Whether or not you believe Chief Economic Advisor Gary Cohn said “Only Morons Pay the Estate Tax,” estate tax is a real problem for many Californians, especially home and business owners. It is something to prepare for ahead of time.
Imagine your parent has a family farm or a successful restaurant or small business and a home, together valued at $10 million. The estate tax would take $1.8 million of that, as this year the individual estate tax is 40% for estates worth over 5.49 million. With almost $2 million going to the state, many families are forced to choose. Do you sell the business? The family home? For many households, it is like having a leg knocked out from under them, and now all competing companies have to do is lean on them.
There are ways to avoid state tax, but many require years of careful planning. Most people who pay the estate tax aren’t morons; they were just caught unprepared. Don’t get caught.