The start of a new year provides an ideal opportunity to review your estate plan, whether creating one for the first time or updating an existing one. This allows you to clearly understand your financial and legal affairs and ensures that your estate plan accurately reflects your current wishes and goals. Additionally, estate planning is not a one-time event.
Your plan should be reviewed and updated regularly to ensure that it continues to reflect your wishes and goals and to take into account any changes in tax laws or your situation. Marriage, divorce, or having a child, e.g., are all life events that should trigger an estate planning review.
Estate planning is an ongoing process that requires regular attention and review to ensure that your wishes are carried out efficiently in the event of your incapacitation or death. This article will provide a comprehensive estate planning checklist of the essential elements of a Colorado estate plan, including wills, trusts, powers of attorney, and advance directives.
We’ll also discuss the importance of regular review and update of your estate plan and provide tips and guidance on how to get started so you can protect your legacy and make sure your wishes are carried out in accordance with Colorado law without leaving any loose ends.
- Understand the Basics of Estate Planning
The first step in estate planning is to understand the terminology and process. Estate planning includes all of the arrangements made by an individual or family to manage and distribute their assets during life and after death. Estate planning in Colorado can ensure that all of the assets are distributed according to the individual’s wishes. Here are some of the most common types of assets that can be included in an estate plan:
- Real property, such as homes or lands
- Financial assets such as bank accounts, bonds, and investments
- Business interests such as LLCs and partnerships
- Personal property such as jewelry, furniture art, collectibles
- Life insurance policies
Once you’ve identified what types of assets should be taken into account, it’s time to consider the most effective approach for handling them. With careful planning and a thorough understanding of all potential options, you’ll find yourself well-positioned for success!
- Identify and Organize Your Assets
Once you understand estate planning, the next step is to identify and organize your assets. This includes everything you own, including real estate, bank accounts, investments, personal property, etc. It’s essential to make a comprehensive list of all your assets and their current value. This will help you determine how your assets will be distributed and help with tax planning. This includes financial documents and important papers such as:
- Deeds to real property
- Titles to vehicles and other personal property
- Insurance policies, including life insurance policies
- A durable power of attorney for finances
- Marriage and divorce certificates
- Prenuptial or Postnuptial and Cohabitation Agreements
- Advance healthcare directive
- Retirement account statements, including pensions and IRAs
- Investment account statements, including stocks, bonds, and mutual funds
- Bank account statements, including checking and savings accounts
- Estate planning documents, including wills and trusts
Keep these documents in a safe place where your executor or trustee can easily access them. This will make it easier for your loved ones to settle your estate and ensure that your assets are distributed according to your wishes without unnecessary delays.
Note; Creating a digital inventory of your assets is important because it can provide you with an organized and easily accessible record of all your important information. These include:
- Bank account details and login credentials
- Investment and retirement accounts
- Online payment services like Stripe, Square, or PayPal
- Social media accounts (e.g., Facebook, LinkedIn, Twitter)
- Email accounts
- Cloud storage accounts (e.g., OneDrive, Dropbox, Google Drive)
- Domain names and website hosting information
- Virtual currency accounts (e.g., Bitcoin, Ethereum)
- Music and video streaming accounts (e.g., Spotify, Youtube, Netflix)
It’s also a good idea to share this information with your loved ones and your estate attorney in the event of your passing. It can be a challenge to access digital assets without proper login information. This inventory will help ensure that your digital assets are recovered and properly handled during a time of loss, so your wishes are respected.
- Choose the Proper Estate Planning Professional
Choosing the right estate planning professional is an essential step in the estate planning process. A qualified attorney can help you create a plan that meets your specific needs and goals. They can also advise you on how to structure your assets to minimize taxes and protect them from creditors. In simple words, this person can manage all of your financial affairs.
However, it’s essential to choose professionals with experience and expertise in estate planning. You can ask for recommendations from friends and family or research online to find a qualified attorney. You can also check the attorney’s credentials and experience to ensure they are eligible to handle your estate plan. Also, ask about their fees and ensure you understand the cost of their service before you begin working with them.
Finally, remember that estate planning is an ongoing process, so it’s crucial to choose a professional who will help you update your plan as your needs and circumstances change.
It’s also important to remember that you should feel comfortable working with your chosen professional, as the estate planning process can be emotional and personal. So trust your instincts and ensure you are satisfied with the expert you choose to help you with your estate plan.
- Create a Will and Trust
A will is a legal document outlining how your assets will be distributed after death. It also allows you to name a personal representative (AKA executor) who will be responsible for carrying out the terms of your will. A trust, on the other hand, is a legal entity that holds assets for the benefit of one or more beneficiaries. Trusts can be used for various purposes, like avoiding probate, protecting assets from creditors after your death, and minimizing taxes.
Creating a will and trust that aligns with your overall estate plan is essential. Your attorney can help you determine which type of will and trust is best for your situation. For example, if you have minor children, consider creating a trust to hold assets for their benefit until they reach a certain age. You should also consider making a living revocable trust if you have a large estate or want to avoid probate.
You should also regularly review and update your will and trust, as your circumstances and goals may change over time. Your attorney can help ensure that your will and trust are up-to-date and aligned with your current wishes. Once your living will and trust are in place, you should also ensure that your loved ones know their existence and where to find them.
In Colorado, assets that are held in trust do not go through probate. Likewise, assets that are held jointly with the right of survivorship, like bank accounts and real estate (if you create them as such), pass to the surviving joint holder without the need for probate.
However, assets not held jointly or in trust, like personal property, will be distributed according to the will. If you don’t have a will or some other legal declaration, they are distributed to family members through Colorado law, which is known as Intestate Succession.
- Plan For Long-Term Care
As we age, the likelihood of needing long-term care (LTC) increases. Long-term care refers to the ongoing assistance required when someone can no longer perform basic activities of daily living, such as bathing, dressing, eating, and transferring. Long-term care can be provided in various settings, such as in-home care, assisted living facilities, or nursing homes.
Planning for long-term care is essential as part of your overall and complete estate plan. One way to do this is by purchasing long-term care insurance. Long-term care insurance can help cover the cost of long-term care services and help preserve your assets. It’s also important to consider how you want to receive long-term care (LTC) and where you want to receive it.
You should discuss your preferences with your loved ones and ensure they know your wishes. Reviewing your long-term care plan regularly is an excellent idea to ensure it is still aligned with your current desires and goals. You can also talk to your estate planning lawyer or financial advisor about the types of insurance needed to cover any costs associated with long-term care (LTC).
Drafting Medical and Financial Powers of Attorneys and Advance Directives is also part of long-term care planning. Using these documents as part of your estate plan allows you to make decisions in advance and set up family members, friends, or others to act on your behalf if you are unable to make decisions for yourself which is extremely vital during a health crisis.
- Consider Tax Implications in Estate Planning
Estate planning in Colorado can have significant tax implications, so it’s important to understand the tax laws and regulations when creating your estate plan. Estate taxes, taxes from retirement plans, and gift taxes are all factors to consider when planning your estate.
In Colorado, there is no state estate tax or inheritance tax. The federal estate tax applies only to estates over $12.92 million in value in 2023, and the federal gift tax applies to gifts over $17,000 per year. It’s important to understand how these taxes may impact your estate and to plan accordingly.
Working with a qualified estate planning attorney or tax professional can help you understand the tax implications of your estate plan and ensure that your plan minimizes tax liability if needed. They can advise you on the best way to structure your assets, including the use of trusts, to minimize taxes and protect your estate for future generations.
By taking the time to understand the tax implications of estate planning in Colorado, you can rest assured knowing that your estate plan is structured in a way that will effectively distribute your assets to future generations without excessive tax consequences.
- Review and Update Your Estate Plan Regularly
As mentioned earlier, estate planning is not a one-time event. Therefore, your plan should be reviewed and updated regularly to ensure that it continues to reflect your wishes and goals. It’s also important to review your estate plan in light of any significant life changes, such as:
- Birth of a child or grandchild
- Marriage or divorce
- Death of a spouse, parent, or other family members
- Moving to another state
- Changes in tax laws or estate planning laws
- Significant changes to your financial situation (such as large investments or inheritances)
- Retirement
One of the most important reasons to review and update your estate plan is to ensure that your assets will be distributed according to your wishes, and those can change over time. Without a valid will or trust, your assets will be distributed according to Colorado intestacy laws, which may not align with your desires. You don’t want state law to determine who gets your assets. Additionally, without proper powers of attorney or living wills, your loved ones may not have the authority to decide on your behalf if you become incapacitated.
An estate planning attorney can help you navigate the complex tax laws and ensure that your plan is structured to minimize taxes and maximize the amount that will pass to your beneficiaries. Lastly, if you move to a different state, you should review your estate plan to ensure that it complies with the laws and regulations of your new state of residence.
An estate planning attorney can help you navigate the differences between states and ensure that your plan is valid in your new state of residence so that your wishes are honored. By regularly reviewing and updating your estate plan, you can be confident that your assets will be distributed according to your wishes and that your loved ones are taken care of.
Finally, staying on top of your estate planning needs may be an intimidating process, but hopefully, this 2023 Colorado Estate Planning Guide has provided you with all the information and direction that you need to plan for your future. Taking a few moments to think through these seven steps can help provide you with comfort and peace of mind.
Whether it’s having a discussion with your family, reviewing legal documents, or registering accounts and investments, estate compiling is an important part of securing your finances.
It’s important to remember that no one plan fits all, so don’t be afraid to tweak the steps to best meet your personal situation. Hiring a financial advisor or attorney to help you every step of the way can also be a valuable decision as they are knowledgeable and experienced in the estate planning process, which can help ensure that your estate is as secure as possible.
Our thanks to McGann Law Group for providing this article.
