Los Angeles has an extraordinary mystique on many different levels. It is the epicenter of the entertainment industry, and it is no secret that high-profile actors, directors, producers, and musicians can make enormous sums of money.
There are also many wealthy people in the sports industry who reside in Los Angeles County, but these famous celebrities are only part of the wealth equation here in our area. As the second biggest city in the United States, businesses that are located in L.A. are at the forefront of virtually every different industry, and people at the top of the food chain make a great deal of money.
Statistics indicate that there are more millionaires per capita in Los Angeles County than there are in any other county in the United States.
The fact is that $1 million does not go as far as it used to in our city, especially when you consider the price of real estate.
Estate Tax
When you are accumulating wealth, you may have certain goals in mind. You clearly want to enjoy your own life to the utmost, but after a certain point, you may start to think about what your money can do for your family after you are gone.
Before you start calculating how you’re going to distribute your wealth, you should stop to figure out how much will be left after you pass away if the federal estate tax is applied to the taxable portion of your estate.
You may think the estate tax is unfair because after all, your estate is comprised of what was left after you paid all kinds of taxes throughout your life. Many people would agree with this line of thinking, but unfortunately, there are enough legislators out there who do not agree, so the death tax is a fact of life.
We should point out the fact that there have been proposals floated over the years that would repeal the death tax, but so far, it is holding fast.
The federal estate tax could be applied on asset transfers to anyone other than your spouse. If you and your spouse are American citizens, you can utilize the unlimited marital deduction. This deduction allows for unlimited tax-free transfers between citizen spouses, and it extends to same-sex couples who are legally married.
The estate tax is only a factor for multimillionaires, because there is a credit or exclusion that can be used to transfer a certain amount tax-free before the estate tax would enter the picture. Each year there are inflation adjustments, so you will see slight fluctuations as the years pass, but the number stands at $5.45 million in 2016. The maximum rate of the federal estate tax is 40 percent.
We touched upon the value of real estate in Los Angeles County in a previous section. When you are determining the value of your estate, you have to include the value of your real property. Life insurance proceeds are also part of your estate for tax purposes.
However, there are estate tax efficiency strategies that can be implemented to ease the burden if you are one of the Los Angeles millionaires who is facing estate tax exposure. When it comes to your home, you could use a qualified personal residence trust to transfer the home to a beneficiary at a the tax discount.
Life insurance policies could be conveyed into an irrevocable life insurance trust for tax efficiency purposes.
These are two of the estate tax efficiency techniques that can be utilized, but there are many others. Family limited partnerships, grantor retained annuity trusts, measured gift giving, generation-skipping trusts, and charitable lead trusts can also provide tax benefits.
The ideal strategy will depend upon the situation. If you discuss your own unique position with a licensed estate planning attorney, your lawyer can explain your options to you and make recommendations.
Ultimately, you can go forward with an estate tax efficiency plan that keeps a maximum store of resources in your family.
Learn More About the Estate Tax
If you work hard and invest wisely, you deserve to enjoy the fruits of your labor. We pay income taxes, capital gains taxes, property taxes, sales tax, entertainment tax, hospitality tax, gasoline tax, and taxes on things like alcohol and tobacco. In spite of this, your death is also a taxable event in the eyes of the tax man.
You should certainly do everything that you can preserve your legacy. To learn more about tax efficiency strategies, download our in-depth special report. The report is free, and you can click this link to get your copy: Los Angeles Estate Tax Report.
To Schedule a Free Consultation
If you are interested in the possibility of working with our firm after learning these facts, please select our “Workshops” tab to RSVP for a free estate planning workshop. At that workshop you will be offered a free one-hour consultation with an attorney: https://collinslawgroup.comseminars/
- Who Will Administer My Estate If My Executor Cannot Serve? - July 30, 2021
- What You Should Consider When Creating a Trust - July 27, 2021
- How to Leave Assets for Your Minor Children in Your Estate Plan - July 21, 2021
