For someone who owns valuable real estate or investments, estate taxes are a serious concern. Such obligations could limit how much of your wealth you can pass on to your loved ones when you die. Many people would prefer to plan carefully rather than to pay taxes again on their most valuable assets after their death.
You pay taxes annually on the income that you earn. You pay taxes to own real estate and sales taxes when making purchases. You have already paid taxes on your most valuable holdings many times over, and the taxes can continue to accrue even after you die. Any property held in your name will then become part of your estate, depending on how much you own at the time of your death, there could be estate taxes due before your beneficiaries receive property from your estate.
Careful planning is crucial for those who hope to avoid such taxes. After all, they can substantially diminish the Legacy you leave for others. How much could those taxes cost your estate after you die?
Federal estate taxes can be rather steep
California does not levy an estate tax on the property someone owns at the time of their death, and there has also no inheritance tax that applies to the assets someone receives from an estate specifically. There is no state-level gift tax in California either. However, there is still the federal estate tax to consider.
As of 2023, an estate worth more than $12,920,000 million dollars could potentially have to pay estate taxes. How much the government charges in taxes will depend on the total value of the estate. The greater the value of the estate, the higher the tax rate. The lowest federal estate tax rate is 18%. Estates worth $13,920,000 or more could potentially have to pay up to 40% of their total value in taxes to the federal government.
Advance planning limits tax liabilities
Changing how you hold certain property and arranging for transfers ahead of time can largely reduce or sometimes even eliminate estate tax liabilities. The types of assets you hold will influence the appropriate strategy for minimizing your estate tax risks.
Learning more about the financial matters that may affect your legacy can help you create a more effective and protective estate plan.