Cost of Living Adjustments to Probate Code

Effective January 1, 2012, certain figures in the Colorado Probate Code were adjusted for inflation, pursuant to the 2010 addition of C.R.S. 15-10-112 to the statutes, but such adjustments are only made where the increase or decrease is in increments of $1,000. The Colorado Department of Revenue is supposed to release the numbers by February 1, but this was the first year for this requirement, and apparently they had not been informed by the legislature! The numbers that change are as follows:

Description	2011 amount	2012 amount
Initial intestate share for spouse where parent survives decedent	$300,000	$309,000
Initial intestate share for spouse where spouse has children from prior marriage	$225,000	$232,000
Initial intestate share for spouse where decedent had children from prior marriage	$150,000	$154,000
Supplemental elective-share amount	$50,000	$51,000
Small Estate Affidavit limit	$60,000 (as of August 2011, increased from $50,000)	$61,000
Exempt Property	$26,000	$30,000 per statute change, not COLA adjustment
Family Allowance	$24,000	$30,000 per statute change, not COLA adjustment

Note that the increase in the small estate affidavit limit to $61,000 creates a disconnect from the total of the Exempt Property and Family Allowance amounts.

SB 12-131 Passed by Legislature

This bill protects a personal representative and trustee from liability for distribution of an estate or trust without regard to a valid designated beneficiary agreement so long as the fiduciary does not have actual knowledge of such an agreement, and the fiduciary reviewed the county records for a recorded designated beneficiary agreement in the counties in which the decedent was domiciled within three years before death.

IRS Expands Penalty and Installment Payment Relief

The IRS announced that it has expanded its "Fresh Start" initiative to help struggling taxpayers by providing late payment penalty relief and making installment agreements available to more taxpayers. Failure to pay penalty relief applies to two categories of taxpayers: (1) wage earners who have been employed at least 30 consecutive days during 2011or in 2012 (up to the April 17^th filing deadline); and (2) self-employed individuals who experienced a 25% or greater reduction in business income in 2011, due to the economy. To qualify, the taxpayer’s income must not exceed $100,000 for single and head of household filers or $200,000 for joint filers. In addition, the 2011 tax liability due cannot exceed $50,000. To seek relief, the taxpayer must file Form 1127-A, Application for Extension of Time for Payment of Income Tax for 2011 Due to Undue Hardship. Those qualifying for relief will avoid the penalty until October 15, 2012, but will be responsible for interest on the tax until paid. With respect to installment agreements, the IRS has raised the threshold limit to $50,000, meaning that taxpayers who owe up to $50,000 in back taxes may qualify for an installment agreement without having to provide financial information to the IRS. In addition, the IRS extended the maximum term for installment agreements to 72 months.

HB 12-1074 Passed by Legislature and Sent to Governor

This bill grants the courts access to contact information from other state agencies for guardians and conservators who fail to timely file required reports. This will add to the court’s options for contacting fiduciaries to obtain such reports. The Denver Probate Court has been issuing Letters to guardians and conservators that expire on the date such reports are due, and will only be re-issued once the reports are filed.

Do Children Born Post-Death of a Parent Qualify for Social Security Benefits?

On March 19, the U.S. Supreme Court will consider the case of Karen Capato, who is trying to receive Social Security survivor benefits for her children who were born after the death of her husband, using in vitro fertilization. In 2000, Robert Capato was diagnosed with cancer and, as a precaution, froze sperm with a fertility clinic, out of concern that the treatment would render him sterile. Robert and Karen decided before Robert’s death to use the frozen sperm to conceive a child, as a sibling to their son. Robert died in 2002, and Karen gave birth to twins in 2003. She then applied for Social Security survivor benefits for the twins, but was denied. The government says this is because of the inheritance laws in effect in Florida (where the Capatos reside) which states that children conceived after the death of a parent cannot inherit property unless specifically provided for in a Will. Mrs. Capato argues that under the 1938 Social Security Act, survivor benefits go to any "child" of a covered individual, and that includes biological offspring of a married couple. The Florida law would only come into play if biological parentage is uncertain. A federal appeals court in Philadelphia ruled in favor of Mrs. Capato last year. There are currently an estimated 100 similar cases pending with the Social Security Administration.

Gifts to Trust Complete Even With Retained Power of Appointment

In Chief Counsel Advice 201208026, the IRS rejected two arguments for transfers to an irrevocable trust to avoid gift tax. First, the taxpayer argued the gifts were "incomplete" because the donor retained a testamentary limited power of appointment over the trust, but no power over discretionary distributions to the current beneficiaries. The IRS stated that the gift was complete as to the income interest of the current beneficiaries, and incomplete as to the remainder. In addition, the "crummey" withdrawal powers were defective because the beneficiaries could not enforce them, and would lose their interests as a discretionary beneficiary if the powers were exercised. For more information, see Federal Taxes Weekly Alert.

The Truth About Financial Elder Abuse

The 2010 Dodd-Frank Wall Street Reform and Consumer Financial Protection Act (P.L. 111-203) established a new agency in the Federal Reserve, the Consumer Financial Protection Bureau.  The Dodd-Frank reforms include major financial regulatory reforms and changes to the financial services industry.

The law established an Office of Older Americans within the Bureau to educate and inform older consumers so they can make better financial decisions.  The Office is committed to carrying out their purpose in a way that produces tangible, measurable and real-life results.

Some facts about Financial  Elder Abuse:

- Older Americans are losing an estimated $2.9 billion a year to financial abuse.

- Three out of five families headed by a person over 65 do not have any money in retirement accounts.

- Women between 80 and 89 who live alone are twice as likely as men to be victims of financial abuse.

This problem is global.  The best way to combat financial abuse is to help seniors speak up and speak out about abusive and deceptive financial services.  For resources, information, or to share a story with the Office of Older Americans, please visit www.consumerfinance.gov/older-americans.

Portability Election for Estates of Decedents Dying in First Half of 2011

For decedents dying in 2011 or 2012 with a surviving spouse, the "deceased spouse’s unused exclusion" (DSUE) amount can be added to the surviving spouse’s estate tax exemption, subject to a number of restrictions. This means that the surviving spouse could potentially double his or her estate and gift tax exemption, but only if a timely filed U.S. Estate Tax Return (Form 706) is filed. The return is due nine months after date of death, but can be extended for six months by filing Form 4768. The IRS recently issued Notice 2012-21, 2012-10 IRB; IR 2012-24 extending the deadline to file the Form 706 for decedents dying in the first half of 2011 to fifteen months after the date of death, but only for "qualifying estate" defined as estates with a surviving spouse and the gross estate does not exceed $5 million. The estate must file Form 4768 by 15 months after date of death to receive this extension, even if Form 706 was filed before the 15 months (but after the 9-month) deadline. For more information, go to IRS Notice 2012-21.

February Fraud Alert from Denver DA

The Denver DA’s office sends out a "Fraud Alert" each month. This month, they caution that "The most common tax fraud this time of year is committed by perpetrators who use stolen identities to file tax returns in the hopes of collecting tax refunds. However, not all identity thieves have financial motives in mind. Stolen Social Security numbers are also used by perpetrators or others with questionable backgrounds to get a job." They note that perpetrators will send e-mails or call saying they are from the IRS and asking for Social Security numbers and other information. The IRS never contacts taxpayers in this way. The alert also tells taxpayers to be sure to use a password to protect your tax return electronic file, and then save it to a disk and delete it from your hard drive. To see other Fraud Alerts, go to Fraud Alerts.

“Temporary” Reduction in Probate Filing Fees

Effective January 23, 2012, the Colorado Supreme Court has temporarily reduced filing fees in court actions, including probate matters. At least temporarily, the fee for filing an application or petition for probate is $127 instead of $164, and the fee for filing a trust registration statement is $126 instead of $163. The fee for certifying Letters is also reduced from $20 to $13. While the directive on the Supreme Court website says that the reduction is temporary, it does not say when the fees will go back up to prior levels. See Filing Fees.