Pet Trusts in Colorado

Clients often ask me if they can provide for their pets in their estate plans. The answer is yes – Colorado does allow for pet trusts – and many people use these as a means to ensure that their beloved companions are provided for if they are either disabled or upon their death.

My dear sweet Master Luke.

Pet trusts are extremely useful in a number of situations. For most household pets, pet trusts are used as just-in-case planning, very similar to naming a guardian in your will for minor children. This ensures that your pets are provided for without burdening your loved ones.  For pets with a long lifespan, such as tropical birds, pet trusts may be viewed as a necessity so that pet owners can provide certainty of care for pets that will almost certainly outlive their human companions. 

In general, trusts need certain types of beneficiaries before they will be recognized and upheld by the law. Typically, these types of beneficiaries have been either ascertainable individuals or charities. Therefore, historically, it was difficult to provide for the continuing care of pets after death. In the past, estate planning to care for pets involved leaving assets to a trusted friend or family member with the understanding that they would use the assets to care for the pet. Although this method has certainly worked, there have undoubtedly been times when the pets have not been taken care of in the way that their human counterparts would have expected or the pets have not been cared for at all, with the trusted friend or family member using the assets for self-benefit instead of the benefit of the pet. Finally, the most obvious person to care for a pets physical needs may not be the best choice to manage the assets placed in the trust for the benefit of the pet.  Pet trusts can accommodate this practical reality. 

PET TRUSTS IN COLORADO

Many Colorado estate planners draft their pet trusts to allow pet owners to leave assets for the benefit of their pets as well as to allow the pet owners to designate both a pet guardian to manage the care of the pet and a trustee to manage the assets in the trust and make appropriate distributions to the guardian. Because of this separation of duties, the creator of the pet trust can ensure that the best person is selected to care for the pet and the best person is selected to manage the assets funding the trust for the pet.

SPECIFICS OF THE COLORADO PET TRUST

Under Colorado law, pet trusts operate in the following manner:

• Assets can be placed in trust for the benefit of a pet.
• The trust can be written so that if the pet is pregnant at the time the trust goes into effect, the trust will remain in force to provide care for the offspring of the pet.
• The trust will remain in effect until there is no living animal covered by it, unless an earlier termination is provided for in the trust itself.
• The trustee is not allowed to use any portion of the principal or income of the pet trust for the trustee’s benefit or in any way that is not for the benefit of the animals covered by the trust.
• The creator of the trust has complete freedom to designate where any assets left in the trust upon its termination should go.
• The appropriate use of the trust funds can be enforced by a trust protector designated in the trust instrument, by any person having custody of an animal for which care is provided by the trust, by any beneficiary designated by the trust creator to receive assets at the termination of the trust, or, if none of the above, by an individual appointed by a court if someone makes an application to the court to review the use of the funds.
• If there is ever a situation in which a pet trust comes into effect but there is no trustee able or willing to serve, a court has the authority to designate a trustee and make other orders and determinations so that the intent of the creator of the pet trust will be carried out.

WHEN TO SET UP A PET TRUST

• Pet trusts can be set up at death, at disability, or immediately upon signing a trust instrument.
• Pet trusts are typically set up in a last will so that upon the death of the creator of the will, the pet trust is established and funded.
• However, pet trusts can also be established in a revocable living trust so that upon the disability of the creator of the revocable living trust, a pet trust will be established to provide for continuity of care of the pet or pets.
• Additionally, at any other time, any individual can set up a stand-alone pet trust to establish a trustee and fund a trust for the benefit of a pet.

Asset Protection- Irrevocable Trusts and Marital Agreements

Asset Protection- Irrevocable Trusts and Marital Agreements a Brief Overview

When I tell people that I am an estate planning attorney, they often ask about trust planning and wonder if they "need a trust." If a person is engaged in a high risk activity, where they risk having creditor's come after them I explore irrevocable trusts and marital agreements with them as a way to protect their assets.  

  Irrevocable trusts can provide asset protection by protecting the assets in the trust from the liabilities of trust beneficiaries and the trust creator (or settlor).  Assets placed in an irrevocable trust are protected from the liabilities of the beneficiaries if the beneficiaries do not have a certain and defined interest in the trust (the beneficiaries interest is contingent on a future event or subject to the discretion of the trustee); or the trust agreement includes a spendthrift provision which prevents creditors from making claims against the beneficiaries’ interest in the trust and prevents the beneficiaries from transferring or pledging their interests.  If the trust language includes these provisions, the only time assets would become subject to the beneficiaries' creditors is after the assets are distributed from the trust to the beneficiary.  As long as the trust assets are retained in the trust they are protected and can continue to provide for and benefit the beneficiaries beyond the reach of their creditors.

The irrevocable nature of a trust can also limit the reach of the trust settlor's creditors.  Since the trust is “irrevocable” the settlor cannot change his mind and either terminate the trust or take back the trust assets.  Upon transfer into the trust, the settlor has no power or authority to change the terms of the trust, use the trust assets or derive any benefit from the trust except as provided in the trust agreement.  As a result, in the absence of fraud, generally the creditors of a settlor cannot reach an asset within an irrevocable trust.   However, if the settlor retains any interest in the trust or the power to change the trust terms or dispositions, the settlor’s creditors may be able to reach the trust assets to the extent of the settlor’s retained power or interest.

 Off-Shore Trusts

Sounding quite glamorous and mysterious, off-shore trusts are trusts established outside the United States in a foreign jurisdiction.  These trusts attempt to provide the settlor asset protection, while still allowing the settlor control of the trust and the benefit of the trust assets.  Often the asset protection is derived from the fact that it is a difficult undertaking for a creditor to not only obtain a judgment against the settlor’s assets in a foreign jurisdiction but then also to collect against those assets.  In fact, some foreign jurisdictions implemented laws to make this process difficult for creditors to thereby encourage settlors to establish trusts in their jurisdictions (i.e., the Bahamas and the Cook Islands).  However, some of the same aspects that make these trusts unattractive to creditors also create risk for the settlor, as the assets are located in a foreign country and are subject to foreign laws and regulations.  The viability of off-shore trusts has been further eroded by increased reporting requirements for offshore trusts and holdings since 9/11 and recent court rulings such as the Anderson case, wherein the court held that the debtors could be jailed for failing to make assets held in an offshore trust available to the Anderson’s creditors. 

Self-Settled Spendthrift Trusts

A self-settled spendthrift trusts (“SSST”) is a form of irrevocable trust that offers greater creditor protection to the settlor while not requiring the settlor to give up absolute control and benefit from the trust assets.  Under a SSST, the settlor can be a beneficiary of the trust and can retain certain controls and authorities within the trust, such as the ability to direct investments or change the trust beneficiaries.  Once an asset is transferred to the trust, a creditor of the settlor has a limited period of time within which to challenge the transfer as an attempt to avoid a debt and assert a claim against the asset.  If the creditor does not make a claim within the proscribed time period, the asset is protected.  Even if the settlor later incurs a debt to the creditor, the creditor cannot reach the asset if the claim is not asserted within the proscribed time period.  The SSST is now authorized in Alaska, Delaware and Nevada.   

Marital Agreements:  Separation of Assets Between Spouses

A final technique asset protection technique that may be considered is the separation of assets and potential liabilities between spouses.  It may be possible to isolate the risks of one spouse (i.e., liabilities through a job or profession) to only that spouse’s separate assets, thereby gaining asset protection for the other spouse’s separate assets.  To achieve this separation, a written agreement between the spouses (a pre- or post-nuptial agreement) that clearly defines the separate property of each spouse is required.  Maintaining the separation of assets requires diligent management of assets and resources during the marriage to ensure that no marital property is created.  This technique would also only be effective to the extent that in the event of a creditor claim, the debtor spouse can show that the liability was incurred by the one spouse individually and not through a marital undertaking.  This type of asset protection planning also has additional ramifications.  In the event of divorce, the marital agreement would apply.  In addition, this technique could have estate tax consequences.  Careful planning is suggested when using this strategy.

Conclusion

When considering taking steps to protect your assets, it is important to keep in mind that no asset protection technique will shield assets from a creditor if the transfer is made in attempt to defraud or hide assets from a creditor with a potential claim.  In fact, such attempts may only compound the problem by turning a financial liability into a criminal liability.

It is also important to keep in mind that much like an estate plan, an asset protection plan must be carefully considered and tailored to meet each person’s individual circumstances.  With many life-legal planning techniques available and a myriad of ways to apply them, asset protection planning should only be done with the guidance of experienced professionals who can correctly analyze your situation and help you formulate a plan to best meet your needs.

Estate Planning Must Dos Before Summer Vacation

Get your estate planning done so that you can enjoy your vacation knowing your life legal plan is in place!

Summer is fast approaching and most of us have already made plans for our vacations, whether it be a trip home to see family, a trip to an exotic country, or camping in our own home state.

Understandably, most of us put more time into planning our adventures then we do in our estate planning. Its a lot more fun!  I can’t tell you how many times clients have reached out just before they take off for a big trip with what I now call the “estate planning itch." Their bags are almost packed, house sitter on board, etc., then the phone call:

“We are leaving next week and are wondering about an estate plan – can you help us quickly get this done.”

Estate planning is a daunting topic to think about. What if something were to happen and one of your family members were to get seriously injured on the trip? What if catastrophe struck? It’s natural to shelve these thoughts and also natural to have them “itch” a little bit.  Why not be proactive and address this now.  Estate planning itself, is actually not that daunting and can be an important tool in not only getting your affairs in order but also in understanding where you are right now in terms of your life planning.  In just a few conversations I can help you sort out and complete your estate planning and almost always clients inform me that it was much easier than they had imagined with great relief. 

Here are seven estate planning tasks that you might want to take care of before you go anywhere this summer.  That way wherever you go you won’t have to worry about the inevitable estate planning itch. 

1. Make a Will

Have you been putting off making a will? Perhaps you don’t think you need one-you do. Or perhaps you don’t think you have enough assets to require one-you still do. These are a few of the many common excuses that could cause turmoil and uncertainty for your family and loved ones were something unforeseen happen to you or a loved one.

Another misunderstanding is that a will is not necessary because the state makes a will for you. True, (these “wills” are actually called intestacy statutes), leaving your final wishes up to the state is fool hardy.  The state decides based on order of relation and not on individual and personal circumstances. 

I’m not even going to try to touch the tip of the iceberg with reasons for why you need a will. The point is, making a will before you go on your summer holiday will let you rest easier while you’re on vacation knowing your life plan is in place.

2. Check Beneficiary Designations

Almost always, a will is not enough to distribute your assets. Some of your largest assets, such as your IRAs, 401(k) plans or life insurance will be distributed outside of your estate to your named contractual beneficiaries. 

Each major financial account lets you designate a beneficiary. Usually you’ll designate the beneficiary on the spot and in a rush while setting up your account. Sometimes your snap decision will be the right one but other times, you might be making your assets more available to certain people than you’d like. For example, do you want your 18-year-old child to have access to your entire retirement savings? Are you certain s/he will spend that large sum of money in the way you’d like him/her to?

It’s worth revisiting who your beneficiaries are in case something happens to you before you travel.  This can be achieved via a simple phone call to your agent or representative.

3. If You Have Children, Please Name a Guardian or Guardians

Regardless of whether or not you make a will, you should always name a guardian (or guardians) for your children. 

It’s devastating to think about something happening to you before your children grow up, but it’s important to name the friends or relatives who can take care of your children according to your values and beliefs.   In Colorado, you can name a guardian to take care of the children and a guardian to take care of the finances if that is appropriate.  If you do not name a guardian it will be up to the Court and relatives to decide who will care for your children. 

You can also create a Pet Trust to care for any animals that you have, providing funds for their care.   

4. Complete your Medical Power of Attorney/Living Will

Sometimes, catastrophe doesn’t mean death. Sometimes, a person is left incapacitated and unable to make decisions about his/her healthcare (being in a coma or otherwise unable to communicate). Who would make the decisions for you if you were incapacitated? If you don't name an agent your loved ones will have to resort to the Court in order to speak to medical personnel on your behalf.  

Signing a medical power of attorney and living will also allows you to specify what type of medical treatment you want and don’t want if you are unable to communicate your wishes.

Why is this necessary? Because without this, your family will have to resort to the the court, who will then appoint a guardian to make those decisions for you. That’s costly both in terms of finances and emotional trauma to your loved ones; and you risk that your wishes won’t be adhered to.

5. Make a General Power of Attorney

Your health care power of attorney allows other people to help make medical decisions for you if you’re incapacitated, in conjunction with the wishes you can specify in a living will. A durable general power of attorney is equally important. This person makes decisions about what happens with your assets and other interests when you are unable to manage them yourself.  Again, if you don't name an agent your loved one's will have to petition the court to appoint a conservator for you.

6.  If your estate plan is complete

Review your fiduciary and beneficiary designations and update them if needed.   Are your choices still appropriate?  If not make the changes now.

7.  If you have children over 18

Once your minor child turns 18, you need to be named as their agent in powers of attorney in order to speak to medical personnel and/or banking and financial institutions, etc.  Whether your child is going off to college or you are just simply trying to schedule a vaccine for travel, it’s important to have these documents in place so that you can be there for them if needed.  

Your Summer Vacation Awaits You….

Think about how good it would feel to have these legal documents completed.   Although chances are good that nothing will happen to you or your loved ones, you don’t want to take the risk that your life plan will be decided by someone other than yourself. 

Hoping that your family makes many happy memories this summer!

Medical Power of Attorney - Choosing Your Agent

In completing your POAs its important to choose an appropriate agent. Here are five criteria to think about in relation to choosing an agent for your medical power of attorney.

1.  Personal belief:  Since the concept of withholding artificial-life support runs contrary to the teachings of some religions and is a very personal decision, it is helpful to find a healthcare agent who understands your feelings in this regard and whose own beliefs are not contrary to your own.

2. Communication: It is important to choose someone you are comfortable speaking with about your health care wishes and it should be clear to you that not only do they understand them but they will be able to communicate these to your health care providers and family members if necessary.

3. Practical reality:  Its critical that the person you choose is willing to accept responsibility and agree to act as your agent - "ready and able to serve".

4.  Voice:  In choosing an agent be sure that they will be able to speak up and stand firm on your behalf - even if faced with physicians who are advising otherwise or other close family members who disagree.

5.  Availability: Make sure this person is likely to be accessible and capable of serving as your agent well into the future.

Revocable Living Trusts In Your Estate Plan

Estate Planning: The Use of a Last Will versus a Revocable Living Trust

Many clients come in asking about setting up a Trust rather then a Will for their estate planning. Trusts are very trendy right now, especially in states like California where the probate process is expensive and complicated.

Each of these estate-planning tools has pros and cons. The following information is meant to make sure you understand the differences and enable you to make an informed decision about which estate-planning method is right for you.

When a Last Will is used, it does not become an effective document until death. A Last Will requires the property of the decedent to go through the probate process prior to being distributed. Probate is the process by which a Last Will is presented to the court, the court authorizes the representative of the estate to take possession of the decedent’s assets, the creditors of the decedent are notified, and, approximately four months later, the representative pays the creditors and then distributes the assets to the intended beneficiaries.

When a Revocable Living Trust is used, the assets titled in the name of the trust are not part of the decedent’s estate, and do not need to go through the probate process. As soon as the individual who set up the trust dies, the alternate trustee named in the trust is entitled to take control of the assets without any court involvement. Importantly, this process also happens when the person who set up the trust becomes incapacitated.

Colorado has an informal probate process. The probate court is minimally involved with the process, and thus most probates here are both inexpensive and efficient. However, as noted above it does take about four months to complete the process.  In a Revocable Living Trust based plan, the immediate ability of the alternate trustee to access the assets in the trust upon the incapacity or death of the settlor of the trust is definitely an advantage if time is a consideration.

If you choose to use a revocable-living trust based estate plan, your personal residence, vacation home, and investment accounts and other types of property are usually transferred into the name of the trust, requiring retitling of these assets, but tax advantaged retirement accounts are usually not. This process of retitling the assets is one of the two disadvantages of using a Revocable Living Trust when compared to a Last Will-based estate plan. The second disadvantage to the Revocable Living Trust is that it is typically more expensive than a Last Will based plan.

I generally recommend a Last Will based estate plan here in Colorado because of our informal probate process. I recommend a Revocable Living Trust based plan to my clients who meet any of the following criteria:

➢ complex asset management needs or diverse types of investment assets since Revocable Living Trusts provide a very strong asset management tool;
➢ property outside the state of Colorado (since such property can be placed in the Trust, no additional probate proceeding will need to be opened in the other states);
➢ the need for privacy (Wills are filed at death and become pseudo-public documents) or the wish that their at-death disposition not be public; and
➢ impending disability (at the disability of the individual, the alternate trustee will be able to take control of the assets in the trust).

Feel free to call or email me if you have further questions regarding the differences between these two types of plans.

Colorado Advance Directives and Do Not Resuscitate Orders FAQs

Medical Power of Attorneys, Living Wills, DNRs, CPR Directives. Many clients want to make sure their medical choices are adhered to if they are unable to speak for themselves. To help them understand the basics - what are these documents and what do they do - I have written a brief summary, below.  I strongly recommend that all of my clients, friends, and family have these documents completed so that their choices are honored about the care and control of their health care treatment if they cannot speak for themselves.  This also avoids the terrible and onerous burden of having their close family members or friends have to go to court to obtain an order allowing them access to the care and treatment of their loved ones, should something happen, if these documents are not complete.

What is an advance directive?

An advance directive tells your doctor what kind of care you would like to have if you become unable to make medical decisions (for example, if you are in a coma). If you are admitted to the hospital, the hospital staff will probably talk to you about advance directives.  If you are not hospitalized these documents are still important to have on hand.

A good advance directive describes the kind of treatment you would want depending on how sick you are. For example, the directives would describe what kind of care you want if you have an terminal condition or illness that you are unlikely to recover from, or if you are permanently unconscious. Advance directives usually tell your doctor that you don’t want certain kinds of treatment. However, they can also say that you want a certain treatment no matter how ill you are.

Colorado’s advanced directives are called Medical Powers of Attorney. The signer is making statements in advance about his or her preferences for medical care should he or she be unable to speak for themselves.

What is a medical power of attorney?

A medical power of attorney (POA) for health care states whom you have chosen to make health care decisions for you by allowing you to name an agent to step into your shoes and also allows you to express legally binding decisions about end of life choices. It usually becomes active any time you are unconscious or unable to make medical decisions. A POA is legally binding, so long as the named agent is present. If the agent is not present then the medical personnel will look to the language and wishes expressed in the living will and most likely adhere to the wishes expressed therein.

What is a living will?

A living will is another type of advance directive. It is a written, legal document that describes the kind of medical treatments or life-sustaining treatments you would want if you were seriously or terminally ill.

If your agent for medical power of attorney is not available to speak on your behalf the medical personnel will generally adhere to the wishes expressed in a living will, so long as it is properly executed per Colorado statute.

What is a do not resuscitate order?

A do not resuscitate (DNR) order is another kind of advance directive. A DNR is a request not to have cardiopulmonary resuscitation (CPR) if your heart stops or if you stop breathing. Unless given other instructions, hospital staff will try to help any patient whose heart has stopped or who has stopped breathing. You can use an advance directive form or tell your doctor that you do not want to be resuscitated. Your doctor will put the DNR order in your medical chart. You both must sign this form in advance.

A medical ID allows you to communicate your choice when you cannot speak for yourself. A DNR request is usually made by the patient via a valid form, bracelet or agent named in the medical power of attorney, and allows the medical teams taking care of them to honor and adhere to the patient’s wishes.

In Colorado, CPR and advanced cardiac life support (ACLS) will not be performed if a valid written DNR order or CPR directive form is present. In Colorado, it is typical for emergency medical services personnel who are presented with a valid DNR form, signed by your doctor, or who identify a standard DNR bracelet on you, to comply with the DNR order.

Advanced Directives are an important part of your life planning necessities.

 What is a CPR Directive

A CPR directive is similar to a DNR order.  The Colorado CPR directive must be signed by both the individual  and his/her physician.  CPR directives must be immediately visible to emergency personnel. At home, the best locations are right by the front door, on the refrigerator, or by the bedside of a home-bound individual.

For more active clients with strong feelings about CPR directives, I recommend a special no-CPR bracelet or necklace that can be purchased from the Award and Sign Connection or MedicAlert Foundation.

Should you complete your advance directives?

By completing your advance directives, you are making your preferences about your medical care known before its too late. This will spare your loved ones the stress of trying to make decisions about your care and you receiving care against your wishes or beliefs. Any person 18 years of age or older can and should prepare their advance directives. Parents who send their children off to college should make sure the kids have medical POAs completed, so that should something happen they can make medical decisions for their children without having to get a court order for guardianship or conservatorship – same with adults with elderly parents, spouses, and single people.

Review your estate plan to make sure it still fits your life plan.

Many clients have an estate plan in place - but for these documents to really serve the purposes they were created for they sometimes need to be updated as life circumstances change and time marches on.  

Periodically reviewing your plan estate plan ensures it accurately reflects your current life plan - both your present needs and your goals going forward.   Make sure you review and update your estate plan if your personal or financial situation changes or if a number of years have gone by and for instance your minor children now have children of their own.

Some of the most important triggers for updating your estate plan include:

Divorce. Once your divorce is finalized, your plan should be revised as quickly as possible to reflect your current situation.   In addition, you can take steps to protect your heirs from potential future relationships that might impact their legacy unintentionally.

Re-Marriage. If you and your new spouse both have children from a previous marriage or relationship, working with an estate planning attorney is essential to navigate the complexities of providing for the children of both parents.   

Birth or Adoption of Children. In addition to providing for your children’s financial future, any good estate plan will also allow you to appoint a legal guardian (both for finances and physical care) in the event you and your spouse die or are incapacitated.  The guardian designation should be updated as needed depending on circumstances and should always reflect the best interests of the child/children NOW.

Illness or Injury. If you or one of your family members becomes seriously ill, you may want to consider changing your plan to reflect increased needs and or the creation of trusts for special needs, etc.

Changes in Tax Laws. Tax laws are constantly changing and can dramatically affect your estate plan.   An estate lawyer can  help ensure that your plan takes advantage of new legislation and makes sure you have a viable, current asset protection plan in place so that your estate avoids taxes as much as possible.

Inheritance. If you receive a large inheritance, this could shift your estate planning considerably.   The increased value of your estate may cause you to change how your assets are distributed upon your death, as you might want or need to add trusts for your beneficiaries and or more charitable contributions or both.

These are just a few examples of when a meeting with your estate planning attorney is in order to make sure your estate plan meets your life plan.  I am happy to discuss my client's current plans with them any time they feel the need for such a review: and always available to review a new client's "old plan" as part of my complimentary initial consultation.