Category Archives: Legislation

January 25, 2016

Colorado Supreme Court Upholds the Strict Privity Doctrine for Attorney Malpractice Claims

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.

October 13, 2015

No Medical Evidence Required for Appointment of a Conservator

by Kelly Dickson Cooper

Imagine that you have just discovered that your father has received several unsolicited emails asking for money and that he has sent almost $500,000 to anonymous offshore bank accounts.  Worried for your father, you decide to seek a conservatorship to protect his assets. 

These are the facts that started the dispute resulting in a recent Colorado Court of Appeals case, In re Neher, 2015 COA 103 (July 30, 2015).

At the hearing, there was no medical evidence presented, but rather, expert testimony from a CPA.  The Court ruled in favor of son and his father appealed.  The father’s primary argument on appeal was that Colorado’s conservatorship statute requires medical evidence before a court can determine whether a conservator is necessary. 

Colorado’s conservatorship statute provides that a petitioner must prove by clear and convincing evidence that the individual is unable to manage his property and business affairs because they cannot effectively receive and evaluate related information.  In addition, a petitioner must prove, by a preponderance of the evidence, that the individual has assets that will be wasted or dissipated unless management is provided and that protection is necessary.

The Court of Appeals denied the father’s appeal and held that medical evidence is not required evidence in a proceeding requesting appointment of a conservator.  The Court of Appeals considered the following in reaching the decision:

-The language of the statute does not expressly require expert testimony like other statutes in Colorado.

-The language of the statute does not require that a petitioner show the causes of the individual’s inability to effectively receive or evaluate information.

-The Court’s interpretation is consistent with other conservatorship statutes.

-To determine legislative intent, the Court compared the Colorado statute to the Uniform Probate Code and specifically identified that the Colorado statute did not contain the language “an impairment” like the Uniform Probate Code.

The Court of Appeals rejected the father’s arguments that the judicial department forms regarding the appointment of a conservator and the termination of a conservatorship contain references to a physician’s letter or professional evaluation.  The Court of Appeals also rejected the father’s out of state case citations as unpersuasive.

Litigation in the area of conservatorships is continuing to grow and this case provides important guidance for the interpretation of the Colorado standard for the appointment of a conservator.

September 1, 2015

The Uniform Trust Code — A Time for Colorado

by Carol Warnick

The Uniform Trust Code (“UTC”) has now been adopted in 31 states.  It is now the law in significantly more states than the Uniform Probate Code.  The UTC is a uniform law drafted by the Uniform Law Commissioners, over a seven-year period.  It is the first comprehensive uniform act dealing with trusts, although several states, notably California, Georgia, Indiana and Texas, all had comprehensive trust statutes at the time.  These statutes, as well as any existing trust statutes in other states, were reviewed by the committee drafting the UTC.  The stated goal of the National Conference of Commissioners on Uniform State Laws (“NCCUSL”) when drafting the model act was to “provide States with precise, comprehensive, and easily accessible guidance on trust law questions.”  The impetus behind the model trust act was the growing use of trusts throughout the country, which coupled with the sparse body of trust law in many states, created significant issues for lawyers and courts trying to deal with trust disputes. 

I practice trust and estate law in three states, Colorado, Utah and Wyoming.  Both Utah and Wyoming have adopted the UTC.  I find that it is so much easier to deal with and solve trust disputes in both Utah and Wyoming because of the provisions of the UTC.  One reason is that the law is set forth much more clearly and gives judges ready authority to back their decisions.  In my experience, bringing a statute to the attention of the court carries more weight than finding a case that is close to “on-point” in the dispute, if finding such a case is even possible.  Because the law is set forth more clearly, everyone going into a dispute knows what the law is.  There is not a significant body of trust common law in any of the states I practice in, therefore the UTC brings significantly more uniformity to the decisions of the variety of judges who have to rule on trust issues. 

In addition, there are innovative portions of the UTC that provide more options to trust beneficiaries and potential litigants when issues arise with respect to a given trust.  One example of such innovation are non-judicial settlement agreements.  The UTC specifically provides that parties may enter into binding non-judicial settlement agreements to resolve issues concerning trusts as long as the agreement doesn’t violate a material purpose of the trust and includes terms and conditions that could be properly approved by a court under the UTC or other applicable law.   Examples of matters that can be approved by a non-judicial settlement agreement would be the interpretation or construction of terms of the trust, approval of a trustee’s report or accounting, direction to the trustee to refrain from performing a particular act or to grant the trustee a necessary or desirable power, resignation and appointment of a trustee and determination of trustee compensation, transferring the trust’s principal place of administration, and the liability of a trustee for an action relating to the trust.  Any interested person can also seek court approval of the agreement, but in my experience working with non-judicial settlement agreements in Utah and Wyoming, no one has felt the need to obtain court approval after the negotiation of such an agreement.   Such flexibility allows the interested persons with regard to a trust (defined as those whose consent would be required to achieve a binding settlement if it were to be approved by the court) to collaborate and work out a variety of issues that would otherwise require the additional time and expense of obtaining court approval for such actions.  I have found this option to be invaluable in working out trust issues for clients, especially when the size of the trust does not justify significant court involvement, and often brings about settlement more readily. 

Much to the chagrin of many estate planners, the UTC was defeated in Colorado over a decade ago but is again being studied by a committee at the Colorado Bar Association.  Each state legislature has the ability to adjust the model act and modify it as seems appropriate to reflect local preferences, so there is hope that the model act can be adjusted in such a way that it can be passed next year.  I want to lend my voice of support to the adoption of the UTC in Colorado as an act that would greatly facilitate the ability to solve trust disputes early, more readily, and with less expense. 

July 21, 2015

Opposition to the Uniform Fiduciary Access to Digital Assets Act

by Morgan Wiener

Despite the final version being passed by the Uniform Law Commission two years ago, the Uniform Fiduciary Access to Digital Assets Act (“UFADAA”) has not yet enjoyed widespread passage by state legislatures.  According to the Uniform Law Commission, to date, UFADAA has only been enacted in one state – Delaware.  An additional 26 states introduced legislation to enact a version of UFADAA during the first half of this year, but none of those measures have been passed.  As tempting as it may be to lay the blame on the sluggish pace of the legislative process, it’s important to note that UFADAA also faces substantive resistance.

Although much of the commentary surrounding UFADAA, both on this blog and in the estate planning community at large, has been positive, industry and consumer groups have both opposed the act on privacy grounds.  For example, letters published by both Yahoo! and a coalition of civil liberties groups have raised concerns that the relatively unfettered access to digital assets allowed by UFADAA goes too far and does not do enough to protect the privacy interests of not only a decedent, but also those who communicated with a decedent during his lifetime.  These letters can be found here and here.  The Internet Coalition, a group that represents the interests of major e-commerce and social media companies, the State Privacy and Security Coalition, Inc., and NetChoice, a group whose goal is to promote e-commerce, have all also opposed UFADAA’s enactment in various states.

NetChoice has gone further than simply opposing UFADAA and has proposed its own alternative to UFADAA – the Privacy Expectation Afterlife and Choices Act (“PEAC”).  Rather than providing automatic access to a decedent’s digital assets, PEAC contemplates that the probate court will grant access only upon making certain findings and contains a number of provisions that appear designed to protect the holders of digital assets.  You can read the full text of PEAC here.

It will be interesting to see whether UFADAA gains more traction during the next legislative session or whether the opposition holds firm.  Watch this space for updates.

June 24, 2015

Updates for fiduciaries from the IRS and Colorado

by Kelly Cooper

The IRS has stated that it will not issue closing letters for federal estate tax returns filed on or after June 1, 2015, unless one is requested by the taxpayer. The information provided by the IRS states that the taxpayer should wait at least four months after filing the return to request a closing letter. A closing letter indicates that the estate’s federal estate tax liabilities have been paid. While a closing letter is not a formal closing agreement, many fiduciaries wish to have a closing letter from the IRS before making final distributions and closing estates. For returns filed prior to June 1, 2015, please refer to the following document for guidance as to when a closing letter will be issued:

Frequently Asked Questions on Estate Taxes

Certain statutes in the Colorado Probate Code are subject to cost of living adjustments each year. The numbers for 2010-2015 can viewed here:

Cost of Living Adjustment of Certain Dollar Amounts for Property of Estates in Probate

April 27, 2015

Who Gets the Embryo?

by Elizabeth Meck

This has been a busy week in celebrity news, particularly with regard to advancements in assisted reproductive technology and the applicability of legally enforceable agreements.

For example, Sophia Vergara, superstar of ABC sitcom Modern Family, is now embroiled in a legal battle with her ex-fiancé, Nick Loeb, regarding two frozen embryos created by the then-couple several years ago when they were planning to use in vitro fertilization and a gestational surrogate to have a baby. Vergara and Loeb executed documents at their fertility clinic stating their agreement to keep the embryos frozen unless both parties mutually agreed to use them (i.e., to implant them into a surrogate) or to destroy them. Otherwise, the parties agreed that the embryos would only be destroyed if one of them dies. Apparently, the standard documents did not address what would happen to the embryos in the event the couple did not remain together or could not agree whether to use or destroy the embryos. Hence, Loeb filed a lawsuit in which he requests that a judge order that the embryos cannot be destroyed under any circumstances and states his position that the survivor between Loeb and Vergara would have control over the embryos upon the death of the other party. For more on the dispute, click here.

This type of dispute is not limited to the rich and famous. Assisted reproductive technology, or “ART,” is on the rise.1 The Centers for Disease Control estimates that approximately 12% of couples experience problems with fertility and as many as 12% of U.S. women and their partners receive infertility services.2 In 2009, the Colorado Legislature adopted the Uniform Probate Code III into the Colorado Probate Code (the “Code”), which incorporated several important changes regarding ART.3 For example, the Code now specifically includes definitions of a “genetic father” and a “genetic mother,” § 15-11-115(5-6), the definition of a “genetic parent," § 15-11-115(7), and clarification as to the individual who “functions as a parent of the child,” § 15-11-115(4), to assist in the determination of exactly who constitutes a child’s “parent” for purposes of succession under the Code.

Further, sections 15-11-116 to -121 of the Code re-codified the existing concept that marital status is not necessarily determinative of a parent-child relationship. As a result, the rules of who is eligible to “take” in an intestacy proceeding have been expanded to include ART children who are adopted or in the process of being adopted. § 15-11-119(5). An ART child does not, however, maintain intestacy rights as to a gestational carrier, absent additional evidence of the parent-child relationship. § 15-11-121(3). Importantly, though, an ART child who is born to a birth mother, who is not a gestational mother, is considered the child of the birth mother regardless of whether the child is genetically tied to the birth mother; and, the person who consented to the assisted reproduction by the birth mother with the “intent” to be treated as the other parent of the child is the parent. § 15-11-120. Intent can be demonstrated any number of ways pursuant to § 15-11-120(6).4 It is important to note that a parent can demonstrate “intent” to be treated as the parent of a posthumously conceived child, so long as the child is in utero within thirty-six months or born within forty-five months of the intended parent’s death. § 15-11-120(11).

ART children may also be included in the definition of a class defined in estate planning documents such as “children” or “grandchildren” or “descendants,” even though they may or may not be genetically related to the grantor or settlor. For example, an ART child may be included in the class even though he or she is not in utero for thirty-six months or born up to forty-five months after the grantor’s or the settlor’s death. § 15-11-705(7).

The presence of ART and the constantly-evolving technologies in this area require that estate planning attorneys, drafters of marital agreements and probate litigators be vigilantly aware of the repercussions of these definitions and our changing laws, as well as how the changing definition of “family” will play out after a decedent’s death. It is increasingly important to ask estate planning clients whether they have any children who were the result of ART, or whether they still have any cryopreserved sperm, eggs, or embryos. Also, including specific instructions with regard to ART in the estate planning documents may become necessary so as to try to avoid dispute after the passing of a genetic parent, an adoptive parent, or an individual who consented to ART by a birth mother.

Additionally, it is increasingly important to inquire as to the existence of any existing written document or directive that specifies the ultimate use or destruction of frozen genetic material such as embryos. Sophia Vergara’s experience could teach us all a good lesson in terms of covering all aspects of “family” as well as “property” when discussing issues with clients whether in the planning stages or during the administration of an estate or trust. For example, practitioners should start to think about the importance of including genetic material in estate planning documents and marital agreements. Further, practitioners should discuss post-death use and disposition of genetic materials with their clients, and address questions such as whether the surviving spouse should be able to utilize a frozen embryo after the death of the other spouse.

At the end of the day, it is crucial to ensure that a client’s documents consistently reflect his or her wishes regarding all assets, family and dispositions, including the often-difficult decision of how to treat and manage genetic materials. Clarification in the planning documents and marital agreements may reduce the potential for surprises and disputes during estate and trust administration or divorce. Otherwise, as in many other areas of probate litigation, disputes with regard to one’s entitlement to an estate or trust will continue to rise.


1ART commonly includes a variety of assisted reproduction methods such as: sperm or egg donation, in vitro fertilization, gestational surrogacy, embryo donation or adoption, embryo or egg or sperm cryopreservation, post-death conception, and the disposition of cryopreserved embryos.
2Centers for Disease Control, 2006-2010 National Survey of Family Growth.
3The Code defines ART as “a method of causing pregnancy other than sexual intercourse.” § 15-11-115(2).
4Intent can be demonstrated by the following: a signed record that evidences the individual’s consent; evidence that the individual functioned as the parent of the child no more than two years after the child is born; or, the intent to function as the parent of the child within two years of the child’s birth notwithstanding that the individual’s intent was thwarted by incapacity or death. § 15-11-120(6).

April 13, 2015

2015 Cost of Living Adjustment of Certain Dollar Amounts Under Colorado Probate Code

by Peter J. O'Brien

The Colorado Department of Revenue has published a list of cost of living adjustments for 2015 for certain dollar amounts under the Colorado Probate Code.  Probate practitioners should be aware of the change in figures related to the intestate share of a decedent's surviving spouse, supplemental elective-share, exempt property, lump sum exempt family allowance, installment amount exempt family allowance and collection of personal property by affidavit.

The 2015 figures are as follows:

Statute

Description

2015 Amount

C.R.S. § 15-11-102(2)

Intestate share of decedent's surviving spouse if no   descendant of the decedent survives the decedent, but a parent of the   decedent survives the decedent

$335,000, plus   fractional share pursuant to statute

C.R.S. § 15-11-102(3)

Intestate share of decedent's surviving spouse if all of   the decedent’s surviving descendants are also descendants of the surviving   spouse and the surviving spouse has one or more surviving descendants who are   not descendants of the decedent

$251,000, plus   fractional share pursuant to statute

C.R.S. § 15-11-102(4)

Intestate share of decedent's surviving spouse if one or   more of the decedent’s surviving descendants are not descendants of the   surviving spouse

$167,000, plus   fractional share pursuant to statute

C.R.S. § 15-11-202

Supplemental elective-share amount

$55,000

C.R.S. § 15-11-403

Exempt property

$32,000

C.R.S. § 15-11-405

Lump sum exempt family allowance

$32,000

Installment amount exempt family allowance

$2,667

C.R.S. § 15-12-1201

Collection of personal property by affidavit

$64,000

February 16, 2015

Premarital Agreements and the Second (Third, or Fourth . . .) Marriage

By Megan Meyers

For couples who marry later in life or who have children from a prior relationship, Premarital Agreements often incorporate waivers of spousal rights at death to ensure that previously created wealth is protected for children, grandchildren and charitable endeavors.  As Premarital Agreements continue to increase in popularity and acceptance for these couples, we have found there to be a fairly consistent misunderstanding common among clients – that is the relationship between the Premarital Agreement and the Will (or Revocable Trust). 

Many clients initially view the Premarital Agreement and the Will as interchangeable documents with similar contractual qualities and are primarily focused on the Premarital Agreement in the event of divorce.  Clients often do not initially understand the importance of including provisions in the Premarital Agreement regarding obligations at death between spouses, and simply state “we plan to just take care of that in our Wills”. 

We have found that it is extremely important to carefully walk through the differences between the Premarital Agreement and the Will with our clients.  Specifically, it is important to discuss that the Premarital Agreement is a contractual document which sets the minimum obligations that each spouse has to the other in the event of death, whereas the Will can be but one of many vehicles used to satisfy these Premarital Agreement obligations and which can provide additional benefits to the less-propertied spouse.  It is also important to note that the Will and other estate planning documents are changeable and in the full discretion of the other spouse during the marriage (provided that waivers of spousal rights are included in the Premarital Agreement).

Related to this issue of Premarital Agreement versus Will is that of the expectations and understanding of any adult children from a prior marriage.  These children may incorrectly view themselves as third party beneficiaries of the Premarital Agreement.  In other words – that the limitations on spousal rights at death which are included in the Premarital Agreement are limits that cannot be exceeded and that all other assets are protected for the benefit of the adult children from the first marriage.  While not all clients want to share these discussions with their adult children, it is important to ensure that clients understand that the Premarital Agreement merely sets the floor in terms of the obligations between spouses at death and that additional gifts may be made in the estate plan without any need to amend the Premarital Agreement.

The Premarital Agreement versus Will discussion also ties to the inevitable issues of capacity for these clients – particularly those who marry again later in life.  We have found that it is helpful to discuss and make explicit the expectations of these clients as to whether an agent or guardian appointed for the incapacitated spouse – particularly, the adult child – should have the authority to (i) amend or revoke the Premarital Agreement or (ii) pursue a dissolution of marriage action during a client’s incapacity. 

December 22, 2014

Updates on UFADAA

by Morgan Wiener

The Uniform Fiduciary Access to Digital Assets Act (“UFADAA”) is the Uniform Law Commission’s answer to the relatively new issues caused by the proliferation of digital assets (online bank accounts, social media accounts, computer hard drives, email, online photos, etc). UFADAA provides solutions to questions involving how fiduciaries can gain access to digital assets, what access fiduciaries may have to digital assets, and what fiduciaries may properly do with digital assets.

UFADAA is a new uniform act, it was adopted in its final form by the Uniform Law Commission in July 2014. Delaware is the only state that has adopted UFADAA so far, and the act will be effective in that state on January 1, 2015. Florida has also introduced legislation to adopt UFADAA.

In Colorado, the Trust & Estate Section of the Colorado Bar Association has been considering UFADAA and revisions to UFADAA so that it will better conform to existing laws and work with this state’s current framework for governing fiduciaries, trusts, and estates. Just this past week, the Statutory Revisions Committee of the Trust & Estate Section approved its final comments and proposed revisions to UFADAA. You can view the version of UFADAA approved by the Statutory Revisions Committee here. Although there are still a number of steps that must be taken before any version of UFADAA is enacted in Colorado, this is certainly a step in the right direction!

October 7, 2014

The Fall of Colorado’s Same Sex Marriage Ban

By Kelly Cooper

Starting on Monday, marriage licenses were issued in Colorado to couples regardless of sexual orientation.

This change came because the U.S. Supreme Court refused to hear cases from Indiana, Oklahoma, Utah, Virginia and Wisconsin.  What do these five states have in common?  Each of them had banned same sex marriage and had those bans declared unconstitutional by a U.S. Court of Appeals. 

In refusing to hear these cases, the U.S. Supreme Court has upheld three U.S. Courts of Appeal’s decisions declaring the same sex marriage bans unconstitutional and making same sex marriages legal in Indiana, Oklahoma, Utah, Virginia and Wisconsin. 

The impact of the U.S. Supreme Court’s refusal to hear these cases has reached far beyond the borders of those five states.  This is because every state in the U.S. is subject to the decisions made by one U.S. Court of Appeals.  For example, Colorado is situated in the 10th Circuit and the 10th Circuit U.S. Court of Appeals declared Utah’s ban on same sex marriage unconstitutional.  Since Utah and Colorado are both bound by 10th Circuit’s decisions, it is likely that Colorado’s same sex marriage ban would also be declared unconstitutional by the 10th Circuit.  As a result, various county clerks began issuing marriage licenses to same sex couples in Colorado.

Current status: There are 19 states that permit same sex marriages plus the District of Columbia.  Due to the U.S. Supreme Court’s decision not to hear these cases, five more states’ bans on same sex marriage will fall bringing the total number of states permitting same sex marriage to 24.  Due to the U.S. Supreme Court’s decision, an additional six states’ same sex marriage bans are effectively overruled, including Colorado’s.  The other five states are Wyoming, Kansas, North Carolina, South Carolina and West Virginia.  This will bring the total number of states allowing same sex marriage to 30.

 We can expect more developments and changes in this area in the near term, so stay tuned.