What estate tax obligation do you have as a California resident?

What estate tax obligation do you have as a California resident?

On Behalf of | Oct 20, 2020 | Estate Planning

California doesn’t currently have an estate tax, but that doesn’t mean that you can transfer your property without anyone having to pay any fees, though. There is a federal estate tax that heirs must pay when they receive estate assets. How much a recipient has to pay depends on their relationship with the decedent and the transferred property’s value. 

Right now, the Internal Revenue Service (IRS) doesn’t impose an estate tax on up to $11.58 million in assets that a decedent transfers to an heir when they die. Spouses generally don’t have to pay estate taxes when receiving property from their deceased husband or wife, either. There may be up to 40% in taxes assessed to all other recipients who receive property valued at over $11.58 million. 

The federal agency details how they calculate the amount of taxes a recipient may need to pay on IRS Form 706. That form shows that the feds assess an 18% tax to property valued at up to $10,000 more than the exempt assets cap. This tax rate increases to $1,800 plus 20% for any transfers between $10,001 and $20,000 over the exempted amount. 

There’s a base rate tax plus an additional 2% due for every $19,999 for transferred property up to $100,000 over the $11.58 million exemption. The base tax rate for a $20,001 to $40,000 overage is $3,800. It’s $18,200 for transfers that come in at between $80,001 to $100,000 over the exempted rate. 

Base amounts and tax rate percentages progressively increase as the transferred property’s value increases over the exempt amount. The IRS reserves the highest 40% index for transfers valued at $1,000,001 or more over the $11.58 million exemption. Individuals who receive property with such value must pay a $345,800 base tax rate plus 40%. 

Sorting out who owes what amount and to whom upon death can be difficult. You don’t want to get on the wrong side of tax authorities and the money that they feel that they’re due. An estate tax planning attorney in Westlake Village can help you determine what your financial obligations are when a loved one dies in California so that you can continue grieving your loss. 


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