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.

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.

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.

There are several ‘myths’ and misinformation that surround wills and estates. Perhaps because it is not a popular conversation topic or perhaps due to incorrect information passed along by others. We ‘debunk’ several common will myths:

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.

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

Estate planning shouldn’t wait until your later years – in fact, the sooner you begin making plans, the better – and here’s why…

Increasing Options

Planning for situations that can come up late in life, such as the need for long term care or Medicaid planning, allows you to plan and choose options, rather than forcing your family members to make tough choices based on availability and cost factors. When it comes to Medicaid planning, which is planning for the use of this need-based program to play for long term care, those who are not in immediate need may have the luxury of distributing or protecting their assets in advance, as Medicaid law limits benefits to those who meet strict asset and income restrictions.

In fact, Medicaid law allows a five year ‘look back’ period when they review your eligibility for this program. In other words, they review any gifts or sales that are made in the previous sixty months to make sure you are not giving away or selling your property to qualify for benefits. Any improper transfers during this time can result in a period of ineligibility for Medicaid benefits.

Lowering Costs

Some estate planning tools, such as life insurance, base a monthly rate on your age. When you purchase life insurance in your earlier years, your monthly cost will be lower than the rate of a policy purchased in your later years.

Peace of Mind

All too often in the news we hear of the tragedies that can tear families apart when it comes to end of life decisions. The Teri Schiavo case stands out in this respect, as a 7 year legal battle between Ms. Schiavo’s parents and spouse made national headlines when they disagreed on whether or not to remove the feeding tube keeping her alive.

By completing advance medical directives such as a living will or durable power of attorney, you are able to document your wishes and spare your family the heartbreaking decisions and conflict that can occur in these situations.

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

Did you know that the laws of the state where real estate or tangible personal property is physically located will govern what happens to out of state property after you die? Most people assume the laws of the state where you live at the time of your death dictate the administration of your estate, but this is not the case. In fact, property located within another state is subjected to a secondary probate process called ancillary probate that takes place in that state.

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.

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

Whether you are single, have children, own a home, are sending a child to college or retired — you buy insurance for peace of mind. It is a safety net for you and your loved ones, but life insurance is not only a safety net, it plays an important role in estate planning, and it is important to choose a policy that meets your specific needs. While an estate planning attorney can help you put together a comprehensive estate plan to include life insurance, it helps to know the basics so you can make an informed decision.

The simplest type is life insurance policy is term life. It provides coverage for a specific period of time, the term, which can be one year or more. For the lowest initial cost, annual renewable term life insurance usually fits the bill. Premiums are particularly low for young people, but they increase each year as you grow older. Level term life insurance policies, on the other hand, offer premiums that are guaranteed not to increase for a set period of time, such as 10, 20 or 30 years.

When is a life insurance policy not just a life insurance policy? When it also offers a method for savings, such as permanent life insurance. This type of life insurance is intended to remain in force for your entire life. Policies offer insurance coverage as well as the potential to accumulate cash value.

As you might expect, permanent life insurance premiums are more expensive than term premiums because some of the money is put into a savings program. The longer the policy has been in force, the higher the cash value, since more money has been paid in and the cash value has earned interest, dividends or both. If you buy a policy today, your first annual premium is likely to be much higher for a permanent life policy than for term.

The premiums for permanent life insurance policies normally stay the same over the years. That extra premium paid in the early years of the permanent policy gets invested and grows, minus the amount your agent takes as a sales commission. The gain is tax-deferred if the policy is cashed in during your life. When you die, the proceeds are usually tax-free to your beneficiary, but are normally included in the value of your estate.

Life insurance plays a critical role in estate planning, and it is important to have the policy coordinated to the other elements within your estate plan. An estate planning attorney can work with you to build a comprehensive estate plan that meets the specific needs of your family.

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

There are a new set of challenges for retirement and estate planning. People are living longer, costs are rising and more. It is now more important than ever to have a comprehensive plan in place to address the issues that seniors are facing. An estate planning attorney can help you address the top four risks that can derail your plans:

Long Term Care and Health Care Expenses

With the average cost of a nursing home in Colorado now topping $70,000, it is now critical to address nursing home and long term care expenses early in the retirement and estate planning process. One process, known as Medicaid planning, helps position assets to preserve family wealth for seniors who may need to turn to this need-based program to help address care expenses, but planning needs to start early. Long term care insurance is another option.

Outliving Your Assets

According to a recent survey, the average person plans for less than 20 years of post retirement living. But in reality, the average person is living longer and looking for an earlier retirement. Your retirement plan will need to support you longer, and this should be a critical aspect of retirement planning.

A Rising Cost of Living

Inflation is a fact of life. While $80,000 annually may allow you a comfortable lifestyle today, what will it get you during retirement? If retirement is 20 years away, you may need as much as $130,000 annually for a similar lifestyle.

Lack of Contingency Planning

As they say, even the best laid plans….Both retirement and estate planning can change as you age and your life changes, but working with a professional can help you address the ‘what ifs’ that can derail your plans, such as incapacity, disability and more.

An estate planning attorney can help you avoid the risks that plague those who choose to turn to do it yourself planning, and these plans can address many of the situations that seniors are now facing.

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

In the US, a Uniform Act is an act proposed by the Uniform Law Commission to standardize state laws in the United States. Since Congress lacks the authority under the Constitution to legislate many issues, and the power is left to state governments, there is a need to have some consistency within laws across the states.

In most states, minors do not have the right to enter into a contractual agreement, and would not be able to own stocks, bonds, mutual funds, annuities or life insurance policies. In particular, that meant parents were not able to transfer assets to their minor children, but instead must transfer the assets to a trust.

In addition, the IRS allows persons to give up to $13,000 annually to another person without any tax burden. If this recipient person is a minor, the Uniform Gift Act to Minors allows the minor to own the assets without establishing a special trust fund. In essence, a custodial account is established, which functions much like a trust, but is less expensive and less complicated to set up.

Additional legislation, The Uniform Transfer to Minors Act (UTMA), also allows minors to own other types of property, such as real estate, fine art and royalties, and for the transfers to occur through inheritance. It basically extended the definition of gifts beyond cash and securities to include real estate, paintings, royalties, and patents.

The Uniform Gift to Minors Act prohibits the minor from taking control of the gifted assets until age 18, 21, or 25 depending on the state. In Colorado, the age is 21.

A gift transferred to an UTMA account is considered irrevocable, meaning it cannot be taken back. A custodian cannot use UTMA assets for the benefit of anyone other than the minor for whom the account was created. While the funds do not need to remain in the original UTMA account, the custodian must keep these assets separate from all other property and keep records of all transactions related to the assets. A custodian of an account is entitled to be paid for their services.

So which is better, a custodial account or an actual trust? It depends, often custodial accounts are better for transferring small sums, while trusts can handle larger transfers. An estate planning attorney can advise you of the various gifting and tax reduction options available to suit your particular needs.

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