When a person decides to begin the estate planning process, one of the first tasks is taking a general inventory of their estate. But, what assets are included in one's estate under California law?
In California, a person's estate includes everything that a person owns. The estate includes everything from bank accounts to retirement plans to vehicles, furniture and jewelry. It includes real estate and investment accounts. It includes life insurance policies the person owns. The estate also includes some payments that are due to the person, but not yet received at the time of their death, such as federal or state tax refunds.
The value of assets in the estate is the fair market value of each asset, less any debt owed on the asset. Thus, the value of one's home is the home's equity: its value less the amount owed on the mortgage.
Placing a total value on the estate is necessary to determine whether the estate will be subject to federal estate tax. For people who die in 2016, if the total value of the estate is not more than $5.45 million, the estate will not be subject to federal estate tax.
It is important to remember, however, that the exemption is actually a combined gift and estate tax exemption. As a result, for tax purposes, the value of the estate includes taxable gifts made during the person's lifetime.
A knowledgeable California estate planning attorney can help a client value their estate and determine whether estate taxes are likely to be an issue. If they are, the attorney can advise the client on strategies to avoid unnecessary taxation.
Source: Calbar.Ca.gov, "Do I Need Estate Planning?," accessed on April 3, 2016