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 In 1870 the inheritance tax was repealed.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.
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will are established to the satisfaction of the court, and (3) the court is satisfied that the will has not actually been revoked by the decedent (remember that, when a will last seen in the decedent’s possession cannot be found, there is a rebuttal presumption that the decedent destroyed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).
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
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
by C. Jean Stewart
Last month Maryland’s highest appellate court released 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
by Jody H. Hall, Paralegal
As of Monday, August 7, 2016, practitioners can now search for probate and trust cases in the Integrated Colorado Courts E-Filing System (“ICCES”). In the past, Colorado probate estate and trust cases were only available for viewing by attorneys of record. If someone needed to determine if a case had been opened, he or she would need to contact the court clerk’s office and often pay a search fee. In the most recent release of ICCES, registered users can search to determine if a probate estate or trust matter has been opened; however, the documents themselves will only be available for online viewing to parties of record and to the Court.
Protective proceedings will remain a protected filing class and only attorneys of record will have access to those cases. An entry of appearance will need to be filed, and accepted by the court, in these matters to gain access.
All Public documents submitted in trust and estate cases prior to August 6, 2016, will be set to a document security type of Protected and not available for viewing unless counsel is of record in the case.
Click here to view the Probate Enhancements section of the Colorado Judicial Branch E-Filing News Newsletter, August 2016.
by Kimberly Rutherford
After Carol Warnick’s blog of December 14, 2015 briefly discussed the new procedure enacted by the Internal Revenue Service (the “IRS”) regarding the issuance of Estate Tax Closing Letters (“closing letter”) only if specifically requested by the taxpayer for all estate tax returns filed after June 1, 2015, we decided to watch closely to see what happened with our requests for closing letters.
The IRS’s website of “Frequently Asked Questions on Estate Taxes” had been previously updated on June 16, 2015, and addressed the issue of when a closing letter could be expected. The IRS asked that taxpayers wait at least four months after filing the Estate Tax Return to make a request for the closing letter. The website also included a chart detailing when the IRS will and won’t issue a closing letter.
by Andy Lemieux, Elizabeth Meck, and Jessica Schmidt
As any practitioner who has dealt with the distribution of mineral interests from a decedent’s estate knows, dealing with these interests can be tricky and the process is not always clear. This is particularly true when old interests have not been distributed properly at the time of death. Thankfully, recent decisions in Colorado, as well as updates to certain provisions of the Colorado Probate Code, provide some clarity to this process. A recent decision in Utah also provides clarity about who is entitled to the proceeds of production from oil and gas operations when life tenants and remaindermen are involved.
Specifically, Colorado just updated its statutes governing the process for the determination of heirship, found in the Colorado Probate Code at Colo. Rev. Stat. § 15-12-1301, et. seq. A sub-committee of the Trust and Estate section of the Colorado Bar Association carefully reviewed the existing statutes, coordinated efforts with other sections of the bar, and with the approval of the Trust and Estate section, presented revisions to these statute sections as part of the omnibus bill, SB 16-133, in February 2016. The committee’s goal was to address the issues Colorado practitioners have experienced in trying to distribute these interests from dormant or previously-unopened probate estates and to make the process to distribute previously undistributed property, including mineral interests, more clear. SB 16-133 was signed by Governor Hickenlooper on May 4, 2016, thereby adopting the revisions recommended by the committee. A copy of the Bill as enacted can be found here.
by Morgan Wiener
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 has recently enacted the Revised Uniform Fiduciary Access to Digital Assets Act (“RUFADAA”). This new act will be effective as of August 10, 2016 and can be found at C.R.S. § 15-1-1501 et seq.
RUFADAA addresses these issues by setting forth the circumstances under which a fiduciary is allowed (or may gain) access to digital assets, while also taking into account the privacy interests of the testator, settlor, protected person, etc. (for ease of reference, I will generally refer to these people as the “Person”). RUFADAA also takes into account the interests of the custodians of the digital assets; a custodian is defined as the person or entity that carries, maintains, processes, receives, or stores a digital asset of a user and includes entities such as banks, Google, Yahoo, and Facebook. RUFADAA places paramount importance on the intent of the Person and limits a fiduciary’s automatic access to the content of the Person’s digital communications absent their consent or a court order.
by Kelly Dickson Cooper
For our litigation clients, a fiduciary’s failure to consider the tax impact of their actions can be the genus for litigation and anticipated tax savings can be the engine that drives a settlement. For our fiduciary clients, it is important for them to ensure that transfer taxes are minimized for the benefit of their beneficiaries. For our planning clients, tax planning is a key component in determining the best structure for their wealth transfer planning. Given the importance of transfer taxes in our practice, we wanted to highlight a few items from the IRS 2015 Data Book relating to estate and gift tax returns:
Number of Tax Returns filed during 2015
- 36,343 estate tax returns (545 from Colorado)
- 237,706 gift tax returns (4,492 from Colorado)
- Estate tax returns – $17,066,589 collected
- Gift tax returns – $2,052,428 collected
Percentage of 2014 Tax Returns Audited in 2015
- 7.8% of all estate tax returns
- Gross estate less than $5 million – 2.1% audit rate
- Gross estate greater than $5 million but less than $10 million – 16.2% audit rate
- Gross estate greater than $10 million – 31.6% audit rate
- 0.9% of all gift tax returns
Results of Audits
- 22% of estate tax returns examined had no change
- 34% of gift tax returns examined had no change
- 70 estate tax returns and 135 gift tax returns had unagreed recommended additional tax
- 543 estate tax returns and 43 gift tax returns resulted in tax refunds