DOES CALIFORNIA HAVE AN INHERITANCE TAX?
Inheritance tax is a widely misunderstood topic, partially because not all states have such a tax. Generally speaking, inheritance tax is a tax liability on an individual’s inheritance. States with an inheritance tax typically exclude surviving spouses from tax liability, and some states exclude other family members. Individuals unrelated to a deceased person, however, tend to be subject to inheritance tax. And although a deceased individual’s estate is usually responsible for the payment of estate taxes, a decedent’s beneficiaries are responsible for the payment of inheritance taxes. That being said, California does not have an inheritance tax. However, this doesn’t mean that inheritance taxes can’t affect California residents who leave assets to individuals in other states. When assets are left to someone who lives in a state with an inheritance tax, he or she will be liable despite the fact that the decedent’s estate is located in California. Luckily, though, with the assistance of an experienced California estate planning attorney, individuals can plan for the reduction or elimination of such taxes through participation in the estate planning process.
How Are Inheritance Taxes Legally Reduced Or Eliminated?
As noted above, although California doesn’t have an inheritance tax, residents of the state can be affected by the laws of states that have such a tax. Therefore, when a California resident has beneficiaries in a state with an inheritance tax, he or she should confer with an experienced California estate planning attorney regarding legal tax reduction methods. Two ways in which inheritance tax may be reduced or eliminated include gifting and donations.
Gifting – Gifting is one method of legally avoiding inheritance taxes. Most states provide individuals with an annual exemption amount for gifts, and this amount can be gifted to a beneficiary on a yearly basis until a specified lifetime cap is reached. However, gifting that is completed in contemplation of death (i.e., gifting that takes place within close proximity to one’s death) won’t avoid the inheritance tax, so this option is usually only available to individuals in good health.
Donations – An additional way to avoid inheritance taxes is to donate assets to charity. Many states exclude donations from inheritance taxes in order to encourage charitable contributions.
Sherman Oaks and Studio City Estate Planning Attorney
If you’re looking for personalized service by an experienced estate planning attorney, then Rodney Gould is the lawyer for you. When you come to the Law Office of Rodney Gould, you can rest assured that you’ll receive responsive, individualized counsel. By choosing the Law Office of Rodney Gould for your estate planning needs, not only will you stabilize your future, but you can rest assured that we’ll make the estate planning experience as easy and pleasant as possible. You can connect with us by calling us or by filling out one of the contact forms on our website.