Estate planning in California: what you need to know
Find out what the process is for estate planning in California and what you need to secure your estate for future generations in the Golden State.
Summary
Estate planning in California entails a number of fees, which can amount to between $900 and $6,000 overall.
California’s estate tax is 0%, making it an attractive state for wealthy families and individuals.
Knowing how much estate planning costs in California can help you plan ahead and ensure you have the finances to cover the expenses.
A financial advisor is best placed to help you manage your estate and ensure your finances are passed onto your beneficiaries most efficiently.
How much does estate planning cost in California?
Several costs are associated with estate planning in California.
The total amount for all necessary documents and procedures can vary drastically between $900 and $6,000. This amount will depend on the number of documents in your plan, the time you spend executing your estate in court, and your attorney’s fees.
Californian estate planning packages are higher on average than in other states, with Texas and Florida both offering similar packages for under $5,000.
Something that separates California estate planning costs from other states is that Californian attorneys charge an additional percentage-based fee for the gross value of the assets being held in the client’s estate. This is what drives up the cost of estate planning in California.
How does California estate tax work?
Estate tax is imposed when transferring a deceased person’s estate to their heirs. The amount depends on the size of the estate, the value of the assets it contains, and where the estate itself is based.
If your estate is based in California, you will not pay estate tax. This makes California a popular state to live in for high-earning individuals who want to protect their wealth. However, if the estate is worth more than the federal tax exemption, you will still need to pay federal taxes.
Investing in life insurance and utilizing marital deductions can help reduce your California estate tax rate from a federal perspective.
How does estate planning for blended families work in California?
The transfer of assets after death changes when the heirs are stepchildren.
In California, unlike biological children, stepchildren do not have automatic inheritance rights — they must be specifically included in legally binding documents such as a will to receive a valid inheritance from their stepparent.
How does tax planning for single parents work in California?
Estate planning for single parents is just as crucial for a successful estate inheritance as it is for joint parents — if not more so.
If you are a single parent in California, you will need an explicit last will and testament that outlines what will happen to your estate and who you nominate as your child’s legal guardian.
Without the latter, issues of the child’s custody can arise.
How does tax planning for married couples work in California?
Estate planning for married couples typically involves filing taxes together for convenience and tax advantages. This is no different in California.
As per California’s inheritance laws, each spouse automatically becomes the owner of half of their property, including all the assets they received while married. Collective debt is also shared between spouses.
If you are married, you may also be eligible for estate tax deductions in California.
How does probate work in California?
Probate is the process of administering a deceased person’s estate.
California probate laws dictate that any assets that do not meet simple transfer criteria (i.e., assets that are not clearly outlined in a will or do not have a listed beneficiary) must go through a formal probate process.
A formal probate process can take between 9 and 18 months, and it must occur within one year of the deceased’s passing. If you don’t file probate, the assets in question will be frozen, and the executor can face criminal charges, civil penalties, and financial liabilities.
What are the final arrangement and organ donation laws in California?
If you are registered as an organ donor in California, your family cannot override your decision after your death.
Even if you are not registered but have stated your wishes to become an organ donor in your advanced directives, the arrangement must be respected.
Your California estate planning checklist
Having a formal estate plan is crucial for everyone, especially if you own a large estate or have many assets in your name.
Here is a California estate planning checklist to help you create an effective estate plan that is in alignment with Californian laws.
Last will and testament
Like most states, Californian last will and testaments need to include specific details of beneficiaries, assets, and wishes so that there is clarity about distribution for your executor.
Healthcare documentation
Healthcare documentation refers to a living will, HIPAA authorization form, and powers of attorney. These healthcare documents clarify what your final wishes are should you become incapacitated before your death in the state of California.
Trusts
The best type of trust to use in California is an irrevocable trust. It allows you to minimize estate tax, provide for family members under 18 years old, and protect assets from creditors.
Power of attorney
The California Statutory Power of Attorney enables you to appoint a person you trust to manage some of all of your estate in the event of your death. You can specify the amount of time that person has control over your affairs.
Pre-need guardian
Adding pre-need guardianship to your last will and testament in California means you have someone who will take care of your personal and property affairs if you’re unable to.
Get expert financial advice
Estate planning in California is known for being wealth-friendly and straightforward. With its 0% tax rate for all estates below the federal tax exemption, wrapping up your estate in California can be a simple process with the right documentation and legal support.
Find out more about estate planning in California by getting matched with a financial advisor through Unbiased.
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