In a handful of industries, the concept of having an employee live on-site is an attractive proposition. Such industries include hotels, motels, assisted care facilities, convenience stores, or businesses that cater to or provide extended-hour operation to customers or clients.

Although attractive, arranging an on-site or “live-in” employee comes with complications. In this series of articles, Chris Wilhelmi of Colorado Law Group will briefly discuss common pitfalls businesses may face with “live-in” employees. This article addresses how to avoid unwillfully creating a landlord/tenant relationship between the business and the employee.

In Colorado, to avoid creating a landlord/tenant relationship between a business and its employee, a business must create and effectuate a written contract of employment between itself and the employee that complies with C.R.S. § 8-4-123. By complying with the statute, a business creates a “a license to occupy the premises entered into as part of an employee’s compensation” that would then terminate at the end of the employment relationship. Per the statute’s subsection (b):

An agreement made pursuant to this section shall be in writing and shall include the following:

• (I) The names of the employer and employee;
• (II) A statement that the license to occupy the premises is provided to the employee as part of the employee’s compensation and is subject to termination at any time after the employment relationship ceases;
• (III) The address of the premises; and
• (IV) The signature of both the employer and the employee.

Once a compliant contract of employment is entered into, “a license to occupy the premises,” rather than a traditional tenancy is created. The benefits of creating a complaint contract are numerous and in particular allow an employer to avoid having to bring a Forcible Entry and Detainer (“FED”) action to evict a current/former employee who refuses to vacate his/her employer-provided dwelling. The statute provides that with a compliant contract in hand and a properly issued receipt of the notice of termination, an employer may go directly to the county sheriff to have the employee removed from the premises. Essentially, a complaint contract will act in lieu of an order of a court that would otherwise be necessary to forcibly evict – thus saving a business significant time, expense, and headache in effectuating the vacancy of an employee from his or her employer-provided dwelling.

This relatively simple guideline (like many statutes) is unfortunately not always complied with by businesses and creates wholly avoidable issues, expense, and frustration. Please look forward to additional articles from Colorado Law Group, PLLC related to employment and business issues.

This article is not meant to be and should not be construed as legal advice by or from Christopher Wilhelmi or the law firm of Colorado Law Group, PLLC. Before relying on or taking any action based on the content of this article, you should contact a duly-licensed attorney for specific advice concerning the information contained in this article. Colorado Law Group, PLLC welcomes inquiries and offers free initial consultations.

The use of trusts in estate planning continues to be a hot topic among estate planning professionals and their clients. For example, whether or not to use a revocable living trust to avoid probate continues to be a widely discussed option in estate planning. The purpose of this article, however, is to discuss the use of trusts in another arena of estate planning. Specifically, how does a client leave his estate to his children and whether the use of a trust is appropriate. This article will discuss two types of trusts that parents can use when transferring their wealth to their children.

These trusts are called testamentary trusts, meaning that they are not established until the client is deceased. In other words, the trust lays dormant in a client’s will until it is effectuated at the client’s death. There are two types of testamentary trusts to consider. The first trust can be referred to as the “three strikes and you’re out” trust. The second trust can be referred to as the “stealth prenuptial” trust.

The “three strikes and you’re out” trust is typically used where a client has minor children. Since the children are minors, they are not legally able to own the assets transferred to them at a parent’s death. If a trust does not exist, then those assets would have to be held in a conservatorship which can be time consuming and expensive to establish and administer. The trust established for minor children under a parent’s Will would provide distributions for their health and education, maintenance and support. If a child is going to college, the trust would be paying for books, room and board, and tuition for the child. If the child needed a car to commute to and from college, the trust could buy the car; the child simply could not have the ability to choose a Lamborghini over a Ford Explorer. The type of car would be determined by the trustee of the trust, someone other than the child. The trust then would provide for distributions of principal free of any control by the trustee at specific ages. A common scheme to distribute is one-third of the trust at ages 25, 30 and 35. The theory of this trust is that if a child makes a mistake and unwisely spends the first third he or she receives, the child may be more mature and thoughtful when he or she receives the subsequent installments.

The “stealth prenuptial” trust can be established for adult children who are in a risky business or profession and the parent wants to provide some asset protection for the child. This trust can also be used for a financially immature adult child or an adult child that cannot say no to a financially immature spouse. In both instances (i.e., asset protection and financial immaturity), the trust is for the life of the child.

In the first instance where the client is trying to provide asset protection for the surviving child, the child is typically his or her own trustee upon reaching a certain age, e.g., age 35. In the second circumstance, where an adult child is not financially immature or cannot say no to a financially immature spouse, the child is a co-trustee along with a third-party trustee. The co-trustee would be either a trusted family member, an advisor, or an institution such as a bank trust department. The advantage of a third-party trustee is that they will act as a governor over the child in making bad financial decisions. Again, the income and principal of the trust would be distributed for the child’s health, education, maintenance and support. In the context of a thirdparty co-trustee, the trust should end up augmenting the child’s life style for his or her entire life.

In selecting a third-party trustee, a preference can be to use a corporate trust department. Corporate trust departments are very effective managers of money in this type of planning for an adult child. It is important to provide that the adult child can always replace the corporate trustee with another corporate trustee. This allows for effective negotiation of trustee fees and flexibility in who the child wants to work with in administering the trust.

The use of trusts in estate planning can be confusing. There is no right or wrong answer to many of the questions and concerns facing clients. The two trusts described in this article are simply two examples of what a client and an estate planning professional should be discussing to see what fits the client’s particular situation.

The Colorado Employment Verification Law (C.R.S. § 8-2-122) requires that Colorado employers affirm the legal work status of a new employee within 20 days of hire and retain copies of the new hire’s identification documents. This requirement is separate and apart from Form I-9, whereby the employer verifies the legal work status of a new hire pursuant to federal law. While many employers seem to be unaware of the Employment Verification Law, the state authorities continue to audit Colorado employers to ensure compliance. Compliance is therefore important for employers to avoid being fined by state authorities.

To what situations does the Employment Verification Law apply?
It applies to any person or entity that transacts business in Colorado and employs a Colorado resident to perform services. Upon hiring a new employee, a Colorado employer has 20 days to affirm that it has examined the legal work status of the new hire. To this end, the Colorado Division of Labor has prepared an “Affirmation of Legal Work Status” form that employers should use. In addition to affirming that it has examined documentation showing that the new hire is legally authorized to work in the United States, the employer must also affirm that it has not altered or falsified the employee’s identification documents, and that the employer has not knowingly hired an unauthorized (illegal) alien.

In addition to filling out that form, Colorado employers must retain for each new hire copies of the identification documents identified in the federal employment verification statute, 8 U.S.C. § 1324, which are also referenced in Form I-9. Employers should note that the state law requirement is in addition to what federal law requires, as it authorizes, but does not require, employers to maintain copies of identification documents.

When must the Employment Verification Form be filled out?
The form must be filled out and signed by the employer, and supporting documents examined, copied, and retained by the employer, within 20 days of new hire. Any failure to do so within the 20-day time limit, or any attempt to post-date the Employment Verification Form, is a violation of the statute and will subject the employer to fines. This requirement is different from Form I-9, which must be completed within three business days.

How long must an employer retain documentation?
The employer must keep either a written or electronic copy of these documents for the term of employment of each employee. This contrasts with Form I-9, which must be kept for the later of three years after the date of hire or until one year after termination of employment.

What is a “Colorado employer” under the law?
Any private or public entity or person that transacts business in Colorado, employs another to perform services, and has control over the payment of wages for such services or is the officer, agent, or employee of the person or entity having control over the payment of wages. This definition includes the officers, agents, and employees of the entity or person, and therefore can lead to personal liability for individuals who act on behalf of another entity or person and recklessly fail to make the required affirmation or keep the required documentation.

What is a “Colorado employee” under the law?
Any person who is a Colorado resident and serves as an employee, regardless of the kind of work or services that person performs. Independent contractors are not included within this definition, but employers must be careful not to misclassify employees as independent contractors simply to avoid complying with the employment verification law. If they do so, in addition to still being liable for a failure to abide by the Employment Verification Law, employers could be subject to liability for failure to pay employment taxes, workman’s compensation, and other costs an employer is legally obligated to pay on behalf of its employees.

How does the state verify compliance? 
The Director of the Division of Labor may audit any Colorado employer at any time to determine if the employer is in compliance with the Employment Verification Law. These audits may be either random or targeted if the Director believes a violation has occurred.

What fines are possible?
If the Director determines that a violation of the Employment Verification Law has occurred, the employer may be subject to a fine of up to $5,000 for the first offense and up to $25,000 for any second or subsequent offense. Each failure to retain documentation constitutes a separate offense.

John P. Gebauer is a partner at the law firm of Colorado Law Group, LLC. He may be reached at (719) 635-4200