5 Common Situations For Including a Trust In Your Estate Plan.
1. You are making gifts to someone who is under 18 years of age. A Trust enables you to specify at what age your beneficiaries are able to make withdrawals, including a tiered distribution schedule.
2. You are making gifts to someone who is disabled or receives public benefits that are “means tested” (their assets and income must be below certain levels). In this situation, failing to use a properly drafted and managed Special Needs Trust can result in a loss of benefits for the person to whom you make your gifts.
3. You own property in another state. When you own property in another state, if the property is not held in a Trust or a corporate entity, you have to perform additional steps in the probate process to sell or transfer the out-of-state property. If your Trust owns the property, then the property can be sold by the Trustee without any probate proceeding.
4. You have a blended family, and you and your spouse want to provide for one another and then divide any remaining assets between both families. Under Colorado law, if a person dies without a Will, his or her stepchildren will not inherit anything unless the stepchildren were adopted by the decedent. Often times, this results in a situation where the surviving spouse receives the entire estate of the late husband or wife. Then, when the spouse dies, his or her children receive the entire estate, and the children of the first spouse do not receive anything. A well drafted Will or, better yet, a Trust can help prevent this from happening.
5. Post-divorce estate planning. If you have children with someone to whom you are not presently (or never were) married, you should have an estate plan that includes a Trust or Testamentary Trust. Unless you have a Trust, your children’s other parent will manage your estate on their behalf. To prevent this, you can create a Trust or a Testamentary Trust (a Trust that is created by your Will if certain conditions exist at the time of your death) and name one or more Trustees to manage your Trust estate. This lets you decide who will manage your gifts to your children.
Every situation is different, and only an experienced attorney can advise you as to whether you should consider including a Trust in your estate plan.