Pet Trusts in Colorado
Clients often ask me if they can provide for their pets in their estate plans. The answer is yes – Colorado does allow for pet trusts – and many people use these as a means to ensure that their beloved companions are provided for if they are either disabled or upon their death.
My dear sweet Master Luke.
Pet trusts are extremely useful in a number of situations. For most household pets, pet trusts are used as just-in-case planning, very similar to naming a guardian in your will for minor children. This ensures that your pets are provided for without burdening your loved ones. For pets with a long lifespan, such as tropical birds, pet trusts may be viewed as a necessity so that pet owners can provide certainty of care for pets that will almost certainly outlive their human companions.
In general, trusts need certain types of beneficiaries before they will be recognized and upheld by the law. Typically, these types of beneficiaries have been either ascertainable individuals or charities. Therefore, historically, it was difficult to provide for the continuing care of pets after death. In the past, estate planning to care for pets involved leaving assets to a trusted friend or family member with the understanding that they would use the assets to care for the pet. Although this method has certainly worked, there have undoubtedly been times when the pets have not been taken care of in the way that their human counterparts would have expected or the pets have not been cared for at all, with the trusted friend or family member using the assets for self-benefit instead of the benefit of the pet. Finally, the most obvious person to care for a pets physical needs may not be the best choice to manage the assets placed in the trust for the benefit of the pet. Pet trusts can accommodate this practical reality.
PET TRUSTS IN COLORADO
Many Colorado estate planners draft their pet trusts to allow pet owners to leave assets for the benefit of their pets as well as to allow the pet owners to designate both a pet guardian to manage the care of the pet and a trustee to manage the assets in the trust and make appropriate distributions to the guardian. Because of this separation of duties, the creator of the pet trust can ensure that the best person is selected to care for the pet and the best person is selected to manage the assets funding the trust for the pet.
SPECIFICS OF THE COLORADO PET TRUST
Under Colorado law, pet trusts operate in the following manner:
- Assets can be placed in trust for the benefit of a pet.
- The trust can be written so that if the pet is pregnant at the time the trust goes into effect, the trust will remain in force to provide care for the offspring of the pet.
- The trust will remain in effect until there is no living animal covered by it, unless an earlier termination is provided for in the trust itself.
- The trustee is not allowed to use any portion of the principal or income of the pet trust for the trustee’s benefit or in any way that is not for the benefit of the animals covered by the trust.
- The creator of the trust has complete freedom to designate where any assets left in the trust upon its termination should go.
- The appropriate use of the trust funds can be enforced by a trust protector designated in the trust instrument, by any person having custody of an animal for which care is provided by the trust, by any beneficiary designated by the trust creator to receive assets at the termination of the trust, or, if none of the above, by an individual appointed by a court if someone makes an application to the court to review the use of the funds.
- If there is ever a situation in which a pet trust comes into effect but there is no trustee able or willing to serve, a court has the authority to designate a trustee and make other orders and determinations so that the intent of the creator of the pet trust will be carried out.
WHEN TO SET UP A PET TRUST
- Pet trusts can be set up at death, at disability, or immediately upon signing a trust instrument.
- Pet trusts are typically set up in a last will so that upon the death of the creator of the will, the pet trust is established and funded.
- However, pet trusts can also be established in a revocable living trust so that upon the disability of the creator of the revocable living trust, a pet trust will be established to provide for continuity of care of the pet or pets.
- Additionally, at any other time, any individual can set up a stand-alone pet trust to establish a trustee and fund a trust for the benefit of a pet.
Review your estate plan to make sure it still fits your life plan.
Many clients have an estate plan in place - but for these documents to really serve the purposes they were created for they sometimes need to be updated as life circumstances change and time marches on.
Periodically reviewing your plan estate plan ensures it accurately reflects your current life plan - both your present needs and your goals going forward. Make sure you review and update your estate plan if your personal or financial situation changes or if a number of years have gone by and for instance your minor children now have children of their own.
Some of the most important triggers for updating your estate plan include:
Divorce. Once your divorce is finalized, your plan should be revised as quickly as possible to reflect your current situation. In addition, you can take steps to protect your heirs from potential future relationships that might impact their legacy unintentionally.
Re-Marriage. If you and your new spouse both have children from a previous marriage or relationship, working with an estate planning attorney is essential to navigate the complexities of providing for the children of both parents.
Birth or Adoption of Children. In addition to providing for your children’s financial future, any good estate plan will also allow you to appoint a legal guardian (both for finances and physical care) in the event you and your spouse die or are incapacitated. The guardian designation should be updated as needed depending on circumstances and should always reflect the best interests of the child/children NOW.
Illness or Injury. If you or one of your family members becomes seriously ill, you may want to consider changing your plan to reflect increased needs and or the creation of trusts for special needs, etc.
Changes in Tax Laws. Tax laws are constantly changing and can dramatically affect your estate plan. An estate lawyer can help ensure that your plan takes advantage of new legislation and makes sure you have a viable, current asset protection plan in place so that your estate avoids taxes as much as possible.
Inheritance. If you receive a large inheritance, this could shift your estate planning considerably. The increased value of your estate may cause you to change how your assets are distributed upon your death, as you might want or need to add trusts for your beneficiaries and or more charitable contributions or both.
These are just a few examples of when a meeting with your estate planning attorney is in order to make sure your estate plan meets your life plan. I am happy to discuss my client's current plans with them any time they feel the need for such a review: and always available to review a new client's "old plan" as part of my complimentary initial consultation.
Estate Planning and Personal Effects
Who gets mom's wedding ring?! When clients hire me to create their estate planning documents, we have a thorough conversation about their assets, how they are held, and to whom they want them to go to. This conversation is focused primarily on the large assets, such as the family home, retirement accounts, insurance policies, other properties and investment accounts. Part of the initial estate planning process is to really look at these and then clearly designate beneficiaries.
Inevitably during this discussion, the client’s personal effects come up. In Colorado, personal effects, such as grandmother’s antique ring, grandfather’s favorite chair, mom’s jewelry, dad’s watch, etc., can be designated in a separate Memorandum of Personal Effects that is incorporated into the Will by reference. This allows my clients to keep a running inventory of bequests and beneficiaries for personal times that can be changed over time.
I provide this memorandum as part of the estate planning notebook I create for my clients. The Memorandum, referenced in the Will, is binding and it simply has to be dated and signed. This allows the personal representative or family members peace of mind and ease. It avoids the stress and conflict of having to figure out who gets what. An analogy I recently read about in the New York Times is that without this Memorandum, its like waking up to a house full of kids on Christmas morning and having no name tags on any of the wrapped gifts – chaos! To read this article click here.
The article, references a workbook called Who Gets Grandma’s Yellow Pie Plate, by Marlene Stum. She says that the process starts with recognizing that dividing up a loved ones’ belongings is laden with emotions and can be a real mine field for family members and friends. The workbook helps sort out the process by helping people:
- Determine what you want to accomplish, decide what's fair to your family.
- Understand belongings have different meanings to different individuals.
- Consider distribution options and consequences
- Agree to manage conflicts if they arise.
To learn more about this workbook, click here.
In representing my probate clients, I have seen sibling relationships torn apart because they don’t agree about how to divide up the personal property of the deceased. My clients that are appointed as personal representatives really struggle, during a time of personal grieving, to try to figure out how to divvy up personal effects fairly, without hurt feelings.
All of this can be avoided with an estate plan that provides for a Memorandum of Personal Effects. I advise my clients to use this Memorandum as a living, breathing document that they can continue to add to and change as time goes by. So when a loved one expresses a sentimental attachment to a certain item, my client can simply add that to their Memorandum and know that that beneficiary will receive that heirloom.
Talking to adult children about your estate plan
If you’ve done your estate planning and have adult children (single, married, divorced, with or without children), its important to let them know that you have taken care of this. It would be courteous to let your children know: Where your documents are located, both copies and originals.
Whom you have chosen as your fiduciaries, such as agents for powers of attorney, personal representative, and trustees.
It would also be helpful if you can convey to them your wishes should you become disabled.
You may wish to discuss the nuts and bolts of your plan in more detail with them, this is a personal matter, and you may decide to not disclose this at all.
However, it might be wise to discuss any areas that might cause conflict in the family up front and address this with the parties now to avoid future contention. If there are any anomalies in your estate plan, such as leaving money to a more distant relative or choosing to favor one beneficiary over others, it’s a good idea to talk about this – that way there will be no hurt feelings or surprises when the estate plan is implemented and you are unable to explain your reasons for the choices you have made.
Talking to elderly parents about estate planning
How to talk to your parents about their estate planning. Its an old adage and maybe even a cliche - we don't talk about whats in the Will and its not polite to bring up aging or death with our elderly loved ones. Yet it is important and necessary. You need to know if they have a plan and where the documents are kept in case something happens. Here are some guidelines to help navigate this awkward conversation with your parent or parents.
- Your intention. Make it clear that your intention in bringing this topic up is to understand their wishes so you can help make sure that they are carried out. If they don’t have a plan it is to encourage them to contact a professional who can help them implement one – tout suite.
- Their privacy. Your focus in this conversation is not to provide them with advice or haggle over the details of their arrangements, but to make sure that they have a plan and that you are able to locate it should something happen.
- Concerns that need to be addressed. This conversation is about them. Are they happy with the arrangements that they’ve made; is there potential for conflict amongst their chosen beneficiaries and if so how can this be averted; are they comfortable with the fiduciaries that they’ve chosen or does this need to be updated. If they don't have a plan why not, what are their fears or reasons for procrastinating and how can you and your siblings help.
- Include your own circumstances if applicable. If you are in a position where receiving money in trust is important or might be important in the future, convey this or other particular concerns to your parents.
- If you have siblings keep them in the loop by letting them know you are concerned and are addressing this with your parents.
Ways to break the ice include talking about:
- Planning gone awry. Talk to them about estate planning horror stories that you have heard on the news (a little celebrity gossip can’t help but break the ice, think Georgia O'Keeffe, Steig Larsson, Thomas Kincaid, etc. ) or through your own experience (your neighbor so and so…).
- Your own planning. If you’ve done your own estate planning it might be helpful to share with them your experience and what you have decided in regards to fiduciaries, etc., as a way of both breaking the ice and so that they know what your own plan entails and who has been designated to implement it.
If there is no planning in place:
- If your parents do not have estate planning in place encourage them to seek counsel and get it done. Many clients that I work with are so pleased to finally get this out of the way and express that this is something they have been thinking about for “a long time” and their relief and boost in confidence about the state of their affairs is palpable. Gently remind them about the added expense, stress and conflict caused to family members if a person dies without estate planning. I do not recommend putting pressure on them about this - ultimately its their estate and their responsibility but at least having this conversation in a gentle way might encourage them to tackle this task.
Seniors Getting Married - Estate Planning Considerations
Seniors getting married and estate planning.
People are getting married later in life. Marriages, with one or both spouses being seniors, retired, and having grown children, have become quite common. And while its fantastic to know that love can blossom at any age and usually children and grandchildren are happy that their parents have companions to spend their later years with, these marriages require unique estate planning considerations.
Estate planning for later life marriages is complicated for a number of reasons. These "senior" marriages can directly impact the inheritance of the children and other family members on both sides. Remarriages also can affect a spouse’s right to alimony payments from a prior spouse, retirement benefits, social security benefits, health insurance, and the spousal medical care obligations. Its important for both spouses to clearly address who their assets are intended to benefit, whether it’s the new spouse, the children and families or a trust – both while the spouses are alive, upon the death of one of them, and when both die.
Other considerations that should be addressed as a part of the estate planning process should include whether long-term care insurance is needed; should income and assets be blended or kept separate; how the primary residence is treated both during life, and upon the death of one spouse, and then both spouses; is a post or prenuptial agreement necessary or advisable as part of the estate planning process; how do the parties wish to pay for future medical expenses (for example, is it advisable to deplete the assets of one spouse first).
People in later year marriages also should consider the conflicts that could arise between the spouse and children should agents named for medical and general powers of attorney need to act. The best way to avoid this is to think these conflicts through in the planning phase and coordinate the choice of fiduciaries in the documents – with the fiduciaries having a clear understanding of the spouse’s agreements to the later life marriage concerns, as delineated above.
Intestate Rules for Non-Married Individuals In Colorado
Singles (aka non-married individuals) often procrastinate about estate planning. If you are one of my friends or colleagues who fall into this category here is a brief summary of who will inherit your assets should something happen to you. By taking the mystery out of what happens I am hoping to alleviate some of the worry and maybe even encourage some proactivity in this regard.
Colorado's intestacy rules are similar to the rules found in other states but don't provide for inheritances by remote relatives, such as distant cousins. State laws set the inheritance rules for the estate of a person who died intestate; however, these rules don't take the financial needs of his heirs into consideration.
If a non-married individual dies with children, their children inherit their estate. If a non-married individual dies with no children then surviving parents inherit his/her entire estate. If both parents are dead, the estate goes to the parents' surviving descendants: for example, the siblings of the deceased person. Surviving grandparents may inherit the estate if the parents have no surviving descendants. If both grandparents are dead, their surviving descendants inherit the estate. In cases where the deceased person's parents and grandparents left no surviving descendants, the estate may go to the state of Colorado.
Colorado's laws allow inheritances by a birth parent who adopted out the deceased person or any birth children the deceased person put up for adoption, but only to prevent the estate from going to Colorado because of a lack of heirs.
Not all property is subject to Colorado intestacy rules, some of it if properly designated/titled can pass out of these intestate rules. Money from retirement accounts, such as 401(k) accounts, and insurance plans go to the person named as the beneficiary on the account or plan paperwork. Property owned with another person as a joint tenant —the family home, for example—belongs to the surviving owner. Any property transferred to a living trust belongs to the trust and isn't subject to intestacy laws. Bank accounts that have another person designated to receive the funds if the account holder dies—known as "payable on death" accounts—pass to that designated person.
Five Criteria to help choose a Medical Power of Attorney
In completing your POAs its important to choose an appropriate agent. Here are five criteria to think about in relation to choosing an agent for your medical power of attorney.
1. Personal belief: Since the concept of withholding artificial-life support runs contrary to the teachings of some religions and is a very personal decision, it is helpful to find a healthcare agent who understands your feelings in this regard and whose own beliefs are not completely contrary to your own.
2. Communication: It is important to choose someone you are comfortable speaking with about your health care wishes and it should be clear to you that not only do they understand them but they will be able to communicate these to your health care providers and family members if necessary.
3. Practical reality: Its critical that the person you choose is willing to accept responsibility and agree to act as your agent - "ready and able to serve".
4. Voice: In choosing an agent be sure that they will be able to speak up and stand firm on your behalf - even if faced with physicians who are advising otherwise or other close family members who disagree.
5. Availability: Make sure this person is likely to be accessible and capable of serving as your agent well into the future.
Do I need a Revocable Living Trust? or Will a Will do...
Estate Planning: The Use of a Last Will versus a Revocable Living TrustMany clients come in asking about setting up a Trust as opposed to a Will in terms of their estate planning. Trusts are very trendy right now, especially in states like California where the probate process is expensive and complicated.
Each of these estate-planning tools has pros and cons. The following information is meant to make sure you understand the differences and enable you to make an informed decision about which estate-planning method is right for you.
When a Last Will is used, it does not become an effective document until death. A Last Will requires the property of the decedent to go through the probate process prior to being distributed. Probate is the process by which a Last Will is presented to the court, the court authorizes the representative of the estate to take possession of the decedent’s assets, the creditors of the decedent are notified, and, approximately four months later, the representative pays the creditors and then distributes the assets to the intended beneficiaries.
When a Revocable Living Trust is used, the assets titled in the name of the trust are not part of the decedent’s estate, and do not need to go through the probate process. As soon as the individual who set up the trust dies, the alternate trustee named in the trust is entitled to take control of the assets without any court involvement. Importantly, this process also happens when the person who set up the trust becomes incapacitated.
Colorado has an informal probate process. The probate court is minimally involved with the process, and thus most probates here are both inexpensive and efficient. However, as noted above it does take about four months to complete the process. In a Revocable Living Trust based plan, the immediate ability of the alternate trustee to access the assets in the trust upon the incapacity or death of the settlor of the trust is definitely an advantage if time is a consideration.
If you choose to use a revocable-living trust based estate plan, your personal residence, vacation home, and investment accounts and other types of property are usually transferred into the name of the trust, requiring retitling of these assets, but tax advantaged retirement accounts are usually not. This process of retitling the assets is one of the two disadvantages of using a Revocable Living Trust when compared to a Last Will-based estate plan. The second disadvantage to the Revocable Living Trust is that it is typically more expensive than a Last Will based plan.
I generally recommend a Last Will based estate plan here in Colorado because of our informal probate process. I recommend a Revocable Living Trust based plan to my clients who meet any of the following criteria:
➢ complex asset management needs or diverse types of investment assets since Revocable Living Trusts provide a very strong asset management tool; ➢ property outside the state of Colorado (since such property can be placed in the Trust, no additional probate proceeding will need to be opened in the other states); ➢ the need for privacy (Wills are filed at death and become pseudo-public documents) or the wish that their at-death disposition not be public; and ➢ impending disability (at the disability of the individual, the alternate trustee will be able to take control of the assets in the trust).
Feel free to call or email me if you have further questions regarding the differences between these two types of plans.
Can I provide for my pets in my estate plan?
Clients often ask me if they can provide for their pets in their estate plans. The answer is yes – Colorado does allow for Pet Trusts – and many people use these as a means to ensure that their beloved companions (dogs, cats, horses, exotic birds etc.) are provided for if they are either disabled or upon their death.
Pet Trusts are extremely useful in a number of situations. For most household pets, Pet Trusts are used as just-in-case planning, very similar to naming a guardian in your Will for minor children. For pets with a very long lifespan, such as many types of tropical birds, Pet Trusts may be viewed as a necessity so that pet owners can provide certainty of care for pets that will almost certainly outlive their human companions. Pet Trusts are also useful to provide continuity of care for pets in the event of the disability of a human companion.
In general, trusts need certain types of beneficiaries before they will be recognized and upheld by the law. Typically, these types of beneficiaries have been either ascertainable individuals or charities. Therefore, historically, it was difficult to provide for the continuing care of pets after death. In the past, estate planning to care for pets involved leaving assets to a trusted friend or family member with the understanding that they would use the assets to care for the pet. Although this method has certainly worked, there have undoubtedly been times when the pets have not been taken care of in the way that their human counterparts would have expected or the pets have not been cared for at all, with the trusted friend or family member using the assets for self-benefit instead of the benefit of the pet. Finally, the most obvious choice of an individual to care for a pets physical needs may not be the best choice of an individual to manage the assets placed in the trust for the benefit of the pet.
Several states now have legislation that specifically authorizes the establishment of trusts to benefit pets and other animals. Colorado law, reflected in Colorado Revised Statues Section 15-11-901, allows a pet owner to put aside assets and ensure that the assets are used for the benefit of the pet.
My best friend, Luke.
PET TRUSTS IN COLORADO
Many Colorado estate planners draft their Pet Trusts to allow pet owners to leave assets for the benefit of their pets as well as to allow the pet owners to designate both a Pet Guardian to manage the care of the pet and a Trustee to manage the assets in the trust and make appropriate distributions to the guardian. Because of this separation of duties, the creator of the Pet Trust can ensure that the best person is selected to care for the pet and the best person is selected to manage the assets funding the trust for the pet.
SPECIFICS OF THE COLORADO PET TRUST
Under Colorado law, Pet Trusts operate in the following manner:
- Assets can be placed in trust for the benefit of a pet.
- The trust can be written so that if the pet is pregnant at the time the trust goes into effect, the trust will remain in force to provide care for the offspring of the pet.
- The trust will remain in effect until there is no living animal covered by it, unless an earlier termination is provided for in the trust itself.
- The trustee is not allowed to use any portion of the principal or income of the Pet Trust for the trustee’s benefit or in any way that is not for the benefit of the animals covered by the trust.
- The creator of the trust has complete freedom to designate where any assets left in the trust upon its termination should go.
- The appropriate use of the trust funds can be enforced by a Trust Protector designated in the trust instrument, by any person having custody of an animal for which care is provided by the trust, by any beneficiary designated by the trust creator to receive assets at the termination of the trust, or, if none of the above, by an individual appointed by a court if someone makes an application to the court to review the use of the funds.
- If there is ever a situation in which a Pet Trust comes into effect but there is no trustee able or willing to serve, a court has the authority to designate a trustee and make other orders and determinations so that the intent of the creator of the pet trust will be carried out.
WHEN TO SET UP A PET TRUST
- Pet Trusts can be set up at death, at disability, or immediately upon signing a trust instrument.
- Pet Trusts are typically set up in a Last Will so that upon the death of the creator of the Will, the Pet Trust is established and funded.
- However, Pet Trusts can also be established in a Revocable Living Trust so that upon the disability of the creator of the Revocable Living Trust, a Pet Trust will be established to provide for continuity of care of the pet or pets.
- Additionally, at any other time, any individual can set up a stand-alone Pet Trust to establish a Trustee and fund a trust for the benefit of a pet.
Copyright Tanya R. Shimer LLC. All Rights Reserved.
Colorado Law and Pre- and Postnuptial Agreements.
What is a Marital Agreement? Pre- and postnuptial agreements (marital agreements) are important tools for couples to manage their assets and avoid conflict, both before and during their marriage and as part of the process of separating if the marriage ends. Prenuptial agreements are contracts executed prior to marriage and post-nuptial agreements are contracts made between the spouses during the marriage, that allow the parties to agree to and delineate the division of assets should a legal separation, divorce or death occur. These agreements are legally binding contracts which can protect both parties by creating a plan that if conscionable will be enforceable and predictable – thereby taking the potential conflict out of the difficult process of separating.
Every couple should consider a marital agreement as a potential tool to enable them to plan for the future, protect their assets and avoid conflict. Couples who do not have a marital agreement are subject to the provisions of the Colorado Uniform Dissolution of Marriage Act, which will determine their rights in the case of separation or divorce; and the Colorado Probate Code, which will determine the rights of the surviving spouse and other heirs, upon death if proper estate planning has not been completed.
How Colorado Law Works for Couples without a Marital Agreement Individuals that are married and living in Colorado have statutory rights if the marriage terminates by divorce. Colorado law defines two types of property that can exist during the marriage. Separate property is the property owned prior to the marriage, and all property received by gift or inheritance during the marriage. Marital property includes all property earned by either spouse during the marriage, including deferred compensation; and all income and appreciation on separate property, whether realized or not - regardless of how the property is titled. When a couple divorces in Colorado, each party keeps his or her separate property - if it was kept separate during the marriage and not co-mingled with marital property. If the parties cannot reach an agreement about the division of property during a divorce, the court is directed to divide the marital property in the proportion that it deems just after considering all relevant factors.
In addition to dividing marital property, a divorce court can award maintenance if it finds that one of the parties lacks sufficient income or property to provide for his or her reasonable needs. The amount and length of a maintenance order is determined by the court’s just determination after considering all relevant factors. Colorado courts have been unpredictable in awarding maintenance and thus it could have a significant financial impact on both parties. Why Should Couples Consider Marital Agreements Marital agreements can be used to define the parties’ rights in regards to the appreciation of separate property and all marital property accrued during the marriage. Couples who have children from previous marriages are able to provide for these children and protect their inheritance in the event of a divorce from a subsequent spouse. If one of the spouses owns a business, a marital agreement can ensure that the new spouse does not become entangled in the company should a separation occur. Marital agreements identify, define, and resolve legitimate issues related to the couples’ finances, estate plans and business interests – while the parties are free of the emotional turmoil created during a separation process. Advantages of premarital agreements for both parties include: Avoiding litigation costs Protecting against fears of family members such as children from previous marriages Protecting family assets Protecting business assets Protecting against creditors Predetermined and thus predictable disposition of property
Contents of a Colorado Prenuptial Agreement A marital agreement may address the following issues: 1. Spousal Maintenance: whether it is waived, set at a predetermined amount, based on years of marriage, etc. 2. Division of property and debts: whether assets acquired after the marriage are kept separate; whether future appreciation on existing assets are separate property; how to apportion pension funds, retirement benefits or other intangible assets. 3. Inheritance: a spouse may agree to waive his or ability to take an elective share of the estate thereby protecting children from a previous marriages’ legacy. 4. Rights and obligations under insurance policies, employee benefit plans, and other assets such as these. 5. Waiver of Rights Upon Death: a common provision in prenuptial or postnuptial agreements designed to prevent probate laws or prior wills from trumping the terms of the prenuptial or postnuptial agreement. 6. Alternative Dispute Resolution: a provision requiring the complaining party to mediate or arbitrate any dispute and preventing him or her from filing a costly lawsuit. 7. Attorney’s fees: who pays for attorney’s fees if the parties are unable to abide by the terms of the agreement. If the parties have children during the marriage, a marital agreement cannot legally bind either party to agreements made regarding child support, physical custody, parenting time and decision-making authority. The parties may agree on proposed terms for these issues but these terms would be subject to the court’s later approval.
What does a Marital Agreement do? A marital agreement allows the engaged or married couple to negotiate around Colorado law in order to define separate property and marital property. By means of a marital agreement you can define separate property to include all income from and appreciation on your separate property. You can also protect your earned income by defining that as separate property, so that assets purchased or investments made with your earned income will remain your separate property upon divorce. Thus, by altering the definitions of separate property and marital property from those provided by statute, you can protect not only the core of your separate property which you amassed prior to your marriage, but also the earnings from and appreciation on that property. If you wish to restrict your spouse's rights upon divorce to your earned income, including retirement benefits, you can do that as well. Spouses can waive their rights to maintenance payments in a marital agreement or they can agree to a certain amount of maintenance to be paid to the less wealthy spouse in the event of a divorce. However, if at the time of a divorce, the court determines that the spousal maintenance terms in the agreement are unconscionable, the court can render that portion of the prenuptial null and void.
Finally, a marital agreement can allow couples to determine what rights a surviving spouse will have upon the first spouse's death. For example, in many marital agreements, each spouse waives his or her right to reject the terms of the others' will and elect to take up to half of the estate outright (depending on the length of the marriage). Such a waiver ensures that the estate plan of the first spouse to die will be honored by the surviving spouse.
Why Couples Choose to Alter Spousal Rights Provided by Law. Couples choose to alter their statutory rights for a number of reasons. Some people simply wish to have certainty as to property rights and maintenance payments upon a potential divorce. By entering into a marital agreement, they eliminate much of the financial uncertainty associated with a divorce. A fairly negotiated marital agreement can provide some assurance to the wealthier spouse as to the extent of the financial impact of a divorce and provide the less wealthy spouse with some guarantee to his or her entitlement to property distribution and maintenance.
People who have children from a previous marriage may wish to protect their assets for these children's benefit. A marital agreement that addresses the rights of a surviving spouse can protect the deceased spouse's estate for the benefit of children from a previous marriage as well.
Sometimes parents encourage their adult children to enter into a marital agreement in order to protect assets owned by the child that were accumulated by previous generations. Usually, a wealthy family wants to ensure that assets that have been gifted to adult children do not become vulnerable to the spouse in a divorce situation.
Enforceability of a Marital Agreement. Colorado adopted the Colorado Marital Agreement Act in 1986. This statute allows the waiver of statutory property and maintenance rights of spouses either before or during a marriage. Thus, the general statutory rule is that marital agreements are valid and binding contracts. However, one party can have the agreement voided if he or she did not sign it voluntarily or if the other party did not provide a fair and reasonable disclosure of his or her property and financial obligations.
When one spouse challenges the validity of a prenuptial, the court will look at several factors to determine whether the agreement should be enforced. The two most important factors the court considers are the adequacy of the financial disclosure and whether either party was under duress when signing the agreement. Full and complete disclosure of all assets is required prior to the signing of the prenuptial agreement because a party cannot knowingly waive rights unless he or she has sufficient information about the potential value of those rights. Duress is reviewed as a question of fact and the court may consider factors such as the timing of the agreement (i.e., was the spouse forced to sign it right before the wedding, etc.) and whether each spouse had independent counsel. It is extremely important that both parties have their own legal adviser during the preparation and execution of a marital agreement.
© 2012 Tanya Shimer All Rights Reserved.
Estate Planning Basics: What should be covered in any estate plan
Foundational Planning – the Basics
The foundation of all estate plans contains:
Last Will or a Revocable Living Trust,
a Financial Power of Attorney,
a Medical Power of Attorney, and
a Living Will.
The combination of these documents allows you to designate how your assets and health will be managed if you ever become disabled. Further, the Last Will or Revocable Living Trust provides for the distribution of your assets upon your death – to the individuals or organizations you choose and in the manner you decide.
A good estate plan with careful planning should allow you to:
During life:
--Manage and enjoy your assets as completely as possible
--Transfer assets to the next generation while minimizing transfer tax upon the transfer or at death.
--Meet your charitable or religious contribution goals
If you become disabled:
--Have at least one primary and one alternate financial decision maker legally recognized and ready to assist you.
--Have at least one primary and one alternate medical decision maker legally recognized and ready to assist you
Upon death:
--Designate who will receive your assets at your death
--Specify how those individuals will receive your assets
--Designate a guardian and trustee for your minor children
--Minimize any transfer taxes
--Ideally and with careful planning, replace any value lost to taxes
Why do I need a will?
Wills are important. A will ensures that whatever personal belongings and assets you have will go to family or beneficiaries you designate. Without a will, the court makes these decisions.
If you have children, a will ensures that your wishes regarding your children will be clear. You will be able to designate a guardian for your children's daily care. By completing a will, you will also be able to name a trustee who will be responsible for taking care of your financial resources for your children until they are adults.
Depending on the size of your estate, careful estate planning in a will can create significant tax benefits. If you have a will and other foundational estate planning documents taken care of you will also avoid subjecting your family and loved ones to confusion and anxiety at a difficult because your wishes will have already been made clear to them.
What does a will allow me to do?
In your will, you can name:
Your beneficiaries. You may name beneficiaries (family members, friends, spouse, domestic partner or charitable organizations, for example) to receive your assets according to the instructions in your will. You may list specific gifts, such as jewelry or a certain sum of money, to certain beneficiaries, and you should direct what should be done with all remaining assets (any assets that your will does not dispose of by specific gift).
A guardian and trustee for your minor children. You may nominate a person to be responsible for your child’s personal care if you and your spouse die before the child turns 18. You may also name a trustee—who may or may not be the same person—to be responsible for managing any assets given to the child, until he or she is 18 years old or older, depending on your wishes.
A personal representative. You may nominate a person or institution to collect and manage your assets, pay any debts, expenses and taxes that might be due, and then distribute your assets to your beneficiaries according to the instructions in your will. Your personal representative serves a very important role and has significant responsibilities. It can be a time-consuming job. You should choose your personal representative carefully.
Asset protection/tax planning. A properly designed estate plan should:
-- protect your assets, your person, and your business from a possible future disability;
--protect your assets from liability during and after your life;
--distribute your assets tax efficiently at your death; and
--ensure that assets left to young beneficiaries are left inside of a structure such as a trust that will provide management and protection of these assets for them.
Special needs planning. Planning for a family member with special needs is often a difficult endeavor for families and is especially important for families with significant assets. Many planning techniques are available to ensure that a loved one with special needs is provided for without jeopardizing their ability to receive the public benefits they need and to protect them from fraud.
© 2012 Tanya Shimer All Rights Reserved.
Once my estate plan is done, what do I do with my documents to ensure safe keeping?
Its important to store your legal documents I a safe place where your representatives can find them.
Many clients have asked how to care for their estate planning documents once they are completed, I suggest the following:
1. Originals. The originals are very important. They should remain in your care and control, and neither I nor anyone else should be entrusted with them. Your original signed will should be kept in a safe place, preferably in a fireproof safe or safe deposit box. Your original powers of attorney can be kept in your reference notebook. In addition, any old/former documents—including any copies—should be destroyed. Many clients ask whether copies of former estate planning documents should be retained “just in case.” The answer is no. All such documents should be destroyed to avoid any confusion as to their validity. Use your best judgment in storing and protecting these documents.
2. Reference Set. If I did your estate plan, you have been provided with a reference set of your documents in your binder. These are yours to be read and to which you may refer with any questions or concerns. The unsigned copy of your will in this binder is not to be signed or presented as a valid document—you have only one valid, executed will. If you decide to provide anyone with a copy of your will, be sure to copy the unsigned, reference will and not the original, signed will. With the quality of today’s copiers, I do not wish to be presented with a document purporting to be an original and have any questions as to whether or not it is the original or a copy.
3. Copies for Agent. You should provide your agents with copies of your executed Powers of Attorney, both General and Medical. This will enable them to have the documents and act upon them without the necessity of obtaining copies once a disability or other unfortunate circumstance occurs.
4. Copies for Physicians. You should also provide your physicians with copies of your executed Medical Power of Attorney and Living Will. They will then be able to keep these important documents in your files so that your agents will not have to search for them in the event of illness or accident.
5. Copies for Home. For clients living alone, especially aged clients, I recommend that copies of your Medical Powers and Living Will be kept in a readily accessible location such as your refrigerator or freezer in the kitchen, along with a note on the refrigerator door indicating that the documents may be found inside. First responders are taught to check the refrigerator door for important medical and pharmacological information. Finding the Medical Power of Attorney and Living Will along with other such information will make their treatment decisions easier, and better insure that your dignity is protected.
© 2012 Tanya Shimer All Rights Reserved.
Why do I need a will?
Wills are important. Regardless of how much or how little money you have, a will ensures that whatever personal property and assets you do have will go to family or beneficiaries you designate. Without a will, the court makes these decisions.If you have children, a will is essential, to ensure that your wishes regarding your children will be clear. In your will, you will be able to designate a guardian for your children who will be responsible to care for your children should something happen to you. In addition to naming your children’s guardian, by completing a will, you will also be able to name a trustee who will be responsible for taking care of your financial resources for your children until they are adults. There are other benefits to having a will, and depending on the size of your estate careful planning can reap significant tax benefits. You will also avoid subjecting your family and loved ones to confusion and anxiety at what is already a difficult time by making your wishes clear.
© Tanya Shimer. All rights reserved.