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January 17, 2017

New Fiduciary Act Brings Both Progress and Uncertainty

by Matthew S. Skotak

You may have previously read on this blog about digital assets, the impact they have on the administration of trusts and estates, the need for fiduciaries to access digital assets, and the privacy concerns that come along with such access. In order to address these issues, Colorado recently enacted the Revised Uniform Fiduciary Access to Digital Assets Act (“RUFADAA”). This new act became effective on August 10, 2016 and can be found at C.R.S. § 15-1-1501 et seq.

RUFADAA is a significant leap by the State of Colorado to catch up to the digital age.  Prior to the passage of the law, the pervasive use of electronic banking and investing has posed a problem for many fiduciaries. Without the receipt of paper statements, personal representatives, financial agents, trustees and conservators have had a difficult time locating an individual’s assets, sometimes leading to an exhaustive search of several banking and financial institutions before asserts are uncovered. Read more >>

December 19, 2016

Claims Challenging Estate Plans

by Rebecca Klock Schroer

We are seeing an increase in the number of lawsuits in which people are challenging or trying to circumvent estate plans.  The claims traditionally include lack of testamentary capacity and those involving improper actions by family members, agents under powers of attorney or conservators.

Testamentary Capacity

A challenge to an estate plan often involves a claim that the testator was not of sound mind. Under Colorado law, a sound mind includes the presence of the Cunningham factors and absence of an insane delusion that materially affected the testamentary instrument.  The Cunningham factors are as follows: the testator must (1) understand the nature of the act, (2) know the extent of his property, (3) understand the proposed testamentary disposition, (4) know the natural objects of his bounty, and (5) that the testamentary instrument represented his wishes.  Cunningham v. Stender, 255 P.2d 977 (Colo. 1953).

In addition to these factors, the testator cannot be suffering from an insane delusion.  An insane delusion exists if a person has a persistent belief, resulting from illness or disorder, in the existence or non-existence of something contrary to all evidence, which materially affects the disposition in the testamentary instrument.  Breeden v. Stone, 992 P.2d 1167 (Colo. 2000).  For example, failure to include a child in the will because the testator believes that child has been abducted by aliens and will never return to earth. Read more >>

December 5, 2016

Will the Estate Tax Really Go Away?

by Carol Warnick

Will the estate tax be eliminated as part of the tax reform promised by the incoming administration?  Unfortunately, my crystal ball is not working well and I don’t have an answer for that question.  I would, however, like to share a bit of the tortured history of the estate and gift tax since the Civil War in the hope that it might give us some perspective when wondering what the future will bring.

A series of Acts between 1862-64 created an inheritance tax which helped finance the war effort.  Rates were between .75% and 5% and there was an exemption of $1,000.  In 1870 the inheritance tax was repealed.  An estate tax was again instituted to fund a war effort in 1916, in response to World War I.  The rates were between 1% and 10% and there was an exemption of $50,000.

Read more >>

November 21, 2016

Beware of Lost Wills

by Morgan Wiener

One of the many complexities that can arise in the probate process is what to do when a decedent’s original will cannot be found.  Although it may be tempting to simply file a copy of the will and seek to admit that to probate, beware!  Copies of wills may not be admitted to informal probate.  Instead, even if a challenge to the document is not expected, copies of wills must be submitted for formal probate.

C.R.S. § 15-12-402(3) provides for the formal probate of a will that “has been lost or destroyed, or for any other reason is unavailable.”  Under this section, the will may be admitted to probate if (1) the fact of execution is established as provided in the Colorado Probate Code, (2) the contents of the will are established to the satisfaction of the court, and (3) the court is satisfied that the will has not actually been revoked by the decedent (remember that, when a will last seen in the decedent’s possession cannot be found, there is a rebuttal presumption that the decedent destroyed and revoked the will).

Read more >>

November 7, 2016

Nuances of Estate Tax Lien Priority

by Margot S. Edwards

In many cases, estate tax obligations have priority over the creditors of an estate, but this general rule has exceptions. It is key for a fiduciary to understand when a creditor may have priority over estate taxes, in order to ensure the fiduciary is properly carrying out its duties to the estate’s creditors.

The primary exception to the general rule is that secured creditors often have priority over an estate tax lien (I.R.C. § 6323). One common example of a secured creditor with priority over estate tax obligations is a lender who provided a purchase money mortgage, which is properly secured by real estate. A secured creditor may have priority over an estate tax obligation if the debt is secured by a security interest that was perfected under applicable state law prior to the decedent’s death.  Read more >>

October 24, 2016

You’re Invited: Fourth Annual Fiduciary Solutions Symposium

Annually, the Fiduciary Solutions Practice Group at Holland & Hart identifies relevant, developing legal issues that impact fiduciary relationships and the litigation that often accompanies conflict and disharmony. Working with the questions and conflicts arising from the transfer of wealth requires insight and vigilance. Our seasoned group of veteran problem solvers will share their experiences, perspectives, practice tips and wisdom to arm you with the knowledge to make the process easier.

Topics will Include:

  • Intersections Between Marital Agreements and Estate Planning
  • Pre- and Post-Death Challenges to Estate Plans
  • Decanting: Is Any Trust Safe From Change?
  • Preserving the Estate Plan
  • Fiduciary Considerations for Living and Dying in a Digital World
  • No Contest Clauses—Risks and Rewards

Agenda: Tuesday, November 15, 2016
7:30 – 8:00 a.m. – Breakfast and Registration
8:00 – 10:00 a.m. – Presentation Read more >>

October 10, 2016

New Colorado Ethics Opinion Provides Guidance Regarding Missing Clients

by Kelly Dickson Cooper

Picture this: you are representing a beneficiary of a trust in heated litigation.  The client is committed to the cause, but as time passes, the client stops returning your calls.  Despite your best efforts, the client seems to have fallen off the radar screen completely.  Late last year, the Colorado Ethics Committee provided guidance to attorneys who find themselves in this difficult situation.

Formal Opinion 128 states that if a client has gone missing since the representation began, the lawyer must take reasonable steps to locate the client, and, whenever possible, seek continuances of court deadlines, but still continue their efforts to contact the client.  “Reasonable steps” may include hiring a professional investigator, searching public records, and/or contacting family or friends of the client. Read more >>

September 26, 2016

Tax Apportionment Controversies Continue to Fuel Litigation

by C. Jean Stewart

Last month Maryland’s highest appellate court released[1] a narrowly-divided (4-to-3) opinion in a tax apportionment case involving the estate of celebrity novelist Tom Clancy (The Hunt For Red October, Patriot Games, Clear and Present Danger, and other popular espionage novels), who died on October 1, 2013.  This case once again confirms that (1) blended families, combined with (2) tax apportionment disputes and (3) ambiguity and inconsistency in estate planning documents, inevitably fuel expensive and protracted probate litigation.

In his will, Clancy gave his tangible personal property and two of his residences outright to his second wife, who survived him, and directed his Personal Representative to divide his residuary estate into three equal parts.  One part, designated as the “Marital Share,” was to be (a) comprised entirely of assets qualifying for the federal estate tax marital deduction, (b) held solely for the benefit of his widow, and (c) exonerated from all tax liabilities to qualify entirely for the marital deduction.   Read more >>

September 12, 2016

A Killer Cannot Profit from His or Her Own Wrong

by Matthew Skotak and Rebecca Klock Schroer

Common law provides that a killer cannot profit from his or her own wrong.  This policy underlies what is known as the “Slayer Statute.”  The Colorado Probate Code includes Colo. Rev. Stat. § 15-11-803 to address the scenario where a person kills another and stands to inherit the victim’s assets.

Under the Slayer Statute, there are two ways to show that a person cannot inherit.  First, if the person is convicted of a felonious killing in a criminal proceeding, after all right to appeal has been exhausted, such conviction is conclusive under the Slayer Statute.  Accordingly, the killer’s right to inherit from the victim is extinguished and the killer is generally treated as though he or she predeceased the victim.

Second, a civil action may be commenced under which the accusing party may try to prove, by the preponderance of the evidence, the elements of a felonious killing.  If the elements are proven, the killer’s right to inherit from the victim is extinguished.  The ability to move forward with a civil action may be particularly useful if the criminal proceeding is subject to multiple appeals and is pending for a number of years.

The Slayer Statute generally addresses the killer’s right to inherit under revocable instruments, nonprobate assets, e.g., life insurance, and statutory rights.  It does not address every possible scenario and therefore, has a “catch-all” provision.  This provision provides that “A wrongful acquisition of property or interest by a killer not covered by this section shall be treated in accordance with the principle that a killer cannot profit from his or her wrong.” Colo. Rev. Stat. § 15-11-803(6). Read more >>