Many of the San Fernando Valley residents that come to see us here at The Law Offices of Alice A. Salvo all share the same concern: estate taxes. If you are current going through a transition of assets following a loved one’s death, this is definitely a topic worth researching. However, a lot of misinformation exists about who actually owes estate taxes, and how much they actually do owe. This often leads to concerns that can cause a good deal of undue stress.
First and foremost, you should understand exactly who estate tax is owed to. As of 2005, the State of California does not require you to file an estate tax return. That leaves only the federal estate tax for you to potentially have to deal with.
Next, you need to determine if you even owe taxes. According to the Center on Budget and Policy Priorities, the federal estate tax exemption level is $5.43 million per person. If the value of your loved one’s estate does not exceed that number, you are not required to pay taxes. In fact, the CBPP estimates that only two out of every 1000 estates will even owe taxes this year.
Even if the estate you are dealing with exceeds the exemption level, it is important to remember that you only pay taxes on the amount that exceeds that exemption. Thus, if his or her estate values at $5.5 million, only $70,000 of that amount is eligible to be taxed. This proves the claim that some have that the estate tax can take up to half of an estate’s asset to be generally false. The CBPP reports that the effective tax rate is actually only 16.6 percent.
Further information on estate taxes can be found on our site.