wills, trusts, estate tax, small business planning and counsel, estate administration and litigation advice.

WHAT ABOUT YOUR WILL?

ESTATE PLANNING AND TAX FACTS

WHEN YOU SHOULD UPDATE YOUR ESTATE PLANNING DOCUMENTS:

Estate planning documents should be reviewed by the client and counsel as necessary every three to five years to make sure the documents comply with changes in the law and your current estate planning goals and needs.  Additionally, it is a good rule of thumb to have your documents reviewed by a qualified estate planning attorney if any of the following events occur in your life or a family member’s life; a new child, a death of a family member, a family member traveling over seas (for military or otherwise), significant increase/decrease in assets, divorce, incapacitation of a family member, or disability of a family member. 

LIVING WILLS AND POWER OF ATTORNEY:  ***Important Change***

Recently an important change occurred in the law regarding health care.  As you may be aware, the federal government strengthened privacy laws making it more difficult to obtain another person’s medical records.  This change in the law may significantly impact you, in the event if you designated another person to act as your agent to make medical decisions for you at such time as you become disabled.  Your agent may not be able to obtain the medical information about you that your agent requires to make important medical decisions for you at a time when you are unable to make them for yourself.  In order to avoid this problem, your medical power of attorney should include specific language referring to the Federal law appointing a health care “personal representative”.

A Medical Power of Attorney and a Financial Power of Attorney are extremely important.  In the event that you or a family member are unable to make a decision, the Power of Attorney can be used.  Often times this is true for family members who have loved ones over seas.  Additionally, many hospitals request a Medical Power of Attorney when going in for any routine procedure.

NOMINATION OF GUARDIANSHIP:

Having children is a rewarding and exciting experience, but have you ever thought to yourself, what if something happened to me?  Nomination of Guardianship provides the opportunity for you to decide who will take care of your children if you suffer an untimely death.  Although this is hard to think about, it is a relief once it is complete.  Additionally, we can provide temporary guardian papers in the event you decide you need a vacation that would take you far away from your children.

DISPOSITION OF LAST REMAINS:

Deciding what you want to do with your remains once you pass is a tough decision, but a decision that follows your wishes.  Upon completing a direction regarding this issue, your family will clearly understand your wishes regarding any funeral ceremony as well as burial.   

WILL:

As of June 7, 2001 the Federal Tax Law changed.  Because of this change, each individual’s estate planning needs vary greatly depending upon the value and type of assets they own. 

When people have minor children or wish to streamline distribution of their estate upon their death, a properly drafted Will or Revocable Trust is essential in order to avoid the possibility of costly delays or court battles after your death.

In Colorado, if you die without a Will, your estate will be distributed to your spouse and/or children or family under the law of Colorado, which may or may not meet your intent.

In Colorado, the surviving spouse can reject the Will of his/her spouse and claim certain statutory rights to property based upon a graduated scale from the first year of marriage (8%) to the tenth year of marriage (50%). There are also certain allowances available to a surviving spouse and dependant children in property and money.

However, spouses can execute an estate planning marital agreement not to assert each spouse's election right, described above, on the separate property of the other spouse. This is usually important in second marriages when either one or both spouses have children from a prior marriage. This type of planning does not affect divorce, only the organization of both spouses' estate planning during the marriage.

A surviving spouse usually receives the entire estate of his/her spouse free of federal estate taxes if the federal unlimited marital deduction is used, i.e. passing property using Joint Tenancy. However, using this deduction may not maximize a couple's estate tax savings if the value of a couple's estate exceeds 2 million dollars (for 2006-2008, see chart below). Properly drafted Wills or revocable trusts can transfer up to 4 million dollars per couple estate tax free. Many people do not understand that their estate taxable value includes the face value of life insurance policies and all retirement money, which they owned at their death and pass by beneficiary designation.

A couple who has an estate exceeding 4 million dollars, may have serious estate tax problems and not be aware that there are many ways to avoid estate taxes, which can quickly run up to 46% or higher (see chart below). The new tax law changes traditional estate planning approaches and many people's Wills and/or Trusts may need substantial revisions to meet its requirements. Properly drafted estate planning documents will assist in the orderly distribution of a person's estate and the savings of estate tax at death.

Please do not hesitate to send an e-mail to us with your questions regarding the estate planning issues discussed above as well as any other estate, business or charitable planning issues. In the event you wish to have a meeting to discuss your planning ideas and questions, you may contact us by telephone or e-mail and we will be happy to set a meeting at a time and place convenient to us both.

Higher exempt amounts

The legislation repealing the death tax that passed in the House would have converted the unified credit and its exemption into a true exemption. In the end, the Senate-House Conference opted to retain the unified credit structure for estate and gift taxes. The amount exempted by this credit is 2 million dollars for 2006-2008.  Additional increases are scheduled for future years. (See the table below)

Comment: The changing exempt amounts are an occasion for will and trust review, one that clients are likely to welcome. One problem to watch for is the inadvertent over-funding of a bypass trust as the value of the exempt amount rises.

Each session, Congress discusses the sun-setting provisions of the current estate tax law.  However, the law currently automatically repeals (“sunsets”) in the year 2011 and the estate tax exemption rolls back to $1 million.  Therefore, it is a good idea to pay attention in the upcoming years to any federal tax law changes.  Ultimately, we have no idea what Congress will enact regarding estate taxes, but it is a good idea to review your estate documents with qualified counsel over the next few years to keep updated on the changes in the law.   

Sample impact

Medium-sized estates are the biggest beneficiaries of the transfer taxes relief scheduled in advance of repeal, as the following table illustrates. The state death tax credit has not been included in these calculations.