Colorado Probate Blog - Wade Ash Woods Hill & Farley, P.C.

March Comes in Like a Lion for Scams

You never thought it would happen to you...don't be the next victim of identity theft.

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346 Hits

Swedish Death Cleaning

A common problem which many families encounter following the death of a parent or other relative is how to deal with the decedent’s personal property. In the absence of a legally effective personal property memorandum, will, or other governing document signed by the decedent specifying who gets what, the disposition of the personal property sometimes leads to bitter, protracted, and often times expensive controversies between the surviving spouse, children of the first or subsequent marriages, or other family members.

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Selecting Your Trustee

Selecting your trustee is one of the most important decisions to make when creating a revocable trust. The trustee is a fiduciary with the legal obligation to carry out the directions set forth in the trust agreement. The responsibilities and duties include collection and management of assets, preparing tax returns and distributing the income and principal of the trust as the document sets forth.

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573 Hits

Don’t Defer Planning Your Estate Because The Estate Tax Might Be Repealed

In 2001, when the estate tax exemption was $675,000 and George W. Bush was President, Congress “repealed” the estate tax. But the repeal was phased in over ten years and was then scheduled to last for only one year. Instead of actual repeal, what we got, under President Obama, was a reinstated estate tax with a much higher exemption of $5 million, indexed for inflation. The Republican party now controls both houses of Congress as well as the White House, and we are again hearing calls for repeal of the estate tax.

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Colorado's New Trust Decanting Statute

Effective August 10, 2016, the Colorado legislature enacted C.R.S. § 15-16-901 et seq., the Colorado Uniform Trust Decanting Act (the “Act”). “Decanting” generally refers to the distribution of trust property from one trust to another trust pursuant to a trustee’s discretionary power to make distributions for beneficiaries. New York was the first state to enact a trust decanting statute in 1992; now, nearly half of the states, including Colorado, have specific statutes addressing and authorizing trust decanting in various forms.

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2962 Hits

IRS Delays Basis Reporting for the Third Time

In Notice 2016-27, 2016-15 IRB 1, the IRS again delayed until June 30, 2016 the due date for filing new Form 8971 by an estate to report basis in a decedent's estate both to the IRS and to the beneficiaries.  As noted in earlier blogs, the "Highway Bill" signed into law on July 31, 2015 requires executors of estates filing U.S. Estate Tax Returns (Form 706) on or after that date to file a statement with the IRS within 30 days, and to report the fair market value of assets on the return to the beneficiaries.  The 2015 Form 1041 (U.S. Fiduciary Income Tax Return) includes provisions requiring consistent basis reporting.  The IRS had delayed the due date for new Form 8971 until February 29, 2016, then to March 31, 2016, and now to June 30, 2016.  The Form and Instructions are posted on the IRS website and proposed regulations have been released, but numerous questions have been raised.  The requirement to file Form 8971 does not apply to "portability returns" (those filed for estates with gross value less than the filing threshold solely to increase a surviving spouse's exemption), nor to assets that qualify for the charitable or marital deductions.  Basis must only be reported to beneficiaries who may receive property from an estate where those assets increased the federal estate tax.

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IRS Delays Basis Reporting Again

In Notice 2016-19, 2016-9 IRB, the IRS again delayed the due date for filing the new Form 8971, Information Regarding Beneficiaries Acquiring Property From a Decedent, reporting the basis in a decedent's estate both to the IRS and to the beneficiaries. The 2015 Form 1041 (U.S. Fiduciary Income Tax Return) includes provisions requiring consistent basis reporting. As noted in earlier blogs, the "Highway Bill" signed into law on July 31, 2015, requires executors of estates and certain heirs filing U.S. Estate Tax Returns (Form 706) on or after that date to file a statement with the IRS, and to report the fair market value of assets on the return to the beneficiaries within 30 days of filing the Form 706. The IRS had delayed the due date for new Form 8971 until February 29, 2016, and has now extended that date again to March 31, 2016. The Form and Instructions are now posted on the IRS website, but numerous questions have been raised, resulting in not only another delayed due date, but a "suggestion" by the IRS that taxpayers wait until proposed regulations are issued to file the return. Proposed regulations are expected "shortly."

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1024 Hits

IRS Delays Basis Reporting Due Date

As noted in an earlier blog, the "Highway Bill" signed into law on July 31, 2015 requires executors of estates filing U.S. Estate Tax Returns (Form 706) on or after that date to file a statement with the IRS within 30 days, and to report the fair market value of assets on the return to the beneficiaries. In Notice 2015-57, 2015-36 IRB, the IRS has delayed the due date for both the information return and the statement until February 29, 2016.

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1041 Hits

Inherited IRA Not Protected From Bankruptcy

In Clark v. Rameker, 113 AFTR 2d 2014-889 (June 12, 2014), the U.S. Supreme Court unanimously ruled that inherited IRAs do not qualify for the bankruptcy exemption that applies to a debtor's own retirement accounts. Some states have their own exemptions from creditor claims that may include inherited IRAs, but the debtors in this state does not. The Supreme Court's decision was based solely on the federal exemptions in the bankruptcy code. In C.R.S. §13-54-102, Colorado has a list of state exemptions for protection from creditor claims. That list includes "property, including funds, held in or payable from any pension or retirement plan or deferred compensation plan..., any individual retirement account, as defined in 26 U.S.C. Sec. 408, any Roth individual retirement account as defined in 26 U.S.C. Sec. 408A..." In 2010, Laurie Hunter proposed in the Statutory Revisions Committee of the Trust & Estate Section of the Colorado Bar Association that Colorado's list of exemptions be clarified to specifically include a reference to inherited IRAs, as a result of conflicting decisions in federal Circuit Courts. Colorado had earlier amended this statute to include the specific reference to Roth IRAs quoted above. That proposal was not adopted by SRC, although a number of members thought our statute was broad enough to include inherited IRAs, which are defined in 26 U.S.C. Sec. 408(d)(3)(C) (a part of Section 408 mentioned with respect to IRAs). However, if creditor protection is important for beneficiaries, it may be preferable to have IRAs payable to trusts created for the benefit of those beneficiaries instead of payable outright to individuals who then "roll them over" into inherited IRAs. If a surviving spouse rolls over an IRA to his or her own IRA, then it should be protected as a part of that spouse's own retirement account. Other individual beneficiaries do not have that option.

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1913 Hits