Living trusts in Colorado avoid probate and ensure family does not fight. It's an estate planning tool you place assets into. It acts as a box to which you, and only you, have the key. The box is the living trust. You and your spouse are the trustees, which means you control the trust and everything in it.
A Colorado living trust does more than just hold assets. It contains instructions for how assets are passed to loved ones when you die. Additional common estate planning documents include a durable power of attorney, to ensure financial continuity in case you're incapacitated, and a living will to ensure your end of life wishes are respected.
A living trust designates whom you want to take over as trustee when you die or if you become incapacitated. At that point, your handpicked trustee takes legal control of your assets, protecting you and your family from the court. Your trust is revocable, meaning that you can modify or cancel it at any time, and you never need to file a separate tax return. Not sure a living trust is for you? Learn about other Colorado trusts here.
Who Needs a Living Trust?
A common misconception is trusts are only for the rich. In fact, anyone with a few hundred thousands dollars stands to benefit. We charge $995 for a trust, which includes a durable power of attorney and living will, which is significantly less than a probate attorney will cost. Not only does it make sense in terms of dollars and cents, but making your wishes clear ahead of time avoids the emotional toll of family infighting. It ensures your wishes are met and your legacy is secured.
Living Trust vs. Will
Both documents let you select beneficiaries for your property. Both additionally allow you to leave property to those of all ages, even young children. They also allow you to make revisions in the future. However, there are some things you can do with a living trust but not with a will. These include avoiding probate, avoiding conservatorship, keeping your finances private following your death, and reducing the possibility of an estate-related court dispute.
A small estate in Colorado can avoid probate with a will, though larger estates do not. For this reason we recommend a revocable living trust versus a will for most of our clients. Probate is expensive, time consuming and public. It can also lead to needless family fighting. With a revocable living trust, no probate proceeding is necessary and your wishes are respected.
Also, a will does not become effective until you die, so it cannot take care of you if you become incapacitated. This is particularly worrisome if you are a business owner. A court will become involved and appoint a conservator for your financial affairs. A complete estate plan includes plans for you, family and your finances during potential incapacity, which makes court involvement unnecessary and protects your wealth.
Why Avoid Probate?
Probate freezes your assets. If your estate ends up in probate, the bulk of your assets are frozen until the court orders their distribution, which typically takes months, and frequently more than a year. This leads to the dissolution of many small businesses. With a revocable living trust, distributions to your loved ones are usually made immediately.
Probate proceedings are also public. Probate proceedings expose your financial information to economic predators and disgruntled heirs. A living trust in Colorado avoids this fate and your privacy is protected.
Other Estate Planning Documents
If you become incapacitated and haven't designated someone to take care of your financial affairs, your family will need to petition a court to appoint a conservator. Even if your spouse becomes your conservator, he or she will be subject to ongoing court supervision. No one - not even your spouse - will have the right to make legal or financial decisions for you without a court's permission.
A durable power of attorney can be used to appoint someone to handle your affairs in the event you become incapacitated. Further, a living will, also called an Advanced Health Care Directive, will ensure your end of life medical wishes are respected. Just as importantly, it doesn't require family members to make critical decisions, during a stressful time, and to later fear they did not respect your wishes.
Revocable vs. Irrevocable
Trusts are either revocable or irrevocable. The primary difference between is the effort required to make changes once formed. A revocable trust, as the name suggests, can easily be revoked. Whether by the person who created the trust, a judge, or another party under certain conditions. This makes a living trust a good tool for avoiding probate and enjoying privacy, but means there is no asset protection. This is because the assets are held in a trust that can easily be revoked, with assets being distributed to pay off creditors.
For the above reason, a living trust is an important part of an estate plan, but those desiring additional asset protection require an irrevocable trust. An irrevocable trust can be used in conjunction with, or as a replacement for, a living trust. An irrevocable trust provides protection from creditors, can bypass probate and remains anonymous if drafted correctly. Examples of irrevocable trusts are special needs trusts, medicaid trusts and asset protection trusts. These can also be formulated as dynasty trusts as well so the benefits extend beyond your lifetime.
Living Trust Taxes
A revocable trust is tax-neutral. This means you won't pay any more, or less, in taxes than if you didn't have one. The trust is a disregarded entity for tax purposes with all income flowing onto your personal tax-return. It's also noteworthy that moving assets to the living trust is not a taxable event. For example, if an asset has capital gains, then moving that asset into the trust won't result in a tax bill.
Both trusts are examples of revocable trusts. However, a land trust has a more specific intention than a living trust. A land trust will provide privacy for a real estate purchase, but does not address larger estate planning goals. A living trust is meant to act as an umbrella under which you can put all of your assets. A land trust is not designed to address a wide variety of estate planning issues with, but unlike a living trust, the beneficiary of a land trust can be an individual, a living trust, or even an LLC owned by another trust.
Our Colorado Trust Attorney
Legally, there is no requirement to hire an attorney to create a revocable living trust or any type of trust for that matter, for you. However, even if you have the the simplest possible situation that could benefit from the use of trust, using the services of an experienced estate and trust attorney will ensure that your wishes are carried out when you are gone. If you would like to schedule a consultation with our Colorado estate planning and trust attorneys, contact us through the contact link on our website.