Taxes on the transfer of property upon your death take a variety of forms. The federal law in this area has changed over the years, and state law differs from state to state. The federal government still imposes an Estate tax on property transferred upon death, but the exemption amount (amount that can be transferred that is exempt from tax) is generous. One can currently give away up to $5.43 million dollars (in 2015) at death without paying a federal estate tax. Furthermore, the exemption amount is combined between lifetime gifts and gifts at death. One can give away a combined $5.43 million dollars during life and at death, without imposition of the federal Estate tax. Spouses can give away a combined $10.7 million between them, although certain tax elections must be made to take advantage of the larger combined amount.
Colorado does not have a separate estate or gift tax. But other states do, and if you own property out of state, consideration for that state’s estate and gift tax laws should be given. The “Death tax” is generally synonymous with Inheritance tax. While the Estate tax is imposed on the deceased’s estate, Death tax or Inheritance tax is imposed on the beneficiary of the estate. Colorado does not have a Death or Inheritance tax, but again, other states do. When clients move from other states, or have been consulting with family in other states, or currently own property in other states—they often arrive at our office with questions and even confusion about the state of taxation in Colorado and on a federal level. While this is a complex subject and some clients need complex planning to navigate the inconsistencies among states, often just a discussion and explanation eliminates concern.
Current information on state death taxes can be found here: http://www.actec.org/public/Documents/Studies/Fox-2015-State-Death-Tax-Chart-Revised-August-31-2015.pdf. The publication is provided by the American College of Trust and Estate Counsel. If you have questions about Estate tax, Gift tax, Death tax, or Inheritance tax, or if you simply need to address your estate planning in general, please call our Trusts and Estates attorney Katie James at 303-688-3045.