Areas of Practice

Both of these documents provide for a distribution of your assets upon your death. A Will allows you to name a guardian for any children under the age of eighteen (18) and provide for testamentary trusts (created after your death) to hold assets for children or any other beneficiaries. Probate in Colorado is relatively straightforward and inexpensive, therefore creating a revocable trust (also referred to as a living trust), may not be necessary as it is in some other states with higher probate costs. A revocable trust offers several advantages to a Will and is a better estate planning tool for certain estates in the following circumstances: if you want comprehensive management of your assets during your lifetime or in the event you cannot make your own decisions which can happen in the event of an illness, frequent travel, memory loss normal as we age, diminishing capacity, or any other reason you wish for a co-trustee to take over the management of your assets; other reasons may include, if you own real property in another state, have children under eighteen (18) years old, want your designations to remain private or want to hire a professional to manage your assets.

The Mechanics of a Revocable Trust

Creating a revocable trust provides a separate entity to hold, manage, and distribute your assets. The trust creator, also known as the grantor or settlor, may act as sole trustee, or may elect to name a spouse, child or other fiduciary as co-trustee. Having a co-trustee or successor trustee, one who would only step in the shoes of the trustee if the serving trustee could not act, allows for a seamless transition in the management and administration of the trust upon absence, temporary illness, or incapacity and eventually death of the serving trustee. Property can be transferred to trust directly by the grantor during life, by an agent serving under a power of attorney for the grantor, or by a “pour over” Will upon the grantor’s death. The Will used with a Revocable trust is referred to as “pour over” Will because it simply pours any assets owned by the decedent into his or her trust. There are no income or estate tax advantages or disadvantages to having a revocable trust, however, probate can be avoided if most of the grantor’s probate assets are transferred to the trust during the grantor’s lifetime.

Advantages of Creating a Revocable Trust

1. You are Concerned About the Effective Management of Your Assets

• One of the best reasons to create a revocable trust is to provide for the management of trust assets by the acting trustee or co-trustees. This can be especially important for sole proprietors or those with complex assets to manage, or if the task of managing your finances is becoming too much for you to handle on your own.  Initially, the trust creator may act as sole trustee, or may elect to name a spouse, child or other fiduciary as co-trustee. Having a co-trustee or successor trustee, one who would only step in the shoes of the trustee if the serving trustee could not act, allows for a seamless transition in the management and administration of the trust upon absence, temporary illness, or incapacity and eventually death of the serving trustee. A co-trustee’s role can be limited to only making certain decisions, only acting if there is unanimous or majority agreement among all co-trustees, or may be unfettered so that the co-trustee may act with the same authority as the grantor.

2. You Own Real Property In More than One State

• If you own real property in a state other than Colorado (this includes timeshare ownership and oil and gas interests, but excludes stocks or interests in an LLC or family partnership), you will need to probate your Will in each state where you own real property. Probating a Will in more than one state is problematic because you must find a good attorney in a state where you may have few contacts to assist you, that state may have an expensive or difficult probate process, and it can add to the expense of administering your estate for your personal representative or executor. These problems can be avoided by transferring any out of state real property to your revocable trust or an LLC during your lifetime.

3. You Need to Avoid the Delays of Probate

• Property placed in trust can be transferred quickly to beneficiaries following death without going through the probate process. Unlike New York, California and Florida, which have the most challenging and expensive probate proceedings in the county, Colorado has one of the most efficient probate processes in the county, so avoiding probate is not as big a concern in Colorado.

4. You Have Children Under Eighteen (18)

• By avoiding the delays probate can cause on the transfer of assets, your trustee will have immediate access to pay for any expenses required for the care of your children. Additionally, if you are injured and alive, but do not have the capacity to handle your affairs, a Trustee can follow the guidelines of your Trust to administer your assets and care for your dependents with clear legal guidance and fiduciary duties.
• Compare this to having a Will and Power of Attorney, where there is minimal fiduciary guidance on how to care for your dependents until your death (because the trust set up for your children in your Will is not effective until your death), and an agent under a power of attorney is given very broad powers that do not have the same fiduciary obligations as a Trustee.  A fiduciary is someone who has the legal obligation to care for another and hold that person’s best interest above the fiduciary’s own interests.  Fiduciary obligations include the duty of care, duty of loyally and avoidance of self-dealing.

5. You Want to Keep Your Designations Private

• If a Will is lodged with the probate court, it becomes part of the public court record and can be seen by anyone who requests to see it. All estate plans should have a Will, however, if you wish for your designations to remain private by creating a revocable trust, the Will simply states that all assets are transferred to trust and the trust provides for the specific designations to each beneficiary. This can be important if you are disinheriting a relative or are concerned about a Will contest due to conflict within the family, which may arise if your family has a conflict with your partner or lifestyle.

1. Wills or Revocable Trusts (as desired or beneficial)
2. General and/or Limited (financial) Durable Power of Attorney
3. Medical Durable Power of Attorney
4. Living Will (Advanced Directive on Medical Treatment)
5. HIPAA Authorization to Release Health Information
6. Last Wishes regarding Ceremonial Requests
7. Beneficiary Designations Sample Language for your Life Insurance and Retirement (that can direct assets to trusts if needed for your plan. This is used, for example, if you have minor beneficiaries, thus avoiding the expense and hassle of appointing a conservator while a beneficiary is a minor)
8. Review of Title on your Home or other Real Estate and Deeds to Transfer Property, if needed.
9.  A letter fully explaining how these documents work as part of the bigger plan.

Here is an overview of the most important documents associated with your plan:

1. General Durable Power of Attorney

This document is much more important than a Will while you are alive if you are ever unable to handle your affairs for any reason. A general durable power of attorney allows your attorney-in-fact to handle your affairs. Without a current signed power of attorney in place, a conservator would have to be appointed by the court to manage your assets or those assets outside of your trust if you have created one. Under Colorado law, a principal must specifically grant certain “hot” powers to be exercisable by the agent, rather than as a broad general grant of power. This document should generally be updated at least every five (5) years.

2. Limited Power of Attorney

A general power of attorney grants very broad powers to your agent. However, if you only need your agent to perform a specific task or want to limit the amount of time the agent can exercise authority over your assets, a limited power of attorney will provide for a temporary or restricted grant of power over your assets. For example, a limited power of attorney could be used if you needed to be hospitalized for a short time and needed someone to look after your affairs for a few only a few weeks, or if you wanted your investment advisor to make decisions on investing a certain amount of cash held by your revocable trust but did not want his authority to extend beyond those decisions.

3. Medical Power of Attorney

The Powers of Attorney described above only allow the person designated to conduct your financial affairs and limited personal matters. The Medical Powers of Attorney allow the person designated to make medical decisions for you, including the withholding or removal of life support, in the event you are unable to. Your agent can be the same for your Medical POA and your Statutory POA, or you may choose different representatives.

4. Advanced Directive for Medical or Surgical Treatment (Living Will)

The Living Will instructs a physician how you wish to be treated if you require life support and you have a terminal condition or are in a persistent vegetative state. This is different from the Medical Power of Attorney which names someone to make all medical decisions for you if you are unable to do so. Under Colorado law, a Living Will controls over a Medical Power of Attorney unless you indicate otherwise.

5. HIPAA Authorization

This form authorizes your agents to obtain your medical information in order to determine if you are incapacitated or what treatment you need. It is also a good idea to have your agents sign such a release so it can be determined if his or her capacity can be evaluated if there is a problem.

6. Declaration of Last Wishes
This document allows you to provide for any ceremonial or burial instructions and wishes regarding organ donation.

A special needs trust (“SNT”) can be created for a person who has special needs or is disabled and requires governmental assistance for his or her care. An SNT provides benefits to a beneficiary that are beyond the means of governmental assistance and will also protect the beneficiary’s eligibility for programs such as Supplemental Security Income (SSI) or Medicaid. This type of planning is also important for an anticipated disability, even if your loved one does not currently require any government assistance.

As part of our approach to disability planning we consider how to plan for clients who may need long-term care, the potential need to qualify for Medicaid and how to protect assets from the cost of long-term care.  The type of planning required will depend on the specific circumstances of each client, including marital status, monthly income, and the total assets a client and spouse have between them.

After a person’s death, probate is the process of winding up the decedent’s affairs, handling any outstanding creditor obligations, and transferring ownership of property to the legitimate beneficiaries. The executor of the estate, known as the personal representative in Colorado, can be held personally liable for mistakes or mismanagement while administering the estate.

Once you are appointed as the personal representative, your role is to administer the estate and wind up the decedent’s affairs. This involves the assembly, collection, and valuation of the decedent’s assets, the payment of debts, expenses of administration and taxes, and the distribution of the remaining assets to the persons entitled to them. Your legal responsibilities include (1) treating the beneficiaries with impartiality and avoiding favoring one over the other; (2) administering the estate for the benefit of the beneficiaries; (3) acting prudently and reasonably when making any decisions; and (4) tracking your time and expenses when serving as the personal representative to be fairly compensated. Having a trusted advisor is vitally important to navigate this sometimes complex area of the law.  Please be aware that our firm does not handle probates where there is a conflict among the parties or potential litigation.

Owning and operating, as well as establishing or dissolving, a small business has many responsibilities. Whether you are in the conceptual phase, winding down a company or wishing to pass ownership to your family, employees or an unknown third party, Kristin Dittus can help you through each of these milestones.

Services for businesses include information and advice on the following:

• Entity formation, including the consideration of which type of business organization, an S-corporation, corporation, a limited liability company (LLC), family limited partnership, or other entity, suits your needs best
• Drafting the required formation documents, such as articles of incorporation, articles of organization, by-laws, operating agreements, etc.
• What the filing requirements are for Colorado and the IRS
• Which professionals, accountants, bankers, insurance agents and financial planners are needed to assist you with your business
• Required records, such as keeping company minutes, documents, and other records
• How to limit your liability as a business owner
• Important considerations when hiring employees or independent contractors

Existing estate plans should be reviewed every three to five years to determine if your current plan continues to minimize tax liabilities, maximizes asset protection and modern tax planning, and effectively accomplishes your goals under the constantly evolving tax rules.

2024 TAX LAW SUMMARY

The current tax numbers in effect for 2024 are below. The Applicable Exclusion Amount (AEA), also known as the Unified Credit, is the amount each person can have in their estate at death or give away during life without incurring any tax consequences. The 2017 Tax Cuts and Jobs Act increased AEA amounts until December 31, 2025. On January 1, 2026, the AEA will return to the previous amount, which is $5 million indexed for inflation from 2010. This is estimated to be around $7–$8 million at this time.

1. Annual Exclusion from Gift Tax

There is an annual exclusion from gift taxes of $18,000 per person. Therefore, you may give any one person $18,000 (or $36,000 if you and your spouse are giving a joint gift to one person) without reporting it on a gift tax return.

2. Estate Tax Exclusion

You are allowed to give away, in life or at death, up to $13.61 million per person and $27.22 million per married couple before any tax will apply.

3. Portability

Portability allows a surviving spouse to apply or “port” any unused estate tax exclusion from their deceased spouse’s estate to his or her own estate.

For example, if a husband dies owning $5 million in assets, he uses $5 million of the $13,610,000 he is entitled to upon his death without owing taxes. As the surviving spouse, the wife receives a large inheritance of $30 million after her husband’s death. Wife can apply her $13,610,000 estate tax exclusion, plus her late husband’s remaining $8,610,000 exclusion to avoid estate tax on $22,220,000 and without further planning, would owe estate tax on the remaining $7,780,000.

4. Unified Tax Exclusion

The estate, gift and generation-skipping transfer taxes are unified, so if the entire exclusion amount of $13.61 million is gifted during life, assets in excess of that amount will be taxed at death. The exclusion amount is increased every year for inflation.

5. Tax Rates

The estate, gift and generation-skipping transfer tax rate is 40% for any amounts over $13.61 million per individual.

6. Step Up (or Down) in Basis Upon Death

There is a step-up (or down) on the tax basis of most assets at death. A “step up in basis” at death means all property titled in the name of the decedent will go from having a cost basis (the property’s original cost/price) or adjusted basis (such as with depreciated property) up or down to the fair market value on the day of death. 

For example, if a house costs $500,000 in 2019 (the basis) and sells for $600,000 in 2022, there is $100,000 in gain, possibly subject to capital gains tax. If decedent owns the property at death, the basis value gets “stepped up” to $600,000 without gain recognition. This allows heirs of an estate to inherit property without a tax. If sold during life, the appreciation may be taxed. Appreciation of an asset after death is taxable to the person who inherits the asset

7. Marital QTIP Trusts vs. Family Trusts

A Marital Trust, with the spouse as the only beneficiary and a required annual income distribution, is a Qualified Terminable Interest Property (“QTIP”) Trust, and assets receive a step up in basis at the death of the spouse. Trusts with beneficiaries other than the spouse (such as children) cannot qualify as a QTIP Trust and trust assets do not get the benefit of a step up in basis. A testamentary General Power of Appointment may be granted to get the step up in non-QTIP Trusts by a Trust Protector.