Category Archives: Legislation

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.

June 16, 2014

Colorado’s New Uniform Premarital and Marital Agreements Act

by Megan Meyers

As of July 1, 2014, a new marital agreement statute with a primary legislative goal of providing greater protection to unrepresented parties will become effective.  The new statute, entitled the Uniform Premarital and Marital Agreements Act, Colo. Rev. Stat. §§14-2-301 et seq. (“Colorado’s New Act”) is Colorado’s adapted version of the Uniform Premarital and Marital Agreement Act. 

Enforceability Requirements

The following are the most significant requirements under Colorado’s New Act:

  • In writing.  A premarital or marital agreement must be in writing and signed by both parties.
  • Voluntary consent.  Parties must voluntarily consent to the terms of the agreement and not be under duress.
  • Access to Counsel.  Under Colo. Rev. Stat. §§14-2-309 of Colorado’s New Act, a premarital or marital agreement will be unenforceable if a party to the agreement did not have meaningful access to independent legal representation. Before signing the agreement, an unrepresented party must have had time to (i) decide whether to retain counsel to provide independent legal advice and (ii) locate counsel, obtain counsel’s advice and consider the advice provided.  If only one party is represented by counsel, the unrepresented party must either have the financial resources to engage counsel or the other party must agree to pay the reasonable fees for the unrepresented party to have independent legal representation.  Note, the practical effect of this new requirement will mean that the presentation and execution of an agreement under an expedited time frame will not be possible – particularly if one party is unrepresented.  Therefore, although independent representation by counsel for both parties is not specifically required under Colorado’s New Act, best practices still recommend this approach.  If either party is unrepresented by counsel, Colo. Rev. Stat. §14-2-309(1)(c) and (3) of Colorado’s New Act requires specific language which must be prominently included in the agreement.  Failure to include the language will invalidate the agreement. 
  • Financial Disclosure.  Adequate financial disclosure must be made which includes disclosure of income.  Specifically, a party must receive a reasonably accurate description and good-faith estimate of the value of the property, liabilities and income of the other party or have an adequate knowledge or a reasonable basis for having adequate knowledge of such property, liabilities and income.
  • Waivers of Maintenance and Attorney FeesColo. Rev. Stat. §14-2-309(5) of Colorado’s New Act includes limitations on the ability of parties to prospectively determine, modify, limit or waive maintenance and the payment of attorney’s fees in the event of divorce.  While such terms may be included in an agreement, determinations as to whether such modifications or waivers are unconscionable will be determined by the court as a matter of law at the time enforcement is sought.
  • Waiver of Marital Rights at Death.  Of additional note, beginning July 1, 2014, a unilateral waiver of a marital right or obligation on the death of a spouse is unenforceable unless the waiver is made in a premarital or marital agreement consistent with Colorado’s New Act. 

Unenforceable Terms

Colorado’s New Act also specifically delineates unenforceable terms in a premarital or marital agreement.  Examples of unenforceable terms include, but are not limited to, terms that (i) adversely affect a child’s right to support, (ii) limit remedies available to victims of domestic violence or (iii) penalize a party for initiating a legal proceeding for legal separation or divorce.

Applicability to Prior Agreements

Colorado’s New Act does not affect premarital or marital agreements executed prior to July 1, 2014 and such agreements will continue to be enforceable subject to the laws in place at the time of execution.   However, amendments from and after July 1, 2014 to previously executed premarital or marital agreements must comply with Colorado’s New Act.  Consistent with existing law, Colorado’s New Act is also applicable to parties to a civil union.

Conclusion

The use of premarital and marital agreements continues to grow for all types of couples as these agreements can be as broad or as narrow as desired by the parties.  For younger couples, such agreements can be the best way to ensure that current and future interests in gifts, inheritances and interests in trusts are protected and remain separate.  For couples who are marrying later in life or with children from a prior relationship, agreements with a broader scope can ensure that previously created wealth is protected for children, grandchildren and charitable endeavors.  Colorado’s New Act enables couples to contract prior to or during their marriage or civil union regarding their property rights in the event of the death of either party or in the event of a legal dissolution of the relationship.  In addition to the statutory requirements, practitioners should follow three basic best practice points for a valid premarital or marital agreement:  (i) allow sufficient time to review, consider and negotiate the agreement: (ii) provide financial disclosure including all assets, liabilities and income sources; and (iii) obtain independent counsel for each party.

May 5, 2014

Colorado’s New Law on Mandatory Reporting of Elder Abuse Goes into Effect July 1, 2014

by Elizabeth Meck

Colorado’s new mandatory reporting of elder abuse law will require certain helping professionals to report any suspected or observed abuse or exploitation of an elderly individual to law enforcement within 24 hours.  The bill was signed into law on May 16, 2013 and takes effect on July 1, 2014.  The bill, as a result of an elder abuse task force established to develop the legislation, makes Colorado the 48th state to have mandatory reporting legislation on the books. 

Under prior law, certain professionals were encouraged to make reports of any suspected or known abuse of an at-risk adult, defined as a vulnerable individual due to mental or physical disability or aged 60 years or older.  The new law incorporates several modifications and additions to the existing law.  Specifically, it adds the definition of an at-risk elder as an individual over the age of 70 and increases the age of an at-risk adult to 70 years or older.  Colo. Rev. Stat. §§ 18-6.5-102(2)-(3).  It also clarifies the definitions of crimes against at-risk adults or elders to include undue influence resulting in conversion and caretaker neglect.  Colo. Rev. Stat. §§ 18-6.5-103(6), (7.5).  Further, the new law sets forth the reporting and response requirements, mandating that not only must the initial report be filed within 24 hours of the suspected abuse, but also that the law enforcement agency must provide notice of the report to the appropriate county agency within 24 hours of the report.  Colo. Rev. Stat. § 18-6.5-108(2)(b). 

The exhaustive list of helping professionals mandated to report under the new law includes a wide variety of professions such as health care professionals, pharmacists,  psychologists and mental health care providers, social workers, long-term care providers, clergy members, law enforcement officials and personnel, court-appointed guardians and conservators, and certain financial professionals.  See Colo. Rev. Stat. § 18-6.5-108(1)(b)(I)-(XVIII).  An individual who fails to report under the statute or one who knowingly files a false report commits a Class 3 misdemeanor.  Colo. Rev. Stat. §§ 18-6.5-108(1)(c), (4).  Upon filing a good faith report, a reporting individual is immune from any related civil action, unless he or she is the alleged perpetrator of the abuse or exploitation.  Colo. Rev. Stat. § 18-6.5-108(c)(3). 

In order to raise awareness among the public and the reporting professionals, the Colorado Department of Human Services was required to implement an awareness program by January 1, 2014.  Colo. Rev. Stat. § 26-1-105.  Further, to prepare law enforcement officers to recognize and respond to incidents of elder abuse and exploitation, the Department of Law’s Peace Officer Standards Training board (“P.O.S.T.”) was required to implement training standards and programs by January 1, 2014; and, as of January 1, 2015, local law enforcement agencies will be required to employ at least one peace officer  who has completed the training.  Colo. Rev. Stat. § 24-31-313.   No later than December 31, 2016, the Colorado Department of Human Services shall prepare a comprehensive report to assess implementation of the new law.  Colo. Rev. Stat. § 26-3.1-110. 

While attorneys are not on the list of professionals mandated to report, they will certainly come into contact with individuals who meet the definition of at-risk elders as well as professionals required to report.  This should cause us all to be increasingly alert and mindful of the provisions set forth in the new law.

March 5, 2014

Tax Certainty for Civil Unions in Colorado

by Kelly Cooper

Couples in a civil union that are permitted to file federal income tax returns jointly can now file their Colorado income tax returns jointly as well.

Governor Hickenlooper signed the bill into law last Thursday (February 27, 2014).  It requires couples in a civil union to file their Colorado taxes using the same filing status used on their federal tax return.  The intent of the legislation is to align Colorado with updated federal tax law that permits joint filing for married same sex couples.

The new law will apply to tax years beginning on January 1, 2013 and any other income tax years that are still open under Section 39-21-107 or 39-21-108, C.R.S.

March 3, 2014

2014 Cost of Living Adjustment of Certain Dollar Amounts Under Colorado Probate Code

by Peter J. O'Brien

At the beginning of every year, the Colorado Department of Revenue publishes a  list of cost of living adjustments for certain dollar amounts under the Colorado Probate Code.  It is important for probate practitioners to 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 and collection of personal property by affidavit.

The 2014 figures are as follows:

Statute

Description

2014 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

$320,000, 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

$240,000, 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

$160,000, plus fractional share pursuant to statute

C.R.S. § 15-11-201

Supplemental elective-share amount

$53,000

C.R.S. § 15-11-403

Exempt property

$32,000

C.R.S. § 15-11-405

Lump sum exempt family allowance

$32,000

C.R.S. § 15-12-1201

Collection of personal property by affidavit

$64,000