Q: What is estate planning?

When someone passes away, his or her property must pass to another person. Any legally competent adult generally may determine how his or her assets are distributed after death. A good estate plan will minimize estate taxes and plan for the disposition of your home, investments, business, life insurance, employee retirement benefits, and other property in the case of death or disability. The estate plan should also include directions to carry out your wishes regarding health care decisions, including the authorization of extraordinary measures, so that if you are unable to give the directions yourself, someone you know and trust can make these decisions on your behalf.

Q: Why is estate planning important?

Unfortunately, many families do little or no estate planning because they don’t believe that they have many assets or otherwise believe that their children can simply divide their assets among themselves. If you don’t properly plan for the management and disposition of your assets and affairs after your death, Colorado’s intestacy laws will take effect upon your death or incapacity. This can result in the wrong people obtaining your assets, and may also result in higher estate taxes.

If you die intestate, your assets are transferred through a public, court-supervised proceeding called probate which typically requires a minimum of six months and often over one year. The probate process is time-consuming and expensive and can tie up your assets during the entire proceeding. The failure to sensibly plan for the transfer of your property can also bitterly divide your family particularly when each person maneuvers to be court appointed with the authority to oversee your affairs.

Q: What assets does my estate include?

Your estate includes everything (tangible or intangible) you own, including:

• Your home or any other real estate
• Any interests you may have in any business
• Your share of any joint accounts
• The full value of your retirement accounts
• Any life insurance policies you own
• Any property owned by a trust, over which you have significant control

Q: How do I name a guardian for my children?

If you have minor children (age seventeen or less), you should designate one or more persons to be appointed guardian(s) over your person and property. A surviving parent can legally name a guardian in his or her estate planning documents yet remain the sole guardian if he or she continues to live with and retains legal custody over the minor children. You should still name at least one alternate guardian in the event the primary guardian cannot serve or is not appointed by the court.

Q: What estate planning documents should I have?

A comprehensive estate plan should include the following documents, prepared by an attorney based on a thorough evaluation after considering your particular family and financial situation: A Will ("Last Will and Testament”) transfers your assets according to your wishes. In the Will, you typically designate someone you know and trust to be your Executor, who is to carry out your written instructions. As previously mentioned, if you have minor children, you should also name both a Guardian and an alternate Guardian (in case your primary Guardian is unable or unwilling to serve). A Will only becomes effective upon your death, and after it has been admitted by a probate court.

A Living Revocable Trust is used to hold legal title to and manage your property. You (and your spouse) are the Trustee(s) and beneficiaries of the trust during your lifetime. You also designate successor Trustees to carry out the instructions you have provided. Unlike a Will, a Trust usually becomes effective immediately after incapacity or death. You can typically make changes to or even terminate a Living Revocable Trust prior to incapacity or death. One of the most highly touted benefits of a properly funded Living Trust is that it will avoid or minimize the delays, expense and publicity associated with probate.

If you have a Living Trust as a part of your estate plan, you also need a Pour-Over Will. A Pour-Over Will is used to name a guardian for minor children. It also protects against intestacy if any assets have not been transferred into the trust at the death of the Grantor. The Pour-Over Will also invalidates any previous Wills which you have executed. This has the effect of "pouring" any assets left out of the trust into the Pour-Over Will so they are ultimately distributed according to the terms of your Trust.

With a “Durable Power of Attorney for Property,” you can maintain your financial affairs if later disabled. Without a Durable Power of Attorney for Property, a guardian or conservator may need to be court appointed to make decisions regarding your financial affairs throughout the time you are disabled. The process of having a guardian appointed is expensive, time-consuming and emotionally draining. Two types of durable powers of attorney exist: a "present" durable power of attorney where your attorney in fact immediately assumes power; and a "springing" or future durable power of attorney which only becomes operational if you’re later diagnosed by your doctor as disabled. An attorney in fact is an individual appointed to make financial decisions on your behalf. You can designate anybody, but most commonly your power of attorney will be a spouse or domestic partner, a family member, or friend. Your exact wishes will be carried out immediately upon later disability when you appoint a power of attorney.

With a “Durable Power of Attorney” or Health Care Proxy, you can appoint a trusted family member or trusted friend to make decisions on your behalf regarding your medical treatment if you are not able to decide for yourself. Your health care agent can make decisions regarding any and all health care options. Hospitals, doctors and other health care providers must follow your agent's decisions as if they were your own.

A Living Will outlines what medical treatment you prefer in the event you become permanently unconscious, terminally ill, or not able to communicate or make your treatment wishes known. Colorado recognizes the force and effect of a living will which preserves your right to refuse medical treatment. The Living Will is essential to a court trying to determine an unconscious patient’s wishes. Combined with other estate planning documents, in the event of future incapacity, a Living Will can bring you and your family security and peace of mind while avoiding unnecessary delay and expense.

Medical providers often refuse to release medical information, even if your Living Will or medical Power of Attorney authorizes such to be provided to your spouse or adult children, because the 1996 Health Insurance Portability and Accountability Act, or HIPAA, may prohibit such a release. Accordingly, you should also sign a HIPAA Authorization Form which releases to your Agents, Successor Trustees or family critical medical information.