Q: I attended an estate planning seminar associated with a well known and respected local elder organization. One part of the presentation was given by an attorney who offered "free" private estate planning reviews for the attendees. We bit! Turned out we were pressured to dump what we had and purchase a document package for several thousand dollars. I just want something that is simple, efficient, and avoids probate.
A: I have received complaints and expressions of concern from a number of folks who attended that seminar and several others this summer. Although I have written about this before, another look at a suggested estate document packet is always helpful.
First, if the combined net worth of your spouse and you (including insurance and retirement accounts such as an IRA) is less than a million dollars, then all that is needed is a Standard Will costing $200 or less for each of you and assets should be titled in joint tenancy, or each of you should be the otherŐs primary beneficiary or a payable on death recipient.
If your combined net worth is over two million dollars, then Tax Wills (usually costing $500 or less for each one of you) should be considered and in general some or all of the assets should be held as tenants in common, not joint tenancy, and non-tax deferred investments with beneficiary or payable on death features should have the estate of the owner named to receive the proceeds. Any tax deferred vehicle such as an IRA, 401, or SEP should have the spouse named to receive the proceeds.
For combined estate values between one million and two million dollars, Standard Wills or Tax Wills need to be discussed. Although currently at the second death $2,000,000 can be passed on tax free (both for Federal and Colorado purposes), and even though the amount is going up to $3,500,000 in 2009 and no tax on any estate amount in 2010, in 2011 the amount that can pass tax free drops back to $1,000,000.
Thus unless the law changes in the meantime, if a spouse dies before 2011 leaving everything to the other spouse and the survivor lives until 2011 with more than $1,000,000 of taxable assets, estate tax exposure will occur. Thus for defensive purposes, some people decide to put in place Tax Wills to minimize the risk of a surviving spouse having more than $1,000,000 of tax exposed assets.
Note that under any of the foregoing scenarios, if a beneficiary who might inherit is a minor or someone with a disability or incapacity, then the Will should also contain a testamentary trust to protect that beneficiary.
I feel that it is essential for everyone to have Durable Powers of Attorney. I would recommend that the authority contained in the document be comprehensive so any decision can be made by the agent for the benefit of the giver, such as medical, personal, business, financial, etc. There should be backup agents named in case the first choice is unavailable to act. I also have the maker sign four originals so there are spare originals in case the agent gives up possession of an original and the power giver is no longer able to sign new ones. For example this happens if a power is not returned to the agent after a matter is completed, or an original document needs to be mailed. If only one or two original powers were signed and there are none left, the agent will not be able to act. The cost to do a set of four usually is less than $100.
Living Trust can substitute for Wills. But because of ColoradoŐs probate system, such documents are not as essential as in California, nor necessarily the quickest, cheapest, and most efficient way to settle an estate. Remember it will cost a family less than $300 doing an estate through the probate court without an attorney and matters can be settled just as quickly (at least after a few days of death) as a trustee of a Living Trust.
Thus with Standard Wills and Durable Powers of Attorney, a couple can have a quick and easy estate packet for less than $600 and face no probate at the first death. At the second death, the court probate cost without an attorney can be less than $300.