Revocable Trust for Individual with Spouse or Partner
(Pot Trust for Children) (CO)

Summary

This template is a revocable trust for use by an individual in Colorado with a spouse or partner in a civil union or registered domestic partnership. It includes a pot trust for the individual's children. This template includes practical guidance, drafting notes, and alternate and optional clauses. This template provides for the residuary trust estate to pass outright to the surviving spouse or partner upon the settlor's death. While Colorado state does not have registered domestic partnerships, it gives full faith and credit to legal relationships validly created in other jurisdictions, such as registered domestic partnerships, if they do not otherwise violate Colorado law (e.g., domestic partnership between siblings). See Colo. Rev. Stat. §§ 14-15-102, 14-15-105, 14-15-106. However, there are municipal jurisdictions in Colorado that allow for registered domestic partnerships (i.e., Denver and Boulder). If there is no surviving spouse or partner and one or more of the settlor's children are under the specified age, the trust assets pass to settlor's children in a single "pot" trust, known as the family trust. Without the family trust, the settlor's children would receive outright gifts upon reaching age 18. The trustee will administer the assets of the family trust until the youngest child reaches a specified age. The trustee has broad discretion in providing for the children and is not required to treat them equally. When the youngest child reaches the specified age, the trustee distributes the family trust assets to the settlor's issue outright and free of trust. All distribution provisions should be carefully crafted to reflect the client's wishes. A pot trust may be desirable if the settlor wants to provide for their children in a way that addresses each child's particular needs, as opposed to giving fixed fractions to each child outright or in separate trusts. A pot trust allows the trustee to treat younger surviving children much as the parents would have if providing for those children during the parents' lifetime, since parents often provide for their children in ways that may not be entirely equal for a variety of reasons. For example, one child might attend an expensive private college and another child might attend a less expensive public college. Or, perhaps one child was born many years after another child, so the parents may not have the same sort of financial resources available for both children. A revocable trust (also known as a "living trust" or "inter vivos trust") is typically used as a will substitute to avoid probate. The revocable trust also includes elements of disability planning as assets can be managed by the successor trustee without an adjudication of incapacity. However, because the settlor retains power over the trust assets, revocable trust do not provide asset protection or estate tax savings. A spouse in Colorado is generally entitled to one-half of the marital property of the deceased spouse's augmented estate, which may include a supplemental elective share and cost of living adjustment. See Colo. Rev. Stat. §§ 15-11-201 et seq., 15-11-301, 15-11-403—404. For more detailed information on how to calculate the augmented estate and marital share, see THE GREEN BOOK Colorado Revised Statutes § 15-11-202 (2014). Colorado law defines separate and marital property in dissolution of marriage or legal separation cases. In general, all property, regardless of how it is titled, that is acquired by either spouse during the marriage is presumed to be marital property, except inheritances, gifts, or by agreement between the parties. See Colo. Rev. Stat. §§ 14-10-113(2), 14-10-113(3). In addition to the exceptions noted above, all property held by a spouse prior to the marriage is considered separate property. However, any increase in value of separate property during the marriage is presumed to be marital property. See Colo. Rev. Stat. § 14-10-113(4). If these presumptions should not apply due to agreement between the parties regarding certain assets, custom drafting regarding the specific character of said assets is required. In addition to the creation of the trust, the settlor will need to fund the trust with all of settlor's individually owned assets to avoid probate. Drafting and funding a revocable trust is a multi-step process as summarized in the image below. Visualization of Revocable Trust Drafting & Funding To assist your client with funding, you should provide a checklist and/or letter to help them understand the additional action required to coordinate the estate plan beyond executing the documents. To ensure that all of the settlor's assets are properly transferred to the intended beneficiaries, a revocable trust should be used together and coordinated with a pour over will. For a letter to a client regarding the importance of funding a revocable trust, see Letter to Client (Funding of Revocable Trust) (CO). For general information on trusts, see Estate Planning with Trusts: What Is a Trust? Video, Estate Planning with Trusts: Drafting Fundamentals Video, and Estate Planning with Trusts: Trust Administration Video. For a full listing of key content on creating an estate plan for an individual with a spouse or partner residing in Colorado, see Estate Plan for Individual with Spouse or Partner Resource Kit (CO).