You may be surprised to learn that the 2001 tax bill did not abolish the estate tax. The following chart shows how the new law increases the amount that can be passed free of federal estate tax. From reading this chart, you might conclude that from 2010 forward, estate planning will not involve tax planning. That is incorrect. If Congress does nothing between now and then, the estate tax will rise from the dead and we will be right where we are now.
Many people think of estate taxes as a tax on the rich.
However, due to real estate inflation in California, as well as a booming economy and stock market, many Californians need to consider estate taxes in planning their estate. If you own a house or a business in California, you should consider estate tax planning. Although financial professionals and attorneys promote many different vehicles for reducing estate taxes, all of these vehicles are variations on making gifts. If the client gives money away before death, generally the money does not count as being part of the estate and is not taxed. There are some exceptions to this rule, and you should contact an attorney or accountant to get the details.