Although all adults should have an estate plan, the first time many people seriously consider making an estate plan is when they have children. Of the many benefits of estate planning, protecting one’s children is among the most important.
Colorado intestacy law, the law of inheritance when an estate plan doesn’t exist, is the state legislature’s estimate of the way a Colorado decedent would want his or assets distributed. However, it’s a tremendous mistake to imagine that intestacy laws provide the protection that most people, especially parents of young children, want for their families. It’s essential to understand the limits of the law, and what estate planning can do to protect your loved ones.
Appointing a Guardian
For many parents, the thought of dying and leaving their children without a mother or father is a nightmare scenario. For a child who has lost both parents, additional pain is unavoidable, but steps can and should be taken in advance to minimize the trauma of the situation.
The first and most essential step to take is to nominate a guardian for your children in your will. Just as Colorado courts can distribute assets without a will, they can also appoint a guardian. However, the guardian chosen by the courts may not be the person you think best for your child. If you nominate a guardian in your will the court will be aware of your preference and in the vast majority of cases will follow your wishes. Typically, the only time the Court would not follow your wishes would be if the fitness of a particular guardian to serve is successfully challenged.
Even if the person the courts would select as a guardian (almost always a near relative like a grandparent, aunt, or uncle) is the one you would choose, the process is streamlined significantly when a valid estate plan naming the guardian is in place. At a time when your children need security and stability, the last thing you want is a protracted court case about who is legally responsible for them.
In addition to naming a guardian in your will, it is always wise to name an alternate guardian in the event that the first is unable to serve when needed. Of course, discuss your choice with the prospective guardians you’ve selected and make sure they are willing to act in that role.
Providing for Your Children’s Needs
In addition to making sure you have a trusted adult to care for your children in the event of a tragedy, you need to provide for your children’s material needs as well. Your goal is not only to make sure that your children have enough funds, but that those funds are both safe and will be accessible as needed. Unfortunately, leaving assets outright to minor children is not the way to accomplish this goal.
A better option is to create a trust for the benefit of your children. The trust can be created through your will or within a revocable living trust, with the direction that your assets be placed in the trust upon the death of both parents. Life insurance can also be used to fund a trust. Creating a trust allows you a measure of control over the assets you would not otherwise have if your children received them outright. A trust can direct how assets are to be used; for example, for medical and educational needs or living expenses. A trust also allows you, the trustmaker, to determine when you want your child to have unfettered access to the assets. Just because a child has reached the age of 18 or 21 does not mean he or she has the maturity to handle a large sum of money. A trust keeps the funds from being dissipated until your children are better equipped to manage it.
If you have a child with special needs, estate planning is even more critical, especially if you believe your child will need assistance into adulthood. If your child receives, or you expect they will receive, government benefits, inheriting assets directly may disqualify them. They may need to “spend down” assets before they become eligible for benefits again, at which time they may go to the bottom of a long waiting list to receive services. A special needs trust may avoid this outcome.
Whatever type of trust you create for your children, the trustee may be the children’s guardian, or may be another trusted individual or financial institution. Having the guardian serve as the trustee is convenient, but having a separate trustee and guardian provides for better checks and balances as to how the funds are actually being managed.
Estate planning not only allows you to provide for your children’s care and material needs, but also allows you to conserve more assets for their benefit. Without a plan prepared by an experienced Colorado estate planning attorney, assets could be needlessly consumed by tax obligations or probate litigation. To learn more about how a customized estate plan can protect your children, contact the experienced estate planning and probate attorneys at Davis Schilken. Call us at 303-670-9855 to arrange a consultation at one of our two locations in The Denver Tech Center and Golden, Colorado. We look forward to working with you.