Estate Planning Basics

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Estate Planning Basics

• Melissa Dalla, Esq.
• Dufford Brown, P.C.
• 1700 Broadway, Suite 2100
• Denver, CO 80290
• [phone]
• mdalla_at_duffordbrown.com

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WHAT IS A WILL?

• A will is a legal document which allows you to
  leave your property to persons or charities in
  the amounts you wish.
• It may also name guardians for your minor
  children, trustees for any trusts you create in
  your will and your personal representative
  (executor) to administer your probate estate.
• A will only takes effect upon death.

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WHAT IS A TRUST?

• A trust is a legal entity that can hold property
  and is created based on a written agreement
  between the person creating the trust and the
  person administering the property on the
  creators behalf.
• A trust may take effect during life or after
  death.

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WHAT IS PROBATE?

• Probate is the court process in which probate
  property is collected, debts and taxes are paid,
  and the assets are distributed according to your
  will (or according to intestate succession if
  there is no will).
• Probate typically lasts 6 months to a year (small
  estates).
• During the probate process, the personal
  representative will go through many routine
  tasks, such as
• Identifying and inventorying estate property
• Filing reports with the Court
• Paying estate debts and taxes and
• Distributing property as directed by the will or
  state law
• if there is no will.

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WHO SHOULD HAVE A WILL?

• Everyone over age 18!
• A valid will requires a written document signed
  by the testator who is at least 18 and of sound
  mind and by two witnesses.

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WHAT HAPPENS TO YOUR PROPERTY IF YOU DO NOT HAVE
A WILL?

• Certain assets in your name that are not
  otherwise distributed after your death (e.g.
  through joint tenancy) are known as your probate
  property
• If you do not have a will, your probate property
  will be distributed according to intestate
  succession which is a pattern of distribution
  found in the Colorado statutes.

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INTESTATE SUCCESSION ORDER OF DISTRIBUTION

• If you do not have a will, your property will be
  distributed in the following order
• Surviving spouse
• If no surviving spouse, then to your descendants
  (i.e. your children and grandchildren)
• If no surviving descendants, then to your
  parents
• If no parents, then to surviving descendants of
  your parents (i.e. your brother and sisters,
  nieces and nephews, etc.)
• If no surviving descendants of your parents, then
  to your grandparents
• If no surviving grandparents, then to surviving
  descendants
• of your grandparents (i.e. your aunts and
  uncles, etc.).

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WHAT HAPPENS TO YOUR CHILDREN IF YOU DO NOT HAVE
A WILL?

• A person becomes a guardian of a minor by
  appointment by a parent in a will or written
  instrument.
• If no guardian is appointed by a will or other
  written instrument, the guardian will be
  appointed by the court.
• The person appointed by the court, however, may
  not be the first person you would choose to care
  for your children.

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WHAT HAPPENS TO ANY MONEY DISTRIBUTED TO YOUR
MINOR CHILDREN IF YOU DO NOT HAVE A WILL?

• If you have a will, you can include trust
  provisions, which create a trust for your minor
  children. Within these trust provisions, you can
  name the person or institution that you want to
  manage the money you leave your children.
• If you do not have a will, the court may appoint
  a conservator to manage your minor childrens
  financial affairs. The appointed conservator may
  or may not be the same person serving as
  guardian, and may not be the person you would
  choose to manage the money left for your children.

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ADVANTAGES OF HAVING A WILL

• You choose who you want to receive your property,
  which may be different than stated in the
  Colorado intestate succession statutes.
• You choose who you want to be your childrens
  guardian.
• You can create a trust in the will and choose who
  you want to serve as trustee for your childrens
  financial needs and make preferences known.

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PERSONAL REPRESENATIVE

• The personal representative is the person who
  administers your estate through the probate
  process.
• In your will, you are able to name the individual
  that you want to serve as the personal
  representative of your estate.
• If you do not have a will (or do not name a
  personal representative in your will) the
  Colorado statutes govern the appointment of your
  personal representative. The order of priority
  under the statutes is
• Surviving spouse who is a beneficiary in your
  will
• Other beneficiaries in your will
• Surviving spouse
• Other heirs
• 45 days after your death, any creditor.

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PERSONAL PROPERTY MEMORANDUM

• The personal property memorandum is a document
  that is separate from the will and is used to
  dispose of personal property.
• You can list who you wish to receive certain
  items of personal property.
• You can make changes throughout your life.
• You must sign and date the memorandum, but it
  does not need to be witnessed like a will.
• You can only list personal property on the
  memorandum. It cannot be used to dispose of
  money, real estate, or securities.

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JOINT TENANCY

• Property owned in joint tenancy passes
  automatically by operation of law to the
  surviving joint tenant.
• Property that can be held in joint tenancy
• Real property
• Personal property, such as a bank account or
  investment account

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OTHER NON-PROBATE PROPERTY

• In addition to joint tenancy property, there is
  other property that will not pass through the
  probate estate, such as life insurance or your
  retirement account.
• On all life insurance policies, you must list a
  primary and contingent beneficiary. The proceeds
  will be paid out to whomever you listed as the
  beneficiary, regardless of what your will may
  say.
• Designate beneficiaries with care!

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TRUSTS

• Trusts have many different uses.
• Two main types revocable and irrevocable.
• Revocable or living trust is the most common
  form of trust.

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WHO SHOULD HAVE A TRUST?

• It depends.
• Properly organized living trusts will avoid
  probate. This may be important depending on
  issues such as cost of probate, privacy etc.
• Trusts can also be used to address issues like
  tax planning, asset protection and problematic
  heirs.

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PLANNING FOR INCAPACITY

• Typically this is the most overlooked issue for
  families.
• Plan ahead by designating someone to act on your
  behalf as to your person (including medical) and
  your property.
• If not, your family will need to go to court for
  a guardianship and/or conservatorship order to do
  so.

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POWER OF ATTORNEY FOR PROPERTY

• A property power of attorney is a document in
  which you name another person to act on your
  behalf for legal and financial matters.
• The power of attorney may allow your agent to do
  all acts or the acts may be limited to certain
  acts.
• By appointing an agent, you can avoid a court
  procedure to appoint a conservator in the event
  you become disabled or unable to make your own
  decisions.

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MEDICAL DURABLE POWER OF ATTORNEY

• A medical power of attorney names another person
  to act on your behalf for medical decisions.
• A medical power of attorney becomes effective
  only if you are unable to make the decisions for
  yourself.
• The power of attorney may allow your agent to do
  all acts or the acts may be limited.

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LIVING WILL

• A living will states your wishes regarding the
  use of artificial life support systems if you are
  terminally ill, comatose, and beyond hope of
  recovery.
• The Colorado statute regarding living wills
  addresses both life support systems (respirator,
  heart machine, etc.) and whether food and water
  should be withheld.

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DELEGATION OF POWERS

• Parents can sign a Delegation of Powers, which
  authorizes a specific person to care for your
  children, including the power to make medical
  decisions.
• The Delegation of Powers is effective only for a
  specific period of time.
• This document is important when both parents are
  out of town and you leave the children with
  grandparents or another caretaker.

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ESTATE TAX CONSEQUENCES

• You will pay estate tax only if the value of your
  assets is over the applicable exclusion amount.
• Applicable Exclusion Amount
• 2010 - 5 million (or opt out)
• 2011 - 5 million
• 2012 - 5 million
• Step-up in basis (fair market value)

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ESTATE TAX cont

• As long as the fair market value of your assets
  are below the exclusion amount, there will be no
  estate tax consequences upon your death.
• Estate tax rates 35