If you’re working on estate planning, you may be nervous that you’ll leave your heirs with high estate taxes. Creating a plan that allows you to pass on your assets while minimizing these taxes can give your loved ones peace of mind.
Working with a Colorado estate tax attorney can help you manage your tax liability and protect your loved one’s inheritance.
What Are Estate Taxes?
When someone passes away and leaves an inheritance to their loved ones, their estate may be required to pay taxes on the value of the estate. In 2024, a single person’s estate can be worth up to $13.61 million before it triggers estate taxes. The IRS doubles this limit for couples.
Ways to Minimize Estate Taxes
A probate attorney in Colorado can help value and distribute assets to minimize estate taxes. A few strategies they may use include the following.
Provide Family Gifts
Gifts to various family members are tax-free, with certain restrictions. A tax-free gift to a family member can be up to $18,000 for a single person or double that for a married couple filing jointly. Your estate tax planning counsel in Colorado can help ensure you don’t go above any limits.
Utilize Charitable Donations
Similarly, you could choose to make charitable donations to reduce your assets — or have an estate tax lawyer in Colorado help you create a trust to do so.
A charitable lead trust (CLT) puts assets into a trust and then donates them to charity. When you die, the leftover value of this trust is transferred to your beneficiaries.
A charitable remainder trust (CRT) is similar but puts stocks or similar assets into the trust instead. This allows you to continue earning from that asset even while it is in the trust. This also avoids capital gains on those assets.
Create an Irrevocable Trust
An irrevocable trust is a way to transfer assets from your estate to someone else. The assets within this trust are not considered when totaling up the value of your estate. It’s important to note that with an irrevocable trust, you cannot make future changes without the approval of the beneficiary, so work with your Colorado estate tax attorney carefully.
Set Up a Family Limited Partnership
If you want to pass on a business to a beneficiary, establish a family-limited partnership. This means creating a business where you are the general partner and in control of the business, and your family members are limited partners.
Use a Qualified Personal Residence Trust
Another trust your tax planning lawyer in Colorado can help you form is a qualified personal residence trust (QPRT). With this, ownership of your entire home is transferred to the trust, which prevents it from being counted as part of your estate.
Reduce Pre-Tax Distributions
If you have a traditional 401(k) or IRA, you may want to try to reduce the pre-tax portion. Transferring the money into an inherited IRA or converting some of your funds into a Roth IRA will allow your loved ones to reduce their tax bill.
Since doing this could impact your current finances, be sure to consult with a Colorado inheritance tax lawyer first.
Talk to a Colorado Estate Tax Attorney About Your Plans
While there are many ways to minimize estate taxes for your heirs, they will vary from situation to situation. Your Colorado estate tax attorney can help you work through your exact situation and determine what you should do next.
If you want to leave your loved ones with the maximum inheritance possible, our Colorado estate planning attorneys can help. Call Grant & Associates Law in Greeley, CO, at (970) 356-5666 to begin.