Q: Please review the general rules on how trusts can be used to protect someone with special needs (whether mental, physical, health, or social). I went to one of your recent speeches on behalf of a local support group but the book that the association gave us seems to conflict with some of your statements.
A: The basic law pertaining to trusts is uniform around the country, but there are important but pesky details which vary widely from state to state. So let me adopt the format that Thomas used in writing his "gospel" and list important "sayings."
Any revocable trust set up and funded by the protected person will offer no protection. Any irrevocable trust set up and funded by the protected person is vulnerable to attack to the extent that the protected person either retained powers or the trustee is obligated to make required distribution. These irrevocable trusts might also be attacked if set up within a certain number of years (which varies depending on who is seeking to set the trust aside) or in the opinion of many Colorado lawyers, if done to defeat present creditors or possibly even reasonably foreseeable creditors.
Trusts set up by third parties for the benefit of the protected person can be pierced if the assets really came from the protected person or if the trustee has any duty to make distribution either under the trust instrument or by law.
These kind of irrevocable trusts are usually set up so that the distributions are completely discretionary and language is added that emphasizes that the trustee has no duty to distribute anything and in fact has a duty to help the protected person locate appropriate programs and aid. Some Colorado attorneys even advise against setting up a pattern of discretionary distributions, such as paying rent, but that may not be practical.
So just as Thomas' works did not make it into the Bible, my guidelines probably will not be included in your group's support book designed for a nationwide audience, but here in Colorado the foregoing should be kept in mind. Otherwise, the money spent on the trust will not buy what was anticipated or desired.
Q: If I have a Will, does that mean my Estate has to be probated?
A: In Colorado do not avoid writing a Will because you are afraid that it means forcing your family into Court. If all of your assets are held in joint tenancy, or with a beneficiary designation, or payable on death, no probate would be necessary, even if you had a Will.
But if real estate or other assets worth more than $27,000 are not so held, then probate would be required and the Will becomes invaluable. Even if no actual Court administration is required, a Will still names who is in charge.