COVID-19 Update: You can do Your Planning From Home

Over the past year, many changes have occurred due to the COVID-19 pandemic. While people are realizing those things that are most important to them, it has also invoked reminders to prepare for the future. For many, this should include updating an estate plan, which can provide peace of mind for them and their family. Additionally, the pandemic has caused new situations and scenarios that require estate planning documents to be further specified. Below are some elements of an estate plan that should be updated and discussed with family members—particularly in light of the pandemic.

Healthcare Documents

While every estate plan includes healthcare-related documents—including a living will and healthcare proxy—some of these forms may need to be altered because of the treatment needed for serious cases of COVID-19. For example, one of the common estate planning documents is a DNR (Do Not Resuscitate) or POLST (Physician Orders for Life-Sustaining Treatment). On this form, some people will indicate no life-saving measures be taken if they are sick, including a prohibition against intubation. However, for many hospitalized individuals with COVID, intubation is necessary to survive. As a part of their estate plan, individuals should specify the cases where they may want intubation—such as COVID treatment—from those situations they do not want intubation—like if they are in a vegetative state. Coloradans can revise their healthcare documents to reflect this change in circumstances.

Over time, the federal laws surrounding estate and gift taxes have been altered—often with the change in administration. This past month, Senator Bernie Sanders introduced his estate and gift tax reform legislation to lower the estate tax exemption to $3,500,000. For Coloradans with an estate plan in place, this may affect them. While this bill has not been passed yet, it is important for Coloradans to contact their estate planning attorneys and get ahead of the curve in case it does.

Senator Sanders’ bill aims to reduce the estate tax exemption from $11,700,000 to $3,500,000. This means if the proposal passes, an individual with an estate valued at over $3,500,000 will have to pay 45% on the excess of the limit up to the first $10 million of assets, 50% on the next $40 million worth of assets, 55% on the next $50 million, and 65% on everything over $1 billion in assets. For married couples, the estate tax exemption will be $7,000,000.

Often, individuals will think gifting away part of their estate is the solution to fall under the estate tax limit. However, this can have complications if a person gives away more money than is exempted from the gift tax. The gift tax exemption is the amount of money that an individual can give away as a part of their estate without paying a tax on the gift. Currently, the limit is $11,700,00, but Senator Sanders’ proposal will reduce the gift tax exemption to $1,000,000. This does not include the $15,000 per year that a person may gift without worrying about it being taxed.

After creating a Colorado estate plan that contains a trust, there is one final step: choosing the trustee to oversee the trust after the creator of the estate has passed away. The trustee manages the assets in the trust and distributes the assets according to the creator’s wishes. A lot of people have misconceptions about who to pick as their trustee, assuming that picking a family member will be more cost-effective and no one knows them better than a loved one. However, there are benefits to picking a professional trustee instead—and all the knowledge and experience that comes with one. Below are common misconceptions people have about choosing a professional trustee and why they are ultimately incorrect in holding these assumptions.

A Professional Trustee Does Not Understand Me or My Family’s Dynamics

Many individuals worry that if they hire a professional trustee, they are choosing someone who does not know them and their family—as compared to picking a loved one to serve as trustee. However, professional trustees not only strive to get to know their clients but also come with the experience to navigate the complicated nature of estate planning. A major part of a trustee’s job is to fulfill the creator’s written wishes. To do so, they build strong relationships with families by learning more about them and treat beneficiaries as partners during the administrative process.

While creating a trust is critical for many people and their loved ones, it may seem complicated at first. There are also important decisions that must be made throughout the process that will impact the beneficiaries and the assets within a Colorado estate plan. One such choice is who to designate as the successor trustee to a revocable living trust. A successor trustee is appointed to take over the trust when the creator of the trust—who normally serves as the initial trustee—becomes incapacitated or dies. Because the successor trustee has important responsibilities, it is important to choose the right person to serve this role.

Initially, the person creating the revocable trust normally acts as the trustee. However, in an irrevocable trust, someone else must be appointed to this position. The successor trustee’s role only comes into play when the initial trustee can no longer manage the trust. When the initial trustee either passes away or becomes incapacitated, the successor assumes control of the trust.

While a successor trustee’s role may seem similar across all successor trustees, this is not the case. The exact duties the successor trustee must undertake depends on the terms set in the trust agreement. The successor trustee often appraises the value of all the assets in the trust, pays all taxes, and sets aside funds for expenses the trust may incur. Regardless of the specifics of the trust, the main duty of all successor trustees is to handle the transfer of assets to the beneficiaries and ensure that they follow the terms written in the trust. Unlike an estate executor, a successor trustee’s role may continue for years after the initial trustee’s passing. For example, the initial trustee may leave a grandson assets that they do not want him to receive until his 25th birthday. If the initial trustee passes when the grandson is 14 years old, the successor trustee must safeguard his inheritance until his 25th birthday.

While many people put off thinking about death, recent policy initiatives have made this not the case for many. With a dramatic increase of states considering right-to-die initiatives—that make it possible for terminally ill patients to use medicine to end their lives—strong opinions over the topic are rampant. Colorado passed The End-of-Life Options Act (the Act), providing terminally ill individuals with the right to use prescribed medication to end their lives. Although many individuals do not think about how this Act could impact estate planning matters, it does. There are critical estate planning measures individuals with terminal illnesses must take to aid their loved ones after their death.

After failing to pass in the Colorado legislature, the End-of-Life Options Act was placed on the Colorado ballot in 2016. This initiative passed and led to the bill’s enactment, which allows terminally ill people to request assistance in dying—but in only certain defined situations. To request a prescription for life-ending medication in Colorado, a patient must be: at least 18 years old; a Colorado resident; mentally capable of making and communicating health care decisions; diagnosed with a terminal disease in which they will die over the next six months. Beyond these requirements, the patient will only be prescribed the medicine if they make three requests—two verbal and one written— for the medicine at least fifteen days apart in front of two qualified, adult witnesses. The doctor must also offer the patient the opportunity to withdraw the request for the medication before providing the prescription.

For individuals with a terminal illness, it is critical to have an estate plan in place before they pass away. This is because an estate plan explains how individuals want to be cared for in their final days and what measures should be taken—this can include taking actions legalized under The End-of-Life Options Act, if the individual has a terminal illness. Otherwise, it provides instructions on the medical interventions they want to be taken, and who should make decisions on the individual’s behalf if they become incapacitated. Additionally, creating an estate plan provides for how, and to whom, they want their assets to be distributed. If a person does not have an estate plan before they die, the court will decide how their assets will be handled. While creating an estate plan—and specifically making end-of-life decisions—may be uncomfortable, it alleviates a major source of stress in the end.

Those who are in the midst of divorce proceedings or planning a divorce should consult a Colorado estate planning attorney to discuss any implications of the life change. Probate courts do not consider the circumstances surrounding a couple’s separation, and consider the couple married, until a judge signs a final divorce decree. As such, individuals must amend their documents in a timely manner, to avoid unintended consequences.

Understandably, those involved in divorce proceedings may become overwhelmed with the time, energy, and logistics that necessitates this life change. However, individuals should prioritize reviewing and modifying their estate plans so that the changes are enforceable in court. There are many components to a complete estate plan, and concerned parties should address each facet.

Specifically, parties should review their:

  • Health care proxy
  • Power of attorney
  • Will
  • Trust
  • Prenuptial and Postnuptial agreements

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The federal gift and tax application exclusion amount, or exemption, was raised from $5.49 million per individual to $11.58 million per individual last year. This means that a married couple can transfer about $23 million without having to pay a gift tax or estate tax. However, the federal gift and estate tax exemption is set to decrease again in 2026. On January 1, 2026, the exemption is scheduled to revert to the previous limit, which is estimated to be around $6 million per individual at that time, though, the exact amount depends on inflation. According to federal regulations, individuals and couples who take advantage of the exemption prior to 2026 will not be adversely affected when the cap decreases. The increased limit has inspired many families to consider ways of taking advantage of the exemption before it decreases. One way families have considered doing so through Colorado estate planning measures is by creating a Spousal Lifetime Access Trust.

A Spousal Lifetime Access Trust (SLAT) is a gift from one spouse to an irrevocable trust with the other spouse as the designated beneficiary. Unlike some similar trusts, the SLAT is established by a gift while both spouses are still alive. Other family members such as children and grandchildren can also be beneficiaries of the trust. A SLAT allows the donor spouse to transfer up to the exemption limit without incurring a gift tax. The value of the assets in the SLAT is excluded from the donor spouse’s gross estate and not subject to the estate tax upon the donor’s death. The appreciation of the SLAT assets may not be subject to estate tax, as SLATs are excluded from the beneficiary spouse’s gross estate and not subject to an estate tax when the beneficiary spouse dies.

The beneficiary spouse can request distributions from the trustee during their lifetime if needed. The trustee can then approve the request and distribute the income or the beneficiary spouse. However, the distributions will be reintroduced into the taxable estate, and the goal of a SLAT is to allow the trust assets to grow for future generations outside of the taxable estate. The SLAT has some drawbacks and risks, and a married couple’s particular personal and financial circumstances should be considered before setting up a SLAT. Consult with an estate planning lawyer to determine if a SLAT is right for you.

With the recent signing of the $900 billion pandemic relief package, individuals have begun receiving stimulus checks in the mail. Because this was the second stimulus check—and there have been talks of a third, $2,000 check—many have questions about whether these checks will impact their Colorado estate plan, and what to do if a deceased relative received a check. Because the COVID stimulus checks are complicated and may implicate other aspects of a person’s life, below is a discussion of the common questions about estate planning and stimulus checks.

How Much is the Stimulus Check?

The plan approved by Congress—and signed into law by the president—provides a $600, one-time payment for most adults, plus $600 per dependent child. However, couples making $174,000 or an individual making more than $124,500 will not receive a stimulus check. Recently there has been discussion of another $2,000 stimulus check, but there is no indication of whether this proposal will pass both the House and the Senate.

It is laudable when people start to make estate planning decisions. However, meeting with a Colorado estate planning attorney for the first time can often be an overwhelming experience. Estate planning attorneys are highly-focused in the field, ready to make sure an individual’s assets are prudently managed and ensuring an individual’s loved ones receive inheritances without issue. Below are common questions that will help individuals evaluate various estate planning attorneys and determine if a prospective estate planning attorney is right for them.

Is Estate Planning Your Primary Focus?

Individuals should only consider estate planning attorneys who answer “yes” to this question. Many attorneys may practice multiple areas of the law, but estate planning is a special legal endeavor. An estate planning attorney will know all of the legal statutes surrounding estate planning and stay updated on any changes to Colorado estate planning law. They will also have the strategic knowledge to effectively draft your planning documents.

How Long Have You Been Practicing?

It is critical to find the most experienced attorney possible, because they will have the most knowledge about preparing effective estate plans. These attorneys will have faced legal challenges from the courts and will be prepared to overcome any obstacles that come their way. Although they are often experienced enough to avoid estate planning complications, it is better to be ready for any unforeseen complications.

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When a senior reaches full retirement age, they can elect to receive monthly Social Security benefits. However, for many reasons, individuals often elect to delay filing for Social Security, either to increase the monthly benefits they will later receive or to continue working and avoid paying taxes on these benefits. Because filing for Social Security and delaying the benefits is a personal decision, and can have broad implications on a Colorado estate plan, below are some common questions aging individuals have about the Social Security process and if they should delay their filing.

What is the Full Retirement Age for Social Security Benefits?

The full retirement age – where seniors are entitled to start receiving their full monthly benefit – depends on an individual’s year of birth. For those born between 1943 to 1954, the full retirement age is 66 years old. For individuals born between 1955 to 1959, the full retirement age is between 66 years and 2 months to 66 years and 10 months (increasing by two months each year). For everyone born in 1960 or later, the full retirement age is 67 years old. It is also important to note that people can file for Social Security benefits as early as 62; however, they are not eligible to receive their entire monthly stipend until they reach the full retirement age.

Am I Eligible to Delay My Social Security Benefits, and What Will Delaying Them Do?

It is a common misconception that seniors must file for Social Security benefits once they reach full retirement age. Rather, seniors have the option to delay their filing, which means they are electing to not receive benefits until a later age, with the knowledge that their benefits will then be more per month. Delaying can grow a person’s benefits up to 8% per year until the age of 70. For instance, if a senior is entitled to $1,500 per month at the full retirement age of 67, they can increase their monthly benefits by $360 if they wait until age 70 to file.

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