The California State Death Tax Laws

Death Tax LawsBy Toma Franklin, Staff Writer

Depending on whom you've asked you have undoubtedly heard conflicting reports regarding the status of the California State Death Tax, so you should know, first of all, that this tax is no longer enforced in the state of California, but beneficiaries are still responsible for federal estate taxes. Death tax rules and regulations vary widely by state, so if you have recently relocated or if you began your estate planning process while living in another state, this article can help you make sense of the California Death Tax and what it will mean to you and your beneficiaries in the future.

The California State Death Taxes

Question:

What exactly are death taxes?

Answer:

Death taxes (also known as estate or inheritance taxes) are additional taxes, separate from any probate-levied taxes, and are paid on transfers of property after death.

Question:

I've heard that there are actually different types of California State Death Taxes. Is this true, and if so, and what are the different types?

Answer:

You heard correctly, but the law has recently been modified to change this. In California, until about 2005, there were two different types of Death Taxes: The federal estate tax, and the state death tax also known as the "pick-up tax, "which meant that the state took more of a share of the federal tax due beneficiaries of the deceased, but also meant that death taxes overall were usually lower. With the new law, the state death tax has been eliminated and a deduction is now allowed to be taken against the federal estate tax for any death taxes that may be imposed from another state. Depending on the amount of "real property" or assets that you own in total from all states, your beneficiaries could face a higher or lower overall death tax

Question:

Will my beneficiaries still be required to fill out a California Estate Tax Return for decedents?

Answer:

No. Because the changes in 2005 effectively eliminated the California State Death Tax, the California state death tax credit is no longer allowed. Therefore, you (or your beneficiaries) are no longer required to fill out a California Estate Death Tax Return form for submission to the IRS.

Question:

Where should I (or my beneficiaries) submit payment for an estate tax due?

Answer:

Payment should be made by check, payable to the State Treasurer, to the following address: State Controller's Office, Division of Collections, Bureau of Tax Administration, P. O. Box 942850, Sacramento, CA 94250-5880.

Question:

What if I need to file an extension?

Answer:

There is no designated form for an extension, but you may submit a photocopy of the Extension of Time to File a Return and/or Pay U. S. Estate (and Generation-Skipping Transfer) Taxes form, (Form 4768) to the State Controller's Office. For further information about your California Estate Tax options and responsibilities, you should make an appointment with your certified financial planning advisor, who will be able to offer advice specific to your situation