Overview

It is human nature to avoid or put off Estate Planning. After all, who really wants to think about death and taxes? The reality is that taking the time to consider and plan today will have a huge impact on the legacy you leave behind for your loved ones.

Most people are familiar with a Last Will and Testament. However, this is just the tip of the iceberg when it comes to estate planning, and is often insufficient for actually accomplishing the goals of the individuals who use it. Our mission is to empower every one of our clients with information and an thorough understanding of all the tools and resources available to them in order to make estate planning and its processes accessible.

What is an Estate?

Simply put, an estate is everything that you own. This includes real estate, vehicles, bank accounts, investment accounts, retirement accounts, and any other personal property that you may own. An estate may also include what you owe such as mortgages, credit card bills, medical bills, and student loan debt. While most people assume that an estate only exists once you pass away, the truth is that your estate exists alongside of you your whole life. As such, most people want to find a way to account for the disposition of their estate once they are gone i.e. an Estate Plan!

What is Estate Planning?

Estate planning is exactly how it sounds: a plan for your estate. This plan not only determines how your personal property will be distributed/managed in the event of your passing, but it also determines how and by whom your property will be managed in the event that you are alive but unable to make decisions due to physical or mental incapacity. In addition to establishing a guide for how your property and health should be managed, an estate plan can also help reduce taxes, protect assets for children or beneficiaries, appoint a legal guardian for a minor, cover funeral and other expenses, and more.

Having no plan is also an estate plan of sorts. Just know that any estate without a plan will be settled per the relevant statutes in Colorado. In this scenario, it is often the case that the closest blood relatives to the decedent receive equal distributions of the decedent’s property, and this is often not a desirable outcome. Thus, it is important to develop and maintain an estate plan that allows your personal property to pass through to your intended beneficiaries.

Who Needs an Estate Plan?

The short answer is that everyone needs an estate plan. Even if you have very limited personal property or assets, an estate plan can ensure that you are cared for in the event of a physical or mental disability. Failing to plan for such events can lead to many hardships down the road, and can create an extremely burdensome process for your loved ones to act according to what you desire.

When Should You Start Building an Estate Plan?

The short answer is: right away! Many people often put off their estate planning needs. The reality is that the only time we are promised is today and the future is uncertain, which makes it imperative to begin planning today.

Estate planning is a lifelong process that should begin at adulthood, and your estate plan will grow and evolve right alongside you. Major life events such as marriage, children, divorce, grandchildren and more can affect your planning needs and desires. Furthermore, changes to tax and inheritance laws will usually necessitate a change to your estate planning documents. As such, it becomes important to review/update your plan every few years. But the first step is always to begin your own estate plan!

How Do You Start Building an Estate Plan?

If you’re reading this then you’ve already taken the first step in planning your estate. You should begin to familiarize yourself with the various estate planning tools and concepts. Our resources section contains an abundance of valuable information for you to take advantage of.

Here at our office, we can evaluate your financial, family, and asset situations to determine the best course of action for you. No two estate plans are alike, and there is no “one-size-fits-all” method to planning. Contact us today and allow us to help you get a plan in place!

Will vs. Trust

The question we see most often is whether our clients should have a will or a trust. As a starting point, we hope to enlighten you, the reader, as to the differences in the two instruments. There are many kinds of trusts, but in this case, a trust refers to a fully-funded revocable living trust under which the client would serve as the trustee and to which they would transfer their assets.

Will

A Last Will and Testament can be thought of as a set of instructions for any assets without a surviving joint tenant or without beneficiary designations. Assets that fall into this category become subject to probate when the owner passes away. The probate court then relies on the instructions laid out in the will to determine to whom the assets shall pass. When evaluating whether a will is an appropriate estate planning tool, you should be familiar with the probate process.

Probate in Colorado usually takes between six months and two years, depending on the complexity, and is a matter of public record. If you own assets in more than one state, separate probate may be required in each individual state. Probate is a legal proceeding initiated and paid for by the family of the deceased. Consequently, an inventory of all your assets, the names and addresses of your heirs, and any family disputes may also become a matter of public record. For various reasons, this may not be a desirable outcome.

In addition to being a manner of public record, probated wills are very easy to contest. Per Colorado statutes, all legal heirs and family members, regardless of standing within the family or in the will, must be notified of the probate proceedings. A simple letter to the judge can tie up assets for months or longer. Disgruntled heirs can use the threat of a will contest to attempt to receive more than they were left in the will.

Trust

In contrast, a trust is its own legal entity. It can be thought of as a private little company in which the creator(s) (grantor(s)) acts as the president, chairman of the board, sole shareholder and sole employee.

There are two basic steps in establishing a revocable living trust. The first is to have an attorney draft trust documents. After signing the trust into effect, it becomes necessary to transfer all or most assets into the trust (funding the trust). Since the trust owns all of the creator’s assets, upon his/her death, there would be no assets subject to probate. The trust would then have specific assets for how to manage and distribute the assets in the event of the creator’s disability or death.

A trust is generally a private document. No notice is required to be sent to disinherited heirs. No inventory, not even a copy of the trust, is required to be filed with any court or elsewhere. Trusts are generally far more difficult to challenge.

This information is a general outline in the differences of creation/administration for a trust and a will and is not meant to replace competent legal advice. There are more nuances and considerations for every individual scenario than could be addressed here. Furthermore, we are happy to sit down and talk with you about what makes most sense for your situation. Contact our office for your free consultation!