Updates to Probate Rates in 2022

Updates to Probate Rates in 2022[1]

The year 2022 saw some major changes as far as dollar amounts related to a series of probate procedures. Changes were to begin on or after April 1, 2022. Not to worry, as they only affect the estates of those who died on or after that same date. Any probate matters related to deaths before April 1, 2022, will continue to adhere to the previously established probate rates.

Changes in Federal Estate and Gift Tax

Federal gift and estate taxes have both annual and lifetime exclusions. In 2021, the federal gift tax annual exclusion was $15,000. Now, that same exclusion is $16,000, essentially meanings that a person can gift up to $16,000 in 2022 per person tax-free without using up any of your lifetime exclusion number. As to that lifetime exclusion on federal gift tax and estate tax, the previous number what $11.7 million. Now, this has increased to a whopping $12.06 million. A bonus piece of information: this changes and combines for persons who are married to DOUBLE that amount or $23.4 million.

Why the change, in general? The federal government increases these amounts approximately every 3 years to keep up with inflation. This change is completely normal and expected, but it is extremely important to keep up with each new rate.

Probate Procedural Rate Increases

In addition to Estate and Gift Taxes, there are several increases to maximum values attributed to various procedural issues. For example, there is a new maximum gross value of estate that qualifies for small estate procedures. A state is considered “small” if it valued at below the maximum established rate. In 2021, the maximum was $166,250. The new maximum today in 2022, is $184,500.

Similarly, the new maximum value of real property that can be transferred using an affidavit went from $55,425 in 2021 to $61,500 in 2022. A transfer affidavit is a document which must be filed when real property is transferred from one party to another. If the property is worth more than $61,500, then the affidavit will not be the procedural method utilized to transfer the property.

As for salaries owed to the deceased that is excluded from the value of the estate, the value increased from $16,625 in 2021 to $18,450 in 2022. This confusing requirement is actually a safety net rather than an impediment to an estate. As it is sometimes unclear who an employer should give the deceased’s final paycheck to, it tends to be paid to either the deceased’s estate or the deceased’s surviving spouse. In 2022, depending on what that “final paycheck” would look like, up to $18,450 of it will not count toward the value of the estate and will therefore not tie it up in probate, rendering it untouchable for the foreseeable future. [2]

Additionally, under California Probate Code Section 13600, a spouse or domestic partner can claim the earnings of the deceased if they have the right to do so using a Declaration for Collection of Compensation Owed to Deceased Spouse or Registered Domestic Partner. The amount that may be claimed went from $16,625 in 201 to $18,450 in 2022, keeping it directly in line with the salary changes in the paragraph above.

Finally, the maximum value of a net estate that qualifies for a small estate set-aside increased by nearly $10,000 this year, rising from $85,900 in 2021 to $95,325 in 2022. A small estate set-aside is a simplified procedure to avoid a drawn-out probate in order to reserve an entire estate for the benefit of the surviving spouse and their minor children. As if it couldn’t get any more beneficial, the small estate set-aside does NOT include the value of the family home.  

Conclusion

Keep track of the new rates in order to ensure your clients can reap the maximum benefit from these new updated totals. As your clients are likely in a vulnerable position, it is important to assist them in utilizing these forms and benefits to the greatest extent possible. Schedule your FREE 30-Minute Consultation or call (855) 219-3333.

Written by Christie Campos, J.D.

[1] 2022 Updates for How to Probate an Estate in California | Nolo

[2] 2016_2_the_dear_departed-making_final_wage_payments_for_deceased_employees.pdf (littler.com)