• 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.

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 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.

If I have a will, my estate avoids probate.

Unfortunately, this is not true, in fact, part of the process of probate is validating the will of a deceased. There are other estate planning tools that do allow certain types of property to avoid probate, such as using a living trust, but you will still need a will to name an Executor for your estate and a Guardian for minor children.

If you do not have a will, the State takes your estate.

If you do not have a will, which is known as dying intestate, the state laws of intestacy determine who inherits your estate based on their relationship to you. The Colorado law governing intestate distribution is written to reflect what most people would put in a will if they had actually written one. The distribution is a matrix of who is entitled to the property based on how closely they are related to you, however, if no living relatives can be identified or located, the estate may ‘escheat’ to the state.

Wills begin with “I, __________, being of sound mind and body”.

This phrase is often used for theatrics, and is not normally the actual first line of will. In fact, the first line or phrase of a valid will is known as the exordium clause which identifies the maker of the will, declares that the document is meant to be a will and declares the testator of the will intends to revoke prior wills.

To disinherit a child, leave him or her just $1 in your will.

It used to be thought that by leaving a pittance to a child within a will you would prove that the parent did not unintentionally overlook the child’s inheritance while preparing the will. In a modern will, a provision would be drafted within a will acknowledging the existence of the child and stating that you intentionally are not providing for the child in the will. This provision can only be used for adult children, as many states have laws in place that do not allow minor children to be entirely disinherited.

Ancillary probate is the probate of property in a state other than the state where you live. If, at the time of your death, you own real estate or other property in your name alone, a probate will be necessary in each state where the property is owned and/or located. This is necessary to transfer the ownership of the property and clear the title, as well as advise creditors that may be located in the state.

One of the biggest drawbacks of ancillary probate is the added cost of having to administer more than one probate estate, including multiple court fees and accounting fees if the estate is extensive. Another drawback of ancillary probate can occur if a person dies without a valid Will. Because the intestacy laws, the laws which dictate the distribution of property for a deceased with no will, differ from state to state, it is possible that the heirs of an intestate estate could be different in the state of the primary probate proceeding versus the state of the ancillary probate proceeding.

The best way to minimize the impact of Probate is to work with an estate planning attorney. Spending money today to establish a valid Will, Trust, or other estate planning documents, as well as properly titling assets, can save your estate substantially when it is time for probate proceedings.

When you create a trust, you transfer assets such as a home, financial accounts and personal property to the trust. These assets are then managed for your benefit during your lifetime, and either continue to be held and managed or transferred to your beneficiaries when you die.

The creator of the trust, also called the grantor, normally names him or herself as the initial trustee in charge of managing the assets, which allows them to remain in control of the assets during their lifetime. For all practical purposes, nothing changes in the way the grantor manages or controls the assets after they are put in trust, often the only difference is the named owner.

A successor trustee is named within the trust document, usually a family member or friend but sometimes an institution such as a bank, law firm or trust company may take over Trustee duties. This successor trustee then will manage the trust assets for the benefit of the grantor if the grantor becomes disabled and for the named beneficiaries after the grantor dies.

Living trusts have become popular tools in estate planning over the past decade, but how do they benefit an estate plan?

1. Living trusts and avoiding probate

Trusts allow property to avoid probate when you die, as you do not own the property, the trust does. But this benefit may be somewhat overused, as only property held within your name will be subject to probate, not jointly owned property. Thus, the living trust may benefit estates that have a large amount of property in sole ownership.

2. Living trusts and establishing a blueprint

A living trust sets up a ‘blueprint’ of sorts for handling your property should you become incapacitated, as a successor Trustee can take over at that time. You are also able to specify your wishes within the trust documents, right down to how you would like money to be spent.

3. Living trusts and maintaining privacy

Living trusts are normally private documents, while wills become public record when filed in Probate Court, thus many prefer using a living trust as a will substitute to keep a family’s financial affairs private.

A Living Trust attorney can advise you whether it’s within the best interests of your estate plan to create a living trust, as well as other approaches that may benefit your particular needs.

• A small estate proceeding for estates valued at under $50,000 that have no real property,
• An informal proceeding for uncontested estates, and
• A formal proceeding for contested estates and those with invalid or questionable wills.

So why would this process take a year or more? There are several tasks that take place during probate, and some of them require waiting times, legal notifications and property inventories. For example, in a typical probate proceeding, the following will take place:

• Opening a bank account for the estate so bills can be paid;
• Identifying the deceased’s creditors, locating them and notifying them of the death;
• Identifying heirs and beneficiaries, locating them and notifying them of the death;
• Identifying and inventorying the property that was owned by the deceased;
• Filing a final tax return for the estate and paying any estate taxes that may be owed;
• Paying off creditors;
• Distributing property to heirs according to the state law if there was no will or beneficiaries that are named within a will.

As you can see, these tasks will not only take time, but they are extremely detail oriented. There are a number of documents that must be filed with the probate court, many of which relate to the above tasks. The process is not horrible, but you must be patient. A probate attorney can help you through this process, as well as help you put together an estate plan that will allow your property to avoid probate if you would prefer.

1. Naming the Executor of your estate.

A pour-over will names an Executor and should also name at least one backup Executor, should the primary choice be unwilling or unable to serve. If you have a properly drafted and funded trust, your Executor is not going to be tasked as much as the Executor of an estate using primarily a will to transfer property, since property within a Trust avoids probate. But an Executor will still have duties, such as filing a tax return for the estate, paying debts and expenses and other administrative tasks.

2. Naming the Guardian for minor children.

Naming a Guardian for your children is one of the primary reasons parents create a will, and this task cannot be handled by creating a trust. As with the Executor, you should also name at least one backup should your original choice not be able to take on the responsibility.

3. Handling the property not currently owned by the trust.

A pour-over will normally directs an Executor to transfer all property into the Trust that is not held within the trust. This will allow the Trust to act as the main document to distribute your property.

Usually, the main assets and property of an estate are held by the Trust, while a pour-over will would cover any smaller property that was not transferred when the Trust was created. If the property covered by the pour-over will is low enough in value, that property may still avoid a lengthy probate proceeding.

If you are considering creating a trust or drafting a will, work with an estate planning attorney to not only ensure that these documents coordinate with each other, but that they meet your family’s specific needs.

Estate Taxes

The term estate tax refers to the federal estate tax assessed on the value of the entire estate. The federal estate tax is front and center in the news for 2010, as it was technically repealed for this year. The year 2011 will see the federal estate tax return with a vengeance, for without Congressional action, estates may be taxed up to a rate of 55%. This tax is paid by the estate, specifically by the Executor of the estate during the probate process, which is the legal process that administers an estate.

Inheritance Taxes

An inheritance tax is assessed only on the value of the beneficiary’s share of the estate, and that beneficiary is normally responsible for that tax burden. The inheritance tax will come into play if the deceased, any beneficiary or any property is located in a state that has an inheritance tax.

There are only ten states in the country that still collect inheritance taxes, they are:

• Indiana;
• Iowa;
• Kentucky;
• Maryland;
• Nebraska;
• New Jersey;
• Oregon;
• Pennsylvania; and
• Tennessee.

While property that is passed to a surviving spouse normally is not taxed, there are several estate planning tools that address both estate and inheritance taxes. As the laws vary by state, it’s important to contact a Colorado estate planning attorney for drafting a will, creating a trust or any aspect of creating an estate plan.

An ethical will certainly does not replace creating a legal will for your estate, in fact it is not a legally binding document, but it is gaining in popularity in estate planning. From handwritten notes to a biographical video, the ethical will can be used not only after passing, but many are choosing to share it during life.

There is no set format for an ethical will, it is as personal as the author, but some of the most popular forms are:

• Writing a family history;
• Autobiographies;
• A statement of family values and beliefs;
• Important lessons of life; and
• Hopes and dreams for future generations.

A valid will is going to take care of your possessions when you pass, the ethical will can offer the personal touch that will ease the pain of your passing on loved ones. Consider adding an ethical will to your estate planning tasks, it can offer valuable insight and life lessons to your family.