Commentary and Analysis Regarding Colorado Law

Lyons Gaddis COVID-19 Alert

This Alert is one in a collection of articles created by Lyons Gaddis in our effort to get important information to our clients regarding the effect of the novel coronavirus (COVID-19) outbreak in the United States.  This Alert focuses on the new procedures for remote notarization in Colorado.

There is a significant new tax deduction taking effect in 2018 under the new tax law, the Tax Cuts and Jobs Act (the Act). It should provide a substantial tax benefit to individuals with “qualified business income” from a partnership, S corporation, LLC, or sole proprietorship. This income is sometimes referred to as “pass-through” income.

The deduction is generally equal to 20% of your “qualified business income” (QBI) from a partnership, S corporation, or sole proprietorship, defined as the net amount of items of income, gain, deduction, and loss with respect to your trade or business. The business must be conducted within the U.S. to qualify, and specified investment-related items are not included, e.g., capital gains or losses, dividends, and interest income (unless the interest is properly allocable to the business). The trade or business of being an employee does not qualify. Also, QBI does not include reasonable compensation received from an S corporation, or a guaranteed payment received from a partnership for services provided to a partnership's business.

TCJA – take it away!   Highlights and lowlights of the new tax act.

The recently enacted Tax Cuts and Jobs Act (TCJA) is a sweeping tax package. Here's a look at some of the more important elements of the new law that have an impact on individuals. Unless otherwise noted, the changes are effective for tax years beginning in 2018 through 2025.

Submitted by Anton V. Dworak

After more than 10 years of tax chaos, the American Tax Relief Act (ATRA) of 2012 ended the uncertainty that swirled around estate and gift taxes. ATRA made permanent the $5,000,000 estate tax exclusion, generation skipping tax exemption and gift tax exclusion with all indexed for inflation ($5,340,000 in 2014). While this change should be heralded as excluding the vast majority of Americans from worrying about Federal estate and gift taxes, this change could make many wills and trusts executed before ATRA more difficult to administer or in some cases have a result that that decedent did not desire for their beneficiaries.

The problem is that when the estate tax exemptions were as low as $600,000, it was standard practice to create wills with formula clauses. These clauses employed a mathematical formula to determine marital and family bequests. Here’s an example: John and Jane are married, but John has 2 children from a prior marriage and Jane has none. John’s estate is $1,200,000 and Jane’s is smaller. John has a will done in 1990 that has a formula that says put the estate tax exclusion in effect in year of his death into a trust for the benefit of his children and put the rest into a marital trust for Jane for income only and some principal distributions, with the remainder passing to John’s children upon her death. In 1990 when the estate tax exclusion was $600,000, if John died this might have worked perfectly. $600,000 would go into a trust for John’s kids with the remaining $600,000 for Jane for her use during her life. If using those same numbers in 2014, the entire estate of $1,200,000 would go to the children in their trust and none to Jane because only assets over the $5,340,000 exclusion would go into Jane’s trust. Jane would get nothing from John’s estate and she would have to rely on her own estate to provide for herself or use some complicated legal proceedings to see if she could get more from John’s estate depending on how long they were married.

Three Ways to Empowerment

Submitted by Anton V. Dworak

When clients make appointments for “estate planning”,  they tend to be focused on how they leave their property when they pass away.    While this is, of course very important,  we always stress that an estate plan is incomplete without properly drafted “powers of attorney.”

 A power of attorney is a legal document where you grant powers to make decisions for you under circumstances you dictate.  These powers include making financial decisions,  paying bills,  executing deeds or making medical decisions.     These powers can be effective immediately or upon disability.    What powers and when they can be used depends on your individual personal circumstances.