You have a substantial estate, and you know that passing it on to your heirs is something that could get complicated. You want to give them the largest possible percentage of your assets. This is money that you’ve worked very hard for in your life and you want it to stay in your family.
You also know that some of the money in your estate is going to have to go to pay debts and taxes. With that in mind, you may be wondering if there’s an estate tax in Colorado.
There is no estate tax
First and foremost, you will be glad to learn that there is no estate tax at the state level in Colorado. The state has had laws like this in the past, but it does not at this time.
However, an estate tax means that your estate itself is taxed initially. An inheritance tax, though sometimes referenced as if it is the same, is actually distinctly different. It means that the money is taxed once it is inherited by your heirs.
In Colorado, there is also no inheritance tax at the state level. But there is a federal inheritance tax. So you still do need to think about this if you have assets that are in excess of $12.06 million. That is slightly higher than last year, when the upper limit was $11.7 million. As of 2022, it has jumped over the $12 million-dollar mark.
If your estate is large enough that you’re worried about these federal taxes, there are some tactics that you can use to reduce the total you have to pay. For instance, some people choose to put money in trusts, give money to charity or give away gifts every year to start transferring their inheritance now.
What other taxes may you need to pay?
Even if you don’t have to pay an inheritance tax or an estate tax, there are still taxes that will need to be addressed by your estate. Even just your property taxes may need to be paid by your estate executor. This person also handles any outstanding debts that you have at the time of your passing.
Creating your estate plan
Thinking about taxes and debts is just one thing that you want to do as you set up your estate plan. Be sure you know about all of the legal steps you need to take to get it in place so that it is there for your family when they need it the most.