History of the Orange Book Forms

An Enduring Product of Its Times

June 2020 By Frank T. Hill

This article explores the history of CBA-CLE’s Orange Book Forms: Colorado Estate Planning Forms. It highlights the major legislation and primary players in the book’s development.

This article provides a chronological history of CBA-CLE’s landmark publication Orange Book Forms: Colorado Estate Planning Forms1 (Orange Book Forms) and the key roles played by several prominent Colorado attorneys in its development. The story of the Orange Book Forms begins in earnest in the early 1970s. The setting was the then-extant federal wealth transfer tax system and the then-current Colorado trust and estate law.

Development of the Federal Wealth Transfer Tax System

The current federal wealth transfer tax system had its origin in 1916. It evolved throughout the Great War, the Great Depression, and World War II. This federal system consisted of an estate tax on wealth transmitted at death and a gift tax on lifetime transfers. By 1935, the top estate tax rate was 70%, the exemption had been lowered to $40,000,2 and an alternate valuation date concept had been enacted.3 In 1940, the top estate tax rate was increased to 77%.4 The Revenue Act of 1942 increased the estate tax exemption to $60,000, set the gift tax exemption at $30,000, and inaugurated the gift tax per-donee annual exclusion of $3,000.5 Finally, the Revenue Act of 19486 introduced the 50% estate and gift tax marital deductions in an attempt to bring parity to federal wealth transfer tax treatment between common law states and community property jurisdictions. Thereafter, not much changed in federal wealth transfer taxation law for the next 28 years.7

During this period of wealth transfer tax legislative inactivity, changes in the economy were working to expand the reach of the wealth transfer tax system. Increasing numbers of donors and decedents were drawn into its grasp by inflationary forces.8 As a result, for at least the next 50 years, avoiding or at least minimizing the impact of wealth transfer taxes became the central focus of estate planning for most clients. Then came the earthquakes.

The Probate Avoidance Revolution

In 1966 Norman F. Dacey published How to Avoid Probate! 9 Rocketing to the top of national best-seller lists, this book decried the archaic state of the regime then almost universally used to settle decedents’ estates across the country, a lawyer-intensive process in which all but the smallest estates were administered under ongoing court supervision (including court audit of final accountings). Nothing could be accomplished without court hearings and orders; executors, administrators, heirs, and devisees were merely spectators. Dacey’s work was soon regarded as a shot across the bow of the probate and trust bar and a harbinger of the revocable trust tsunami soon to come. The term “probate” had become a dirty word, and “avoiding probate” soon became the mantra of nearly every prospective estate planning client.

In the early 1970s, it was considered very sophisticated for banks to publish form books for attorneys to consult for guidance in preparing documents that might later end up being administered by the bank. The first such work I encountered was put together by renowned Denver attorney William S. Huff. It was a compilation of some of the most commonly used basic estate planning forms (e.g., general power of attorney, simple will, will with contingent trust, and marital deduction will) with accompanying comments on their appropriate use and modification. These were assembled into a small loose-leaf book and distributed to bar members by the Trust Department of what was then the United Bank of Denver.

Origin of the Colorado Forms

Throughout the 1960s, in a project conceived and led by the late attorney William P. Cantwell, a team of quite a few Colorado attorneys volunteered countless hours of valuable time to help create an estate planning handbook for Colorado lawyers. It was recognized that such a work would be strengthened by including a set of forms that attorneys could adapt to their practices. An initial set of suggested forms was originally contributed by trust departments of several prominent Colorado banks. These forms were then refined by a select committee of four Colorado attorneys and included as Chapter 27 of the original edition of the handbook, Colorado Estate Planning,10 published in 1972. This work was released in conjunction with CLE’s presentation of a major institute on estate planning. This first edition was produced in a 6“ x 9“ orange loose-leaf binder. Therefore, it quickly came to be referred to as the “Orange Book,” and its forms became known as the “Orange Book forms.”

Impact of the Uniform Probate Code

The next major development in Colorado’s probate world was the enactment in 1973 of the Uniform Probate Code (UPC) as the Colorado Probate Code (CPC),11 effective July 1, 1974. The CPC addressed many of the long-standing abuses cited in Dacey’s book and revolutionized the world of estate administration. It replaced a judicial-based system premised on presumed mistrust with a new administrative-based system built on presumed good faith. The CPC was designed to allow for more expeditious and economical estate settlements, with minimal court involvement intentionally limited to resolving controversies as they might arise. This new system was so revolutionary that it necessitated a full three-day roll-out program, which was sponsored by CLE and the CBA’s Probate and Trust Law Section and held in the grand ballroom of the Regency Hotel in Denver. Hundreds of lawyers attended from all over the state.

The CPC altered the decades-long era during which probate and trust lawyers had reaped generous “commissions” dictated by “minimum fee schedules” that were universally promulgated by state supreme courts, state bar associations, and ethics committees. Such schedules (including one created by the CBA) were designed, ostensibly, to eliminate the unseemly aspect of competition from the profession. The UPC introduced the novel concept of “reasonable compensation” for both fiduciaries and their counsel, which was the idea that they should only be compensated for the value of services actually rendered. This idea was bolstered by a related development when attorneys filed a major case challenging state supreme court blanket prohibitions against lawyer advertising as violating their right to constitutionally protected commercial speech.12 The US Supreme Court determined that merely advertising the fees at which routine legal services would be performed falls within the scope of First Amendment protection and does not undermine true professionalism. Shortly after this double-barreled assault, the CBA withdrew its minimum fee schedule.

Enactment of the CPC dramatically transformed probate law and practice in Colorado, so the forms comprising Chapter 27 of Colorado Estate Planning were completely revised by a small committee of prominent Colorado probate and trust attorneys led by the late Walter B. Ash. These revised forms were then published as a dedicated estate planning form book rather than as a chapter in the comprehensive handbook. The form book was printed in 8½“ x 11“ loose-leaf format, which, together with larger type size and generous line spacing, was designed to accommodate the direct use of the forms as reproducible mark-up masters. Envisioned as a companion publication to the also-revised handbook, CLE published the form book in 1975 in a separate one-inch, orange loose-leaf binder as the first edition of Orange Book Forms.

The Modern Era

The “modern era” of federal wealth transfer taxation began with the Tax Reform Act of 1976.13 Under this Act, the estate and gift tax systems were substantially integrated (coupled). The separate gift tax exemption and estate tax exemption were replaced by a unified credit against tax liability. At the time of enactment, the amount of the unified credit had the effect of increasing the former estate tax exemption from $60,000 to $120,000.This unified credit was then scheduled in the statute to be raised annually over the next few years, which would create the effect of gradually increasing the exemption from $120,000 to $175,625 by 1981. Also, the maximum estate tax rate was reduced from 77% to 70%, special use valuation was introduced to give relief to capital-intensive farms and small businesses, and a new generation-skipping transfer (GST) tax and the short-lived income tax carry-over basis regime were created.14 Thus, the first two legs (estate tax and gift tax) of the current triad federal wealth transfer tax structure were put in place.

Then, in 1979, the Colorado inheritance tax was repealed. Before its repeal, this annoying tax affected the administration of nearly every decedent’s estate in Colorado. It was replaced by the Colorado estate tax,15 which was a “pick-up” tax, so called because it picked up the maximum amount allowed as a credit against the federal estate tax for state death tax paid. Once again, a small committee of prominent trust and estate attorneys worked to revise Orange Book Forms to reflect the tax law changes brought about by the Tax Reform Act of 1976 and the Revenue Act of 1978.16 Again edited by William S. Huff, this second edition, published in May 1979, contained the second generation of Colorado’s tax planning forms.

The next major development in the wealth transfer tax system occurred with the Economic Recovery and Tax Act of 1981 (ERTA),17 which continued the upward increase of the unified credit annually in steps so that by 1986 the estate tax exemption effectively would be raised from $175,625 to $600,000. Significantly, it also completed the evolution of the marital deduction with the introduction of the “unlimited” marital deduction. In addition, the top estate tax rate was dropped from 70% to 50% and the gift tax annual exclusion was raised from $3,000 to $10,000.18

The late J. Michael Farley soon recognized the need to update the existing Orange Book Forms in light of ERTA’s introduction of the unlimited marital deduction. In 1982, he assembled an ad hoc committee of the Probate and Trust Law Section, which set about revising and updating all the forms in light of ERTA and recent developments in Colorado law. Having completed its work, the ad hoc committee was disbanded. This committee’s work product, the third generation of Colorado tax planning forms, was promptly published as the third edition in May 1983.

The Tax Reform Act of 198619 soon followed. It retroactively repealed the original 1976 version of the GST tax and replaced it with the current version of that tax.20 Now the third leg of the current triad of the federal wealth transfer tax structure, the GST tax, was finally in place. Although it would go through another 20-plus years of refinement, the basic fundamental elements of that system had been firmly set.

Soon thereafter, the late Clifton B. Kruse Jr., then chair of the Probate and Trust Law Section, recognized that it was a disservice to CBA members to have static Orange Book forms in the face of ever-evolving federal tax law and Colorado state law. Accordingly, in 1989, together with his co-chair, David W. Kirch, Clif was instrumental in convincing the section council to inaugurate his nascent Colorado Estate Planning Forms Committee (the Committee) as a standing committee of the section, charged with the mission of keeping the forms current to meet the increasing demand for additional practitioner guidance. Clif remained the Committee’s guiding hand for the next four years.

Rather than taking a band-aid approach, the Committee’s monumental effort entailed a major overhaul of every form in the book, especially those of a tax-planning nature. The result was the fourth generation of tax planning forms, which included expanded Notes on Use of the forms, illustrations of alternative distributions from family trusts, and alternative mandatory versus discretionary distribution provisions. This was a period of intense work on all of the then-existing forms; it included the introduction of several new forms as well as the Tab A “matrix,” a comparative compilation of all administrative provisions across all will and trust forms in the book.21 This result of the Committee’s nearly four-year effort was finally published as the fourth edition in 1993.

Now firmly established and still in full stride, the Committee continued charging ahead. Each form in the 1993 edition was carefully reviewed and revised in light of the revisions to CPC Article II, effective July 1, 1995. The Committee also added a new medical durable power of attorney, a revocable disclaimer trust, an engagement letter for married couples, and the very first irrevocable life insurance trust.22 This work product of the Committee was then published as the fifth edition in 1996.

Since there had been no federal tax legislation increasing the unified credit, the $600,000 federal estate tax exemption had been on a static plateau for the previous 10 years. The Taxpayer Relief Act of 199723 finally resumed the upward increase of the unified credit annually in progressively larger steps so that by 2006 the estate tax exemption effectively would be $1 million. It also introduced the first ever inflation-indexing to the wealth transfer tax system, directing that subsequent amounts of the gift tax annual exclusion, the GST tax exemption, and the IRC § 2032A special use valuation exemption be indexed annually for inflation.24

The Committee’s work continued apace. In these years before CLE started annual or biennial supplementation of the Orange Book Forms (which began in 2004), CLE would accumulate several years of the Committee’s work product until CLE deemed it feasible to publish another complete edition. This next edition, the sixth in October 2001, became the great “Maroon Book” fiasco! Apparently, someone in the CLE hierarchy thought it desirable, for economy and uniformity, to have maroon-colored binders for all of its loose-leaf publications. Flying in the face of revered tradition and oblivious to the possibility that an uproar might ensue, CLE proceeded to distribute this latest edition of the “Orange Book” forms in a maroon binder. The predictable outrage of trust and estate practitioners was barely assuaged by having the Notes on Use printed on orange paper. The Almighty can be thanked that this ignominy has never again been foisted upon us in any later edition. The Maroon Book was published as the sixth edition in October 2001.

The year 2001 also saw the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA),25 game-changing legislation that nearly led to the phased-in permanent repeal by the end of 2010 of the federal estate and GST taxes. Over the next eight years, the administration of the transfer tax system headed toward the great experiment of a one-year temporary estate and GST tax repeal, brought about by gargantuan leaps in the estate and GST tax exemptions from $675,000 to $3.5 million, which were accompanied by a rapid decline in the top tax rate from 55% to 45%. But all was not to be rosy, as the repeal of the estate and GST taxes was replaced by the resurrection of yet another iteration of the ill-fated income tax carry-over basis regime. Further, EGTRRA had a sunset provision that repealed itself prospectively on December 31, 2011 “as though this Act had never been enacted.” This effectively would bring about the subsequent reinstatement of the Taxpayer Relief Act of 1997, which had not been repealed but only temporarily superseded by EGTRRA. Thus, pervasive uncertainty as to the structure of future transfer tax legislation became the order of the day for practitioners and clients for nearly a decade.

For three years the Committee grappled with the mission of revising the (Maroon Book?) forms in light of the temporary 10-year evolving wealth transfer tax system imposed by EGTRRA. For its part, CLE likely saw that this “moving target” tax act might call for frequent updates to the forms, so it decided to update the forms book by annual or biennial supplements rather than by publishing new editions every few years. The Committee’s cumulative work was then published as the 2004 supplement to the sixth edition, and (voila!) it all came out in a sparkling new orange binder (and all was forgiven). Subsequent supplements through 2009 saw the addition of GST tax provisions, forms for single persons, an estate-planning questionnaire, a community property agreement, and trust-funding deeds.

The opening of 2010 found planners in shock and disbelief that the estate and GST taxes had been repealed, if only for this one year, and that the return of the Taxpayer Relief Act of 1997 freight train (with its paltry $1 million estate tax exemption) was fast approaching! How could a practitioner plan for clients in such an uncertain environment? How could a Committee of trust and estate lawyers charged with providing guidance to the Bar proceed under these chaotic circumstances? Happily, from the Committee’s perspective, a constant stream of changes in state law provided it with plenty of projects to focus on while Congress sorted out the nation’s wealth transfer tax system. This work product of the Committee was then published as the seventh edition in 2010.

On December 17, 2010, the president signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Act),26 which retroactively reestablished the federal estate tax with a new basic exclusion amount of $5 million, and reunified (recoupled) the federal estate and gift taxes. It also retroactively reestablished the GST tax with a new base amount of $5 million for the GST exemption, set the top estate tax and GST tax rates at 35%, and finally introduced inflation-indexing to the amount of the estate tax basic exclusion amount. Most suprising, the 2010 Tax Act also provided for the revolutionary concept of “portability” of the first deceased spouse’s unused estate tax exclusion amount to the surviving spouse. But this temporary act still had a two-year sunset provision, so the return to the dark days of the Taxpayer Relief Act of 1997 (with its $1 million estate tax exemption) remained a real possibility.

The American Taxpayer Relief Act of 2012 (2012 Tax Act)27 finally relieved the country from the uncertain future of its wealth transfer tax system by repealing the 2010 Tax Act’s sunset provision and thus making it as permanent as any Congressional act can be. Notably, the 2012 Tax Act also increased the top estate tax and GST tax rates from 35% to 40%.

In the stream of supplements published each year since the release of the seventh edition, the Committee foremost tried to assist practitioners with recognizing the implications of the new tax acts while asking practitioners to understand that it could take several years to address the impacts of the new acts on all Orange Book Forms will and trust forms. The Committee continued updating and revising the forms to include, among other things, provisions regarding the rule against perpetuities, guidance to clients on funding their revocable trusts, and guidance on dealing with Colorado’s Civil Union Act and the national focus on the validity of nontraditional marriage.28

Orange Book Forms Evolves

From its outset way back in 1972, the Orange Book Forms has served as a collection of example forms (as opposed to model forms) to address the most likely needs of practitioners in normal estate planning situations. The forms have been paired with extensive Notes on Use designed to alert practitioners to issues involved in drafting various aspects of each form. Thus, Orange Book Forms has always served as a teaching tool; it was never intended to be a compendium of model estate planning forms covering every variation of a given planning approach. And it does not replace the practitioner’s duty to draft appropriately for each client, but aims to assist practitioners by providing some guidance, some examples, and some alternatives, and most important, by raising issues deserving the drafting attorney’s careful attention.

Over the past decade, it had become apparent that the “collage of forms” structure was becoming cumbersome as more and more forms were added to the collection. It had become difficult even for experienced Committee members to navigate their way through the book, to say nothing of practitioners new to the estate planning field, arguably those whom the book was intended to serve.

A New Approach

Enter the new functional structure of the current 2017 eighth edition! Three years ago, a subcommittee of the Committee worked with CLE to redesign the structure and format of the book to make it more user friendly. While the substance of the forms, Notes on Use, and caveats has not changed, the user interface has been dramatically improved. Hopefully, it is now easier for practitioners to access information in the book and choose the planning approach most related to each client’s needs.

Current Matters

The Tax Cuts and Jobs Act of 2017, also known as the Budget Reconciliation Act of 2017 (depending on one’s political persuasion),29 temporarily doubled the 2010 Tax Act’s $5 million estate tax basic exclusion amount and the $5 million GST tax exemption to $10 million each (indexed for inflation). But both of these temporary increases are scheduled to sunset at the end of calendar year 2025. While this tax legislation may not have any noticeable impact on the content of Orange Book Forms, it should encourage practitioners to focus even more on non-transfer tax planning opportunities, especially for clients whose estates, at least temporarily, have been sheltered by its dramatically increased exemption amounts.

A special subcommittee of the Committee has brought together some of the original members of the 1989 Committee, the very architects of what were then the “new” tax-sensitive forms (the fourth generation of forms) created for the 1993 edition. For more than four years now, the participants in this reunion have been working to develop a group of nine new will and trust forms aimed at suggesting a fresh approach to wealth transfer tax planning (which will constitute the fifth generation of tax planning forms) in light of the planning revolution brought about by the 2010 and 2012 Tax Acts. The full Committee will thoroughly review this subcommittee’s work product, after which it is anticipated that new forms will be forthcoming in a future supplement or perhaps in a new eighth edition.

Lastly, before 2019, the Committee only had meager existing statutory and case law upon which to rely for drafting provisions governing trusteeships in will and trust forms. Therefore, the forms have always reflected what were believed to be “best practices.” However, with the advent of the Colorado Uniform Trust Code (CUTC), another subcommittee is thoughtfully considering the CUTC’s impact on these existing best practices as reflected in the Orange Book Forms trusteeship and administrative provisions.

Conclusion

Hopefully, this walk down memory lane has been informative and entertaining. At a minimum, it illustrates the acumen of the CBA’s trust and estate law practitioners and their ongoing dedication to upholding the highest standards of Colorado practice.

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