We all spend time every year trying our best to minimize our tax liability. Do we also have to worry about taxes on our estate after we pass away or in the event we will be inheriting? The answer will depend on the value of the estate, and you should always discuss your concerns directly with an experienced estate planning lawyer in Colorado who can evaluate your specific situation.
The first bit of good news is that there is no Colorado estate tax. In fact, only twelve states in the U.S. have state-level estate taxes, and Colorado is not one of them. There is also no Colorado inheritance tax or gift tax imposed under state law. However, some estates might still be subject to federal estate taxes, so it is important to understand how estate taxes work and whether they might apply to your estate.
What is an Estate Tax?
The United States estate tax is a tax levy imposed when certain estates are transferred after the estate owner’s death. The tax applies whether the property is transferred through a will or according to Colorado intestacy laws. While federal law still imposes estate taxes on certain estates, very few estates are taxed due to high exemption values. Only about two of every 1,000 people who pass away – or 0.2 percent – have to pay any taxes at all.
The following are the federal estate tax exemptions for 2020:
You do not have to pay taxes if your individual estate is valued at less than $11.58 million
Married couples can exempt up to $23.16 million
The annual gift exemption is $15,000
Only the very wealthy have to worry about estate taxes, though the right estate planning lawyer can help those who might be taxed plan ahead to minimize or eliminate their estate tax liability.
While you might not have to worry about estate taxes this year, the increased exemptions expire in 2025, and there is no guarantee that Congress will maintain the high exemptions. For this reason, it is not a bad idea to consider planning ahead even if you are within the exemptions this year.
Further, keep in mind that 12 states still have estate taxes and six have inheritance taxes. If a loved one passes away in one of these states, the state might tax their property – either before or after you receive your inheritance. It cannot hurt to encourage your loved ones to discuss estate tax planning with a trusted attorney.
Contact a Colorado Estate Planning Attorney for More Information
At Brestel Bucar, we help clients plan for the future to protect their hard-earned property, as well as their beneficiaries. You worked hard to build your estate, and the last thing you want is for a large portion of it to go to the IRS. Even though there is no Colorado estate tax, there are still tax-related concerns for many people when it comes to estate planning. Contact us to schedule a consultation with a member of our legal team today.