We understand that as a parent of young children, most of your day to day focus is on caring for your children.  This focus needs to extend to your estate planning as well.  Here are 4 important estate planning documents that parents of young children need to have.

• Will

You name guardians for your minor children in your will.  Be sure to get the guardian’s permission before naming them.  This best ensures that the guardian will serve when needed.  Name back up guardians as well, just in case your primary guardian is unable or unwilling to serve when needed.

• Revocable Living Trust

Minor children cannot inherit directly; they, however, can be named as beneficiaries of life-time trusts that provide for their needs and are managed by a trustee.   When your child becomes an adult she can act as a co-trustee.  These assets can even be asset protected, so they can’t be taken in a subsequent divorce, bankruptcy, business failure, or lawsuit.

• Stand-by Guardianship; Child Care Power of Attorney; Temporary Guardianship Authorization

Stand-by Guardianship; Child Care Power of Attorney; and Temporary Guardianship Authorization are all names for the same document.  Because the guardians in your will only have authority to act if you are deceased, you need to authorize these same guardians to care for and make decisions for your children if you are alive, but somehow incapacitated, and unable to care for them.  Again, name contingent temporary guardians.

• First Responder Authorization

The First Responder Authorization authorizes trusted friends and neighbors to stay with your children until your named guardians arrive to take them into their custody.  Include trusted friends and neighbors who can get to your house within 15 minutes.  This is about how long the police will stay in your home before taking your children into protective custody (i.e. foster care.)

If you are the parents of young children, you need comprehensive estate planning, incorporating these documents.  Be sure to consult with a qualified estate planning attorney.

The Hammond Law Group is a member of the American Academy of Estate Planning Attorneys.

Probate is the legal process involving the administration of a deceased person’s will or the estate of a deceased person without a will (known as dying intestate). Probate is carried out within a Probate Court and is the process in which:

• A will is declared valid or invalid;
• Property is transferred from the deceased to an heir or a beneficiary named in a will;
• An executor of an estate is given legal standing to handle the estate’s business;
• The liabilities and bills of the estate are paid;
• The assets of the estate are distributed.

Where does a probate attorney fit into the process? A probate attorney, also referred to as an estate attorney, can help prepare an estate plan that helps avoid probate, as the probate process can be costly and complex. They can also assist the executor, the person named as the estate’s administrator, with tasks that are faced in probate, such as:

• Preparing and filing probate forms and paperwork;
• Advising and assisting with the sale of the estate’s assets;
• Advising and assisting with the payment of the estate’s liabilities and bills;
• Requesting permission from the probate court for various actions as required under Colorado law;
• Obtain a taxpayer identification number for the estate and file the final tax return;

Some probate lawyers are also willing to be named as the executor of the will. In this case, they are paid a fee to oversee the distribution of assets. The fee for serving as the executor of a will is separate from the fee for preparing a will.

A probate lawyer can be hired by either a person making a will or those who are named within the will. The attorney will have an ethical duty to represent the wishes of his client to facilitate the probate process and act within the best interest of their client both before and during the probate process.

The Hammond Law Group is a member of the American Academy of Estate Planning Attorneys.

Living trusts have become popular estate planning tools over the past few decades, but unfortunately, misinformation and aggressive advertising and sales tactics have been all too common. In particular, the biggest myth of a living trust is the claim that living trusts have many tax advantages.

Living Trusts and Income Taxes

There are no income tax advantages to creating a living trust. You will pay income taxes on the income the trust earned since you have a control and interest in the trust property. In fact, your social security number is the identification number for the trust, and the trust’s income and finances are normally reported on your personal income tax return.

This is the case since a living trust is a revocable trust, and as long as you retain the power to revoke or modify the trust, it is still considered yours for tax purposes. But when you die, you can no longer pay income taxes, so the trust becomes a separate tax entity and pays its own income tax.

Living Trusts and Estate Taxes

Assets in your revocable living trust will be considered part of your estate and will be subject to estate tax. Whether estate tax will have to be paid will depend on whether your estate is valued above or below the current federal estate tax exclusion amount at the time of your death. While this amount in 2011 and 2012 is $5,000,000, the law is currently slated to change at the end of 2012, so the future exemption, once again, is uncertain.

If you control the trust – you, or your estate, will pay income and/or estate taxes on the assets in the trust – just as if they were personally owned by you – but an irrevocable trust can be a whole different story. It is important to note that, for a married couple, a revocable living trust may double the amount of money that you can pass tax-free, depending on what year you pass away.

While a living trust can be a powerful estate planning tool, it’s important to know the facts and use it for the right reasons, and a trust attorney can help you find the right trust for your needs.

The Hammond Law Group is a member of the American Academy of Estate Planning Attorneys.

What do actor Mickey Rooney and the late philanthropist Brooke Astor have in common? Unfortunately, the tie that binds these two famous names is that of elder abuse. Rooney, who is now 90 years old with one of the longest careers of any actor, filed a case against his stepchildren in February, 2011 charging verbal, emotional and financial abuse, and alleging that they denied him such basic necessities as food and medicine.

Mr. Rooney testified that the pair not only took all of his identification, but that they also put a lock on the refrigerator and threatened him if he were to come forward. Luckily, he did come forward and recently testified about his experience to a special Senate committee considering legislation to curb abuses of senior citizens.

Brooke Astor was a beloved New York philanthropist, with an estimated estate of $185 million. As Mrs. Astor grew elderly and infirm, Astor’s grandson filed a lawsuit seeking the removal of his father as her legal guardian. The lawsuit alleged that Marshall had not provided for his elderly mother and allowed her to live in squalor. Furthermore, the lawsuite alleged that he had cut back on medication and doctor’s visits, while enriching himself with income from her estate. In 2009, Brooke Astor’s son was convicted of stealing millions from her.

It is estimated that near half a million elderly people are being abused by family, friends, and/or advisors. The crime is known as elder exploitation, and many of the victims are too sick to know that abuse is taking place or to be able to report the abuse. For those that suspect there is an issue, fear of abuse, abandonment, and retribution also play a role in keeping them from reporting their concerns.

An elder law attorney can address many of the issues that senior citizens are facing. If you or a loved one suspects elder abuse, not only should you seek assistance immediately, but consult with an elder law attorney for guidance.

The Hammond Law Group is a member of the American Academy of Estate Planning Attorneys.

Retirement accounts play an important role in estate planning, one of the main benefits being that retirement accounts avoid probate, as they pass to a named beneficiary using a beneficiary form that you complete when you open your account. IRAs, Individual Retirement Accounts, are not only powerful estate planning tools, but they, of course, are great vehicles for saving for retirement with tax benefits.

In fact, the income tax on an IRA is payable only when funds are withdrawn from the plan, normally in later retirement years when income is lower and you are assumed to be in a lower tax bracket.

While IRAs and other retirement plans are great for retirement savings; you need proper estate planning to pass the account on to your beneficiaries, since the assets in the plan are subject to federal estate and there may be other tax issues if you do not plan properly.

Without proper estate planning, in the hands of the beneficiary, the IRA or retirement plan may be worth less than one half of what it was to the original account owner. Since the IRA beneficiary can make withdrawals over his or her life expectancy, naming a young person or a minor child as beneficiaries is tempting, and it is allowed. But if it is not done properly, naming a minor can have disadvantages and result in fees that reduce the benefit of the accumulated IRA.

In general, when it comes to IRA’s, taxes and estate planning, your spouse has the greatest flexibility as the beneficiary to your retirement account, and they are able to roll over the IRA to their own IRA or decide to treat your IRA as their own IRA. This can provide more tax and planning options, but also may increase the size of the surviving spouse’s estate.

An estate planning attorney can help you determine how your retirement plan fits into your overall estate plan, and offer guidance on the best way to pass your retirement account with the least amount of tax and legal implications.

The Hammond Law Group is a member of the American Academy of Estate Planning Attorneys.

Part of the comprehensive estate planning process is drafting a set of advance medical directives to allow you to control your medical decisions in the event that you can no longer express your wishes on your own. One of the documents is a living will, which allows you to express your wishes for end of life care. But all too often, people turn to online forms or self-drafted living wills for these important documents, and the top three problems that come up with living wills are:

1. Missing in Action

Sometimes family members or medical providers do not know that a living will exists. If they do know there is a living will, they cannot find it. It’s important that your family knows of the document and where to locate it.

2. Poorly Drafted Documents

Many of the online living will forms are extremely vague and do not offer much guidance when it comes to the emotional decisions surrounding end of life care. Why? It is often much more complex than simply removing life support from a patient with no hope of recovery. Most people are unable to imagine many of the scenarios that can occur, let alone how they will feel in advance.

3. Emotional Choices

While your general wishes are there in black and white, there’s much more to it – the human factor. Tough decisions will need to be made, with various if/then aspects. A document may not be able to insert common sense and emotions into the picture – and sometimes that is what is needed when it comes to these decisions.

There are steps you can take to make sure your end of life wishes are heeded by having other estate planning documents in place, such as a Durable Power of Attorney for Health Care, which allows you to appoint a health care proxy to make decisions on your behalf if you become incapacitated.

An estate planning attorney can not only help you draft the legal documents needed, but they can provide direction and advice that makes the documents work toward a comprehensive estate plan that meets your specific needs and goals.

The Hammond Law Group is a member of the American Academy of Estate Planning Attorneys.

For many seniors the equity in their home is their largest asset, but it is unavailable for their needs unless they take out a home-equity loan – but that is money that must be paid back with interest.

Reverse mortgages have been touted as a risk-free way of tapping into home equity without creating monthly payments and without requiring the money to be paid back during a person’s lifetime. Instead of making payments to a lender, the cash flow is reversed and the homeowner, who must be aged 62 or older, receives payments from the bank.

Many seniors are finding they can use a reverse mortgage to pay off debt, buy a second home or just supplement their income – and seniors are still discovering new uses for another income stream. In fact, over the last five years the number of reverse mortgages nationwide has tripled.

But a reverse mortgage is not just for the wealthy, it may serve a purpose for the senior citizen who owns a home, but has limited income, as it can allow them to remain in the home by providing money for home modifications or even home health services that may not otherwise be covered.

It’s important to realize that there are drawbacks to reverse mortgages, as the fees can be pricey and, unlike a regular mortgage that pays down your debt, a reverse mortgage is actually building debt. If you plan on only taking out a small portion of money or plan on living in your home for only a short time, then the associated fees and costs can push the effective rate of the loan considerably higher. There are also scams and misinformation that can surround reverse mortgages, so it is important to do your homework.

It is also crucial to realize that in terms of estate planning, you are reducing the size of the estate that will be left to your heirs. You should also speak with your estate planning attorney to see if this income will impact any other aspects of your estate plan.

A reverse mortgage may be useful to some senior homeowners in specific circumstances, but it needs to fit within your estate plan, and you should speak with a trusted advisor before taking this on, as it not only impacts your future, but the future of your heirs as well.

The Hammond Law Group is a member of the American Academy of Estate Planning Attorneys.

Creating a will is the cornerstone of estate planning, don’t underestimate the need for a valid, legal will. It is necessary, even if you have a living trust, to name an executor for your estate, to name a guardian for any children under the age of 18 and to distribute or ‘pour over’ any property not owned by a living trust.

The popularity of do it yourself will kits and forms has increased over the past decade, but there are four things that may be missing from this estate planning document that can make a big difference on how smoothly your estate is ‘settled.’

Successor Executors and Guardians

Naming an executor and a guardian is an important part of drafting a will, but what happens if your choices are unwilling, unable or even unavailable to serve in that capacity? Naming backups, or successors, is critical to keeping these choices within your control.

Bond Waivers

Many probate courts require the executor of an estate to post a bond to ensure the estate and its assets are protected and debts are paid. Without a will that explicitly waives the need for a probate bond, courts may mandate their purchase, meaning more time and expense for your executor and your estate.

Contingent Beneficiaries

Unfortunately, wills aren’t updated as often as they should be. Life changes, and your estate planning documents should change with it. A will should have ‘backup’ beneficiaries in case one or more of your named beneficiaries has since passed away.

Self Proving Affidavits

A will needs to be properly witnessed by at least two parties. A self proving affidavit is an attached document signed by a notary public that shows the will was properly signed and witnessed and that it is the will of the person who signed it. Many states accept these affidavits in lieu of actual witness testimony, and it avoids the time and expense of the executor having to track down the witnesses.

An estate planning attorney can help you create a will that not only has all of the aspects that help your loved ones get through the administration of your estate, but they can work with you on other estate planning tools that meet your needs.

The Hammond Law Group is a member of the American Academy of Estate Planning Attorneys.

Having to consider a guardianship over an aging parent is difficult, although sometimes necessary. If your loved one has revocable living trust or, in some cases, a recent durable power of attorney, properly drafted, and a health care proxy in place, the need for a guardianship proceeding may be eliminated – but what exactly is involved with a guardianship proceeding?

A guardianship is a legal relationship in which a probate court gives an appointed person, the guardian, the power to make personal and financial decisions for a ward, the person who is no longer capable of managing these decisions on their own. A guardian can be appointed when someone is incompetent due to mental illness, including dementia or Alzheimer’s disease, or physical incapacity.

Some of the steps that may be taken during a guardianship proceeding are:

• First, evaluate your loved one to determine if, in fact, they are unable to care for themselves. This can involve family members, personal observations and physicians. In some cases, such as when someone has had a stroke and is completely incapacitated, this may be clear, whereas in other cases, such as someone who aging with memory loss, it may be less clear whether the person is still able to handle their own affairs.
• If it is determined that the person is unable to care for themselves, you would then need to file a petition in the Probate Court requesting that a guardian be appointed.
• The Court will require that the proposed ward receive notice of the petition. The Court sets a date by which anyone, including the proposed ward, may object to the guardianship.
• A hearing is held and the judge decides whether a guardian should be appointed.
• A temporary guardian can be appointed for 90 days, or a permanent guardianship can be established.

Having the proper documents in place can help both you and your loved ones avoid a guardianship proceeding. Work with an elder law attorney to make sure you have plans in place to address issues that may come up later in life.

The Hammond Law Group is a member of the American Academy of Estate Planning Attorneys.

Life insurance can play a valuable role in estate planning, from providing cash to the trustee or executor to pay off debts and final expenses, to providing funds to pay off a mortgage or provide for college, or to replace an income for a surviving spouse and children. Sometimes it is even used to infuse cash into a business upon the untimely death of a partner, or in larger estates, to provide the liquidity needed settle up any estate tax liability without having to sell off any of estate’s assets.

However, when it comes to taxes, it is important to remember that with estate planning, we are often talking about two different kinds of taxes: income taxes and estate taxes. Life insurance is normally income-tax free to the beneficiary. (There are a few exceptions, particularly if the policy is used in business partnerships).

The key to remember is that while life insurance in most instances is income-tax free, it is still taxed under the federal estate tax rules, because the federal estate tax is a tax on the transfer of property. This transfer tax is assessed on the assets you leave to the next generation. Because of this, the proceeds of all the life insurance that you own or control is included in your taxable estate for purposes of calculating your estate taxes, even if the proceeds did not come into your estate.

There are, however, estate planning tools that can address the issue, such as an ILIT, an Irrevocable Life Insurance Trust, that may be used if an estate is facing a tax burden. Work with an estate planning attorney to determine the best tools to meet your specific needs, whether it is determining the role of life insurance in your estate, drafting a will or creating a trust.

The Hammond Law Group is a member of the American Academy of Estate Planning Attorneys.