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
by Jody H. Hall, Paralegal
The entire world entered mourning when music legend Prince died unexpectedly on April 21, 2016 at the age of 57. There is certainly no shortage of stories and speculation in the news and social media regarding the circumstances surrounding his death, and the handling of his legal, personal and business affairs.
However, as trust and estates professionals, we are drawn to the estate planning, or lack thereof, of the cultural icon. The story that will undoubtedly change and evolve as the estate is administered can be an entertaining and valuable source of lessons learned to share with clients, family members, and dare I say, ourselves.
No one has been able to find a Will. The initial reports stated that no one was able to find a will, and no one had reason to believe that a Last Will and Testament had been created. This underscores not only the importance of having a Will, but also of making sure your nominated personal representative knows where to find it. Most jurisdictions still require the original will to be lodged or filed with the Court, so your loved ones will need to be able to easily access the original signed document. Copies are generally not acceptable without additional court action. The best place to store those documents may also not be in a bank safe deposit box, unless that person has access to the box already. Otherwise, it may require Court intervention to access the box to determine if a Will is inside. Communication before your death with those that you trust to handle your affairs after your death will alleviate much stress and confusion. Read more
by Margot S. Edwards
Executors of estates required to file a Form 706 Estate Tax Return, and filing such return after July 31, 2015, must comply with two new reporting requirements. These requirements are set forth in Section 6035 of the Internal Revenue Code (the “Code”), and corresponding proposed regulations. The new reporting obligations are designed to ensure that the initial basis in property distributed to an estate beneficiary is equal to the value of such property for estate tax purposes, and to provide for ongoing consistency of basis. These obligations include both (1) filing form 8971 with the IRS, and (2) providing a statement to certain beneficiaries with information about the value of estate assets received by those beneficiaries.
Who Must File
The term “executor” as used in Section 6035 incorporates the estate tax definition set forth in Section 2203 of the Code. As a result, for purposes of identifying who must complete these filings, the term includes, for example, the trustee of a fully funded revocable trust.
The proposed regulations clarify that an executor filing a form 706 that is not required, but which is filed to elect portability or to make GST elections, is not required to fulfill these reporting obligations. Read more
by Morgan Wiener
How many of you have heard your clients complain about the various fees and costs they have to pay after the death of a loved one or the expense of going through the probate process? Well, the next time you hear someone complain, you might want to tell them to be glad they don’t live in England! (Full disclosure: I’ve spent time living and working in England, and it’s a delightful place, even if a little pricey.)
The Financial Times recently reported on a proposal to raise the cost of obtaining probate in England and Wales. Under the proposal, the fees for obtaining probate through the courts, which the Financial Times states is necessary for personal representatives to be able administer an estate, will increase from £155 (or £215 if a lawyer is used) to up to an astonishing £20,000 – or approximately $28,000! The proposed fees would be charged on a sliding scale so that estates valued up to £50,000 (approximately $70,000) would pay no fees, and estates valued above £2 million (approximately $2.8 million) would pay £20,000. These proposed fees would be in addition to any inheritance tax that is owed.
The revenues raised from the proposed fees would go towards the court system and are expected to raise up to £250 million per year.
Practitioners in England and Wales are concerned that the new fees would be especially difficult for cash-poor estates to pay. As with many estates in the United States, the value of many estates in England and Wales is largely comprised of real property. With property prices being so high – the average home price in London is a reported £536,000 – many relatively modest estates would be subject to significantly higher fees under the new proposal and may not have the cash to pay them.
The Ministry of Justice for England and Wales is continuing to consider the proposal and is soliciting comments through April 1. For more information from the Financial Times, click here.
by Kelly Dickson Cooper
The Colorado Supreme Court upheld the strict privity doctrine for attorney malpractice claims by nonclients and reaffirmed that an attorney’s liability is limited to when the attorney has committed fraud or a malicious or tortious act, including negligent misrepresentation. Baker v. Wood, Ris & Hames, case number 2013SC551 (2016 CO 5).
In Baker, the dissatisfied beneficiaries sued the attorneys for their father and alleged as follows:
- The attorneys failed to advise their father of the impact of holding property in joint tenancy.
- The attorneys failed to advise their father that failing to sever those joint tenancies would frustrate his intent to treat his children equally with his stepchildren.
- The attorneys’ actions allowed the surviving spouse to change their father’s estate plan after his death.
- The attorneys drafted documents for the surviving spouse that were different from their father’s original plan.
- The beneficiaries were the intended beneficiaries of the client’s plan, that the attorneys failed to advise the beneficiaries of the relevant facts, and that they had suffered damages as a result.
The beneficiaries asked the Colorado Supreme Court to adopt the “California Test” or the “Florida-Iowa Rule” and set aside the strict privity rule. The Court rejected the adoption of both tests and reaffirmed the strict privity rule. The Court also held that the beneficiaries’ claims would fail under both the California Test and the Florida-Iowa Rule.
The Court put forth the following rationales for upholding the strict privity rule in Colorado:
- It protects the attorney’s duty of loyalty to the client and allows for effective advocacy for the client.
- Abandoning strict privity could result in adversarial relationships between an attorney and third parties. This could result in conflicting duties for the attorney.
- Without strict privity, the attorney could be liable to an unforeseeable and unlimited number of people.
- Expanding attorney liability to nonclients might deter attorneys from taking on certain legal matters. The Court reasoned that this result could compromise the interests of potential clients by making it more difficult to obtain legal services.
- Casting aside strict privity would increase the risk of suits by disappointed beneficiaries. Those suits would cast doubt on the testator’s intentions after his or her death when he or she is unavailable to speak.
- The beneficiaries have other avenues available to them, including reformation of the documents.
- A personal representative can pursue legitimate claims on behalf of a testator.
The Court held, “We further believe that the strict privity rule strikes the appropriate balance between the important interests of clients, on the one hand, and non-clients claiming to be injured by an attorney’s conduct, on the other.” As a result, the strict privity rule remains intact in Colorado.
by Carol Warnick
The Internal Revenue Service (“IRS”) announced earlier this year that it would no longer routinely send out an estate tax closing letter and that such letters would have to be specifically requested by the taxpayer. The change in procedure was effective for all estate tax returns filed after June 1, 2015.
Previously, an estate tax closing letter was evidence to show that the IRS had either accepted an estate tax return as filed, or if there has been an audit, that final changes had been made and accepted. Receipt of an estate tax closing letter has never meant that the statute of limitations on the return has run, but it has given comfort to the estate administrator that he or she could make distributions and/or pay creditors knowing that the chances of further IRS review of the return was not likely. Many personal representatives and trustees have made it a practice to wait for such a closing letter before funding sub-trusts or making any significant distributions.
On December 4, 2015, the IRS announced that “account transcripts, which reflect transactions including the acceptance of Form 706 and the completion of an examination, may be an acceptable substitute for the estate tax closing letter.” Such account transcripts will be made available online to registered tax professionals using the Transcript Delivery System (TDS). Transcripts will also be made available to authorized representatives making requests using Form 4506-T. They still must be requested, but may be easier to obtain than an estate tax closing letter.
For further instructions, here is the link to the information on the IRS website: http://tinyurl.com/plhb6f6.