frequently asked questions on Estate Planning.
*Please click on a question below.
Everyone, from the moment of birth, has an estate plan. If you don’t create your own estate plan, you fall under your state’s intestacy rules. That’s what it means to die intestate—you’ve died without your own estate plan and now you’re subject to the state’s intestacy rules.
The only way to avoid dying intestate is by putting in place your own legally valid estate plan.
Probate is the legal process by which a decedent’s debts are settled and his or her property is then transferred out of the estate. In Colorado, it generally takes 6 months to probate an uncontested estate.
Real property must be probated in the state it is located. So if you live in Colorado, but have a vacation home in Montana, there will be two probate proceedings—one in Colorado and one in Montana. Unless, of course, you have an estate plan in place. Ancillary probate is easily avoided with the proper planning.
Well, that depends. First of all, if your estate would face ancillary probate then it’s usually a good idea to avoid probate altogether. Second of all, probate proceedings are a matter of public record. Very wealthy and very private people may want to avoid probate for that reason alone. Keep in mind, however, that planning to avoid probate often unnecessarily complicates the estate planning process.
You can only avoid probate by not having “probate assets” at the time of your death. The most common way to do this is by establishing and funding a revocable living trust, although for smaller estates there are other options.
A revocable living trust is basically a complex contract. It establishes how you want your property managed if you are incapacitated or deceased. By placing your assets into a revocable living trust, you transform them into non-probate property. When you become unable manage the assets yourself, then the person you’ve preselected steps in as a “trustee.”
If you’ve nominated a guardian, that nomination becomes effective upon your disability or death. If you have not nominated a guardian, then the decision is up to a judge. The court will send notice to all interested parties and invite them to petition for guardianship. The judge will then consider the petitions and make a decision in the best interest of the child.
If you’ve nominated a healthcare power of attorney, then that person has authority to make healthcare decisions on your behalf. A healthcare power of attorney is required to make decisions in accordance with your wishes, not what they themselves believe is best. If you haven’t nominated a Healthcare Power of Attorney, then the physician must reach out to known “interested parties.” This includes family members and close friends. Those individuals must meet and select a “medical proxy.” If there is no consensus, it goes to court.
Guardianships and Conservatorships are protective proceedings designed to help legally incapacitated persons. A Guardian is responsible for overseeing the person of the incapacitated individual (known as the “ward”), while a Conservator is responsible for the estate or assets of the incapacitated person (known as the “protected person”).
The federal estate and gift tax exemption amount for 2016 is $5.45 million. That means every individual can have an estate worth $5.45 million before having to pay any estate taxes. Above the exemption amount, an estate is taxed at a flat 40%. While Colorado has no state estate and gift tax, many states do. If you live or own property in another state, or plan to leave a considerable sum to someone in another state, consult an attorney.
Certain life events can trigger the need to update an estate plan. This can include marriage, divorce, an addition to the family, relocating to a new state, or realizing a substantial increase in net worth (through, for example, an inheritance or successful business venture). Even absent a significant life event, you should review your plan every few years – this will ensure your estate plan remains relevant, both in terms of current law and your wishes.
We hope our list of Estate Planning FAQ’S helped you better understand Estate Planning and the process of Estate Planning. For more information on the process of Estate Planning, visit our Estate Planning Attorney page or schedule an initial consultation with Boulder Attorney Gina Weinberger.