Frequently asked questions
Estate planning answers two fundamental questions: Who gets your stuff when you die, and who makes decisions for you when you can’t. Even if you think you don’t have much, proper planning prevents your family from facing legal headaches and extra costs.
Without a plan, state laws will decide how your assets are distributed, which may not align with your wishes. And if you haven’t designated decision-makers like an agent under a financial power of attorney, someone will have to go to court and be formally appointed as your conservator before they can pay your bills while you’re incapacitated. This is time-consuming, expensive, and prevents prompt action on your behalf.
Consider people who share your values, have the emotional and financial capacity to raise children, live in a stable environment, and are willing to take on this responsibility. It’s wise to name both primary and backup guardians. You should have honest conversations with potential guardians before naming them, and consider naming different people as guardians of your children versus managers of any inheritance.
Once you’ve selected guardians, they will be formally nominated in your estate plan.
A will makes direct distributions to your beneficiaries when you die – they get their inheritance outright. A trust, on the other hand, can hold assets and distribute them over time according to rules you set. This makes trusts essential when your beneficiaries can’t manage their own finances yet, like minor children, or when you want to provide ongoing financial guidance.
Trusts also offer protection that wills cannot. If a beneficiary is going through a divorce or has creditor problems, assets held in a properly structured trust are generally protected from those outside claims. With a will, once beneficiaries receive their inheritance directly, those assets become part of their personal wealth and can be subject to division in divorce or seized by creditors.
If you don’t take any action, your personal representative will have to find someone to take your pet, but they’ll use their own judgment about who that should be – which may not align with what you would have wanted.
Alternatively, you could designate someone to whom you gift your pet after you pass. You’ll want to talk to that person ahead of time to avoid surprising them with an unexpected fur-baby.
For the strongest protection, a pet trust allows you to set aside specific funds for your pet’s care. You can name both a caregiver for daily care and a separate trustee to manage the money and ensure your wishes are followed. This arrangement continues until your pet passes away, at which point any remaining funds go to beneficiaries you choose.
If you have a will, or die without a will or a trust, probate is the court process that oversees the distribution of your assets.
In some states, probate should be avoided at all costs because there are significant taxes and costs associated with the process. That isn’t the case in Colorado, where our probate process is relatively streamlined.
However, probate requires that your personal representative be appointed by the court, which takes some time. On the other hand, the trustee of your trust can get to work right away, even while you’re alive but unable to manage your assets yourself.
The “avoid probate” advice you hear often comes from other states where the process is much more burdensome. In Colorado, the decision between a will-based plan and a trust should focus on your family’s specific needs rather than fear of probate costs.
We’ll talk about what makes the most sense for you during your Design Meeting so you can weigh the pros and cons.
You have several options for handling your home, each with different advantages. You can include it in your will to be distributed or sold during probate, add it to a trust to be held for beneficiaries or sold as needed, or use a beneficiary deed that automatically transfers the home to people of your choosing after you pass away.
What you should avoid is quitclaim deeding your home to another person while you’re still alive, even if it seems like a simple solution. This creates several serious problems: it’s a taxable event that may trigger gift taxes, you lose control of your own home since you can’t undo the transfer without the other person’s consent, you eliminate valuable tax savings that come with the “stepped-up basis” your beneficiaries would receive if they inherit the property after your death, and the home becomes subject to the other person’s creditors and potential divorce proceedings.
The best choice depends on your specific situation – whether you want to avoid probate, need ongoing management if you become incapacitated, have concerns about beneficiaries managing real estate, or want the simplicity of a beneficiary deed. Each option keeps you in control during your lifetime while achieving your goals for the property after you’re gone.
As long as you’re the trustee of your own trust, there are no ongoing costs. The trust is essentially an extension of you – it doesn’t file a separate tax return, and you manage it just like you would your other assets.
After you’re gone, there may be administrative expenses while the trust remains open, such as tax preparation fees, trustee fees (if you’ve named a professional trustee), and other management costs. However, your trustee will generally keep the trust assets invested and generating returns to offset these expenses, so the trust can sustain itself financially.
The key is proper planning – making sure there are sufficient assets in the trust to cover any ongoing costs, and choosing a trustee who understands how to manage investments effectively. For most families, the costs are manageable and far outweighed by the benefits the trust provides in terms of control, protection, and flexibility in distributions.
This is very different from some other estate planning strategies that require ongoing fees or maintenance during your lifetime, making trusts a cost-effective option for many families.
