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Death and taxes

June 13, 2017


Benjamin Franklin famously said there are only two things certain in life: death and taxes. When it comes to income taxes, he was right (ask Wesley Snipes). But when it comes to estate taxes, he was a little off. (Just to be clear, income tax is a separate issue from estate tax.) 


When someone passes away, everything that person owned is lumped into a conceptual pot called an estate, which is just legal-speak for "everything the guy owned." Luckily, California doesn't assess an estate tax at the state level. But the IRS does at the federal level. However, very few estates will ever have to pay any federal estate taxes. Why?


Federal estate tax threshold. For someone passing away in 2017, no estate tax will be due unless the estate was worth more than $5.49M. The reality is that most people won't have an estate worth this much, so estate tax planning is not really something that most people need to worry about.


For those few that exceed the threshold. Some fortunate people out there are already worth more than $5.49M. For them, smart tax planning can result in tremendous tax savings for their beneficiaries, as the estate tax rate can be as high as 40%. There are a variety of tax planning measures one can take. For a discussion of one of those options -- portability -- please read this article.



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