When you first hear the term “estate planning”, you may assume that this is what wealthy people do when trying to decide who should inherit the numerous properties they have. Well, while you wouldn’t be technically wrong, there is one thing that you absolutely need to be aware of. This type of planning is certainly not only for the wealthy. As long as you have any assets whatsoever, as well as people that you want to leave those assets to, you will benefit from this particular procedure.
Here’s the concept defined simply: https://en.wikipedia.org/wiki/Estate_planning
There is a chance that you are not completely familiar with the estate planning concept and that you don’t even know what it precisely entails. If that is the case, then you will definitely need to do a lot of learning. Apart from learning the basics, you will also need to be aware of the fact that laws tend to change and that you should be up to date with all the changes in your specific state, so as to know what to do and how to properly plan everything.
If you live in California, for example, you need to be aware of all the rules and the laws that you will have to follow when planning your estate. Of course, you will also need to become acquainted with any changes that you can expect in 2023, because you don’t want to make some planning mistakes that you will afterwards regret. Given all of that, here is what we are going to do right now.
First of all, I will get you familiar with estate planning in general, because you need to know precisely what this process entails before you can start learning about those rules. Then, we will also check out those rules in California that you should be aware of in 2023, meaning that you’ll get up to date and learn about any changes that might have happened. So, without any more ado, let us begin with the first order of business.
What Is Estate Planning?
The first order of business, of course, consists of us explaining specifically what estate planning is. After all, it wouldn’t be fair of us to start talking about the rules if you are not even familiar with this process in the first place. If you view website and have a look at what professionals have to say about this, you will quickly realize that estate planning is the process of preparing documents and tasks that will serve to manage your specific asset base in the event of your death.
While nobody likes thinking about death, the truth is that we need to look it right in the eyes if we want to create the perfect plan. This may be quite uncomfortable, but the process will be a bit easier when you get the right professionals to guide you through everything and help you complete the plan successfully. The plan will, of course, include the bequest of your assets, as well as the settlement of estate taxes. This can be quite a complex process, which is precisely why hiring professional attorneys to help you out is the best thing to do.
Rules In California To Be Aware Of In 2023
As I have previously mentioned, there are certain rules that you will need to be aware of when planning your estate. You should look into the specific rules for your particular state, because those can differ from one place to another. If you live in California, then you can continue reading to get familiar with some of the rules and check if any changes have been scheduled for 2023. I have explained already why staying up to date and being informed about those changes is important.
- Estate Taxes
Estate taxes are first on the list of numbers that you’ll need to worry about when creating the plan. Basically, this is a tax charged on the value of a person’s estate once it reaches a specific amount after that person passes away. People call it a death tax because of that. In 2023, the threshold is $12.92m , meaning that your property won’t owe any federal taxes if its value is below that number. Some states have a different threshold, but $12.92m is the number that you should keep in mind if you live in California.
- Inheritance Taxes
You should also be aware of inheritance taxes when planning your estate. The good news is that only a few states collect an inheritance tax, and that doesn’t include California. So, if you live in that state, you will definitely not have to worry about inheritance taxes at all.
- Homestead Exemption
There has recently been an increase in the homestead exemption limit in California. It ranges from $300.000 to $600.000 with the actual amount depending on the median home sale price for the previous year, provided that it is within that particular range. If you don’t really understand how this works in practice, let me quickly explain it for you. The minimum exemption is $300.000, and the maximum is $600.000, but your specific limit will be the last year’s median home sale price for your specific country. If this all sounds too confusing, you can always talk to an attorney to get the explanations you need.
- Small Estate Threshold
Small estate threshold is completely state specific, meaning that you will need to get properly informed about the rules in the particular state you live in. Once again, if you live in California, here is what you should know. This threshold in California is actually any real property regardless of the value, or a $184,500 gross estate value. The small estate threshold will remain the same until 2025, which means that you won’t have to check for changes for the next couple of years. California is likely to always have the highest threshold, but you shouldn’t rely on assumptions, and you should always check this when trying to create the perfect plan.