Estate Tax Planning
Estate taxes are the taxes that may be imposed on the value of your estate at your death. There are two levels of taxes that may be imposed: state and federal. California has eliminated state-level estate taxes but everyone is subject to federal estate taxes. There are a little over 10 states that have an inheritance tax so if a California resident moves to one of those states, you may be subjecting yourself to that state’s estate taxes.
The Reality of Estate Taxes
Generally speaking, the amount of estate taxes you pay is determined by the size of your taxable estate, the value of the federal estate tax exemption and the federal estate rate. At this point, for any person who dies in 2023 and has over $12,920,000, there will be a 40 percent federal estate tax levied on every dollar over $12,920,000. There is uncertainty as to the exact amount of federal estate taxes due at the time of your death because of constant changes in federal tax laws.
There are many planning strategies that can be used to minimize or reduce your estate tax liability.