The federal estate tax is a tax on your right to transfer property at your death—whether by will or intestate succession (transfer to heirs when a person dies without a will, as provided by state statute). The estate tax consists of an accounting of everything you own or have certain interests in on the date of your death.
The fair market value of these items is used—not necessarily what you paid for them or what their values were when you acquired them. The total of all your assets at death is your "gross estate." The property included in your gross estate may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.
In California, as in the rest of the United States, the federal estate tax applies to the transfer of property at death. The tax is based on the fair market value of the decedent's assets at the time of death, rather than their original purchase price or value at acquisition. This includes a wide range of assets such as cash, securities, real estate, insurance, trusts, annuities, and business interests. As of the knowledge cutoff in 2023, the federal estate tax exemption is significantly high, meaning that only estates exceeding a certain value are subject to the tax. The exact exemption amount is adjusted annually for inflation. Estates that are valued below this exemption amount are not required to pay federal estate tax. It's important to note that California does not impose a state-level estate tax, so the federal rules are the primary concern for California residents in terms of estate tax liability.
