Almost all Colorado residents need to make a will. This most basic of estate planning documents details how you want your assets and possessions disbursed after your death. But even more importantly, it allows you to name a guardian for any minor or disabled children. Without it, your child(ren) may become the center of a courtroom battle between family members fighting for the right to physical custody.
A will can also designate one person as custodial guardian and another as fiduciary guardian, since the one who may provide the best home atmosphere may not be the best choice to manage assets and make financial decisions. When choosing a custodial guardian, consider carefully and periodically revisit your choice if and when there is a change in relationships or circumstances.
In many cases, however, simply having a will is insufficient to cover all of your intentions. This is particularly true if you are the parent of a disabled child who will struggle to or be unable to support her- or himself upon reaching adulthood. If your grown child depends upon government benefits like Medicaid, with eligibility dependent on means, direct inheritance can jeopardize eligibility. Your child might have to spend down the inheritance and reapply for benefits.
A special needs trust alleviates the problems inherent with a direct inheritance in such cases. A trust can be created within the will itself or be a completely separate legal document naming an individual or entity as trustee. Even if your child has no special needs, trusts can prevent a child from inheriting at too young of an age to manage the funds properly and prevent spendthrift behaviors that can be dangerous or prevent young adults from developing the marketable skills to earn their own money.
Trusts can be used as repositories for monetary gifts from friends and family on gift-giving occasions, leading to a nice nest egg one day. During their lifetimes, parents usually serve as trustees and then name a successor to assume their duties when they become incapacitated or die. Some advisers recommend naming a corporate trustee together with an individual co-trustee who has the authority to remove the corporate trustee if it becomes necessary to replace it with a different institution.
Source: The Wall Street Journal, "Getting Your Estate Plan Right" Carolyn T. Geer, Aug. 02, 2014