Estate Planning

Protecting Your Will Against Disputes

September 22, 2022 | by Braverman Law Group

The probate process in many states can be complicated and stressful for the families of individuals who have recently passed. Thankfully, a skilled estate planning attorney can do much to help individuals and families avoid these headaches, including setting up trusts to keep some assets out of probate and drafting clear wills and other beneficiary designations. Still, many individuals do not have an estate plan or fail to have an updated and comprehensive estate plan. Unfortunately, this lack of foresight can enable disputes, even if you believe your assets to be clearly designated. Even families that get along harmoniously can act out of character in the presence of grief and finances.

According to a recent article, these family disputes are unfortunately all too common. An adult child of divorced parents recently posted to a message board that their father is ill and would likely pass soon. The adult child’s mother, who divorced from the child’s father over 20 years ago, when the child was just a teenager, has told the child she believes she is owed a stake in her ex-husband’s assets. The child stands to inherit enough money to help purchase a home, but the mother is asking for a piece of the inheritance because she asserts she did not receive enough money in the separation agreement.

Fortunately, divorce settlements are difficult to reopen in the United Kingdom, where the writer is located. And if their father has a well-drafted and clear last will and testament and estate plan, it is unlikely the mother’s claim holds water. This story, however, goes to show one of many ways families can squabble over inheritances when the time comes.

Spousal Lifetime Access Trusts in 2022

September 1, 2022 | by Braverman Law Group

Many clients, including high-net-worth individuals, often worry about the impact of taxes on their estates. Tax laws change regularly with the political landscape, and frequent updates to tax shield strategies should be considered. The 2017 Tax Cuts and Jobs Act protected estates with a number of tools to shield and exempt against taxation. However, this law sunsets, or expires, at the end of 2025. One tool enabled by the law is the creation of a Spousal Lifetime Access Trust, or SLAT, designed to transfer assets between spouses in a way that protects against tax liability. Read on for more on SLATs and how you can take advantage of these estate planning tools now.

What is a Spousal Lifetime Access Trust?

A Spousal Lifetime Access Trust (SLAT) is an irrevocable trust, which means the grantor or creator of the trust cannot change or end the trust after creating it. In a SLAT, one spouse—the “donor spouse”—creates the trust for the benefit of the other spouse, or “beneficiary spouse.” The spouse does this by using their gift tax exemption, which is an amount that varies each year, to fund the trust with a gift. The property or assets placed in the trust are then accessible by the beneficiary, though multiple structures exist that can allow children or grandchildren to benefit. The funding of the trust up to the gift tax exemption cap allows the trust to avoid probate and estate taxes, preserving value for the grantor’s family and beneficiary.

Protecting Your SLAT

In 2022, the maximum possible gift tax exemption is $12,060,000. This means a spouse could fund a SLAT in this amount without that portion of their estate is taxable. The assets should not be jointly owned by both spouses. If the assets appreciate in value, that appreciation is also considered outside of your taxable estate. The SLAT assets could also continue to grow tax-free if not distributed or withdrawn by the beneficiary spouse, which could then go to the next generation if also named as current or remainder beneficiaries.

Estate Planning During Tax Season

July 15, 2022 | by Braverman Law Group

Less than 46% of Americans surveyed by Gallup in 2021 had a will. This number is shocking—not having estate planning documents can cost your loved ones thousands in legal fees, not to mention family strife and arguments. Or, if you and your family are some of the 54% with plans in place for the future, when was the last time you revisited and updated your estate planning documents? Outdated documents may also cost your family in time and money.

A person without—or with outdated—estate planning documents may not be fully protected. Tax season is a great time to revisit existing estate plans or think about establishing new ones. Why? Tax season serves as a natural (and government-imposed) check on your assets and liabilities. Changes in yearly earnings or the sale and acquisition of significant assets can have big tax implications and big implications on what you may want to reflect in your estate planning documents.

Changes to Watch Out For

In 2022, many individuals are finding that investing as a hobby is easier than ever. Investments can fluctuate in value, and estate planning documents should account for big windfalls or substantial losses. In the same vein, cryptocurrencies are beginning to become a more mainstream investment for many individuals. However, cryptocurrencies require private keys to access. Estate plans should include instructions for accessing cryptocurrency portfolios to avoid losing assets to a misplaced password.

How to Qualify for Inflation Reduction Act Tax Credits

June 30, 2022 | by Braverman Law Group

The recently passed Inflation Reduction Act includes several initiatives that provide tax breaks and rebates for households that take steps to improve their energy efficiency. Consumers who make energy efficient home upgrades and purchases may qualify for up to $10,000 or more in these benefits, in addition to other benefits such as lower electricity bills and a smaller carbon footprint.

Tax Credits for Homeowners

Homeowners could get up to a 30% tax credit for installing solar panels or other renewable energy equipment, such as windmills. Costs incurred in installation from 2022 through 2032 qualify for a 30% tax credit. The credit falls in later years, dropping to 26% in 2033 and 22% in 2034. This extends a previous tax credit set to expire in 2023 and, starting in 2023, includes battery storage technology so homeowners can pair solar panels with storage.

Other home efficiency projects, such as energy-efficient windows and water heaters, also qualify for a 30% tax credit toward installation costs. The cap on these savings is $1,200 a year, though some projects can qualify for higher caps. The installations must meet certain efficiency criteria to qualify, and some specific items have individual caps. The credit also covers the cost of a home energy audit (up to $150) and an electrical panel upgrade (up to $600).

Event: Structuring Trust Protector Provisions

June 15, 2022 | by Braverman Law Group

Estate planners are increasingly using trust protector provisions in trust documents. While these provisions can be flexible and preserve the intent of a trust’s grantor, they also come with risks and complexities. A panel of the trust and estate planning attorneys at Braverman Law Group are hosting a CLE/CPE course to provide a practical guide to structuring trust protector provisions and discuss best practices.

What Are Trust Protector Provisions?

Trust protectors are third parties given power within a trust provision to make adjustments to the terms of trusts in a way that complies with the intent of the trust’s grantor, or the person establishing the trust. Trust protectors provide an extra level of flexibility not available in a traditional trust. These are especially useful in long-term trusts when the circumstances surrounding the parties to a trust may change substantially. A trust protector helps protect the spirit and intent of the trust when changes would not be otherwise possible.

What Are the Risks?

While trust protector provisions allow for more flexibility, they can be complex and subject to abuse. Different states and jurisdictions have varying laws surrounding the power of a trust protector and the structure of those powers. For example, a range of actions can be taken by a trust protector, and different jurisdictions limit those actions in different ways. Some allow trust protectors to modify trust terms, while others allow trust protectors to oversee the actions of the trustee. Trust protectors can sometimes make elective distributions, change the trust’s situs, or even replace the trustee. Trust agreements can identify the trust protector’s powers and designate the fiduciary extent, but estate planning counsel must fully understand the breadth and scope of the risks and consequences.

What is a Pour Over Will in Colorado Estate Planning?

May 26, 2022 | by Braverman Law Group

Many people know it is critical to have a will—and sometimes a trust—as part of their overall estate plan. However, they may not know that there are different types of wills that can be utilized, depending on the person’s financial and personal situation. One of the more unique options is a pour over will. A pour over will works in combination of a trust, assisting the transfer of assets if the person who established the trust—called a grantor—did not transfer all the assets they wanted into the trust. Because pour over wills are a new concept for many, below are common questions and explanations about pour over wills.

How Does a Pour Over Will Work?

A pour over will functions after an individual has already created a trust and funded the trust—meaning, they have placed certain assets in the trust to be given to beneficiaries after their death in order to avoid the probate court process. However, as people tend to acquire more assets after the creation of the trust—and they may forget or not have the time to place these assets in the trust too—a pour over will can ensure these assets are still placed in the trust. A pour over will allows the grantor of the trust to state that any assets not previously added in the trust should be included upon the grantor’s death. These assets would then be treated the same as those initially added to the trust.

What is Web3 and How Does it Affect Colorado Estate Planning?

May 10, 2022 | by Braverman Law Group

Technology is ever-changing, and it constantly affects daily life: how individuals communicate, travel, and even plan for the future. The term Web3 has been utilized more recently, seeing the near future as a new technological age where new platforms and marketplaces will be created. This new technology could also expand into the estate planning arena, where Coloradans are advised to completely change how they view estate planning entirely. Below are common questions and explanations about Web3 and how it could change the way estate plans are drafted and implemented forever.

What is Web3?

Web3 is seen as the potential next “generation” of the internet and technology at large, where social media platforms and search engines would be owned collectively, rather than by a single corporation. Rather than having to log into different accounts depending on the platform, individuals would be able to use a single personalized account throughout the internet and vote on how a platform should be improved over time. According to experts in the field, his technology would be built using blockchain technology, which is currently used by cryptocurrency.

How Can Web3 Affect My Estate Plan?

If Web3 becomes a reality in the future, individuals could build blockchain-based estate plans. This would allow individuals to set up smart contracts that would immediately pass their assets to their beneficiaries, without having to go through the current hurdles that individuals face—like probate court. When a person passed away, the assets would be sent to the listed beneficiary on the estate plan, which would speed along the estate planning process and not require loved ones to have to wait months on end—if not longer—until the assets are cleared to be given to them.

How to Plan for Retirement in Colorado

April 30, 2022 | by Braverman Law Group

Many individuals look forward to the day when they retire and spend their days relaxed and free—be it at home reading a book or tanning on a beach. However, they may not think about the planning they need to do beforehand to actually enjoy their retirement. Most people think about the most important aspect—saving money—but they do not think about other critical aspects of estate planning. Some of these steps are simpler than others but all are crucial financial preparation in order to be comfortable in retirement. Below are these vital steps Coloradans should accomplish as they prepare for retirement.

Paying Off Debt

While saving for retirement is extremely important, paying off any outstanding debts is just as critical. This includes debts from credit cards, mortgages, and student loans. Otherwise, the money the individual is saving for retirement will be eaten into by further debt repayment over the years. Many people overlook this crucial step and paying off debts sooner than later will leave more money in the future for retirement pursuits.

Retaining Health Insurance and Other Forms of Insurance

When people near retirement, it is essential they focus on the health insurance they have—both now and in the future. Especially are individuals age—and more health issues arise—they tend to rely on health insurance more than before. Beyond qualifying more Medicare when a person reaches 65 years old, many estate planning attorneys recommend having supplemental insurance as well. This can be one of many options, including a Medigap policy, a Medicare Advantage plan, or—if the individual was a federal employee—their federal employee health benefits.

What Are Colorado Bypass Trusts?

April 16, 2022 | by Braverman Law Group

Married couples receive special benefits in estate and tax planning solely due to their married status. Many of these benefits make it easier for couples to pass assets along to one another and avoid complications when one of them die. Estate planning attorneys can advise clients on strategies they should utilize to take advantage of these benefits. One of these is a bypass trust, which married couples can use to avoid estate taxes on certain assets when one passes away. Below is information on bypass trusts and how they can be implemented into a Colorado estate plan.

What is a Bypass Trust?

A bypass trust is a legal arrangement that permits married couples to split their joint assets in order to avoid estate taxes when one spouse passes away. When the first spouse dies, the estate’s assets are split into two trusts. The first trust, called a marital trust, is owned by the surviving spouse. This is a revocable trust that can be altered at any time, and the surviving spouse owns the assets in this trust.

The second trust, the bypass trust, is an irrevocable trust—meaning it cannot be changed later. When the first spouse passes away, a majority of their assets go into the bypass trust. The surviving spouse can access the assets in the bypass trust and receive income from it. However, they technically do not own the assets in the bypass trust.

What Are the Benefits of a Bypass Trust?

One of the major benefits of a bypass trust is that often the surviving spouse does not need to pay the estate tax on the trust. Because of this, many couples will plan to have their IRA or 401(K) proceed placed in a bypass trust. However, it is important to note that after the passage of the SECURE Act, if IRA or 401(K) proceeds are within a bypass trust, the proceeds must be paid out within 10 years. This is a new change, so estate planning attorneys can advise clients on how this will affect their current trusts.

How High Net Worth Coloradans Conduct Estate Planning

March 31, 2022 | by Braverman Law Group

Because everyone is different, they have unique estate planning needs. For some people, this means prioritizing savings for retirement, whereas for others, it may mean planning how they would like end-of-life care handled. For ultra-high net worth individuals, their primary estate planning goal is protecting their current assets for future generations. Ultra-high net worth individuals are those with over $30 million in net worth. Because of this, their estate planning strategies may be different from other individuals. Below are some estate planning strategies that ultra-high net worth individuals can utilize to maximize their wealth for future generations.

Splitting Family Income

Splitting family income can assist ultra-high net worth individuals in mitigating their estate tax liability—one of the primary estate planning goals for these people. The American tax system is based on the idea that individuals who earn more pay higher taxes. Because of this, their estate tends to be larger—meaning, their estate will have to pay an estate tax before assets are distributed amongst beneficiaries. By dividing income among other lower-income earners in the family, the family’s tax burden will be reduced. This reduction will be seen both yearly through income taxes and when a person passes away in their estate tax liability.

Planning for Business Succession and Instilling Financial Responsibility

Many ultra-high net worth families have accumulated most of their wealth through owning a business. For those families who this is true, they should start taking steps now to plan for the future of the business. This may include planning for who will take over the business in the future, discussing the transition, and giving them the ability to ease into a larger role in the corporation over time. Planning for a business’s future can allow owners to know that the business will be in capable hands, even after they pass away. While this may not seem like an estate planning issue, attorneys can advise clients on how to ensure a smoother transition and how to incorporate the business success into their estate planning documents.