How The New 15 Million Dollar Federal Estate Tax Exemption Will Reshape Colorado Estate Planning In 2026

Federal legislation lifting the estate tax exemption to fifteen million dollars per person in 2026 changes the framework that Colorado families and their advisors rely on. Many anticipated a return to a lower threshold when earlier provisions expired, yet Congress moved in the opposite direction. The most direct consequence appears simple: far fewer estates will be subject to federal transfer taxes. The planning implications, however, require closer analysis. A higher exemption does not eliminate the need for careful estate design. It merely shifts the focus toward income tax efficiency, long-term control, and durable family structures.

A sophisticated approach helps clients avoid unintended outcomes. Older documents drafted during lower exemption years may no longer serve their intended function. Formula-funded trusts, credit-shelter provisions, and gifting patterns designed for tax minimization must be reviewed to ensure they still align with each family’s priorities.

Understanding How the New Exemption Alters Transfer Tax Exposure

A clear exemption threshold provides the foundation for every other planning decision. The fifteen-million-dollar figure applies across the estate, gift, and generation-skipping transfer systems. Married couples who use portability often combine their exemptions to protect up to $30 million. That scale removes most Colorado estates from federal taxation, especially those composed primarily of residential real estate, marketable securities, and business holdings below the new threshold.

This shift does not mean that long-term planning fades in importance. It simply alters which risks matter most. Techniques developed when the exemption was lower sometimes introduce unnecessary administrative burden. Credit shelter trusts may divide assets in ways that complicate investment strategy or constrain access for a surviving spouse. Older gifting programs may also result in adverse income tax consequences if appreciated assets are transferred during a lifetime rather than being held for a later basis adjustment. Reviewing each structure helps identify where modernization improves efficiency.

Basis Planning Moves to the Center of Estate Strategy

Income tax considerations take on greater weight once federal transfer taxes are removed from the picture. Colorado residents frequently hold assets with meaningful appreciation. Residential property along the Front Range, equity positions accumulated during long careers, and ownership interests in closely held businesses often contain substantial unrealized gain. Preserving the opportunity to secure a step-up in basis, therefore, becomes a core objective.

A higher exemption also reframes the value of grantor trust strategies. Trusts created primarily for tax minimization may no longer yield the same benefits if the underlying assets would produce greater long-term gains through basis adjustments at death. Some families evaluate whether old transfers remain helpful or whether partial trust modifications can restore future tax flexibility. Techniques such as introducing powers of appointment, adjusting administrative provisions, or merging related trusts sometimes create improved outcomes. Each decision depends on the structure of the assets and the family’s long-term objectives.

Colorado’s Economic Landscape Creates Unique Planning Considerations

Local factors shape how federal rules apply. Real property values across Colorado continue to show long-term growth, which means that many families hold homes or investment properties with significant appreciation. Agricultural families often own land accumulated over generations. Business owners frequently operate companies, service firms, and professional practices that contain goodwill or other intangible assets. These categories of property require individualized planning because lifetime transfers may reduce the opportunity to increase basis.

A thoughtful strategy addresses these local dynamics. Some clients choose to simplify ownership by transferring appreciated property back into an estate when doing so creates a more favorable tax profile. Others maintain entity structures for operational or liability-related reasons, yet adjust internal ownership levels to accomplish generational planning without forfeiting income tax benefits. The correct approach depends on the family’s asset mix, liquidity needs, and succession plans.

Existing Irrevocable Trusts Should Be Reevaluated Under the New Regime

Many Colorado families hold irrevocable trusts created during an era when limiting estate tax exposure dominated planning. These trusts often continue to serve legitimate non-tax purposes, including governance, asset management, and creditor protection. However, others primarily addressed tax concerns that no longer apply. A comprehensive review identifies whether a particular trust continues to advance current family goals.

Several questions guide this analysis. Practitioners evaluate whether specific trust assets would generate improved income tax results if included in the grantor’s estate. They also assess whether the trust’s administration remains efficient in the modern environment. Investment strategy, fiduciary powers, and long-term distribution patterns all play a role. When adjustments appear appropriate, tools such as decanting, modification under state law, or careful restructuring may help realign the trust with the family’s contemporary priorities. Each decision must be made cautiously to avoid unintended tax results.

Lifetime Gifting Plays a More Nuanced Role When Transfer Taxes Decline

A larger exemption affects how advisors approach gifting. Prior strategies focused on reducing the value of a taxable estate, often through annual exclusion gifts, intrafamily loans, or valuation-based transfers. Those tools still hold value, yet their purpose changes. Families may continue to make gifts for reasons unrelated to tax, such as supporting younger generations or protecting assets from personal liability risks. Still, the economic analysis behind each transfer shifts once tax pressure diminishes.

Modern gifting strategy, therefore, examines the nature of each asset. Cash transfers maintain flexibility. Interest in entities may support legacy planning if they align with family governance goals. A highly appreciated property requires special caution because a lifetime transfer may prevent a future basis increase. Reviewing outstanding promissory notes from prior transactions, especially those involving grantor trusts, may help identify opportunities to improve long-term results. Practitioners should approach these adjustments with precision to preserve existing benefits while positioning clients for the new environment.

Charitable Planning Evolves Under a Higher Exemption

Colorado philanthropists also reconsider their strategy under the new exemption. Charitable lead trusts, private foundations, and testamentary gifts were once used frequently to reduce taxable estates. Those designs still support values-driven objectives, yet the tax rationale may no longer carry the same weight. Families now focus on administrative efficiency, flexibility, and long-term control rather than a driven structure.

Some clients may choose donor-advised funds to streamline philanthropy. Others may refine the mission of existing entities or simplify complex structures created in earlier decades. Reviewing how each charitable tool operates helps ensure that future giving aligns with both personal values and modern tax objectives.

Continued Importance of Coordinated Multigenerational Planning

Even with a high exemption, families benefit from coordinated planning. Colorado households often include blended families, children from prior marriages, or multigenerational ownership of properties and businesses. Governance, succession planning, and clear distribution language remain essential. Updating documents to reflect current goals ensures that the increased exemption does not lead to complacency that later causes conflict.

Estate tax exposure may shrink, but the need for structured planning does not. A cohesive design protects beneficiaries, organizes long-term administration, and supports the family’s evolving financial picture.

Speak With a Boulder Estate Planning Lawyer for Guidance

If you want a tailored strategy that accounts for the new fifteen-million-dollar exemption and Colorado’s unique planning landscape, you can schedule a free consultation with Braverman Law Group, LLC’s Boulder estate planning lawyers at (303) 800-1588 for thoughtful guidance grounded in current federal law.