Boulder Estate Planning Legal Blog

Contesting Trusts and Actions of Trustees

May 20, 2023 | by Braverman Law Group

Trusts are increasingly utilized in Colorado and throughout the nation. Trusts offer several benefits in estate planning and asset distribution. Trusts allow for great specificity regarding how, when, and to whom assets are distributed. Additionally, there is a wide variety of special-use trusts dedicated to particular estate planning coals, such as charitable giving or tax reduction.

However, a trust not only designates who may benefit from the funds or resources in the trust, but addresses situations of incapacity, such as strokes, dementia, or Alzheimer’s. Those at risk of such circumstances may want to consider utilizing trusts to ensure that their resources and funds are preserved, managed, and spent in a manner that conforms to their wishes while in the care of loved ones or healthcare professionals.

Contesting a Trust

Contesting Trusts and Actions of Trustees

May 10, 2023 | by Braverman Law Group

Trusts are increasingly utilized in Colorado and throughout the nation. Trusts offer several benefits in estate planning and asset distribution. Trusts allow for great specificity regarding how, when, and to whom assets are distributed. Additionally, there is a wide variety of special-use trusts dedicated to particular estate planning coals, such as charitable giving or tax reduction.

However, a trust not only designates who may benefit from the funds or resources in the trust but addresses situations of incapacity, such as strokes, dementia, or Alzheimer’s. Those at risk of such circumstances may want to consider utilizing trusts to ensure that their resources and funds are preserved, managed, and spent in a manner that conforms to their wishes while in the care of loved ones or healthcare professionals.

Contesting a Trust

Similarly to a will, trusts can be contested for a number of reasons, including but not limited to a lack of testamentary capacity, undue influence, or a lack of requisite formalities. Additionally, beneficiaries may challenge a trustee’s actions for violating the terms or purpose of a trust. Many, if not all, settlors will utilize mechanisms to limit challenges, such as inserting no-contest clauses in the trust that sever a beneficiary’s interest if they unsuccessfully challenge the trust.

How to Use an “Inheritor’s Trust” to Protect Your Heirs’ Inheritance

April 30, 2023 | by Braverman Law Group

Estate planning strategies and the creation of trusts are often used to protect a family’s assets from high tax burdens or other preventable attacks on an estate. The most common way for anyone seeking to control the division of their estate is by drafting a will, which mandates how the estate assets are divided. Some people instead choose to place their money into a trust that may offer additional protection for the assets in an estate. Traditionally, parents planning a bequest to their children or grandchildren might set up a trust themselves for the heirs’ benefit; however, there are alternatives to a benefactor-initiated trust that may work better for your family.

An “inheritor’s trust” is a trust that is set up by the heirs to an estate before the death of a benefactor. Using an inheritor’s trust can further help protect the assets of an estate from creditors, divorcing spouses, and high tax burdens. Unlike traditional trust instruments, which are designed from the top down, an inheritor’s trust is designed to be initiated from the bottom up. This change represents a growing movement for beneficiaries and heirs to an estate to take a more active role in managing the estate while the benefactor is still alive.

Although inheritors need not know the exact amount of their inheritance to create an inheritor’s trust, the trust still must be created with the consent of the benefactor. This could create uncomfortable conversations, as the benefactor must be alive at the time of its creation for the trust to function properly. If properly created, an inheritor trust can protect a family’s assets for generations as the trust continues to function, even as the generations pass. Anyone seeking to leave a legacy for their children or other heirs should research and ask questions about the possibility of an inheritor’s trust to manage and protect their assets most effectively.

Exploring the Financial Advantages of Nevada “Incomplete Gift, Nongrantor Trust” (NINGs)

April 11, 2023 | by Braverman Law Group

As of 2022, Colorado features a 4.40% state income tax rate. According to the Tax Foundation, state income tax rates throughout the nation can run as high as 13.30% in California, or as low as 0% in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. Some states are known for promoting favorable asset protection laws designed to attract wealthy families and individuals from across the country and the world.

Nevada is one such state looking for innovative ways to help families and individuals protect and save their wealth. One such method and tool that Nevada has introduced is the Nevada Incomplete Non-Grantor Trust (NING). NINGs are not a one size fits all solution to addressing state income tax issues but can be highly advantageous in certain circumstances.

What is a NING?

A NING is a trust in which income is placed to be paid out to beneficiaries living in a state with no income tax or an income tax with lower rates. In order to avoid state income tax, the trust must not be categorized as a “grantor trust” under the income tax laws of the state in which the settlor resides. Further, to avoid any federal gift tax issues, trust contributions must not be treated as gifts for federal gift tax purposes. Transfers that are not gifts are often referred to as “incomplete gifts.”

Reasons Why Will and Estate Planning Means You Care for Your Loved Ones

March 21, 2023 | by Braverman Law Group

When a loved one passes away unexpectedly, it can be a shocking, emotionally intense, and confusing time. The confusion may stem from figuring out what happens next. When it comes to figuring out who has legal rights to a deceased person’s property, it is not as straightforward as one may think. According to a recent CNBC news report, two-thirds of adults living in the United States have no will. On the one hand, different states have different laws when it comes to will and estate planning. In addition, after a loved one passes without a will, it can cause intense complications between family members and potential heirs because of varying goals.

The probate court is a section of the court system that oversees the execution of wills and the handling of estates, conservatorships, and guardianships. In an intestate situation or a situation where someone has died without a will, the matter will likely be handled in probate court. If a person passes away without a will or intestate, the probate court decides who gets the deceased person’s property, although it is up to the survivors to claim their right to the property. When there is no will in place, you can never be sure how a court will decide to distribute the deceased person’s property.

In an intestate situation, the probate court appoints an executor for the estate. This executor will follow the laws of the state where the deceased person lived. This process may involve identifying the kinship of the deceased and may cause the children to have the burden of proving that they are the offspring of the deceased. The family members also will need to locate the records of the deceased, including proof of residency, amongst other records. The process can take a lot of time.

Can Colorado Trust Beneficiaries Remove a Trustee?

March 10, 2023 | by Braverman Law Group

Family trusts can offer a lot of advantages, including tax advantages and benefits from long-term care planning. However, it is not uncommon for there to be disputes and conflicts between trustees and beneficiaries. When such disputes arise, there may be a time when you consider whether a trustee needs to be removed and you may be wondering what this entails.

Understanding the Terms

As a quick review of some essential terms, the person who creates a trust is called a trustor, grantor, or settlor. A family trust is created when the trustor and the beneficiaries of a trust are members of the same family. A trust agreement is the legal document that sets up a family trust, and the agreement typically designates an initial trustee or two or more initial co-trustees. The trust agreement also designates one or more successor trustees in the event that the initial trustees are no longer able to serve (i.e. in cases of death, removal, or resignation). The trust agreement should include the circumstances under which a trustee may be removed by the trustor.

Understanding How Removal Works in a Revocable Trust

It is important to note that the removal of a trustee is governed both by the trust agreement and by state law. When looking at a trust agreement, in a revocable trust, the trustor may amend the trust agreement in order to remove a trustee. Trust agreements typically allow the trustor to have the ability to remove a trustee, and this may be done at any time and also may be done without the trustee giving a reason. However, in an irrevocable trust, the trustor cannot remove a trustee.

Should “Swedish Death Cleaning” be a Part of Your Estate Plan?

February 21, 2023 | by Braverman Law Group

All cultures worldwide have different rituals and traditions pertaining to the end of one’s life. As the radius of influence between cultures is shortened by technology and migration, some of the death traditions of all cultures become available for discovery and possible adoption. The Swedish practice of döstädning, or “death cleaning,” could help American and Colorado families to ease the burden on loved ones when someone passes away.

Death cleaning, while it may have a morbid-sounding name, is truly a service that is done by someone approaching the end of their life to help ease their heir’s difficulties in managing the estate. Swedish author Margareta Magnusson, author of the popular book, “The Gentle Art of Swedish Death Cleaning: How to Make Your Loved Ones’ Lives Easier and Your Own Life More Pleasant,” explained that the practice stems from the Scandinavian values of simplicity and minimalism. Death cleaning involves going through one’s personal effects and belongings and handling their disbursement or disposal before one’s death.

Death cleaning can benefit both the aging person as well as their heirs and beneficiaries. The work of managing a deceased loved one’s estate can be physically and emotionally taxing. Grieving family members are often forced, while under emotional distress, to decide what items are important and what can be disposed of or donated. Through the practice of death cleaning, an aging person can make some of these decisions themselves, helping their heirs make remaining decisions after their death. Studies have shown that minimalist practices, including death cleaning, can also have a positive effect on the mental health of the person going through their belongings. The act of organizing and cleaning in anticipation of death can be both sentimental and cathartic, possibly improving the cleaner’s quality of life for the last few years and months.

How to Take Advantage of the 20% Pass-Through Tax Deduction for Rental Properties

February 10, 2023 | by Braverman Law Group

In 2017, the US Congress passed a bill known as the Tax Cuts and Jobs Act, which was signed by the President and has since become law. The Act modifies the tax code in various ways, generally reducing the amount of taxes that American business owners are required to pay annually. Part of the Act includes a 20% pass-through tax deduction on rental property business income. This deduction could make a significant difference in the tax burden for landlords who operate their rental properties as a business.

According to an article recently published by a financial advising trade publication, taking advantage of the deduction may not be simple for all Colorado landlords. The deduction requires landlords to own the property personally or through a business entity such as an LLC. Additionally, the properties must be managed as a “business” and not as an investment. Although the exact requirements for a property to be managed as a business are not clearly laid out, landlords who meet certain requirements laid out by the IRS can ensure that they are able to use the pass-through deduction.

The IRS has established a “safe harbor” rule that allows Colorado residents and other Americans to utilize the pass-through deduction if they keep separate books for their rental properties and can show that at least 250 hours of real estate rental services are performed on the properties each year. The 250 hours do not need to be performed personally by the taxpayer and can include services such as maintenance, cleaning, lease preparation and negotiation, advertisement, collecting and processing rent, as well as other work performed on the business.

SECURE Act 2.0 Changes for Federal Retirees

February 8, 2023 | by Braverman Law Group

On December 29, 2022, the SECURE 2.0 Act was passed in an effort to make retirement planning easier for federal retirees. The Act, however, contains myriad provisions and may be difficult to comb through for someone looking to adapt their retirement plans to take advantage of the more lenient new rules. Staying abreast of legislative changes to retirement requirements and benefits can help ensure there are no surprises when the time comes to begin withdrawing retirement funds. And knowing how to plan around certain requirements during early retirement planning can ensure your nest egg is as large as it needs to be to meet your needs when your retirement day approaches.

Required Minimum Distributions Changes

Many of the SECURE 2.0 Act’s new provisions are around required minimum distributions or withdrawals that must be taken from certain retirement accounts, such as traditional IRAs or Thrift Savings Plans, when the account holder reaches a certain age. These rules stand to make sure retirement accounts are not used as wealth transfer vehicles but are instead used by a retiree during their lifetime.

The act now delays the start age from 72 to 73 starting in 2023, and it will increase again to 75 in 2033. Financial planners caution that this may not be beneficial for tax purposes, though on its face, it seems more lenient. And for individuals close to these minimum ages, more time to plan and strategize could be a benefit. Always conduct a financial planner and your attorney when planning these withdrawals.

Don’t Let Your Life Policy Expire! It’s Worth Money!

January 22, 2023 | by Braverman Law Group

While taking out a life insurance policy always seems like a good idea at the time, your life circumstances can change such that continuing to pay premiums no longer makes sense. For example, if you do not have dependents, or if your dependents would not face financial hardship if you passed away without a life insurance payout, it may not be the best move to hang on to your life insurance policy. Assess if your family can keep up with payments such as a mortgage, student loans, and car payments without harming their standard of living. In addition, you may not be able to afford to pay your premium any longer. If you cannot afford to pay your premium, selling your policy may be an attractive alternative to simply letting it lapse, depending on the value of your policy.

But a life insurance policy that no longer makes sense for you and your family may not be worthless. Instead of letting the policy lapse or expire, consider selling your life insurance policy. In a life settlement, you can transact on the secondary market with investors to sell part of or all of your life insurance policy for cash. Payouts can vary significantly, so selling may not make sense in all circumstances. Speaking with a financial advisor can help you assess all of your options.

Do I Qualify to Sell My Policy?

If you are over the age of 65—and especially over the age of 70—or have had a recent unfortunate change in health diagnosis, you are more likely to find a buyer for your policy. High-value policies, such as those with a death benefit payout of at least $100,000, and policies issued by well-rated life insurance companies are also most attractive to investors. Policies with flexible or low premiums, to minimize payments the investor will have to make on the policy, are also preferred.