The estate plan that includes the will belongs to the person who has died. Once the will reaches probate, the person listed as the beneficiary receives the inheritance. However, you may not be the only person to get money from the estate.
California is one of the highest-taxed states concerning income tax. Does that include estate and inheritance taxes?
California does not impose an estate tax, so you or your beneficiaries are free and clear to a specific dollar amount. However, the federal government will ask for an accounting of everything you owned at the date of your death. The IRS will then use the fair market value of items and add them together to find if your property reaches the exemption amount. Items included may comprise:
- Real estate
- Business interests
If the value of your estate is above a certain amount, the estate must pay taxes on that amount.
The inheritance tax is a state tax a person pays when they receive money, property or other assets from the estate of a deceased person. The beneficiary, not the estate, is responsible for the tax. Fortunately, California does not have an inheritance tax.
If you live in a state like Maryland with an inheritance tax, you will not have to pay if you inherit property or money from someone who died in California. However, you would have to pay something if the California resident-owned property in Maryland.
Be aware of the estate and inheritance laws, whether you are putting together your estate or you are the beneficiary. Living in California, chances are you will not have to pay taxes.