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

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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When creating a Colorado estate plan and preparing for the future of an older loved one, there are many angles and aspects to consider. Beyond the regular benefits many aging people can receive from the federal government, additional benefits can be given if the loved one served in the armed forces. Through the Department of Veterans Affairs’ pension benefit programs, qualifying veterans or their surviving spouse can provide additional monthly support.

What Are Veterans Pension Benefits and Who is Eligible to Receive Them?

The pension benefit program is a needs-based program that provides a monthly stipend to the veteran or their surviving spouse. However, benefits are not dependent on any service-related injuries. The pension benefits can also help offset the cost of an in-home aide, a nursing home, or an assisted living facility. Because these services are often quite expensive, receiving these benefits can dramatically improve an older loved one’s quality of life.

The COVID-19 pandemic has forced many people to do long term thinking, evaluating their life and their future. Thus, many individuals are starting to create a Colorado estate plan, so their family is taken care of in case of their unexpected passing. Despite this recent estate planning trend, 62% of Americans do not have a will and thus are unprepared for what the future holds. Here are a few common misconceptions about developing an estate plan and why individuals should start now, regardless of their situation.

“I Don’t Have Enough Money to Need a Will.”

Regardless of income or assets, it is critical that people create a will. This way, any property, money, or belongings they have are given to the proper recipients. In Colorado, if a person dies without a will, the probate court decides who inherits the assets according to the state’s intestate laws. Depending on the situation, the process can take years as the court shifts through the necessary documentation and evidence.

Even if a person does not think they have anything that can be inherited, they may be wrong. Regardless, the worst-case scenario for everyone is to have a judge decide where their assets go, when all they have to do to void this is draft a short will.

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Since COVID-19 hit the United States, everyone has been in the process of adjusting to our new normal. Social distancing guidelines, stay at home orders, and masked faces are becoming a part of the new daily routine and have brought a slew of changes that have impacted nearly every aspect of life. However, despite some of the more challenging changes that we couldn’t plan for because of the suddenness and unexpected nature of the pandemic, creating a Colorado estate plan to ensure that your future is secure, even during COVID-19, is encouraged.

Although the pandemic has led to much uncertainty for many in both physical and emotional health and finances, estate planning doesn’t have to take a backseat just because the world looks a bit different than it did a few months ago. Unexpected events are still likely to occur at any time – sudden illness, losing a job, changes in marital status, etc. are all still happening during these strange times. Thus, making the proper arrangements is crucial. Here are our top three estate planning tips applicable to Colorado residents during COVID-19.

Plan for the long term

Choosing a trustee to manage a Colorado trust after someone has died may seem like a simple decision; however, much thought should be put into it. From keeping a detailed record of trust account activity to reporting the income tax liability of the trust, performing the duties associated with being a trustee can often be both overwhelming and immensely important. While the first instinct might be to pick a friend or family member to serve as trustee for the estate, there are compelling reasons why a professional trustee should be chosen instead.

Managing an estate can often be very technical and time-consuming. Because of this, there are factors to take into account when selecting a trustee:

Cost

It may seem logical that having a family member serve as a trustee would be cheaper than hiring a professional; however, this is not often the case. Individual trustees, unlike fiduciary institutions, must hire other professionals like attorneys and CPAs to help them perform estate-related duties. These costs are often unexpected and not included when calculating the overall cost of a trustee. On the other hand, corporate trustees often provide these services in house and are bundled into a comprehensive fee.
Additionally, inexperienced trustees will often forget that the residence of a trustee determines the income taxation of a trust and its relevant state law. On the other hand, professional trustees may also have an office in a state that will avoid state income tax on the estate.

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Many Colorado residents are members of what is often called the “sandwich generation”- people raising their own children while also taking care of their aging parents, thus being “sandwiched” between the two roles and care taking needs on both sides of the family tree. Being a part of the sandwich generation can be incredibly stressful, especially during the current pandemic and economic downturn. However, with an effective Colorado estate plan in place, members of the sandwich generation can lessen some of the stresses that come along with their role

One major concern of the sandwich generation is how to take care of their parents as they age and require more attention and services. Unfortunately, there may become a time when the sandwiched individual has to assume the role of caregiver and make important, life-changing decisions for their parents. This can be extremely difficult and overwhelming, especially if the individual has not planned ahead and created an estate plan for their parents. Without an estate plan, they may find themselves unsure of what an incapacitated parent would have wanted, or unable to make important legal, financial, or even medical decisions when their parent falls ill. This can come as a shock to many members of the sandwich generation.

That’s why Colorado residents are encouraged to work with their parents to create an estate plan as soon as possible, so that they can have the proper legal documents that authorize them to act and make decisions on their parents’ behalf. It can also be beneficial for members of the sandwich generation because it allows them to talk through future plans with their parents before things get more challenging, which can eliminate guesswork and stress in the long run. Working with aging parents to create an estate plan can ensure that everyone is on the same page about what happens with a parent’s estate after their death, for example, or who has power of attorney to make legal and financial decisions on their behalf.

Creating a Colorado estate plan is essential for everyone, especially for couples who live together and are not married. According to the state intestate laws, the property of people who die without a will passes to their spouse or children. However, no federal or Colorado laws allow unmarried couples to ensure the same smooth transition of property and assets. Because of this, it is essential for unmarried couples to create an estate plan and to allow their partner to make health care and inheritance decisions on their behalf.

While there are no laws protecting the assets of unmarried partners, there are estate planning steps these couples can take to guarantee their end-of-life decisions are handled in the way they wish. One such option for couples is to designate each other as their durable power of attorney. This appoints an individual to act on financial and legal matters in the event of incapacitation. Similar to a power of attorney, it may be critical for unmarried couples to appoint each other as their health care proxy. A health care proxy can make health care decisions for another person when they can no longer do so themselves. Without taking these steps, the partner might have to go to court to seek the appointment of a conservator, all of which could have been avoided through the proper estate planning documentation.

Beyond appointing a power of attorney and health care proxy, one way to ensure property passes to an unmarried partner is to jointly own the property with the right of survivorship. However, joint ownership can create problems because removing a joint owner can be difficult and can trigger income tax issues. Because of this, creating a revocable living trust is often a preferable option for many unmarried couples.

Families support each other, through both the easy and the tough times. Because of this, it is understandable that a family would want to provide additional support to a loved one, especially if they require assistance because of a disability. Federal and state law allows family members to set up a Colorado special needs trust to preserve a disabled person’s eligibility for government benefits while still allowing them to receive financial help from their family. Creating a special needs trust can be complicated, but planning ahead can ensure the assets are there to provide for a loved one without risking the family’s financial future.

Typically, to receive government benefits like Medicaid and Supplemental Security Income (SSI), an individual must remain below a certain asset and income level. If a loved one were to provide assets to someone receiving these benefits, they could lose their eligibility. However, funds that are transferred into a special needs trust do not count for government benefit purposes, and thus will not jeopardize their eligibility.

There are two types of special needs trusts in Colorado: self-funded trusts and third-party created trusts. A self-funded trust can be established for any disabled person under 65 years old by their parent, grandparent, or guardian, or even created by the beneficiary himself. These trusts are established with assets belonging to the person with special needs, such as inheritances or personal injury settlements. A third-party trust is funded by someone other than the beneficiary, and does not include assets they own. A typical example of a third-party trust is a trust created for a disabled child by his parents during their lifetime, to enhance his standard of living while not endangering his eligibility for benefits. A parent could also create a third-party trust by including language in their will, which would then be funded upon the death of the parent.

Although technology is a part of everyday life, most individuals do not think about their digital assets (such as blogs, art, music, business websites, etc.) and digital information (email, banking accounts) when preparing their estate. However, without providing this critical information to a trusted individual, it can be extremely difficult for estate executors, or even a caretaker once a person becomes ill, to fully handle one’s final affairs.

Recently, AARP published an article discussing estate planning considerations for managing online assets and digital information. While it might seem like a hassle to update estate planning documents to include digital assets, this can go a long way toward providing loved ones with the authority and ability to handle one’s matters after passing.

It is critically important to give someone, whether a family member, caretaker, or future executor, the authority to manage digital assets before death or a medical crisis. When crafting a digital estate plan, the first step is to prepare (or revise) estate planning documents to authorize someone to be the “agent” for virtual assets and information. This includes providing the “agent” with the legal authority to “access, control, use, cancel, deactivate or delete digital accounts and digital assets.” In Colorado, the Revised Uniform Fiduciary Access to Digital Assets Act legalized this action by allowing a person’s family or executor the right to manage online assets, information, and devices after the person dies while still protecting their privacy interests.

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