Protecting Your Future: The Importance of Wills, Powers of Attorney, and Trusts

If you live in Arapahoe, Denver, Douglas, or Adams counties, or anywhere in Colorado, Probate is mandatory for those estate with over approximately $80,000 in assets. Probate is the legal process of proving the validity of a will and administering the deceased person’s estate. It involves gathering the deceased’s assets, paying off debts, and distributing the remaining assets to the beneficiaries named in the will or, if there is no will, to the legal heirs.

Key steps in the probate process typically include filing the Will, appointing a personal representative, inventorying assets, notifying creditors (and given a deadline to file claims against the estate), paying debts and taxes, and distributing assets (the remaining assets are distributed to the beneficiaries according to the terms of the will or, if there is no will, according to the laws of intestacy).

Why may you want to avoid probate in Colorado? Because its an open court process, anyone can use it to resolve disputes. Just having a Will, or even worse not having one, just leaves the door open for everyone to come in with their disputes. It also puts creditors in front of beneficiaries.

How can probate be avoided or minimized?

Create a comprehensive estate plan with an attorney. McMechan Law can help with this development, even taking over the entire process, if you need it. It is less expensive to have the devices constructed by McMechan Law if you plan to contact your asset managers and instruct them yourself.

You can also transfer assets during your lifetime: You can transfer assets to beneficiaries or trusts during your lifetime, reducing the amount of property that will go through probate. This does count toward your lifetime giving exception.

Consider joint ownership: Joint ownership with rights of survivorship can allow assets to pass directly to the surviving owner upon death, avoiding probate. However, you may then end up deferring costs from capital gains onto your beneficiaries. A middle ground is a beneficiary deed, which is revocable, and transfers to the beneficiary upon your death.

The Power of Powers of Attorney

Powers of attorney are legal documents that authorize someone you trust to make decisions on your behalf if you become incapacitated. They expire when you pass away, so they are pre estate planning devices, as periods of incapacitation can be much longer than you expect. There are two main types:

Durable Power of Attorney: This grants someone the authority to handle your financial affairs, such as paying bills, managing investments, and selling property.

Healthcare Power of Attorney: This allows someone to make medical decisions on your behalf if you are unable to do so yourself.

You Need at least a Will, if Nothing Else.

Surveys consistently show that approximately 58% of Americans do not have a will or other estate planning documents. Regular Gallup polls have consistently found that around 40-50% of U.S. adults have a will. Various other surveys and studies have reported similar findings, indicating that a large segment of the population is unprepared for the eventuality of their passing.

It’s important to note that these are national averages, and the percentage of people with wills can vary significantly by region, age, income, and other factors.

Estate planning is often seen as something for the wealthy or elderly, but it’s a crucial aspect of financial planning for everyone. Having essential documents like a will, powers of attorney, and potentially a trust can provide peace of mind and ensure your wishes are carried out, especially in unforeseen circumstances. Unforeseen circumstances aren’t like old age, they are the surprises that can come at us at any time. Let McMechan Law help you protect your assets.

Why a Will is Essential

A will is a legal document that outlines how you want your assets distributed after your death. Without a will, the state will decide who inherits your property, which may not align with your wishes. A will also allows you to appoint a personal representative, which is what we call an executor in Colorado, who will be responsible for managing your estate and distributing your assets according to your instructions.

When a Trust Might Be Necessary

While a will and powers of attorney are foundational estate planning tools, a trust can offer additional benefits, especially for individuals with special needs or significant assets. A trust is a legal arrangement where property is held by a trustee for the benefit of beneficiaries.

The key reasons to consider a trust, are for asset protection, special needs planning, succession planning, or for tax benefits. Trusts can help protect your assets from creditors, lawsuits, and probate. For individuals with disabilities, a special needs trust can ensure they receive the care and support they need without jeopardizing their eligibility for government benefits.  Trusts can facilitate the transfer of a family business or other assets to future generations. And in some cases, trusts can be used to minimize estate taxes.

Taking Action

Creating an estate plan is a proactive step that can provide peace of mind for you and your loved ones. Consulting with an estate planning attorney can help you understand your options and create a plan that aligns with your goals. Remember, it’s never too early to start planning for the future. Contact McMechan Law via our website: www.mcmechanlaw.com, call or text to (720)249-7852 for estate planning, or probate, even special needs trusts or business trusts.

Sources and related content

Why Is Estate Planning Important? | U.S. Bank; www.usbank.com

5 essential estate planning documents – Empower; www.empower.com

What is a Will? – CDC Foundation; www.cdcfoundat

Probate: What It Is and How It Works With and Without a Will – Investopedia; www.investopedia.com

What Is Probate | Probate Meaning – ACTEC | The American College of Trust and Estate Counsel; www.actec.org