- What is the Estate Tax?
- Will I Have to Pay Estate Taxes When I Die?
- How can I avoid paying Estate Taxes?
- What is Probate and Should I Avoid It?
- Do I need a Will?
- What is a Testamentary Trust?
- What is a Revocable Trust and Do I need One?
- What is an Irrevocable Trust?
- How Can I Protect Myself in Case I Become Incapacitated?
- Can I Write My Own Estate Planning documents?
- What is Medicaid Planning?
- What Happens in the Initial Consultation?
- What Do I Need to Bring to the Initial Consultation?
What is the Estate Tax?
The Estate Tax is a tax on the Decedent's assets being transferred to others upon death.
An Estate is required to file an Estate Tax Return if its taxable assets are greater than the Exempt Amount, even if it has enough deductions to avoid paying tax.
Will I Have to Pay Estate Taxes When I Die?
How can I avoid paying Estate Taxes?
The Estate Tax Exemption increases each year for cost of living. The Exemption amount for 2018 is $11,180,000.00 (almost $11.2 million).
If a couple has combined assets valued at greater than the Exempt Amount, and most of their assets are held in joint names, they will most likely not be eligible to take advantage of the full amount of Exemption allowed. This is because when the first Spouse dies, all assets will pass automatically to the Surviving Spouse, who will later die with assets valued greater than the Exempt Amount (see above), thus resulting in an Estate Tax on the excess amount.
Such clients should consult with an Attorney to determine how to best structure their assets and Estate Planning documents in order to take advantage of the Exempt Amount both when the first Spouse dies, and again when the second Spouse dies, thus giving them the maximum total allowable Exemption.
If a single person has assets greater than the Exempt Amount, he/she should consult with an Attorney regarding how to shelter some of his/her assets from Estate Taxes.
Estate Tax Planning can be accomplished either through the use of Testamentary Trusts (trusts created under a Will) or Inter-vivos Trusts (trusts created separately from a Will).
Do I Need a Will?
We recommend that everyone have a Will, no matter how much or little they own, because it is a way in which the client can specify who should get what, and who should be in charge of making sure everything is handled properly. Even if the client has a Revocable Trust (see below), a Will is necessary to handle any assets that are not titled properly in the Trust at the time of death.
If you do not have a Will, the State of Colorado will create one for you. You should at least investigate who would be entitled to receive your assets and who would be entitled to be in charge of handling your Estate under that state-created scheme, to be sure that it is agreeable to you.
When a person dies with a valid Will, the probate proceedings are much smoother and usually less expensive than when they die without a Will.
Certainly, if you have children who are minors (under the age of eighteen), you should have a Will, possibly with a Testamentary Trust included, to make provisions for the care and custody of minor children.
What is a Testamentary Trust?
A Testamentary Trust is one that is provided for under a Will. It will not be created until the person who wrote the Will has died.
Testamentary Trusts are used to provide for management of assets for minor children, disabled relatives, or any other person that the person writing the Will wants to make provisions for but feels they cannot handle an inheritance properly by themselves.
Testamentary Trusts are also used in order to take advantage of the Estate Tax Exemption when a person dies. This is called "Estate Tax Planning".
What is a Revocable Trust and Do I Need One?
A "Revocable Trust" is also known as a "Revocable Living Trust" or a "Living Trust".
This type of Trust is "living", which means that it is set up during the lifetime of the person who creates it, as opposed to being set up upon that person's death as is the Testamentary Trust. It is "revocable", which means that the person who creates it can change the terms of the Trust or end the Trust entirely, at any time, for any reason, since the funds are theirs to do with what they please during their lifetime.
The person setting up the Trust is called the Settlor. Usually that person is also the Trustee (the person who handles or manages the Trust's assets) and the Beneficiary (the person who receives the benefit of the Trust - Trust funds are used for that person's support or benefit).
Whether or not a client needs a Revocable Trust depends on his/her specific assets and personal situation. Revocable Trusts are recommended whenever the client owns real property located outside of Colorado.
What is an Irrevocable Trust?
An Irrevocable Trust is one that cannot be changed after it is set up. These Trusts are usually set up during the lifetime of the Settlor, but for the benefit of someone else, such as his/her Spouse and/or children.
Usually, these Trusts are set up to avoid Estate Taxes or other types of taxes. They can also be set up in order to take care of a beneficiary who is incapacitated. There are several types of Trusts available. Please consult with an Attorney for more information.
Can I Write My Own Estate Planning documents?
We do not recommend that clients write their own Estate Planning documents. Although they may be valid, there are often problems with the interpretation of the language in the documents, because the average person does not have a working knowledge of the legal interpretation of otherwise normal words.
It is best to have your Estate Planning documents written by an experienced Attorney who can state your wishes in a manner that will not be disputed. In addition, an Attorney should keep notes as to their conversations with clients, which can be used to clarify any questions that may arise in the future.
What Happens in the Initial Consultation?
Bette Heller provides potential clients a FREE FIFTEEN MINUTE PHONE CONSULTATION to review their basic situation and goals. During that phone conversation, the potential client can determine if they feel comfortable with Ms. Heller and wish to proceed with a face to face appointment.
Ms. Heller prefers to meet with clients at one of her offices, where her professional resources are accessible. However, if a client is unable to come to her office, Ms. Heller is willing to make house calls to the client.
During the initial consultation, Ms. Heller will review the client's goals, assets and any family situation to be considered. She will also explain how the laws pertain to the client's situation and goals, analyze the client's needs as they relate to the situation and goals, and make suggestions as to how to accomplish those goals within the parameters of the relevant laws and the client's comfort level regarding complexity or simplicity of the plan.
Ms. Heller charges an hourly fee for the initial consultation and analysis. As of January 2017, Ms. Heller' s hourly rate is $300.00 per hour. This rate can change from time to time. Clients can expect between 1-2 hours for Estate Planning and 2-3 hours for Medicaid Planning. The length of time involved depends on how organized client's information is, how complex the client's situation is, and how many questions the client has with regard to these matters. Payment for the initial consultation is expected at the end of the consultation.
At the end of the initial consultation, Ms. Heller will recommend actions to fulfill the client's needs and desires; and she will provide firm quotes for document preparation.
The client is free to take time to think about these recommendations, or decide to continue with Ms. Heller's services immediately.
For a full Estate Plan, if the client does decide to continue with Ms. Heller within thirty (30) days of the initial conference, she will credit the consultation fee against the quoted fee for document preparation. Ms. Heller requests payment of one-half of the document preparation fee before beginning to draft those documents. The remaining fee is due upon completion of the documents, and any deduction for the consultation fee will be made at that time.
What To Bring To The Initial Consultation?
The following is information needed to advise clients as to Estate or Medicaid Planning. The advice given will be based on what information is provided. The more complete the information, the better the advice. Bring the following information and supporting documents:
- Real Estate:
Legal description; how titled; estimated market value; estimated balance of any mortgage; actual value listed on real estate tax notice.
- Vacation Home
- Rental Property
- Vacant Land
Bring copy of Warranty Deed or Quit Claim Deed showing purchase (not Deed of Trust), and copy of most recent real estate tax notice.
- Bank Accounts:
Name of bank; type of account; account name and number; how titled; current (or average) balance; POD or beneficiary designation, if any.
Bring copy of most recent statement.
- Investments/Securities (NOT held in retirement account):
For individual Securities List name of security; number of shares; current value; how titled.
- Stocks and Bonds
- Mutual Funds
- Investment Accounts
Bring copy of certificates or other documentation.
If securities are held in an investment account, list name of investment company; account number; how titled; current value of account; POD or beneficiary designation, if any.
Bring copy of most recent statement.
- Retirement Accounts:
List name of company; account number; type of account/plan; current value of account; beneficiary designation.
- 401(k), etc.
- Other Company Plans
Bring copy of most recent statement.
- Life Insurance:
List name of company; policy number; face value; cash surrender value; death benefit; beneficiary designation (first and second); amount of annual premiums, if any. Is policy whole life, term or group?
Bring copy of policy, and any correspondence regarding value or beneficiary designation.
- Interest in a Business:
List each owner and their percentage ownership, the current value of the business, the form of entity (partnership, corporation, limited liability company, etc.), any buy-sell agreements, any life insurance policies, etc.
Bring copies of all such documents.
- Tangible Personal Property: value, descriptions, evidence of ownership, title information, etc.
- Miscellaneous: Client should bring information on any other assets that they own or may own in the future, such as:
- Potential Inheritance - List estimated amount and from whom.
- Interest in a Trust - List who set up the Trust; what is your interest, current or future; current value of Trust and your interest.
Bring copy of Trust.
- Other Assets