As you piece together your estate plan in Hayward, one nagging thought that likely lingers in the back of your mind is that at least a portion of your accumulated assets will have to go towards paying taxes. Like many people, you may have already accepted this as an inevitability (after all, “death and taxes,” right?).
Yet that may not necessarily be the case. California does not impose either an estate tax or an inheritance tax on its residents, meaning that the only taxes your estate may be subject to come from the federal level. There is the possibility, however, that your estate may escape a tax liability altogether (either through allotted exemptions or your careful planning).
The federal estate tax exemption
According to the Internal Revenue Service, a federal estate tax exemption exists for 2020 in the amount of $11.58 million. Thus, if the total taxable value of your estate comes in at less than that amount, it will not be subject to tax. It is also possible for you to extend that amount by combining your estate plans with those of your spouse.
Electing estate tax portability
The benefit of estate tax portability permits you to combine your unused estate tax exemption with that of your spouse. By using this benefit in conjunction with the unlimited marital deduction (which allows you to pass an unlimited amount to your spouse free of taxes), you could potentially protect up to $23.16 million for your beneficiaries. Leaving your assets to your spouse upon your death invokes the unlimited marital deduction while preserving your entire estate tax exemption. Your spouse then need only file an estate tax return within nine months of your death to combine that unused exemption amount with their own.