A new year is an excellent time for Colorado residents to take stock of their estate plans. Changes in federal tax laws can be evaluated to determine the potential impact on one's heirs. Additionally, this is an important time to make adjustments related to major life events that have occurred recently. In 2014, the federal government received nearly $13 billion in estate taxes, making closer scrutiny of one's plans a priority.
Colorado residents may benefit from learning more about the facts concerning estate taxes. The federal government taxes all gifts, generation-skipping transfers and estate taxes. Gifts that exceed specific limits may be taxable during someone's lifetime or after their death. Transfers made during the lifetime are taxed when they exceed the exemption limits for taxable gifts. Transfers that exceed exemption limits after death may be subject to estate taxes.
When parents die, their adult children not only must deal with their grief, but also tend to the practicalities of arranging their funerals and handling matters of their estates. Some Denver residents may be shocked to learn that one or both parents died heavily indebted.
Colorado residents with large estates may have questions about the $5 million federal estate tax exclusion and how it affects them. Because it doesn't affect the majority of residents, few may have even heard of it.
In 2011, Congress introduced a tentative tax planning device that eventually became a permanent part of the tax code due to an act passed in 2012. Dubbed "portability" by tax agents, the new law could provide for some big tax savings if correctly implemented in an estate plan.