Family Trust
Generational Wealth
Bottom Line Up Front: Family Trust – Generational Wealth is about making sure the American Dream in Colorado isn’t just for one generation, but builds upon itself, each generation standing on the shoulders of the previous, unencumbered by government siphoning off legacies. We intend to fortify that ladder of prosperity for every Colorado family that strives to climb it.
a. Protecting Inheritance and Family Businesses: We support policies that encourage and safeguard Family Trusts and Generational Wealth transfer – meaning families being able to pass down the fruits of their labor (be it a home, farm, small business, savings) to their children and grandchildren with minimal government interference (like heavy taxes or probate complications). Building generational wealth is key to upward mobility and financial stability in communities. When families can accumulate assets and invest long-term, it strengthens the economy and reduces dependence on government in retirement or tough times. Sadly, estate taxes (federal level) and sometimes property taxes or other factors force sales of family properties (like a family ranch) upon inheritance due to tax burdens. We want to alleviate that. Proverbs 13:22 says, “A good man leaves an inheritance to his children’s children.” We take that to heart by making it easier for Colorado families to do exactly that.
b. Current Colorado Scenario: Colorado has no state estate or inheritance tax currently (we phased out estate tax after federal credit removal in early 2000s). So, the main estate tax is federal (40% on estates above ~$13 million as of 2023). Most family estates fall below that, so estate tax hits mostly the very wealthy. However, family farms or businesses can cross that threshold even if cash-poor (land value, etc.). Also, capital gains tax can hit heirs if assets not stepped up properly or if they sell inherited property. At state level, capital gains are taxed as normal income (flat 4.4%). Colorado at times considered higher real estate transfer taxes (not allowed by constitution without vote). Also, property tax increases threaten multigenerational ownership of property (discussed in property tax section).
​
Additionally, trust law in Colorado is fairly standard. Perhaps streamlining probate and trust processes could help families avoid legal pitfalls. Ensuring that our policies don’t penalize saving vs consumption is key (e.g., property tax elimination or reduction plays into that – encourages holding assets long-term). Another factor: the ability to create family trusts or family limited partnerships easily without onerous state fees/regulations encourages wealth retention.
​
c. Policy Measures:
​
1. No State Estate Tax – Constitutional Ban: We will ensure Colorado never reimposes an estate or inheritance tax. Perhaps put a constitutional amendment to explicitly ban state-level estate tax to reassure families and attract wealth retention in state (some older folks choose Florida or others partly due to tax climate; Colorado not having these taxes is a selling point – lock it in). If future federal law lowers estate exemption dramatically, a state not adding on a tax becomes more important for moderately wealthy families.
​
2. Cut Income/Capital Gains Taxes on Inherited Assets: If someone inherits a family business or property and then sells it, capital gains might be due on appreciation. Currently, stepped-up basis means appreciation pre-death isn’t taxed, which is good (federal law; some have proposed eliminating step-up – we strongly oppose that). At state level, we could allow an exclusion or credit for capital gains from inherited small family businesses or farms, to encourage keeping that wealth in family or at least not taxing if they need to sell due to practical reasons. Alternatively, if they continue operating business, ensure state programs (like any inheritance-related property tax benefits) continue. Actually, Colorado has some farmland inheritance protections (if a property stays in family, maybe assess it as ag land not highest development value). We should keep such provisions to prevent huge tax jump when property passes to next generation. Possibly create new ones: e.g., allow seniors to transfer their homestead property tax exemption to heirs living in that home, to keep it affordable for the next gen.
3. Promote Family Trusts/ Estate Planning: Not everyone knows how to navigate estate planning. The state can sponsor or coordinate free seminars for farmers and small business owners on succession planning, trusts, etc. This helps more families set up appropriate vehicles (like life insurance trusts, etc.) to avoid forced asset sales. It’s a low-cost educational initiative that pays off by reducing family wealth dissipation through lack of planning (which often ends up causing them to need public assistance later – preventative measure). We can partner with CSU Extension or legal aid on this.
​
4. Life Insurance and Savings Incentives: To help families create generational wealth, encourage life insurance and saving. For instance, remove state premium taxes or fees on life insurance payouts used for inheritance (if any). Or perhaps a state matching for low-income families who contribute to a child's long-term savings or college fund, helping even modest families start building generational wealth (like a baby bonds concept but via matching contributions to 529 or similar). The idea: even those who aren’t rich should be aided to save something to pass to kids (education, house down payment).
5. Protect Family Businesses in Regulations: Many second or third generation businesses struggle with regulatory compliance costs. We should maintain a light regulatory environment so that a family hardware store or ranch doesn’t get crushed by red tape when leadership passes to next gen. Possibly have “regulatory ombudsman” focus on helping these transitions – e.g., informing them of any licensing changes needed etc., with minimal hassle. Also consider delaying tax burdens on transfers: if a family partnership changes hands among family, maybe exempt certain transfer fees.
6. Housing for Heirs: In housing, if parents want to give house to children, streamline that transfer and possibly freeze the property tax at parental level until child sells. Some states allow parent-child property tax base transfers (California’s Prop 58 historically, though they changed it recently). We could implement something like: when property is inherited by direct descendant, they retain the assessed value of decedent (so property taxes don’t jump massively). That’s key in high growth areas to allow children to keep family home.
​
7. Guarding Against Predatory Practices: Unfortunately, sometimes when an elderly property owner dies, unscrupulous actors try to get heirs to sell quick or undervalue. We can instruct consumer protection to monitor and educate families about predatory estate buyers or reverse mortgages issues. Knowledge is power to preserve wealth.
​
8. Legacy and Philanthropy Encouragement: Not strictly generational wealth but encouraging estate giving to charities can also positively impact communities and reduce tax burdens. If a family is moderately wealthy and charitably inclined, we should ensure state law encourages establishing foundations or endowments (ease state-level excise taxes if any, etc.). This helps keep wealth serving local causes rather than going to taxes or being moved out of state.
​
9. Intergenerational Training: Work with local Chambers or trade associations to create mentorship programs where retiring owners mentor heirs or even unrelated younger entrepreneurs to take over businesses. This keeps businesses in operation across generations rather than shutting down when founder retires. E.g., a local machine shop owner might have no children to take over; connecting them with a younger protege who can buy or inherit business keeps wealth and jobs local – we could support that matchmaking.
​
Vision: Over time, these policies mean more Colorado families accumulate assets (homes, investments, businesses) and keep them in family over generations, increasing financial security and narrowing wealth gaps. It particularly can help minority communities where historically passing wealth was harder. Reducing estate and inheritance related taxes and having a pro-business climate allows communities to build capital.
​
We present this not as favoring “the rich,” but empowering ordinary families to become more prosperous and independent. Government doesn’t need to seize a chunk upon death – better those resources stay in private hands, funding scholarships, new ventures, or caring for grandchildren. If someone spends life paying taxes already on income and property, taking another cut at death is double-dipping.
​
Since Colorado already lacks estate tax, our moves would cement that and improve property tax handling and such. We should highlight comparisons: some states have estate/inheritance tax (e.g., IL, NY); those often see people leave in retirement to avoid them. Colorado by pledging no such taxes and less property tax could attract and retain wealth here – which then gets invested locally or donated. Good for economy.
​
We will gauge success by observing fewer family farms forced to sell, more small businesses staying local after founder passes, and surveys showing families feel confident about their financial future spanning generations. Ideally, see homeownership rates climb and family net worth across demographics rise (closing racial wealth gap is often about ability to transfer wealth – our policies help with that by not taxing it away).