What Actually Is A Trust? Who Needs A Trust In Colorado?
A trust is a legal arrangement that sets up an entity to essentially hold your assets. With a revocable living trust, you would generally be the trustee or manager, and you would also be the beneficiary during your lifetime. If you have re-titled your assets in the name of the trust, there is no need for a probate court administration when you pass away or lose capacity, because the assets aren’t held in your own name. The trust is written in such a way that you can appoint new trustees to step in if you lose capacity or die, and they would be the new beneficiaries upon your death. Essentially the trust is a legal entity that outlives you and has a lot of flexibility in terms of how you want to structure things for your beneficiaries.
There are also other types of trusts such as irrevocable trusts, but those trusts are generally used for specific purposes such as tax planning. The revocable living trust is the standard estate planning trust that most people would use.
As for the question of who needs a trust, it really depends on what your goals are. Some people ask me if they have enough money for a trust. I’ve talked to people with modest estates who don’t know if they have enough money for a trust, but I’ve also talked to people with quite a lot of money who don’t know if they have enough money for a trust. My answer is that it doesn’t really matter how much money you have beyond a certain point; it just matters what you’re trying to accomplish. We can do a lot of planning with a trust that is either not possible or much harder to do in a will. In general, a trust costs more and requires more effort to set up on the front end, but over the life of the trust it should cost much less money because you don’t have to go through a court proceeding.
Can Or Should I Have More Than One Trust?
You can. Sometimes we do other types of trust for tax planning. Sometimes spouses who have mixed families and separate assets create two separate trusts. You might have your own trust and your spouse might set up another trust with you as a beneficiary. It’s possible to have multiple trusts. In general people just do the one, but there are circumstances where it’s appropriate to have more than one.
What Are The Different Types Of Trusts And Their Purposes?
There is a standard revocable estate planning trust. That is intended to be your primary estate planning document so your estate can avoid probate court. It can include some tax planning and it will also describe who should receive your assets upon your death as well as how and when they will do so. It describes who is going to be in charge of settling your estate. The revocable trust is the broadest trust.
There are other more specific trusts you can do. There are irrevocable trusts which are often used for tax planning or asset protection. There are a number of different types of trust, but revocable and irrevocable are the two main types.
There is also what’s called a testamentary trust. That is a trust that is written into the will but it doesn’t come into existence until after the person dies. A testamentary trust comes into existence through the probate court administration, in contrast with a living trust which is set up during your lifetime. In general, I advise people to do a living trust rather than a testamentary trust because a testamentary trust does not provide the benefit of avoiding probate.
What Are The Legal Requirements Of Setting Up An Effective Trust?
You have to have three parties: the trustor is the person who sets up the trust, the trustee is the manager of the trust, and the beneficiary or beneficiaries would get the benefit or use of the trust assets. There are a number of provisions that you want to have in there to take advantage of this type of planning. You want to not only outline who is in those roles but all the terms and provisions that are necessary for it to work properly.
You also have to fund the trust – a trust has to own assets. This is a step a lot of people skip or forget about, which is unfortunate. If you don’t put your assets in the trust then it doesn’t work, and we would still have to go through probate court. The way a trust works is that it owns your assets and it outlives you – it just has new trustees and beneficiaries in the future. If it doesn’t own anything then it doesn’t have anything to manage.
If the trust didn’t get funded while you were still alive, we’d have to go through a probate court to have assets re-titled. You should always have a will as well as a trust, because the will can function as a backup plan. If the will just states “I leave everything to my trust,” the legal term for that is a pour-over will. Think of it as pouring assets over to the trust. However, it would still have to go through probate court, which could have been avoided if you had gotten everything in the trust while you were alive.
For more information on Trusts In the State Of Colorado, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (720) 805-3444 today.
Call For A Free Consultation