3 of My Favorite Tools for Non-Probate Estate Planning

By Aaron Gutierrez, Esq.

Many financial gurus have espoused the benefits of non-probate planning, take Suze Orman for instance.  The truth is that non-probate estate planning is a very important tool. The difference between the probate and non-probate process is that probate planning can be handled almost entirely in your will, while non-probate planning requires careful planning around many documents and financial instruments that you may be using in your everyday life. Non-probate planning is supposed to accomplish that all-important goal of avoiding the expense and delay of a formal probate in a court after you have passed on.  However, if your non-probate planning is not done correctly (or completely) it can compound into many more layers of litigation and disputes between your family and heirs than probate would ever be, so it is important to get it right.

Non-probate planning can include an endless list of tools, property rights, and beneficiary designations.  Here are three of my favorite tools to work with clients on:

• The Colorado Beneficial Deed

• The Colorado Beneficial allows you to pass your residence to your heirs upon your death outside of probate, with many of the benefits of a probate transfer.

• The real property receives a full step up in basis at death because there is no gift during life, meaning that if the heirs have to sell the house, they will not be charged capital gains tax on the appreciation of its value up to the date of the grantor’s death.

• Multiple heirs can be named as beneficiaries in a single deed; and

• There is no gift tax owed on the transfer before death.

• Inter-vivos Revocable Trusts/Revocable Trusts/Living Trusts

  • Living Trusts have long been touted by fans of non-probate planning as a safe and effective way of protecting wealth and avoiding probate for their track record of reliability.

  • Living Trusts allow clients a large amount of flexibility if their formalities are properly observed.

  • The Living Trust allows for us to plan for any tax consequences of property that will be transferred to beneficiaries through its provisions, thereby reducing the “tax bite” on the transfer of your wealth.

• Buy-Sell Agreements and funding mechanisms. For business owners I like to ensure that they have a solid Buy-Sell Agreement and funding source in place.

  • For a single owner business, the Buy-Sell agreement can guarantee that the family of the business owner receives peak value of the business when the Business owner passes away if it is funded properly.

  • For businesses with multiple owners, a Buy-Sell Agreement with a funding mechanism will help ensure that the business continues operating under the authority of the other owners while providing solid and fair compensation to the family of the decedent owner’s family.

  • Buy-Sell Agreements can ensure that a business will continue to prosper and profit for all of the people who are involved from the Ownership down to the employees.

  • Buy-Sell Agreements help entrepreneurs ensure that the legacy that they have worked for their entire life will live on and prosper.

These three tools can be used to bring a lot of peace of mind to you, but they are just some of the tools we use at Newmoon Law, P.C. to serve our clients.  Remember that taking care of your future requires action, so start the ball rolling right now and request an appointment with me so that we can get started on your non-probate estate plan.