Category Archives: Will & Trust Construction

April 10, 2017

Contracts to Make Wills or Trusts

by Carol Warnick

Does the fact that a husband and wife create “mirror-image” wills or trusts mean that they have entered into a contract with their spouse to maintain the dispositive provisions in the document?  The law in Colorado is very clear that no contract exists merely because the documents are “mirror-image” or reciprocal.

Pursuant to Colo. Rev. Stat. § 15-11-514, a contract to make a devise may be established only by:

(i) provisions of a will stating material provisions of the contract, (ii) an express reference in a will to a contract and extrinsic evidence proving the terms of the contract, or (iii) a writing signed by the decedent evidencing the contract. The execution of a joint will or mutual wills does not create a presumption of a contract not to revoke the will or wills. (emphasis added).

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January 30, 2017

Charitable Trusts and the Cy Pres Doctrine: An Overview

by Jessica J. Smith

Charitable trusts are both valuable estate planning tools and excellent philanthropic devices. For instance, certain charitable trusts provide appealing tax benefits for donors creating charitable inter vivos trusts. While in most respects, charitable trusts are governed by the same state law concepts often discussed here on this blog (like fiduciary duty obligations for trustees), there are a few notable exceptions worth highlighting for anyone looking to take advantage of charitable trusts for estate or tax planning purposes.*

In general terms, a charitable trust is simply a trust that has a charitable purpose. See, e.g., Denver Found. v. Wells Fargo Bank, 163 P.3d 1116, 1125 (Colo. 2007) (“Instead of identifying a person or corporation as beneficiary, the settlor of a charitable trust must describe a purpose which is of substantial public benefit.”). Under Uniform Trust Code § 405, charitable purposes include “the relief of poverty, the advancement of education or religion, the promotion of heath, governmental or municipal purposes, or other purposes the achievement of which is beneficial to the community.” The Restatement (Third) of Trusts § 28 largely matches the UTC, although it is a tad more expansive. For instance, the Restatement includes the advancement of knowledge, rather than just education, in its definition of charitable purpose. The differences between the UTC and the Restatement, though, are slight.
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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 >>

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 >>

July 18, 2016

Seeking Clarity in the Distribution of Mineral Interests from a Decedent’s Estate

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.

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June 20, 2016

Colorado Uniform Trust Decanting Act

by Rebecca Klock Schroer

The Colorado Uniform Trust Decanting Act (“Act”) was recently signed by the Governor and it will become effective August 10, 2016.   The legislation is large, complex and important for both estate planners and probate litigators.

Decanting allows a trustee to distribute the assets of one trust (“first trust”) to a second trust (“second trust”) under specific circumstances. The Act applies to an irrevocable trust, other than an irrevocable trust held solely for a charitable purpose. Colo. Rev. Stat. § 15-16-903. Decanting is used, among other things, to correct drafting errors, change the situs/governing law of a trust, alter trustee provisions (e.g. trustee succession, create a directed trustee arrangement, reallocate trustee powers), alter powers of appointment, add special needs provisions, and comply with changing tax laws.

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May 16, 2016

Basic Estate Principles Learned From the Death of Prince

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 >>

March 16, 2015

Advancements

by Rebecca Klock Schroer

Almost every estate dispute among children seems to have an emotional component relating to perceived disparity in treatment by one or both parents.  For example, a will may leave property in equal shares to the Decedent’s children, but the children still argue because one feels that the other received more financial support during the Decedent’s life.  Usually this results in one side making the argument that certain lifetime gifts should be counted against the child who received them and reduce their share of the estate. 

If a lifetime gift counts against a share of the estate, it is commonly referred to as an advancement.  The Colorado Probate Code is very specific regarding what is necessary for a gift to qualify as an advancement or ademption by satisfaction.  Colo. Rev. Stat. § 15-11-109, which is entitled “advancements,” addresses the requirements when a Decedent dies intestate.  Colo. Rev. Stat. § 15-11-609, which is entitled “Ademption by Satisfaction,” addresses the requirements when a Decedent dies with a will.

To be considered an advancement, (1) the will (if there is one) must specifically provide for deduction of the gift or (2) a contemporaneous writing by the Decedent or the heir (or devisee) must declare that the gift should be counted against a devise made in the will or the intestate share of the heir.  Colo. Rev. Stat. §§ 15-11-109(1) & 15-11-609(1).

For purposes of valuation, the property is valued at the time the heir or devisee came into possession or enjoyment of the property or the Decedent’s death, whichever occurs first.  Colo. Rev. Stat. §§ 15-11-109(2) & 15-11-609(2).

The two statutes address the effect of the heir or devisee predeceasing the Decedent.  If the Decedent dies intestate, the property is not taken into account unless the Decedent’s contemporaneous writing provides otherwise.  If the Decedent dies testate, the gift is considered a full or partial satisfaction of the devise, as appropriate, in applying 15-11-603 (antilapse statute) and 15-11-604 (failure of a testamentary provision), unless the testator’s contemporaneous writing provides otherwise. Colo. Rev. Stat. §§ 15-11-109(3) & 15-11-609(3).

Finally, for a Decedent who died intestate, Colo. Rev. Stat. § 15-11-109(4) provides that an heir does not have to refund the estate if he or she received more than his or her share, unless otherwise provided under the elective share statutes.

In order to minimize disputes, an estate planning attorney should ask their clients whether they wish to have any gifts counted as advancements and whether they have executed any other relevant writings.  For example, ambiguity could arise if the Decedent had a contemporaneous writing that referred to a certain gift as an advancement, but then signed a will at a later date that does not mention the gift.  Does the later will override the contemporaneous writing? 

Finally, the calculation of the impact of an advancement is referred to as a “hotchpot.”  Below is an example:

  • an estate holds $280,000
  • the estate is to be divided equally among three children
  • one child received a $20,000 advancement

First, the $20,000 advancement has to be added back in: $20,000 + $280,000 = $300,000. 

Second, the total is divided by the number of beneficiaries: $300,000/3 = $100,000 per beneficiary. 

The $20,000 is then subtracted from the share for the beneficiary that received the advancement, so the final shares of the estate would be (1) $100,000, (2) $100,000 and (3) $80,000.

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.