How Does Probate Tax Work in California?
Updated: Jun 2
In California, you may or may not pay probate tax depending on the situation. The laws stipulate that assets owned by joint tenants, survivorship community property, IRA or life insurance policies, and assets held in trust are exempt from the probate process. Such assets pass by operation of law, meaning that they will not be subject to probate tax. If a property is subject to probate, how do you determine the amount of probate? How much do you pay as tax? What are other fees applicable? Here's a breakdown of those issues.
Is probate tax inheritance tax?
NO! California is one of the states that does not impose an inheritance tax. Probate tax is the fee you pay to facilitate the probate process.
But if each beneficiary has an estate above $11 million, the estate will be subject to estate tax. But the tax is not paid by the beneficiary; instead, it is paid by the estate.
How is the net taxable estate determined?
The net estate of a deceased is determined by performing an inventory of the assets. What about liabilities? Liabilities, like debts, are not included in determining the net value of the estate. Say a $100,000 mortgage is attached to a house valued at $200,000. The house's total value with regard to probate tax will be $200,000; debt cannot be used to offset the gross valuation of an asset.
Statutory probate fees
The law in California (§10810) provides a simple guideline on the tax payable depending on the estate's value. You will be required to part with a fee equivalent to 4% of the first $100,000 of the estate. Then you will be required to pay:
· 3% of the next $100,000.
· 2% of the next 800,000
· 1% of the next 9,000,000
· 0.5% of the next 15,000,000
NOTE: The law provides for both the attorney and personal representative. So if the personal representative elects to be paid, the fee will double. If the attorney is paid $4,000, the personal representative will receive an equal amount.
What are other fees applicable?
Petitioners are bound to pay court fees. The most expensive fee, a $435 fee for filing the petition, is paid in Nevada. In the entirety of the process, you will come across fees for certified court documents other miscellaneous fees.
The bottom line is that if the parties(beneficiaries) agree, the process will be cheaper and easier. It gets complicated and expensive when misunderstandings arise.
Seek professional help
Do you want your beneficiaries to avoid probate? Are you a beneficiary who wants the probate process to be smooth? If the answer is yes, our advice is simple; work with a qualified attorney. To avoid trust, you should create a trust; essentially, you should plan your estate. Contact…. Today. We are California-based legal professionals with a wealth of experience in estate planning and probate matters ready to serve you.