Estate planning in Denver not only includes deciding how your estate will be distributed upon your death; it is also important to know how the estate and/or inheritance taxes will affect your loved ones. Just like there are both federal and state income taxes, there are also federal and state estate taxes.
Federal Estate Tax Laws
Unless you inherit a very large estate, federal estate taxes may not be an issue in 2016: The estate will be exempt from federal estate taxes if the estate is valued at:
- Under $5.45 million in assets (for a single person)
- Under $10.90 million in assets (for a married couple)
State Estate Tax Laws
State estate taxes are another story. There are still 16 states and the District of Columbia that have estate taxes that kick in for estates valued around $1 million or more. Hawaii and Delaware match the Federal exemption threshold at $5.45 million, meaning the estate is exempt from taxes if the value of the estate falls below this number.
Taxable Estate Assets
There are a variety of assets that can be taxable (these vary from state-to-state and from estate-to-estate) some of which include:
- Life insurance proceeds
- Retirement accounts
- Home values
There are also 7 states that impose an inheritance tax, with Nebraska, Kentucky and New Jersey having the highest rates. There are exemptions for inheritance taxes – these differ based on the inheritor’s relationship to the deceased.
In fact, New Jersey has the lowest exemption threshold for state estate taxes ($675,000) and they also enforce the inheritance tax, so inheritors may have to pay out a larger tax amount.
Another Reason to Love Colorado: Lower Estate Taxes, No Inheritance Tax
Luckily, Colorado is among the growing number of states that are working hard to encourage retirees to stay in (or move to) their states by providing a break on estate taxes. These states have increased the number of estate tax exemptions from state estate taxes so their loved ones will not have to pay high estate and/or inheritance taxes. There is no inheritance tax in Colorado.
As with most legal affairs, state estate taxes can be complicated to understand. The attorneys at The Brown Law Firm, LLC can help you understand what estate assets can be taxed in Colorado. Contact us today at (303) 339-3750 or send us a message online to start the conversation.