How Can A Trust Avoid Probate In Colorado?
A trust avoids probate because your assets are not in your own name when you die, they are in the name of the trust. The trust will outlive you and have new trustees and beneficiaries in the future. The purpose of probate court administration is to determine what should be done with the assets of a deceased person. The probate court has a process to make sure that creditors get paid and that taxes get paid. Everything’s done in a certain order and eventually the remaining assets are transferred to the beneficiaries or heirs.
A trust avoids all that because the trust is the owner. The person that set up the trust has it set up so that someone else can take over when they can’t manage it anymore and someone else gets the benefit of the trust when they’re gone. The court doesn’t have anything to do because it’s already been set up to handle the death of the trustor.
What Generally Needs To Be Done To Settle Or Administer A Trust After Someone Dies?
The first step is to get the new trustee appointed. Usually that’s just in the form of an affidavit. The new trustee or trustees would sign the affidavit, and they can then replace the deceased trustee as the manager of the trust’s assets. There is a legal procedure to notify creditors and to shorten the statute of limitations for creditor claims – if you don’t give notice then creditors have a much longer period of time to come forward than if you give notice.
The trustee will need to inventory all the assets, figure out what the person owned, and get everything appraised. They have to keep very careful books and records because at the end of the day they’ll have to render an accounting to the beneficiaries showing what assets there were, what came in, what went out, and what’s left at the end of the day. They have to do the tax returns for the deceased person. There’s usually the final individual return and then there will be trust income tax returns for larger estates to determine whether a federal estate tax return has to be filed. They may have to move money around in such a way as to make it more manageable. They may need to sell things to make distributions to pay the creditors and taxes. They may need to negotiate with the creditors – sometimes there’s an opportunity to negotiate after somebody has passed away depending on the creditor or the situation.
At the end of the day they have to follow the terms of the trust and distribute the assets the way the trust is written. In general, the trustee will need the advice of counsel to figure all that out, especially to help them interpret how the trust terms are written. They’re also going to need the help of an accountant, because there are several tax returns and some bookkeeping requirements. While a trust is more efficient than going to probate court administration, you still are going to end up doing many of the same tasks. It’s just that you can do all this privately rather than through a court.
How Long Does It Generally Take To Settle A Trust?
It’s a minimum of four to six months. That’s due to the length of time required for creditor notices. You have to give them an opportunity to respond. Sometimes a trust is written in such a way as to just keep going after the person is deceased, so in that case it could be years. There are cases when a trust just keeps going for decades with the beneficiaries receiving money from the trust. In some circumstances, it could all be wrapped up in four months
Can Someone Realistically Handle Trust Administration Without An Attorney’s Assistance?
Generally, no – there are some people who have a background in accounting or finance or maybe even in law that can handle it with minimal assistance from counsel and then there are some people that are just completely lost and they need as much assistance from the lawyer as they can get. I would say in general that you must hire a trust and estate lawyer. You’re going to need advice to make sure you’re carrying out your fiduciary duties properly as trustee. A lot of mistakes can be made because a lot of it isn’t intuitive. You can get yourself into real trouble because if you mismanage a trust, there’s a possibility of you being personally liable. I suppose a person very familiar with the process could do it, but it wouldn’t be advisable.
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