Estate Planning For Colorado

Summary

Placing a home in an irrevocable trust can protect it from being counted as income for medicaid eligibility. A special needs trust (snt) can help maintain eligibility for medicaid and snap benefits. The five-year look-back period affects the grantor, not the beneficiary. The grantor can specify remainder beneficiaries in the trust. The trustee can be the adult child of the disabled adult. Consult an estate planning attorney for detailed guidance.

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I’m wondering how an adult child who is listed as the sole beneficiary of the grantor’s home and who is also a currently disabled, on Colorado Medicaid and Colorado SNAP, can be maintain their eligibility for Medicaid and SNAP if they inherit the home. The adult child has lived in the home with the grantor for 25 years. I thought that if the house is placed in a irrevocable trust upon it being transferred to the beneficiary, it is protected from being counted toward income qualification and if placed in an irrevocable trust it is not protected from counting as income for Medicaid eligibility. Do you have any suggestions of how this can be accomplished?

In Colorado, placing the home in an irrevocable trust can indeed help protect it from being counted as income for Medicaid eligibility. Here are some key points:
- Irrevocable Trust: The home must be placed in an irrevocable trust at least five years before applying for Medicaid to avoid the look-back period penalties.
- Special Needs Trust: Consider a Special Needs Trust (SNT) to ensure the beneficiary's eligibility for Medicaid and SNAP benefits. The SNT can hold the home and other assets without affecting eligibility.
Would you like more details on Special Needs Trusts?

Yes, but first , please take into consideration that the beneficiary and not the grantor is currently on Medicaid. Doesn't the 5 year look back thing only effect a person who is trying to qualify for long term care under Medicaid and not the beneficiary who inherits the home home? The beneficiary is not seeking long-term care. Please clarify.

The five-year look-back period mainly affects the grantor who is applying for long-term care Medicaid benefits, not the beneficiary. For the beneficiary who is already on Medicaid, placing the inherited home in a Special Needs Trust (SNT) can help maintain their eligibility for Medicaid and SNAP benefits.
Would you like more details on setting up a Special Needs Trust in Colorado?

Yes, please.

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To set up a Special Needs Trust (SNT) in Colorado:
- You will need to work with an attorney experienced in estate planning and public benefits.
- The trust should be specifically designed to supplement, not replace, Medicaid and SNAP benefits.
- The trust can hold the inherited home and other assets without affecting the beneficiary's eligibility.
Would you like to be connected to local lawyers who can better assist you with your case?

Not quite yet, Can you provide an example of a Colorado SNT?

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Sure, here is a general example of a Special Needs Trust (SNT) in Colorado:

Special Needs Trust (SNT) Example:
Trust Agreement
*. Trustee: Appoint a trustee who will manage the trust. This can be a family member, friend, or professional trustee.
*. Beneficiary: The individual with disabilities who will benefit from the trust.
*. Purpose: The trust must state that its purpose is to supplement, not replace, government benefits such as Medicaid and SNAP.
*. Funding: Detail the assets that will be placed in the trust – in this case, the inherited home.
*. Distributions: Specify how the trustee can use the trust assets for the beneficiary's needs without affecting their eligibility for government benefits.
*. Remainder Beneficiary: State who will receive the remaining assets in the trust after the primary beneficiary passes away.
*. Irrevocability: The trust must be irrevocable, meaning it cannot be changed or terminated by the beneficiary.
*. Compliance with Laws: Ensure the trust complies with federal and state laws regarding SNTs.
Would you like more detailed guidance on any specific section of the Special Needs Trust?

Please expand on the intention of this portion from the statement below “not replace” *. Purpose: The trust must state that its purpose is to supplement, not replace, government benefits such as Medicaid and SNAP. I thought that the statement below only applied to one who was on long term care paid for by Medicaid, passes away? “ *. Remainder Beneficiary: State who will receive the remaining assets in the trust after the primary beneficiary passes away.”

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To clarify:
- Supplement, Not Replace: This means the trust's funds are meant to provide additional support to the beneficiary without affecting their eligibility for government benefits like Medicaid and SNAP. The trust should cover extra needs not provided by these benefits.
- Remainder Beneficiary: This clause specifies who will receive any remaining assets in the trust after the primary beneficiary (the person with disabilities) passes away. This is a standard provision in SNTs to ensure assets are distributed according to the grantor's wishes after the primary beneficiary's death.

I appreciate your patience in explaining this. I do still need clarification. You wrote: Remainder Beneficiary: This clause specifies who will receive any remaining assets in the trust after the primary beneficiary (the person with disabilities) passes away. This is a standard provision in SNTs to ensure assets are distributed according to the “grantor's wishes after the primary beneficiary's death.” Do you mean the beneficiary who is the grantor of the SNT trust? Also how does this apply ““grantor's wishes after the primary beneficiary's death.” ” If“ State who will receive” “ *. Remainder Beneficiary: “ State who will receive” the remaining assets in the trust after the primary beneficiary passes away.” Can the beneficiary actually bequeath the house to someone other than the state to keep the state for grabbing the house?

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The "grantor" is the person who creates the trust, and the "beneficiary" is the person who benefits from the trust. The remainder beneficiary is named to receive any remaining assets after the primary beneficiary's death.
In a Special Needs Trust (SNT), the assets are typically distributed according to the grantor's wishes, not the beneficiary's.
As for protecting the house from state claims (estate recovery), a properly drafted SNT can help. The state may seek reimbursement for Medicaid benefits, but legal strategies can be employed to protect assets.
Would you like more details on how to protect the house from estate recovery?

Yes

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In order to protect the house from estate recovery while ensuring the beneficiary's continued eligibility for Medicaid and SNAP, here are some options:
- Special Needs Trust (SNT): The assets in the SNT are not considered part of the beneficiary's estate, potentially protecting them from estate recovery.
- Life Estate: The grantor can retain a life estate, giving the beneficiary the remainder interest. This can sometimes shield the property from estate recovery.
- Qualified Income Trust (Miller Trust): For income over Medicaid limits, though this is more relevant for income issues.
Would you like more detailed guidance on any of these options?

yes

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Sure, I can provide more details on the options mentioned to protect the house from estate recovery:

Special Needs Trust (SNT):
- Protection: Assets in the SNT are not considered part of the beneficiary's estate.
- Set-Up: Requires an experienced attorney to ensure compliance with federal and state laws.

Life Estate:
- Arrangement: The grantor retains the right to live in the property for their lifetime. The beneficiary receives the remainder interest.
- Protection: This arrangement can sometimes shield the property from estate recovery.

Qualified Income Trust (Miller Trust):
- Purpose: Primarily for managing income that exceeds Medicaid limits.
- Relevance: More pertinent for income issues rather than asset protection.
Would you like more detailed guidance on setting up a Special Needs Trust, a Life Estate, or a Qualified Income Trust?

Ok, but first a few question pertaining to your previous answers about “grantor’s wishes” *.) How can the wishes continue to be effective after the Grantor passes away and yet still protect the beneficiary. Can they be made legally binding to protect the property of the beneficiary? - Remainder Beneficiary: This clause specifies who will receive any remaining assets in the trust after the primary beneficiary (the person with disabilities) passes away. This is a standard provision in SNTs to ensure assets are distributed” according to the “grantor's wishes” after the primary beneficiary's death. The statement above is very confusing - In a Special Needs Trust (SNT), the assets are typically distributed “according to the grantor's wishes”, not the beneficiary's. This is also confusing regarding how the grantor’s wishes can be ensured- like written in stone to protect the beneficiary.

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To clarify:
- The grantor's wishes can continue to be effective after their death if they are clearly detailed in the trust document.
- A Special Needs Trust (SNT) includes specific instructions on how the assets should be managed and distributed both during the beneficiary's lifetime and after their death.
- The "remainder beneficiary" clause ensures that any remaining assets are distributed according to the grantor's wishes, even after the primary beneficiary passes away.
Would you like more detailed guidance on setting up a legally binding Special Needs Trust to protect the beneficiary's property?

Yes but I am really confused. At first it sounds like Medicaid has power over the grantort's wishes if the house that the benficiary recvieves is placed in an irrevicable ttrust upin the benficiarties death. So van the grantor simply state that the hoiuse will continue to be passd down u[on the beifiaciaries death? If yes, can Medicaid stil take the assets if the decedant who inherits the house after the first bemficiarfy dies, is NOT on mediacid?

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The grantor can indeed state that the house will continue to be passed down upon the beneficiary's death. However, Medicaid can seek estate recovery from the assets of the deceased Medicaid recipient. If the house is properly placed in an irrevocable trust or SNT, it can help shield it from Medicaid recovery.
Would you like more detailed guidance on how to set up these trusts to protect the property?

Yes and I want to get back to every YES I wrote but I still need clarification. Your answer: “if the house is properly placed in an irrevocable trust”. So how long does the Medicaid recovery last. Does it apply to every descendant that inherits the house last. Does it apply to every descendant that inherits the house? How about if the house is sold and another house purchase any time in the time line we are speaking about from first beneficiary to descendants?

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Medicaid recovery generally applies to the estate of the deceased Medicaid recipient, not every descendant. Here's more information:
- Irrevocable Trust: If the house is in an irrevocable trust, it can protect the house from Medicaid recovery after the grantor's death.
- Duration of Recovery: Medicaid recovery only seeks assets from the estate of the deceased Medicaid recipient.
- Inheritance: The recovery does not apply to each descendant unless they become Medicaid recipients and pass away.
- Selling the House: If the house is sold and another is purchased, the same rules apply if the new house is placed in an irrevocable trust.
Would you like to understand more about the specifics of setting up such trusts in Colorado?

Ok. Lets first go back to every YES I wrote at the start of my previous prompts. Yes to every ending of answers you provided where you offered to provide more information. I'm trying to understand the dynamic since there seem to be several good options for the grantor's wishes to be carried forward and for the benefit of their first beneficiary and also the descendants. If you can create an "IF" and "THEN" for every possible protective option, that would be great. It would be helpful if you put the options in an outline or bullet form. Thank you

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Sure, here's a comprehensive outline of the options available to protect the grantor's wishes and the beneficiary's property in Colorado:

If/Then Scenarios for Protecting the Beneficiary and Descendants

*. Special Needs Trust (SNT)
- If the grantor places the home in a Special Needs Trust (SNT),
- Then the assets in the trust are not counted as part of the beneficiary's estate and can be protected from Medicaid recovery.
- Then the trust can specify remainder beneficiaries to inherit the assets after the primary beneficiary's death, according to the grantor's wishes.

*. Irrevocable Trust
- If the home is placed in an irrevocable trust,
- Then the home is protected from being counted as an asset for Medicaid eligibility.
- Then Medicaid cannot recover the home upon the death of the grantor, as it is not considered part of the estate.
- Then the trust can specify how the assets should be passed down to descendants.

*. Life Estate
- If the grantor retains a life estate and grants the remainder interest to the beneficiary,
- Then the home remains the grantor's property for their lifetime but will pass to the beneficiary upon the grantor's death.
- Then this can sometimes shield the property from Medicaid recovery.

*. Qualified Income Trust (Miller Trust)
- If income exceeds Medicaid limits,
- Then a Qualified Income Trust can be used to manage the excess income.
- Then this trust is more relevant for managing income rather than protecting the home.

Additional Considerations:
- Selling the House:
- If the house is sold and another house is purchased,
- Then the new house can also be placed in an irrevocable trust or SNT to maintain protection.
- Duration of Medicaid Recovery:
- Medicaid recovery generally only applies to the estate of the deceased Medicaid recipient, not to each descendant unless they become Medicaid recipients and pass away.

Would you like to dive deeper into any of these specific options?

This is excellent! I appreciate your attention to detail and simplifying the content. One question first, is INCOME the value of the house or money from rents and businesses that are generated from the house and I suppose, land it sits on? For instance, the benefiaciry rents a room to another party to help pay fpr the house expenses or if thebenficiary mones out but keeps the house as a rental?

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The term "income" generally refers to money generated from rents or businesses associated with the house, not the value of the house itself. For example:
- Rent from a room or the entire house would be considered income.
- Income from businesses operated on the property would also count.
Do you have any specific concerns about how this income might affect the beneficiary's eligibility for Medicaid or SNAP?

Almost. So the value of the house itself is not counted towards income? If so then the beneficiary can just put the house in a revocable trust and still keep their existing Medicaid? If yes, then should the beneficiary sell the house and buy another one, will the sale proceeds sunk into another home , still protect the Medicaid beneficiary since there are no left over funds?

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In Colorado, the value of the house itself is not counted as income for Medicaid eligibility. Here are some points to consider:
- Revocable Trust: Assets in a revocable trust are considered part of the beneficiary's estate and may affect Medicaid eligibility.
- Irrevocable Trust: Assets in an irrevocable trust are not counted as part of the beneficiary's estate and may protect Medicaid eligibility.
- House Sale: If the house is sold and the proceeds are used to buy another home, the new home must be placed in an irrevocable trust to protect Medicaid eligibility.
Do you need more details on setting up an irrevocable trust in Colorado?

I am confused again. So is it yes or no regarding the value of the house being counted towards Medicaid income regardless of revocable, irrevocable and sold/ Were just talking about “Value” or Valuation to be specific. This was the answer you provided “- Revocable Trust: Assets in a revocable trust are considered part of the beneficiary's estate and may affect Medicaid eligibility. - Irrevocable Trust: Assets in an irrevocable trust are not counted as part of the beneficiary's estate and may protect Medicaid eligibility. - House Sale: If the house is sold and the proceeds are used to buy another home, the new home must be placed in an irrevocable trust to protect Medicaid eligibility.”

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The value of the house itself is generally not counted as income for Medicaid eligibility. Here’s the breakdown:
- Revocable Trust: The house value is counted as part of the estate, possibly affecting Medicaid.
- Irrevocable Trust: The house value is not counted, protecting Medicaid eligibility.
- House Sale: Proceeds must be used to buy another home and placed in an irrevocable trust to protect eligibility.
Do you need more detail on irrevocable trusts?

Great! Ok, I get it. Thank you so much! Ok, how can an irrevocable trust be written that is almost as flexible as a revocable trust to allow the beneficiary wiggle room to execute actions written into the irrevocable trust such as sell the house or do upgrades or other common actions that would be conducted the trust was actually revocable? This to avoid seeking court assistance when needing to take actions.

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To create an irrevocable trust with flexibility similar to a revocable trust, consider these points:
- Trustee Powers: Grant broad powers to the trustee, allowing them to sell, upgrade, or manage the property.
- Trust Protector: Appoint a trust protector to oversee and amend the trust if needed.
- Specific Provisions: Include detailed provisions for common actions like selling or upgrading the property.
Would you like more detailed guidance on drafting these provisions?

Yes, please provide solid provisions . Also can the trustee appointed by the disabled adult who inherited the house from the original grantor, be the adult child of the disabled adult? Is that permitted ? And also, can the disabled adult list that Trustee as the beneficiary of the house when the disabled adult dies?

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Yes, the trustee can be the adult child of the disabled adult. Additionally, the disabled adult can list the trustee as the beneficiary of the house upon their death. Here are some solid provisions to consider:

Flexible Provisions for an Irrevocable Trust
- Trustee Powers:
- Authority to sell, upgrade, or manage the property.
- Power to invest the trust assets.
- Ability to distribute income and principal as needed for the beneficiary's welfare.
- Trust Protector:
- Appoint a trust protector with the power to amend the trust if circumstances change.
- Authorize the trust protector to replace the trustee if necessary.
- Specific Provisions:
- Clearly outline circumstances under which the trustee can sell the property.
- Include provisions to allow for property upgrades and repairs.
- Specify how rental income should be managed and distributed.
Would you like more detailed guidance on any specific provision?

Yes please. Your answers are very clear.

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I'm glad you find the information helpful! Let's dive into more detailed guidance on drafting specific provisions for the irrevocable trust in Colorado:

Trustee Powers:
- Sale of Property: The trustee has the authority to sell the property if it benefits the beneficiary. They must ensure the sale proceeds are used in the beneficiary's best interest.
- Upgrades and Repairs: The trustee can authorize property upgrades and repairs as needed, ensuring the property remains in good condition and enhances the beneficiary's quality of life.
- Asset Management: The trustee has the power to manage, invest, and reinvest trust assets to ensure they are productive and generate income.
- Income and Principal Distribution: The trustee can distribute income and principal from the trust as necessary for the beneficiary's welfare, considering their needs and maintaining eligibility for benefits.

Trust Protector:
- Amendment Power: The trust protector can amend the trust to address unforeseen circumstances or changes in law, ensuring the trust remains effective and beneficial.
- Trustee Replacement: The trust protector has the authority to replace the trustee if they are not fulfilling their duties adequately or if a better-suited individual is available.

Specific Provisions:
- Property Sale: Outline conditions for selling the property, such as the need for the sale to benefit the beneficiary, and specify the process for managing the sale proceeds.
- Upgrades and Repairs: Include provisions that allow the trustee to approve and fund necessary property improvements and repairs.
- Rental Income Management: Detail how any rental income should be managed and distributed, ensuring it supports the beneficiary's needs without affecting their eligibility for benefits.
Would you like to focus on a particular provision or need further details on any of these points?

Let's first do "further details on all these point and I like your blue blocks containing the answers so please continue to use those,

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Sure, let's go into further details on each of these points:

Trustee Powers:
- Sale of Property:
- The trustee has the authority to sell the property if it benefits the beneficiary.
- The trustee must ensure that the sale proceeds are used for the beneficiary's best interest, such as purchasing another home or investing the proceeds.

- Upgrades and Repairs:
- The trustee can authorize necessary property upgrades and repairs.
- The goal is to maintain the property in good condition and ensure it enhances the beneficiary's quality of life.

- Asset Management:
- The trustee has the power to manage, invest, and reinvest trust assets.
- The aim is to ensure the assets are productive and generate income for the trust.

- Income and Principal Distribution:
- The trustee can distribute income and principal from the trust as necessary.
- These distributions should consider the beneficiary's needs and maintain their eligibility for benefits.

Trust Protector:
- Amendment Power:
- The trust protector can amend the trust to address unforeseen circumstances or legal changes.
- This ensures the trust remains effective and beneficial for the beneficiary.

- Trustee Replacement:
- The trust protector has the authority to replace the trustee if they are not fulfilling their duties adequately.
- This ensures that the trust is managed by the most suitable individual.

Specific Provisions:
- Property Sale:
- Outline conditions for selling the property, such as the need for the sale to benefit the beneficiary.
- Specify the process for managing and reinvesting the sale proceeds.

- Upgrades and Repairs:
- Include provisions that allow the trustee to approve and fund necessary property improvements and repairs.
- This ensures the property remains in good condition and serves the beneficiary's needs.

- Rental Income Management:
- Detail how rental income should be managed and distributed.
- Ensure the rental income supports the beneficiary's needs without affecting their eligibility for benefits.
Would you like to dive deeper into any specific provision or need further details on any of these points?

This is great! Are all of these Trustee powers written in the only the disabled adult child's irrevocable trust?

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Yes, all of these trustee powers should be written into the irrevocable trust for the disabled adult child. This ensures that the trust can be managed flexibly and according to the beneficiary's needs while maintaining their eligibility for Medicaid and other benefits.
Would you like more guidance on drafting the trust document with these provisions?

Yes, thank you.

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To draft an irrevocable trust with the necessary provisions for flexibility, consider working with an experienced estate planning attorney. Here are key points to include in the trust document:

Trustee Powers:
- Sale of Property: Grant authority to sell the property and reinvest proceeds.
- Upgrades and Repairs: Allow the trustee to authorize and fund necessary property improvements.
- Asset Management: Empower the trustee to manage, invest, and reinvest trust assets.
- Income and Principal Distribution: Permit the trustee to distribute funds as needed for the beneficiary's welfare.

Trust Protector:
- Amendment Power: Enable the trust protector to amend the trust for unforeseen circumstances or legal changes.
- Trustee Replacement: Allow the trust protector to replace the trustee if necessary.

Specific Provisions:
- Property Sale: Define conditions for selling the property and reinvesting proceeds.
- Upgrades and Repairs: Detail how the trustee can approve and fund property improvements.
- Rental Income Management: Specify how rental income should be managed and distributed.
Consulting an attorney ensures these provisions are correctly implemented. Would you like to be connected to local lawyers who can assist you with this?

Sounds good. Ok, one more question. *) Is it ok if Trustee of the original revocable trust of the grantor who passed the house to the disabled adult child, appoint that disabled adult child who has mental clarity and is only physically disabled, be the trustee of the irrevocable trust? The reason is that the original grantor has lived with the disabled adult child who has cared for the original grantor and would prefer that disabled adult child be the only one privy to the original grantor’s affairs since there are no other beneficiaries listed in the trust and all personal property like books and such will be distributed via a residuary beneficiary that is the original grantor’s grandson.

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Yes, it is generally permissible for the trustee of the original revocable trust to appoint the disabled adult child, who has mental clarity and is only physically disabled, as the trustee of the irrevocable trust, provided that the trust document allows such an appointment. Here are some key points to consider:
- Mental Clarity: The disabled adult must be capable of managing the trust and making decisions in the best interest of the beneficiary.
- Trust Provisions: The trust document should explicitly allow for such an appointment.
- Legal Advice: Consulting with an estate planning attorney to ensure compliance with Colorado law and proper drafting of the trust provisions.
Would you like more detailed guidance on appointing a trustee in Colorado?

Yes

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If the disabled adult child has mental clarity and is physically capable of managing the trust, they can be appointed as the trustee of the irrevocable trust. Here are some key points:
- Mental Clarity: Ensure the disabled adult can manage the trust.
- Trust Provisions: Include clear provisions allowing such appointment.
- Legal Advice: Consult an attorney to ensure compliance with Colorado law.
Would you like more detailed guidance on drafting these specific trust provisions?

Yes

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Here's how to draft the specific trust provisions:

Trustee Powers:
- Management and Sale of Property: Specify that the trustee has the authority to manage, sell, and reinvest proceeds from the property.
- Property Upgrades and Repairs: Allow the trustee to approve and fund necessary upgrades and repairs.
- Asset Management: Empower the trustee to invest and reinvest trust assets.
- Income and Principal Distribution: Permit the trustee to distribute income and principal as needed for the beneficiary's welfare.

Trust Protector:
- Amendment Power: Grant the trust protector the ability to amend the trust when necessary.
- Trustee Replacement: Allow the trust protector to replace the trustee if required.

Specific Provisions:
- Property Sale: Define conditions for selling the property and managing sale proceeds.
- Upgrades and Repairs: Detail how the trustee can approve and fund property improvements.
- Rental Income Management: Specify how rental income should be managed and distributed to support the beneficiary.
Consulting an estate planning attorney will ensure these provisions are correctly implemented.
Would you like to be connected to local lawyers who can better assist you with drafting and setting up these trust provisions?

For now, this is great. I have lots of info to comb through. I really appreciate your help and will be back. Have a fabulous day!

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I'm glad I could help! Feel free to reach out when you're ready or if you have more questions. Have a fabulous day!

Estate Planning For Colorado

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