SOME QUESTIONS AND ANSWERS ABOUT ESTATE PLANNING IN COLORADO

Please note: This Q&A pertains only to Colorado law. It is for general informational purposes only and does not address every situation or legal nuance. For advice regarding your circumstances, please consult a reputable estate planning attorney in your area.

. . . I was too busy
. . . I didn’t think I owned enough to bother with it
. . . I could not decide who should get my assets
. . . I did not know how to start or where to get help
. . . I did not want to spend money on it
. . . I did not want to face my mortality or incapacity

Reality check:

• Contemplating your own incapacity or death may be troublesome, but you must finish and sign your documents or amendments before incapacity or death strikes
• You need your estate planning documents to speak for you when you cannot
• Spending some time and money now to create and maintain a good estate plan will help save time and money later for your successors

Your estate plan consists of all the tools by which you will communicate your instructions and wishes if you become incapacitated or die

Core elements of an estate plan include:

• Durable financial power of attorney
• Medical power of attorney (also called health care power of attorney)
• Advance medical declaration (declaration as to medical and surgical treatment or living will)
• Will (last will and testament)
• Personal property memorandum
• Designation of guardian for minor children

• Your beneficiary designations on investment accounts, retirement accounts, insurance policies, annuity contracts
• Your payable-on-death designations on bank accounts
• Deeds and other documents showing joint ownership of real property, stocks, bank accounts, etc.
• Beneficiary deeds transferring real property at death
• Business documents, such as buy-sell agreements, operating agreements, and shareholder agreements
• Marital or domestic partnership agreement

A written document in which:

• You appoint an agent and alternate agents
• To manage your finances and assets
• For your benefit
• While you are living but not able to manage them yourself
• According to the authority granted in the document

• Appointing an agent you have selected
• Guiding and directing the agent
• Reducing potential for disagreements among family and others

• Your durable financial power of attorney can and should be amended as your circumstances or wishes change
• Your durable financial power of attorney expires at your death
• After your death, your agent no longer has control over your money or other property - your personal representative or trustee takes over then

A written document in which:

• You appoint an agent and alternate agents
• To make health care decisions for you
• In consultation with your health care providers
• If you can't personally communicate your own decisions
• Because you are incapacitated (temporarily or long-term)

• Giving the medical provider the name and contact information of the agents you have appointed
• Putting your needs and preferences in writing so that they are clear to your family and medical providers
• Reducing the potential for disagreements about your care

• Your medical power of attorney can and should be amended as your circumstances or wishes change
• Your medical power of attorney expires at your death

• This is different from a "Do Not Resuscitate" or "DNR" order, which can only be signed by a doctor

A written document in which you:

• Appoint a personal representative (executor) to gather and distribute the assets that can be controlled by the will
• Make specific gifts of money or other property to individuals and charities
• Direct the disposition of your residence
• Provide for your surviving family members
• Distribute the rest of your assets to the people or charities you have designated
• In other words, you give your instructions and wishes about "who, what, when, where, why, and how"

• Appointing someone you believe will do a good job
• Appointing alternates so your successors don't have to ask the court to appoint one
• Giving specific directions about distributing your money and other property
• Reducing the expense of administering your assets
• Reducing potential disagreements among family and other beneficiaries

• You must have legal capacity to sign a will or codicil (amendment to a will)
• Your will can and should be amended as your circumstances or wishes change
• Your will and any codicils take effect only at your death
• You can give specific items by a separate signed and dated personal property memorandum
• An improperly prepared will may be unenforceable or only partly enforceable

Your will typically does not control all your assets

"Nonprobate" assets are controlled not by the will but by beneficiary designations, deeds, or contractual arrangements

Be sure to review these items with your estate planning attorney:

• Beneficiary designations on investment accounts, retirement accounts, insurance policies, annuity contracts, and the like
• Payable-on-death designations on bank accounts
• Joint ownership of real property and bank or investment accounts
• Beneficiary deed for real property
• Marital or domestic partnership agreement
• Trust and business agreements

• If you do not leave a valid will, a probate proceeding may be required
• Your instructions to family or friends about your assets may not be enforceable
• The default statutes under state law determine who can be appointed as personal representative
• The default statutes under state law determine who receives your assets after expenses are paid
• Other relatives, friends, or charities would not have a right to receive anything from your estate

• Take legal responsibility for the estate and its assets
• Locate, gather, and inventory the assets
• File the original will, if any, with the court
• File other required court documents
• Communicate with beneficiaries
• Hire accountant, attorney, real estate agent, and other professionals as needed
• Pay the decedent's final expenses and expenses of administering the estate
• Keep an accounting of income and expenses
• Make provisions for support of decedent's immediate family
• Settle any claims or debts
• Distribute assets according to the will or as required by law or court order
• Transfer title to real property
• Prepare and file the decedent's final income tax return and other tax filings
• Take care of other matters

Probate in Colorado is less expensive and burdensome than in many other states:

• Court hearings are usually not required
• Uncontested probate cases are often finished in 6 to 9 months
• Colorado does not have a state inheritance tax
• Attorneys are not paid a percentage of the estate

• A "small estate" has no real property and has a total value of less than $68,000 (in 2019)
• No court involvement, except that the will (if any) is filed with court clerk
• The successor uses a Small Estate Affidavit to gather the estate's assets

• In Larimer County, over 90% of probate proceedings are under the "informal probate" procedure
• Handled as an administrative matter by the probate registrar of the court
• Usually no court hearings or court supervision
• An application and other documents are filed with the court
• The probate registrar issues "Letters" appointing the personal representative and authorizing that person to act on behalf of the estate
• The personal representative is responsible for gathering the estate's assets, paying expenses, and distributing money and other property to the beneficiaries
• Notice is mailed to persons having a legal interest in the estate
• A notice to creditors is published and mailed
• The court is available if needed to resolve an ambiguity or dispute

In a trust, you:

• Identify the trust property and the purposes of the trust
• Designate the trust beneficiaries
• Appoint a trustee and alternates
• Give instructions to the trustee about handling trust assets and regulating the flow of money to beneficiaries
• Direct the trustee to keep an accounting, preserve records, and send reports to designated persons - in addition to what is required by law

• Each parent has a will with a testamentary trust
• The trust comes into effect only at the death of the second parent and only if any of their children is under a specified age
• The trust is funded with money and other property, through the will or by beneficiary designation
• The trustee manages the trust assets and makes payments for the support and benefit of the children
• When each child reaches the specified age, the rest of the child's share is distributed to the child as a lump sum
• Can be used for other purposes, such as to support a disabled person or to manage particular assets
• Your attorney can help you decide whether the benefits of a will with testamentary trust justify the additional cost

• You create it during your life
• You can change it during your life, so long as you have legal capacity
• You transfer money and deed property to the trust
• The trust benefits you, your spouse, and other beneficiaries as stated in the trust agreement
• The trust continues after your death and becomes irrevocable at that time
• Assets owned by the trust normally pass without probate at death
• At death, a very simple will ("pourover will") adds your other property to the trust
• Revocable trusts are often used to plan for your future incapacity, managing assets that you own separately from your spouse, dealing with out-of-state or community property, or providing for beneficiaries who are not U.S. citizens
• Despite some marketing claims, "avoiding probate" is generally not a primary reason to use a revocable trust if you live in Colorado and all your assets are in Colorado - remember that Colorado probate is much simpler and less expensive than it is in California, New York, Florida, and other states
• Your attorney can help you decide whether the up-front expense of creating and maintaining a revocable trust is justified and appropriate to your situation

• You give up ownership and control of certain assets
• Gives complete (or almost complete) control to trustee
• Removes those assets from being counted for estate tax purposes
• One of the many uses for an irrevocable trust is to hold a life insurance policy to provide funds to family members or to pay anticipated estate taxes

Maybe, but . . .
You may find that writing a will is trickier than it sounds
Any significant mistakes, ambiguities, or gaps in your document may cost your successors attorney fees, court fees, time, and hassle to resolve them - and attorney fees, for one, will undoubtedly be higher at that time than they are now
A note of caution about handwritten wills (holographic wills):

• They are recognized as wills in Colorado, if they meet the requirements of Colorado law
• A holographic will must also meet the standards that apply to wills in general - a will that does not may be unenforceable or only partly enforceable
• Only about half the states recognize holographic wills, and they have different requirements
• If you move to another state, your holographic will may no longer be valid

Yes, but . . .

• Legal forms are not magic
• The content varies greatly from one form to another and from one state to another
• The same goes for information on websites
• Do you understand what it says?
• Does it fit your situation?
• Is it of high quality, up-to-date, and appropriate under Colorado law?
• How do you know?
• Websites cannot give you specific legal advice and can rarely be held accountable for mistakes

Consider hiring an estate planning attorney if any of the following apply:

• You value personalized advice and service
• You need help understanding the legal, practical, and family issues
• You need help understanding the possible ways to achieve your goals
• You have business interests, real property, or other potentially complex assets
• You want to coordinate all the elements of your estate plan

• Ask your friends, accountant, or financial advisor for a referral
• Interview several firms that have a specialty in estate planning
• Don't be shy about discussing the potential cost at the first meeting
• The cost will depend on the details and complexity of the situation
• You should receive a written engagement agreement saying what the law firm will do, the rates you will be charged, and other details
• Be a good consumer of legal services

• Make sure you understand your documents before you sign them
• Talk to your loved ones about your concerns, plans, and intentions
• Make sure all your beneficiary designations are up to date
• Keep your estate and property documents where your successors can find them
• Review your estate documents with your attorney every few years or if you have a change in family or financial circumstances
• If you have been putting it off, please don't wait any longer!