Taxes require advanced planning when it comes to your estate and while they may not apply to every individual or that person’s estate, it is valuable to be educated about the basics so you can determine if other planning steps are required. There are three types of taxes that could apply when you pass away and your loved ones collect on any assets you’ve transferred to them. These are capital gains taxes, estate taxes, and income taxes.
Capital gains taxes are frequently the responsibility of a beneficiary to an estate. A personal representative or the individual appointed to handle your estate does not necessarily need to pay these taxes, but your personal representative may need to notify beneficiaries about their individual responsibility to pay for those taxes if the beneficiary sells high-value inherited property.
The second type of taxes are estate taxes. State-level estate taxes are not assessed by California, but someone with a very successful business or ownership in real property may be subject to federal estate taxes depending on the value of their estate. The exemption threshold for federal-level estate taxes in 2024 currently sits at $13,61 million but could change in the future.
Finally, income taxes may apply to your estate. In most cases, a personal representative of an estate files a final tax return on behalf of the deceased. This final tax return helps ensure that any outstanding tax obligations are clarified and ideally paid.
In some cases, the estate may be responsible for paying those income taxes. If the sale of estate resources generates $600 or greater in revenue, the person representative may need to file individual income tax returns for the estate as well. This could lead to personal liability if a person does not file these necessary tax requirements.
Communicate with our Pasadena estate planning lawyers for more assistance with your own planning strategy.
