For nearly a decade, estate planning conversations in Colorado carried a ticking clock: the elevated federal exemption was scheduled to sunset, and families were urged to act before it fell. Couples rushed gifts, signed complex trusts, and marked calendars. Then, in mid-2025, Congress rewrote the ending — the sunset never came.
The 2025 federal tax law made the higher estate and gift tax exemption permanent, increased it beginning in 2026, and kept it indexed for inflation. 'Permanent' in tax law means until Congress changes its mind, but the scheduled cliff that drove so much planning urgency is gone. For the large majority of families, federal estate tax is now a distant concern.
That is genuinely good news — and it is precisely why existing estate plans need rereading. Documents drafted for a smaller-exemption world, or in a rush before a sunset that never arrived, can now behave in ways their owners never intended. Whiteford's Colorado team, part of the firm's national trusts and estates platform, helps families read their plans against the law as it actually stands.
What the 2025 law changed — and what it didn't
The law resolved the biggest uncertainty in estate planning: the scheduled drop in the exemption. Instead of falling, the unified estate and gift exemption was set at a new, higher level starting in 2026 and made permanent, with annual inflation indexing. The generation-skipping transfer tax exemption moved in parallel. The rate structure above the exemption, the marital deduction, portability, and the step-up in basis at death all continue as before.
What the law did not do matters just as much. It did not repeal the estate tax — estates above the exemption still face it. It did not change state-level estate and inheritance taxes in the states that have them, which matters for Coloradans who own property elsewhere. And it did not freeze anything forever: future Congresses can revisit these numbers, which is why flexible planning ages better than planning welded to any particular year's figures.
Why 'good news' still breaks old estate plans
Many married couples' documents from earlier eras use formula clauses: at the first death, 'the exemption amount' automatically funds a credit-shelter trust, with the rest passing to the spouse. When exemptions were modest, that produced a balanced result. Under today's much larger exemption, the same sentence can push nearly everything into an irrevocable trust — restricting the surviving spouse's access, adding unwanted administration, and potentially costing a second basis step-up.
Rush-era planning cuts the other way. Some families completed large gifts or funded irrevocable trusts specifically to beat a sunset that no longer exists. Those moves aren't necessarily wrong now — asset protection and growth-shifting benefits remain — but their tax logic has changed. Options such as trust modification, decanting, or simply changing course on future funding deserve an informed look rather than autopilot.
- Formula or credit-shelter clauses written for a much smaller exemption
- Plans signed hurriedly before the expected sunset, now serving unclear goals
- Irrevocable trusts whose assets may miss a basis step-up the family now wants
- Portability elections skipped at a first death because 'we're under the limit'
- Documents that have simply outlived marriages, births, moves, and business sales
What Colorado families should actually do now
Start with a calm reread, not a rebuild. Most plans need targeted adjustments — updating formulas, revisiting trustee choices, confirming beneficiary designations — rather than replacement. Because Colorado imposes no state estate or inheritance tax, the analysis for most local families now centers on income tax basis, family protection, and probate avoidance. Families with businesses or fast-appreciating real estate should also project forward: an exemption that covers you today may not cover a company that keeps compounding.
This is educational context, not a prescription — whether any strategy fits depends on your assets, family, and goals, and the attorney will tailor the approach with you. If you want a structured way to begin, the free Colorado Estate Snapshot at /estate-snapshot inventories your assets and current documents, and a free Legacy Game Plan Session with our Colorado team turns that snapshot into a clear read on what the 2026 changes mean for your plan.
