Boulder Estate Planning Legal Blog

Is It Time to Review My Business’s Ownership Agreement?

September 30, 2024 | by Braverman Law Group

In June 2024, the United States Supreme Court issued an important decision in a case called Connelly v. United States. The decision has huge implications for business owners working on their estate plans, and there are several approaches that businesses can take moving forward in light of the decision. Because the decision itself is technical, it can be difficult to parse out how to react. With the right Boulder estate planning attorney, though, you can ensure that your estate plan is appropriately responsive to the Connelly decision. On today’s blog, we offer a brief review of the Connelly decision as well as some ideas for how businesses can review their ownership agreements with the decision in mind.

Legal Landscape Pre-Connelly

As the legal landscape stood before the Connelly decision, it was common for companies with business succession plans to include the use of life insurance policies to fund a buy/sell agreement. In the past, case law has allowed estates to exclude insurance proceeds when valuing business interests in buy/sell agreements. This reality, in turn, has allowed companies to account for life insurance policies without having to worry about the Internal Revenue Service (IRS) including these policies as part of their business valuations. When the life insurance policies were excluded, businesses’ estate tax bills were necessarily lower. This is the background against which the Supreme Court decided Connelly on June 6, 2024.

What’s the Difference Between a Will and a Trust?

August 31, 2024 | by Braverman Law Group

When you begin your estate planning process, you begin to learn about the wide array of tools available to estate planners. As we so often tell our clients, every person is different, so every estate plan is necessarily different. The way you formulate your estate plan will depend on your personal goals, and your Boulder estate planning attorney should be able to help you figure out how to match an estate planning tool to your circumstances. Two possible estate planning tools that many of our clients consider are the will and the trust. Today, we cover some basic differences between the two, so that you can understand whether one (or both) might be right for you.

The Will

By definition, a will is a legal document. It contains an individual’s wishes and instructions for what should happen with their assets after they die. A will can include instructions for cash, bank accounts, investment accounts, real estate, personal belongings, and more. A will can also include provisions such as funeral instructions, pet care instructions, and social media account information.

Required Minimum Distributions: What You Need to Know

July 31, 2024 | by Braverman Law Group

If you have an Individual Retirement Account (IRA), you will be subject to required minimum distributions (RMDs) when you turn 73. By definition, an RMD is an amount of money that the IRS requires you to withdraw from your IRA once you reach the age of 73. The exact amount depends on every person and how much money is in their account, and there can be significant consequences if you fail to withdraw your required amount. On today’s blog, we review the basics of RMDs. Because an RMD can differ greatly depending on each person’s circumstances, if you have questions about how this blog post applies to you, contact a Boulder estate planning attorney that can help you assess your needs and goals in relation to your IRA.

How Does the IRS Calculate RMDs?

To make things simple, there are calculators you can use to figure out how much you need to withdraw from your IRA when you turn 73 years old. The calculator works by dividing your account’s year-end balance by your current year’s life expectancy factor. The IRS has what it calls a “Uniform Life Expectancy Table,” where it assigns you a life expectancy factor based on your current age. As you get older, your life expectancy goes down, so the denominator of your calculation will also go down. It follows that an older person with $100,000 in his IRA will have to withdraw more money than a younger person with $100,000 in his IRA.
There is, however, an exception to this method of calculation. The exception applies if you have a spouse that is over 10 years younger than you and that is named as the full beneficiary of your account for the whole year. In this limited scenario, the IRS uses a “Joint Life Expectancy Table” instead of a “Uniform Life Expectancy Table.” Your combined life expectancy with your spouse will be smaller, which of course means your RMD is then lower.
Of note, you can always withdraw more than the RMD requires you to withdraw. However, whatever money you do withdraw will be taxed as ordinary income, so few people decide to exercise the option to take more than necessary.

Which Accounts Require You to Take RMDs?

In general, the following types of IRAs are subject to RMDs: traditional, rollover, inherited, simplified employee pension, and savings incentive match for employees. Qualified retirement plans are also generally subject to RMDs. Roth IRAs, on the other hand, are almost always exempt from the requirement.

What is a Trust Protector, and Why Does It Matter?

June 30, 2024 | by Braverman Law Group

70ae4677-c165-4ad9-9450-5108be974ed-300x300 In drafting an estate plan, one tool available to clients is to create a trust. When you decide to create a trust, you essentially set up your assets to be managed by a third party (i.e., the “trustee”). The trustee’s job is to distribute the trust’s assets in a way that aligns with your stated goals. By putting your assets in a trust, you can avoid probate, protect funds from being used for any other purpose besides the one you intend, and avoid certain estate and gift taxes. While many clients assume the trust is only helpful for high-net-worth individuals, it can be a valuable tool no matter the size of your estate.

Many of our clients decide to create a trust as part of their estate plan, understanding its benefits and wanting to use those benefits for their advantage. What many clients don’t know from the get-go, however, is that there are extra layers of protection that could be helpful to add to their trust. One such layer is called the trust protector.

The trust protector is a person or entity that has power over the terms of the trust but that is not the trustee. The trust protector is always someone without any interest in the assets involved, meaning the trust protector does not stand to benefit from receiving any of the trust’s funds. Many times, individuals choose a law firm to act as their trust protector. The trust protector should be explicitly named in the trust’s documents so that there is no confusion about who is taking on the role.

The Corporate Transparency Act: What You Need to Know

May 20, 2024 | by Braverman Law Group

In the past few months, several clients have approached us to ask about the new reporting requirements under the Corporate Transparency Act. The Act (commonly referred to as the CTA) introduced a new set of obligations earlier this year, and companies will start to have to figure out how to comply with these regulations in the coming months. Today, we review the basic purpose, requirements, and exemptions under the CTA; but as always, if you have specific questions about how the CTA’s language might affect you or your business, we recommend that you speak with a Boulder attorney that can walk you through any possible overlap with your individual circumstances.

The Basics

The purpose of the CTA is simple: the federal government is trying to make it more difficult for individuals to create and use shell companies, which are businesses without assets that are often formed to avoid taxes or launder money. The CTA essentially creates a huge database of companies that are either formed or operating in the United States. By requiring these businesses to provide the government with basic information about their identities, the government creates a mechanism to track their functions and methods, monitoring against fraud in the process.

The new rules under the CTA were introduced on January 1, 2024; however, the government has given entities one year (until January 1, 2025) to come into compliance with the CTA’s regulations. However, if an individual or group of individuals creates a business in the year 2024, that business has only 90 days to register to file their information with the government.

Wealth Management and Tax-Related Services: The Inevitable Link

April 30, 2024 | by Braverman Law Group

The link between wealth management and tax-related services is strong and growing stronger every year. For those who are either building an estate plan, making decisions about yearly gifts, establishing trusts, or partaking in special needs planning, it can be crucial to think about how yearly taxes will change based on the structure of your assets. With April 15 having recently come and gone, it is natural to feel like you may have been rushed into filing your taxes or that you did not have the chance to include everything you intended to include.

On today’s blog, we cover some important connections between the two industries, as well as what you can do if you feel like you need more time on your taxes. As always, this blog represents only a portion of what clients should know about the overlap between wealth management and tax-related services, and it is never a bad idea to speak with an experienced attorney that can help you navigate both worlds as seamlessly as possible.

Filing for an Extension

If you are in the process of starting to prepare your estate plan, do not hesitate to request a tax extension. During tax season, there is a common misconception that requesting an extension leads to an increased audit risk, but this is not the case. Instead, extensions can offer much-needed relief to those who are taking time to get their affairs in order. For those who will end up filing differently depending on the structure of their estate plan, it can be well worth it to ask the IRS for more time to file. Additionally, creating and finalizing an estate plan can take many months, and it is better to participate in the process thoroughly and carefully, so as not to skip any key steps in drafting your plan.

CTA Ruled Unconstitutional: What Should Business Owners Do Now?

March 18, 2024 | by Braverman Law Group

In a March 1, 2024 ruling, the U.S. District Court for the District of Alabama deemed the Corporate Transparency Act (CTA) unconstitutional. In the wake of this decision, small business owners are asking how the ruling will affect their businesses and how they should move forward in alignment with the ruling. On today’s blog post, we take some time to walk you through the basics of the Court’s decision and discuss its possible implications, both today and further down the road. As always, if you have questions about how this post might or might not apply to you, contact an experienced Boulder estate planning attorney that can tell you more about the District Court’s ruling in this case and its possible implications moving forward.

What is the Corporate Transparency Act and Who Must Comply with the Act?

The CTA requires certain businesses to submit “beneficial ownership information” (BOI) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network. The Act’s purpose is to ensure that businesses are above board, in that they are not engaging in illicit activities such as tax evasion and money laundering. Importantly, only certain kinds of businesses most comply with the CTA – these businesses include LLCs, corporations, and some other entities formed through filing with a Secretary of State. To check if your business is required to report under the CTA, you can either speak with a trusted attorney or look closely at the CTA’s requirements on the Department of Treasury’s website.

The CTA lays out important details such as reporting deadlines, reporting requirements, and penalties for non-compliance. In order to comply with the Act, businesses can face average costs of $8,000 within the first year of reporting, which can be a huge lift for smaller businesses. When businesses send in information according to the Act’s requirements, the information is not made public; instead, the government uses the information to monitor possible illicit business activities.

Will Contracts: What You Need to Know

February 29, 2024 | by Braverman Law Group

The world of estate planning is a complicated one, and the sheer number of tools available to those creating, enforcing, and challenging a will or trust can be overwhelming. One of the goals of this blog is to break down some of these tools for you, so that you can go into your own estate planning journey with a foundational knowledge and an idea of what might work for your individual circumstances. In today’s blog post, we cover the will contract, reviewing its purpose, its nuances, and the reasons you might want to ask your Colorado estate planning lawyer if it is right for you.

What is a Will Contract?

A will contract is an agreement made between two individuals (most frequently made between spouses) that dictates how each person will distribute his or her assets. During marriage, money becomes comingled, making it difficult to differentiate between each spouse’s assets as the marriage goes on. With the will contract, each spouse commits in writing to a specific arrangement for his or her assets upon death. That way, for example, if one spouse comes into the marriage with more assets than the other, he or she commits to giving that same percentage of assets to his or her heirs after death, as opposed to giving a smaller percentage after the couple’s assets have become comingled over time.

Take an example. If a husband and wife have children from another marriage, and each spouse wants to make sure his or her children are protected, the couple might consider making a will contract. Without a will contract, the following scenario could occur: the husband passes, the wife legally inherits the husband’s assets, and the wife then fails to honor the husband’s wishes by giving money to his children. She instead inherits the assets and gives the money directly to her children, bypassing his children entirely. If the pair had a will contract, the wife would be obligated to give a certain percentage of her husband’s assets to his children. She would have signed an agreement binding her to look out for them, even after her husband is gone.

Make Estate Planning Your New Year’s Resolution in 2024

January 19, 2024 | by Braverman Law Group

Do you have a 2024 resolution? Have you thought through this year’s goals and priorities? The best place to start could be a place you hadn’t considered: estate planning. Time and time again, we speak with clients and prospective clients that put off estate planning for the “later” stages of their lives. Because their circumstances do not vary much from year to year, they say, there is no reason to spend the time and resources engaging in estate planning now when they could just start later.

We always dissuade our clients from thinking this way. To state the obvious, we never know what’s around the corner. With no way of predicting the future, the best tool we have to ensure that our wishes are respected in the long-term future is making a thorough estate plan as soon as possible. Below, we detail several reasons why now is the best time to start (or continue) your estate planning journey.

Tax Exemptions in 2026

The federal government is gearing up to significantly alter how it handles certain kinds of tax exemptions. For example, did you know that the gift and estate tax exemptions will all be cut in half in 2026? The lifetime gift tax exemption was $11.58 million in 2020, increased to $12.92 million in 2023, and is now scheduled to decrease to $6 million in 2026. As for the estate tax exemption, it currently sits at $12.92 million per person. In 2026, the exemption is scheduled to decrease to roughly $7 million.

These exemptions can have major implications for those trying to pass on assets to their heirs and loved ones. This means that if you want to do more in 2024 and 2025 to pass on gifts to loved ones, 2024 is the time to put plans into action. By waiting until the end of 2025, you risk missing out on a major tax benefit that will be substantially less beneficial within the next two years.

The Colorado Privacy Act: What You Need to Know

December 22, 2023 | by Braverman Law Group

Online and elsewhere, Coloradans have been buzzing about the Colorado Privacy Act, which represents our state’s successful push to pass broad consumer privacy legislation and protect individuals as they share their personal data (whether intentionally or unintentionally). The Act is good news for the state, and today we take some time to walk you through its implications so that you can be aware of your rights under the Act. The Act is both long and involved, and while today’s post does not provide a review of every provision, it represents the key parts of the Act that are vital for your own privacy protection.

In the summer of 2021, the Colorado governor signed the Colorado Privacy Act into law, and it went into effect exactly two years later. Now that the Act has been in place for six months, we are starting to see its positive effects on the lives of everyday Coloradans, and we are also starting to get questions about what some of the Act’s terms mean.

In short, the Colorado Privacy Act takes steps to protect individuals’ personal data. The more we use our phones, travel, make purchases, browse the web, and log onto social media, the more of our personal data is out there and potentially at risk of being used without our consent. With the Colorado Privacy Act, we, as consumers, maintain the right to access, delete, and correct our personal data. This data includes financial data, which is often part of clients’ efforts to protect their assets and guard against creditors, lawsuits, and other financial losses.

Protecting You Against the Sale of Personal Data

Importantly, the Act allows individuals to decide that websites cannot sell their personal data for the purpose of marketing – many sites, for example, use consumers’ data to keep records on which demographics are flocking to their pages, which they can then use to create targeted advertisements with the goal of selling more products to more people. With the Colorado Privacy Act, though, individuals can opt out of the processing of their personal data for targeted advertising.

Individuals are also now able to opt out of the use of the sale of their personal data and the use of their data for profiling, which happens when companies keep information on consumers to track what they like, don’t like, and might be interested in going forward.