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

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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Third Party Rights: Small Estates and Non-Probate Assets

Many of our probate statutes are designed to carry out a decedent’s intention as expressed in his or her will. Certain rules of construction (survivorship, substitution of assets) apply to wills and revocable trusts as will substitutes. The statutes also provide for recognition and ordering of third party (non-beneficiary) interests in probate and revocable trust assets. These would include taxes, creditor claims, and family protection entitlement during the period of administration.

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Beneficiary Designations May be Dangerous to Your Estate Plan

Traditionally, the central document in an estate plan was a will or revocable trust. For many people, that continues to be true, but it is now possible to pass almost any kind of property outside the terms of your will. For example, this can be done by adding the beneficiary as a joint owner on a bank account, by naming the beneficiary as a “pay on death” (POD) or “transfer on death” (TOD) payee on a stock or securities account, or by signing a “beneficiary deed” that names a beneficiary to become the owner of real estate when you die. Colorado recently added automobiles to the list of assets that can pass by a TOD beneficiary designation. These arrangements, which I refer to generically as “beneficiary designations” can be useful, but they can also seriously disrupt a careful estate plan if they are done without care and appropriate advice.

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Elusive Assets After Death

Aubrey McClendon, a co-founder of Chesapeak Energy Corp. and a pioneer in the shale industry, died on March 2, 2016. Mr. McClendon had significant assets yet his estate appears to be insolvent. Creditor claims filed to date exceed $1.1 billion. Mr. McClendon’s business holdings were complex and the estate has had a hard time selling assets.

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Don't Forget Your Annual Exclusion Gifts!

A donor may give up to $14,000 per year per donee that qualifies for the annual exclusion from federal gift tax (generally, a gift of a present interest). Earlier in the year, it had been anticipated that amount would increase to $15,000 in 2016, but that turned out not to be true because of a low rate of inflation. So if you have not made annual exclusion gifts for 2015, and you are in a program of giving to reduce the size of your estate, you should make your $14,000 gifts before the end of the year, and you can make 2016 gifts of the same amount in January. If spouses intend to "split their gifts" by doubling the amount of the annual exclusion gifts, the election to split gifts must be made on a U.S. Gift Tax Return (form 709) filed with the IRS. The federal estate tax exemption is $5,430,000 in 2015, and it is increasing to $5,450,000 for decedents dying in 2016.

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Pretermitted Heirs

Suppose you have a will and then, following the execution of the will, get married/or have a child. Did you know that Colorado has a “pretermitted heir” statute which basically provides that, under those circumstances, the new spouse or child is granted an intestate share of your estate. The intestate share is 50% + for a spouse and an equal share of the balance for a child. The shares are to be distributed outright, and the failure to redo your will may seriously distort the pattern for distribution of your estate. For example, your present will may set up trusts for children which coordinate the management and timing of trust distributions for the benefit of your other, pre-existing children.

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