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Estate of Affairs

Estate planning blog

Avoid Death Tax in CA, Click for a FREE, No Obligation Consultation!

There is one question on your mind right now: “Do I have to pay death taxes?” I am a probate and estate planning attorney in the Sacramento area and serve clients from the Bay Area to Redding to San Diego. Today, let’s talk about Death Tax. (Too Long; Didn’t Read? Book a free consultation! Call: 916-282-9799 or Book online: Book now)

What is a Death Tax?

A Death Tax is the tax your family will pay when you die. The term “death tax” has two meanings. First, it is the Government Tax on any gifts made during life or at death that some people will pay. Yet, for nearly everyone else, the tax refers to the cost to transfer property at death. For a reference to probate and the cost, see my article about Aretha Franklin’s estate.

How Much is the Government Death Tax?

Forty Percent. Yes – 40%. That’s 40 cents of every dollar you transfer will go to the government. The tax rates are found under 26 U.S. Code Section 2001 (also known as Internal Revenue Code (IRC) Sec. 2001). Because the death tax INCLUDES a lifetime gift tax, you can’t give property away during your life to avoid the the tax at death. Meaning, all gifts you make while alive are added up with the gifts you make at death, then taxed together.

How Much is California Death Tax?

If we are talking about the state’s death tax, you’re in luck because California does not tax the actual transfers at death – but it can, and does, allow a “tax” on the transfer process at death. This process of transferring property at death in California is very expensive. The process (called probate) can cost up to $30,000.00 in fees if your home can sell for $500,00.00, even if you have a loan to pay off! And unless you do something now, YOU WILL PAY FEES.

How To Avoid Death Tax?

Avoiding death tax is easy if you hire our estate planning firm. But if you do not have an estate plan, the cost of your death will pass to your family. Our tax and probate avoidance plans offer solutions to protect you, your family, and your wealth.

Estate Tax Exemption?

Technical stuff ahead: The exemption for federal estate tax is a basic exclusion amount of $5,000,000, adjusted for inflation (see IRC Sec. 2010) beginning in 2010.* That means, the first $5.0m (adjusted for inflation in 2017 to $5.49 and expected around $7m in 2026*) is exempted from tax. But consider that in California it is very easy to hit the $5.5 million mark given the value of homes in the state. And the exclusion does NOTHING to help the probate costs. (*note: a temporary doubling effect began in 2017 – see below)

The exclusion was doubled on January 1, 2018 under the Tax Cuts and Jobs Act. But…

Estate Tax Exemption Sunset?

The increased exclusion will expire, or “sunset,” on December 31, 2025 unless Congress acts to extend it. Given the state of politics in Washington, the likelihood of that happening is slim.

So, If I Die After the Sunset…?

This question comes up a lot: Am I Better Off Dead? The easy answer is, of course, NO. Sensing people would rather die than pay 40 cents on the dollar (and some really would), the IRS has special rules that you can take advantage of if you act now. We can help you take advantage of these rules through a proper estate planning strategy. Call us today!

More Death Tax Information

For more information about Death Tax, California Probate Costs, and the Estate Planning strategies to avoid both, call us for a free consultation. Call: 916-282-9799 Book online: Book now

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