SimplyTrust Knowledge Base

A: For decades, Alabama followed the “pick-up tax” system. Under this system, the state estate tax was directly tied to the federal estate tax credit for state taxes paid. Essentially, the state piggybacked on federal rules—when someone paid a federal estate tax, part of it redirected to the state.This changed in 2005 when the federal government phased out the state death tax credit and replaced it with a deduction. Since Alabama’s tax was linked to that now-defunct credit, it effectively repealed itself. The state never enacted a new stand-alone estate tax, and there’s been no serious legislative movement to bring one back.

A: The underlying goal—smoother, more private transfers—is the same. And the core benefits are similar in both states. Streamlining administration after you’re gone. Helping avoid or minimize probate for assets titled in the trust. Keeping the details of your plan more private than a will alone.The differences come into play with probate and process. In Colorado, a funded revocable trust can reduce how much property goes through the probate court, especially if you own real estate in multiple states. Colorado’s probate system is more streamlined than in some other states, so the “probate savings” may feel modest for smaller estates. However, it’s more noticeable when there are many assets or out-of-state property. Nevada revocable trusts work similarly. Assets titled in the trust generally avoid a full probate process, with a successor trustee stepping in to carry out the instructions in the trust document.

A: The person receiving the assets pays an inheritance tax, not the estate itself. Different states structure these taxes in their own way. Some tax distant relatives or non-relatives more heavily, while exempting spouses or children. Colorado stands out because it has no active inheritance tax, which simplifies things for many families.

A: Colorado didn’t always skip estate taxes. In 1927, the state created an inheritance tax, paid by people receiving property. In 1980, lawmakers swapped that for an estate tax, paid by the estate itself before assets passed to heirs. Colorado’s estate tax was what’s called a “pick-up tax.” Instead of designing its own rate table, Colorado simply took advantage of a federal credit that used to reward states for imposing an estate tax. Colorado’s estate tax equaled that federal credit, so it didn’t increase the overall tax bill. It just redirected some revenue from the federal government to the state. In the early 2000s, federal law (EGTRRA and later changes) phased out and then eliminated this state credit. When the credit disappeared for people who passed after December 31, 2004, Colorado’s estate tax effectively disappeared too.

A: A revocable trust—also called a living trust—is a flexible estate planning tool that allows you to manage your assets during your lifetime and determine how to distribute them later. You can update, amend, or cancel the trust at any time while you're alive and mentally competent.Revocable trusts are popular because they help avoid probate, maintain privacy, and streamline asset management. However, the effectiveness of a revocable trust can vary depending on the laws in your state.Both Arkansas and Nevada allow individuals to create revocable living trusts—but the details around privacy, taxes, asset protection, and administration differ in ways that may influence your planning decisions.