Thursday Q&A: Estate Planning & Elder Law – June 11, 2020

Estate planning and elder law attorney Bill Henry answered compelling questions about wills, advance inheritance, trusts, and more in the June 11, 2020 edition of Thursday Q&A.

Below is a transcript of the event for your reference. Additionally, each question in marked in the video as a white dot for your easy viewing.

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All right, Bill Henry with Robinson and we’re here for another Estate Planning Thursday, got a few questions, not a ton but some great ones. So jump right in and get started.

Question 1: Can I hand write my will, or do I need a lawyer?

So our first question is from Steven in Denver, and Steven wants to know, can he hand write his will? And does he really have to go through a lawyer?

Well, Steven, of course I am a lawyer, so I guess it’s a little hard for me to answer that question, but the answer is, yes, you can hand write your will.

How to Make Your Will Valid

So, let’s look at what are the actual rules for wills in Colorado and the execution ceremony in order to make them valid.

Signatures & Witnesses

So in Colorado, generally speaking, we need to have our wills witnessed by two people or notarized, and then it needs to be signed by the testator – that’s the person that’s drafting the will.

Question 2: How do I put my house in my trust?

All right, Darlene from Colorado, How do I put my house into my trust?

Using a Deed to Transfer Property

So great question, Darlene, it’s relatively easy to put your house into a trust. Most people have heard of what’s called a quitclaim deed, that’s just a deed that transfers property into, for example, your trust or to someone else’s name.

Now there’s lots of different types of deeds like warranty deeds, general warrants deeds.

In a law firm, when we’re transferring property to trust, we will generally use what’s called a bargain and sale deed, and all that’s saying is that any after acquired interest in the property will automatically be transferred.

Which Deeds Do What…

So let me just give you an example. A quitclaim deed only transfers your interest in the property that exists at the time of the transfer.

So if, let’s say, the mineral interests, let’s say, you had mineral interests on your property that hadn’t invested yet. So you didn’t actually own them yet. Well, when you transfer the property into the trust via quitclaim deed, then those mineral interests would not be transferred.

On the other hand, with a bargain and sale deed, those after-acquired interests, would be transferred into the trust. Generally, we would use a bargain and sale deed.

Cautions When Transferring Property

Now, the most important thing to know is that when we make transfers into trust, we are changing the title to the trust, and when we do that, we can have issues with the title insurance.

So you always need to make sure you go back and find out with your underlying title insurance, if you are still covered and basically what that means is you have to list the trust as an endorsee on the policy or get an entirely new title insurance policy.

Same thing with your homeowners insurance. You need to make sure that your trust is listed as an endorsee on that homeowners insurance and for both insurance policies.

What the concern is, is that if something were to happen. So let’s say there were some owners that came out of the woodwork and said that they owned an interest in your property, and you have title insurance, which you probably do whenever you bought the house, will be covered, in other words, will the insurance companies say, “Yes, I will cover the trust because now the trust owns the property.”

So we just need to be careful when we do those transfers that we’re making sure that our insurance is still good, both homeowners insurance, as well as title insurance. All right, what’s next here.

Question 3: If my grandchildren are still minors, whenever I pass away, how do I make sure someone other than their parents manages their inheritance, including the college fund I set up for them?

So next question is, if my grandchildren are still minors, whenever I pass away, how do I make sure someone other than their parents manages their inheritance, including the college fund I set up for them? They are concerned about the property being mismanaged.

So lots of different ways that we can tackle that, but let’s talk about the college account.

Create a Custodial Account

So I assume that the college fund is in a 529 account for this next bit of information. So if it’s in a 529 account, depending on the state that it was formed, you likely, like in Colorado, you can change or designate who the account owner of that a 529 plan’s gonna be.

It could also be what’s called a custodial account and a custodial account simply means, that the minor child will own that account after they turn 18. So once they become, once they reach the age of majority.

Create a Trust

For all your other assets, that’s just the classic use of the trust. So we put the property into a trust and then we decide who’s gonna manage the money on behalf of the beneficiary.

So in your case, the beneficiaries are the grandchildren and then the trustee is the person that manages the property for the benefit of those grandchildren. That could be anyone you want, it does not have to be their parents.

Who Manages the Trust

So it could be for example, an independent party, so it could be for like a independent trustee, like a bank, it could be an attorney, a CPA, or it could be a family friend or some other family member that is not your children, if that’s a concern that you have.

So potentially two different answers there for a 529 account, you likely will designate the account owner based on the contract you set up with the financial institution that holds that 529 account for you. So you wanna look at that paperwork. All right, next, we have, let’s see here.

Question 4: Do I need to update my living will given the COVID pandemic?

Alright, Ronald from Denver, he is concerned, he says, here, let me read it to you, it’s a longer one. Intubation is common for many hospitalized patients with COVID-19, what happens if you come down with COVID?

So a living will is also called the advanced directive in Colorado.

So a living will is used during life, but before we die, right? So it’s during life and what it’s saying is that if I’m in a persistent vegetative state or, alternatively, if I’m in a terminal condition and the life sustaining procedure like intubation or some sort of artificial breathing, or a feeding tube, things of that nature will only prolong the dying process. What do I want to have happen? Do I want the artificial respiration?

When the Living Will Does Now Kick In

So you could see right there with that definition, your example would not apply at all because you are intending and the doctors assume that you’re gonna be coming out from this. Although you’re intubated for a period of time, the doctors still expect that you will make a full recovery.

So your living will does not kick in so to speak. It is not active at that point because you’re not in a terminal condition and you’re also not in a persistent vegetative state. So that really, I think is the answer there.

When the Living Will Is Activated

If at some point of course she became terminal after you’d been intubated, well, that’s a different scenario, then at that point, your living will, would kick in, but not until the point whenever, the doctors do not expect that you will make a recovery.

How to Change Your Living Will

So as to the final part, how do you change it? And is it easy to amend? It is you can do whatever you want, it’s your documents.

You could rip them up and destroy them and then further they have no legal validity at that point, or you can go in and you can just make new ones.

COVID-19 & Your Living Will

But I wouldn’t be so concerned with it if I’ve been intubated for COVID-19 that all of a sudden, they’re just gonna turn it off on me. That’s not how that’s gonna work, but really good question, especially given our current times.

Question 5: Can I give my son an advance on his inheritance?

All right, Jim, from Lakewood, he wants to know, my wife and I want to give our son an advance on the inheritance and they want to give him $20,000 and he’s gotten advice that he can either write a check for $10,000 to his son and then his wife could do the same for another $10,000 to make $20,000, or he could write, he, Jim could write, his son $10,000 check and then he could also write another $10,000 check from the same account.

So I’m just gonna make sure I just got that there right before we talk about it. Oh, okay, I misspoke a little bit there. So it’s $10,000 check from Jim and Jim’s wife to his son. So each $10,000, but it has to be from the same account or alternatively, he could write his son, a $10,000 check and his wife, a $10,000 check.

So really great, excellent question that I get all the time and what we’re really talking about here is gift tax.

So, you of course can give your son as much money as you want and so let’s talk about, well, let me answer the question first.

What would I do in your case? Is I would just get your wife and you could give your son $20,000 and there would be no issues with that whatsoever.

So let’s talk about why these kind of issues come up and what the concern is.

The Gift Tax Exclusion

So the concern all has to do about the gift tax exclusion and so every year each one of us can give up to $15,000 to any person without having to report it to the IRS. So therefore you, Jim, and your wife, could give your son up to $30,000, $15,000 a piece to your son without having to report anything to the IRS just because you gave your son more.

Filing the Gift With the IRS

So if let’s say you decided to give your son a million dollars, well that also doesn’t mean that they’re gonna have to pay any tax. All it means is that you will need to file a gift tax return with the IRS at the end of the year, because each one of you, you and your wife, have a, I think for 2020, we’re at $11.6 million. So a lot, so let’s call it $23 million combined that you can give to your son before there’s going to be any gift tax assessed.

So again, you can really give a tremendous amount, but the confusion is, is everyone thinks that they can only give up to a certain amount, but you really can give away more just when do you need to disclose it?

The reason I say, I would for both you and your wife to give it to your son, is that most people in here, I think it’s even mentioned that it’s an advance on his inheritance. So if you want him to inherit the money, then I would just give it directly to your son.

If he keeps it into a separate account than it is his money, I’m sure he’s not intending to get divorced, but if anything like that ever happened, then it is separate, same thing from any of his wife’s creditors, that it’s separate money, it’s his own money in Colorado.

So again, I would really encourage you just to give it to your son. You and your wife to each give $10,000, does not have to be out of the same account, there’s no rule that it has to be out of the same account. So it can be from any account, your wife can have her own account, you can have your own account and again, it’s all about that $15,000 limit before you need to disclose it to the IRS on a gift tax return. So hopefully that answered the question, if not feel free to email me afterwards, I know that gets a little bit confusing.

Question 6: A family member might be taking money from my mom. What can I do?

What could I do if I suspect a family member is taking money from my mom, what legal steps can I take? And what proof do I need to have?

So we don’t have all the information that we would need.

Does the Individual Have a Right to Use the Money?

The first question is, how are they taking money from your mother? So if the family member is on the account, well, they may have the legal right to take that money because it’s both of their money because they’re both on title the account.

On the other hand, if the family member is the power of attorney, so they just have the legal authority to write checks out of your mother’s account, well, in that case, that right there is what’s called a breach of fiduciary duty, and what you would do, is you would go to court and you would ask the court to appoint a conservator over your mother.

Seek a Conservator for Mom

A conservator is basically the legal process that the court is going to oversee all the money going in and out of the account.

So there’s a lot more court oversight in that case and then of course, the courts ensuring that this family member is not stealing any money. Relatively easy to get.

Evidence You’ll Need

If you’ve got some level of evidence, what would that look like?

Bank accounts, things of that nature that you show, that these checks are being written to whoever this family member is and of course, if let’s say that family member, has absolutely no involvement with your money, excuse me, your mother, well, that’s just stealing, call the police in that case.

So it just sort of depends on the scenario but if you’re concerned with financial abuse, then you will go to court and ask the court for a conservator.

About Adult Protective Services

You could also call adult protective services, they would come out and investigate, although your mileage may vary with how that goes because once you turn that over to the state, there can be a lot of issues that do occur with adult protective services and then them removing your mother from their living situation and so you just don’t exactly know where that whole things can go, but great question.

Question 7: If my beneficiary dies, who gets the money?

All right, Jerry, Jerry is from Colorado. If my beneficiary dies, who gets the money? Does it go to their family or does it get passed on to other, in my family?

Jerry, that’s a really good question, and it just depends on how your estate is set up.

If You DO NOT Have a Will and Your Beneficiary Dies

So if you have a will, you can override all the different rules I’m about to tell you.

Generally, if you do not have a will and your beneficiary is entitled to property, and they die, it’s going to go to their family members.

Their Family Will Get Your Property

So it will go to their children. So a typical scenario, I’ll give you an example if let’s say, I say, all right, I want my son to have a $100,000 upon my death and my son pre-deceases me, well, then it’s going to go to his children, if he has kids.

If he’s married, it does not go to his wife, it’ll only go to his kids. On the other hand, if let’s say he has no kids and he does have a wife go in that case, it does not still, it does not go to his wife, then it goes back over to my other descendants.

So for example, it could go to my daughter because my son had no children. So it really is gonna depend on your particular circumstances at that time on what’s going to happen, and, again, all these rules you can override.

How to Maintain Beneficiary Control 

So you can decide. You can say that this person must survive me in order to inherit anything and if they don’t, then I want it to go to someone else that’s totally valid but it’s important to know, just as I think your question indicates, what’s gonna happen, if what I think is gonna happen? In other words, if this beneficiary dies and where’s my property go in that case? So if you make your wishes known through your will, then that’s where it’s gonna go, great question.

Question 8: Do powers of attorney hold up in other states?

All right, help from Aurora. Do powers of attorney hold up in other states or do you have to create a new one? Great question.

They’re Valid in Colorado

So I can give you the answer for Colorado. So powers of attorney that come into Colorado, are valid documents. If they’re valid in the state, whenever they were created. So that’s what Colorado’s can use, and that’s what honestly, what most courts use, excuse me, states use under the uniform probate code.

If You Leave Colorado

So generally speaking, if you have a power of attorney, it is going to be valid in another state, but if you do move out of Colorado, you should always, of course, have it looked at by an attorney of that state to make sure that it’s valid.

Why POAs are Critical 

A power of attorney, both a financial power of attorney and a medical power of attorney, are critical estate planning tools, because what we’re doing is we’re avoiding, in the case of a financial power of attorney, a conservatorship and in the case of a medical power of attorney, we are avoiding a guardianship.

Question 9: I’m divorced, if I pass I want my kids to get my money.

All right, if I… Here’s another one, sorry, there, if I’m getting divorced, what are my options for changing the beneficiaries on my life insurance policy and retirement accounts to ensure my children get the benefits in the event of my death. So, another great question.

Contingent Beneficiaries

In Colorado, whenever the divorce is finalized, there is a law Colorado that it says, “If your spouse, your former spouse has predeceased you.” So it’s as if they have predeceased you, therefore it will go to your contingent beneficiaries.

Changing Your Beneficiaries

If you want, after you’re divorced and depending on what your separation agreement says or what the court ordered, you can go change your beneficiaries, I gave you that caveat because there’s situations in some of these family law cases, where the parties are required to keep a certain amount of life insurance, and they may have to make the former spouse, the beneficiaries of those policies.

Get a Legal Review

So anytime you’re changing beneficiary, you definitely need to talk with your attorney, and look at your final orders to see what could actually be done but the short answer is that whenever we get divorced in Colorado, the beneficiary designation of the spouse is revoked, ’cause they assume if you’re getting divorced, most people don’t want to give the money to their ex.

Question 10: Is there an oversight I can put on my kids inheritance?

Concerned parent from Parker, my adult child has suffered from addiction for many years, is the trust the best way to set up something for them to make sure they have access to their inheritance, but there is some kind of oversight of it?

Set Up a Trust

I think you’ve nailed it a hundred percent. That’s exactly what I would recommend, is that you set up a trust and so that trust can have any rules that you want.

Here’s an Example

So for example, your trust could say, that you can only access the money after you’ve gone to rehab and you’ve stayed clean for a certain number of months, it could say, it can only be used for schooling or some other trades.

So you can really set the rules, it is your money ultimately, but the trust is the mechanism that we use, whenever we wanna have some level of control after our death, so, great, great question. All right and let’s see, make sure I got them all in here.

Question 11: Should I tell my beneficiaries who they are?

Ah, are you supposed to let people know who your beneficiaries are?

It’s Not Recommended & Here’s Why

The answer to that is you can, I don’t necessarily recommend it, there’s no requirement that you do and the reason I say that is that your beneficiaries have no actual legal rights to your money.

So they have more of what’s called an expectancy, meaning that they might expect to get some of your money.

So children, for example, but they have no legal right to it. So we don’t need to tell our beneficiaries that they are actual beneficiaries under our estate planning documents.

Definitely Talk to Your Estate’s Executor

Now your personal representative, that’s the executor in Colorado, you should definitely let them know that, hey, you’ve been named the executor or a personal representative under my will, or if your agents and a medical power of attorney, you should definitely let them know and let them know where your documents are even if you don’t give them the documents, let them know where those documents are so that way, if something it does happen to you, that they can go ahead and fulfill their responsibilities.

Question 12: Can the same person be my medical and financial POA?

Okay, looks like we got one more, Connie from Denver, says, “I’ve read, you should not have the same person “to be both your financial and medical power of attorney, “but what if you have only one child “and no other living relatives in the state?”

So a few questions in there, Connie. It’s very common to have, that I see my clients, have both the financial power of attorney and their medical power of attorney to be the same person.

Spouses as POAs

So we just think about spouses first. Of course, spouses are our natural choice for our financial power of attorney or medical power of attorney, but, even beyond that, it’s, once again, very common that we’re gonna have both our, for example, in your case, your child be both the medical power of attorney and the financial power of attorney, because at the end of the day, we should be able to trust who we’re going to appoint here.

They Have a Legal Obligation to You

And I think some of the concern is, well, maybe they’re not gonna have my best interest in heart because they’re both of these roles, but they do act in a fiduciary capacity.

So they are required by law to act in your best interest, but, even beyond that, again, we only wanna pick people that we can trust and that we believe are gonna act in our best interests and really fulfill our wishes because that’s what being a fiduciary is all about.

What is it that the person that I’m serving would want in this particular situation? And how do you know what they would want? Well you look at the documents first and foremost, what did they write down? Did they say they wanted artificial nutrition, hydration? Back to the question we had on intubation, did they say that they wanted to remain on life support? For how long?

And will this person I picked, even if they don’t fundamentally agree with what I chose, would they want, or will they still do what I would want in that situation? Of course not take advantage of me.

If we have any concern that someone’s gonna take advantage of us, whether it’s with the medical power of attorney or the financial power of attorney, we don’t wanna name them.

Having said that, it’s true, that the statistics are out there that is normally our family members, unfortunately, that end up stealing from us. I can tell you just in my own practice, that is the same thing that I see.

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