An inheritance tax is levied on the amount of money a beneficiary receives when someone passes away. These taxes are administered by the states, and they are only in effect in six states. An estate tax is a tax that the estate of a deceased person pays on real estate owned in a state at the time of the person’s death. There are 15 states with a separate estate tax, and there is a federal estate tax as well. If you own property and pass away in California, do any of these taxes apply to you?
California’s Inheritance Tax
California currently does not have a state inheritance tax. This means that if someone from San Francisco inherits real estate from someone who lived in Los Angeles, then there is no tax on the value of the land.
However, that does not prevent that person from having to pay an inheritance tax in other states. If the person from San Francisco inherits property in Nebraska, then there will be an inheritance tax bill from the state of Nebraska.
California’s Estate Tax
When a person who owns property in California dies, their estate will not have to pay a California estate tax because one does not exist. This means that the estate will not have to pay an estate on property before the property is distributed to a beneficiary.
Federal Estate Tax
In 2018, the laws regarding the federal estate tax have been changed dramatically. The federal government puts a ceiling on assets to determine whether or not an estate must pay a tax when the owner of the estate passes away. In 2018, an estate must be worth more than $11,180,000.00 before any estate tax is applied. This is in effect in California as well as all of the other states in the union.
Double Estate Tax?
The existence of the federal estate tax does not cancel out any estate taxes applied at the state level. For example, if a person owns real estate in Delaware passes away, then that estate will have to pay a federal and state estate tax on that asset. These estate taxes are the reasons why so many people with assets use financial vehicles to try and protect their families from having to pay extremely high estate taxes upon their deaths.
California is a state where there is no inheritance or state estate tax. The only time a resident of California would have to pay an inheritance tax is if they are the beneficiary of a person who lives in a state with an inheritance tax. Since the federal ceiling for estate taxes has been raised to such a high level, most people in California will never have to worry about paying an estate tax when their loved one passes away.