A frequent comment of new clients is that they have put off estate planning for their family because they didn't know where to start. Actually creating an estate plan is relatively simple and involves only four or five steps - four for most of us.
The First Step is identifying the beneficiaries of your estate. Typically, the choice is your spouse, or if your spouse is deceased, your children. However, under Colorado law your children are not legally entitled to receive anything from your estate. Thus, if you wish, you can designate friends, charities, parents, siblings, etc. as beneficiaries. In fact your estate plan can include your pets as beneficiaries.
The Second Step is determining what each beneficiary will receive. The simplest approach is to divide the estate into percentages. Thus, if you have three children, give each of them one-third of the estate. As a general rule, it's not a good idea to leave a specific dollar amount to a beneficiary because your estate might grow (or shrink) before you die — which can create unintended consequences. Ditto for specific parcels of land, stocks, and other investment accounts.
The Third Step is deciding who will serve as your Personal Representative (for your Will), Agent (for your powers of attorney) and Trustee of your Trust (if your plan includes one). You should also choose backups for these persons in case your first choice is unable or unwilling to serve in these roles. And, if you are the parent of minor children, you will need to choose a guardian(s) for the children.
The Fourth Step is developing a plan that will avoid probate , the court administered procedure for distributing your estate to the beneficiaries and paying creditors. Although the probate process in Colorado is less convoluted than in many states, it still usually takes a year to complete, costs an average of 2-5% of the probate estate and can be emotionally draining on the personal representative. Thus, your plan should be designed to either avoid probate altogether, or at least minimize the cost.
The Fifth Step is developing a plan that will not subject your estate to the federal estate tax. Frankly, this is a good "problem" to have since the federal estate tax exemption has increased from $675,000 in 2000 to $5,250,000 in 2013. However, if your net worth is greater than $5,250,000, there is a serious potential problem since the estate tax rate is 40%. Thus, your plan should be designed to eliminate (or at least reduce) the estate tax.
Steps One, Two and Three are primarily personal and family decisions to be determined by you and, if you are married, your spouse. However, Steps Four and Five require the involvement of an experienced and competent estate planning attorney who can assist you in devising a plan that will minimize the cost of administering your estate and will avoid the federal estate tax.