Estate Planning is something that is incredibly important. Real estate agents in Denver and the wide surrounding area are often asked to list homes that their clients recently inherited. If you are a Denver area agent, then you may already have received a call from a potential client immediately following the death of their benefactor. The potential client is eager to sell quickly, as they do not wish to pay for the house’s upkeep or property taxes. However, they may also be apprehensive about how much of their inheritance they will lose because of taxes.
What is a taxable estate – and when is an estate nontaxable? Knowing that information is imperative whether you are an agent or a beneficiary.
What Is a Taxable Estate?
True to its name, a taxable estate is the total value of a deceased person’s assets that are subject to taxation. It includes not only the deceased’s real estate holdings, but also their personal property and investment holdings.
It is important to note that the deceased’s taxable estate is not merely the sum of all their property. In addition to any of their liabilities, the value of the tax-deductible portion of assets left behind by the deceased is also subtracted from their taxable estate. This is why estate planning is essential to maximizing the value of the property bequeathed to beneficiaries: If clever planning lowers the value of the estate beneath a certain threshold, the deceased’s beneficiaries will not have to pay an estate tax (also known as a “death tax,” a phrase which combines both of life’s great inevitabilities).
What Is a Nontaxable Estate?
As of 2023, the federal government does not impose an estate tax if the total value of the deceased’s assets does not exceed $12.92 million (or double that amount in the case of a married couple). When the value of an estate exceeds either of those thresholds, the federal estate tax ranges from 18 to 40%
Colorado real estate agents do business in one of the 38 states that does not impose an estate tax. This is not to say that Coloradans are exempt from the federal estate tax – but so long as they died in 2005 or later, the Centennial State will not impose a tax on the deceased’s estate.
In effect, a nontaxable estate is one that (A) totals less than $12.92 million in value (or $25.84 in the case of a married couple); and (B) isn’t subject to a state estate tax (which is why nontaxable property sales in Denver are relatively common).
It is also worth noting that Colorado also does not have a gift tax. However, as of 2023 the federal government does charge a tax on gifts which exceed $17,000 in value. Gifting someone more than that amount in a single year will count against your $12.92 million individual lifetime exemption.
Are you selling or buying property in the greater Denver, CO area? Then we welcome you to contact Colorado Premier Realty & Auction Services today! Our expert team will make certain your transaction is fully compliant with both state and federal law.