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

Articles Posted in Estate Planning

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 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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The attorney-client privilege and duty of confidentiality are two of the most essential recognized privileges. They protect conversations and dealings between a client and their attorney. Colorado courts have consistently maintained these privileges to ensure full communication between lawyers and their clients, allowing the parties to resolve legal issues effectively. Although the privileges are critical during a client’s lifetime, it is equally important that individuals understand how these privileges extend after the client’s passing.

In a recent opinion, the Colorado Supreme Court addressed the critical issue regarding which party holds the attorney-client privilege after the client’s death. The record indicates that when the decedent passed, he left all of his possessions to his widow and named her his personal representative. However, the decedent’s former wife made a claim against the estate based on promissory notes. The man’s widow did not know of the notes’ existence until she received the claim. The widow asked the decedent’s attorney for all of her deceased husband’s legal files. However, the attorney refused, citing confidentiality. In addressing the woman’s request, the court reviewed the interplay between attorney-client privilege, confidentiality, and a personal representative’s duty to settle a decedent’s estate.

Under Colorado Probate, Trusts, and Estates Law, section 15-12-709, grants personal representatives the right to a decedent’s property. Colorado Probate Code defines “property” to include real and personal property or any interest that may be subject to ownership. When a personal representative requests access to intangible property, the court must evaluate whether the decedent had any property right to them. Generally, clients do not have a property right to their full legal files.

Trusts are an essential component of most Colorado estate plans. However, despite their importance, many individuals do not understand the basics of a trust, including their key concepts and terms. While trusts can sometimes be complicated, the following post breaks down the essential aspects and terms associated with a Colorado trust.

What is a Trust and Who is Involved in the Process?

A trust is a legal agreement involving at least three parties, where one party holds and distributes assets on behalf of another. The terms of the trust – which all parties must abide by – are included in a legal document called the trust agreement.

As mentioned previously, there are three parties involved in a trust agreement. The first party is called a trustor, who creates the trust and is giving away, or transferring, the assets. The second party is called the trustee, who manages the trust and its assets. The trustee is legally obligated to manage the trust in the best interest of those receiving the assets and also consistent with the terms of the trust agreement. The third party is called the beneficiary, who will receive the assets in the trust. They are called the beneficiary because they benefit from the trust. It is important to note that the same person can be in more than one of these roles, even at the same time. For example, often, the same individual will be the trustor and the trustee.

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