An estate tax taxes an inheritance when someone dies. It is the estate that pays the estate tax, not the heir or recipient. An estate tax is a percentage of the value of assets that are inherited.
Seventeen states and the District of Columbia have an estate or inheritance tax. Luckily, California is not one of them. There is currently no estate tax, inheritance tax, or generation skipping transfer tax in California for any person with a date of death as of January 1, 2005 or after. Likewise, there is no gift tax for any lifetime gifts made as of January 1, 2005 or after.
However, if the decedent passed prior to January 1, 2005, then the California estate tax, gift tax and generation skipping transfer tax must be considered. And if the decedent died prior to June 8, 1982, then the California Inheritance Tax must be considered.
The State Controller’s Office, Tax Administration Section, administers the Estate Tax, Inheritance Tax, and Gift Tax programs for the State of California (not the Franchise Tax Board, which deals with income tax).
The Economic Growth and Tax Relief Reconciliation Act of 2001 phased out the state death tax credit over a four (4) year period beginning January 1, 2002. Effective January 1, 2005, the state death tax credit has been eliminated.
The information below summarizes the filing requirements for Estate, Inheritance, and/or Gift Tax:
· For decedents that die on or after January 1, 2005, there is no requirement to file a California Estate Tax Return.
· For decedents that die on or after June 8, 1982, but before January 1, 2005, a California Estate Tax Return must be filed with the State Controller’s Office if a federal estate tax return (Form 706) is being filed with the Internal Revenue Service. See the chart below for the federal estate tax exemption amount that applied to each year to determine whether a federal estate tax return was required.
· For decedents that died prior to June 8, 1982, the State Controller’s Office will continue to collect the Inheritance Tax.
· For gifts made prior to June 8, 1982, the State Controller’s Office will continue to collect the Gift Tax.
· The California generation skipping transfer tax shall not apply to the generation-skipping transfers after December 31, 2004.
Thus, most decedents’ estates in California do not have to consider the estate, inheritance, gift, or generation-skipping transfer tax. However, if there is an estate that has not been administered where the person died before January 1, 2005, then you will have to comply with the requirements of the estate tax, inheritance tax, or generation-skipping transfer tax in California.