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The Importance of CSEDs & How Taxpayers Can Use Them to Tackle Tax Debt

So, you have been contacted by the IRS because they say you owe a hefty amount in unpaid taxes. Maybe you’re thinking – “I’m sure I always paid my taxes”, or – “that amount cannot be correct”, even – “but that was so long ago”. You may be surprised to learn that the latter is actually quite important when it comes to the IRS’ ability to collect on unpaid taxes.

It’s called the Collection Statute Expiration Date (CSED), or commonly referred to as the statute of limitations. According to IRS code 26 U.S.C. § 6502, this is the maximum time period in which the IRS is allowed to collect tax debt, which is usually about 10 years after your tax debt was originally assessed.

However, the IRS clock is a fickle one, that is, 10 years may turn into 20 years. A taxpayer can unknowingly suspend this clock (also referred to as a tolling event), which effectively extends the collection period. There are a few different actions that will cause a CSED to suspend its 10-year clock, such as:

• Filing for an Offer In Compromise
• Filing an installment agreement request
• Residing 6 months or more out of the United States
• Filing for Bankruptcy
• Military deferment
• Filing for a Collection Due Process Hearing
• Fraudulent Action
• Filing for an innocent spouse claim

Our firm has worked with many clients that the IRS is still pursuing tax collection, even though the statute of limitations is way past the 10 year expiration date. The IRS’ reason? Because the client suspended their statute of limitations. It’s not uncommon for our clients to be battling with the IRS over tax debt that is 15 to 20 years old due to multiple instances of suspension.

So what’s the good news? The IRS has not had an easy time calculating these CSEDs.

IRS’ Difficultly Calculating CSED

CSEDs are extremely complicated to calculate. So hard in fact that the IRS messes up these calculations nearly 40% of the time, according to a National Taxpayer Advocate’s audit of recalculated CSED’s between July 1, 2011, and June 30, 2012. This is extremely important to know – if the IRS is miscalculating so many CSEDs, it means that they may be wrongfully extending CSEDs and violating taxpayers rights by unlawfully collecting on debt that should have expired.

This happens because IRS employees use a computer system called the Integrated Collection System to obtain approval from IRS managers on manually recalculated CSEDs. The audit cited ineffective internal controls in checking the accuracy of such calculations.

How a Second Opinion May Help your Tax Case

If you have tax debt that has gone past or near its 10-year deadline and the IRS is still attempting collection, it’s in your best interest to recalculate your CSED, especially with such strong evidence that the IRS doesn’t always calculate them correctly.

CSEDs are important in every tax case and can mean the difference between paying hundreds of thousands of dollars to little or nothing. A qualified tax attorney can give you a second opinion on your tax case by double checking the IRS’ CSED calculation. A good tax attorney is trained to utilize all IRS tools, such as the IRM (Internal Revue Manual) and FOIA (Freedom of Information Act) to check if the statute of limitations has been correctly calculated. Even for taxpayers whose statute of limitations hasn’t passed, an accurate CSED calculation can be extremely useful when negotiating settlements with the IRS.

If you believe your CSEDs are inaccurate or would like to know more about calculations, please schedule a free consultation with one of our tax attorneys.

How Savvy Property Investors Utilize Deferred Tax Transactions

Current and prospective investors know that the market is always in flux and what may have been a good investment then, may not be now. So how can an investor keep their investment properties profitable and take advantage of a changing market? The answer lies in 26 U.S.C. § 1031 of the IRS code, referred to as a 1031 exchange.

In short, a 1031 exchange allows a taxpayer to swap an investment property for another “like-kind” property without having to pay capital gains tax. A “like-kind” property is defined as property that is of the same nature, character or class. Additionally, there is no limit to how many 1031 exchanges a taxpayer can make. So how can someone take advantage of this IRS approved tax deferment? To start, it depends on the investor’s circumstance and investment goal. Depending on those things, there are four types of 1031 exchanges to choose from.

1. Simultaneous Exchange

This is a direct exchange of “like-kind” property between two parties. Under this type, most transactions where a property is relinquished and the replacement property is closed on in the same day. However, this is the least used exchanged, as it can be difficult to find a like-minded investor who also happens to have a similar property.

2. Delayed Exchange

This type allows for an investor to sell a property and find a replacement property within a certain amount of time. As this gives the investor more time between the sale and replacement process, it is the most popular 1031 exchange.

3. Reverse Exchange

This is for an investor who has found a replacement property before they were able to sell the current property. To close on the replacement property, the seller must give the title of either the relinquished or replacement property to a LLC (limited liability company), who will “park” the title until the other property is sold. This must be done, as an investor is not allowed to hold both titles simultaneously. Once the other property is sold, then the LLC will transfer the title of the replacement property.

4. Improvement Exchange

A requirement for a 1031 exchange is that one property must be replaced by a property of equal or higher value. This type of exchange overcomes this rule by allowing an investor to buy a less valuable property, so long as the remaining funds from the sale of the original property are used to build/improve the replacement property. This way, no profit from the sale of the original property can be taxed, as it is instead funneled into the replacement property.

Cardinal rules to follow:

Must be a “like-kind” property. This means that you cannot sell a rental property for construction equipment. Instead, the properties must be of the same “nature” or “character” – such as apartment complexes, restaurants, vacation rentals or commercial office buildings are all alike. Further, the exchange doesn’t have to be a 1:1 ratio, but instead could be multiple properties for a single, larger property or vice versa.

All properties must be located in the U.S. As a 1031 exchange is an IRS rule, it only impacts properties within federal scope. Thus this rules out international properties, as these exchanges would involve the jurisdiction of other countries.

Personal property doesn’t count. A 1031 exchange can only involve a business or investment property. So primary residences cannot be exchanged, if say, one were to move from one state to another.

Equal or greater value. Exchanges can only occur on properties of equal or greater value to the original property. If an investor chooses to buy a property of lesser value, then they must either conduct an improvement exchange or pay taxes on the differential amount.

The 45 and 180-day window. To qualify for a 1031 exchange, an investor has to abide by two deadlines: A seller has 45 days after closing on the sale of the first property to locate another replacement property; and, a seller has 180 days (or six months) to purchase a replacement property.

For a savvy investor, the 1031 exchange allows investment flexibility, while saving thousands of dollars in taxes. That is if such a person can abide by various IRS rules and understand the particulars of real estate investing, market cycles, and growth opportunities.

Due to the complex process of 1031’s, coupled with the fact that even a small mistake can jeopardize tax deferment, even career investors tend to seek help. For those who would like more information on 1031 exchanges, need advice on a transaction or need a legal review of paperwork, please contact our real estate attorneys at Robinson & Henry for a free consultation.

SB17-215 – Sunset Licensed Real Estate Brokers and Subdivision Developers

Signed into law on 6/1/17

The new bill continues regulation requirements until until September 1, 2026. New modifications include:

1. A broker cannot employ or supervise other brokers without first demonstrating that have the sufficient experience and knowledge. The Real Estate Commission has until January 1, 2019 to establish how brokers will be required to demonstrate these skills. Until then, the Commission will be auditing supervising/employing brokers to ensure they have the necessary education and experience.
2. On June 1, 2017, the Real Estate Commission will now have two additional members of the public, who will join three real estate brokers. Two of the brokers are required to have 5+ years of industry experience, with one having substantial experience in property management. Governor Hickenlooper has already chosen the broker with substantial experience, Carolyn Rogers, who has over 30 years of industry experience.
3. License expiration dates will be changed from anniversary dates to a December 31 date. Meaning if your license is set to expire in July, it will now expire in December of that year. Licenses are still valid for three years. The Commission will begin issuing December 31st renewal dates when people begin renewing their licenses on January 1, 2018.
4. The Commission has the authority to investigate and/or discipline a broker who has “plead guilty” or “plead no contest” for any crime listed in the 12-61-113(1)(m), C.R.S. The law was expanded to also include any crimes with a deferred judgment or deferred sentence.
5. The law now requires that a referral fee be only paid by a licensed real estate broker when reasonable cause for payment of a referral exists, which is defined in 12-61-203.5, C.R.S.
6. A real estate broker is now allowed to complete standard forms for use in a real estate transactions, including any of the activities listed in 12-61-101(2), C.R.S. A standard form is now defined as anything that is drafted by the Real Estate Commission, licensed Colorado attorney, governmental agency, a quasi-governmental agency, a lender regulated by state or federal law, the Colorado Bar Association or its successor organization, a title company, or a letter of intent created by a broker which states that it is legally non-binding.

HB17-1035 – Sex assault and stalking victims may break leases

Signed into law on 6/1/17

This bill expands on the rights of tenants to break a lease agreement. This bill makes it possible for tenants to break a lease agreement if they are victims of sexual abuse or stalking and believe that further residence at their current location would continue to put themselves (and/or children) in danger. This bill also expands and clarifies tenants rights to break a lease agreement if they are victims of domestic violence or domestic abuse.

Under this bill, the law dictates that a person must provide in writing that they are a victim of such abuse and are thus seeking early termination of their lease to their landlord. Along with the written letter, the victim of sexual abuse, domestic violence, or domestic abuse must supply evidence in the form of either a police report (written within the prior 60 days), a valid protection order, or a statement from a medical professional confirming the tenant’s victim status. Additionally, a victim of stalking can also supply as evidence a written statement from an application assistant who has consulted with the victim.

What this means for Colorado landlords: The landlord in now required by law to allow victims of sexual assault and stalking victims to break their lease agreement, should they be provided with a letter from the tenant and the corresponding evidence. Additionally, the tenant can only be held responsible for one month’s rent after leaving the property. A landlord is also forbidden from disclosing the victim’s status to anyone other than the victim, unless they have the victim’s consent.

For homeowners and real estate investors alike, it’s prudent to protect the investments you’ve worked so hard to acquire and grow throughout your lifetime. Whether you’re the owner of a single family home, or you’ve amassed a few investment properties, we’ve put together a quick Q&A to help you better understand what you can be doing to protect your real estate legacy.

Q. What happens to my assets when I don’t have a last will and testament?

A. If a person dies without a will, that person’s real estate and other tangible and intangible assets are considered to be intestate, where they will go into probate and will be divided according to Colorado law. The probate process is lengthy, taking up to a year, can be quite costly and emotionally traumatic for the surviving family members. It’s important to note, that verbal wishes of the deceased, made while alive, will not be considered in court’s decision. To avoid probate, save money and keep your real estate legacy intact, an individual should consider the use of a trust. An estate planning attorney can help establish a trust.

Q. What if I have a blended family?

A. Generally, without a will the deceased assets will be divided between the closest kin. So for those who wish to keep their estates intact, or dictate who gets what, or split the division of the estate into equal or unequal shares, then you will need to complete a last will and testament. Creating an updated will for those in a blended family can mitigate future issues such as:

• The surviving/inheriting spouse or partner favors their own children over the deceased’s biological children in the division of the assets.
• Leaving large amounts of money or property to an unprepared/irresponsible family member.
• Causing ressentiment by making your kids wait until the death of your surviving spouse to inherit anything.

Q. What if I have a co-owned vacation property?

A. Depending on what type of co-ownership you have will determine how to proceed. For those in a joint tenancy, the surviving owner will inherit the deceased’s portion of ownership. For those in a tenancy in common, there are no rights of survivorship, so a will is needed to determine who will inherit that portion of ownership/interest in the property.

As you can see it’s not only prudent to put your wishes in writing, but also thoughtful, so your children and other family members are not left trying to sort everything out while grieving. A lack of a will or unclear directions can cost a family’s peace of mind and the loss of your financial legacy. If you or your clients would benefit from legal counselling on this matter, please contact us for a free consultation.

Wills and trusts are powerful tools within the estate planning arsenal. Deciding whether to go with a trust, will or both, depends on an individual’s goals and circumstance. Before deciding on which route to go, it’s important to first understand the major differences between the two. Let’s break it down.

What is it?

Both a will and a trust are legal tools that are used to dictate what should happen to a person’s estate (finances/property) in a specific circumstance, such as death or incapacity. The difference lies in how they carry out those wishes.

Defining terminology of a trust:

1. A grantor is the person who sets up the trust.
2. A trustee is appointed by the grantor to manage the trust.
3. A beneficiary is the person who receive the benefits of the property titled in the name of the trust.

There are two types of trusts – revocable and irrevocable. In a revocable trust the grantor retains the right to change or dissolve the trust. In contrast, in an irrevocable trust, once the grantor transfers their ownership of the property to the trust, they cannot change their mind and regain ownership or make decisions in regards to that property.

Defining terminology of a will:

1. A testator is the “will-maker”.
2. An personal representative is appointed by the testator to manage the distribution of the assets, pay debts, and handle other administrative duties.
3. A beneficiary is the person who benefits from inheriting items set forth in a will.

Major differences?

So how are trusts and wills different? Let’s see…

Probate. Unlike a will, a trust doesn’t have to go through probate. Probate is the legal process, where a court distributes your property after you die. A court decides how to distribute your property either through the instructions set forth in a will, or if a will was never made, then through Colorado’s intestacy laws, which dictate who inherits your estate. Some people prefer to avoid probate due to that fact that it takes time and money, and is also a matter of public record.

Time. A will only takes affect after the testator dies. Conversely, a trust becomes valid as soon as it is duly executed and assets are added. So unlike a will, a grantor can also act as the trustee and manage their assets while their still alive. A grantor can then appoint a trustee to manage the trust after they die.

Children. A will can appoint a guardian for dependent children, which a trust cannot.

When to choose a Trust

• When you want your beneficiaries to have immediate access to your estate after you die.
• If you want to protect the assets your children inherit from their creditors.
• Withhold inheritance until a beneficiary comes of age.
• Prevent your financial affairs from becoming public record.
• If your estate is valued over $5 million and you want to minimize estate taxes.
• If you have a dependant with special needs or a disability.

Other reasons to choose a trust:

• If you own multiple properties or have real estate investments out of state.
• If you think there is a good likelihood that your wishes will be contested by other family members after you die.
• If there is a possibility of incapacity.
• You want to make sure children from a previous marriage are taken care of.

When to choose a Will

• If you’re young and in good health.
• If your estate is of lower value.
• If you have dependant children and need to appoint a guardian should you be unable to care for them.
• Would like to dictate any funerary wishes.

Ideally, a person should have both a will and trust, or at the very least a last will and testament. While a will is generally less complicated to prepare and thus cheaper, the cost of setting up a trust is usually offset by its ability to avoid probate and the costs that go along with it. If you would like more information, please schedule a free consultation with one of our Colorado estate planning attorneys

The death of a loved one, whether sudden or expected, can shatter a person’s world. In addition to coping with the avalanche of emotions, there is also the unexpected pressure and emotional rollercoaster of having to deal with the deceased’s material (and immaterial) things.

While it’s usually easier for those we leave behind to have a last will and testament to dictate how our finances and assets should be divided, there are occasions where a will was not prepared correctly, leaving the surviving family members to contest it. There are many reasons why a family member may wish to contest a will. Here’s a list of the most common legal grounds for contesting a will.

1. Undue Influence

Undue influence comes about when a person misuses power and trust, pressuring and manipulating the will creator (legally referred to as the testator) to such a degree that they lose free will and succumb to the will of the influencer.

To contest in court, undue influence can be difficult to prove. Claims of nagging or verbally abusive behavior are, in and of themselves, not enough evidence. But if a person can show that the influencer consulted with the attorney, paid for the will and/or isolated the person from fellow friends and family members, then those claims carry greater weight in probate court.

For example: if a testator’s children are left out of a will, despite having a good relationship with the deceased, can be seen as a suspicious action in probate court but not necessarily indicative of undue influence. However, if the children or other close family members are inexplicably left out and a person who cared for the deceased (could be a family friend, neighbor) was granted a large portion of the estate, then a will’s validity may be called into question.

2. Failure of formality

Colorado law statute § 15-11-501 dictates certain standards of formality in which a will should be drafted and signed. In addition to the requirement that the testator be 18 years of age or older and be of sound mind (not deemed mentally incompetent), other required formalities are:

• that the will be in writing,
• signed by the testator,
• signed and witnessed by two impartial witnesses, and
• acknowledged by a notary public.

Generally, it is considered best practice for the witnesses not to be beneficiaries of the will. However, Colorado may not invalidate the will if it is witnessed by an interested witness (§ 15-11-505). Additionally, if the testator is unable to sign their own name, then according to statute § 15-11-502, the testator can appoint someone else to sign on their behalf.

While Colorado law does allow for these alternative scenarios, it is recommended to follow the “best practices”, such as using an estate planning attorney to draft the document, the use of two impartial witnesses and the testator sign for themselves. Otherwise a will opens itself up for possible contention by unhappy relatives.

3. Mental Incapacity

Colorado state law requires that a testator be of “sound mind” when a will is made and signed. To contest that a person was mentally incapacitated, you must prove that the person did not fully comprehend the document that was being executed.

To demonstrate incapacity, you must show that the testator either did not understand the measure and extent of their estate; the consequences of the division and disbursement of the will, or; were unable to make rational decisions.

For example: mental incapacity in the form of Alzheimer’s or dementia may be established in probate by offering evidence in the form of medical records, witness testimony or correspondence written around the time the will was created, that showed mental incapacity.

Contesting a will is a vigorous process in Colorado, requiring one to go to probate court, notify the other beneficiaries and the burden of proof is placed on them to show why the will is not valid. Our Colorado Springs estate planning attorneys are experienced litigators. They understand state laws and are familiar with various local courtroom procedures and the personality of local judges.

Call to schedule a free consultation with one of our estate planning attorneys today.

Understanding the difference can help you when creating your Colorado estate plan

If an adult becomes incapacitated as a result of an illness or an injury, or is in another way disabled and unable to make decisions for himself/herself regarding his/her care or estate, then a Colorado probate court will appoint someone to make those decisions for the incapacitated person.

Those decision-makers are called guardians and conservators and they can also come into play in situations involving a minor child.

If both parents of a minor child are deceased, incapacitated or deemed by the court unfit to parent, the court will appoint a guardian and a conservator to care for the child.

While in some cases one person might fill both roles, each has its own specific responsibilities. There are also situations in which the court will appoint only a guardian or only a conservator.

To serve as a guardian or conservator (whether for an adult or for a minor), you must be 21 years of age or older and file a guardianship petition in the district court in the county where the ward (the formal term for the person you will be caring for) resides; if the ward resides in Denver, the petition must be filed with the probate court.

The court’s first choice is to appoint these roles to a close family member, such as a spouse or parent in the case of an incapacitated adult or an aunt, uncle or grandparent in the case of a minor child. Other relatives or close friends are a second choice when no close family member is available or suitable. In the event that no friend or family member is available, the court will typically appoint an experienced, specially trained attorney.

Here’s the difference between guardianship and conservatorship for an adult in Colorado:

A guardian of an incapacitated adult …

• Is responsible for an incapacitated person’s well-being and personal care.
• Makes decisions regarding the incapacitated person’s medical treatment and living arrangements.
• Determines what sort of assistance and supervision the person will receive.
• Can only handle small amounts of money on the protected person’s behalf. Examples include monthly stipends or Social Security benefits. If the guardian needs to handle more than $24,000 annually, the court will appoint a conservator (if it has not done so already).

Colorado courts require a guardian to submit an initial care plan for the incapacitated person within 60 days of appointment and to submit annual reports regarding the ward’s condition and activities.

The appointment of a guardian does not automatically void the ward’s current medical power of attorney unless the court orders otherwise.

A conservator of an incapacitated adult …

• Is responsible for managing an incapacitated person’s property and financial affairs.
• Does things like pay the incapacitated person’s bills, deposit checks or even take care of their home if they’re living in a care facility.
• Continue or participate in the operation of any business of which the incapacitated person has ownership.

A conservator is typically only appointed if the incapacitated person has more income and assets than is required for meeting daily needs.

Colorado courts require a conservator to submit an inventory with a financial plan within 90 days of appointment and to provide an annual report detailing the incapacitated person’s finances. The conservator must get permission from the court before doing things like selling the protected person’s house.

The appointment of a conservator does not automatically void the protected person’s financial power of attorney unless the court orders otherwise.

Here’s the difference between guardianship and conservatorship for a minor child in Colorado:

The roles of guardians and conservators for children under the age of 18 are relatively similar to those roles for incapacitated adults, though the daily duties and responsibilities (listed below) differ slightly. The court usually appoints the same person to be both guardian and conservator for a minor child, though it is not required that be the case.

A guardian of a minor …

• Assumes the same duties and responsibilities as a parent.
• Is responsible for the minor’s care, protection, mental and physical health, living arrangements and education.
• Does things like sign school or physician consent forms.
• Arranges for the minor’s food, clothes, personal care items, housekeeping and transportation.

Many parents appoint a guardian in their will. Generally, if one parent dies or becomes incapacitated, the minor child will be placed in the care of the living parent, even if the deceased or incapacitated parent appointed a different guardian in his/her will.

Children over the age of 12 must consent to the guardian, and if the child doesn’t consent to the guardian appointed in the parents’ will, then the court will choose the guardian.

If both parents die or become incapacitated and neither had a will appointing a guardian for their minor child(ren), then the court will appoint a guardian.

The guardianship of a minor child automatically ends on his/her 19th birthday unless he/she is incapacitated, though it might terminate earlier if he/she gets married, joins the military or becomes self-supporting.

A conservator of a minor:

• Manages a minor child’s financial affairs.
• Has a legal obligation to use and protect the minor child’s money in a way that is fiscally responsible and in the best interest of the child.
• Manages and invests assets appropriately.

Colorado law requires the court to appoint a conservator if a child inherits an amount of money that is greater than $11,000. The conservator holds and manages the property until the minor is 21.

A conservator is also required when a child is listed as a beneficiary of a life insurance policy and if a child inherits any real estate or other titled property, a conservator is required to sell that property. Any proceeds from such a sale are retained for the minor child in the conservatorship until the minor is 21.

Are you a parent of young children? Click here to read our post about estate planning if you have minor children.

How it all factors into your Colorado estate plan

An incapacitated person cannot appoint his/her own guardian or conservator, nor can an incapacitated person appoint a medical or financial power of attorney. However, in the event that the incapacitated person executed a good estate plan before becoming incapacitated, guardianships and conservatorships can generally be avoided.

For many parents of minor children, one of the primary reasons to create a will is to appoint a guardian for their children should they no longer be present or able to do so themselves. And when determining a conservator for a minor child, the court will consider a person named in the will of the last parent to die, along with the wishes of the child if he/she is 12 years of age or older (though the court is not bound by the parents’ or the child’s choice).

Creating a good estate plan while you’re healthy and capable is a good way to ensure that your wishes are known for the future care and protection of yourself and your children should the unthinkable become a reality.

Meet Robinson & Henry’s lead estate planning attorney

Robinson & Henry’s Colorado Springs estate planning attorney, Michael Hanchett, can assist you through the process of creating an estate plan from start to finish. It’s also recommended that you consult with an estate planning and probate attorney like Michael if you would like to file a petition for conservatorship or guardianship of a friend or family member. Start by scheduling a free consultation today; call (303) 688-0944 or click here to make an appointment online.

Whether your days are spent wrangling toddlers, driving pre-teens to soccer practice and dance recitals or you just brought your first bundle of joy home from the hospital, if you have minor children, it’s critical to have an estate plan to ensure your wishes would be carried out in the event both you and your children’s other parent die or become incapacitated.

Of course, the subject is a difficult one to tackle, but for as emotional and uncomfortable as it is to discuss and plan for now, for most parents, the peace of mind that comes from knowing that their children will be taken care of according to their wishes if the unthinkable happens outweighs any temporary discomfort.

While everyone’s circumstances and needs are unique, for parents of minor children it’s particularly important to consider the following items when creating an estate plan.

Name a guardian

Naming a guardian for your children should both you and your children’s other parent die or become incapacitated is one of the most difficult decisions a parent must make, but it’s also one of the most important. While the conversation might be difficult, if you don’t appoint a guardian in your will, it will be up to the court to appoint one should the need to do so arise.

When appointing a guardian for your child(ren) in your will, you’ll need to list a guardian for each of your children (if you have more than one); you can list the same person for each child, but it’s also perfectly legal to list a different guardian for each child. Similarly, you can list two guardians if you wish; this is common in situations where, for example, you are appointing a married couple as guardians. Just be sure to list the names of both individuals.

Determine who gets and controls your assets

For most parents, a close second to ensuring their children will be under the care of the right person is ensuring their children will be taken care of financially. Many parents wish to leave their children an inheritance, but children cannot legally own property which means an adult must manage the property until the child is of legal age.

If you intend to leave an inheritance that is greater than $11,000, if your child is listed as the beneficiary of any life insurance plan or if you leave real estate or any other investments, then an adult will be put in control of the inheritance until the child is 21. This role is called a conservator and if your estate plan doesn’t identify who should be appointed to this role, then the court will decide.

When the child turns 21, Colorado law allows him/her to receive the entire inheritance in a lump sum.

However, parents often opt to have the property they intend to leave as an inheritance held in a trust, which allows them to control when the child receives the inheritance, whether that be in a lump sum at an age that is older than 21, in installments at different ages or on another schedule that makes sense to the parents.

Bonus tip: You should also name beneficiaries for any 401(k) or IRA accounts you have. This is quick and easy to do and can be changed at any time. Just ask your employer or account custodian for a beneficiary form.

Create a living will

Every person 18 years of age or older should have a living will (also known as an advance medical directive) and durable medical and financial powers of attorney. Unlike your last will and testament, which is where you leave assets and name a guardian, these documents spell out things like who you want to make your medical and financial decisions if you become incapacitated and whether you’d want to be kept alive on a ventilator.

Your advance medical directives can be as specific as you’d like; you can outline certain circumstances in which you’d want, or not want, extraordinary life saving measures (like CPR) or if or how long you’d want to be kept alive on a ventilator.

While these topics can feel unpleasant, or downright impossible, to think and talk about, having these documents in order can be a huge blessing to your family if you become suddenly, severely sick or injured, since it relieves them of the burden of making these decisions for you.

Bonus tip: It’s important to remember that these documents – both your last will and testament and your living will – should be reviewed and updated on a regular basis. These documents aren’t static and can – and should – change and evolve as your life’s circumstances evolve and change, for example, if you get divorced or remarried.

While these are all important considerations to take when creating your estate plan if you have minor children, this list is not exhaustive, nor is it one-size-fits-all. The best way to make sure your estate plan is as comprehensive as possible for protecting your minor children is to work with an attorney like Robinson & Henry’s Colorado Springs estate planning attorney Michael Hanchett.

Michael Hanchett is Robinson & Henry’s lead estate planning attorney. He helps individuals and business owners plan for the future by drafting powers of attorney, last wills and testaments, trusts and advance directives. Please call 303-688-0944 or click here to schedule a free consultation with Mike.

The process of getting a divorce can be rife with stress and painful emotions, but it can also be a time to find renewal and a fresh start. This is quite literally the case when it comes to what to do with your estate plan during, or following a divorce. In fact, the recommended first step in updating one’s estate plan following a divorce is to revoke the old will by shredding or tearing it up and creating a new one.

We’ve answered three of the most common questions about how a divorce will impact your Colorado estate plan below, but it’s important to remember that each divorce and estate plan is unique and may be subject to exceptions or special considerations depending on the circumstances. You should work with both your divorce attorney and your estate planning attorney to ensure you don’t miss anything and that any changes you make are in line with the law.

Robinson & Henry has experienced attorneys in both family law and estate planning. Call 303-688-0944 or click here to schedule a free consultation with an attorney from either practice.

Q: What happens to my current estate plan when I get divorced?

A: In the State of Colorado, a divorce decree automatically revokes the designation of the ex-spouse as a beneficiary or fiduciary in any will or trust, this means that, unless you update your documents (including beneficiary designations on any life insurance policies or retirement accounts), your assets will go to the named contingent beneficiary instead. This extends to any appointments naming your spouse as your personal representative/executor or power of attorney.

Q: Do I have to wait until the divorce is final to update my estate plan?

A: No, and in fact, it’s wise for spouses to revise their estate plans while their divorce is pending because Colorado law only automatically revokes a designation of a former spouse as a beneficiary or a fiduciary in a will after a divorce is final. If a spouse dies before the divorce is final, then his/her assets could still go to the other spouse unless the will had been updated to designate other beneficiaries.

It is, however, important to consult with your divorce attorney before making any changes to your estate plan because when one spouse files for divorce, a temporary injunction goes into effect that prevents both spouses from transferring, encumbering, concealing or in any way disposing of any marital property without the other spouse’s consent or an order of the court.

In cases where you still want your spouse to be included in your will as a beneficiary, fiduciary or power of attorney, you will have to re-insert them into your will after the divorce is final.

Click here to read about estate planning if you’re getting remarried.

Q: The law says my child(ren) will automatically go to my ex-spouse if I die before my child(ren) are 18, but what if that’s not what I want? How can I make that known in my will?

A: It’s correct that if you pass away before your child(ren) are 18 and your ex-spouse (the child(ren)’s other biological parent) is still alive, the law says he/she will become their sole guardian. If you believe your ex-spouse is not responsible or feel he/she is abusive or otherwise unfit to parent, you should attach a memorandum to your will explaining your reasons so the court will at least consider that the remaining parent is unfit. You can also include any police reports or court records that may further speak to why your ex-spouse is unfit to parent.

You should, of course, also name in your will the person(s) whom you would like to act as guardian(s) for your children should anything happen to you. This is something you should do regardless of whether you’d want your ex-spouse to have sole guardianship since whomever you name will be considered for guardianship if both you and your ex-spouse die before the child(ren) are 18.

Ideally, you and your child(ren)’s other biological parent would name the same person(s) in your wills to avoid fighting amongst family members in the unfortunate event that both both of you are deceased. However, if you and your ex-spouse can’t agree on a guardian, then it’s important to consult with your divorce and estate planning attorneys about how to best approach the situation and remember that these things, no matter how uncomfortable they are to talk about, are best dealt with while everyone’s alive and well.

Click here to learn more about estate planning for parents of minor children.

As in all situations, the best way to make sure your estate plan is as comprehensive as possible is to work with an attorney like Robinson & Henry’s Colorado Springs estate planning attorney Michael Hanchett.

Michael Hanchett is Robinson & Henry’s lead estate planning attorney. He helps individuals and business owners plan for the future by drafting powers of attorney, last wills and testaments, trusts and advance directives. Please call (303) 688-0944 or click here to schedule a free consultation with Mike.

Whether you are engaged or already married, no couple want to discuss, let alone think about the two big D’s – death and divorce. While these topics may be unpleasant to discuss, these dialogues are positive opportunities to look after the future welfare of your spouse, learn about the consequences of divorce and strengthen marriage bonds.

While no couple can predict the future, even those who overcome the statistical odds of divorce there is a real certainty that one spouse will outlive the other, whether that happens later in life or prematurely. In either of these tragic events, a martial agreement can give couples peace of mind concerning the uncertainty surrounding their financial future.

What they do

A marital agreement can offer security and manage expectations by specifying who gets rights to what property in the event of the dissolution of the marriage or death of a spouse. In short, marital agreements create fiscal certainties in an uncertain future, by defining things like:

• Property rights – who gets what property rights during marriage, or in the event of death or divorce.
• Debt liability – who is responsible to pay for debt(s) during marriage, and how it is transferred in the event of death or divorce.
• Spousal Maintenance (commonly referred to as alimony) issues – what if any alimony is to be received in the event of death or divorce.
• Attorney fees – who will pay any legal fees if a couple has to go to court in the event of a divorce, separation or annulment.

However, there are some important limitations, such as an agreement cannot reduce or eliminate any future child support responsibilities of either spouse. Nor can it punish a spouse for initiating a divorce, or restrict lawful remedies for victims of domestic violence.  Waivers of spousal maintenance and attorney fee allocations can even be set aside if severely unfair.  If an agreement is made with any of the above limitations, then it can be rendered unenforceable.

Who they help

Marital agreements are not just for those who are entertaining marriage. In fact, an agreement can be drafted whether you are engaged, or already married. A marital agreement only becomes effective once married or for those who are already married. However, if you are married, they cannot be prepared for couples who are contemplating divorce, in that circumstance the solutions might only include legal separation or divorce.

Prenuptial. This is for couples who are intending to marry but haven’t yet married and are looking to resolve many financial issues during and upon a potential dissolution of their marriage.

Postnuptial. This option is beneficial for couples who for whatever reason didn’t think about it, or were simply unable to get a prenuptial agreement put together in time. It can also be suitable for couples who feel that current circumstances warrant a marital agreement – such as coming into a large inheritance, the creation of a business or a change in liabilities for either or both parties.

Separation Agreement. To be clear, separation agreements are not technically “marital agreements” under the law, but are rather documentation of the couple’s settlement upon legal separation or dissolution of marriage. The only other option is the typically cumbersome and costly process of trial before a judge or arbitrator.

When prepared correctly, marital agreements give peace of mind to a couple entering or continuing.  When agreements are incomplete, missing information or contain the wrong language, room is left for agreements to be contested in the future by an unhappy former spouse. Thus, it is recommended to consult an attorney to avoid mistakes and make sure the agreement reflects both spouses’ needs, wishes, and preferences to resolve potential problems before they can even arise.

James Garts leads the Robinson & Henry family law practice in Denver. With over 13 years of experience, James oversees a dedicated team of attorneys and support staff. James has helped many couples strengthen their marriage through enacting mindful marital agreements, as well as navigate clients through the emotional circumstance of separation agreements.

Heading out of town? You may want to update your estate plan before you go.

Summer isn’t over yet; there’s still plenty of time between now and when the leaves start their annual transformation to hit the road or jet away for a few days to rest, restore and explore. Before you go, though, there’s one critical item to check off your pre-trip prep list: update your estate plan. And if you don’t already have an estate plan, then now is one of the best times to create one.

You can plan every little detail of your trip but there’s just no way to plan for the unexpected. Car accidents increase in the summer when more folks than normal are on the road and there’s no telling when a sudden illness might strike. The best you can do to prepare for the worst – a situation in which you’re suddenly unable to make decisions or care for your loved ones – is to ensure your estate plan is in order.

There are a few key items in particular that you should review and/or have in place before you pack your bags, including:

1. A care plan for any minor children.

Whether the kids are joining you on your trip or staycationing with grandma and grandpa while you’re away, it’s critical to make sure this part of your plan is in order before you go. Make sure you have a guardian listed for each minor child (it can be the same person for each child).

A guardian is the person who you would like to care for your child(ren) in the event that neither you nor the other parent is able to do so. It’s even a good idea to include a backup guardian in case your first choice is unable to serve in that role.

You can also put in writing who you would like to manage any inheritance your child(ren) would receive. This person is called a conservator (click here to learn more about the difference between guardians and conservators).

Bonus tip: If the kids are staying behind, it probably goes without saying that you would leave their caretaker with a list of allergies, medications, doctor’s phone number, etc. But you should also consider giving those caretakers the authority to make medical decisions for your children while you’re away. And if the kids are coming along, bring that list of medical information with you.

2. A living will and medical power of attorney documents.

A living will is a type of advanced directive, which is a legal document that states your health care preferences in the event that you’re unable to make decisions for yourself. It covers things like whether you would want to be kept alive on life support if you became seriously ill or injured. By documenting your wishes in a living will, you relieve loved ones of the burden of having to guess at what you would want in that situation.

A medical durable power of attorney is a document you sign to appoint someone to make health care decisions for you in the event that you’re unable to do so.

Bonus tip: Take a moment to understand the laws regarding health care decisions in the state you’re traveling to (if you’re traveling to another state within the United States) to confirm that your living will would be valid if you became incapacitated and couldn’t be moved from a hospital in another state. People with known conditions who travel frequently between states will often create multiple versions of their living will, one for each state where they spend time.

3. A plan for your assets.

Whether you use a will or a trust (click here to learn more about the difference between a will and a trust) to determine who will receive your assets when you die, this is a good time to check in with these documents to make sure they’re up to date and reflect any changes – births, deaths, divorces – that have happened among your beneficiaries since you created it, or since your last check in.

Of course, if you don’t already have a will or a living trust, then it’s a good idea to create one before you depart on your trip.

Bonus tip: Create or update a master file, whether electronic or hard copy, of all your accounts and documents before your vacation. Include login information where necessary, put it all in a safe, but obvious place and make sure someone, like your estate planning attorney and/or your loved ones, know where to find it. This will make it easy to access your accounts and find pertinent information if something happens to you while you’re away.

After you’ve taken the time to create or update your documents, an important final step is to make sure those people you’ve identified to make decisions or act on your behalf are aware of the role to which you’ve appointed them.

While these are all important considerations to take with regard to your estate plan before you go on vacation, this list is not exhaustive, nor is it one-size-fits-all. The best way to make sure your estate plan is as comprehensive as possible is to work with an attorney like Robinson & Henry’s Colorado Springs estate planning attorney Michael Hanchett.

Michael Hanchett is Robinson & Henry’s lead estate planning attorney. He helps individuals and business owners plan for the future by drafting powers of attorney, last wills and testaments, trusts and advance directives. Please call 303-688-0944 or click here to schedule a free consultation with Mike.

In a nutshell, an estate plan ensures that your assets are distributed according to your wishes following your death. But there’s really so much more to it than that; a strong estate plan provides instructions to your loved ones about things like what to do with any debt you leave behind and how to proceed with funeral arrangements. For parents of minor children, it’s an opportunity to identify a guardian for their children should both parents pass away.

A good estate plan not only provides peace of mind for the person creating it, but it’s also a tremendous blessing to those grieving the loss of a loved one. An estate plan ensures no one will have to guess about what you would have wanted, which also helps avoid fighting among family members.

Whether you’re drafting your first estate plan or revising one you established a decade ago, you’ll want to avoid these common mistakes.

Mistake #1: Thinking you’re too young for a will.

Unless you’re under the age of 18, you’re not too young for a will. If you are 18 years of age or older and die without a will, you are said to have died intestate and Colorado law will determine what happens to your property. This can make what is already a very difficult time for your loved ones even more difficult as they try to determine what you would have wanted, especially if you are married, divorced, remarried and/or have children.

Also consider what would happen in a situation where you become incapacitated and could not make your own medical decisions; who would do so and how would they know what you would want? By completing an advance directive, or living will, which is one part of an estate plan, you can directly answer those questions so that your wishes would be carried out if you were severely sick or injured.

Mistake #2: Never revisiting or updating your plan.

An estate plan is not a once-and-done project. Especially if you avoid mistake No. 1 and get started when you’re young. An estate plan should be treated as a living, breathing bundle of documents that needs to grow and evolve as your life does. It’s important to review and revise your plan on a regular basis, in tandem with major life events like the birth of a child, the death of a loved one, marriage, divorce or remarriage, especially if it means creating a blended family, and even before less major life events like going on vacation.

Mistake #3: Failing to talk about your wishes with your loved ones.

Taking the time to inform your loved ones about what you’ve documented in your will and even explaining why you made the decisions you did can help clear up confusion and possibly avoid any conflict or fighting among family members.

Also, if you’ve named a guardian for any minor children and/or appointed powers of attorney, it’s important to talk to those people about the appointment, explain why you chose them and confirm that they’re up for the job.

Mistake #4: Relying on a holographic will.

A holographic will is one that is handwritten and signed solely by the testator (a testator is the person who created the will). Typically, in Colorado a last will and testament must be signed by the testator and two “uninterested parties,” and notarized. However, Colorado is one of 26 states where a holographic will is considered valid, but that doesn’t mean you should rely on one to ensure your wishes are carried out after your death.

Holographic wills often use improper terminology and ambiguous language, which leaves them more vulnerable to being contested by family members and long, pricy ordeals in probate court.

Mistake #5: Failing to name a conservator for minor children.

Minor children cannot legally own or manage property. Thus, when a minor receives an inheritance, an adult is appointed to control the inheritance until the minor turns 21. The legal term for the adult who fills this role is conservator. Often this role is filled by the child’s guardian, but that’s not always the case, nor is it a requirement. You can identify who you would like to serve in this role in your will; if you don’t the court will decide for you.

Learn more about the role of conservator here.

Mistake #6: Creating a will when you really need a trust.

A will is perfectly effective for those whose estate is simple and straightforward, but for those whose estate is more complicated by things like debt and multiple out of state properties or valued over $5 million, then a trust is usually a better option or, ideally, both a will and a trust.

Further, for those for whom privacy is a top concern, a trust offers more protection than a will because, unlike a will, a trust does not have to go through probate court (a will becomes public record when it goes through probate). Avoiding probate usually also means a reduction stress, conflict and expenses for surviving family members.

Additionally, under Colorado law when a child turns 21, he/she inherits any assets or property left to him/her in their entirety. Many parents are uncomfortable with the thought of a person so young inheriting a significant amount of money, but the only way to avoid this is to create a trust, which allows you to dictate exactly when and under what terms a child receives an inheritance.

An estate planning attorney can help you determine which tool is best for you.

Read our post “Will or Trust: What’s the right choice?” to learn more about this topic.

Mistake #7: Failing to develop contingency plans.

Even if you intend to be diligent about reviewing and updating your estate plan on a regular basis, it’s wise to also build contingency plans (i.e., name secondary, even tertiary beneficiaries) into your will and other documents. Doing so ensures that in a situation where, for example, your primary beneficiary dies before you and you become incapacitated in a way that makes you unable to update your will or otherwise make decisions about your estate, both the court and your loved ones know how to proceed.

Mistake #8: Not working with an attorney.

With various forms and software programs available online that promise quick and easy wills, advance directives and more, it’s true that you could create an estate plan and never even consult with an attorney. But the documents in an estate plan are hardly one-size-fits-all and only an experienced estate planning attorney, like those at Robinson & Henry, can help you identify which tools are the best for your situation and circumstances and help you create an estate plan that most effectively protects your legacy and loved ones.

Michael Hanchett is Robinson & Henry’s lead estate planning attorney. He helps individuals and business owners plan for the future by drafting powers of attorney, last wills and testaments, trusts and advance directives. Please call 303-688-0944 or click here to schedule a free consultation with Mike.

Remarriage is a wonderful second chance at happiness. While it does come with unique challenges of merging families and separate assets, an estate plan can help make sure financial goals are realized and that dependent children are cared for. A new estate plan should reflect the goals of the new couple, as well as take into account the new family structure, which may include children from a previous marriage.

Why is this important? Let’s discuss what happens in Colorado if you pass away without an updated will, as well as discuss some common issues blended families face when a proper estate plan isn’t in place.

Dangers of not having and updated will

In the state of Colorado, the law states that unless otherwise specified in a last will and testament, the inheritance of a married person (including common law marriages) goes to the surviving spouse. In remarriages, specifically those with blended families, this scenario is wrought with potential problems.

Leaving your spouse to take care of inheritance. Without a will to specify who gets what, the surviving spouse could favor their own children over nonbiological children. They could choose to gift away assets outside of the family. They could run into problems with creditors and debtors who liquidate assets to pay off debt. They could remarry and accidentally disinherit the children from the previous marriage – meaning your assets would go to your spouse’s new partner and not to your children.

The above scenarios aren’t meant to instill distrust of one’s spouse. Instead they are intended as an acknowledgement of the uncertainties of the future. And if you have certain wishes in regard to your estate, then don’t leave your spouse guessing, put it down in writing. When thinking about how best to tackle your new estate plan, ask yourself questions like:

• What happens to my separate and commingled assets should I die and my spouse remarries?
• How do I want to divide my assets between biological and nonbiological children?
• Do I want my children to wait until both my spouse and I die to inherit?
• Who will inherit my house – my spouse or children?

The pains of probate. Without an updated estate plan, when you die, your assets will go through probate, whereby a court will disburse your assets according to Colorado law. This process can emotionally taxing for your surviving family members, as it can be a lengthy and expensive process. For those wishing to avoid this, they can update their estate plan to include a trust.

A revocable trust allows you to avoid probate, keep your finances off the public record and protect your wishes from contentious family members. A trust is also a good option for:

• Minimizing inheritance taxes (for larger estates worth $5 million or more).
• Caring for disabled or special needs dependants.
• Safekeeping inheritances until dependants come of age. Or conversely;
• Allowing family members immediate access to inheritances by bypassing the probate process.

Reviewing your guardianship plan

In the event of your death, your children will go to the other biological parent; if you’re remarried, that means your ex-spouse. If, for whatever reason, you believe that your ex-spouse should not get sole custody of the children, then you can state so in your will. A court will usually favor keeping a child with the biological parent, so you will need to collect evidence that shows why your ex-spouse is unfit, to persuade the court to accept other arrangements. Evidence such as police reports or other court records are a good place to start.

If you have children with your current spouse, you may want to also consider appointing a guardian should you and your spouse pass away unexpectedly. Things to consider when selecting a guardian are – how far away do they live from your children’s school and other family members? Do they have a spouse and would that spouse be supportive? Is this person financially able and mature enough to care for your children? To read more about guardianships, please read our blog post here.

Next steps

To get the ball rolling on developing a new estate plan, a couple can start by:

1. Taking an inventory of all marital and separate assets.
2. Having a frank discussion with one another on goals and wishes.
3. Taking into consideration the feelings of immediate family members.
4. Meeting with your estate planning attorney to update all documents and beneficiaries.

Call our estate planning attorneys for a free consultation. They can review your estate and help you decide if your family would best be served by a trust, will and/or a power of attorney.

If you enjoyed reading this blog about remarriages and blended families, you may also like to read our blog on marital agreements, which are an important component to safeguard any marriage.

In recent years, the Internal Revenue Service (IRS) has increased its efforts to collect unpaid back taxes from individuals and businesses who have outstanding balances due. If you have tax debt, then you probably already know this. By now, you’ve likely heard not only from the IRS but you’ve also likely heard from numerous tax settlement firms (also known as tax resolution or debt resolution firms), which promise – for a thousands-of-dollars retainer – to help reduce or even eliminate your tax debt.

That promise might sound overwhelmingly appealing, especially when your stress levels are elevated and you’re up all night wondering how to fix your tax problems. But the truth is, these companies often end up piling more weight onto an already too-heavy burden. In fact, the Federal Trade Commission (FTC) has issued a scam alert about these firms, stating:

“Tax relief companies use the radio, television and the internet to advertise help for taxpayers in distress. If you pay them an upfront fee, which can be thousands of dollars, these companies claim they can reduce or even eliminate your tax debts and stop back-tax collection by applying for legitimate IRS hardship programs. The truth is that most taxpayers don’t qualify for the programs these fraudsters hawk, their companies don’t settle the tax debt, and in many cases don’t even send the necessary paperwork to the IRS requesting participation in the programs that were mentioned. Adding insult to injury, some of these companies don’t provide refunds, and leave people even further in debt.”

A far better option for getting assistance with your tax debt is to head to a law firm with experienced tax attorneys, like Robinson & Henry, P.C.

Law Firms Versus Tax Settlement Firms

There are big differences between the individuals working for tax settlement firms and attorneys, as well as big differences in the standards and regulations each are held to. A prime example of such a difference is, unlike tax settlement firms, law firms cannot use salespeople to call individuals on the Notices of Federal Tax Lien (NFTL) list.

When a taxpayer gets a call from a tax settlement firm, or vice versa, the representative from the firm is usually a salesperson whose primary goal is to get the taxpayer to pay the firm’s retainer, which can be $5,000 or more. Complaints to the Better Business Bureau (BBB) and FTC show that more often than not, the settlement firm does little to nothing with that retainer which, in the end, usually results in the taxpayer and the firm parting ways to the detriment of the taxpayer, who is by then likely in greater debt and still without a resolution.

The IRS allows only Enrolled Agents (EA), Certified Public Accountants (CPA) and licensed attorneys to represent taxpayers before it. As you can see in the table below, the differences in education, knowledge and experience requirements between these three roles are dramatic.

You’ll often find EAs and CPAs at tax settlement firms, but it is illegal in the State of Colorado for settlement firms to employ attorneys, so if a tax settlement firm is advertising that they have tax attorneys on staff, that should be a red flag.

Closer Look: Major Differences

Client’s best interest. According to Forbes, taxpayers are best served by a reputable tax lawyer because lawyers know law and how to research and argue it. Further, they are trained in the art of advocacy and are subject to disciplinary authority of their state bar, which holds them to a high set of legal and ethical standards.

Just as a doctor is ethically bound to “first, do no harm,” an attorney is ethically bound to act in his/her client’s best interest or risk losing his/her license. CPAs and EAs are held to no such standards and those who call on behalf of a tax settlement firm are focused on one thing: trying to get you to buy their product, regardless of if it’s in your best interest.

Unable to testify against you in court. Also consider that communications between a client and his/her lawyer are privileged. This is not the case when it comes to communications between a client and an accountant or between a client and a tax consultant. For example, your EA or CPA could be subpoenaed to testify against you in an IRS court case, however, under attorney-client privilege, an attorney could never divulge private information that you had discussed with him/her.

Multiple Solutions. A tax attorney can also look at your situation and offer solutions that CPAs and EAs wouldn’t know to offer, like bankruptcy or suing a collector if they violate the Fair Debt Collection Practices Act. Additionally, a tax attorney must remain up-to-date on the latest laws, tools and tactics available to them and their clients.

How to spot a scam

Be wary of tax settlement firms that …

• Make unrealistic claims in their advertising, by using statements like, “We’ve helped thousands of people settle their tax debts for a fraction of the amount owed.” Or, “We can significantly reduce your tax debt, call for a free consultation.”

• Use high pressure sales-tactics to strong-arm you into paying their retainer.

• Require large upfront fees.

• Don’t offer face-to-face consultations and/or ask for your credit card information over the phone. Know that often these firms aren’t even in the same state as you.

If you’re seeking help sorting out your tax debt and dealing with the IRS, even if you’ve already been contacted by a tax settlement firm, it’s critically important that you contact a tax attorney to get a second opinion on your tax case.

Robinson & Henry’s lead Colorado Springs tax attorney, Michael Hanchett has successfully negotiated hundreds of resolutions with the IRS and state taxing authorities and has experience working with individuals, sole proprietors, partnerships, limited liability companies and large corporations. Contact us today to schedule a free consultation with Mike or another attorney in our tax law practice.

Protect yourself, your family, and your business from potential creditors and predators.

Most business owners spend their whole life working hard to create a legacy for their family. Running a small business can be physically and mentally demanding, and it is not uncommon for accidents to occur on the job. It only takes one accident for a lawsuit to potentially wipe out an entire lifetime of hard work and savings for a business owner.

Although we always hope for the best, experience has shown that we should diligently plan for the worst. It is prudent for individuals and business owners to consider the estate planning tools that are available to them to protect their assets and future legacy. Estate planning can protect your business from:

• Excessive estate taxes (or death tax). Should you pass away, a tax of 35 to 50 percent of the business’ value is due to the IRS within 9 months of your passing. Such a tax is a common reason why businesses cannot carry on after an owner passes.
• Disruption and potential liquidation. If a co-owner becomes incapacitated, without any directions, their spouse/family may fight with the surviving owner over what should happen with the business.

Depending on your needs and personal situation, there are various estate planning tools one can utilize, such as:

Buy-Sell Agreements

This is a good option for a business owner who co-owns their business with one or more persons. Let’s say Jim and Nancy co-own a bed and breakfast. Jim suddenly becomes, ill, dies, has to file for bankruptcy or decides to retire. A buy-sell agreement protects both owner(s) interest in the company, as well as keeps your business intact – safeguarding against family/co-owner/spouse infighting and subsequent liquidation.

Basically, it is a prenup agreement between co-owners. As a binding contract it allows co-owners to control howeach owner is allowed to sell their share of their company – this is done by dictating when an owner can sell, who they can sell it to and at what price they can sell.Without such an agreement, if one owner becomes incapable, then the surviving owners are left without direction, causing disruption to the business and perhaps financial disaster.

In addition to protecting the business from disruption and co-owners from financial distress – this type of agreement also protects an owner’s family’s investment. For example, if an owner passes away, without a buy-sell agreement already in place, the surviving spouse is usually forced to sell their share of the business at an unfair, heavily discounted price (usually to the surviving owner), just because he or she is unable to operate the business.

Living Trusts and Wills

Wills and trusts can be useful for a variety of reasons. For those who have children, they can arrange guardianship for minor children, provide future care for disabled children, and safeguard assets that are set aside for them. For small business owners, a trust is useful for protecting assets, creating a line of succession for your business, and minimizing estate tax liability. Without a trust, your assets and business will have to go through probate court; leaving your family to deal with legal fees, court costs, and to square off with contentious relatives and creditors in the division of your assets.

Power of Attorney

This document allows a business owner to appoint another person to manage your financial affairs, make healthcare decisions, and conduct other business on your behalf should you become incapacitated. Having power of attorney documents in place will give you and your loved ones peace of mind now and especially later, at a time of personal stress and emotional upheaval.

Don’t allow yourself, your family or your business to become a victim of unfortunate circumstances. By preparing now for the future, our clients have the peace of mind that only comes from knowing their options and creating a plan to minimize their exposure and protect their assets.

Meet Michael Hanchett, our lead attorney in Estate Planning. He helps individuals and business owners plan for the future by drafting powers of attorney, last wills and testaments, trusts, and advance directives. Please call 303-688-0944 to schedule a free consultation with Mike.

Being contacted by the IRS for an audit can invoke immediate feelings of stress, panic and uncertainty, especially if you’re a small-business owner. You probably already have too much on your plate and worrying about your business being examined under the IRS’ microscope is the last thing you need. When there’s so much on the line, like your business’ financial future and, perhaps equally important, your sanity, the best thing to do is hire a professional to represent you in the audit.

Hiring someone to represent you in an audit helps in a few ways: it ensures that the auditor only receives the required information (taxpayers who go it alone often divulge too much, which can expand the scope of the audit and possibly worsen the outcome for the taxpayer); it puts someone on your side who can work to minimize any penalties or liability and, finally, it helps keep the auditor in check since the right tax pro will know if an auditor is right or wrong.

The IRS allows three types of tax pros to represent taxpayers in an audit: Certified Public Accountants (CPA), Enrolled Agents (EA) and tax attorneys. Giving a tax pro the power to represent you in an audit is as simple as filling out IRS form 2848, Power of Attorney and Declaration of Representative. Once that form is signed and submitted, you no longer have to communicate personally with the IRS (your tax pro will handle communications from here), which for many taxpayers is an immediate relief.

Deciding not to go it alone with an audit is only the first step, however. The next is deciding exactly who will represent you. While you could choose a CPA or an EA, there are clear and critical advantages to choosing a tax attorney, including:

1. Confidentiality. Thanks to attorney-client privilege, communications between you and your tax attorney are confidential. While there is CPA-client privilege, it’s limited only to Federal/State tax matters. A CPA could be subpoenaed to testify against you in an IRS court case, but an attorney could never divulge private information that you had discussed with him/her.

2. Ability to litigate. CPAs and EAs do not have the same ability to litigate as a tax attorney does, so if there’s even the smallest chance that your case might go to court, you’re going to want an attorney to represent you.

3. Knowledge and experience. A good tax attorney has in-depth knowledge of the tax code and regulations and also understands how to deal with any bureaucratic and legal complexities that may arise. Further, tax attorneys who have experience dealing with the IRS know where the IRS looks for vulnerabilities and can employ strategies that are proven to defend your case.

4. Approach. Attorneys are trained in the adversarial system, whereas CPAs and EAs are trained in compliance. This means that an attorney advocates for your interests and is willing to help position your audit in the best light possible. For example, if you don’t have receipts available, an attorney will work to prove your expenses via circumstantial evidence. So, if you need to prove mileage for which you don’t have records, an attorney will use things like your calendar, emails, averages from other professionals in your industry and other circumstantial evidence to prove your mileage.

For more information on the differences between tax attorneys, CPAs and EAs and to learn about why you should hire a law firm over a tax settlement firm to help with tax debt, read our blog post on the subject here.

Robinson & Henry’s lead Colorado Springs tax attorney, Michael Hanchett has successfully negotiated hundreds of resolutions with the IRS and state taxing authorities and has experience working with individuals, sole proprietors, partnerships, limited liability companies and large corporations. Contact us today to schedule a free consultation with Mike or another attorney in our tax law practice.

Robinson & Henry is proud to announce that James Garts, lead family law attorney in the Denver office was selected by his peers for inclusion in The Best Lawyers in America© 2018 in the field of Family Law.

About Best Lawyers®

Since it was first published in 1983, Best Lawyers® has become universally regarded as the definitive guide to legal excellence. Best Lawyers lists are compiled based on an exhaustive peer-review evaluation. 83,000 industry leading attorneys are eligible to vote (from around the world), and we have received almost 10 million evaluations on the legal abilities of other lawyers based on their specific practice areas around the world. For the 2018 Edition of The Best Lawyers in America©, 7.4 million votes were analyzed, which resulted in more than 58,000 leading lawyers being included in the new edition. Lawyers are not required or allowed to pay a fee to be listed; therefore inclusion in Best Lawyers is considered a singular honor. Corporate Counsel magazine has called Best Lawyers “the most respected referral list of attorneys in practice.”

About James Garts

James began his legal career in Memphis, Tennessee, and initially worked in a variety of legal areas ranging from criminal law to medical malpractice defense. He was always interested in equity and the harm injustice inflicts upon society. A graduate of Colorado College, he was lured back to Colorado by his love of the state in 2006. He passed the Colorado Bar that same year and, soon after, focused his Colorado practice in the field of family law. He considers family law a place to pursue equity with the goal of limiting the fallout of divorce on families. Click here to read more.