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Quarterly Newsletter: Leaves Are Falling, Estate Planning Is Calling



Dear Clients and Other Friends,

Greetings from Scarola Law! It is that time of year again. You have been here before. New school year beginning. First day of kindergarten. First grade. High school. Going off to college. New shoes. New clothes. New beginnings.

Maybe we all need to go back to school. To relearn what we have always known. Work hard. Save for a rainy day. Pay it forward. Lend a hand. Play by the rules. Help those that need it. Worship as you will. Keep an open mind. Do unto others as you would have them do unto you. Rules we have lived by and ideas that build our country. As you enjoy the fall season and prepare for the holidays, make sure you take the time to evaluate your estate plan to ensure that it continues to meet your needs, or to finally set one up. Failure to plan for the future is planning to fail. But if you plan, you can:

  • Keep savings for the future.

  • Provide for your loved ones.

  • Choose the care you want in the event you need it (in-home vs. a care facility).

  • And still pay it forward.

If you think any of your friends or family need an estate plan and would benefit from working with us, it would be an honor to work with them. We are never too busy for your referrals. Stay well and thank you again for subscribing to our newsletter.

— Scarola Law Team


Fact or Fiction? Estate planning is only for couples.

There is a long-standing belief that estate planning is only recommended for couples or those with children. This prevailing myth dissuades many people who could benefit from estate planning from considering doing so if they don’t fit into either of these boxes.


Estate planning is encouraged for every person, however, regardless of their relationship status. Having a plan in place ensures that you have a say over yourself if you were to become incapacitated for any reason. Additionally, having an estate plan allows you to govern certain decisions when you cannot, such as distributing any assets (for instance, to charities near and dear to your heart) or providing for any loved ones (including pets!).


The power to have your wishes carried out when you are unavailable to advocate for yourself is meaningful regardless of your relationship status.


What happens if I don't have an estate plan in place?


If you don’t have a plan in place, it is much less clear to courts and potential beneficiaries what your wishes might be. This means that it is less likely that your wishes will be carried out the way you would otherwise prefer.


In Colorado, for instance, the laws of intestacy would govern how your property would be distributed according to the applicable statute. Additionally, were you to become unable to manage certain affairs yourself during your lifetime (such as medical or financial decisions), other court processes, like guardianships or conservatorships, may empower other people to handle your affairs for you. These processes can be expensive, time consuming, and may not conform with your own wishes.


What documents should I focus on in my estate plan if I am unmarried?


The main documents you should prioritize as an unmarried person are your medical and financial powers of attorney along with your living will since these documents allow you to advocate for yourself regarding any medical or financial decisions. Additionally, if you own real property, you should consider a beneficiary deed which allows real estate to automatically transfer to your beneficiaries (or trust) upon your death.


The financial power of attorney document gives someone you trust (called an agent or attorney-in-fact) the authority to act in a broad range of matters, such as buying and selling real estate and personal property, managing your banking and investments, operating a business, handling taxes and lawsuits, and applying for government benefits.


Regarding medical decisions, a living will (also called an advanced directive) allows you to make your own end-of-life decisions, such as whether you would like life support and it helps to prevent confusion about the type of care want in the event you become incapable of communicating your wishes. Alternatively, the medical power of attorney document authorizes your agent to make medical decisions on your behalf if it is determined by your doctor that you are incapable of making such decisions, or you are unable to communicate your wishes, if you’re in coma, for example.


While these documents are necessary if you would like medical and financial decisions to be made in accordance with your wishes, you should also strongly consider creating a will. Not only does a will allow you to dispose of your property upon your death according to your wishes, but it also allows you to name a personal representative (executor) to administer your probate estate, to name any beneficiaries (such as any charities or family members), and to set aside money for and designate a guardian for your pets.


If you are interested in finding out more about your estate planning options, please book a free consultation today.




Everybody Knows: Wills Avoid Probate! Reality Check: Wills Require Probate…


You might be an expert on certain things. You know how to play the piano. Or fly fish. Or hike. You might have learned on the job. Or as a hobby. But you are an expert. You know how this stuff works.


And then you hear someone else talk about it. A friend. A neighbor. Your sibling. Maybe read about it in the news. And they get it wrong. All wrong.


When you pass away, who gets your stuff, your assets? That really depends.


Enter the Last Will & Testament. If Hollywood were reality, the Will reading would take place in a creepy old house, with a creepy old lawyer, surrounded by heirs of mixed ages and questionable virtue. Reading dramatically from the Will in his creaky old voice, the lawyer would deliver deeds, heirlooms, and sacks of cash. Virtuous, good heirs rejoice. Evil, bad heirs plot their revenge.


And it is all over in just a few minutes.


But this isn’t the movies. And when you have a Will (or don’t have a Will) you need to go through probate. So, what is probate? Probate is the formal legal process that gives recognition to a will and appoints the executor or personal representative who will administer the estate and distribute assets to the intended beneficiaries. The laws of each state vary, but typically probate can take anywhere from 6 to 18 months. Simply put, probate is the answer when people do not plan. And most people do not plan.


Your Will ONLY works in probate. It is instructions to the Probate Court, through the Personal Representative or Executor, expressing your desires as to who should oversee your estate and who gets what.


Your Will only “works” after you have died.


Your Will only “works” by going through Probate.


Your Will does not avoid Probate… it is a creature of Probate.



You’ve named the wrong executor

Maybe you thought that a member of your immediate family — perhaps your spouse or oldest child — would serve as the executor of your estate. Or you may have planned for a close friend to handle these duties. But the person you assumed would be the obvious choice turned out not to be the best one for the job.


Choosing the “wrong” executor could cause a multitude of problems. For example, missteps by this person could lead to financial or logistical troubles. He or she may make mistakes that hinder the probate process or jeopardize estate planning benefits. And the executor might make decisions that defeat your intentions.


Even worse, an executor’s actions could create friction within your family and result in legal squabbles. It might even split the family apart for good.


So how do you pick the “right” person for the role of executor? First, be sure that your top choice is willing to provide the services required. While your spouse may be the best choice, it’s also important that he or she know that tasks may be delegated. The executor is ultimately responsible for ensuring that your wishes are carried out appropriately, and such responsibility would include relying on experts as needed.


If you do not have a spouse or wish to choose someone other than your spouse, you will reduce the potential for confusion if you choose someone with financial expertise. The person doesn’t have to be a professional executor, but it helps if he or she has the background necessary to perform these duties. Finally, pick someone who’s familiar with your affairs or can easily be brought up to speed.



Meet Our Newest Law Clerk!

Emily Bennett is a law clerk who assists the firm with document drafting and execution while she awaits her July 2021 Colorado Bar Exam results. She has held various internships throughout law school in diverse areas such as corporate law, alternative dispute resolution, cannabis law, and employment law before ultimately finding her passion in estate planning while interning with Scarola Law.


In her free time, she enjoys gardening and taking care of her many houseplants, taking her dog, Patty, to the dog park, and vegan baking.


My Approach

Creating an estate plan often requires confronting difficult scenarios that may never come to pass and I hope to use my legal background to make the difficult but necessary process of estate planning more comfortable, simple, and straightforward. Ultimately, I would like for families to feel secure that there are steps in place if or when they need them.


Education

University of Denver, Sturm College of Law

Juris Doctor, 2021

Texas A&M University

B.A., Anthropology, 2016



In the Spotlight

Jason Baer, CFP, CWS Aaron Leatherwood, CPA, CFP, CWS, MS


We are wealth advisors and owners of a boutique wealth management firm, Centerpiece Wealth Advisors. We help our clients have financial clarity, confidence, and peace of mind so they can be present for what matters most. Our purpose is to improve the lives of the people we serve by navigating them through their questions and concerns around money and guiding them to a place of financial wellbeing. We focus on helping those planning for retirement, business owners, or who have family wealth needs and offer financial planning, investment management, tax planning and preparation, and estate planning services. A topic that has been top of mind for many lately is Roth conversions. A Roth conversion is simply taking assets in your traditional IRA and converting them to a Roth IRA. When you do this, you have to pay taxes on the amount you convert. There are several variables to evaluate when determining if Roth conversions improve your situation, but an often overlooked and critical consideration is how it impacts the beneficiaries of your IRAs and overall family wealth. The SECURE act changed the rules for inherited IRAs and went into effect in 2020. Under the old laws, generally, a beneficiary was required to take distributions over their lifetime, allowing them to stretch the benefit and resulting taxes over a long period. However, under the new rules, a beneficiary must withdraw the total amount within ten years (with some exceptions). This is true for either an inherited traditional IRA or an inherited Roth IRA. However, there are important income tax differences. With a traditional IRA, whether it's the original owner or beneficiary, the amount withdrawn is subject to ordinary income tax. When a beneficiary inherits a traditional IRA and is required to distribute the total amount of the IRA within ten years, they are often pushed into higher income tax brackets. And depending on the beneficiary's other sources of income, perhaps from wages and salaries, they could be forced into significantly higher tax brackets. Roth IRAs, whether it's the original owner or beneficiary, are taxed differently. The amount withdrawn is generally tax-free. As a result, your beneficiary inherits a tax-free asset, and their required distributions will not push them into higher tax brackets. Given this change in tax law and considering the tax consequences, you should project your income tax liability over your lifetime and your beneficiary to determine if there are opportunities to "smooth" income taxes and fill up lower tax brackets. The impact of implementing a series of Roth conversions over many years can be significant. In our experience, this is often a very effective method to preserving and growing family wealth. Our clients are often pleasantly surprised when we run this analysis for them and calculate the potential benefit to their families.

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