A death in the family is always a source of a lot of stress and sadness, and dealing with the decedent’s estate can add to that stress. One thing that typically causes the most anxiety is the dreaded estate tax. But there is some good news when it comes to estate tax—the threshold is actually quite high and you, or more accurately, the estate probably won’t have to pay any tax.
Estate Tax Exemption
The federal estate tax exemption is $12,920,000, so if your loved one’s estate is worth less than that, the estate will not have to pay any taxes before being passed on to you. And you will not pay taxes on what you inherit unless you sell it and make a profit.
What Is Included in an Estate
The total of all of the property in a person’s estate is considered the gross estate, and the value of that property is typically based on the fair market value of the property at the time of the person’s death. This can include real estate, cash, securities, insurance, business interests, retirement accounts, life insurance, annuities, and other assets. Once the gross estate has been determined, funeral expenses and any outstanding debts are paid, and any charitable or state death tax deductions are taken. Now, if the estate is worth less than $12,920,000, there are no taxes to be paid and, in fact, an estate tax return does not need to be filed.
California Estate Tax
Of course, there are still state taxes to contend with, but California does not have an estate or inheritance tax. If you live in another state, you should check your state tax laws.
Losing a loved one is a stressful event. Let us help you deal with your taxes at this difficult time. Contact us today.
**Please keep in mind: Tax laws, eligibility requirements, and rates change often, and these lists are not exhaustive. Always contact a tax preparer for the most up-to-date information.