Death and Taxes in Northern California

James Zakasky
An estate attorney who goes beyond drafting wills and creating trusts

Northern California Tax Issues and Estates

Do I still have to pay taxes if I Die?

In California if the dead guys estate is larger than $5.45 Million then any non-spouse will pay 40% tax on the overage amount. For Example, if John Doe dies with 10 Million in his estate the tax that his son Jim Doe, the only heir to his estate will be calculated as follows:

Estate worth:                                     10,000,000.00

2016 IRS Exemption amount           <5,450,000.00>

Over Amount                                     4,550,000.00

Tax @ 40%                                          1,800,000.00

Wow that’s a lot of zeros but a problem that very few of us would not mind having. The good news is that  California does not have a State Inheritance tax so if your thinking of moving you may want to look at our State Inheritance tables on this page.

The Gift Tax

If someone is receiving income in the form of non-taxable gifts, any gifts made within the last thre years of that persons death will come back to haunt the estate in the form of estate tax. If the beneficiary of a trust was receiving 100,000.00 a year for the last thre years prior to his death that amount of money will go back into the estate and be taxed at the 40% rate. For Example of Jim Doe was gifted the 300K over three years the estate will be taxed as follows:

Estate Worth                                      2,000,000.00

Total gifts last three years                     300,000.00

Tax @ 40%                                               120,000.00

Any US citizen can gift up to 14,000.00 per individual tax free and it is a great way to reduce your overall tax burden but it can be tricky following the death of the donator. Always watch out for the governmental look back period that is usually three years.

Final Income Tax Return of the Dead Guy

Federal Income Tax rules are created equal for both the living and the dead. So the question of whether a dead guy has to file a final return is based on the same rules if he were living.  See rough tables below:

Tax Payer 2012                                                                                                                  Minimum Income

Single under 65                                                                                                                         $9750.00

Single over 65                                                                                                                           $11,200.00

Married under 65                                                                                                                      $19,500.00

Married over 65                                                                                                                        $20,650.00

Married over 65 Both spouses                                                                                                  $21,800.00

More resources:

https://taxfoundation.org/

https://www.irs.gov/pub/irs-pdf/p559.pdf

http://www.sco.ca.gov/ardtax_estate_tax.html

 

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