Colorado parents usually plan their estates for the benefit of their children. Not wanting their child to suffer the financial hardships that they did, they may be more than willing to name their child as the beneficiary of their most valuable assets. However, it is important that they plan their estate carefully while keeping in mind that their children may not be capable of handling money wisely yet.
Many parents simply list their children as beneficiaries on their financial accounts without considering the children's ages. Even though minor children cannot inherit a life insurance policy, investment account or savings account balance until they reach adulthood, they still might not be ready to handle a cash windfall the day that they turn 18. If parents are planning their estate while children are still minors, it may be best to set up a Trust to benefit the children rather than leaving their children money outright. They should speak to a Denver Estate Lawyer to discuss all of the options and devices a Trust can include into their estate plan
Below is also a very common question when families are setting up their Trust or Estate Plan in Denver.
If you put a home in an irrevocable or revocable trust, is that an immediate gift to the beneficiaries with carryover basis. How do you get the step-up in basis?
We always include a limited testamentary power of appointment in the irrevocable trust, which permits the grantor to redirect who gets the house or other trust assets when they die. For tax purposes, this results in the trust property being in the grantor's taxable estate when he dies and as a result, the heirs get a step-up in basis.
Additionally, for revocable Trusts; the transfer, for tax purposes, doesn’t take place until the grantor and co-trustee (spouse) pass away. This allows the beneficiaries to get the full step-up in basis. This is especially important for Denver families as many of them own and manage rental properties. Rest assured that all properties transferred into a trust will receive a full step-up in basis.