As you get deeper and deeper into the estate planning process in San Diego, you start to see that one of its main purposes is to help you maximize the assets you have to pass on to your beneficiaries. Yet one liability you may think that you cannot avoid is estate taxes.
Yet that may not be the case. California does not impose a state estate tax on its residents, meaning that the only estate tax liability you need concern yourself with comes from the federal level. There are are measures in place that may even help you avoid a massive tax liability against your estate once you are gone.
Utilizing the federal estate tax exemption
There is a federal estate tax exemption that allows many (indeed, a majority) of estates to avoid being subject to taxes. According to the Internal Revenue Service, that amount for 2020 is $11.58 million. Provided the total taxable value of your estate comes in below that amount, it will not face an estate tax liability.
Your spouse likely figures heavily into your estate plans. While the value of your estate may not exceed the threshold amount, theirs may after having received assets from yours. Yet if you plan carefully, you can avoid this (and even maximize your exemption even further).
Estate tax portability
The law allows you and your spouse to combine your exemption amount through a process known as portability. You can use this benefit to effectively double your exemption. Leaving all of your assets preserves your entire estate tax exemption (by instead utilizing the unlimited marital deduction, which lets you give an unlimited amount to your spouse free of taxes). Your spouse then simply needs to claim your unused exemption by filing an estate tax return the same fiscal year that you pass away.