Colorado Estate Planning - Will You Disinherit Your Grandchildren by Mistake?
Most parents leave their estates outright to their children. They have language in their wills giving the share of a deceased child to the children of that deceased child if the child dies before the parents. But what happens when the parents die, giving the inheritance to the children, and then the children die later. In most cases, even if the children are well meaning, their inheritances will pass to their spouses. This is where problems begin. Even if you love your son-in-law or daughter-in-law, they may marry again or become ill or use all of the money. They may get manipulated into leaving money to other people at death, leaving your grandchildren out in the cold holding an empty bag.
This problem is easy to solve with a Bulletproof Trust. With proper trust planning, the funds left to a surviving child will remain in trust with all of the money available to your grandchildren when a child dies. All of the money goes to the children of that deceased child, (your grandchildren), and no one else. The ability of the Bulletproof Trust to keep family assets in the family blood line makes these types of trust extremely popular with our clients blessed with grandchildren. The use of a Colorado Living Trust with special Bulletproof Trust provisions is the answer.
Colorado Trust Funding Mistakes
When our clients plan with a Colorado living trust, they plan with the goals in mind of avoiding probate and, in some cases, death taxes. Unfortunately, good intentions seem to fade as time passes.
During the initial design and implementation of their Colorado living trust, clients are taught how to transfer assets into their trust now and how to transfer assets that they acquire later. To avoid Colorado probate, we need to transfer all real estate interests by deed to the name of their living trust. If they own real estate outside the state of Colorado, we seek the assistance of an attorney in each state to help with the deed work.
Mutual funds, CDs, savings accounts, money market accounts, brokerage accounts, savings bonds, promissory notes, business interests and other securities need to be transferred to the name of the trust during the planning process. This is done by changing the title ownership on the accounts or the stocks and bonds, naming the trust as the owner. With written instructions, most of our clients can make these changes on their own. We always handle the deed work.
Regardless of how well the initial funding is done, problems seem to develop later on when assets change. When refinancing real estate, title is usually transferred out of the trust so that the trust owners can secure new financing. Frequently, the trust owners fail to transfer the property back into the trust. If a death occurred, this property would go through a Colorado probate or a probate in whatever other state that property was located. We caution our clients to contact us whenever they refinance property so that we can help them flip the property back into the trust when the loan transaction is complete. Unfortunately, many do not heed this warning.
Our clients change brokers and investments as time goes along. Although our clients may have titled their securities properly at the time they created their trust, they may neglect designating their trust as the title owner of their new accounts when changes are made.
Similar oversights occur with CDs. The general rule is to name the trust as the title owner of all CDs, savings accounts and money market accounts. Because these accounts get changed frequently, clients often forget to stay on track.
In an effort to help our clients avoid making these mistakes, we have created a trust maintenance plan we call the “Inner Circle” which is designed to help our clients catch these errors before they become problems. Through the Inner Circle, our clients are invited back to our offices once every three years for a complete planning review to correct funding errors. Our monthly newsletter also keeps our clients informed of new laws and strategies and reminds them to continually be vigilant when it comes to titling their assets in their Colorado living trust. When real estate is purchased, sold or refinanced, we offer to do all of the deed work without charge as a benefit of Inner Circle membership.
In short, keeping trusts fully funded is an on going process that requires attention to detail. Funding is the secret to avoiding probate.
How Does the Internet Know What You Want for Your Family?
Yesterday I had a little spare time, so I decided to surf the net to see what was out there about estate planning…and man, did I find plenty. Most of what I found were websites that promised a flawless estate plan—complete with a living trust—for under a hundred bucks. They all claimed how easy it was to “do-it-yourself” and avoid the expense of an attorney. Some even promised you could do it all in less than 30 minutes.
Intrigued at the prospect that an internet program could so completely replace me, I signed on to LegalZoom.com and paid the money to generate my comprehensive, all-inclusive estate plan for the low, low price of $149. Read more
The Colorado Medicaid Asset Protection Trust — Further Explained
The trust that Mary sets up could be either revocable or irrevocable. The type of trust that Mary would set up would depend on a number of different circumstances, both personal and financial. An irrevocable trust would afford asset protection with respect to problems the other children may have over the years, including divorces, lawsuits, debt problems and irresponsible behavior. A revocable trust will not offer those protections, but is easier to maintain and administer over the years. Counseling with the family will help determine which way to go here. Read more
The Colorado Medicaid Asset Protection Trust
As I mentioned in my previous blog, giving assets away to a trust that you set up for yourself is probably not the way to go in today’s strict Medicaid world. It’s this type of “self-settled” trust that the Medicaid folks are coming down on hard. Instead, give assets away to your children as a group or to your most trusted child and have that child or your children hold the money for your future needs. Read more
Colorado Medicaid Opposes Irrevocable Trusts
As a follow up to my first post, I want to elaborate a bit on what I believe is Medicaid’s position with regard to the use of irrevocable income-only trusts by those folks seeking to protect their assets from nursing homes and Medicaid Estate Recovery in the event of a nursing home stay.
Medicaid allows for the use of income-only irrevocable trusts as a way to shelter assets and as an alternative to outright gifts of assets to children. Therefore, many Coloradans have transferred assets to these trusts with the expectation that the assets transferred would not be considered as available resources when they later apply for Medicaid assistance when a nursing home becomes necessary. Over the last couple of years, however, Medicaid has been much tougher in their review of these trusts before Medicaid is granted to an applicant. Medicaid is now saying that any irrevocable trust that confers any kind of a benefit to the Trustmaker will fail with the result that the assets in the trust will be considered available resources. This will result in the denial of Medicaid benefits because they will be considered “over resourced.” Read more
The Colorado Medicaid Bureaucrats
My law firm just won an important case in front of Judge C. Jean Stewert in the Denver Probate Court, but the State Medicaid bureaucrats are saying that they don’t care what the court ruled. They’re going to do what they want when it comes to the treatment of irrevocable income-only trusts and an applicant’s attempt to qualify for Medicaid. The case is complicated even to those well-versed in Medicaid law, so I won’t go into the details of the case now but will post the Court documents shortly so you can dig into the details if you choose. The main thrust of this post is to express my frustration with the Medicaid bureaucracy and publicly expose the arrogance they are now exhibiting with regard to their disregard of Court orders. They believe they are above the law and can ignore court orders that attempt to protect our poorer citizens. If you have an interest in seeing how these bureaucrats work the system, stay tuned. More later.