by Margot S. Edwards
There are several proposals to repeal the estate tax currently percolating in Congress. None of these proposals appears to have been fully fleshed out, and it is unclear how the differences will be reconciled. Notably, none of the proposals reflects the Trump campaign position supporting a “mark to market” tax to be imposed at death. Below is a brief summary of the currently proposed legislation, and the key differences between them.
H.R. 451: Known as the “Permanently Repeal the Estate Tax Act of 2017,” this bill is the shortest. It states simply that for “decedents dying after December 31, 2016, Chapter 11 of the Internal Revenue Code of 1986 is repealed.” This operates to repeal the estate tax, but to leave the gift tax and generation-skipping transfer tax in place. Read more
by Jody H. Hall, Paralegal
It is well documented that all of our lives have become more data-driven and we are practically tethered to our electronic devices. Therefore, it should not be surprising to realize that more and more of our assets, and those of our clients, have a digital component. What may be surprising, however, is just how much value we place on our digital assets. Surveys report that the average value of personal digital assets owned by individuals globally ranges from $35,000 – $55,000.
A few key words typed into any search engine, including a review of articles written on this blog, will provide a wealth of information on accessing digital assets, including digital assets in your clients’ estate planning documents, and safeguarding your digital assets inventory. However, after the client’s death, once we have a list of their digital assets, and have gained access those assets, it is prudent for the probate and trust practitioner to remember to value those assets. Read more
by Morgan Wiener
Much has been written on this blog about digital assets, and you have likely given some thought to the impact that this relatively new category of assets has on estate planning and administration. But have you considered the other ways in which new digital devices and technologies might impact your practice and your clients’ lives? If not, a murder case in Bentonville, Arkansas, home of Walmart, will give you something to think about.
James Bates is accused of murdering his coworker Victor Collins (yes, they both worked at Walmart) in a hot tub in November 2015. On the night of the alleged murder, Bates’s Amazon Echo was streaming music through its speaker, and Bentonville police have issued a search warrant for the Echo’s recording from that night hoping it will shed light on what happened.
The Amazon Echo is a speaker and virtual assistant that works by constantly listening to background noise and conversation. The virtual assistant, Alexa, is activated when the Echo hears someone say “Alexa.” The background conversations are not recorded by the Echo, but anything said after Alexa is activated is recorded. Because Bates’s Echo was streaming music on the night of the alleged murder, the police believe that it may have been activated and recording conversations. Read more
by Kelly Dickson Cooper
The rules and regulations surrounding the operation of family foundations contain traps for the unwary and prohibit self-dealing transactions. We regularly help families navigate the complex rules regarding self-dealing transactions for private foundations.
These self-dealing rules tripped up the Donald J. Trump Foundation, which has admitted that it has engaged in self-dealing. How do we know? A private foundation is required to file a Form 990-PF each year and that return requires a foundation to answer questions regarding its activities and transactions. The following question caused issues for the Trump Foundation: “During the year did the foundation (either directly or indirectly): Transfer any income or assets to a disqualified person (or make any of either available for the benefit or use of a disqualified person)? By answering “Yes,” the Trump Foundation has admitted that a self-dealing transaction occurred. The Trump Foundation’s Form 990-PF (and many other foundations’ returns) are available through www.guidestar.com.
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.
by Matthew S. Skotak
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 recently enacted the Revised Uniform Fiduciary Access to Digital Assets Act (“RUFADAA”). This new act became effective on August 10, 2016 and can be found at C.R.S. § 15-1-1501 et seq.
RUFADAA is a significant leap by the State of Colorado to catch up to the digital age. Prior to the passage of the law, the pervasive use of electronic banking and investing has posed a problem for many fiduciaries. Without the receipt of paper statements, personal representatives, financial agents, trustees and conservators have had a difficult time locating an individual’s assets, sometimes leading to an exhaustive search of several banking and financial institutions before asserts are uncovered. Read more
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.
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
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).