Key Takeaways:
- Estate tax is based on the total value of everything you own at death.
- The federal estate tax exemption for 2024 is $13.61 million per person.
- States may have their own estate or inheritance taxes with different rules.
- Gifting assets during your lifetime can help lower estate tax liability.
- Setting up a trust can protect assets and reduce tax burdens.
- Working with an estate planning attorney in Orange County ensures the best strategies for minimizing taxes.
- Married couples can use the portability rule to double their exemption.
- An Orange County trust administration lawyer can help manage assets efficiently.
Estate taxes can feel overwhelming, but they don’t have to be. If you’re wondering whether your estate will owe taxes, the answer depends on a few key factors. The good news? Most people won’t have to pay federal estate taxes, but some estates might be subject to state taxes. That’s why proper planning is important.
What Is Estate Tax?
Estate tax is a tax on the total value of a person’s assets at the time of their death. It’s different from inheritance tax, which is paid by the people receiving the assets. In the U.S., the federal government only imposes estate tax if the total estate value exceeds a certain amount. For 2024, this exemption is $13.61 million per person.
If your estate is below this limit, you won’t owe federal estate tax. But if it’s above, the portion exceeding the limit is taxed at rates between 18% and 40%.
Steps to Calculate Estate Tax
If you think your estate might be taxed, here’s how to figure it out:
- Determine Your Gross Estate Value
- Add up all assets, including:
- Real estate
- Bank accounts
- Investments
- Retirement accounts (401(k), IRA)
- Business interests
- Life insurance proceeds (if owned by the deceased)
- Personal property (cars, jewelry, art, etc.)
- Subtract Allowable Deductions
- Common deductions include:
- Mortgages and other debts
- Funeral expenses
- Charitable contributions
- Estate administration costs
- Marital deduction (assets left to a spouse are not taxed)
- Apply the Estate Tax Exemption
- If your taxable estate is below $13.61 million, you won’t owe federal estate tax.
- If it’s higher, only the amount above the limit is taxed.
- Calculate the Tax Rate
- The taxable portion of the estate is taxed at a progressive rate:
- 18% for amounts up to $10,000 over the limit
- 40% for amounts over $1 million above the limit
Do You Have to Pay State Estate Taxes?
Some states have their own estate taxes. California does not have a state estate tax, but if you own property in another state with an estate tax, those laws may apply. An Orange County Trust Administration Lawyer can help you understand state laws if they apply to you.
Ways to Reduce Estate Tax Liability
Even if your estate is above the tax exemption, there are ways to lower your tax burden:
- Gifting Assets – You can give up to $18,000 per person per year tax-free, reducing your taxable estate.
- Setting Up a Trust – Trusts can help protect your assets and avoid unnecessary taxes. A trust attorney in Orange County can help set up the right trust for your needs.
- Charitable Contributions – Donations to qualified charities reduce taxable estate value.
- Life Insurance Planning – Proper planning can keep life insurance proceeds out of your taxable estate.
- Marital Transfers – Assets left to a spouse are tax-free due to the unlimited marital deduction.
Why You Need an Estate Planning Attorney - Parker Law Offices
Even if you don’t think your estate will be taxed, proper planning ensures your loved ones avoid complications. A trust attorney in Orange County can:
- Help set up trusts to reduce tax burdens.
- Guide you on gifting strategies.
- Ensure your estate plan follows tax laws.
At Parker Law Offices, we make estate planning easy and stress-free. If you want to protect your estate from taxes, our experienced team can help. Whether you need an estate planning attorney in Orange County or an Orange County probate attorney, we’re here to guide you. Call us today for a consultation and take control of your estate plan!
