Estate Taxes...What Will You Owe?
Can You Reduce Your Liability?
How Do You Do It?

Our Attorneys Can Help Protect Your
Estate Legally and Honestly

According to the tax laws of the United States, whatever you own is subject to the federal estate tax upon your death, whether such property is transferred through a will or according to the state laws of intestacy. In addition to the federal government, many states also impose an estate tax, with the state version called either an estate tax or an inheritance tax.

However, not all estates will be taxed. If an asset is left to a spouse or a charitable organization, the tax usually does not apply. In addition, the estate tax only applies to estates valued at more than $2 million dollars in 2008; this amount will increase to $3.5 million in 2009. The estate amount is the value of all the property owned by the decedent at the time of death. It is important to remember that life insurance benefits may be included in the estate (even though the proceeds arguably were not "owned" by the decedent and were never received by the decedent). Similarly, bank accounts or other financial instruments which are set to "pay on death" or "transfer on death" are usually included in the taxable estate, even though such assets are not subject to the probate process under state law.

As noted above, a certain amount of each estate is exempted from taxation by the federal government. Below is a table of the amount of exemption by year an estate would expect. Estates above these amounts would be subject to estate tax for the amount above exemption.

For example, assume an estate of $3.5 million in 2008. There are two beneficiaries who will each receive equal shares of the estate. The maximum allowable credit is $2 million for that year, so the taxable value is therefore $1.5 million. Since it is 2008, the tax rate on that $1.5 million is 45%, so the total taxes paid would be $675,000. Each beneficiary will receive $1,000,000 of untaxed inheritance and $412,500 from the taxable portion of their inheritance for a total of $1,412,000. This is a lot less then the $1,750,000 they could have received if the estate had not been taxed.

One simple way you can reduce estate taxes is to give some of your estate to your children, or anyone else, during their lives in the form of gifts. Creating a trust with what is commonly referred to as a ”credit shelter sub-trust” is also an effective strategy, but only for married couples. Many rules apply, however, so make sure you consult an attorney before gifting your money away.

In addition to our main office in Denver, we also offer satellite locations in Arvada, Aurora, Lakewood, Highlands Ranch, Thornton, Lone Tree, Golden, Stapleton, Littleton, and Boulder