We have been talking about ways to keep assets in an estate from going through the probate process. This installment is about giving gifts.
Giving money or other assets to family members accomplishes three desirable tax outcomes:
Which form of co-ownership is right for you?
In the last episode of our “How to Avoid Probate” series, we discussed how co-ownership is an effective way around the probate process.
Now let’s drill down a bit, to understand the two common forms of co-ownership. They sound similar, but they are different categories, with different outcomes:
What should I know about long term care planning?
Long term care planning should be a concern of every person in Denver. Additionally, you should carefully consider long term care options well before the time comes, whether you are in search of a living situation for yourself or a loved one.
That’s why the Mayo Clinic recommends becoming acquainted with all of your long term care options as soon as possible. The first step is to understand the different types of long term care available to you. For instance, an assisted living facility features a full staff which helps elderly residents with daily tasks (such as eating and bathing). Conversely, a nursing home offers a more comprehensive level of care intended for those beset by illness and unable to properly see to their own needs. There are also senior living communities, and facilities that combine many different tiers of care.
Researching your nursing home options
Like many that come to us here at The Hughes Law Firm PC, you may have neglected to account for yours or your loved one’s long-term care in your estate planning. Planning for the potentially losing the security of self-sufficiency now avoids you or your loved one being left to the mercy of others in Denver if it ever does happen.
Part of planning for yours or your loved one’s long-term care may require selecting a nursing home that has the resources to meet your needs. However, admittance to a facility can bring with it the potential to experience abuse or neglect at the hands of caregivers. Indeed, the National Center on Elder Abuse reports that in 2014 alone, 14,258 claims of nursing home neglect, abuse and exploitation were reported to authorities.
Avoid probate by co-owning assets
People treat the probate process as if it is as inevitable as, well, death and taxes.
People with substantial assets fear the probate process because it is a public matter, and it exposes the estate to taxation. The objective is to keep as much as possible "in the family," and not turn it over to Uncle Sam.
Can you prevent inheritance disputes with proper planning?
Organizing your estate and drafting a will are excellent ways to guarantee that your property gets to the desired parties upon your death. However, failure to include critical details or pay attention to articulation can leave your family members squabbling and bitter. Fortunately, with proper planning, you can help prevent unnecessary inheritance disputes.
The Huffington Post suggests some proactive steps you can take throughout estate planning to make your wishes clear and leave nothing to personal discretion. These suggestions include the following:
- Stay private: Involving your beneficiaries in the planning or writing of your will can create problems if you are easily influenced. Keep your thoughts personal and your will private.
- Give gifts: Sometimes, it can be overwhelming to look at all of the property you own and wish to give to your loved ones. If possible, begin giving some of your assets away before your death to reduce the amount of property in your inheritance and to effectively make your wishes clear.
- Have evidence: Videoing the signing of your will is an excellent way to provide family members with evidence upon your death. Additionally, the video proof can show that you were mentally capable of making the decisions you have and family members cannot dispute otherwise.
- Choose witnesses: Put time and thought into the individuals you select as witnesses to sign your will. With trusted associates on your side, you can be confident in their ability to defend your wishes upon your death.
The benefits of a life insurance trust
Even though you may not have many assets to leave to your minor children, it is essential to their future that you create a will so that they are taken care of if you die while they are young. The team at The Hughes Law Firm often helps parents to protect their children’s welfare with a wide range of estate planning tools.
One of the primary facets you may be thinking of is who you should appoint as guardian, and a factor in that decision is financial. You need to know that the person who you trust to raise your children has enough money to adequately provide for them. That person may also hesitate to agree because it would stretch his or her finances to the breaking point. With a life insurance trust, you may be able to eliminate this problem.
Avoiding Probate: An Overview
Back in 1965, a book with the unsexy title "How to Avoid Probate," by Norman Dacey, became a perennial best-seller. Lawyers hated the book because it was a jumble of forms for people to fill out, which lead to considerable confusion and opened the door to costly mistakes.
Dacey's spiral-bound book tipped off a revolution, but one clarification must be made. The book portrayed the probate process as being akin to the Bubonic Plague. While probate poses many challenges - and offers a variety of solutions - it is not demonic.
What are estate taxes in Colorado?
If you have had a loved one pass away, then you may have heard about taxation on the inheritance you receive. The main form of taxation is an estate tax. Estate taxes, as defined by the Colorado General Assembly, are those assessed when assets are transferred upon the death of a person. Until 2004, Colorado had an estate tax, but due to changes in federal laws, that tax was eliminated. Only about one-fourth of all states impose estate taxes due to the changes made by the federal government to the tax laws. Of course, future changes could reinstate the tax, and the federal government still charges estate taxes, so you may have to pay them in some form.
There are other taxes that may be levied against an estate. These include inheritance and gift taxes. Estate taxes are paid by the estate, but these other taxes would be paid by you if you inherit anything from an estate. However, the inheritance tax in Colorado was replaced by an estate tax in 1980, and as you now know, in 2004, the estate tax was eliminated, so you will not pay either to the state.
How does the probate process work?
Whether you have lost a loved one or a close family friend has named you as administrator of his or her estate, you may be required to enter into the probate process. During probate in Colorado, the estate left behind by the deceased is valued, and the property is distributed to the heirs named in the will. Understanding how probate works is critical, as it may simplify the process for you and for the beneficiaries of the estate.
Depending on the unique circumstances surrounding the situation, you may enter into one of three types of probates. Small estate probates are designated for cases where the property values at less than $50,000. Informal probate are used for uncontested estates, or estates where there are no disputes over property and/or assets. Finally, formal probates are reserved for estates that involve questionable, unclear or invalid wills. This type of probate may also be enacted when it is unclear who the beneficiaries are or when there are property title disputes and other challenges during the division of the estate. While small estate probates are often simple and may move through the system rather quickly, informal and formal probates may stay open with the court for a minimum of six months.
