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Does the New Estate and Gift Tax Bill Affect My Colorado Estate Plan?

Over time, the federal laws surrounding estate and gift taxes have been altered—often with the change in administration. This past month, Senator Bernie Sanders introduced his estate and gift tax reform legislation to lower the estate tax exemption to $3,500,000. For Coloradans with an estate plan in place, this may affect them. While this bill has not been passed yet, it is important for Coloradans to contact their estate planning attorneys and get ahead of the curve in case it does.

Senator Sanders’ bill aims to reduce the estate tax exemption from $11,700,000 to $3,500,000. This means if the proposal passes, an individual with an estate valued at over $3,500,000 will have to pay 45% on the excess of the limit up to the first $10 million of assets, 50% on the next $40 million worth of assets, 55% on the next $50 million, and 65% on everything over $1 billion in assets. For married couples, the estate tax exemption will be $7,000,000.

Often, individuals will think gifting away part of their estate is the solution to fall under the estate tax limit. However, this can have complications if a person gives away more money than is exempted from the gift tax. The gift tax exemption is the amount of money that an individual can give away as a part of their estate without paying a tax on the gift. Currently, the limit is $11,700,00, but Senator Sanders’ proposal will reduce the gift tax exemption to $1,000,000. This does not include the $15,000 per year that a person may gift without worrying about it being taxed.

For some families who are worried about this change, this may mean gifting everything during their lifetime except the $1,000,000 exemption and the $3,500,000 estate tax. Another option is to put funds in an irrevocable trust in the name of a spouse or decedents because it will not be counted as part of a person’s estate. However, when assets are put into an irrevocable trust, the individual—entitled the grantor—relinquishes control of them, and the terms of the trust cannot be changed later. The funds in the trust will be given to the beneficiaries only at the grantor’s death. Therefore, this is a very permanent solution individuals should talk about with their estate planning attorney before enacting.

While the proposed bill may not seem complicated, it has implications for many Colorado estate plans. Therefore, individuals who believe this bill may impact them should contact their estate planning attorney to amend their plan or discuss solutions that will best fit their needs.

Contact a Colorado Estate Planning Attorney

If you or a loved one needs help reviewing their estate plan, contact the Colorado estate planning attorneys at the Braverman Law Group. Our attorneys have decades of experience advising clients about their existing estate plans, as well as crafting new estate plans for clients without one in place. We will keep you up to date on any relevant changes to federal or Colorado law that affects your estate plan. To schedule a free consultation and to speak with one of our knowledgeable attorneys, give us a call at 303-800-1588 today.

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