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Maylin falling in leaves

Beneficiary Deeds, am I right?

There was a recent article in the Daily Sentinel that created a lot of buzz with my estate planning clients you can read here. All of sudden, everyone wanted a beneficiary deed. We wrote and recommended such a tool in 2016 It solves everything, am I right? Maybe.

Essentially, a beneficiary deed is executed and recorded like a regular deed, but it has a special designation for your grantee. It is codified in the Colorado Revised Statutes in 2004. It acts like a death beneficiary designation you might have on your checking account or life insurance policy. The grantee does not own the asset until the property owner’s death. You can revoke it any time without the beneficiary’s consent. And you can sell the property without the beneficiary’s consent. However, upon death of the property owner, it will automatically transfer the real property to the listed beneficiaries. If you are worried about avoiding probate, this tool also assists with that.

But there are downsides to a beneficiary deed: If you have two or more beneficiaries on the deed, it could cause a problem down the road. They will each own a portion of the house. The beneficiaries must cooperate, maintain, and consent to sell the property. If not, litigation may result to force the sale of the real property by partition. This example is illustrated in a Washington Post article or this article between two siblings who inherited the house. Of course, the same problem would occur if you devised your house to two or more beneficiaries by Will. The alternative is to appoint one personal representative in your Will to sell and split the proceeds of the house.

Another downside: Because a beneficiary deed it is an incomplete gift before death, Long Term Care Assistance with Medicaid eligibility is an issue (I am referring to Medicaid for Long Term Care Assistance, not Medicare). If you require and need Medicaid Long Term Care Assistance, you cannot keep the beneficiary deed and must revoke it. If Medicaid is part of  your estate plan, a beneficiary deed may not work.

A beneficiary deed is a great estate planning tool, but you should consider these questions and consequences before executing one. If you want more information or a consultation regarding your estate plan, please contact the grand junction estate attorneys, Reams & Reams at 970-242-7847 or email us at ztreams@reamslaw.com.

Estate Taxes? “Rolling in the Deep”

Administering an estate or trust? Were taxes filed before the person died? How would you know? The IRS allows access to previously filed returns with authority. An unpaid income tax bill is common. Hopefully, there is a recorded lien to alert you. But some go unnoticed. This problem occurs at every income scale. As a recent example, review the Estate of Aretha Franklin.

Ms. Franklin died August 16, 2018 from pancreatic cancer. She was a prolific singer and songwriter. She was inducted into the Rock and Rock Hall of Fame. Her estate may be worth over $80 million (which might trigger “estate tax” problems). But she neglected to pay her income taxes for years.

The IRS filed an additional Proof of Claim for more than $1.5 million for tax years dating back as far as 2010 for 945 taxes and related penalties.


Irs Seeks To Recover Millions In Unpaid Taxes From The Estate Of Aretha Franklin
Kelly Erb – https://www.forbes.com/sites/kellyphillipserb/2018/12/28/irs-seeks-to-recover-millions-in-unpaid-taxes-from-the-estate-of-aretha-franklin/#5e5003715f9c

Ms. Franklin forgot or neglected to file. Now, it is the executor’s problem. The IRS is a creditor of the estate. Any unpaid tax will be a liability. It is the fiduciary’s job to negotiate or satisfy these claims.

Some people confuse “estate tax” with income tax in an estate. The federal “estate tax” might affect the estate if the combined assets of the decedent or trust are over $11.18 million (2018). See IRS’s reference to the Estate Tax. Aretha Franklin will have that problem, but the majority of Americans should never worry about it.

However, if the estate generates income above a certain amount, such as capital gains or dividends, the fiduciary will have to file an estate return for that income. See IRS’s reference to the Income Tax Return for Estates and Trusts. Of course, these are general considerations. The are exceptions to these rules. There are also pitfalls and penalties if you do not file on time. Do not be a link in the IRS’s “Chain of Fools,” as Ms. Franklin would belt. Retain an accountant to advise on any taxable event or liability before you close the estate or trust (even better: hire them immediately when you start acting as a fiduciary).

If you need advise on how to properly administer an estate or trust, please contact the Estate Attorneys of Grand Junction, Reams & Reams at 970-242-7847.

Auctioning Estate Property has Consequences

Auctioning off a property is quick. It gets the property sold. However, it comes at a cost. When real estate in an estate or trust sits on the market for too long, the heirs may start to get impatient. Even if you listed the property for market value, you may not get any offers. An auction may be the next step to get the property liquidated. But a guaranteed sale may have consequences. As an example, this billionaire’s estate property in Aspen, Colorado, with roughly 244 acres and six family homes sold for 75% from the original asking price: https://www.wsj.com/articles/ex-billionaires-colorado-ranch-sells-for-over-75-off-1537563592.

If you are attempting to liquidate estate or trust property and need advice, please contact the Grand Junction Estate Attorneys Reams & Reams at (970)-242-7847. Please review our practices areas here and our qualifications.

House for Living Trust - Reams & Reams

Do I need a Trust? Consider a beneficiary deed

I recently read an article that posed the question whether you should put your home in a living trust. The author did not like probate. If you from a larger city, I don’t blame her: Probate proceedings in different states with larger populations can get expensive and lengthy (Relatively, Colorado is a much cheaper state to probate a Will). Instead, the author recommended a living trust, but suggested the price tag would be at least $1,500 to $3,000. That does not include maintenance or guidance execution. These numbers are not unlike the market rates you will see here in the Western Slope. For example, an estate firm in Grand Junction lists their flat fees on their website, and they charge $1,500 for a nontaxable estate plan person with a trust. I assume by nontaxable, they mean an estate less than $5.4 million. If it is taxable, the charge is $2,500. Many firms do not do flat rates and charge an hourly, because every estate plan is different and hard to estimate. It is likely though the total charge for any living trust may exceed $2,000. The reason? They are complicated to draft with conditions specific to your estate plan and assets need to be transferred and maintained, which includes other legal documents. You also need a trustee and the ability to manage it every year. If the trust generates income, you need a tax accountant that is familiar with fiduciary returns.

In contrast, a Will may be less than $1,000. Some attorneys can do one for a couple hundred dollars for a simple Will. Once it is drafted, it is done–you do not need to look at it again unless you have a significant life event may effect the Will. With a Will, the amount you pay for a trust is about the same or more you might pay to probate the Will for a simple estate. Therefore, there is not a savings to do a living trust for smaller estates. But why do that when there are other ways to avoid it altogether and potentially save money? That is why you should consider a beneficiary deed with your estate plan as an alternative.

A beneficiary deed operates much like a payable on death designation you might have on your checking account or life insurance policy. The beneficiaries are listed on the deed, but they do not own the property until death. You can revoke it any time or sell the property without the beneficiary’s consent. Upon death, it will automatically transfer the house to your beneficiaries upon recording the death certificate. Is there a downside? A couple, depending on your situation. Because it is an incomplete gift, Medicaid eligibility is an issue (I am referring to Medicaid for Long Term Care Assistance, not Medicare). They wont allow you to keep the beneficiary deed, and they will ask you to revoke it before applying or they will deny your application. If Medicaid is part of  your estate plan, a beneficiary deed will not work.

There are a couple other downsides: a Beneficiary Deed does not include conditions or contingencies. Do you want to give your home to  your children but only until they graduate college or turn a certain age? Do you own multiple properties in different states and want them managed properly after death? Do you have children on disability or public assistance, which might be jeopardized if they receive an inheritance? If the answer is yes to any of these questions, then a trust or a Will with a testamentary trust might be a better option for you.

 

If you are considering these options or want more information regarding your estate plan, please contact the grand junction estate attorneys at Reams & Reams. We are available to assist completing or even modifying your estate plan.

 

I received a claim in an Estate. What do I do now?

If you are the executor or the personal representative of an estate, chances are you received a claim in the mail for the decedent. Most likely, it is an unpaid credit card bill. That bill has now been forwarded to collections and they are asking you, the next of kin, to personally pay it. Rest assured: You are not personally liable to pay this debt; however, the estate might be liable. Generally, creditor claims have priority over heirs, but they must be filed within certain deadlines. If it is a known creditor, that deadline to file a claim is generally one year from date of death. If you want to shorten this, give the known creditor notice. They have sixty days to file a claim or until the published notice deadline, whichever is later, or the claim is barred. If it is an unknown creditor and you publish a Notice of Creditors in the newspaper, the deadline to file is generally four months from the notice. This is considered the published notice deadline. That is why it takes at least six months to open and close an estate: You want the creditor period to expire first. You pay heirs before creditor, you open yourself up to personal liability. After the deadline has passed, the claim is barred and forever extinguished. The personal representative actually does not have the authority to pay a barred claim.

If the claim is valid or court-ordered to pay and if you have more than one, you must pay claims in the following priority. (1) Property held by or in the possession of the deceased person as fiduciary or trustee of a trust; (2) administrative costs and expenses to administer the estate or trust; (3) funeral expenses; (4) federal taxes; (5) medical expenses of last illness of decedent; (6) state taxes; (7) Medicaid; (8) child support obligations; and (9) all other claims. This is not word-for-word; I am paraphrasing the statute. For a more complete citation, look at the Colorado Revised Statutes Section  15-12-805. You can review them here.

As an example, if the estate has $100, and you receive a claim for $200 from Medicaid but you also have a funeral bill for $400, pay the funeral bill first and give notice to Medicaid why they are not receiving any funds.

If you do not think the claim is valid, disallow it. The creditor has sixty (60) days to file a petition for allowance and set a hearing for the claim or it is barred.

If you need assistance with a claim or general administration of an estate, please call the Grand Junction Estate Attorneys at Reams & Reams: 970-242-7847.

5 Easy Steps to Effectively Administer an Estate or Trust or Conservatorship

Managing an estate is much like managing a trust or a conservatorship. It primarily involves gathering the assets, managing them for creditors, heirs, or any interested persons, and then distributing the assets to the rightful people upon conclusion. With all these entities, there are things you need if you want to effectively administer assets for another person or an estate. Here are five of the most important things:

  1. Hire an accountant or an attorney with estate tax knowledge. Most often, there is no tax issue to deal with if the estate only consists of a house (see the “step up” basis rule) and some personal property; however, I recommend having a tax professional tell you that rather than ignoring what could become a tax nightmare. Accountants sometimes charge a reduced rate to review your file to confirm a return is not needed. For example, if the estate or trust collects dividends, that is considered taxable income, and the estate should file a return for that year you received the dividends. If you close or terminate the estate or trust before paying that taxable income, as the fiduciary, you might be stuck with personally paying the bill or penalty if your forgot about it. By then, the heirs are probably long gone or have already spent their money.
  2. Inventory the assets as best as you can.  In most cases, heirs or interested persons can reasonably work out how to divide the assets. However, in every case, you should itemize and inventory everything as best as possible. Contested cases sometimes materialize overnight. At the very least, put tags like these on every piece of property the estate or trust owns. Take pictures of everything. These practices will separate your stuff from the estate’s stuff, and it will avoid commingling. You should then prepare an inventory. Microsoft Excel works great. We track our assets with Wasp MobileAsset. The price for that may be more than what you are willing to invest for one estate; however, you can use this excel template I made as a guide. It will keep track of what the estate owns, the estimated value, and what the items sold for. I would recommend quickbooks and quicken to track your expenses and income as well. When you conclude your administration, this report is vital to show the interested parties how everything was distributed. If you do not adequately track the personal property and expenses, somebody is going to ask you about a particular item six months into the administration. Without proper tracking, you will not have any idea where that item is located or where it went.
  3. Keep track of your time and expenses. Many executors or trustees that do not regularly to this type of work forget to track their time on a consistent basis. When administration has concluded, they end up trying to estimate how much time they spent. Without calendars or a billing system, estimating in lump sums will get contested and you may not be able to charge at all or at a very reduced rate. Buy a cheap or free calendar and put down your hours for each day. You can calculate a reasonable hourly rate later. Don’t forget about mileage either. Expenses are also reimbursable.
  4. Get appraisals or a market analysis for assets. If you are selling land or valuable assets, nothing is better than a professional appraisal to back up your sale. They are also great expert witnesses to rely upon in contested cases. Where there have been disputes over sale of assets, and the ones that stand up are professional appraisals behind them the sale. The assessed value with the county’s assessor and Zillow will give you a good estimate but do not solely rely on them.
  5. Never buy or take estate owned for yourself. This is axiomatic, but it needs to be repeated. Someone else has put you in charge to handle the estate or conservatorship. Someone entrusted you to do the right thing on behalf of the others involved and to not take from the estate. Even if you buy it for market value, you are putting yourself in a compromising position. Further, the transaction could be voidable if it is not expressly authorized by the court and after notice of interested persons.

 

In many cases, you probably can do most of the work on your own if you follow these rules. If you need assistance, maybe even limited advisement, please call the Grand Junction Estate Attorneys, Reams & Reams at 970-242-7847.

Family member has died. Do I need to file a probate proceeding? Consider a Small Estate Affidavit.

As the nominated personal representative or the successor of an estate, you have a lot of options to consider. Whatever you do consider, please also review the duties you have to the estate in general, including to the creditors and to the beneficiaries of the estate from the Colorado Bar Association’s article: So Now You Are A Personal Representative. This article gives enough information to get started; however, one thing it does not mention is whether you even need to open up an estate probate proceeding.

If the estate you are administering does not have real property in the decedent’s sole name (exclude properties in joint tenancy) and the estate has less than $64,000 in assets less liens and encumbrances, you may be able to avoid a formal probate proceeding altogether. On the Colorado Judicial Branch website, you may use a signed Affidavit for the Collection of Personal Property if it meets the following criteria:

  • No real property in the decedent’s sole name (Check the Assessor’s webpage and the Mesa County Clerk and Recorder to review the chain of title to the property and the vesting deed.) and the estate has less than $64,000 in assets less liens and encumbrances;
  • At least ten days have elapsed since the date of death; and
  • There is no appointment of a personal representative pending in this district or any other state.

If you meet the criteria above, you may be able to use the Affidavit in the following ways: (1) collect assets from a financial institution; (2) transfer or sell vehicles in the decedent’s name (the DMV will require the use of its own form); (3) authorize cremation or deal with funeral services;  (4) deal with creditors of the estate; or, but not limited to (5) distribute assets to heirs.

Anyone who uses this the Small Estate Affidavit is still held accountable for any action they make on behalf of the estate. If there is a Will, follow the Will’s division of property after creditors have been paid. If there is no Will, you will have to divide any assets after creditors are paid by intestate succession pursuant to the Colorado Revised Statutes. The statutes are somewhat complicated if there are no known next of kin.

There is one disadvantage to using a small estate affidavit as opposed to a probate proceeding, even if you do not need to file: They have different creditor periods. With any unknown or known creditor of an estate, generally creditors have a year from the date of death to claim against the estate. The most common claims are credit card debt. If you file a probate proceeding and publish the Notice to Creditors in the local newspaper, it cuts the creditor period for unknown creditors to four months. C.R.S. 15-12-801 (Use Lexisnexis’s website to review statutes). The same works for known creditors you can prove they had actual notice of the published notice. You can also cut it down to 60 days if you intentionally give notice to a creditor of the estate. (Review the same statute). If they do not file their claim or petition to allow their claim, it is barred forever (there are always exceptions, but they are not covered here). The reason why creditor periods are important is if you distribute the assets to heirs before the creditor period expires, you might be liable to that creditor if they have a valid, timely claim.

 

If you need assistance with the estate administration, please contact Reams & Reams at (970)-242-7847.

 

The material presented on this site is included with the understanding and agreement that Reams & Reams is not engaged giving legal advice by posting material on this website. The services of a competent professional should be sought if legal or other specific expert assistance is required. Further, the firm does not wish to represent anyone desiring representation based upon viewing this website in any state or jurisdiction where this website fails to comply with all laws and ethical rules. The firm is also only licensed to practice in the State of Colorado. Any material presented on this site may be different or incorrect in another state. Please consult any attorney before using any of this information.

Probate Questions from last presentation

At our last probate presentation we held at Immaculate Heart of Mary Catholic Church (if you would us to speak with your institution or group, free of charge, about Will, Trusts, and Probate, please contact us), there were a number of index cards with questions that we quickly answered. If you forgot or wanted more detail with those answers, I wanted to follow up with some of those answers on our site.

 

Some of you asked about the Colorado Judicial Branch website for the standard forms. You can find those forms here: https://www.courts.state.co.us/Self_Help/Index.cfm

I have also linked a couple of the forms from other resources on our resources page: http://dev.reamslaw.com/resources/

However, take caution with anything you download.

The number one piece of advice we tried to instill from the presentation: Refrain from downloading forms off the internet. If you must do it, have someone (preferably an attorney) review the document before signing it. These documents have legal consequences that sometimes take years and may spend a lot of your hard-earned assets to fix in the court system if they are not done right. As I noted in the presentation, some of those forms, which purport to reflect Colorado law, are glaringly wrong.

 

Here were some of the index cards and my answers:

 

Question: I have a Colorado Will, but I will move out-of-state soon. Is this the Will still good? Vis-versa: I moved into Colorado and my Will is from another state.

Answer: Your Will is still generally valid from another state, but there are some things you need consider that you may want to update: What law governs my Will? (Most of the time, that clause is near the bottom of your Will.) If another state governs the interpretation of your Will or if it changes depending on which state your reside in, did distribution schedule of your Will change? (Terms like per capita at each generation or by representation may be defined differently in other states). Now that you have moved, will my nominated personal representative be able to efficiently administer my estate or will he or she have to delegate from afar? The marital rules may have changed, especially if you moved into a community property state such as California. Does the new state allow common law marriage and will that effect the outcome of your Will?

 

Q: Do you prepare medical and financial powers of attorney?

A: Yes, and we prepare them along with your Last Will and Testament and Advanced Directives to give your medical agent instructions in certain situations. Most estate planning attorneys can provide all of these documents for your estate plan.

 

Q: If most of my assets are in a 401k, should I still have a Will?

A: If your 401k has a listed beneficiary other than the Estate, this is considered a non-probate asset. That means upon death, it will generally be distributed to whomever is the listed beneficiary, no matter what your Will says. There are always exceptions to this rule, but generally non-probate assets trump your Will. However, even if all of your assets are going to be distributed outside your Will, we recommend a Will as a backup. There may be cases where you missed an asset, or the beneficiary designation is ineffective, or any issue that may arise. The most important thing to consider is making sure your estate plan is consistent. Without a Will, the distribution of assets may not be what you intended.

 

Q: What is the quickest type of Will to put together?

A: In Colorado, if you need to make a Will immediately and you have the capacity to do it, you may write out your Will in your own handwriting (on a legal pad, napkin, or any medium available) and then sign it. For some reason, Colorado does not require it to be dated, but I recommend it in case you do more than one. In this form, it does not need to be witnessed or notarized, but I recommend that too to confirm it was you who signed it and to prevent forgery or undue influence. Colorado refers to this as a holographic will. However, I do not recommend you continue to use this as your Last Will and Testament. Any mistake and ambiguous term or clause may invalidate it or create litigation among your family.

 

Q: Do I need a Trust?

A: My general answer to this question for most of my clients is No, but it depends on the person’s needs and estate plan. Trusts are complicated and difficult to manage if you do not maintain them appropriately. Colorado has a very efficient probate system, unlike California, which has seemed to have created the trust problem. Unlike California, lawyers cannot charge percentages (I have seen in some instances where they have, but the percentage has to be reasonable to services rendered on behalf of the estate.). The high commissions in California have resulted in a lot of trusts, because people have tried to avoid the probate system. In Colorado, I only recommend trusts if it serves a particular purpose, such as, but not limited to

  • Beneficiaries that are disabled, on special needs, public assistance, or minors
  • Beneficiaries have issues with financial responsibility and have creditors
  • Beneficiaries are incarcerated
  • You want give your beneficiaries their inheritance over time or when they reach a certain milestone rather than in one lump sum
  • Tax or marital issues
  • Medicaid issues
  • Real property in multiple states or multiple properties that need managed

 

Q: In Colorado, does a financial power of attorney expire on death?

A: Yes. Your authority to act as an agent under a financial power of attorney terminates on death.

 

Q: How much does a Will cost?

A: It depends. At our firm, we strive to keep the costs low. Please see our Estate Planning page to understand the factors of the cost and how you can lessen the cost. Estimated costs that I have seen in other firms range from $300 to $2,000; however, the market average in Mesa County seems to center around $500 to $1000. If you know someone who has done their estate plan recently, ask them about their experience and who they would recommend.

 

If any of these questions concern you, we recommend you have someone review your estate plan. Contact us today at 970-242-7847.

 

The material presented on this site is included with the understanding and agreement that Reams & Reams is not engaged giving legal advice by posting material on this website. The services of a competent professional should be sought if legal or other specific expert assistance is required. Further, the firm does not wish to represent anyone desiring representation based upon viewing this website in any state or jurisdiction where this website fails to comply with all laws and ethical rules. The firm is also only licensed to practice in the State of Colorado. Any material presented on this site may be different or incorrect in another state. Please consult any attorney before using any of this information.