When it comes to windfalls of any kind, Uncle Sam usually has his hand out. But there are ways for Colorado residents to limit the taxes that heirs have to pay on any legacies they receive.
Unless an estate is valued at more than $5,300,000, federal law permits each person an exclusion for estate and gift taxes. However, if the deceased had begun dispensing with his or her property to the heirs during his or her life, the amounts of any gifts are considered part of this lifetime total.
A bit of good news is that heirs don't get hit with federal gift and estate taxes upon their receipt of legacies and assets. But there are costs associated with probate that will have to be taken care of. A legal professional who handles estate planning can suggest different strategies to reduce the costs of administering the estate.
If the deceased owned property in different states, ancillary probate must be initiated. Because assets are probated in two or more states, the costs associated with the probate rise. The attorney filing the probate can provide detailed information regarding the expenses.
The rules governing estate administration on both the federal and state levels are complex and are frequently adjusted. The best way to make sure that the process goes smoothly is to retain a legal professional who knows the ins and outs of the statutes governing estate administration and taxes. This will provide peace of mind, as the client will be doing everything legitimately and no penalties can be assessed to the heirs for running afoul of state or federal laws.
Source: The Dallas Morning News, "Minimize Taxes Upon Death" Trudy Turner, Jul. 10, 2014