Estate planning has seen some major adjustments in recent years, whether it be from law changes or issues related to the pandemic.
Attorney Christopher Cole, a member at Sherman & Howard who does a lot of tax planning for high-net-worth families, said his practice has seen a shift.
“The boomers are the wealthiest generation that the world has ever seen,” Cole said. “They’re also starting to pass away and transition their wealth and just demographically, I think we’re seeing a lot more interest in estate planning for that reason alone.”
With the Colorado General Assembly and governorship belonging to Democrats, Cole and his peers have also found estate planning proposals taking a back seat to policies the party is more interested in.
“I think the reason they don’t get more traction is because they’re not as flashy from an optical standpoint,” Cole said. “There are these more publicly understandable policy proposals that just are easier to sell and may have more perceived political capital.”
“Colorado has a very sound base of trust and estate law already in place, so any changes wouldn’t be too radical,” added Michael Silberberg, an associate at Sherman & Howard who works in trusts and estate planning.
Cole added some of the most common problems people deal with when it comes to estates is not having any estate plan.
“By far the most common malady that I encounter involves people who never made a will; never signed a power of attorney,” Cole explained.
Silberberg noted another problem is poor estate planning and inconsistencies between documents. Cole added a key success factor for attorneys in this area is making sure the core intent behind the plan is what the client wants now, instead of something they decided 20 years ago.
Another issue Cole often sees is a plan that was made a decade ago may not be as tax efficient now as new laws are in place. Cole noted it’s important to put something together that’s transparent.
“You’ll see in some families that the wealth generators … won’t communicate to their children or whoever their beneficiaries are, during their lifetimes, exactly how the estate plan operates,” Silberberg said. “When they die, the children or whoever the beneficiaries are, could be shocked at what the estate plan actually is. That lack of communication could often lead to litigation issues that maybe could be avoided.”
The pandemic has also gotten more people thinking about the future and their own mortality, according to Cole, as estate planning workloads at Sherman & Howard has gone up.
Law Changes
As estate planning continues to grow, laws are also changing.
One of the bills approved in Colorado in 2023 impacting Cole and Silberberg’s practice was Senate Bill 23-100. Cole said in California for example, if someone earns income or acquires property while they are married, a spouse owns half of it, including upon death. Cole said under the bill, if you come to Colorado from one of the states where you acquired community property, the state will respect that legal distinction, even though Colorado isn’t a community property state.
Cole said the biggest change for him from a state law perspective in recent years, is Colorado’s 2018 adoption of the Uniform Trust Code. Cole noted it’s a set of rules that govern the administration of trusts, the rights beneficiaries have and what types of information can be disclosed.
“That was a tectonic shift for many trust and estate practitioners because it adopted a lot of new rules that were either not in place or changed,” Cole explained, noting before much of the code was piecemeal. “It also brought us into the 21st century in terms of modernizing our trust and estate law.”
Much of the work Cole does is focused on the federal side of the law. Cole said the federal gift and estate tax exemption, which is the amount you can give away during life, death or a combination without paying those taxes, was $600,000 in the 1990s. Currently it sits at about $13 million. There had been concerns recently the exemption amount would be reduced by the Build Back Better Act, but that didn’t happen Cole said.
“There’s a lot of uncertainty associated with the future of this exemption, so wealthy Americans are worried about where it’s going,” Cole continued. He noted there’s a sunset clause on the $13 million exemption at the end of 2025 and if Congress doesn’t do anything to change it, the exemption would be cut to about $5 million (indexed for inflation from 2011).
According to a recent study from Caring.com, about 67% of Americans don’t have any kind of estate planning documents.