ESTATE PLANNING ATTORNEY IN THORNTON, COLORADO
What is an estate plan and why do I need one?
It is a term used to describe a legal strategy to take care of your assets while you are alive and to distribute them after your death. Most of these strategies are anchored by either a will or a revocable living trust and include medical and financial powers of attorney and a medical directive (also known as a “Living Will”). A plan may also include irrevocable trusts, special needs trusts and/or charitable trusts. In any case, everyone has an estate plan after death. If you haven’t made a plan of your own, you have, by default, chosen to have your estate handled in probate court according to the laws of intestacy in the state where you live and in any state where you have property.
Your Last Will
Your last will is just one part of a comprehensive estate plan. If a person dies without a Will they are said to have died "intestate" and state laws will determine how and to whom the person's assets will be distributed. Some things you should know about wills:
A will has no legal authority until after death. So, a will does not help manage your affairs if you become incapacitated, whether by illness or injury.
A will does not help an estate avoid probate. A will is a legal document submitted to the probate court, so it is an "admission ticket" to probate.
A will is a good place to nominate the guardians (or back-up parents) of your minor children if they are orphaned. All parents of minor children should document their choice of guardians. If you leave this to chance, you could be setting up a family battle royal, and your children could end up with the wrong guardians.
Trusts: Revocable Living Trusts, Irrevocable Trusts, Testamentary Trusts, Special Needs Trusts, etc.
There are many "flavors" of Trusts. They can be simple or complex, and serve a variety of legal, personal, investment or tax planning purposes. At the most basic level, a trust is a legal entity with at least three parties involved: the trust-maker (also known as “Settlor” or “Grantor”), the trustee (trust manager), and the trust beneficiary. Oftentimes, all three parties are represented by one person or a married couple. In the case of a revocable living trust, for example, a person may create a trust (the trust-maker) and name themselves the current trustees (trust managers) who manage the trust assets for their benefit (trust beneficiary).
Depending on the situation, there may be many advantages to establishing trust, including avoiding the need for probate. In most cases, assets owned in a revocable living trust will pass to the trust beneficiaries (or heirs) immediately upon the death of the trust maker(s) with no probate required. Certain trusts also may result in tax advantages both for the trust-maker and the beneficiary. Or they may be used to protect property from creditors, or simply to provide for someone else to manage and invest property for the trust-maker(s) and the named beneficiaries. A well-drafted revocable living trust can provide for effective management and protection of your assets during your incapacity, as well as after your death.
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A power of attorney is a legal document giving another person (the agent or attorney-in-fact) the legal right (powers) to do certain things for you. What those powers depend on the terms of the document. A power of attorney may be very broad or very limited in scope.
All powers of attorney terminate upon the death of the maker and may terminate when the maker (principal) becomes incapacitated (unable to make or communicate decisions). When the intent is to designate a back-up decision-maker in the event of incapacity, then a durable power of attorney should be used. Durable Powers of Attorney should be frequently updated because banks and other financial institutions may hesitate to honor a power of attorney that is more than a year old.
Health Care Documents (or Advance Medical Directives)
An advance medical directive is a document that specifies the type of medical and personal care you would want should you lose the ability to make and communicate your own decisions. Anyone over the age of 18 may execute an advance directive, and this document is legally binding in Colorado. Your advance directive can specify who will make and communicate decisions for you, and it can set out the circumstances under which you would not like your life to be prolonged if, for example, you were in a coma with no reasonable chance of recovery.
A document that goes hand-in-hand with your advance directive is a HIPAA authorization, which, when given to your medical providers, allows specified individuals to access your medical information. Without this authorization, your doctor may refuse to communicate with your hand-picked decision-maker. HIPAA authorizations should always be included in a Medical Durable Power of Attorney and may also be included in a General Durable Power of Attorney.
Health Care Documents (or Advance Medical Directives)
An advance medical directive is a document that specifies the type of medical and personal care you would want should you lose the ability to make and communicate your own decisions. Anyone over the age of 18 may execute an advance directive, and this document is legally binding in Colorado. Your advance directive can specify who will make and communicate decisions for you, and it can set out the circumstances under which you would not like your life to be prolonged if, for example, you were in a coma with no reasonable chance of recovery.
A document that goes hand-in-hand with your advance directive is a HIPAA authorization, which, when given to your medical providers, allows specified individuals to access your medical information. Without this authorization, your doctor may refuse to communicate with your hand-picked decision-maker. HIPAA authorizations should always be included in a Medical Durable Power of Attorney and may also be included in a General Durable Power of Attorney.
What Happens If You Don't Have Advanced Directives?
As you age, you may lose the capacity to take care of yourself and your assets. If you don’t have an estate plan when you lose capacity to make your own decisions, it is too late to make an estate plan and you may then find yourself in need of what we call “living probate”, which is a lawsuit brought against you, paid for by you, requesting a court to find you incompetent and appoint a guardian and/or conservator to take control and care of you and/or your assets. This guardian/conservator may be a family member, some you would not have chosen yourself, or even a stranger.