Most states do not make heirs pay inheritance taxes when getting assets as part of an estate plan. California is one of them. You do not have to worry about an estate tax at the state level.
That said, it’s important to note that the laws are different across state lines, so there is a chance that distant property could face taxes that you do not expect. One common example is Kentucky. An heir may live in California, but assets in Kentucky could still fall under Kentucky’s estate tax laws, meaning that money has to be paid. This can come as a surprise if you’re from California and you’ve never examined the laws across the country.
Types of assets
While many people only own assets within their home state, or at least the state where they now reside, this isn’t true for everyone. Here are a few types of assets someone could own in another state:
- A vacation home
- A family home that has been passed down for generations
- A business
- Investments and other financial assets being held out of state
For instance, perhaps you live in California, but your family is originally from Kentucky. You still own a cabin that your grandfather built, and you and your children visit it every year for vacation. California may not have an estate tax but, if you leave that cabin to your children, are out-of-state taxes going to be applied?
These are important things to consider and wise questions to ask. Everyone’s situation is unique. Just make sure you take the time to carefully consider your situation and your legal options.