A Colorado Springs estate planning attorney at Buckingham & McGuire can assist clients with the drafting of wills and trusts in addition to overall estate planning techniques and questions.

What is a Will by Denver Estate Planning Attorney

What is a will and who are the parties involved.  The video below has been prepared by an estate planning attorney at The McGuire Law Firm to discuss these issues.  Although, many people understand, or have an idea as to what a will is, many people still have questions as to what a will can do and who is involved with a will and last testament.

Please feel free to contact The McGuire Law Firm to schedule a consultation with an estate planning attorney.  An estate planning attorney can assist you with making decisions regarding the documents that will help pass your assets as well as how such assets can be distributed to your loved ones and beneficiaries.

Contact The McGuire Law Firm to schedule your consultation with a Denver estate planning attorney.

Basis Issues Relating to Joint Tenancies Created Via Gift

What are the basis rules regarding joint tenancies that are created by a gift?  Under Internal Revenue Code Section 1015(a), generally, the basis of property received via a gift would be the basis of the donor, or the last preceding owner that did not acquire the property via a gift.  When the basis in property is determined by the donor’s basis, this is often referred to as a carryover basis because the basis in a sense “carries over” from the person making the gift.  In other words, there is no increase or “step-up” in basis.  In regards to determining a loss, the basis in property that is acquired via gift would be the lesser of the donor’s basis in the property, or the fair market value of the property at the time the gift is made.  Based upon the above, the majority of the time, the basis of a joint tenant’s interest in property that is held in joint tenancy will be the adjusted cost basis of the donor.  The adjusted basis of the donor may also be a portion or percentage depending upon the interests of the donor in relation to the other joint tenants.  It is also important to note that the donor’s adjusted basis should be increased by the appropriate portion of any gift taxes paid, but not above the fair  market value of the property under Internal Revenue Code Section 1015(d)(6).

If the transfer is made between spouses, or is a transfer incident to a divorce, basis would be determined under Internal Revenue Code Section 1041 as opposed to Section 1015.  Under IRC Section 1041, the transfer would be treated as a gift whereby no gain or loss is recognized and the transferee or recipient of the gift would take the transferor’s adjusted basis, or a carryover basis.

An example may help illustrate the above issues.  For this example, assume that Mr. Husband purchased real estate with a value of $700,000 of his own funds, and the property is held jointly with his wife as joint tenants.  Further, we will assume wife is a US Citizen and that the interests of the spouses would be severable under state law.  Thus, both husband and wife would be considered to own 50% (fifty percent) or half of the interest real property.  The gift to wife of $250,000 would not be taxable because of the marital deduction under Internal Revenue Code Section 2523.  Because husband’s adjusted cost basis would determine wife’s adjusted basis in the property received via the gift, wife’s adjusted basis in the real property should be $250,000.

It is important to note Regs 1.1041 because the carryover basis under IRC Section 1041 would apply even if the adjusted basis in the property that has been transferred exceeded the fair market value of property that the time of transfer.  Therefore, transfers of property subject to IRC Section 1041 can produce a different result than when applying the tax law under IRC Section 1015.

If you have questions relating to gifts or your estate plan, please contact a Denver estate planning attorney at The McGuire Law Firm.  An estate planning attorney can assist you with gifting issues and the drafting of estate planning documents such as a will or trust.

Denver Estate Planning Attorney

Why an Estate Planning Attorney should draft your will

Do you need to have an attorney draft your estate planning documents?

Estate planning attorneys often see people try to “save money” by purchasing software that allows them to create their own estate planning documents. These same people say that attorneys charge high fees for basic documents just to make money. Though some attorneys may charge high fees, the consumer holds the power to shop around for the best attorney for him or her. At The McGuire Law Firm an experienced Denver estate planning attorney will charge you a fair price for all estate planning services, including a basic will plan, which includes documents tailored to each client’s specific needs.

When you speak with an estate planning attorney, however, the communication allows the estate planning attorney to tailor the documents to your needs. Do you own rental property? Do you own a small business? Do you have minor children? Do you have specific family issues for which the documents must address? Moreover, the attorney, based on his or her experience, may bring up additional issues or questions that the individual may never have thought of on his or her own.

Most people, once they learn the cost associated with hiring an experienced estate planning attorney to draft their documents, find the fee more reasonable than they expected. Also, the companies that sell and promote their documents do not have an altruistic motive for doing so. They make money for pre-packaged documents. Their companies work from a profit motive despite statements to the contrary.

Contact The McGuire Law Firm to speak with an estate planning attorney and discuss your needs.  Free consultation.

Avoiding Probate by Denver Estate Planning Attorney

Many people have heard horror stories about the probate process.  Maybe they have heard probate is costly, or maybe it took a very long time for Denver Estate Planning Attorney Denver Estate Planning Lawyera friend or family member to go through the probate process for a loved one.  Due to these issues and stories, it is common for estate planning attorneys to be asked, how do I avoid probate?  While the probate process may be different in different states, many people do wish to avoid probate and there are ways to avoid probate.  The article below has been drafted by a Denver estate planning attorney and discusses how probate may be avoided or how assets may avoid probate.

There are several methods to titling property that may avoid or bypass the probate process.  Assets that do not go through the probate process are referred to as non-testamentary assets or non-probate assets.  Certain methods may act more as a deferral than a true avoidance.

 

Assets Held in Trust

Many people use a revocable living trust to avoid probate.  A revocable living trust can hold title to property for the benefit of an individual.  Because title is held in the name of the trustee and a beneficiary is named for the property, the property held in the revocable living trust is not part of the probate estate.  The trust document will direct the trustee regarding the distribution of the trust property at death.  A revocable living trust also provides some privacy as it does not become public record.  However, you must be very diligent at titling the assets under the trust or they may become probate assets.  Further, there is a misconception that a revocable living trust provides asset protection.  This is false and incorrect.  A revocable living trust does not provide asset protection.

 

Assets with Beneficiary Designations

Employer sponsored retirement accounts, individual retirement accounts, life insurance death benefits and annuities pass directly to the beneficiary named by the account or policy owner because they are considered contractual obligations to pay out a death benefit.

 

Assets with Payable on Death (POD) Designations

Any money in a POD account will pass directly to the named beneficiary upon the account holder’s death, but the account holder will retain exclusive rights to the account while they are alive.

 

Joint Tenancy with Right of Survivorship

This may be jointly held bank accounts or brokerage accounts with JTWROS designations placed on the account or real estate held by two or people as joint tenants.  Property owned in joint tenancy with a right of survivorship automatically passes without probate to the surviving owner or owners when one owner dies.  Unlike tenants in common, a joint tenant does not own a fractional share or interest, but instead, each owns 100% of the whole.  Holding property in joint tenancy may work well when couples acquire assets such as real property, bank accounts, securities, vehicles or other property together and desire to “automatically” leave the property to the survivor.  Joint tenancy also has its disadvantages, such as one tenant may not want the other to receive their interest; both tenants could die in a common accident; one tenant may wish to sell their interest; the avoidance of probate with joint tenancy exists only as long as there is a surviving tenant.  Thus, there may come a time when there is only one tenant and the property is held in fee simple and thus probate would be required at their death without further action.  This is an example of potential probate “deferral” without full avoidance; a jointly owned asset is subject to the judgment against every owner and may be lost in the bankruptcy of an owner.

Ultimately, how you wish to pass your assets is a personal decision.  A Denver estate planning attorney or tax attorney at The McGuire Law Firm would welcome the opportunity to meet with you and discuss your estate questions, issues and options.  All potential clients receive a free consultation with an attorney.

Contact The McGuire Law Firm to speak with a Denver estate planning attorney or tax attorney!

Testamentary Assets by Denver Estate Planning Attorney

Estate planning attorneys are likely to receive the question, “what are testamentary assets?”  Many people are aware of the termsdenver-estate-planning-lawyer will, testamentary and probate.  Further, many people are aware that there are means by which to avoid probate, but they still do not fully understand what a testamentary asset is.  The article below has been drafted by an estate planning attorney in Denver to provide a little insight as to what constitutes testamentary assets.

Testamentary assets are those assets that are part of an individual’s probate estate and are subject to the probate court process at death.  Sometimes these assets are also referred to as “probate” assets.  Examples of testamentary or probate assets are below.  Assets held in fee simple (100% individual ownership) whereby there is full and absolute ownership and no other owners with survivorship interests.  Thus, it could be a bank account, house, stock certificate whereby there is no payable on death designation or survivor interest.  Property held as tenants in common would be a testamentary asset.  Tenants in common could be defined as two or more people owning property without rights of survivorship.  Under this situation, each tenant’s ownership interest will become part of their probate estate and therefore distributed to the individuals designated in their will and last testament.  As a tenant in common, you absolutely own your percentage share in the property.  You may sell the interest during your lifetime or you can leave the interest to your chose beneficiaries upon your death.

As you may have inferred from the above information, there can be ways by which assets can avoid probate.  Some people do not care if their assets go through probate, while others feel strongly that their assets not pass through the probate process.  Many people think probate is costly, time consuming and troublesome for their loved ones.  It is possible to defer or avoid probate by titling assets, holding assets in trust, establishing beneficiary designations, establishing payable on death designations or holding property in joint tenancy with a right of survivorship.  Some of the above options work well in certain circumstances, but there can be potential disadvantages as well.  The options to avoid probate will be discussed in future articles.

Please contact The McGuire Law Firm to speak with a Denver estate planning attorney regarding your estate plan and related questions.  We offer all potential clients a free consultation and estate plans that are affordable and fit your needs.

A free consultation can be scheduled with a Denver estate planning attorney by contacting The McGuire Law Firm.

Probate Discussed by Denver Estate Planning Attorney

Most people have heard the term probate, but a common question asked to an estate planning attorney is, what is probate?  The Denver Tax Attorneyarticle below has been drafted by a Denver estate planning attorney in an attempt to provide a short definition of probate.

The legal definition of probate would be something like: the legal process of administering an estate of a deceased person, resolving all claims and distributing the deceased person’s cash, property and assets.  During a continuing legal education course, I heard an estate planning attorney define probate as, “a lawsuit filed against yourself that you end up paying for, in order to give away your money and property.”  I found this definition comical and in many ways true!

Each state may have somewhat of a different probate process and there are states that are UPC states and non-UPC states.  UPC stands for the Uniform Probate Code.  In Colorado, there are generally three “types” of probate situations.  You can have the small estate whereby the value of the estate is less than $50,000 and there is no real property.  Heirs can collect assets by using an affidavit and not opening probate action through a court.  You can have an uncontested estate, sometimes referred to as an informal estate.  This is generally allowed when there is a valid will or clear intestacy, no contests are expected and there is a qualified personal representative ready to be appointed.  Under this situation, the court has a limited role in the administration of the estate, but the court will still act to ensure the will or intestacy laws are followed.  Of course, you have the contested estates or the issue(s) of an invalid or questionable will.  This may be referred to as formal probate and is required when a will is being contested or the will is unclear and/or invalid.  The court may require that the personal representative obtain approval for every transaction regarding the transfer or disposition of property.  Given the circumstances, formal probate can take significantly longer than a small estate or informal probate.

Many people wish to avoid probate and many people do not seem to mind the thought of their estate (and family) going through the probate process.  There are several methods to titling property that can be used to “avoid” or “bypass” probate.  Assets avoiding probate are referred to as “non-testamentary” or “non-probate” assets.  In some circumstances, the methods may actually work more as a deferral of probate, than as a true avoidance of probate.

If you have questions regarding your estate, please feel free to contact a Denver estate planning attorney at The McGuire Law Firm.  All potential clients receive a free consultation to discuss your estate planning needs and other legal issues.

Schedule your free consultation with a Denver estate planning attorney by contacting The McGuire Law Firm.

Estate Planning and Gift Tax Analysis on Transfers of Property

Gift Tax Analysis on Transfers of Property

 Denver Estate Planning Attorneys

             Maybe you are considering gifting property or money to a child or other family member, or maybe you have already gifted property and are wondering about the gift tax consequences.  If you have not transferred the property and made the gift, it is always advisable to speak with you’re your estate planning attorney or a tax attorney prior to the disposition.  However, if the gift has been made, this article may be able to assist you in analyzing the tax consequences of such gift.

 

First and foremost you must ask, was there a completed gift?  Did you actually gift the property to a third party?  For a complete gift, you as the donor must completely give up dominion and control of the property to have a completed gift.  Thus, the donee must have the immediate right to use, possess or transfer the property, as well as right to enjoy any income from the property.  For example, property transferred to a revocable trust is not a gift because the trust can be revoked.  If creditors have the right to income from the property transferred, this also would not appear to be a completed gift.

 

If it is determined that the gift is a completed gift, then you must consider whether the gift constitutes a present interest.  For the annual gift exclusion to apply, the gift must be a completed gift of a present interest.  For example, if Joe gifts property into trust and his son Mike holds a remainder interest in the trust, Mike does not hold a present interest as a remainderman and thus the annual gift exclusion would not apply.

 

If it is determined that the gift is a completed gift of a present interest then you must look at the value of the gift.  The fair market value of the gift is the fair market value as of the date of transfer.  The amount of the gift exceeding the current year annual gift tax exclusion would reduce the donor’s lifetime exclusion or be taxable if the donor has already “used” their lifetime exclusion or credit.

 

After the gift is made, what is the donee’s (recipient’s) basis in the gift?  This is important so that the donee’s gain can be calculated upon their transfer of the property.  The recipient takes a carryover basis in the gifted property under Internal Revenue Code Section 1015.  Thus, the recipient takes the donor’s basis.  Further, if the donor pays gift tax on the transfer, the gift tax paid by the donor increases the donee’s basis, and this is known as the Gift Tax Paid Adjustment (GTPA).

 

One issue to consider is that property received via inheritance receives a stepped up basis to the fair market value of the property at the death of decedent under Internal Revenue Code Section 1014.  Thus, it may not always be wise to gift property (depending upon the circumstances) in order to take advantage of the stepped up basis rules when property is received through an inheritance.

 

Individuals considering gifting property should consult their estate attorney or tax attorney to discuss the current and long term tax implications of the transfer and to ensure the transfer will achieve the intended results.

Contact The McGuire Law Firm to speak with and schedule a free consultation with a estate planning attorney.