The Estate tax exemption is a federal tax on your right to transfer property after death. It takes into account everything you own or have certain interest in at the date of death. This includes cash, securities, real estate, insurance, trusts, annuities, business interests and other assets. There are deductions for various things like debt, estate administration expenses, property passing to your spouse or to qualified charities.
How much is the Estate Tax?
The Estate Tax exemption amount has increased to 13.61 Million per individual and 27.22 Million for a married couple. This is a 690k increase from the previous year. What this means is that any amounts over exemption are taxed at a rate of up to 40% depending on how far over the exemption limit the estate is. The following link has a table explaining rates in more detail: https://smartasset.com/estate-planning/california-estate-tax
How do you avoid the Estate Tax?
If your estate is under the amounts above then there is no need to worry. All of your estate can be passed to your heirs tax free. If your estate is over the exemption amount an estate planning attorney (often times in conjunction with a financial planner and or CPA) may be able to help you with avoiding some of or all of these taxes. Stay tuned for another post where we will discuss in further detail some of the methods for avoiding the estate tax.
Please contact us to get your estate plan started today!