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You have spent years building a life. You want those assets protected and transferred according to your wishes. Most people assume a will is enough to protect their family. Then they learn that certain assets may still pass through probate, loved ones may face delays, and a simple estate plan does not always provide the level of control they expected. For many Colorado families, trusts offer benefits that a will alone cannot provide. Working with an experienced trust lawyer can help ensure your estate plan aligns with your goals.
While both trusts and wills are important estate planning tools, they serve different purposes. A will provides instructions for how your assets should be distributed after your death and can name guardians for minor children. However, assets distributed through a will typically must go through probate, which is the court-supervised process of administering an estate.
A trust holds assets on behalf of beneficiaries and can take effect during your lifetime. Depending on the type of trust, it may allow assets to pass to beneficiaries without probate, provide instructions for managing property if you become incapacitated, and give you greater control over how and when beneficiaries receive assets. Many comprehensive estate plans include both a will and a trust because they work together to address different estate planning needs.
A trust is a type of legal agreement that Colorado law recognizes. It can be used to hold and manage property so that another person can benefit from that property. To be enforceable, a trust must follow Colorado’s rules for how trusts are created, administered, modified, and terminated. These laws help ensure that trusts operate according to the creator's wishes and protect the interests of beneficiaries.
A grantor or settlor is the person who forms the trust and adds assets to it. The trustee is the person who manages the trust. Beneficiaries are the people who benefit from the trust.
One of the primary reasons people decide to use a trust in their estate planning is to avoid probate. The assets in the trust do not go through probate with the rest of the deceased’s estate. This helps maintain privacy, as probate proceedings become public record.
Using a trust creates greater control over how and when assets are distributed to beneficiaries. During incapacity, the trust can ensure assets are handled in accordance with your wishes. The trust can include instructions for the trustee to follow.
Depending on the trust type and how it’s set up, it can potentially protect assets from accruing tax liability for the beneficiary. A knowledgeable trust lawyer can help you understand which trust structure may best fit your family's needs.
Creating trust is only the first step. Many people are surprised to learn that for the trust to work as intended, assets need to be transferred correctly into the trust. If that crucial step is overlooked, some assets may still have to pass through probate. That is why at Altitude Family Law, we schedule an asset transfer meeting with our clients.
During this meeting, our team discusses the practical matters of transferring assets. This includes explaining how to transfer assets and how different types of assets need to be handled. Some may need to be retitled into the trust’s name. It’s also an opportunity for clients to have their questions answered.
We find this meeting is essential because people’s assets change over their lifetime. They may buy real estate, open financial accounts, or acquire new personal property. As your life changes, your estate plan also needs to evolve. During the asset meeting, our team provides practical information about future asset planning. That way, you can ensure your trust remains effective and continues to provide the protections and benefits you intended. A trust lawyer can also help you update your trust as your circumstances change.
Several types of trusts are recognized in Colorado. They each serve a different purpose and have different rules that govern them. Working with an estate planning attorney or trust lawyer will help families choose the type of trust that will best suit their needs.
Sometimes a grantor wants to maintain control and flexibility when creating a trust. A revocable living trust accomplishes that. It can be modified and even revoked during the grantor’s lifetime. This type of trust is useful for avoiding probate for the trust’s assets.
When an intended beneficiary has disabilities, a special needs trust may be appropriate. This type of trust protects the beneficiary while ensuring their needs are met. When correctly set up, the trust can provide for the beneficiary without jeopardizing their government benefits like Medicaid or Supplemental Security Income.
A grantor’s home property is placed in a Qualified Personal Residence Trust (QPRT). The home can be transferred to the beneficiary with protections in place. The home’s value at the time of the trust creation is locked in. In some circumstances, it removes all future appreciation of the home value from the taxable estate. This can significantly reduce gift taxes. The grantor can continue to live in the home after the QPRT is formed.
When assets are transferred directly to the next generation through probate, estate taxes can apply. To avoid this, the intended inheritance can be placed in a generation-skipping trust. Assets in an estate can be passed to grandchildren or later generations. Spendthrift protections can be put in place to protect the assets long-term.
A life insurance policy can be placed in a trust. When the trust owns and manages the life insurance policy, the proceeds from that policy are placed in the trust. Estate tax is avoided, and the beneficiary typically has access to the financial assets faster than those going through probate.
It’s in the name; the person chosen to serve as the trustee needs to be someone you trust to perform their fiduciary duties. Under Colorado law, they must practice prudent administration of the trust while maintaining loyalty. The individual chosen could be a close family member or friend. Another option is to use a professional trustee. There are several factors to consider. Speaking with an experienced estate planning attorney can help you determine the best trustee for your trust. Speaking with a trust lawyer can help you determine the best trustee for your trust.
A trust is just one estate planning tool. While it’s effective, it’s not right for everyone. Homeowners, parents of minor children, business owners, and those with a significant amount of assets may find that forming a trust is the right solution for their estate planning goals. The flexibility of a trust makes it a good option for families who are planning for the care of members with special needs. Finally, a trust can be a useful tool for those looking to simplify the transfer of their assets and avoid the traditional probate process.
Every family's circumstances are different, which is why there is no one-size-fits-all approach to trust planning. From avoiding probate to providing for children or protecting assets, a trust can serve a variety of purposes when properly drafted and funded.
At Altitude Family Law, we guide clients through the estate planning process with practical advice and personalized attention. We take the time to understand your concerns and create strategies designed around your family's needs.
Contact our office today to learn how a trust can help protect your legacy and provide security for your loved ones.
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