2022 Cost of Living Adjustment of Certain Dollar Amounts Under Colorado Probate Code

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by Jody Hall, Paralegal

The 2022 cost of living adjustments of certain dollar amounts under the Colorado Probate Code has been published by the Colorado Department of Revenue. Probate practitioners should be aware of the change in figures related to the intestate share of a decedent’s surviving spouse and supplemental elective-share. The amounts for exempt property, lump sum exempt family allowance, installment amount exempt family allowance and collection of personal property by affidavit have been adjusted upwards from 2021 as well. Read more

2021 Cost of Living Adjustment of Certain Dollar Amounts Under Colorado Probate Code

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by Jody H. Hall

The 2021 cost of living adjustments of certain dollar amounts under the Colorado Probate Code has been published by the Colorado Department of Revenue.  Probate practitioners should be aware of the change in figures related to the intestate share of a decedent’s surviving spouse and supplemental elective-share.  The amounts for exempt property, lump sum exempt family allowance, installment amount exempt family allowance and collection of personal property by affidavit remain unchanged from 2020. Read more

2020 Cost of Living Adjustment of Certain Dollar Amounts Under Colorado Probate Code

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by Jody Hall, Paralegal

The 2020 cost of living adjustments of certain dollar amounts under the Colorado Probate Code has been published by the Colorado Department of Revenue.  Probate practitioners should be aware of the change in figures related to the intestate share of a decedent’s surviving spouse, supplemental elective-share, exempt property, lump sum exempt family allowance, installment amount exempt family allowance and collection of personal property by affidavit.

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Be Wary of Colorado Entity Renewal Notices from Unofficial Sources

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by Jody H. Hall, Paralegal

In the past week, our firm has had several clients receive in the mail, and fortunately ask us about, a form titled “2019 – Period Report Instruction Form (Colorado LLCs)”.  This form purports to advise the client that the annual report or renewal for their entity is now due; however, the form is not from the Colorado Secretary of State but is instead from a non-related company.  The form does list the specific entity name and address information and looks deceptively official; however, it also specifically states “… is not a government agency and does not have a contract with any governmental agency to provide this service.”

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Planning Opportunities Under the New Tax Cuts and Jobs Act

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By Chelsea May

In December, President Trump signed into law what is commonly referred to as the Tax Cuts and Jobs Act.  This legislation, which is mostly effective as of January 1, 2018, is the first major reform to the federal tax code since 1986 and affects almost every individual and business taxpayers in some way or another. For individuals, the top tax rate has temporarily dropped from 39.6% to 37% and the standard deduction has nearly doubled.  Personal exemptions are repealed and the mortgage interest deduction is limited to interest on a mortgage of $750,000 or less per married couple. The AGI limitation for deductions of cash donations to public charities increased from 50% to 60% and the deduction for alimony payments was repealed (for divorces or separations executed after December 31, 2018).  Corporate tax rates have dropped from a 35% top rate to a permanent 21% flat rate, a 20% deduction is now available for certain pass through entity income and the corporate AMT has been repealed.

The new tax act also increased the federal estate and gift tax exemption amount. Specifically, for lifetime gifts and the estates of any decedents passing between January 1, 2018 and December 31, 2025, the estate tax and GST tax exemption amounts were increased to $10 million per person, adjusted for inflation occurring after 2011 (expected to be about $11.2 million for 2018). The marginal transfer tax rate remains at 40%. Read more

Fifty Ways to Leave Your Lover (or Fifty Ways to Plan, Administer and Litigate Estates)

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by Carol Warnick

As the old song by Paul Simon contemplates, there are fifty ways to leave your lover, and there are also fifty ways to plan, administer and litigate estates and trusts.  I have recently become aware of various situations in which attorneys assume that because things are done a certain way in the state in which they practice, they are done the same way in other states.

I am licensed in three states, Colorado, Utah and Wyoming, and deal regularly with the significant differences between them.  For example, Colorado tends to use “by representation” in dealing with passing assets down the generations, but Utah and Wyoming both use “per stirpes.”  Read more

Contracts to Make Wills or Trusts

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by Carol Warnick

Does the fact that a husband and wife create “mirror-image” wills or trusts mean that they have entered into a contract with their spouse to maintain the dispositive provisions in the document?  The law in Colorado is very clear that no contract exists merely because the documents are “mirror-image” or reciprocal.

Pursuant to Colo. Rev. Stat. § 15-11-514, a contract to make a devise may be established only by:

(i) provisions of a will stating material provisions of the contract, (ii) an express reference in a will to a contract and extrinsic evidence proving the terms of the contract, or (iii) a writing signed by the decedent evidencing the contract. The execution of a joint will or mutual wills does not create a presumption of a contract not to revoke the will or wills. (emphasis added).

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Recent IRS Statistics

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by Kelly Dickson Cooper

For our litigation clients, a fiduciary’s failure to consider the tax impact of their actions can be the genus for litigation and anticipated tax savings can be the engine that drives a settlement.  For our fiduciary clients, it is important for them to ensure that transfer taxes are minimized for the benefit of their beneficiaries.  For our planning clients, tax planning is a key component in determining the best structure for their wealth transfer planning.  Given the importance of transfer taxes in our practice, we wanted to highlight a few items from the IRS 2015 Data Book relating to estate and gift tax returns:

Number of Tax Returns filed during 2015

  • 36,343 estate tax returns (545 from Colorado)
  • 237,706 gift tax returns (4,492 from Colorado)

Amounts Collected

  • Estate tax returns  – $17,066,589 collected
  • Gift tax returns – $2,052,428 collected

Percentage of 2014 Tax Returns Audited in 2015

  • 7.8% of all estate tax returns
    • Gross estate less than $5 million – 2.1% audit rate
    • Gross estate greater than $5 million but less than $10 million – 16.2% audit rate
    • Gross estate greater than $10 million – 31.6% audit rate
  • 0.9% of all gift tax returns

Results of Audits

  • 22% of estate tax returns examined had no change
  • 34% of gift tax returns examined had no change
  • 70 estate tax returns and 135 gift tax returns had unagreed recommended additional tax
  • 543 estate tax returns and 43 gift tax returns resulted in tax refunds

Now There Are Tax Transcripts In Lieu of Estate Tax Closing Letters

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by Carol Warnick

The Internal Revenue Service (“IRS”) announced earlier this year that it would no longer routinely send out an estate tax closing letter and that such letters would have to be specifically requested by the taxpayer. The change in procedure was effective for all estate tax returns filed after June 1, 2015.

Previously, an estate tax closing letter was evidence to show that the IRS had either accepted an estate tax return as filed, or if there has been an audit, that final changes had been made and accepted. Receipt of an estate tax closing letter has never meant that the statute of limitations on the return has run, but it has given comfort to the estate administrator that he or she could make distributions and/or pay creditors knowing that the chances of further IRS review of the return was not likely. Many personal representatives and trustees have made it a practice to wait for such a closing letter before funding sub-trusts or making any significant distributions.

On December 4, 2015, the IRS announced that “account transcripts, which reflect transactions including the acceptance of Form 706 and the completion of an examination, may be an acceptable substitute for the estate tax closing letter.”   Such account transcripts will be made available online to registered tax professionals using the Transcript Delivery System (TDS). Transcripts will also be made available to authorized representatives making requests using Form 4506-T. They still must be requested, but may be easier to obtain than an estate tax closing letter.

For further instructions, here is the link to the information on the IRS website: http://tinyurl.com/plhb6f6.

Updates for fiduciaries from the IRS and Colorado

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by Kelly Cooper

The IRS has stated that it will not issue closing letters for federal estate tax returns filed on or after June 1, 2015, unless one is requested by the taxpayer. The information provided by the IRS states that the taxpayer should wait at least four months after filing the return to request a closing letter. A closing letter indicates that the estate’s federal estate tax liabilities have been paid. While a closing letter is not a formal closing agreement, many fiduciaries wish to have a closing letter from the IRS before making final distributions and closing estates. For returns filed prior to June 1, 2015, please refer to the following document for guidance as to when a closing letter will be issued:

Frequently Asked Questions on Estate Taxes

Certain statutes in the Colorado Probate Code are subject to cost of living adjustments each year. The numbers for 2010-2015 can viewed here:

Cost of Living Adjustment of Certain Dollar Amounts for Property of Estates in Probate