Thursday, October 14, 2010

Do You Know the Difference Between Your Probate Estate and Your Taxable Estate?

Do you know the difference between your probate estate and your taxable estate? Knowing how they are different and how to use those differences to your advantage is a critical component to your estate planning

In this article we will explore those differences and why it matters to you and your family. First, two examples of the consequences of the differences.

1. Did you know that you could have a probate estate that did not generate any estate taxes? It's true.

2. Did you know that you could have a taxable estate worth millions but your probate estate was worth $0? That's possible too.

Both of these examples are possible because of the differences between the probate estate and taxable estate.

Second, what is an estate. In general terms, your estate is what you pass on when you die. But that is a huge over-simplification that ignores the differences we are discussing here.

Third, what is probate? Probate is the legal system in each state of transferring title from a deceased person's name into the names of the appropriate beneficiaries. Keep the idea in mind of the name on the title of something as you read on.

What is your probate estate?

Your probate estate is determined by how you OWN what you own. In other words, the probate estate is all about ownership which is all about titling.

Titling is how you own what you own. There are several ways you can own something and which way determines your probate estate. Here they are:

1. Title is in your name alone, with no named beneficiary.

Think of a bank account that is just in your name, that is an example of this first category.

2. The title is in your name along with another person as tenants in common.

Think of two sisters who own a house as tenants in common. (Note, this is not joint tenancy which is discussed below).

3. The title is in your name alone, but you have named someone as the beneficiary.

For this third category, think of a life insurance policy where you have named a beneficiary.

4. The title is in your name along with another person as joint tenants with rights of survivorship.

Here think of spouses who own their residence together as joint tenants. This form of ownership has the unfortunate illusion of seeming like a good idea. It's not, but that is the subject of a different article.

5. The title is owned by another entity like a trust that you established.

For this fifth category, think of someone who has placed real estate into a trust which they created.

The benefits and faults of each of these five forms of ownership is not discussed here, I will write about that another time. So go back and read again each of these five forms of ownership.

Categories 1 and 2 are in your probate estate. Categories 3-5 are not in your probate estate. Categories 3-5 are also known as probate free transfer devices. Again, we are not discussing which of these is better, just how it affects your probate vs. taxable estate.

What is your taxable estate? Your taxable estate is about what you own, direct and control even if you don't own the title to the asset.

Think of the five categories all added together. Then add all things that you get benefits from, direct or control. Even some gifts that you made in the past are included. The total of all of that is your taxable estate.

When you examine these differences it is possible to see how you can have a non-taxable estate that is entirely subject to probate; or a huge taxable estate that is entirely probate exempt.

In estate planning, you will need to be aware of these differences, now they affect your property and family and plan accordingly. Your estate plan, when thought through, will probably end up being some combination of all the forms of title we examined above.

How can you know the best way to proceed. Schedule a visit with your expert estate planning attorney before making any moves.

Bernie Greenberg

Note that federal tax law requires that we notify you that you cannot use this article or any portion thereof in any manner to attempt to evade federal taxes or penalties.

Monday, October 11, 2010

Communicating in the Modern World

You may have noticed that many changes have occurred in the world of communications recently. It's not like several years ago when you would just write someone a letter or call them on the phone. Even the entire media industry has shifted and with the internet, newspapers are closing and how we get our information has also changed.

The purpose of this message is not to debate whether these changes are good or bad. I'm not so sure, but I do know that our world has shifted and because of the shift, it is important to embrace these changes and learn how to use them to your benefit.

These changes have certainly impacted how we communicate with you. We no longer publish a hard copy newsletter having shifted that to our firm's website several years ago. Now, there are many ways for us to get you information faster than ever before. I hope you are using at least one of these new information sources.

Let's review all the ways you can communicate with our firm and all the ways you can receive information from us:

There's the old standby, what is now called snail mail. When you actually send a letter in the U.S. Mail. Our mailing address is:

26 W. Dry Creek Circle, Suite 520
Littleton, CO 80120

The second old standby is the telephone. Here is our phone: 303.730.7100.

A third standy, the fax machine is also used, but less and less and will probably not exist sometime in the future. Here is our fax: 303.730.7195.

There are numerous more modern ways to also be in touch with us. These appear below and we encourage you to try them out. Just paste each address into your browser and each site a visit.

Our newsletter is now published on our firm's blog. We hope you follow it and enjoy our articles. You can find it here: and that is where you landed to be reading this article.

We still have our firm's website you can use it every day. Also, older newsletters appear there along with other important estate planning information. You can find our website here:

We also now have our firm on Twitter. If you are using Twitter, you can follow us here: @BHGreenberg or

We also have a presence on facebook. You can find us on facebook here:

We are also on Linkedin and you can find us there at:

You will notice that when you follow us at these other places and in these other ways, you will receive more information about estate planning and estate taxes than ever. We also post articles from other sources that we think you will find interesting and useful in thinking about estate planning and your own finances. Try at least one of these other ways of being in touch with us and let me know what you think.

As always, thank you for your interest and support.

PS: Congress has failed to act to clean up their estate tax mess. There are numerous articles on our blog about this topic and how it affects your planning. After you read that, if you have questions, just let me know. And, you can even just give me a call or send me an email, just like in the old days.

Bernie Greenberg

Thursday, October 7, 2010

The First & Most Important Element in Your Financial Plan

The First & Most Important Element in Your Financial Plan: How to make sure your financial house is built on a solid foundation.

Most people agree that planning finances is important. Most agree that if they don't have a financial plan, they would like to have one some day.

Even if you have a financial plan, how do you know if it is built on a solid foundation? That is a critical question and we will explore here how to make sure your plan has a solid foundation.

Let's start with a basic premise. Any structure, including your financial plan requires a sold foundation. Whether a house, building or financial plan, the structure will ultimately fail if the foundation is not solid.

Imagine a pyramid, it looks like a triangle with the point of the pyramid at the top.

The bottom of the triangle or pyramid is the foundation. Because everything rests on the foundation, we want NO risk in that foundation. That foundation must support the entire structure in any kind of situation, storm or trouble. That is why pyramids are built like this and they have certainly withstood the tests of thousands of years.

Unfortunately, most financial plans are not structured this way. In fact, if you turned the pyramid with the top on the bottom, that is how most plans are built. In complex legal lingo, we call such a plan top-heavy. To use more complex lingo, the plan is ass-backwards. The slightest wind or trouble will topple that plan.

How is it possible that such an important structure, your financial plan, could be made upside down? The answer is more simple than you may think. Most plans do not protect against the biggest risks first. Such plans are focused on what to invest in, funding retirement, college education for kids and other similar and important goals.

But such a plan is upside down because they are built on a false assumption. The false assumption is that you will make the money necessary to deposit into the financial plan over the right number of years in order to make the plan work. That length of time is called the plan horizon. The assumption is false because it fails to anticipate that you may not be able to meet the plan horizon due to illness, disability or death.

Said another way, upside down financial plans fail because there is NO foundation. The foundation of any properly constructed plan has to protect against the WORST that can happen first. Not last, but first. A proper plan must first assume that you will not meet the plan horizon and have contingencies built into the plan that will still allow the plan work as intended.

We get now to the first and most critical step in any financial plan: estate planning. You read that right, estate planning. The first step in building your financial plan is to START with your estate plan. This is because your estate plan is about protecting against the worst risks first. Your estate plan is what protects your blind side.

I won't cover here the elements of a proper estate plan here, you can read about that elsewhere here on my blog. Suffice it to say though, that your estate plan covers YOU, your loved ones and your property if anything happens to YOU. A proper Will, perhaps a trust for the kids, Durable Powers of Attorney; a Living Will; proper beneficiary designations, life insurance, health insurance, proper auto and home insurance, and disability insurance are all important pieces of this foundation.

Don't let your financial plan fail because it is built upside down. Make sure that your plan is built on a solid foundation of your estate plan. Insist that you and your loved ones be properly protected. Remember, friends don't let friends drive with an upside down financial plan. Don't let your own plan be hazardous to your family and your wealth.

Bernie Greenberg

Tuesday, October 5, 2010

Where Did All The Money Go?

Where Did All The Money Go?

That's a very good question. If you don't know what I am referring to, I am referring to $2 trillion. That's a lot of money, and I'd like to know where it went.

What $2 trillion you ask? Did you know that for the first time in history (recorded or otherwise) a government has spent $2 trillion in just 18 months!! According to Colorado Senatorial candidate Michael Bennet, there is nothing to show for that money!

Here's what happened: the current administration is the first government ever, to spend $2 trillion in just 18 months. I am not going political in this article, I just want to know where the money went. It is simply inconceivable for the administration to have spent that much money and not know where it went and what the country got for that much spending.

So I pose the question: where did the money go? Do you know? Bennet says it was wasted and we have nothing to show for it. We know it didn't improve the economy or the help with unemployment. So where did the money go? Does anyone in Washington actually know? Does anyone there actually know what they are doing?

If you know, let me know and maybe send a message to Michael Bennet and let him know too.