Denver estate tax attorney

Thoughtful planning yields tax savings. At Colorado Estate Matters, our skilled attorney focuses on estate planning and can help you keep as much money in your pocket as possible. Give us a call today at (303) 713-9147 to speak with a Denver estate tax lawyer and schedule your free case consultation.

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What is an estate tax?

An estate tax is a tax on estates over a certain amount that’s adjusted annually for inflation and is subject to changes based on legislation.

In 2023, the federal estate tax exemption is $12.92 million for individuals and $25.84 million for married couples. On behalf of the surviving spouse, the estate’s representative may elect “portability” of the deceased spouse’s unused exemptions to increase the value of the estate that’s not subject to estate tax.

Difference between estate tax and inheritance tax

The main difference between an inheritance tax and an estate tax is who pays them.

Estate taxes are levied by the federal or state government based on the estate’s value, while an inheritance tax is paid by the heir(s) based on the taxation rate in the state where they live – not the state where the decedent lived.

Is there an estate or inheritance tax in Colorado?

There’s currently no Colorado estate or inheritance tax. If you own real estate in another state, it may be subject to that state’s estate or inheritance tax with differing threshold amounts and tax rates.

Importance of estate tax planning

Estate tax planning involves creating legal protections for assets, including real estate, investments and accounts, and other items of value to reduce the amount of tax an estate pays.

Because estate taxes are calculated on the net value of the estate once debts, mortgages, and other deductions are applied, it’s important to make the value of the estate as small as possible for tax purposes.

Certain estate tax planning methods, like creating a trust or family partnerships, can protect specific assets so they aren’t considered part of the estate but are still accessible to the beneficiaries. Other kinds of estate tax planning include transferring assets in a way that doesn’t require filing an estate tax return.

Estate tax planning strategies

Your Denver estate tax attorney with Colorado Estate Matters may use one or more of the following estate tax planning strategies to help you meet those goals and preserve as much of your estate as possible for your heirs:

IRA distributions
A charitable trust
Credit and Marital Shelter trusts
Irrevocable life insurance trusts
Foreign trusts
Family Limited Partnership (FLP) or Family Limited Liability Corporation (family LLC)

The exemptions for estate planning change annually. If you don’t know the threshold for each exemption or which exemptions you’re eligible for, your estate may end up owing hefty taxes, reducing the amount your heirs receive. If you have extensive business interest or property, then estate tax planning strategies can keep the bulk of their value intact.

Timing and filing requirements for estate tax returns

Federal estate tax returns must be filed within nine months of the deceased’s death, although the estate administrator may seek a six-month extension.

In Colorado, if the estate or trust was administered in Colorado with an income source in Colorado must file a Colorado Fiduciary Income Tax Return if it has a Colorado tax liability or is required to file a federal income tax return. These returns are due 3.5 months after the end of the fiscal year or by April 15th for calendar year filing. A six-month extension may be obtained for calendar year filers.

What is a gift tax & what is the amount in Denver?

Under current federal tax law, a person may gift a certain amount to recipients tax-free without using their lifetime gift and estate tax exemptions.

In 2023, the amount is $17,000 per recipient, and married couples can give $34,000 per recipient. This amount is indexed for inflation, and all gifts must be of a “present interest” to qualify (i.e., the immediate use and enjoyment of the recipient must not be deferred in any way.)

Gifts above this amount are reportable and will count against your overall lifetime (and at death) limit. No tax is payable until you exceed this limit. The limit changes annually; for 2023, it’s $12.92 million for single filers and $25.84 million for married filers. As Colorado has no gift tax, only the federal limits apply.

For all practical purposes, you can give as much as you want, and there will be no tax payable, although there may be a reporting requirement if you exceed the annual amount per recipient.

Though the recipient won’t be subject to any gift tax, you need to take into account the issue of “cost basis” – when you give a gift, the cost basis you have in the property or item being transferred goes with the gift and becomes the cost basis for that item by the recipient whenever it is sold. Cash has no basis.

Estate tax planning for business owners

Small business owners or proprietors of a family business have probably thought about who will take over the business when they die, but business succession planning goes beyond simply deciding who’s in charge next.

Without the right legal framework, your wishes for business succession could be in jeopardy. Worse, without estate tax planning for business owners, the business assets could be subject to heavy taxes, which could mean that small businesses end up closing.

Business owners can create estate tax plans for their business or business interests, such as their share of a partnership agreement or an LLC.

Our Denver estate tax attorneys help create protections that ensure that a business keeps running after the death or incapacitation of the owner. For example, we can help you create contracts and buy-sell agreements that are triggered by specific events listed in the contract (such as the death of one of the business owners).

Our business estate tax planning services include:

Creating a business estate plan, including a will for running or selling the business
Tax planning for the business so business assets aren’t mingled with personal assets
Create strategies for minimizing inheritance and estate taxes on the business
Create a succession plan for the business

How to avoid estate tax

There are several ways to avoid paying estate taxes; we can help you determine which is best for your situation:

Give gifts – you can give portions of your estate to loved ones before you pass and avoid taxes if the gift is under the threshold for taxation
Create an Irrevocable Life Insurance Trust
Transfer some of your assets to charity by setting up a charitable lead trust (CLT) or a charitable remainder trust (CRT)
Create a Family Limited Partnership
Draft a Qualified Personal Residence Trust for your home

We can help you with any or all of these strategies, depending on your wishes.

Estate tax compliance

Failure to file and pay estate taxes correctly and on time can have serious repercussions — fines into the thousands are common. In some cases, the IRS may even seize estate assets to cover taxes owed. Our attorneys are diligent about meeting all compliance requirements for estate tax preparation, filing, and payment.

Benefits of hiring an estate tax lawyer

Our team keeps up-to-date with any changes to the inheritance and estate tax structures at the state and federal levels. We review changes in legislation and advise our clients on how these changes may impact their estate plans.

A savvy estate tax lawyer helps you understand the tax implications of certain personal or business financial decisions you make. They also create personalized business or personal estate tax planning strategies that help you provide for your heirs in the way you wish.

Get in touch with a Denver estate tax attorney

At Colorado Estate Matters Ltd., we’re dedicated to serving our clients to meet their financial goals and needs. Call (303) 713-9147 to speak with an estate planning attorney in Denver today to learn how we can serve you.

What is probate in Colorado?

Probate in Colorado is the legal process by which a deceased person’s assets are distributed and their debts are paid under court supervision.

When is probate necessary in Colorado?

Probate is typically required when a person dies with assets solely in their name, and those assets exceed a certain value, or there’s any real estate. The threshold amount changes over time, so checking the current limits is essential.

How do I start the probate process in Colorado?

To initiate probate in Colorado, you need to determine if formal probate is required, and then file an Application or a Petition (as well as the necessary ancillary documents) with the appropriate court, depending on the circumstances.

What assets are subject to probate in Colorado?

Generally, assets that are solely owned by the deceased, such as real estate, bank accounts, and personal property, are subject to probate. Jointly owned assets with rights of survivorship, assets held in a trust, and assets with designated beneficiaries typically bypass probate.

How long does the probate process take in Colorado?

The duration of probate in Colorado can vary depending on the complexity of the estate and any disputes that may arise. Often it takes a year or more to complete.

What are the costs associated with probate in Colorado?

Probate costs in Colorado can include court fees, attorney fees, personal representative fees, and other administrative expenses. These costs can vary based on the size and complexity of the estate.

Can I avoid probate in Colorado?

Yes, there are strategies to avoid probate in Colorado, such as creating a revocable living trust, using beneficiary designations on assets like life insurance policies and retirement accounts, and jointly owning property with rights of survivorship.

What are the rights and responsibilities of a personal representative in Colorado?

The personal representative (executor or administrator) is responsible for managing the estate, paying certain debts and taxes, and distributing assets to beneficiaries in accordance with the law and the deceased person’s will (if one exists).

How are disputes handled in Colorado probate cases?

Disputes in Colorado probate cases can be resolved through mediation, negotiation, or litigation in court if necessary. Common disputes may involve the validity of the will, claims by creditors, or disagreements among beneficiaries.

Is estate tax a concern in Colorado probate?

Colorado does not have a state-level estate tax, but federal estate tax may apply to larger estates. It’s important to consider federal tax implications when dealing with an estate.