help you avoid the progressive federal estate tax. The greater the value of your estate, the more important it becomes to carefully plan to minimize or avoid estate taxes.

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