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. 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 on your gifts when you die. The term “death tax” literally refers to the Federal Estate and Gift Tax on gifts made during life or at death. But it can also figuratively refer to the cost of transferring property at death, such as through probate. For a reference to probate and the cost, see my article about Aretha Franklin’s estate.

How Much is the Death Tax?

Forty Percent. Yes – 40%. That’s 40 cents of every dollar you transfer. The Estate and Gift Tax rates are found under 26 U.S. Code Section 2001 (also known as Internal Revenue Code (IRC) Sec. 2001). And you can’t give property away during your life to avoid the gifts you make at death because the death tax is an estate AND GIFT tax. Meaning, all gifts made during your lifetime are grossed-up and added to gifts at death.

How Much is California Death Tax?

If we are talking about the literal death tax, you’re in luck because California does not have a death tax. However, if you are asking about the cost of transferring property at death in California it is very expensive. A probate can cost up to $26,000 on just $500,00.00 of property.

How To Avoid Death Tax?

Easy: Hire our estate planning firm. If you do not have an estate plan, then the stress and cost of your death will pass to your family. Our comprehensive tax and probate avoidance plans offer solutions to protect you, your family, and your wealth.

Estate Tax Exemption?

The exemption for estate tax is a basic exclusion amount of $5,000,000, adjusted for inflation (see IRC Sec. 2010) and would be approximately $5.5 million. That means, the first $5.5m 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.

The exclusion was increased to $10,000,000 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. Perhaps the IRS, sensing people would rather die than pay 40 cents on the dollar (and some really would), the IRS has special rules. 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 Estate Planning strategies to avoid both, call us for a free consultation. Call: 916-282-9799 Book online: Book now