Commentary and Analysis Regarding Colorado Law

Many small business clients find granting employees or key service providers a stake in the business an attractive concept as a tool for encouraging employee retention and quality work product. However, stock options and other grants of equity in small businesses often meet significant tax challenges that derail business owners’ good intentions.

One traditional type of equity grant, a grant of stock options, is used in many startup-friendly industries to help fledgling businesses compete with their more-established, full-pocketed competitors that offer higher salaries. But one hurdle is that stock options, when vested or when exercised, are often considered taxable income to the recipient.

The Special District Association (SDA) hosted its annual conference in Keystone in September 2022. In attendance this year were over 1,000 special district board members, district leaders, and administrators, as well as attorneys and other professionals who work with these local governmental entities.  The SDA conference provides three days of education from experts and professionals on a wide variety of topics and issues relevant to special districts. Two of the sessions this year were led by attorneys from Lyons Gaddis. John Chmil spoke on Construction Projects: From RFP to Completion, and Adele Reester and Cathy Tallerico teamed up to teach about Don't Let Your Grievance Procedure Let You Down. 

It is with great sadness that we announce the passing of our colleague and friend, Anton Dworak.  He was recently diagnosed with Creutzfeldt-Jakob disease (vCJD), a very rare and fatal condition, and passed away on August 3^rd at the age of 54.  Anton leaves a significant hole in our firm, this community, and the Colorado legal scene. 

Anton began work at Lyons Gaddis in 1999.  He became a shareholder on January 1, 2004, and served on the firm’s management committee and as the firm’s President.  He was Past-President of the Boulder County Bar Association and a Vice President of the Colorado Bar Association.  He was also a member of the tax, business, and estate planning sections of each association, and assisted Bar Association members as a volunteer on the Professionalism Committee.

On April 7th, Governor Polis signed Senate Bill 86 into law, drastically increasing Colorado’s homestead exemption to $250,000 for most individuals and $350,000 for older and disabled Coloradoans, in addition to broadening what constitutes a homestead in Colorado, granting using cars, trailers, RVs, tents, and other non-traditional residences as home exemptions for those dwellings. The bill also created a number of new exemptions for various forms of personal property, including exemptions for: 

• $2,500 of cash held in bank accounts;
• Firearms, hunting and fishing equipment;
• Economic impact payments;
• Health savings accounts; and
• Cash held in life expectancy set-aside accounts or similar reserve fund, escrow or impound account,

You may be wondering: what does that mean for Coloradoans? What is the homestead exemption? How do I take advantage of it? Am I considered “elderly or disabled”? 

A Knot of Benefits

In part due to the COVID-19 pandemic and in part due to a political push to provide enhanced minimum benefits for workers, the federal government, the Colorado legislature, and, most recently, Colorado voters have approved multiple leave benefit laws that apply to the majority of Colorado employees. While the many different programs tie together to form a safety net for employees, the overlapping benefits pose a complex knot for employers to navigate. The most recent of these programs is the Colorado Family and Medical Leave Insurance (FAMLI) program takes effect in January 2023.

Proposition 118

Joining just a handful of other states, Colorado voters approved Proposition 118 in November 2020 creating a state-run insurance program to provide paid leave when Colorado employees to take leave for eligible reasons. Employers and their employees will begin paying into the insurance program on January 1, 2023, and benefits will be available to workers starting in January 2024.

After you sign your will, it may be tempting to put it in a safe place and forget about it.  However, it’s wise to revisit your will, and your entire estate plan, from time-to-time.  The following are just some of the reasons why updates to your estate plan may be appropriate.

1. Change in Family Circumstances. There can be a variety of changes in family circumstances that warrant revisiting your estate plan, such as births, deaths, marriage and divorce. Even if there is not a dramatic change in family circumstances, you may have named certain individuals as your fiduciaries (such as agent under your power of attorney or personal representative under your will), and as time passes these individuals get older, possibly move away, or may no longer be the best choice to serve in these roles. 
2. Children Reaching Adulthood. If you sign a will while your children are young, it’s important to revisit your planning when your children reach adulthood. For example, if your plan calls for assets to be held in trust, it may now be appropriate to consider leaving the assets outright to your children.  Conversely, if your assets will pass outright to your children under your current plan, you may determine that the assets should instead be held in trust.  You may want to leave assets in trust due to concerns that your children will not prudently manage their inheritance, or you may just want to take advantage of the protections offered by trusts.  If properly structured, leaving assets in trust for a child can provide some protection against the child’s creditors and some protection against claims by the child’s spouse.
3. Financial Changes. A well-considered estate plan will be crafted with your assets in mind. The overall value of your assets is important, as well as the types of assets that you have.  As your assets change, it may be advisable to also make adjustments to your estate plan.  For example, if your assets increase in value then it may be advantageous for your estate plan to include planning to reduce or eliminate estate tax at your death.  On the other hand, if your assets go down in value, you may be able to simplify your estate plan.  When appropriate, simplifying your estate plan can reduce costs that would be incurred later to implement a plan that no longer fits your needs.
4. Updating Beneficiary Designations.  It’s important to periodically check your beneficiary designations to make sure they coordinate with your estate plan.  When you signed your will, you hopefully checked the beneficiary designations for your assets and made any necessary updates.  As time goes by, and new assets are acquired, you may forget to name beneficiaries consistent with your estate plan.
5. Law Changes. The law is constantly evolving. Over the past decade, there have been significant changes to federal estate tax law and also to state law.  Your estate plan may not be the optimal plan for you in light of these changes.  For example, the laws applicable to how retirement assets are distributed following death have changed significantly since 2019. Also, the estate tax laws have changed over the years.  Your will may include estate tax planning as a cornerstone of the plan.  Depending upon the value of your estate, it may make sense to eliminate that tax planning and thereby simplify your plan and as a result, simplify administration of your estate.
6. Move to Another State. Most states recognize a will as valid if it was validly executed in another state. However, a will executed in one state may not contain a plan that is optimal in another state.  Accordingly, it may be appropriate to update all or some of your estate planning documents after you make a move. 

Signing a will is a good step in leaving a thoughtful estate plan for your family.  To ensure that your property passes as you intend, and as smoothly as possible, you should dust off your will, and other estate planning documents, at least every 3 to 5 years, and consider whether any updates are needed.  The estate planning attorneys at Lyons Gaddis can assist you in reviewing and updating your estate plan.

With the ever-increasing development along the Northern Front Range, many of Lyons Gaddis’ irrigation company clients are asked to either permit a crossing of their ditch easement or to relocate their ditch to facilitate development. Both should result in an agreement. The difference between these two agreements is frequently not well understood but they are dramatically different legal agreements.

License Agreement for a Crossing

A license agreement for a crossing allows another party, frequently a developer, utility, telecommunication provider or a municipality, to install a crossing of their easement without affecting the easement. The license agreement does not grant an easement or other real property interest to the entity crossing. It simply allows or licenses the crossing on terms and conditions that protects the use of the ditch easement, covers all of the ditch company’s costs and almost always assesses a modest license or crossing fee, generally in the range of $1,000 - $5,000 per crossing. These license agreements for crossings utilize fairly standard forms and are relatively simple to draft once the necessary information is obtained. These license agreements for crossings are also used for bridges, road crossings, utilizing culverts, and sometimes for overhead powerlines. The guiding principle is that the irrigation company’s easement remains intact and unaffected.

As I was preparing recently to write this blog post a few weeks ago, several friends had just lost homes in the Marshall Fire that occurred in Boulder County on December 30^th, and I was reminded that my LAST blog post, dated October 22, 2020, “Climate Change Impacts on Colorado Water Users,” specifically touched on increased wildfires as a potential consequence of climate change. In October of 2020, Colorado was just coming out of one of the hottest and driest summers in recorded history.  Unfortunately, the beginning of 2022 isn’t shaping up to look much better.  As of the date of the Marshall fire, Colorado, and the country as a whole, had just experienced the hottest six months in recorded history.  The next highest six-month average temperature occurred during the 1930s, during the Dust Bowl.

The data, sourced from the National Oceanic and Atmospheric Administration, illustrated that the average Colorado temperature between July and December reached 53.4 degrees, which is over a degree and a half warmer than the same six-month span in 2020.  The next highest six-month state average was 52.1 degrees in 1933.

The Marshall Fire of December, 2021 is a tragedy that has impacted thousands in Boulder County. In its aftermath, we all – those impacted and those not impacted – need to revisit our homeowners and property insurance policies to ensure we have adequate coverage. Merely clicking “renew” each year is far from adequate, and it could leave you drastically uninsured. Here’s what everyone should do:

1. Get a copy of your declarations page from your homeowners insurance carrier. Most homeowners policies have four types of coverages: dwelling or home coverage (covering your house); ‘other structures’ or ‘detached structures’ coverage (covering things like decks, sheds, detached garages, and sometimes accessory dwelling units); contents or personal property coverage (covering your clothes, furniture, pots, pans, etc…); and additional living expense coverage (covering a rental property or hotel if you need to be out of the house during repair/rebuild).
2. Try to approximate the value of each of these categories of coverages. For the house, remember, it’s the cost to rebuild or replace the home structure, not the value of the land or landscaping. For other structures, it’s the cost to replace your deck, shed, and detached garage. For contents, it covers everything from your TV to your blue jeans. Additional living expenses would be the cost to rent a similar property for up to two years. The best thing to do is to get an appraisal of the home that separates the value of the house from the land, then separately appraises each other structure. Most people don’t want to pay over $1,000 for an appraisal like this. There are alternatives, such as looking at Zillow’s “Zestimate,” looking at comparable home sales prices, and talking to friends or colleagues in the construction industry. Whatever you do, try to get the best information you can on what it would take to replace your home, replace your belongings, and replace the other structures. Look up the cost to rent a similar property.
3. Look at your policy’s coverage terms. For your home dwelling coverage, look for terms such as “refundable depreciation” or “non-refundable depreciation.” This has a big impact on how much you get from the insurance carrier if you decide you want to rebuild versus start anew somewhere else. Read the personal property coverage section to see what types of personal property, such as jewelry, art, collectibles, or musical instruments need special endorsements or riders, and make sure you get those endorsements or riders for your valuables. If you don’t, they probably won’t be covered.
4. Increase your policy limits to at least match what it will cost to rebuild your home, rebuild your other structures, replace your personal property, and cover your rental income. Yes, this probably will make your rates go up. Do it anyway.
5. Do this at least every other year, and while you’re at it, check your auto policy, and look into an umbrella policy.

Homeowners insurance often doesn’t provide the type or level of coverage most people need in the time of a catastrophic loss. Even when your house burns down, you’re still obligated to pay your mortgage and pay your property tax. When your coverage kicks in, it’s usually to replace the structure on the same piece of land. For people with mortgages, this often leaves them with little choice but to rebuild in the same location, even if it looks like the surface of Mars.

Thank you, Jeff Rose, for this discussion regarding fire insurance claims in the wake of the Marshall Fire in Colorado.

In the last decade or so my favorite genre of commercials on television has undoubtedly become commercials for home and auto insurance. I will literally back up the DVR to see how I have become my parents by bundling my home and auto insurance. Whether it’s Flo, the LMU Emu, the Geico gecko, or the Patrick price/Rogers’ rate, boring insurance companies have gone over the top to seem clever, and it’s worked. But not a single one of these companies actually advertise one detail about what they are selling. Deciding what coverages and how much you need of each is never mentioned. And, like bad red wine, the policy you’ve had since you were twenty years old has not aged well.

I know that this sounds like an insurance agent working for your business. I’m not, nor am I qualified to sell you anything. But what I can tell you is that as a lawyer working with people who have been seriously injured, I have looked across the table at too many people learning too late that the auto carrier of the person who injured them doesn’t come close to covering their damages. Those same people often learn that the coverages they opted for multiple years ago to save a few premium dollars don’t help them either. Your car insurance, like your car, needs maintenance from time to time. You should check what coverages you have and what they actually cover. Call your agent and ask what coverages are available and in what amounts. Ask yourself, what do I have to lose if I am seriously injured, or what if I injure someone seriously? If the answer makes you shudder, you don’t have enough coverage.

Barefoot Lakes

Lyons Gaddis represents Brookfield Residential and its affiliates in connection with the 1,300 acre Barefoot Lakes master planned community located adjacent to the St. Vrain River and immediately east of I-25 in Firestone, Colorado. With over 1,000 homes already built or under construction, when completed, Barefoot Lakes will contain a new residential community consisting of over 3,500 single-family homes, 100 acres of lakes, miles of trails, new regional water and wastewater utility systems, new regional roadways, and 350 acres of parks, trails, and open spaces for public use. Lyons Gaddis attorneys Cameron Grant, Suzan Fritchel, Jeff Kahn, and Sean Stewart assisted Brookfield Residential with entitlements on the project, including the annexation of the property to Firestone, preparation and approval of Planned Development zoning, subdivision platting, and third-party negotiations crucial to project success. Several of the unique components of this complex land use and development project are summarized below:

For many people, their retirement assets, such as IRAs and 401(k) Plans are their most valuable assets.  Therefore, it is particularly important to plan carefully for what will happen to these assets at death.  Doing so is tricky because most of these plans, with the exception of Roth IRAs and Roth 401(k) Plans, are subject to income tax as withdrawals are made from them.  Also, the rules regarding distributions from these plans are rigid.  The following are a few examples of issues to consider:

Surviving Spouse: When retirement assets are left to a surviving spouse, the surviving spouse has a variety of options.  One option is to rollover the retirement plan into the spouse’s own IRA.  The surviving spouse then has all the opportunities that the spouse would have if the assets had originally been contributed to the IRA by the surviving spouse.  The surviving spouse can withdraw all of the assets and also can leave the assets to whomever he or she chooses.  This may be appropriate in many cases, but not always.  For example, if each spouse has children from a prior marriage, they may want to leave the retirement plans held by the first spouse to die in trust for the surviving spouse so that he or she receives distributions from the plan during life, but the balance is designated to pass upon the surviving spouse’s death to the children of the first spouse to die.  The trust needs to be carefully crafted with the retirement asset rules in mind.

Unfortunately, as we complete the first month of 2021, the COVID-19 pandemic is still surging and many of the laws related to it changed on January 1, 2021. This article surveys a few of those laws, but is by far not an exhaustive list or a complete analysis of all of the new laws. Please give us a call if you have any specific questions related to the COVID-19 laws or otherwise.

Colorado Healthy Families and Workplace Act

On December 16, 2020, the U.S. Equal Employment Opportunity Commission (EEOC) issued revised COVID-19 guidance effectively permitting employers to implement mandatory COVID-19 vaccination policies for employees as long the employer: 1) follows accommodation requirements for disabilities and religious beliefs; and 2) allows employees to receive the vaccine from a third party that does not have a contract with the employer.

Mandating Vaccination is Generally Permitted under the ADA

Lyons Gaddis – is thrilled to announce that Chad Kupper and Jeffrey Rose have been elected shareholders in the Firm effective January 1, 2021.

This class of new shareholders represents the next generation in the Firm’s region-leading legal team.  Managing shareholder, Cameron Grant, stated, “I could not be happier to have Chad and Jeff as shareholders at the firm.  Each has continuously shown their talent in delivering stellar legal work, providing value to clients on the business side, and carving out niches for themselves in their practice areas.  In addition, they are simply great people, exhibiting qualities that make them leaders in the legal industry and within the firm.  Congratulations!”

There are times when a person is so severely injured in an accident there is no question whether or not to file a personal injury claim. The amount of money, time, and misery experienced because of the accident makes the need for compensation obvious.

But this isn’t always the case. Sometimes, even with injuries, victims aren’t sure whether a claim is necessary.

Current and future landowners of real property within unincorporated portions of Weld County will soon have a new comprehensive plan along with new zoning and subdivision codes to consider when planning for potential uses and possible division of their lands. On November 9, 2020, the Weld County Commissioners heard the final reading of County Ordinance 2020-13, to enact a new Weld County Code Chapter 22, for the Weld County Comprehensive Plan (for ease of reference, the “Comp Plan”). Then on November 16, 2020, the Commissioners heard the final reading of Ordinance 2020-16, to enact an amended Code Chapter 23, regarding Zoning, and an amended Code Chapter 24, regarding Subdivisions.

Obviously, Weld County personnel and elected officials have devoted a lot of time and effort in crafting the new Comp Plan in response to an anticipated doubling of the population of Weld County over the coming decades and the desire for orderly growth. The new Comp Plan sets out several goals, the major ones being to steer future industrial and commercial development to areas closer to major highways and intersections, and to steer larger developments to areas within three miles of municipalities. The County has created a Comprehensive Plan Map which illustrates the vision of areas appropriate for various types of future development. Comprehensive Plan Map  

Colorado has four statutory deeds: General Warranty Deed, Special Warranty Deed, Quit Claim Deed, and Bargain and Sale Deed. Historically, General Warranty Deeds were the most prevalent and preferred since they grant the broadest protection for buyers as their sellers are warranting the title to the real property since the beginning of time. Special Warranty Deeds limit the warranty of title to the period that the seller owned the real property. Quit Claim Deeds give no warranty of title – the buyer gets only what the seller had at the time the deed is signed. Bargain and Sale Deeds also offer no warranty of title but do transfer the title to the seller at that point in time as well as title that the seller acquires after the date of the Bargain and Sale deed.

Then in 2019, Colorado enacted a new statute that allowed deeds to be subject to “Statutory Exceptions” which are composed of

Gift and estate tax uncertainty is not new.  Over the past several years, we have seen the amount a person can leave free of estate tax utilizing their estate tax exclusion amount rise from $600,000 in 1997 to $11,580,000 in the year 2020, with several stops in between.  We have had one year of estate tax repeal, in 2010.  In 2012, we were on the brink of the estate tax exclusion amount dropping from $5,120,000 to $1,000,000, but the law was changed at the eleventh hour to prevent that from happening. 

Even the current law contains a provision that will cause the exclusion amount to drop to $5,000,000 plus an inflation adjustment in the year 2026 (resulting in an exclusion amount of approximately $6,000,000).