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Commentary and Analysis Regarding Colorado Law

Planning with Retirement Assets

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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.

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Gift and Estate Tax Uncertainty

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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). 

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Financial Danger Ahead: See Your Financial Advisor/Attorney Now

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Assuming a regime change in Washington, the Biden tax plan proposes monumental changes that will have a massive impact on how many individuals (this means you) have structured their estate plans and finances for decades. Some of the things that should be discussed NOW with your financial consultant:

 

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Preparing for Death and Possible Disability

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Estate Planning in Uncertain Times

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 estate planning issues during the current crisis.

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2020 Notary Public Alert: COVID-19 Emergency allows for TEMPORARY remote notarization

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.

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When is an Irrevocable Trust Not Irrevocable?

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Decanting and the Art of Change

What is in a name?  There was a time when irrevocable meant just that.  In Colorado (and at least 24 other states); however, an irrevocable trust can now be changed by decanting.  Decanting can describe the gradual pouring of a liquid, typically wine, from one container into another.  Recently, the term “decanting” has taken on a new meaning in the legal profession where it refers to a technique whereby assets are transferred (decanted) from one trust to another trust.  Decanting essentially allows modification of an otherwise irrevocable and unamendable trust.

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May He Rest in Peace; now give me his football tickets!

Cameron Grant

Frank Lumpkin Jr. loved Georgia football.  As the story goes, one Saturday (over 50 years ago) Mr. Lumpkin walked through downtown Columbus, Georgia with his infant son.  He came upon an Auburn fan and the two ultimately came to blows, with Lumpkin clutching his son’s bassinet in his left hand while he swung at the Auburn fan with his right.

Mr. Lumpkin looked out for his two loves that day – his son and his Georgia Bulldogs.  Unfortunately, he later forgot to take care of his kids when he failed to mention his Georgia football season tickets in his will.  Now, his son, Frank Lumpkin, III, and his daughter, Julia Lumpkin, are embroiled in litigation over their parents’ estate, with ownership of the Georgia tickets as a major sticking point. 

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For the Love of Spot – Pet Trusts in Colorado



Submitted by Eve Canfield Spot is my neighbor’s dog. There are few people Spot doesn’t want to bite. Because I fostered her as a rescue puppy, I am one of the lucky and very few humans that she loves unconditionally. If anything happened to Spot’s family, she would be welcomed into my home. She knows the way quite well. For a large number of the over 2.7 million animals euthanized in the U.S. every year, there is no home to go to when their owner (or “guardian” in Boulder) dies. Apparently we can partially thank Leona Helmsley, according to an article in the UMKC Law Review, for the establishment of enforceable Pet Trusts in Colorado and 37 other states. Leona left $12 million for the care of her dog, Trouble, in trust. In a legal sense, dogs and cats are personal property and are left to heirs or beneficiaries, who may or may not want to or be able to, care for a relative’s pet. It often takes weeks to resolve issues of personal property, but you can’t just store a pet with the silver until somebody makes a decision. A Pet Trust, however, can take immediate effect upon death to provide for your pet’s care.
Trusts are typically established with designated property for specific people. Some trusts are established for a particular purpose, such as a charitable trust. Pet Trusts are often called “honorary trusts.” This is because the pet can’t enforce the provisions of a trust to take them for a walk or to give a good scratch (although many pet owners might disagree). Colorado Revised Statute § 15-11-901, provides for an enforceable trust for the care of a designated domestic animal or pet and any of the offspring in gestation. It is interesting and unusual that this statute exempts a Pet Trust from the application of the rule against perpetuities (worthy of a separate explanation) and it also specifically allows extrinsic evidence to be admitted in the event a court has to interpret a Pet Trust and determine the intent of the person who transferred property into a trust for the pet’s care. There are several options available to provide for the future care of a pet, such as a simple provision in your will for a designated person to care for your pet and with a designated amount of money. You can also set up a separate trust with a formal trust document and designate property to fund it. You can also obtain a life insurance policy to fund the trust upon your death. So if you don’t have $12 million like Leona Helmsley or a neighbor who also loves your dog, like Spot does, you can still provide for the care of your pet when you’re gone.

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