Navigating Estate Planning
Our estate lawyers discuss with the client not only their assets, but also their principles. For example, many of our clients have in place a long-standing tradition of giving to their religious institutions, communities, charitable organizations, etc.; however, planning may not be in place to continue that tradition after death – not because those administering the estate do not think it is important, but merely because the client has not thought through this issue and left sufficient instructions.
Our Estate Planning Questionnaire is designed to raise issues to explore more than the (relatively simple) question of who gets what when. There are many questions designed to provoke thoughtful consideration of many other issues.
Get started with your planning by downloading our estate planning questionnaire.
While tax planning is important, the client’s personal wishes should take priority. Our firm guides the client in addressing the following:
- Who does the client want to receive the assets that will be in his/her estate?
- Is there a spouse who, due to differing levels of wealth, the client wishes to treat differently than he/she would be treated under the prevailing statutes?
- Is there a “partner” the client treats as his/her spouse but who is not, legally, a spouse?
- Is this a second marriage with assets and children that fall under the differing categories of “yours,” “mine,” and “ours”?
- Are there persons the client wishes to be treated as children but are not legally children of the client?
- When, if ever, does the client want the assets to be turned over to the beneficiary?
- Are there beneficiaries who, for whatever reason, the client does not want to ever have control of the assets (e.g., the beneficiary is a spendthrift, the beneficiary is suffering from drug or emotional dependency, or from some other incapacity)?
- Are there any beneficiaries who can better utilize Medicaid or other social security benefits if the assets can be kept out of their control?
- Who does the client want to manage the assets until they are turned over to the ultimate beneficiary?
Whether you are naming the personal representative/executor, the trustee, or an agent under a power of attorney, you need to consider the fact that the named fiduciary will have the duties and responsibilities of
- Investment decisions.
- Keeping accurate financial records.
- Understanding and applying fiduciary accounting rules and using discretion in applying these rules.
- Preparing and filing appropriate tax returns, and making the appropriate tax elections.
- Allocating discretionary distribution between or among multiple beneficiaries and dealing with disputes with beneficiaries who question the use of discretion.
While it is true that a trusted friend or relative might be qualified to act as an investment advisor, that person may not be the best choice to make the multitude of discretionary decisions encountered. Conversely, the person chosen to be the Guardian of a minor or otherwise incapacitated person might not be the best person to handle the finances.
In short, it may be appropriate to divide duties among an investment advisor, a financial decision-maker, and, where appropriate a guardian of an incapacitated person. Or it may be appropriate simply to name someone not the fiduciary on whom the fiduciary can rely for advice. The alternative choices are numerous, and often depend on the values elicited in the course of a careful review of the Estate Planning Questionnaire.
Holistic Approach to Estate Planning
Estate Planning is more that merely determining who will get what and when. There are other issues that are rarely addressed, not because they are unimportant, but because they simply have never been discussed. These include:
- Burial and memorial service instructions
- Identification of all internet (digital) assets, including user names and passwords
- Instructions regarding the continuation or termination of social media accounts
- Identification of all internet access usernames and passwords, including bank accounts, automatic payments by bank account or credit or debit cards, and other matters that no longer communicate by the hard copy “snail mail”
- Life insurance policies and retirement plans and annuities
- Real estate owned in other states
Estate Tax Planning
Although most estates fall well below the need to consider estate taxes in Colorado, the same is not true if the client owns real estate in other states or could be considered a resident of another state. For those large estates or those cases where the laws of other states must be considered, we offer the following services:
- Personal Transfer Tax Planning (Gift, Estate, and Generation-Skipping): Effect the transfer of one’s estate during life and after death to minimize federal and state estate tax losses.
- Specific planning around the generation-skipping tax liabilities.
- Planning to preserve the family wealth with by long-term trusts, “dynasty trusts,” and planned giving vehicles such as split-interest charitable trusts.
Why an Estate Plan if no Estate Tax.
For a review of specific issues that militate in favor of having an Estate Plan even for smaller estates and for some of the complications of dying intestate, without a Will, see the program “What, me Worry?” under Resources.
Charitable Giving Planning
Have you taught your children the importance of giving? Have they ever seen you make a charitable contribution? Even in your House of Worship, do they see you put anything in the plate, or do you send in a check?
The gift of giving must be shared. It is not inherent in our being but must be learned, over time. Consider an annual family meeting, where you collectively decide the causes to donate to and the gifts’ timing. Encourage your children to come to you regularly with suggestions for giving. Some will be appropriate for “emergency grants,” and some should warrant consideration at the annual meeting. The most important thing is to instill in your progeny the gift of giving. Most often what lacks in the development of an estate plan is passing this idea to the next generation. Most post-death disputes would be avoided if the parents had instilled in their children an understanding of the gift of giving. Consider the following:
- Are there specific charities that the client has supported during his / her lifetime that would be appropriate recipients of bequests in the client’s Will?
- Is it appropriate for the client to make a lifetime gift to a split-interest charitable trust, reserving the income for life, with the remainder to charity?
- In so doing, the client may benefit from a current income-tax charitable deduction, even though the client’s estate is less than would be expected to benefit from an estate tax charitable deduction.
- The remainder after the lifetime income could go to a charity selected by the client, or could be set up so that his / her children could choose the charity.
- The lifetime income tax deduction could produce sufficient income tax savings, allowing a lifetime gift to those who would have inherited if the gift had not been made.
- How about setting up a charitable “donor-advised fund”? In doing so, the donor receives the immediate tax deduction from a large charitable gift to a public charity. The donor can also periodically select charities. After the donor’s death, the donor’s children can continue as the donor-advisors.