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Law Offices of Ronald W. Rutz
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April 26, 2003: Essential Estate Legal Documents

Thank you for all the positive comments about the last column and in response to requests during the last two weeks, the following is a modified sister column that ran with it.

Q: Everyone from financial planners, insurance types, stockbrokers to CPAs seem to want to give me advice on the estate legal documents that I need. What do you feel is necessary?

A: In Colorado, three types of documents should be considered - wills, durable powers of attorney, and living wills. Everyone should have a will, whether to name guardians for the children, or to be able to direct where assets should go, or just make the estate process easier and more efficient for family members.

There are basically three kinds of wills. A standard will is for someone who does not have an estate tax problem (i.e. the taxable estate is worth less than $1,000,000 including insurance and retirement accounts) and has no beneficiary needing trust protection. The average cost in northern Colorado for such a will is around $175.

A testamentary trust will is for a person without estate tax exposure but with a beneficiary that needs a trust, such as a couple with minor children, or a beneficiary that might be in a nursing home or not able to handle his or her finances. Since a testamentary trust will is both a will and a trust combined, the cost is around $275 for the document.

The third kind of will is for a couple with estate tax exposure. But even if a couple's net worth is less than $1,000,000, due to the recent tax reform act, if it is possible that one person could die between now and 2011 and in 2011 the survivor could have a taxable net worth of more than $675,000 (some contend the figure is $1,000,000), then tax wills should be put in place, even if there is no current tax exposure. (I tell you this whole area has gotten murky after the last tax "reform" act.) A tax will usually costs around $500 for each will.

Yes, a living trust can be a substitute for a will, even in Colorado. Be sure, however, that the promoter not only tells about the advantages but ALSO the disadvantages. And the discussion should reflect Colorado law and not just generalized bromides that seem to be thrown around, especially at these so- called estate planning seminars. Additionally, seek a second opinion before committing to a living trust. But then if it makes sense, go for it. The cost can vary from $1500 to $6000.

Everyone should consider doing durable powers of attorney—the document giving an agent the ability to step forward and do things for the principal as needed. The alternative is having to set up a conservatorship through the Court.

Consider signing four original durable powers of attorney so that if a third party who was presented the power by the agent won't give the original back after the task is done and the principal is unable to sign additional powers, there will still be executed, original documents available for use by the agent. I prefer drafting an all-encompassing power without conditions, permitting the agent to make any decision, including medical ones.

If shutting off the machines is important, then a living will should also be signed, even if a durable power of attorney with medical powers has been executed. Thus one knows that the machines will be turned off (an agent with the power of attorney may decline), plus that very difficult decision has been taken away from the agent who emotionally may not be in the best state of mind to make it. Be sure to sign the Colorado format, however. The forms are readily available at area hospitals and some doctors' offices.

Unless there are tax wills in place, or unless there is a personal or business reason not to do so, a couple should hold everything in joint tenancy. If there is a beneficiary designation or a payable-on-death provision present, each person should be the other's primary beneficiary. It is probably not a good idea for a single person (such as a surviving mother or father) to hold property in joint tenancy with others, even children. But that is a topic for another column.

Make an asset list that includes location of documents, advisor names, property identification numbers, etc. and revise the list periodically. Such a guide for the personal representative will save time, expense, and needless frustration.

Finally, keep everything together where it can be easily found. In Colorado, do not be afraid of a safe deposit box. The box will not be frozen, nor will it be inventoried, as long as someone on the signature card is alive and has been given access to the box's key by the owner.

Phew! "Out of space!" I hope this column has helped, and if you want more information in a future column, let me know.

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