Estate Planning Basics
Melissa Dalla, Esq.
Dufford & Brown, P.C.
1700 Broadway, Suite 2100
Denver, CO 80290
(303) 861-8013
mdalla@duffordbrown.com
WHAT IS A WILL?
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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.
WHAT IS A TRUST?
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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
creator’s behalf.
A trust may take effect during life or after
death.
WHAT IS PROBATE?
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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:
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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.
WHO SHOULD HAVE A WILL?
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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.
WHAT HAPPENS TO YOUR PROPERTY IF
YOU DO NOT HAVE A WILL?
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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.
INTESTATE SUCCESSION – ORDER OF
DISTRIBUTION
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If you do not have a will, your property will be distributed in the
following order:
(1) Surviving spouse;
(2) If no surviving spouse, then to your descendants (i.e. your
children and grandchildren);
(3) If no surviving descendants, then to your parents;
(4) If no parents, then to surviving descendants of your parents (i.e.
your brother and sisters, nieces and nephews, etc.);
(5) If no surviving descendants of your parents, then to your
grandparents;
(6) If no surviving grandparents, then to surviving descendants
of your grandparents (i.e. your aunts and uncles, etc.).
WHAT HAPPENS TO YOUR CHILDREN IF
YOU DO NOT HAVE A WILL?
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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.
WHAT HAPPENS TO ANY MONEY
DISTRIBUTED TO YOUR MINOR CHILDREN IF
YOU DO NOT HAVE A WILL?
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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 children’s 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.
ADVANTAGES OF HAVING A WILL
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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 children’s
guardian.
You can create a trust in the will and choose who
you want to serve as trustee for your children’s
financial needs and make preferences known.
PERSONAL REPRESENATIVE
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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:
(1) Surviving spouse who is a beneficiary in your will;
(2) Other beneficiaries in your will;
(3) Surviving spouse;
(4) Other heirs;
(5) 45 days after your death, any creditor.
PERSONAL PROPERTY MEMORANDUM
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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.
JOINT TENANCY
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Property owned in joint tenancy passes
automatically by operation of law to the
surviving joint tenant.
Property that can be held in joint tenancy:
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Real property
Personal property, such as a bank account or
investment account
OTHER NON-PROBATE PROPERTY
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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!
TRUSTS
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Trusts have many different uses.
Two main types: revocable and irrevocable.
Revocable or “living” trust is the most
common form of trust.
WHO SHOULD HAVE A TRUST?
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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.
PLANNING FOR INCAPACITY
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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.
POWER OF ATTORNEY FOR PROPERTY
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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.
MEDICAL DURABLE POWER OF ATTORNEY
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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.
LIVING WILL
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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.
DELEGATION OF POWERS
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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.
ESTATE TAX CONSEQUENCES
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You will pay estate tax only if the value of
your assets is over the applicable exclusion
amount.
Applicable Exclusion Amount:
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2010 - $5 million (or opt out)
2011 - $5 million
2012 - $5 million
Step-up in basis (fair market value)
ESTATE TAX con’t
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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%