Taxes play an important role in estate administration. They are a potential source of liability for the estate and possibly the personal representative if they do not follow the appropriate steps.
The personal representative overseeing the process usually files a final tax return for the deceased individual. They have to use estate resources to cover any outstanding income tax obligations. When an estate is large, there could be estate taxes due in addition to income taxes.
Personal representatives are not in a position to reduce estate tax liability. Generally speaking, estate tax planning must occur before an individual dies. Failing to take estate taxes into account can drastically reduce what beneficiaries inherit. What estate tax rates might apply?
Estate taxes are progressive
The good news for California testators thinking about their legacies is that the state does not collect an estate tax. However, their resources could be valuable enough to trigger federal estate taxes. If the assets included in an estate add up to more than $13.99 million as of 2025, then estate taxes may be due. The tax rate depends on how much the estate exceeds the exemption threshold. The lowest tax rate is 18% of the estate’s value, while the highest tax rate is 40%.
Even if estate planning cannot eliminate estate tax obligations, the right plans can at least help a testator minimize the tax rate that applies. Carefully crafting an estate plan with tax liability in mind can help people limit how much they lose to taxes. The more assets people own, the more of their estate might end up at risk after they pass without advance planning.
