Saving throughout your lifetime and investing your resources can allow for a comfortable life and a pleasant retirement. It can also mean that you have more assets than you need, allowing you to pass a substantial inheritance on to your family members and other loved ones.
The greater the value of your assets when you die, the more likely it is that estate taxes could impact what property actually passes to your family members. Your executor has an obligation to pay taxes on behalf of your estate before they distribute any of your property to the people named as beneficiaries in your will.
What estate taxes do you need to plan for?
As a California resident, you have likely paid more in taxes throughout your adult life than people living in most other states. Thankfully, those obligations end when you die. Only a handful of states collect estate taxes, and California is not one of them.
Neither your executor nor your heirs will have to worry about California taxing the assets in your estate or the inheritance that they receive. Still, if your assets are worth millions of dollars, then federal estate tax could still apply to what you leave behind when you die. Currently, estates worth more than $11,7000,000 are potentially subject to estate taxation. Large estates without adequate planning could have to pay as much as 40% in federal estate taxes.
Planning ahead to reduce your tax liability will benefit the people you love by increasing their inheritance and thereby helping to solidify a large and long-lasting legacy in your name.