Estate plans: When and why you need it
February 25, 2014
"You want your hard-earned filling potholes?" I've asked a client more than once.
"Well, let's just say, in the unlikely circumstances that when you die, none of your named heirs have survived you."
"If you don't name an ultimate 'taker' under the will, then the estate may escheat to the state."
"The state would get your dough."
"Because I don't have heirs?"
"Because you haven't named who should get your stuff if you run out of heirs."
"I see. So I should …"
"Name someone or something who should succeed to your estate just in case you survive your heirs."
"Pick what you like. Choose what's dear to you. The American Heart Association, Doctors Without Borders, the Humane Society …"
"So I'm the one who directs it?"
"OK. Tell me more. Why, exactly, should I have a will — an estate plan — in the first place?"
"If you are a resident of Colorado and you die without a will, then you die 'intestate.' If you die intestate, then your property passes to your heirs in a manner prescribed strictly by statute. In other words, the state, not you, determines to whom the property will pass and how it is to be divided. Under present law, the property of an intestate passes one-half to his or her spouse and one-half to his or her surviving children. If there are no children, then the estate passes in full to the spouse. If there is no spouse, then the estate will pass in full to the intestate's children. If there are neither children nor a spouse, then the property passes to the deceased's parents. And so on."
Here, I clear my throat.
"A seminal reason for estate planning is to provide for circumstances where one wishes to make a different distribution of his or her property than that prescribed by the laws of intestacy."
"Say, I want to give one kid more than another?"
"What if one has special needs and the others don't? By setting up appropriate instruments, you can also determine when and under what conditions a kid or another heir gets his or her portion of your estate. Say, for example, you wouldn't want a kid to come into real money until she was 30 or 35."
"I could do that?"
"Yes. And you could allow for 'invasion' or her share under certain conditions; for college or to start a business or to get married for example."
"The cornerstone of any estate plan is a will which must be written. A will ensures that there will not be intestacy. A will is your legal declaration of what you want done with your property in the event of your death. In Colorado, any person older than 18, who is of sound mind, can make a will. For the simplest of estate plans, the only thing which may be needed or desired in a will. With more complex estates, more complex devices, such as trusts, usually are called for."
"Trusts essentially set up 'conditions' which must be fulfilled or which must come to pass before someone gets a share of an estate say, for example, reaching a certain age."
"Most times, formulating an estate plan becomes essential when a couple first has children. Before the arrival of children most, but not all spouses, wish their property to pass in full to their spouse. There may exceptions, of course, and those should be dealt with in a will. Once an estate plan is established, it should be periodically updated; essentially whenever there occurs a significant life event: the arrival of another child, divorce, remarriage, becoming empty-nesters or a substantial change in wealth.
"Another significant reason to develop an estate plan is to avoid probate. Probate is the means by which the state ushers an estate through court. By careful planning, probate can usually be avoided."
"Why do you want to avoid it?"
"It takes time. And money. And the court files are public record."
"What about taxes?"
"Another common reason to develop an appropriate estate plan is to minimize the tax consequences of one's death. By careful crafting, property can be transferred to one's heirs with a minimum of pain.
"Other things you'll likely want to have prepared are a living will, medical and general powers of attorney, and a letter of last instruction. The living will directs your medical care if you're not in a position to say what you want. The powers of attorney give someone you designate to act on your behalf in medical and business decisions, respectively, if you are incapacitated."
"The last damn thing I want is my hard-earned filling pot holes."
"Well, then, let's get started."
Rohn K. Robbins is an attorney licensed before the bars of Colorado and California who practices of counsel in the Vail Valley with the law firm of Stevens, Littman, Biddison, Tharp & Weinberg LLC. His practice areas include: business and commercial transactions, real estate and development, family law, custody and divorce and civil litigation. He can be reached at 970-926-4461.