Out of the Frying Pan into the Fire
In the midst of all of the talk about potential federal estate tax repeal, many individuals have elected to postpone further estate planning trusting that the repeal will occur. However, if you are a California citizen it appears that no such hope will exist. Back in February of this year, California State Senator Scott Weiner, proposed a ballot measure that would provide for a California estate tax if the federal estate tax is repealed. This tax would be equal to the federal estate tax that would have otherwise been paid by a California resident decedent. Subsequently, on March 23rd of this year, Senator Weiner amended this Bill to provide for a special election of California voters to implement his proposal with respect to the estate tax.
Although California citizens voted in 1982 to prohibit any estate or inheritance tax, the proposed measure put forth by Senator Weiner would repeal that prohibition and establish a California estate and gift tax essentially identically to that now found in the current Internal Revenue Code.
Although this will require voter approval, history shows that the majority of voters favor increased taxes on the perceived rich. Therefore, it appears that there is a very viable reality that California’s wealthiest residents may end up with a substantial estate tax. Of course, this then introduces the question ̶ will other states follow California’s lead in this area?
The bottom line is that one still has to do estate planning not only for purposes of testamentary disposition and avoiding probate, but, also giving their estate the flexibility necessary to avoid estate taxes.