May 21, 2013

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The American Taxpayer Relief Act of 2012: Bidding Adieu to the Sunset (Part 3)

April 11, 2013 by Leave a Comment

Editor’s Note: This is Part 3 of a 3-Part Series. For Part 1, click here, and for Part 2, click here.

By Merry H. Balson and Laurie A. Hunter

Return of the Charitable IRA Rollover Through 2013. The 2012 Tax Act extended the IRA charitable rollover rules through 2013. These rules were originally put in place in 2006, and had expired at the end of 2011. The charitable IRA rollover provisions allow individuals who are 70 ½ or older to transfer (or “rollover”) up to $100,000 per year from their IRAs to most charities on a “tax neutral” basis if the transfer is a “qualified charitable distribution” and satisfies certain rules. Qualified Charitable Distributions will not count as taxable income to the individual (as would usually be the case in any other distribution from an IRA) but no charitable income tax deduction is allowed for the contribution. Transfers must be directly from the IRA trustee to the charity to qualify. Additionally, transfers to private foundations, donor advised funds, supporting organizations or split-interest trusts (such as charitable remainder or charitable lead trusts) do not qualify for this special treatment. Because the charitable IRA rollover had expired in 2011 and has now been reinstated retroactively for 2012, taxpayers were also allowed to treat distributions from IRAs made after November 20, 2012 and before January 31, 2013 as a charitable IRA rollover for 2012, if that distribution is made in cash to charity before January 31, 2013. As a result, in 2013 taxpayers had an opportunity to give up to $200,000 to charity from their IRAs (with $100,000 treated as given in 2012) if they acted by the end of January.

Other Annual Extenders. The 2012 Tax Act also extended a number of credits and deductions that have been extended year by year for some time, and did not make them “permanent.” These include the American Opportunity Tax Credit,[1] more favorable conservation easement rules,[2] more favorable depreciation rules, the wind energy credit, and research and development credits.

Health Care Act Changes. Finally, changes taking place in 2013 include raising the medical expense deduction to 10% of adjusted gross income from 7.5%, and the new 3.8% surtax on net investment income for single taxpayers with $200,000 “modified” adjusted gross income and $250,000 for married filing jointly.

Conclusion

The 2012 Tax Act is replete with references to permanence. While that might provide comfort to some, keep in mind that the provisions of the 2012 Tax Act are only truly permanent until Congress and the President decide to change them. Until then, we can all breathe a sigh of relief that sunset never came to pass, and for the first time in decades advise our clients about the tax implications of their gifts during life and at death with some measure of certainty.

Merry H. Balson is Of Counsel at Wade Ash Woods Hill & Farley, P.C., where her practice emphasizes estate planning, estate and trust administration and forming and advising exempt organizations. She can be reached at mbalson@wadeash.com or 303-329-2215.

Laurie A. Hunter is a Shareholder at Wade Ash Woods Hill & Farley, P.C., where her practice emphasizes estate planning, probate and trust administration. She can be reached at lhunter@wadeash.com or 303-329-2227.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

 

[1] Pub.L. 112-240, Sec. 103, H.R. 8, 126 Stat. 2313 (2013).

[2] Pub.L. 112-240, Sec. 206, H.R. 8, 126 Stat. 2313 (2013).

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The American Taxpayer Relief Act of 2012: Bidding Adieu to the Sunset (Part 2)

April 4, 2013 by Leave a Comment

Editor’s Note: This is Part 2 of a 3-Part series. Click here for Part 1.

By Merry H. Balson and Laurie A. Hunter

How does the 2012 Tax Act affect estate planning?

Lifetime Gifts. Many clients who were concerned that sunset would cause the estate tax exemption to decrease from $5 million to $1 million made gifts before the end of 2012 to use all or part of the $5 million exemption. Those who did not make end of year gifts in 2012 (and those who did but did not fully use their exemption equivalent) are given another chance to make such gifts because the historically high exemptions are still in effect. Completed irrevocable gifts can remove future appreciation from the donors’ estates, as well as give trust beneficiaries other benefits of irrevocable trusts generally, such as creditor protection and protection from claims of divorcing spouses (in certain circumstances). In addition, if only one spouse made a gift to an irrevocable trust for the benefit of the other spouse, but because of the “reciprocal trust rule” the other spouse did not make a similar gift, that spouse may now wish to consider, after the passage of time, making a gift of their own.

Keep in mind that the downside of making gifts still applies: no stepped up basis on death. Instead, the gifted assets have a “carryover basis” from the donor.

Continued Use of Family or Credit Shelter Trusts. There are a number of reasons an estate planner should continue to discuss the use of family trusts or credit shelter trusts in estate plans instead of relying solely on portability of the first spouse’s unused exemption. First, future appreciation of assets in the family trust will pass estate tax free. Second, income from the family trust can accumulate outside the surviving spouse’s estate. Third, the family trust can be designed to provide creditor protection for the surviving spouse. Fourth, assets in the family trust can avoid claims of a new spouse to the trust assets either at the surviving spouse’s death or divorce. Finally, the family trust can provide a vehicle for an independent trustee to administer the assets, especially in the case of a blended family.

Addressing Portability Election in Planning Documents. With the permanence of portability, practitioners who are not already doing so should consider the extent to which the portability election should be addressed in wills and trusts. The documents could require the personal representative to elect portability on a timely filed estate tax return or could merely authorize the personal representative to do so. Additionally, consider addressing who should bear the cost of the estate return preparation, particularly where the return is being filed solely to elect portability. Furthermore, issues relating to the portability election may also be a subject for negotiation in premarital or postmaritial agreements.

Income Tax Changes in the 2012 Tax Act. In addition to the estate and gift tax provisions, there are numerous income tax provisions in the 2012 Tax Act. The following is a summary of some of those provisions affecting individuals:

  • Tax rates stay the same for most taxpayers. Individuals will have an increased tax rate (back to Clinton-era rates) if they have taxable income over $400,000, and married filing jointly taxable income is over $450,000. The top tax rate will be 39.6%.[1]
  • Payroll tax rate returns to 2010 level. The 2% reduction in the social security payroll tax has expired.[2] Withholding will increase for all taxpayers back to the 2010 level.
  • Long-Term Capital Gains rates stay at 0% (for 10% and 15% rate taxpayers) and 15% (for up to 35% rate taxpayers). For those in the new 39.6% rate, the capital gain rate will be 20%.[3] Qualified dividend rates stay at the same rates as long-term capital gains.[4]
  • Alternative Minimum Tax changes are made “permanent” so that the income levels are $50,600 for single taxpayers and $78,750 for married filing jointly, and these levels are indexed for inflation.[5] Previously, these changes had to be adopted every year.
  • Personal exemptions will be reduced because the suspended phaseout is again in effect. For $250,000 single taxpayers or for $300,000 for married filing jointly, the personal exemption will be reduced by 2% for each $2,500 over the threshold.[6] These levels will be adjusted for inflation.
  • The limits on itemized deductions that had been suspended will again apply so that for the same threshold for the personal exemption levels discussed above, the total amount of itemized deductions will be reduced by 3% of the amount by which the taxpayer’s income exceeds the threshold, but not more than 80%.[7]
  • Trusts and Estates reach the highest tax rate (now 39.6%) at roughly $12,000 in taxable income, so trusts in particular may be subject to the higher income tax rate, the higher capital gains rate and the new 3.8% surtax on investment income mentioned below.[8]

To be continued…

Merry H. Balson is Of Counsel at Wade Ash Woods Hill & Farley, P.C., where her practice emphasizes estate planning, estate and trust administration and forming and advising exempt organizations. She can be reached at mbalson@wadeash.com or 303-329-2215.

Laurie A. Hunter is a Shareholder at Wade Ash Woods Hill & Farley, P.C., where her practice emphasizes estate planning, probate and trust administration. She can be reached at lhunter@wadeash.com or 303-329-2227.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

 

[1] Rev. Proc. 2013-15, Sec. 1.01, 2013-5 IRS 444 (January 11, 2013).

[2] Pub.L. 112-240, Sec. 101 (a-b), H.R. 8, 126 Stat. 2313 (2013).

[3] Pub.L. 112-240, Sec. 102(b), H.R. 8, 126 Stat. 2313 (2013).

[4] Pub.L. 112-240, Sec. 102(a), H.R. 8, 126 Stat. 2313 (2013).

[5] Pub.L. 112-240, Sec. 104, H.R. 8, 126 Stat. 2313 (2013).

[6] Pub.L. 112-240, Sec. 101(b), H.R. 8, 126 Stat. 2313 (2013).

[7] Id.

[8] Id.

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Governor Hickenlooper Signs Several Bills Into Law

April 2, 2013 by Leave a Comment

Governor Hickenlooper signed the first bills of the 2013 legislative session on January 31, 2013. Since then, he has signed an additional 116 bills, for a total of 118 bills.

On March 22, 2013, Governor Hickenlooper signed 29 bills. Five of them are summarized here.

  • HB 13-1126 - Concerning Statutorily Established Time Intervals, by Rep. Jared Wright and Sen. Irene Aguilar. The bill continues amending statutes in order to comply with “rule of seven” date calculations.
  • HB 13-1166 - Concerning the Repeal of Certain Crimes that Include Marital Status as an Element of the Crime, by Rep. Elena Kagan and Sen. Pat Steadman. The bill repeals the crimes of adultery and promoting sexual immorality.
  • SB 13-012 - Concerning Reporting of Suspected Child Abuse and Neglect by Youth Sports Organizations, by Sen. Rollie Heath and Rep. Jonathan Singer. The bill mandates that coaches, directors, and athletic personnel for youth sports organizations report suspected child abuse and neglect.
  • SB 13-078 - Concerning Points of Diversion that are Not Located at the Physical Location Specified in the Decrees for Diverted Water Rights, by Sen. Angela Giron and Rep. Jerry Sonnenberg. The bill allows owners of water rights to correct established but erroneously recorded points of diversion without having to apply for a change in water right.
  • SB 13-118 - Concerning Clarification of the Exemptions from the Laws Regulating Mortgage Loan Originators, and, in Connection Therewith, Exempting Real Estate Licensees Representing Persons Providing Seller Financing for the Sale of a Limited Number of Residential Properties Annually as Allowed by Law, by Sen. Mary Hodge and Rep. Dan Pabon. The bill allows a private property owner to provide seller financing to up to five properties without needing to fulfill licensing and registration requirements of mortgage brokers.

Governor Hickenlooper signed 12 bills into law on March 29, 2013. Four of them are summarized here.

  • HB 13-1016 - Concerning the Distribution to Beneficiaries of Amounts on Payable-on-Death (POD) Financial Institution Accounts Pursuant to Written Designation in the Records of the Financial Institution, by Rep. Bob Gardner and Sen. Cheri Jahn. The bill  specifies that funds held in a payable-on-death account may be distributed in an unequal manner if such intent is clearly written in the records of the financial institution.
  • HB 13-1168 - Concerning an Expansion in the Ability of a Ditch to Operate as an Acequia Ditch, by Rep. Edward Vigil and Sen. Gail Schwartz. The bill allows acequia ditch corporations to operate on properties other than long lots.
  • SB 13-008 - Concerning Elimination of the Waiting Period for Children’s Eligibility Under the Children’s Basic Health Plan, by Sen. Linda Newell and Rep. Beth McCann. The bill removes the waiting period for CHP+ health insurance, in hopes that removing the waiting period will encourage people to leave group plans and join CHP+.
  • SB 13-177 - Concerning Changes to the Juvenile Corrections Programs Resulting in Cost Reductions and Reducing the Juvenile Detention Bed Cap, Reducing the Appropriation for Commitment Beds and Assessment Services, and Making an Appropriation for Transportation, by the Joint Budget Committee. The bill reduces the maximum number of beds available in the Division of Youth Corrections due to a decreased number of youth offenders.

Finally, Governor Hickenlooper signed one bill on April 1, 2013. It is summarized here.

  • SB 13-194 - Concerning a Repeal of a Telephone Assistance Program for Low-Income Individuals and Reducing an Appropriation, by Sen. Pat Steadman and Rep. Cheri Gerou. The bill repeals the Low-Income Telephone Assistance Program.

For a complete list of Governor Hickenlooper’s 2013 legislative decisions, click here.

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The American Taxpayer Relief Act of 2012: Bidding Adieu to the Sunset

March 28, 2013 by Leave a Comment

Editor’s Note: This is Part 1 of a series. Stay tuned for Parts 2 and 3.

By Merry H. Balson and Laurie A. Hunter

On January 1, 2013, while the ink on many year-end gift tax transfers was still wet, the 112th Congress passed the American Taxpayer Relief Act of 2012 (the “2012 Tax Act”).[1] The 2012 Tax Act was signed into law the following day, ending more than a decade of estate and gift tax uncertainty. This article summarizes the estate and gift tax provisions of the 2012 Tax Act, discusses the Act’s impact on estate planning, and outlines select income tax provisions affecting planning for individuals.

Phase-Ins and Sunsets: A Brief History of the Federal Estate, Gift and Generation-Skipping Transfer Tax System

The federal tax on transfers at death has been in existence since 1916 and the tax on inter vivos gifts has been part of the federal tax system since 1924, with the exception of a brief hiatus during its repeal between 1926 and 1932.[2] Phased in changes to the unified credit against estate and gift taxes and applicable transfer tax rates have been part of the estate planning practice for over three decades. In 1976, with the passage of the Tax Reform Act (“TRA”) of 1976, Congress created a unified estate and gift tax system and added the generation skipping transfer tax (“GST”).[3] It also phased in increases in the estate tax exemption from $60,000 in 1976 to $175,000 in 1981. The Economic Recovery Tax Act of 1981 (“ERTA”), among many other things, phased in increasing unified credit amounts over six years, increasing exemption equivalent amounts from $175,625 to $600,000 by 1987.[4] The top estate tax rate under ERTA was reduced to 55%, down from a maximum tax rate of 70% prior to enactment. Similarly, the Taxpayer Relief Act of 1997 provided for a phased in exemption equivalent from $600,000 to $1,000,000 in 2006.[5] The TRA ‘97 phase in never fully took effect because in 2001, when the exemption was only $675,000 and the estate and gift tax rate remained at 55% (plus 5% for estates over $10,000,000), the Economic Growth and Tax Relief Reconciliation Act (“EGTRRA”) of 2001 changed the estate and gift tax unified credit and rates yet again.[6] EGTRRA increased the exemption equivalent to $1,000,000 in 2002 and then incrementally through 2009 to $3,500,000, maintaining the gift tax exemption at a flat $1,000,000, decreasing the top rate to 45% by 2009 (which was subsequently accelerated to 2007), repealing the estate and gift tax in 2010 (but a carry-over basis regime) and sunsetting all EGTRRA provisions on January 1, 2011, with the effect of reverting to the law as it existed on January 1, 2001.[7] At the end of 2010, after nearly a year of estate and gift tax repeal, Congress passed the taxpayer friendly Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “2010 Tax Act”).[8] The 2010 Tax Act extended EGTRRA’s sunset provisions for two additional years (through January 1, 2013), increased the exemption equivalents to $5,000,000 for estate and gift tax (indexed for inflation starting in 2012) and reduced the tax rate to 35%.[9] The 2010 Tax Act also introduced the concept of “portability,” whereby a surviving spouse could “port” or use his or her deceased spouse’s unused unified credit provided certain conditions were satisfied.[10]

Finally a “Permanent” Tax Bill? After 12 years of planning under a looming sunset, finally there is no automatic sunset date for the 2012 Tax Act (although as noted below, certain extenders are set to expire). The major estate planning provisions include the following:

  • The estate and gift tax exemptions remain unified, and will stay at $5 million, but will be indexed for inflation. For 2013, both exemptions are $5,250,000.[11]
  • The GST exemption will also stay at $5 million, again, as indexed for inflation. The GST exemption is also $5,250,000 for 2013.[12]
  • Portability is permanent.[13] A deceased spouse’s unused estate tax exemption is “portable” if the surviving spouse timely files a U.S. Estate Tax Return (form 706). With certain exceptions, portability allows the surviving spouse to use the deceased spouse’s unused estate tax exemption immediately in addition to their own exemption. Importantly, however, the GST exemption is not portable and any unused portion at the first spouse’s death is lost. The 2012 Tax Act also corrected a technical problem in the 2010 Tax Act to be consistent with Treasury Regulations issued last summer that were favorable to the taxpayer by permitting “tacking on” of more than one former deceased spouse’s unused exemption to the surviving spouse.
  • Gift, estate and GST tax rate increases to 40% on the amount over the exemption.[14] The rate was 35% in 2011 and 2012, but had been 45% in 2009.

Additional effects of the repeal of the EGTRRA Sunset. The result of finally repealing the looming sunset provisions of EGTRRA and the strange results from it disappearing “as if it had never been enacted,” are among the following:

  • QFOBI is truly gone. The Qualified Family Owned Business Interest deduction, a complicated estate tax deduction that had no effect after 2003 due to the increase in estate tax exemptions, is now permanently repealed.
  • The state death tax credit was converted to a deduction, and now stays that way. For Colorado and about half the states, this means no state death tax, but the other half of the states changed their laws to include a state inheritance or estate tax, so continue to check local laws if your clients own real estate outside Colorado.
  • GST automatic allocation rules[15] and GST qualified severance rules both remain in effect.[16] These taxpayer-friendly rules are now permanent.

This is Part 1 of a 3-part series. Stay tuned for parts 2 and 3.

 

Merry H. Balson is Of Counsel at Wade Ash Woods Hill & Farley, P.C., where her practice emphasizes estate planning, estate and trust administration and forming and advising exempt organizations. She can be reached at mbalson@wadeash.com or 303-329-2215.

Laurie A. Hunter is a Shareholder at Wade Ash Woods Hill & Farley, P.C., where her practice emphasizes estate planning, probate and trust administration. She can be reached at lhunter@wadeash.com or 303-329-2227.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

 

[1] Pub.L. 112-240, H.R. 8, 126 Stat. 2313 (2013).

[2] The estate tax was enacted by the Revenue Act of 1916 (39 Stat. 756). The gift tax was first put in place by the Revenue Act of 1924 (43 Stat. 253), repealed by the Revenue Act of 1926 (44 Stat. 9), then reenacted by the Revenue Act of 1932 (47 Stat. 169).

[3] Pub. L. 94-455, H.R. 10612, 90 Stat. 1520 (1976).

[4] Pub. L. 97-34, H.R. 4242, 95 Stat. 172 (1981).

[5] Pub. L. 105-34, H.R. 2014, 111 Stat. 787 (1997).

[6] Pub. L. 107-16, H.R. 1836, 115 Stat. 38 (2001).

[7] See Sec. 901, Sunset Provisions of EGTRRA.

[8] Pub. L. 111-312, Title III, H.R. 4853, 124 Stat. 3296 (2010).

[9] Id.

[10] Id., Sec. 303.

[11] Rev. Proc. 2013-15, Sec. 2.13, 2013-5 IRS 444 (January 11, 2013).

[12] Under I.R.C. Sec. 2631(c), the GST exemption is equal to the basic estate tax exclusion amount.

[13] Pub.L. 112-240, Sec 101, H.R. 8, 126 Stat. 2313 (2013).

[14] Id. at Sec 101(c).

[15] See I.R.C. Sec. 2632(b-c) for deemed GST allocation rules.

[16] See I.R.C. Sec 2642(a)(3) for qualified severance rules.

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Governor Hickenlooper Signs Historic Civil Unions Bill

March 22, 2013 by Leave a Comment

On Thursday, March 21, 2013, Governor Hickenlooper signed SB 13-011 - Concerning Authorization of Civil Unions and, in  Connection Therewith, Making an Appropriation. The bill was sponsored by Reps. Pat Steadman and Lucia Guzman from the House, and Sens. Mark Ferrandino and Sue Schafer from the Senate.

Governor Hickenlooper issued a statement through One Colorado, remarking, “I had the incredible honor of signing civil unions into law. It was a historic moment for Colorado, which now joins a tide of hope sweeping the nation that affirms all couples should have the protections they need to care for each other and their families.” The bill grants rights to same-sex couples that are similar to those protections married couples enjoy under the law.

The bill takes effect on May 1, 2013, and will impact many areas of the law. The practice areas that will be most directly affected are family law and trust and estate law. On May 1,2013, the effective date of the legislation, CBA-CLE will host two half-day programs discussing the impact of civil unions on family law and trust and estate practice. Topics to be discussed include

  • Predicting the legal consequences of civil unions on  Title 14 and Title 19 actions;
  • A survey of same-sex marriage and civil unions in other jurisdictions and reciprocity issues;
  • Implications of the civil unions law in Colorado and nationwide;
  • Highlights and key provisions of the law that are important to a trust and estate practice; and
  • Civil unions and elder law.

The programs will be presented by Elizabeth Bryant, Erica Johnson, Richard Mishkin, Marie Avery Moses, and Richard Rotole. Click the link below to register or call (303) 850-0608.

CLE Program:  Civil Unions – Legal Consequences for Family and Trust & Estate Practices

This CLE presentation will take place on May 1, 2013, in the CLE Large Classroom. Click here to register for the live program and click here to register for the live webcast.

Can’t make the live program? Click here to order the homestudy.
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Civil Unions Bill Awaits Governor’s Signature

March 18, 2013 by Leave a Comment

On Tuesday, March 12, 2013, the Colorado Legislature gave its approval to SB 13-011, “Concerning the Authorization of Civil Unions, and, in Connection Therewith, Making an Appropriation.” The bill was introduced by Sens. Pat Steadman and Lucia Guzman, and Reps. Mark Ferrandino and Sue Schafer.

Senator Pat Steadman, who sponsored this year’s bill and also last year’s civil unions bill (SB 12-002) and the 2011 version (SB 11-172), issued the following statement on his website.

On Tuesday, March 12, 2013, the House of Representatives voted to pass SB 13-011 by a margin of 39 to 26.  All Democratic members of the House and Senate voted to support the extension of basic legal rights that SB 11 offers to couples in our state, as did a handful of Republican members.  The bill will soon be delivered to the desk of Governor John Hickenlooper for signature.

I’m incredibly proud of our state and this historic accomplishment.  We’ve come a long way from the dark days of 1992, when voters added a controversial and discriminatory provision to the Colorado Constitution that sought to exclude gays and lesbians from the equal protection of the law in our state.  The United States Supreme Court struck down “Amendment 2,” as it was known, in a 6 to 3 decision in 1996.  I sat in the courtroom the October day in 1995 when they heard oral arguments in the Romer v. Evans case.  Looking back on this chapter of our history puts today’s victory in perspective.

The road to equality is long and rocky.  We’ve overcome some major obstacles along the way, but there is more work still to do.  Another provision of the Colorado Constitution continues to discriminate against gay men and lesbians and prevent their equal inclusion in the fabric of our society.  Some day soon it too must be overturned.  As Justice Anthony Kennedy wrote in the Romer v. Evans opinion, “A state cannot so deem a class of persons a stranger to its laws.”  Passage of SB 11 helps remedy the inequality enshrined in our state constitution and ends the status of “strangers to our laws,” but we still have far to go before the promise of liberty and justice for all is fulfilled.

Governor Hickenlooper promised support of the bill in January’s State of the State address, where he urged the legislature to pass a bill allowing civil unions — “Some of us tried very hard, but it didn’t get done last year. This year, let’s do it. Let’s pass civil unions!”

The Colorado Bar Association has supported the civil unions bill for the second year in a row. The legislation has far-reaching effects, impacting not only domestic relations law but also estate planning, employment law, and other areas. We will continue to post about civil unions, including its effects on specific practice areas, using the civil unions tag. Stay tuned.

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Environmental Concerns in Estate Planning and Real Estate Conveyancing

March 6, 2013 by Leave a Comment

When constructing an estate plan, property conveyance is an important feature. However, devising property can sometimes create unanticipated problems when the property is subject to environmental laws such as the Clean Water Act,  Endangered Species Act, and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

The Clean Water Act (CWA) regulates the discharge of pollutants into natural waters and regulates quality standards for surface waters. The CWA originated in 1948, but was significantly amended into the current CWA in 1972. There are numerous provisions of the CWA that may affect a landowner’s conveyance, but the most likely scenario encountered is the necessity of obtaining a Section 404 permit, which can authorize discharge of dredge or fill material into waters.

The Endangered Species Act (ESA) intends to protect and recover endangered or imperiled species in order to maintain the natural ecosystem. It has been described as the most far-reaching wildlife preservation act in the world. Although the ESA does not prevent conveyance of property, it has significant potential to inhibit development of land. If an endangered or threatened species resides on the land to be conveyed, the ESA could prohibit any changes to the natural ecosystem of that species.

CERCLA, the Comprehensive Environmental Response, Compensation, and Liability Act, was created by Congress in 1980. CERCLA creates penalties for the release of hazardous substances. It also encourages individuals to clean up waste in order to recover cleanup costs from others. CERCLA’s provisions can extend to inherited property, trusts, estates, and trustees or fiduciaries, so it has broad application to estate planning.

Strategies for addressing these environmental acts will be discussed at the CLE offices on Friday, March 9, 2013, at the “Natural Resource Issues in Estate Planning” seminar. Water law topics, real estate conveyancing, conveyance of mineral interests, oil and gas planning, and hard minerals will also be discussed. To register, click the link below or call the CLE offices at (303) 860-0608.

CLE Program: Natural Resource Issues in Estate Planning

This CLE presentation will take place on Friday, March 8, 2013, at 9:00 a.m. Click here to register for the live program, and click here to register for the webcast.

Can’t make the live program? Click here to order the homestudy.
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2013 Cost of Living Adjustment Figures for Colorado Probate Code Available

January 25, 2013 by Leave a Comment

The Colorado Department of Revenue released its 2013 Cost of Living Adjustment (COLA) figures for certain amounts in the Colorado Probate Code, as required by C.R.S. § 15-10-112. The COLA figures affect decedents’ estates, elective shares, exempt property under C.R.S. § 15-11-403, lump sum distributions of family allowances, and collection of personal property by affidavit. Trust and estate practitioners should be aware of the new figures.

2013 Cost of Living Adjustments from the Colorado Department of Revenue

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HB 13-1016: Changing Distribution Mechanism for Payable-On-Death Amounts

January 25, 2013 by Leave a Comment

On Wednesday, January 9, 2013, Rep. Bob Gardner and Sen. Cheri Jahn introduced HB 13-1016 - Concerning the Distribution to Beneficiaries of Amounts in Pay-On-Death (POD) Financial Institution Accounts Pursuant to Written Designation in the Records of the Financial Institution. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Current law provides that a financial institution account with a pay-on-death (POD) designation naming two or more beneficiaries must be paid to the surviving beneficiaries in equal shares, with no ability of the account owner to designate different proportions to each beneficiary. The bill changes the law to allow an account owner to specify something other than an equal division of a POD account. If one or more beneficiaries of the POD account predecease the account owner, the designation reverts to equal distribution unless the account owner amends the POD designation to dictate some other distribution. Assigned to the Judiciary Committee.

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New Tax Law for a New Year

January 22, 2013 by Leave a Comment

JenniferMSpitzBy Jennifer M. Spitz

On January 2, 2013, the President signed into law the American Taxpayer Relief Act of 2012 (ATRA). ATRA extends much of the prior tax laws, by extending tax acts passed in 2001 and 2010. ATRA also makes some changes to prior law. Much of ATRA is permanent, meaning it is not scheduled to expire. Select highlights of ATRA of particular interest to trust and estate attorneys, including changes to some key exemptions and rates, are summarized below.

2013 Tax Act 01 18 13

Portability: The 2010 tax act included a provision allowing a surviving spouse to utilize the unused estate tax exclusion amount of the first spouse to die, if a timely election is made. This concept is referred to as portability. ATRA extends portability. The IRS has issued Treasury Regulations clarifying some aspects of portability. Also ATRA included a technical correction to make clear there is no “privity” requirement.

GST Tax: ATRA extends the generation-skipping transfer tax benefits that have been in place since 2001, such as qualified severances, automatic allocation of GST exemption to certain lifetime transfers, and 9100 relief.

Clawback: During 2011 and 2012 there was much discussion about whether there would be a “clawback” if the gift and estate tax exclusion amount dropped from the $5,120,000 amount applicable in 2012 to a lower amount in 2013. Since the exclusion amount did not drop, the clawback issue is moot.

IRAs:  ATRA reinstates the ability for certain individuals to make tax-free distributions to charity from individual retirement plans. ATRA includes special transition rules in light of the fact that this benefit was not extended until after December 31, 2012. This provision of ATRA is not permanent. It applies to years 2012 and 2013, and then expires.

Colorado Estate Tax: With the passage of ATRA, the state death tax credit is still repealed. C.R.S. § 39-23.5-103(1) imposes a Colorado estate tax equal to the state death tax credit. Since there is no credit, Colorado continues to impose no estate tax. However, about half of the states do impose estate tax, and many of those states have an estate tax exclusion amount much lower than the federal level.

Jennifer M. Spitz practices law in Longmont, Colorado with Stover & Spitz LLC, a Tier 1 Trust and Estates law firm, as recognized by U.S. News Best Law Firms. Jennifer primarily practices in the areas of estate planning, probate and trust administration. She is a graduate of the University of Colorado School of Law. She is a Fellow of the American College of Trust and Estate Council (ACTEC) and is listed in The Best Lawyers in America® and Colorado Super Lawyers.  Jennifer is very active in the Trust and Estate Section of the Colorado Bar Association, including recently serving as the Section’s Chair.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

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Colorado State Judicial Branch Revises Several Probate Forms

July 9, 2012 by Leave a Comment

This is Part 1 of 4 posts about new forms from State Judicial. Check back soon for more updates.

The Colorado State Judicial Branch issued 15 revised forms in July 2012 for probate proceedings, including instructions and forms regarding guardianships and conservatorships, as well as publication and notice forms. Practitioners should begin using the new forms immediately.

These forms were amended by the Colorado Supreme Court on June 29, 2012, and outlined as Rule Change 2012(11).

Most forms are available in Adobe Acrobat (PDF) and Microsoft Word formats; many are also available as Word and Excel templates. Download the new forms from State Judicial’s individual forms pages, or below.

Probate

  • JDF 714 – “Affidavit Regarding Due Diligence and Proof of Publication” (revised 7/12)
  • JDF 716 – “Notice of Hearing By Publication” (revised 7/12)
  • JDF 785 – “Final Order Accepting Guardianship/Conservatorship in Colorado From Sending State” (revised 7/12)
  • JDF 807 – “Notice of Hearing to Respondent (Adult or Minor)” (revised 7/12)
  • JDF 821 – “Affidavit of Acceptance of Appointment By Written Instrument as Guardian for Minor” (revised 7/12)
  • JDF 823 – “Instructions for Appointment of Guardian – Minor” (revised 7/12)
  • JDF 840 – “Instructions for Appointment of Guardian – Adult” (revised 7/12)
  • JDF 844 – “Notice of Appointment of Emergency Guardian and Notice of Right to Hearing” (revised 7/12)
  • JDF 860 – “Instructions for Appointment of Conservator – Minor” (revised 7/12)
  • JDF 875 – “Instructions for Appointment of Conservator – Adult” (revised 7/12)
  • JDF 882 – “Conservator’s Inventory with Financial Plan and Motion for Approval” (revised 7/12)
  • JDF 887 – “Instructions to File a Petition to Terminate Conservatorship” (revised 7/12)
  • JDF 945 – “Notice of Disallowance of Claims” (revised 7/12)
  • JDF 949 – “Notice of Hearing to Interested Persons and Owners By Inheritance” (revised 7/12)
  • JDF 950 – “Notice of Hearing By Publication to Interested Persons and Owners By Inheritance” (revised 7/12)

For a complete list of probate forms from State Judicial, click here.

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Governor Hickenlooper Signs More Bills, Including Industrial Hemp Bill

June 6, 2012 by Leave a Comment

In the past few weeks, Governor Hickenlooper has continued his efforts to sign bills into law. So far this legislative session, he has signed 278 bills into law.

Governor Hickenlooper traveled to Ft. Collins on May 22, 2012, to sign the following bill:

  • HB 12-1326 – Concerning Assistance to the Elderly, and, In Connection Therewith, Making an Appropriation.
    Sponsored by Rep. Cindy Acree and Sen. John Kefalas. The bill encourages the State Board of Health Services to raise the monhly Old Age Pension amount and also allows seniors with partial Medicaid eligibility to receive dental assistance and transfers funds to the Senior Services Account.

Governor Hickenlooper signed 29 bills into law on Thursday, May 24, 2012, including one that encourages Colorado’s use of clean energy alternatives. Five of the bills signed that day are summarized here.

  • HB 12-1315 – Concerning the Reorganization of the Governor’s Energy Office and, In Connection Therewith, Making an Appropriation.
    Sponsored by Rep. Jon Becker and Sen. Pat Steadman. The bill reorganizes and renames the Governor’s Energy Office and changes its statutory mission. The bill intends to promote clean and renewable energy.
  • HB 12-1346 – Concerning Sex Offender Registration.
    Sponsored by Rep. Bob Gardner and Sen. Steve King. The bill establishes requirements for sex offender registration for individuals who do not have a fixed residence.
  • HB 12-1328 – Concerning Exclusion from the “Uniform Commercial Credit Code” of Certain Charges by Persons Regularly Engaged in Making Contracts for Purchase of Tangible Personal Property in the Course of Business if Those Charges Do Not Exceed Amounts Permitted by Law.
    Sponsored by Rep. Kevin Priola and Sen. Angela Giron. The bill clarifies the appication of the pawnbroker exclusion to the UCCC.
  • HB 12-1307 – Concerning the Authority of a Nonlawyer Trustee of a Certain Size Trust to Represent the Trust Before the Board of Assessment Appeals.
    Sponsored by Rep. Jim Kerr and Sen. Ellen Roberts. The bill authorizes a nonlawyer trustee to represent its trust before the Board of Assessment Appeals if the total size if the trust is less than $3 million.
  • SB 12-009 – Concerning the Consolidation of Cash Funds Administered by the Division of Water Resources, and, In Connection Therewith, Making and Reducing Appropriations.
    Sponsored by Sen. Mary Hodge and Rep. Keith Swerdfeger. The bill creates the water resources cash fund, as recommended by the Water Resources Review Committee, and consolidates it into six branches.

On Tuesday, May 29, 2012, Governor Hickenlooper signed 14 bills into law. Four of them are summarized here.

  • SB 12-078 – Concerning Protections for At-Risk Adults.
    Sponsored by Sen. Evie Hudak and Rep. Sue Schafer. The bill clarifies definitions and modifies requirements regarding the mistreatment, self-neglect, and exploitation of at-risk adults.
  • HB 12-1237 – Concerning the Records Kept by Unit Owners’ Association of a Common Interest Community.
    Sponsored by Rep. Angela Williams and Sen. Ted Harvey. The bill identifies a list of the records required to be kept by a unit owners’ association for a common interest community.
  • HB 12-1263 – Concerning Reducing Barriers to Employment by State of Colorado Agencies for People with Criminal Records.
    Sponsored by Rep. Claire Levy and Sen. Pat Steadman. The bill prohibits state agencies from advertising in employment solicitations that people with criminal backgrounds may not apply, and prevents agencies from doing background checks unless a conditional offer has been given.
  • HB 12-1293 – Concerning Modifications to Procedures that Govern Recall Elections.
    Sponsored by Rep. Nancy Todd and Sen. Keith King. The bill makes various changes and clarifications to the rules governing recall elections.

On Wednesday, May 30, 2012, Governor Hickenlooper signed one bill into law.

  • HB 12-1278 – Concerning the Authorization of a Study of the South Platte River Alluvial Aquifer, and, In Connection Therewith, Making an Appropriation.
    Sponsored by Rep. Randy Fischer and Sen. Scott Renfroe. The bill requires the CWCB in connection with the State Engineer and the Colorado Water Institute to conduct a study to compile historical hydrological data for the South Platte River Basin.

Finally, on Monday, June 4, 2012, Governor Hickenlooper signed 17 bills into law. Four of them are summarized here.

  • HB 12-1261 – Concerning Effective Educators in Low-Performing, High-Needs Schools, and, In Connection Therewith, Making an Appropriation.
    Sponsored by Rep. Judy Solano and Sen. Bob Bacon. The bill requires that teachers and principals holding certification from the National Board for Professional Teaching Standards be awarded a stipend.
  • SB 12-068 – Concerning Prohibiting the Inclusion of Industrially Produced Trans Fats in Foods Made Available to Students by Public Schools, and, In Connection Therewith, Making an Appropriation.
    Sponsored by Sen. Lucia Guzman and Rep. Tom Massey. The bill prohibits public schools from making available foods or beverages that contain industrially produced trans fats. The bill requires districts with 1,000 or more students to comply and encourages districts with fewer than 1,000 students to comply.
  • HB 12-1099 – Concerning the Establishment of an Industrial Hemp Remediation Pilot Program to Study Phytoremediation Through the Growth of Hemp on Contaminated Soil, and, In Connection Therewith, Making an Appropriation.
    Sponsored by Rep. Wes McKinley and Sens. Lois Tochtrop and Suzanne Williams. The bill allows the Industrial Hemp Remediation Pilot Program to study how contaminated soils and water can be purified by the growth of industrial hemp.
  • HB 12-1314 – Concerning an Exception to the Requirement to File an Oil and Gas Severance Tax Return for a Person Who Has Less Than a Certain Amount Withheld, and, In Connection Therewith, Making an Appropriation.
    Sponsored by Rep. Jerry Sonnenberg and Sen. Cheri Jahn. The bill creates an exception from filing oil and gas severance tax returns and prohibits the DOR from sending non-filing taxpayers notices of liability unless certain requirements are met.

For a complete list of Governor Hickenlooper’s 2012 legislative decisions, please click here.

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