The Shaw Atlas
Welcome to The Shaw Atlas, the monthly newsletter from Shaw & Associates, CPAs & Financial Advisors. We look forward to keeping you abreast of ever-changing tax codes, providing you with money saving accounting tips and illustrating proactive strategies to help you achieve the financial life you envision.
Each month during tax season we have invited guest writers with expertise in areas we believe are important to our client’s finances to write an article for our newsletter. This month we have a very informative and timely article on wills, trusts and powers of attorney from local estate attorney Jack Vahrenwald with the law firm Vahrenwald, Johnson & McMahill. Please enjoy!
Wills, Trusts and Powers of Attorney
By: Jack D. Vahrenwald
Vahrenwald, Johnson & McMahill, LLC
When a person passes away, certain documents need to be filed with the courts to transfer ownership of the decedent’s assets. This court process is called probate. If the decedent did not have a valid will at the time of death, Colorado, as well as the other states, have adopted laws establishing who are the heirs to receive the assets. Those heirs are relatives of the decedent, however, they may or may not be the people the decedent wanted to receive the assets. If no relatives can be located, the State of Colorado receives the assets. It is important to have a will so that a person can select who is to receive the assets and who is to be in charge of handling the estate.
There are three (3) general categories for wills:
- Basic Will. If the person preparing a will (a testator) does not have minor children and does not have an estate greater than the then current amount that will be exempt from federal estate tax ($5,340,000 in 2014), a basic will is adequate in most circumstances. The testator selects the beneficiaries to receive the assets upon the testator’s death and names the person or persons to be in charge of handling the estate.
- Will with a Trust for Minors. Children under the age of 18 years cannot inherit directly, someone needs to inherit the assets for them. If a testator has minor children who the testator wishes to receive a portion of the assets, this will creates a trust to receive the money for said minors and names the person in charge of that money (a trustee) to financially care for the children until the children reach an age of majority picked by the testator.
- Tax Planning Will. If a testator has an estate in excess of the maximum amount which can pass to heirs without having to pay federal estate tax, a tax planning will can help to avoid or at least lessen the federal estate tax that might be due as a result of the testator’s death.
In addition to a will, it is important for a person creating an estate plan to have financial and medical powers of attorney. These documents allow someone else to make both financial and medical decisions for a person in case that person is incapacitated. Without powers of attorney, if a person becomes incapacitated due to an illness, injury, etc., in order to handle that person’s business and medical affairs, documents need to be filed with a court to have a conservator and/or guardian appointed for that person. In addition, the conservator/guardian must also file annual reports with the court advising what is the status of the incapacitated person. This all creates more cost for the incapacitated person and the person named by the court may not be who the incapacitated person would have selected.
Some people prefer to create living trusts as part of their estate plan. There are various types of trusts, but the most common is a revocable living trust. Once the trust is created, the person transfers all of his or her assets into the trust so that upon death, the person owns nothing in his or her name, the trust owns everything. The trust reads like a will in that the person names a trustee to be in charge of the assets and states who is to receive the assets. The main advantage of this type of trust is that upon the person’s death, there is not a need to open an estate and, thus, the court process is avoided. When creating such a trust, it is important that all of the person’s assets are placed in the trust because if some of the assets are still in the individual’s name when the person passes away, probate will probably still be needed to transfer those assets to the heirs. Many states have very complicated probate laws and, thus, trusts are created to avoid the probate process. However, Colorado Probate Law is streamlined and most estates can be opened, administered and then closed without actually having to appear in court. Rather, the appropriate papers are filed with the court, the court approves them and then the estate is ultimately closed with no court appearances being necessary.
This is a very brief overview of the laws and rules regarding estate planning. In order to have an estate plan that fits a person’s specific needs, the person should retain the services of an attorney who is qualified to help make the proper decisions for an estate plan.
For further information, please contact Jack Vahrenwald at (970) 482-5058 or firstname.lastname@example.org
Client Spotlight – Fort Collins Veterinary Emergency and Rehabilitation Hospital
Fort Collins Veterinary Emergency and Rehabilitation Hospital is a 24 hour facility, located at 816 S. Lemay, owned by a group of 24 local veterinarians, 7 of whom are employees. The company was started in 2003 and has grown to an annual revenue of 2.4 million with 40 employees. The goal of the hospital is to improve the lives of both pets and people by providing the best care possible. The state-of-the- art hospital provides a broad spectrum of diagnostic procedures through in-house testing and also through the use of external laboratories. The focus of care is emergency, critical care and rehabilitation, but other services such as Internal Medicine, Cardiology and Surgery are available on a part-time basis. The company has been listed on the Mercury 100 list of fastest growing companies for the past three years.
Along with the growth has come many financial challenges, and Kevin Shaw and his associates have been very helpful in timely tax planning and filing returns with many moving parts. Keeping track of multiple owner percentages and efficiently distributing K-1’s electronically has been a major help in keeping the ownership current on financial matters and on-time tax return filing.
Kevin and his associates have been very helpful in assisting myself and my wife with our business and personal returns as well. In addition, we have appreciated working with John Selzer of Capital Point Financial Group with our personal retirement and financial planning issues. We have appreciated the entire team’s efforts in keeping our financial issues on track.
Fort Collins Veterinary and Rehabilitation Hospital