If someone dies without a Trust, their assets may be required to go through a process called probate before their assets can be distributed to the decedent’s beneficiaries. During probate, an estate administrator must perform certain duties in accordance with state and federal law. One crucial task is ensuring the payment of taxes.
Probating an estate is a challenging process, but failing to meet federal and state tax requirements may lead to additional fines. As an estate administrator, you have the right to retain legal counsel from an experienced probate attorney. We recommend retaining a specialist certified in Trust, Estate, and Probate matters who understands estate tax in Luis Obispo probate cases for guidance throughout this process.
An estate administrator in California may face three different types of tax issues: Federal Estate Taxes, State and Federal Income tax issues, and State Property Tax concerns.
Federal Estate Taxes
A decedent’s estate is not subject to Federal Estate Taxes unless the fair market value of the assets exceeds the Estate Tax Exemption Amount. In 2024, the exemption amount is $13.6 million per individual or $27.2 million for a married couple. Estates subject to the Federal Estate Tax are rare but require very particular filing requirements and are covered by other articles.
Income Tax Issues
In California, there are no estate taxes on the state level. However, there could be a federal tax depending on the estate size. The Internal Revenue Service (IRS) will consider specific assets to determine whether an estate is large enough to warrant federal taxes.
The property subject to probate includes any personal assets the decedent owned in their name as well as accounts or insurance policies that do not have a named beneficiary. This includes:
- Real estate
- Vehicles
- Business interests
- Jewelry and collectibles
- Land and mineral rights
- Life insurance policies, investments, stocks, and savings accounts
The federal estate tax threshold is currently $12.92 million. Estate taxes range from 18 to 40 percent of the assets over this amount. A San Luis Obispo attorney with experience handling high-value estate taxes can answer specific questions after reviewing a probate case.
Assets Excluded From Probate May Still Face Taxes
Not all assets must go through probate. Property that may be excluded from this process include:
- Living trusts
- Assets held in joint tenancy
- Accounts with a pay-upon-death beneficiary
- Life insurance policies with a named beneficiary
Assets that are exempt from probate are not necessarily exempt from taxes. Other tax requirements may involve:
Inheritance Tax
While an entire estate is subject to estate taxes, individual beneficiaries may have to pay an inheritance tax upon receiving select assets. Depending on where the estate owner lived prior to their death and where beneficiaries currently reside, there may be state or federal tax requirements on inherited assets.
Generation-Skipping Transfer Tax
Historically, estate planners could help beneficiaries avoid paying estate taxes by leaving assets to grandchildren rather than children. However, the government recognized this loophole and passed a bill instituting a generation-skipping transfer task. The federal government imposes this federal tax when the grantor leaves their assets to grandchildren or another generation besides their direct children.
A skilled San Luis Obispo attorney could help determine whether an estate’s assets will be subject to the probate process or alternative tax requirements.
Call a San Luis Obispo Attorney About Estate Tax in Probate Cases
A variety of rules and guidelines dictate the payment of estate taxes during probate. While California does not impose an estate or inheritance tax, the estate you are administering could be subject to federal taxes or alternative tax requirements in other states.
The probate process is complex, and mistakes could delay the distribution of assets or put an entire estate at risk. Working with a diligent lawyer who understands estate tax in San Luis Obispo probate cases can ensure compliance and help protect you and the estate from fines or levies. Call Toews Bio & Abram, Inc today for legal support.
N/a
