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When To Make That Gift!

In Estate Planning there is always the question of what inheritance to leave; who will benefit; how to leave it and when to leave it.

At times, a decision is made to make a substantial gift while you are still living.  There are many reasons to take this approach –

1)  People are living longer and your children might well be senior citizens themselves before they inherit from your estate.

2)  There are financial pressures on younger generations and there is a sense that the inheritance might be useful – “sooner rather than later”

3)  You have determined that you have adequate funds to take care of yourself into the future. (This is particularly important.  If you have to tap into an IRA to make a gift – you might want to rethink your retirement plans.)

4)  You are considering a trust/gift that aids and encourages specific achievements – for example setting aside funds for a child’s college education or establishing a trust for a grandchild

5)  You consider loans for a specific use – for example aiding your child to purchase or upgrade a home; or money for an adult child to take educational courses to improve their job skills

6)  You consider periodic gifting now from a trust – rather than a ‘lump sum’ inheritance upon your death.

A review of your Estate Planning goals and adjusting them as you age and as your adult children age – are good reasons to consider when is the best time to make a gift.

So, at this holiday season and approaching the end of the year, now might be a good time to review your ‘gift giving’ plans for the longer perspective.

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Changing Behaviors

Much is written about the role of estate planning and the “hand from the grave” – Trusts that “rule” after the death of the person establishing the Trust.

First, let’s review some legal terminology for the sake of this article:

The person establishing the Trust is known in legal parlance as Donor, Settlor, Trustor and in some cases also the Trustee.

The Trustee is the individual(s) or institution/entity administering the Trust. The Trustee is responsible for carrying out the terms of the Trust.

(Usually, the Trustor and the Trustee are different entities, but in some cases they can be the same entity.)

The Beneficiary is the person(s) who will receive ‘something’ from the trust (money, land/property, art work, etc.) In short, the Beneficiary ‘benefits’ from the Trust – now or into the future.

Now that we have some simplified legal terminology in place — what happens if a parent or grandparent wants to make a bequest to a child/grandchild, but that child/grandchild is not quite reliable?

The Beneficiary may suffer from conditions such as an addiction to alcohol, gambling, gaming, narcotics, etc. – or they may just be unprincipled  with money or have poor decision- making skills.

ENTER…the Incentive Trust… a trust that may encourage good habits; motivate in some way; prevent ‘misuse’ of inheritance funds; reward ‘good’ behavior (or at least behavior in line with the Trustor);  and assist loved ones to make better decisions for the long term.

But, and there is always a ‘but’…the Incentive Trust is ‘tricky’.

Money can sometimes be the means of destruction, particularly for those with addictive personalities.

But the withholding of funds is equally difficult.

Incentive Trusts, like all trusts, must be structured with great care if the Trustor is to obtain the outcome they anticipate. They should have the labeling – “Use With Care”

Take one simplest example of an Incentive Trust –

A grandparent establishes an Incentive Trust for their grandchild. The grandparent really wants the grandchild (the Beneficiary) to graduate college.  So they state that the grandchild, in order to receive his/her Trust funds, must graduate college. So far…simple.

But…what about grade point average? Which accredited college?  Does an On-line college qualify? Length of time to graduate (4 years or twenty years)? Will the type of degree matter?  Where are the funds to attend college coming from? Will payments for college be made to the Beneficiary or directly to the college?  How much discretion will be given to the Trustee (the person or institution administering the Trust)?  Will there be benchmarks?  How many different colleges can the Beneficiary attend (how often can they change colleges?)  How many courses must Beneficiary take each semester?  Can the Beneficiary marry and have children while attending college?

Well…You get the idea. Simply stating for Trust purposes that the Beneficiary must graduate college….is not nearly enough of a directive.  Such a lack of directive can leave much to the discretion of the Trustee.

Likewise; preventing bad behavior is equally fraught with serious questions.

An example: a child is addicted to drugs; to gambling;  or to alcohol.  The parent wants that child to be provided for (under the terms of a Trust.)

What precise behavioral changes will qualify for the child (the Beneficiary) to receive their funds from an Incentive Trust?

What if the child ‘substitutes’ one addiction for another?

Will child be required to submit to periodic drug testing? Help programs?

What specifically would ‘qualify’ as alcohol abuse or gambling?

How long will the child be required to remain drug free?

At what age, if any, will all Trust funds be given to the Beneficiary? Or should funds be administered as a monthly ‘stipend’?

If the child cannot keep to the terms of the Trust, what happens to the funds in the Trust?

Will the Trust provide for ‘intervention’ or help for the child to cope?


Is an Incentive Trust the best trust vehicle for every circumstance? As with many things…the devil is in the details.

A qualified Estate Planning attorney is probably the best ‘investment’ that you can make when establishing a Trust – if you want to achieve the outcome that you anticipate in the future.

Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.”                 –Ayn Rand

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Do You Own Property in Another State?

Having a property in another state is often a great pleasure. Often the property is a vacation get- a- way  and it offers the opportunity to enjoy a different part of the country, enjoy the snow (or a warmer climate) and create new experiences.

But, what happens when the owner(s) of the property dies and the property becomes part of the probate system?

The answer in many cases is …ancillary estate. Yes, there is a process where the property might become part of the probate system of another state – in short, going through probate twice. To put it simply, states and their probate courts do not necessarily have legal authority in another state.

There are ways to avoid this situation, and setting up your estate plan to include out-of-state property could be the best advice you read today.

Here in Colorado there is a process – ancillary filing. Below is just a small portion of the information required if you have property within the state of Colorado (and do not live in Colorado) and are going through the probate process in another state; for example the deceased resided in Florida and had a mountain retreat in Colorado.

A portion of the ancillary estate documents of the Colorado court:

“There must be a probate case open in another state. Through an ancillary filing, the Colorado court acknowledges an appointment by another state and gives that person the authority to act in Colorado.”

The person who was actually appointed as Personal Representative/Executor/Administrator by the other state must be the same person asking to be given authority to act in Colorado.

If you are opening an ancillary estate in Colorado in order to transfer real property, you should know that you will need to file an ancillary estate proceeding in the court for every county where you need to transfer property.

The court will need certified, authenticated, or exemplified copies of the documents from the court in the state where the original probate was filed, including the will, if there is one.”

The above is just the start of the process.

If you have questions about ‘ancillary estate’ or other property issues, please feel free to contact me via the contact information on my website.

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Fair May Not Mean Equal

In estate planning, the distribution of assets is of paramount importance. The estate plan is helpful in guiding a person to determine how assets will be preserved; how those assets can be protected for future generations; and ultimately upon death, how those assets will be apportioned.

Often when creating an estate plan the question of ‘fairness’ comes into question. One simple question –

“Do I always give my children equal shares of my estate? What happens if I choose not to divide my estate ‘equally’?”

There are circumstances when “fair” may not mean “equal” distribution of your estate– and here are just a few examples:

A family has a special needs child or grandchild to be provided for – you may decide that the one family member needs more of your assets

There is a family business and only one of your children has worked in that business – you may decide that the child who has worked in the business should get a larger ‘share’ of asset

A family farm – when ‘division’ of the property could mean dissolution of the farm business

You have given one child/grandchild a large loan that has not been repaid

One of your children is in a low income career, the other earns a very good living – you may choose to give more financial ‘help’ to the low earner

One of your children has a large family, the other child has no offspring – you may decide that the child with the larger family needs more financial assistance from your estate

You have previously given larger financial gifts to one of your children – to ‘even’ the score you decide to leave them less money

You have co-signed on a school/house/property loan for one of your children/grandchildren

You have remarried and you want to provide financial security to your biological children (your step children are adults who have already received money from an estate)

The above issues (and there are many others) all call for serious consideration of whether an ‘equal’ distribution of your estate is a ‘fair’ distribution.

And, there are solutions to the question of ‘fair’ vs ‘equal’.

An estate planning attorney can assist in helping you decide how best to distribute your assets within your individual estate plan.

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Estate Plan Basics

I probably should have titled this post – I don’t need an estate plan…do I?  Some of my clients come to me with ideas for what they term a “simple will”.  Going through that scenario they find that the will leaves more questions unanswered than answered.

In its simplest form a will can be a list of “who gets what”  and that approach is OK…as far as it goes.  But a will is for the after life.  If anyone has plans for their estate, during their lifetime, then having an estate plan can offer much more peace of mind and address those questions of”  “What If…?”

Having an estate plan is for many a critical element of future financial planning. Just a few of the reasons for establishing an estate plan are:

Avoiding Probate – Probate is a very public, lengthy and expensive process for those with any assets, and in a very general sense…the more assets, the lengthier the process

Securing and protecting the welfare of a special needs dependent

Maintaining control of assets during one’s lifetime – estate planning is not only planning for death, but rather for appropriate financial decisions during a lifetime

Asset protection – a good estate plan considers long term implications of financial decisions

Avoiding family disagreements –  Discussing an estate plan can often go a long way in explaining why certain decisions are being made with respect to inheritance issues

Simplifying business succession– if there is a small or family-owned business involved, an estate plan can help avoid costly mistakes when planning for the future of that business

Managing taxes – there are mechanisms that can be put into place to maximize what heirs    receive

Allocating for the future needs of ‘blended’ families – this is particularly true when there are children from previous marriages

Offering a smooth transition in the event of incapacity or death – an estate plan can provide for situations when a person is incapacitated, either temporarily or permanently

Securing the future for beneficiaries who are minor children – an estate plan is imperative to protect the interests of minor children and  issues such as guardianship

The above are the top ranking reasons for considering an estate plan, but there are others.

Ultimately a well- structured estate plan offers peace of mind.

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Collectors Dreams

Across my desk came an interesting offering from Heritage Auction* – a book titled – The Collector’s Handbook. It is a 204 page volume offered in pdf format.’(or you can order the hard copy of the book)

The forward by James L. Halperin is both entertaining and insightful. The book will be a useful source of information for anyone with a collection –  to learn how to catalogue and maintain records and for those  who have inherited a collection (whether valuable or sentimental).

Some of the chapters of particular interest include :  Estate Planning for Your Collectibles,  All in the Family and Division of Assets.

And one point in the book made by the authors:

“We strongly recommend that, after studying this information, you engage the services of a competent legal professional, preferably an attorney who is board-certified in estate planning and/or probate law by your state, and a tax advisor, preferably a CPA. An experienced and competent professional with expertise in life insurance should also become a valuable part of your team of advisors.”

I could not have written that better myself.

For anyone who has inherited a potentially valuable collection – remember these basic principles:

  • Preserve and Protect the collection until decisions are made
  • Have the collection professionally valued
  • Consider the tax implications of any decision

The Collector’s Handbook 2016 10th edition  James L. Halperin, Gregory J.Rohan with Mark Prendergast, Ivy Press Inc, Dallas, Texas

* You can learn more about Heritage Auction through their website and they offer a free membership.

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Collections, Heirlooms and Your Heirs

Recently, across my computer screen came the Fall, 2016 issue of Heritage Magazine for the Intelligent Collector. (

In that issue is a very interesting article about what heirs may encounter when inheriting a loved-one’s unique collection, whether it is a valuable coin collection or a less than pristine collection of old stamps.

The hypothetical questions to be confronted – What do we do with great Aunt Matilda’s antique doll collection or Uncle Bart’s cherished assortment of old train timetables? Do they have intrinsic value? How do we know how the collection was acquired? Do we know how much was paid for the collection?

In the Heritage Magazine article titled: “Avoiding the Chaos” – “Whether you intend to collect to the very end or sell next month, it’s crucial to keep your heirs informed” – by James L. Halperin and Gregory J. Rohan with Mark Prendergst (Fall 2016, p.86) – we find instructive examples of how heirs can either overestimate (or grossly underestimate) the value of a loved one’s collection.

One caveat by the authors is that collectors might be advised to keep good documentation of their collections.

To give my own example, heirs might find documentation of a collection of sets of coins acquired at antique auctions of more interest that the collection of dubious silver candlesticks purchased at garage sales.

This is not to say that the candlesticks may not have a very real value (ala Antiques Roadshow), but the likelihood of the coin collection having a higher value is significantly better.

Even a simple card file system can go a long way to help heirs begin to uncover the true worth of a collection.

If you are a collector (of anything), the article is well worth your reading time.


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Colorado Conservation

Living and practicing law in a state like Colorado I am always interested in what is happening to the extensive agricultural and scenic lands in the state, not only from the legal perspective, but also from the POV of a resident of our lovely state.

The Colorado Coalition of Land Trust (CCLT) is an interesting group, working toward conservation within the state. Their website offers information about land initiatives and there are many other articles available of interest.

Two of the free (and free is good) offerings from CCLT are:  “The Disappearing West report”  and the “Mountain & Prairie” podcast by Ed Roberson (interviews with “creative individuals who are helping to shape the future of the American West.)” Note: For the podcast you will need Apple iTunes.

If you live in Colorado, or are interested in conservation topics, check out the CCLT website.   

Another interesting read (whether you agree or disagree with the concept of land trusts):

Journal Advocate – guest column post – Conservation gives landowning families a choice       By Erik Glenn and Jordan Vana (Guest column)  06/08/2016

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DNA and Your Estate Plan

I have previously written about the impact of assisted reproductive technology (ART) on a person’s estate plan. The article is titled:  The Ticking Clock & The Ticking Time Bomb (2/9/15) on my website:

That article dealt with frozen genetic material, assisted reproductive technology and the Estate Planning process.

There are cases where a child is born after someone’s death and again some cases where that child is the product of assisted reproductive technology. (The eggs had been frozen and then implanted in a surrogate.

There is a slippery slope created in terms of ART, frozen genetic material and issues of Estate Planning. Another factor in Estate Planning is evolving and that is the proof of biological connection, via DNA analysis.  The most notable current situation – following the recent death of Prince, people came forward who claimed to be biologically related to the music legend and wanting to claim part of his substantial estate.  Interestingly, a judge (prior to the cremation) had ordered DNA collection from the music legend.  This test could determine whether the future claims of heredity were valid.  Those people who claimed to be the biological relations of Prince would have to prove that connection with their own genetic testing results.

Thus, genetic testing for heredity is moving into the realm of estate planning. DNA test results could prove or disprove biological relationship in an inheritance dispute – even post mortem.

Should everyone have their DNA tested and kept on file. That depends on the likelihood of a dispute, the size of the estate and other factors.  But it certainly offers another aspect of Estate Planning strategy.

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What Should I Leave My Children?

Estate Planning as a process has two distinct phases. A good estate plan can provide a ‘roadmap’ of an individual’s (or family) current needs, requirements, and asset allocations.

Estate planning can also help to answer a parent’s question – How much inheritance will I be able to leave to my child(ren) and what is the best way to do that?

Before deciding on the amount of an inheritance – “How much to leave” – an individual would be wise to consider their own future requirements.

The process should include:

  • Planning to be able to continue a comfortable lifestyle beyond retirement;
  • Planning not to become financially dependent on their children in the future;
  • Considering the types of assets e.g. trust funds, property, stocks, mutual funds, insurance policies – since each of these have very different tax implications for the recipient;
  • Planning in the event of economic downturn or reversal of investment proceeds;
  • Considering escalating healthcare costs;
  • Considering life events such as remarriage/divorce (your own and your heirs)
  • Strategizing how NOT to outlive your retirement income
  • Planning in the event of the death of a spouse

Only by careful consideration of what your own (and your spouse) future needs might be, can you decide what portion of your estate can safely be allocated as an inheritance.

The estate planning process is a valuable tool and the choice of methods by which a parent can provide an inheritance is wide ranging.

An experienced attorney in the area of estate planning will be able to devise a suitable ‘roadmap’ to follow.


Working to Preserve Your Wealth and Protect Your Future…in a Constantly Changing World

Please read my full Disclaimer and “How I Can Help You”

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