It’s that time of year again: As the snow moves in, another year is on its way out. Although you may find yourself busy with holiday gatherings and the multitude of outdoor activities that Colorado has to offer each winter, it is also an important time to check in on your estate plan.
Here are some of the main areas of estate planning to review in 2021.
Tax Exclusions
The unified tax credit allows people to transfer portions of their estate without incurring federal gift or estate taxes.
For 2021, the unified tax credit is $11.7 million for individuals and $23.4 million for married couples. These figures apply to gift and estate taxes combined. In other words, use of the exemption for lifetime gifts reduces the amount of assets that can be transferred tax-free after death.
It is important to understand that this generous exemption is not intended to be permanent. Unless Congress passes legislation saying otherwise, then the current credit will apply only to tax years up to 2025. Under current law, the exclusion will be halved after 2025. For this reason, it may make sense to begin gifting assets to loved ones now rather than through a will.
In addition to the unified tax credit, it is also important to consider the annual gift tax exemption.
Each year, people can make up to a certain dollar amount of gifts without incurring the federal gift tax or dipping into the lifetime exclusion. For 2021, the annual exclusion amount for an individual is $15,000 for each gift recipient. That means that a married couple could gift $30,000 to each of their children, grandchildren, nieces, nephews, and other loved ones without incurring the federal gift tax. For some couples, taking advantage of the annual gift tax exemption is an excellent strategy to reduce their taxable estate while still preserving the lifetime exemption.
Advance Directives and Powers of Attorney
In addition to reviewing your financial planning documents, it is also prudent to review periodically your plans for end-of-life care or periods of incapacitation. Especially if you have recently experienced a significant life change—such as losing your partner or becoming ill—it may be necessary to update the legal documents that will guide your medical and financial decision-making should you become incapacitated.
Although it is best practice to review your estate plan at least annually, various pieces of legislation and the change in administration has made 2021 an especially important year to complete a year-end review. Working with an estate planning law firm can help ensure that you are making the most of your assets while protecting them in the years to come.
Consult with a Colorado Estate-Planning Lawyer
As the year draws to a close, there is still time for Boulder residents to create or revise planning documents before the New Year. To help ensure your plan is optimized for 2021, contact the Braverman Law Group today. Our experienced attorneys provide advice and representation regarding Colorado estate plans, asset protection, special needs trust, and more. Whether your estate planning needs are simple or complex, we have an excellent track record of helping people like you achieve peace of mind through responsive estate planning. To schedule a free initial consultation with one of our Coloradan estate planning attorneys, call (303) 800-1588 today.