When many California residents think of their end-of-life wishes, they consider who they want to receive certain assets. However, it is important to go beyond that line of thinking when estate planning. For example, it is often a smart move for parties to consider reducing estate taxes, which could leave more assets for loved ones.
Though many estates are exempt from having to file an estate tax return, there are many that still need to consider this measure. As of 2020, estates with combined gross assets and prior taxable gifts that total more than $11,580,000 will need to file an estate tax return. Fortunately, parties can think ahead and consider what is included in their taxable estate and what steps they could take to reduce their taxes.
Typically, assets like cash, insurance, annuities, real estate, securities, business interests and more are totaled to find the gross estate amount. To reach the amount of the taxable estate, allowable deductions can be subtracted from the gross estate amount. Certain debts, like mortgages, estate administration costs and property passing to a surviving spouse can often be deducted.
Of course, each estate is different. As a result, California residents will need to thoroughly review their assets and taxable estate to determine whether they may need to look into reducing estate taxes. If parties are concerned about such actions, they may wish to consult with knowledgeable attorneys who can go into more detail regarding estate taxes and steps available to reducing those taxes for the benefit of their surviving loved ones.