More Thoughts on Asset Protection

Since writing a blog a few weeks ago about  asset protection, I read an article in the Wall Street Journal by Jonathan Clements that I thought was excellent.  Here is the link to it

I liked this article because for the most part it discusses things that most of us are already doing, with emphasis on how those strategies can help protect our assets.

First, Mr. Clements discusses saving for retirement by noting that plans created pursuant to federal laws such as IRAs, 401ks, etc. are usually protected from creditors claims.  The take away is that we should do more or most of our investing in these accounts.  He did not mention the awesome tax advantage of being able to invest via a Roth IRA and avoid taxes on the profits.  Of course the trade off on the Roth is that you cannot deduct the original contribution/investment.   That is not a very big tradeoff, if you have good returns on your investment.

Second, Mr. Clements discusses state protection of your primary home aka the homestead exemption.  For most of us with an established business or residence, that just means looking up the law to see what it is in our state.  Under the Colorado exemption system, homeowners may exempt up to $60,000 of their home or other property covered by the homestead exemption.  The homestead exemption is $90,000 if the homeowner, his or her spouse, or dependent is disabled or 60 years of age or older.    The take away is that when you need money you may want to borrow against your home, but if you live in Colorado and are over 60, you may want to make sure that you leave at least $90,000 of equity in your home BECAUSE  it is safe from creditors.

The homestead exemption can be even more important if you are choosing a place to retire or for some other reason you want to relocate.   WHEN CONSIDERING RELOCATION you should always check out the homestead exemptions provided in the states that you are considering.  Leading the list are Texas and Florida which traditionally have offered 100% protection for your home.

Third, Mr. Clements reminds us that for those who own a home and a car and have good credit, most insurers provide a liability umbrella at a very reasonable rate.  This is often a very inexpensive way to provide some added protection to the assets that we have been able to acquire.

Fourth, if we have our own business or properties we should consider using business entities to segregate our assets, so that if a problem arises in a particular business or property, that problem is isolated to that business or property and cannot adversely affect our other assets.

Fifth, when we do estate planning we should consider whether or not we are at the stage where we want to consider an irrevocable trust.  In that consideration people consider the inconvenience to their lifestyle, the situs of the trust (whether it is in a favorable state or country), and the cost.

Remember that it is likely fraud to change our assets after a claim is made against us, but, before there is any claim against us it is good planning to consider how we can protect our assets from potential claims.



Posted on June 29, 2014 .

Build Glade Resevoir ASAP

This year the reason that the proposed Glade Reservoir should be built ASAP is quite obvious.  In Weld County several roads and paths are closed because of flooding rivers.   If we had more place to store water they would not be closed, but we would be saving water for use in Colorado.  Without more reservoirs great quantities of water are flowing to the Mississippi River and then the ocean.  There you have it:  flood control and Colorado usage/drought control.

The opponents of the Glade project do not want more water storage because they do not want more growth.  Growth is inevitable....people move to Colorado because it is a great place to live.   That is not going to change.  If we do not build Glade now, we will have more floods and more drought.  Then when the pressure of the growing population demands, Glade will be built for a much greater price.   What is the logic of enduring the floods, droughts and then paying the greater price required because of normal inflation?

Sometimes Glade opponents claim that they are concerned about the quality of the Poudre River.  They should check the history book, since most of our larger mountain "lakes" are reservoirs along with Horsetooth and others that are widely known as reservoirs, all of which were created for exactly the same reasons....keep more water in Colorado and allow for flood and drought control.  The rivers have run for decades..connecting the various reservoirs..without damaging the rivers.

The anti Glade people are also on the losing side of the anti growth sentiment that has been active in Colorado for at least 60 years.  None of us like to see more vehicles on I-25 or on our city streets.  But many of us have children and grandchildren who want to live in a nice place.  The last several decades have shown that though we understand the unattractive aspects of growth, as a society we do not have the power or desire to stop people from having children nor do we have the power or desire to prohibit people from moving into our area.

The only logical conclusion is to put the much needed new reservoir into useful public service.  Soon its opponents or their children or grandchildren will be enjoying fishing, boating or hiking on or around the new Glade reservoir along with enjoying the added flood and drought control.  Unfortunately there will be more people in Colorado in the future.  The timing of the Glade Reservoir will have no affect on that.

Posted on June 22, 2014 .


When people write favorable articles about IRA's, they like to tout the fact that money can be put away, which will be protected and grow for generations.  On June 12, 2014, an opinion written by Justice Sotomayer, in the case of Clark v. Rameker was published by the U.S. Supreme Court (see the opinion at ).  This opinion has established the rule that IRAs are NOT protected from creditors after they are inherited from the original owners.

In the Clark case the child of the original owner inherited the IRA.  The child had debts.  The child claimed in a proceeding before a bankruptcy court that the creditors could not take the IRA funds to pay the debt from the inherited IRA.  Judge Sotomayer reasoned that:  1. the inherited monies were not the child's retirement,  2.  Congress has protected retirement funds from creditor claims, 3.  Therefore since the inherited funds were no longer retirement monies they were no longer protected from creditors.   Seems to make sense, even though, those of us who love IRAs would like to see them have protected treatment forever.

Even after losing that "forever" creditor protection, the IRA is an excellent choice, where during the life of the original investor/retiree, the investment is protected from creditors without the creation of an irrevocable trust in a state with favorable laws or having an offshore company own the investment.   The Roth IRA, in addition to the creditor protection, has the additional benefit of  tax free growth of the investment ... no need to worry about capital gains tax or any other tax on the money earned in the investment.   That is a great combination.

Compare that to the investment in your home.  The Colorado Homestead  Exemption found at section 38-41-201 C.R.S. protects $60,000 in home equity ($90,000 for older persons) and only the first $250,000 for single homeowners or the first $500,000 for married homeowners is protected from taxes (see ).   There are definite limits to the protections  and tax benefits of home ownership, whereas,  there are no similar limits on the Roth IRA investment.

So, even though the creditor protection on the Roth IRA does not last forever, the Roth IRA is still an excellent way to invest.

Posted on June 15, 2014 .

Asset Protection

Bad things happen, even in Fort Collins, Colorado.   When bad things happen there can be devastating financial consequences that can make even a very rich person penniless.  So, what can a person do to plan for a catastrophic event?

#1.  Do not skimp on insurance.  Buy the best health insurance you can afford.   Make sure that your home and possessions are insured so that they will be fully replaced if damaged.  Consider flood insurance for your home and other real estate.  Have plenty of liability insurance at home and professionally.

#2.  Periodically review your assets and determine what are the best strategies to protect them.

Here are some things to consider:

A.  If you have more than enough assets to provide for yourself and your spouse, consider transferring some of the excess to adult children and charities.  If you no longer own the assets, then you cannot lose them because of some unforeseen calamity.

B.  In Colorado and in many other states, retirement funds are exempt from creditors.  That means that if you do have a problem, your creditors can not get your retirement funds.  By contrast, if that same money was in a bank account, your creditors would have no problem taking that money.

C.  You can use entities such as limited liability companies to invest your money.  If you keep your personal and each entity's money and business absolutely separate, then in the best case a problem may be isolated, and a creditor may not be able to successfully take anything of value from the limited liability company because of restrictions regarding charging orders.

D.  If you have assets in excess of ten million dollars you may want to consider having you assets kept outside of the United States in a jurisdiction that is not as friendly to creditors.  There is nothing magic in the $10,000,000.00 figure, but it is probably a useful benchmark, since taking money is so expensive, you need to have a large sum to make it a cost effective alternative.

THE MOST IMPORTANT THING TO KNOW IS, that once someone sues you or after you incur a debt, it is likely too late to do anything.  Our courts prevent fraud, and that includes fraud on creditors.  So, once you incur a debt, it is usually too late to move your assets around to make it difficult or impossible for that creditor to recover its loss.  ON THE OTHER HAND, before you have that big creditor, there is absolutely nothing wrong in using the strategies noted above along with other legal strategies to make some or all of your assets difficult or impossible for creditors to take.


Posted on June 1, 2014 .

Financial Advisers

There are many financial advisers looking to earn a fee.  Should you or I hire one?  Here are my thoughts.

1.  Unfortunately only a handful of people in Fort Collins, Colorado can afford those advisers that could make us very rich.   Those advisers that have the inside track to the most lucrative deals are the investment bankers/advisers with firms such as Goldman Sachs that only work with the super wealthy.   Its ironic that those of us who need to be in on the best deals cannot have access to them.

2.  The other extreme are those advisers that are dishonest.  There are always a handful of investment advisers that are in the court system heading for prison for stealing client money.

3.  In between these two extremes there are many advisers that are trying to sell products to earn commissions.  Some offer a full range of products including stocks, bonds, and insurance products.  In my opinion, everyone that has someone depending on him or her for support MUST have pure insurance to protect those children or a spouse during the time they are dependent on that support.   By pure insurance I am referring to term insurance.  I call it pure insurance,  because that is all it is, pay a premium in exchange for the promise to pay an amount certain upon your death or disability.  There is no investment in pure insurance...if you do not die or become disabled the insurance company pays nothing.

Insurance companies have a full range of products that in addition to the death benefit will pay additional monies in return for a premium larger than that for the term insurance.  In considering those products, be very careful.   The monies promised to be paid as a return on investment always appear greater than what they really are.  Just remember that the returns on your investment are split between you and the insurance company .  The reason that the return as quoted by the agent seems so high, is that the insurance contract which grants you a healthy profit is very complex and contains limits, fees, and other devices used  to make sure that the insurance company earns its profits before you get any profits from the investment made.  If you are considering investing in any insurance product other than a term policy,  you should read one of Warren Buffett's letters to his shareholders.   In recent years, he explains how the insurance companies that Berkshire Hathaway owns are cash cows...leaving him with hundreds of millions of dollars to invest.   Also have an attorney or other expert review the proposed contract you are considering so you know exactly what the fees, limits, etc. are.

My final thought, probably should have been stated first.   You are most likely to obtain unbiased advice from a fee based adviser as opposed to an adviser who earns commissions from products sold.  Use only fee based advisers for advice.

4.  If you are nearing retirement after a successful career,  it is very likely that you should be your own adviser.   If you have spent thirty years in an industry, you probably have extremely valuable knowledge that could be very lucrative.  For example if you have been a successful farmer or rancher,  you probably could invest in farms, ranches, crops, etc and make far more money than any adviser.   Likewise if you have been involved in construction, real estate, etc. you may be able to invest in real estate, rentals, etc. and do far better than any financial investor with your own money.

Hope these ideas are helpful to you in finding a financial adviser...even if it is you.

Posted on May 25, 2014 .

Why you should care about the fight over Mickey Rooney's estate

Here in Fort Collins, Colorado, when you consider all who die, a very small percentage of the surviving families end up in court fighting over the estate left by the deceased.  But the fear of such a fight is used by trust salesmen/lawyers to convince many to part with several thousand dollars to create a trust.  Therefore it is very instructive to look at a family fight to understand the few instances when such a fight is likely and what can be done to prevent it.

Currently such a tragedy is being played out over the estate of Mickey Rooney.  For the details check out the following link:   

The first thing that should be learned is that prior to Mr. Rooney's death there was a huge warning that a fight would be forthcoming.   That warning was two fold.  First,  Mr. Rooney had significant wealth AND he was NOT leaving his wealth to his eight children and his wife, but to a stepson.  And, second, Mr. Rooney had become incompetent which required the appointment of a conservator.  So, when the testator's competency is an issue and the most common and natural beneficiaries (spouse and children) are excluded, coupled with a significant estate,  you have the ingredients for litigation after death. 

Most of us do not have significant wealth, so we do not need to worry about litigation over our estates.  Secondly, most of us leave what wealth we have to our spouse and children.  So again we do not need to worry.   And finally most of us do not change our will to exclude our spouse and children after we become again no worries.

But, if we do have wealth, may be considered incompetent, and want to exclude our wife and children from our estate, then how do we protect our estate from litigation?  The nub of the problem is not the amount of wealth nor, is it the excluding of the most common recipients (the spouse and children).   The nub of the litigation will be Mr. Rooney's competency when the document excluding the spouse and children was signed.  A careful lawyer at the time of that signing would do the following:

1.  Have medical/mental evaluations of the person making the will (in this case Mr. Rooney), done immediately before the signing by respected mental health evaluators.  If the evaluators indicate that the proposed will signer is competent then sign the will.  If not, either wait until he/she becomes competent or do not sign the will.

2.  Have video and audio recordings of the will signing with an extensive questioning of the will signor regarding his/her understanding of his/her property and why he/she is excluding the spouse and children.  If the signor's responses and demeanor are not convincing as to his/her competency, then either wait until they are, or do not sign the will.

If there is the convincing evidence of Mr. Rooney's competence, such as that described in paragraphs 1 and 2 above, the court should be convinced that he was competent and his will excluding his wife and children should be honored.  On the other hand, if no such evidence exists and the wife and children can present evidence that Mr. Rooney was incompetent at the time of making the will that excludes them, then that will should not be honored and the estate should be given to the wife and children.

So, in any situation where a will is to be signed involving an estate with significant assets where the beneficiaries are not the wife and children, have the evaluations performed and record a well prepared will execution that demonstrates competency.  That preparation should avoid litigation, but if it does not, it should dictate the outcome of that litigation.



Posted on May 18, 2014 .

Four Documents Everyone Must Have

Recently Tom Lauricella wrote an article for the Wall Street Journal titled, "Four Estate-Planning Documents Everyone Should Have.  Check that article out via this link

I agree with his thesis that everyone should have a will, durable general power of attorney, durable medical power of attorney, and living will.

If you have minor children your will should determine who will care for them in your absence.  If you have any assets you should have a will to establish who will be in charge of distributing those assets and who will receive them.  Since you may acquire additional assets up to the moment of death, the distribution of assets is important even if you think that you have already made adequate provision by gift or deeding them, directing their disbursement via some entity such as a trust, corporation, partnership, limited liability company or the like.

The powers of attorney are crucial since we may all become incompetent at some time.  If we become incompetent to make our own decisions we should have a power of attorney designating who we want to make decisions for us instead of leaving control to someone else who may not know our priorities.  The "durable" used before powers of attorneys refers to the statement contained in those powers of attorneys that they are not affected by the signor's later becoming incapacitated.  This is important because of the legal concept that agreements may be voided upon the signor's incapacity.  In the case of a power of attorney...when you become incapacitated is just when you want the document to be effective...not when you want it to be made void.   So be sure to include the language that the power of attorney is not to be affected by your incapacity.

Finally, the living will.  in the last half century there have been several high profile lawsuits regarding disputes in families as to whether or not to discontinue artificial life support for a family member who is terminally ill and comatose.  In most of those cases, the judges have stated that it would be very helpful if the now comatose person had stated his or her preference regarding life support before becoming incompetent.  Now many make their wishes known regarding prolonging life when they are near death by executing "living wills".   The living will usually states that the signer does not want medical devices to prolong his/her life if he/she is very near death, cannot communicate, and is not likely to recover.  If that is your philosophy you should execute a living will.   If you disagree and want medical science to prolong your life even if you are comatose and there is no hope of recovery, then a living will is not for you.

As Mr. Lauricella stated:  almost everyone should have a will, general power of attorney, medical power of attorney and a living will.

Posted on May 4, 2014 .

The Australian Mortgage/the magic mortgage accelerator program is in Fort Collins

This past week Anita and I attended a financial planning seminar hosted by a Fort Collins/Loveland financial planner.  As part of the presentation we were invited to purchase a "mortgage accelerator computer program" for $1,500 that would get our 30 year mortgage paid off in as little as 6 years.  Sounded too good to be true.  It was.   When I returned home I began studying this product.  I learned that this product has been around for some time and is used extensively in Australia. 

This is how it works: 1.  The homeowner sets up a home-equity line of credit (HELOC) secured by the home.  2. The homeowner purchases the proprietary software costing between $1,500 to $3,500.  3.  The homeowner enters all the required data such as all required debt payments and the dates when income will be received.  4.  The software then computes the date when  payments larger than the monthly payments required by the mortgage are to be made on the mortgage from the HELOC which are paid.    5.  All income is paid to the HELOC lender.  6.  All debt payments are made from the HELOC on the dates dictated by the software.

I have not studied this program, but I found the following comments on the web:

Dave Ramsey stated: 

"The other kind of mortgage accelerator plan out there is a total rip-off. I’m talking about one where some companies will try to sell you a $3,500-piece of software tied in with a home equity line of credit, or HELOC. These things are often called money merge accounts. In this situation, you pay your bills out of the HELOC, and your paychecks are deposited against the HELOC. Then, they’ll apply whatever’s left against your mortgage, and it “magically” pays off your mortgage faster.

The problem is that no matter how many times you move the shell, the pea is still underneath. Whether you use a HELOC or just a yellow pad to make a budget, if you want to make extra principal payments on your first mortgage, you have to live on less than you make. And there’s no way I’m paying some rip-off company $3,500 for the privilege. Talk about stupid! You can do that on your own by making a decision to sit down every month with a pen and a piece of paper and write out your own monthly budget."    Read full article at 

In the other articles I read the commentators conclusions were the same as Dave Ramsey's, though none were as direct or colorful. listed 4 ways to pay off your mortgage earlier  The 4 ways are:  1.  Just pay more. 2. Switch to biweekly payments.  3.  Refinance to a shorter term mortgage. and 4.  Use money merge accounts (the Australian method).

Unfortunately, many lenders charge extra to switch to biweekly payments and once you switch you are locked in to that payment schedule until the mortgage is paid off.   A refinance of your mortgage will certainly cost hundreds and likely thousands of dollars to implement and again you are locked in to the new higher payments until the loan is repaid in full.  We already saw what Dave Ramsey said about the merge accounts. 

To me the best choice is the easiest...just pay more.  Just make sure that  A.  there is no prepayment penalty associated with your current loan.  and B.  all additional payments are immediately applied to principal (some loan documents state that additional payments are kept until the end of the year and then applied, etc.)   By just paying more, you have maximum flexibility.   Pay extra each month, or make one additional payment each year or whatever you desire.  There are simple loan calculators on line that allow you to determine how much you need to pay to accelerate your loan to whatever payoff day that you desire.  If your plans change you can always continue making the current payment amount (the required amount) and discontinue making additional payments.


Posted on April 26, 2014 .

Getting married with, will or prenup?

THE MOST IMPORTANT thing that you should do if you are getting married and have children and have property is to prepare a prenuptial agreement.  If you do not have a marital agreement then the marriage may cause some of your property to be transferred to your new spouse and his/her family.  The reason for this is that there are many laws established to protect spouses.  For example, probate laws usually require at least half of your property (estate) be transferred to your surviving spouse upon your death.  Divorce laws often do the same upon termination of a marriage.  In states with community property laws a spouse may obtain a half interest in any real estate when that property is purchased.  The result of all these different types of laws is that upon marriage half of your property may end up with the new spouse or her/his heirs.

If this is a first marriage and if you have little or no property, then such a result may work to your advantage.  But if you have obtained some assets and have children with the other parent of those children who is not the person you are marrying, then having half or more of your property end up with another person and his/her family could be a devastating result.

I am know a family in Fort Collins where that occurred.  This was a family who had a farm in Larimer County.  Mother, father, and several sons farmed it for decades.  The sons then went onto other careers.  Eventually mother and father sold the farm for more that a million dollars and retired.  While in their seventies mother died.  Father remarried a younger woman.  The newlyweds took the million dollars

Posted on April 26, 2014 .


My job here in Fort Collins is to help my estate planning clients avoid making big mistakes in their estate plans.  The following is a list of some of the biggest mistakes that may be made:

1.  For parents of minor children, the biggest mistake they can make is not designating a guardian to care for their minor children if both parents died or became totally incapacitated before their children become adults.   If this mistake is made then a judge makes all the choices concerning who cares for your children and what happens to their money if they are orphaned.

This mistake can be avoided by contacting the person or persons that you would want to care for your children.  Asking them if they would be willing to do that for your if you and their other parent were unable to care for them.  And finally, that person and at least one back up, after both have a agreed to help if needed, must be named by you in a properly written designation.  That designation can be part of a will or a separate document.   The potential guardians should have a copy of that document after it has been signed, witnesses and notarized.

2.  The second biggest mistake that parents of minor children can make is to fail to designate who will care for their children's finances if both parents die before their minor children become adults.   Again if this mistake is made it falls to a judge to decide who controls those assets.

In many states appointing a guardian as per paragraph one takes care of both.  In Colorado the appointment of a guardian is insufficient.  In Colorado a conservator also needs to be appointed using the same procedure as set out above for selecting and nominating a guardian.  For many if not most a better approach to arranging for the financial protection of minor children may be the use of a trust.  The reason a trust is often the best way is that it gives you the opportunity to state your preferences regarding education, religious training, when the children should receive their money, etc.

3.  The biggest mistake that divorced or widowed people with children can make is not having a prenuptial agreement in place before they remarry.  If this mistake is made your assets may not end up with your children or other heirs.  It is likely that many or most of your assets may end up going to the person that you marry and his/her family.  Take care of your children and get the prenuptial agreement.  You may also want to consider an irrevocable trust with an independent trustee to protect your children.

4.  A common mistake is not reviewing beneficiary designations on a regular basis.  We all think that we did it correctly  even if it was done decades ago.  If you were smart and lucky enough to have had extra money, hopefully you have had IRAs, 401Ks or similar investments for decades.  Unfortunately, many people do not review the beneficiary designations regularly,  So,  if there have been after born children or other changes in the last few decades, those changes may not have been made to the beneficiary designations, even though you are positive that you took care of it at the time.  Rather than relying on memory, get a fresh copy of each designation every few years to be sure they are all up to date. Upon death you do not want your assets to not be fairly divided with your younger children, or go to your parents, or a former spouse.  Check those designations.

5.  Some have a spouse or children with physical, mental or emotional disabilities that impair their ability to manage their money and other aspects of their lives.  In those situations, establishing a trust or other viable plan could be a huge benefit to those family members.  It would certainly be a mistake to neglect to plan for them.

The potential problems created by a failure to plan as noted above is not limited to the rich.  Each of these problems can be devastating to families with only modest assets.  Therefore lets take action to protect our spouses and children.

Posted on April 19, 2014 .

You do not need a Realtor to sell a home in Fort Collins for less that $350,000.

As I sat down to write this post, I asked myself what is new with my law practice.  The answer was easy.  I am doing a lot of real estate contracts and closings.  For years have I have done only a few each year.  Why the change?  The answer is obvious.   People who are selling their homes for less than $350,000 do not need a Realtor.   They put a sign up or tell a few people and buyers show up.   It s that simple for those who have a well maintained home in a good neighborhood that is priced realistically. 

The real estate statistics that I have reviewed confirm the ease of selling homes worth less than $350,000.   There are very few available, so when such a home becomes available it sells almost immediately.   The statistics also show that there are plenty available for $700,000 or more and that sellers of those home have to lower their asking price if they want to sell.

The people who are using me to help with their real estate transactions usually pay me somewhere around $500, depending on the services they request, instead of the $18,000 they would pay a Realtor(s).  Seems like a pretty easy decision.  The reason they do not need the Realtor is that they do not need any help in finding a buyer.  That is the main function of the Realtor.  Realtors strongly disagree with the observation that their main function is to find a buyer.  Instead they claim that they provide great expertise in filling out the form contract (really? its a fill in the blank form which I believe is one of the worst contracts ever.   It is horrible, because the mark of a good contract, is a contract that is easily understood by the parties.  The form Realtors must use is almost impossible for the untrained to understand.  Thus, it is clearly a horrible contract.  Though it is horrible, it is usually easy to plug in the names, address, dates, etc in the blanks.  You just need to read each paragraph a few times to figure out what it means).  Realtors also assert that they provide great service in assisting the parties prepare for closing, etc.  A good title company closing agent will do all that.  I agree that an experienced Realtor can offer some sage advice now and then, but the big thing that the Realtor adds to the transaction is finding that buyer for the sellers home.

An attorney can prepare the above described form contract or even a better contract and do everything else that is usually needed to close the deal for a few hours of attorney time.  So in the current real estate market in Fort Collins, Colorado, if you are selling a home for less than $350,000 you should consider selling the home yourself and use an attorney to provide the help that you might need, such as contract preparation, disclosures, etc.

Posted on April 12, 2014 .

Will or Trust, CONTROL AT A PRICE?

In estate planning a will is the least expensive alternative because of the lower cost of creating a will (you do not need to pay the trust salesmen...usually lawyers, the $3-$5,000.00 they are looking for) and you do not need to pay a trustee or pay to transfer all your assets to the trust.  The most expensive alternative is to create a trust with a professional trustee and transfer all your assets into that trust. 

So, how do you decide how to proceed along the simple will to professionally managed trust continuum?  The guiding principal should be the amount of control that you feel is needed.  For most who are starting out in life with few assets a simple will is likely all that is needed.  Actually if you live in Fort Collins or any other part of Colorado where probate is less expensive then the usual cost of creating a trust, a simple will is all that most will need.  A will is simply  a document that takes effect at death that dictates the disposition of your assets after your death.

The other extreme is someone who has substantial assets and is very concerned that upon death those assets may not pass to his or her children because of a mistake that may be made by an elderly spouse; or is concerned about the welfare of a disabled child; or has very definite ideas as to how his or her assets are to be used (just leaving them to the kids is not good enough).   If you have significant assets and have serious concerns, the safest thing to do is create an irrevocable trust (a trust that cannot be changed) naming an institutional trustee such as a bank to make sure that those concerns will be dealt with, AND TO TRANSFER ALL YOUR ASSETS TO THAT TRUST.   Such a trust guarantees that your plans will be fulfilled.  The reason for having a professional trustee is that even though you have made an irrevocable trust, a non professional trustee still could possibly ignore the dictates of your trust, whereas a bank or similar institution has layers of supervision that guarantees that your plans will be carried out, and if it does not,  the bank has enough assets to correct any error whereas many individuals who could serve as your trustee would not have the assets to fix a significant mistake in the administration of your trust.

There are alternatives between these extremes.  For example, a will can contain trusts that would become effective upon death.   They could even be irrevocable.   Trusts can be established now using family members as trustees.   The variations that can be created are numerous.

I have observed families that had all of their assets in insurance and retirement accounts with designated beneficiaries who have successfully transferred all of their assets from the parents to the children upon the death of both parents with no will, no probate and no other transfer costs

In Fort Collins it is my opinion that the most common estate planning document is a simple will. For almost everyone, the simple will works just fine.

As mentioned in an earlier blog I witnessed at least one family that had an excellent will, but unfortunately the family assets were transferred to another family because after the death of the mother, the father remarried and mistakenly invested all those assets in a new home as joint tenants with a younger second wife.  Something different should have been done for that family.  Fortunately that tragedy is not very common, but it could have happened with a revocable trust or even with an irrevocable trust if the elderly father was the trustee and had ignored the irrevocable nature of the trust.

It is an individual question.   No will,  a simple will or the irrevocable trust with a bank trustee; or somewhere in between?

Posted on April 6, 2014 .