A couple of weeks ago I was participating in a seminar with a financial planner friend. Our presentation discussed how to best approach financial concerns in retirement, and how to make money last through retirement. My part was to talk a bit about the legal planning necessary for retirement, including the basics of estate planning, like a will, living will, financial and medical powers of attorney, and also the role of trusts in estate planning. The seminar covered basic information and was not intended to be a comprehensive look at anything, or provide specific legal advice.
After the seminar concluded, and as we were cleaning up our computers, projector, screen, and the like, a person came up to me and wanted to ask a specific question of me. The person asked me how he could avoid paying capital gains tax on his mother’s house. I responded that if his mother were to pass away, and he inherited the house, then he would inherit the house for full fair market value, and then sell the house, so there would be no gain to tax. This apparently was not a satisfactory answer. The person then pressed me, demanding to know how to avoid capital gain tax “NOW!” I informed him that I was not aware of other exceptions in the law to reduce or eliminate capital gains tax.[Insert Now Grafiti Picture somewhere in here, or off to the side of a paragraph]
That answer was also not good enough for this man. He launched into a diatribe about he believed capital gains tax would be severely increased in the future. I responded that until new laws were in place, we really could not do anything about a potential new law. His response was nearly yelled, “So, you don’t think it is wise to anticipate changes in the law?!?” I informed him that I was not in the business of speculating about what may, or may not happen to the law in the future, which he seemed to think was also not an OK answer to give. I politely informed him that tax planning was not really in my area of law and that I would not be able to help him avoid capital gains. He made some remark about me not being a very good attorney, and went on his way.
Creating Your Plan Can Reduce Uncertainty in the Face of Changing Laws
This is not the first time I have been accused of being a bad bad attorney, and will probably not be the last. I find that those who level the accusation usually do not like the answer I gave them, or are angry that I did not know the answer to whatever question they posed to me, whether that question was within my area of practice, or not. I did find the man’s insistence that I was supposed to anticipate possible future changes to be a bit silly. I must deal with laws as they exist, and no matter what I think of the law, the law is written the way that it is, and I have to operate under current laws. I also cannot speculate on what law changes may or may not occur in the future.
The man’s question was premature to ask, as no laws have changed yet. I cannot anticipate what laws will, or will not change in the future. National income tax laws may change, yes, but most estate planning laws are made at the state level. Estate planning seeks to eliminate uncertainty, to the degree possible. An estate plan will let you know what should happen with your assets at death. You will be able to eliminate that part of the uncertainty. You can also plan for the rest of your life and what you want to have happen, which can be a big relief. Many people worry about becoming a burden to family, but proper legal planning can reduce these concerns. Most people are not comfortable talking about death, and I do understand that. However, if we are able to get an estate plan in place, you can be more certain about what will happen, and you don’t need to worry as much about death.
What Happens to Your Assets
One of the primary reasons to create an estate plan is to describe what happens to assets at your death. You can leave assets to your spouse, your children, your grandchildren, or whomever else you choose. You can also leave assets to charities or other entities if you don’t want to leave them to your family, or you can choose one family member over another. Sometimes, if family members have made poor choices, or have already received money while alive, not giving all children an exactly equal amount makes sense. Your spouse is entitled to a certain amount of your assets under Colorado law, unless you choose to modify those rules. To modify the amount a spouse may receive, you and your spouse need to agree to the modification. Children are entitled to a certain amount if you have no estate plan under the intestate rules, which means you die without a will. Creating a will, or other estate plan, will make sure your wishes are carried out, and not the default rules the government has set up for everyone..
Planning For the Rest of Your Life Can Be Just As Important
I had a potential client call me a couple of weeks ago to discuss his parents. He talked about how his parents had moved to Windsor a few years ago to be closer to him and his family. The parents wanted to have a good relationship with their grandchildren, but then the potential client who called me had changed jobs and moved down to Denver. The distance was not a problem until the COVID-19 pandemic hit. The parents were now isolated from the son and from their grandchildren. We discussed what options were available to get the parents closer, especially so the son could keep a closer eye on his parents. He worried about his father driving as he aged, and worried about his parents being injured in a fall, or becoming sick and needing long term care.
We discussed some legal options for protecting assets, including using an irrevocable trust. The potential client saw the value in that approach, but needed to talk to his parents to make sure they were on board with the plan. The parents are like most people. They want to be independent as much and as long as possible, but still want to be close to family. By planning ahead for how the rest of their lives would play out, we could preserve assets for their living arrangements and care, while still allowing them to have a good family relationship. This would reduce the uncertainty surrounding what will happen during the rest of their lives.
Almost Nobody Wants to Talk About Death – An Estate Plan Can Eliminate the Worry!
I don’t meet a lot of people who are excited to talk about death, especially their own. Instead, people really do not want to talk about death, at all. There are many more pleasant topics of conversion – like just about anything else. I understand this. However, I do realize if we have an hour’s long conversation, and take some time to prepare and sign the estate plan, the worry about death can be reduced. Of course, even with an estate plan, we cannot eliminate the uncertainty as to the time and manner of death, but we can eliminate concern about what will happen to your loved ones and possessions at the time of death. Your plan can guide loved ones in making decisions and help them to carry out what you want to have happen, instead of guessing at what you want.
Control What You Can Through Your Estate Plan
Currently, we are experiencing uncertain times. The COVID-19 pandemic has us all wondering if we will contract the virus, and how it might negatively affect our health. The recent election created much uncertainty, and even now there is uncertainty as to how future governance will happen and laws will change. These only add to the other uncertainties of life – what will happen to our children, when will we die, how will it happen – which we all face. Setting up an estate plan established some certainty in an uncertain world and life, giving you peace of mind. You can let your loved ones know how you want to be cared for and what will happen to your assets at your death…and you won’t need to worry about that anymore. Peace of mind through an estate plan – maybe not as profound as some other philosophical sayings, but still a good thing for you!