When you die, any property in your name becomes part of your estate. What happens to that property depends on how well you plan before you die. If you pass without an estate plan, California state law determines who inherits your property. If you create a will, you get to decide where your assets go after your death.
Your family members will locate your estate plan and provide that paperwork to the probate courts, along with information about your finances. The California probate courts will oversee the administration of your estate. They will help make sure that the representative you select follows your instructions and that they fulfill your obligations, like repaying your debts.
Taxes can also be an important part of the estate administration process. Large estates are sometimes subject to estate taxation. Is that something you need to plan to avoid?
Estate taxes can be as high as 40%
An estate tax applies to the assets within an estate and generally requires payment before any remaining assets pass to beneficiaries. An inheritance tax applies to the wealth someone receives from an estate.
Although California does not levy an estate or inheritance tax against estates probated here, the federal government does assess an estate tax on particularly large estates. In 2022, estates worth just over $12 million would be subject to federal estate taxes. This progressive tax becomes more expensive the greater the value of the estate. The top estate tax rate is 40%.
Addressing estate taxes when you plan your legacy can help ensure that as much of your property goes on to your loved ones as possible after you die.