California Estate Planning Lawyer for Tax Considerations

Attorney for Reducing Estate Tax Obligations

In large part, an estate plan is meant to ensure that your assets pass to your heirs and beneficiaries according to your wishes. If you are like many people, your wishes include protecting as much of your assets as possible from taxes in order to maximize the amount left to provide for your family and serve any of your other desired purposes. Fortunately, there are estate planning strategies available to reduce your tax obligations.

At the Law Office of David Schechet, our principal attorney graduated with highest honors from UCLA Law Scchool, and he brings 35 years of legal experience to our estate planning practice. We understand all of the available options for protecting your assets from estate taxes and other obligations. We can advise you of the best approach for your situation based on factors like the size of your estate and your family's needs. With our help, you can minimize your losses and any tax burdens that may fall on your surviving family members.

Estate Planning Tax Concerns in California

In California, there are three types of taxes that you should consider when creating your estate plan: estate taxes, gift taxes, and income taxes.

Estate taxes take effect upon a person's death for any assets belonging to the estate of the deceased. Unlike some other states, California does not have an estate tax at the state level, nor does it have an inheritance tax that beneficiaries are expected to pay on assets they receive. However, estates that exceed a certain value are subject to federal estate taxes. As of 2021, federal estate taxes apply for estates valued at $11.7 million or more. Assets above this threshold can be taxed at a rate of up to 37 percent.

Federal gift taxes apply when a living person gives away some of their assets to another person without expecting compensation. Gifts can include cash or any other form of property. In 2021, gifts of up to $15,000 per recipient per year are exempt from federal gift taxes, but larger gifts can be taxed substantially.

For estate planning purposes, income taxes primarily apply to assets held in trusts. Depending on the type of assets and the structure of the trust, a trust may generate income through interest, appreciation, dividends, and other capital gains. Income tax obligations may fall on the trust itself, or on beneficiaries who receive distributions from the trust's income.

Minimizing Tax Obligations Through Your Estate Plan

If your estate is large enough to trigger federal estate taxes, we can help you consider strategies to reduce or eliminate the taxes assessed. One option is to leave a substantial portion of your estate to your spouse in your will or trust, as distributions to a surviving spouse are not subject to estate taxes. However, if you have no surviving spouse, or if you want to leave more assets to your children and other beneficiaries, you will need to consider other strategies.

One of the most effective strategies is to establish an irrevocable trust. Upon creating an irrevocable trust, the assets you use to fund it will no longer be considered part of your estate, which can prevent you from exceeding the threshold at which federal estate taxes would apply. You can name anyone of your choice as a beneficiary of the irrevocable trust and establish provisions for how and when the assets will be distributed. This often provides tax benefits when compared to simply gifting the assets. When the trust is structured strategically, you can also minimize taxes on the income the trust earns. However, once the trust is established, you will no longer be able to access the assets, and you will not be able to revoke or amend the trust without the approval of the beneficiaries.

Contact a California Estate Planning Attorney

Reducing tax obligations through your estate plan may be complicated, but with the guidance of an experienced attorney, it can be done. We can help you understand your options when you contact us at 800-282-4731 to schedule a free consultation. We provide estate planning services throughout California, and we can meet with you in the comfort of your home.