Tax laws are always changing and the way they affect the estate of the living and the dead can be one way one day, and then another way the next. If you are preparing an effective and comprehensive estate plan, then it is smart to work with a Los Angeles estate planning attorney. If you have a large estate or if you have any type of possessions and wealth that you want to pass on, it is natural to want to avoid any tax burden your loved ones will have to face. After death, there is inheritance tax and estate taxes to think about.
What is the Difference between Inheritance Tax and Estate Taxes?
When a person dies and passes on their wealth to their heirs, inheritance tax is only applied if the person who died lived in a state that had an inheritance tax requirement. Anything that you have that has value will be subject to inheritance tax if you live in any of the following states:
- Iowa
- Kentucky
- Maryland
- Nebraska
- New Jersey
- Pennsylvania
Even if you live in a state that doesn’t have an inheritance tax requirement, the tax will still be levied on you if your loved one resided in one of these states. The value of the inheritance will dictate how hefty the tax burden will be. While spouses won’t be taxed for an inheritance, the further you are in the bloodline from the person whose assets you are inheriting will also be a factor as to how high your tax rate will be. Family members that are not closely related will pay a higher rate.
If you inherit assets and then sell them and make a profit, you could be subject to taxation. Capital gains tax occurs when a person inherits some type of asset of value and then sells it and makes more money off of the sale than what the asset was worth when it was first inherited. This is why understanding what your inheritance is worth when you receive it is so important. What you do with your inheritance could change your taxation situation.
Estate taxes, on the other hand, tend to be put on estates that are of very high dollar value. The estate is assessed at a value and if it is worth more than a certain amount then the estate will pay a tax on the assessed amount. After that, the remains of the estate will be disbursed to heirs. As of 2021, estates that are worth $11.7 million or more will be subject to estate taxes.
Speak to a Los Angeles Estate Planning Attorney Today
Tax laws can be confusing in general, but because they are always changing, working with a proficient estate planning attorney in Los Angeles is critical to learn how to maximize the amount of your wealth that will actually go to the heirs you name. If you need help with estate planning in California, call the Los Angeles business attorneys at the Leiva Law Firm today at (818) 519-4465.
