Q: I don’t feel I have a tax problem so a tax will is not for me. What should I have? (Summarized questions and statements received from a number of readers during the past week.)
A: During this season of family, sharing, gifting, and giving thanks, one of the best ways to express that spirit is by putting one’s affairs in order. In Colorado, unlike most states, we can keep things simple and relatively inexpensive because we have a very user-friendly version of the Uniform Probate Code. Thus, a comprehensive estate plan should include having a Will, possibly doing Durable Powers of Attorney, maybe executing a Living Will, compiling a list of assets, and being sure that assets are properly titled.
There are basically only three kinds of Wills. The first is a Standard Will which is for a person who has no "death tax" exposure and whose beneficiaries can inherit without the need of special protection in the form of a trust. The cost of the Standard Will should be under $200 here in northern Colorado.
A second kind of Will is called a Testamentary Trust Will and is for someone without estate tax exposure but who has a beneficiary that needs trust protection, such as a minor child, a parent in a nursing home, or a "spendthrift" recipient. Thus, instead of the inheritance passing directly to such a beneficiary (and triggering the need for a court-appointed conservatorship as in the case of a minor), the assets will be administered outside of Court by the person designated as trustee. The cost of the Testamentary Trust Will should be less than $300.
Finally, the Tax Will is for a couple either with a current taxable net worth of $1,000,000 or more, or possibly the survivor of the couple in 2011 having that net worth. The Tax Will should cost around $500.
Yes, there is a fourth kind of Will (pour-over), but it is just an ancillary document to funnel assets outside of a living trust back to the living trust.
But what about a living trust? In most other states, a living trust would be the vehicle of choice, but in Colorado, normally probate will cost around $2200 or less with an attorney involved (even with a taxable estate) or about $300 if the family runs the matter through court themselves. Thus settling an estate with a Will seems to be a very quick, easy, and efficient way to go. Remember that if property ownership is set up in joint tenancy and beneficiaries are designated where permitted, no probate is needed at the first death anyway. And it is only at the second death where there may be court involvement.
Without a Durable Power of Attorney in place, no one (including a spouse) has the legal authority to step forward and handle legal, personal, financial, etc. matters for another. The cost to do a set of four originally executed documents is less than $100 and avoids having to go to court to set up a conservatorship and overcomes the frustration now being encountered because of the privacy laws.
You know what you have and where documents are located, but your personal representative (executor) certainly will not. A list of assets is needed to fill the void. Such a check list will get the personal representative off on the right foot and will certainly make things easier and reduce any costs.
Finally, if you want the machines turned off if the time comes, then a living will needs to be signed. In Colorado, the form that is available for free at most hospitals is just as good as the document that would trigger a fee if done by an attorney.
Out of space. Sorry. But I do hope this has been helpful and shows yet another "privilege" of living in Colorado—easy and inexpensive estate settlement if the proper steps are done beforehand.