Few people want to think about what will happen to their property after they die. However, individuals may inadvertently place undue hardships on their families and other beneficiaries without thorough and effective planning.

Complicated laws, excess tax burdens, and uncertainty over which properties should pass to whom can create challenges and costs. A revocable living trust can ease these burdens and help property owners and their families focus on more important matters.

WHAT IS A REVOCABLE LIVING TRUST?

A Revocable Living Trust is an estate planning solution that helps property owners transfer their property and assets at death without going through a court-administered process. The trust is a written document that should provide clear instructions for property management, distribution, and ownership. Should the trust maker, also called the grantor, become mentally incapacitated or pass away, another appointed person, a successor trustee, should administer the trust. It is considered “revocable” because the grantor can amend the trust to reflect changing circumstances or decisions during their lifetime.

The stakeholders can include:

Grantor / Trust Maker.: The property owner who creates the trust.

Trustee: The individual who is responsible for managing the trust property. The grantor typically acts as the trustee until they die or become incapacitated.

Successor Trustee: When the original trustee dies or can no longer serve in this role, the successor manages the trust.

Beneficiary: The trust establishes this person as the one who will receive the property after the death or incapacitation of the grantor.

WHAT HAPPENS TO MY PROPERTY IF I DON’T ESTABLISH A REVOCABLE LIVING TRUST?

Revocable living trusts provide significant protection for individuals and their families in the case of their death or incapacitation. Under Colorado estate laws, properties typically go into probate after the deaths of their owners, potentially leading to complicated legal issues and considerable expenses for the beneficiaries.

A carefully crafted revocable living trust can help circumnavigate the probate process. Wills are subject to court involvement, and they become part of the public record; revocable living trusts, however, allow grantors to distribute their property privately.

HOW DO I SET UP A REVOCABLE LIVING TRUST IN COLORADO?

Setting up your Colorado Revocable Living Trust is probably much easier than you think. Property owners generally enlist the help of an experienced and qualified estate planning attorney. A lawyer can carefully examine your circumstances and ensure your trust is effectively written, funded, and executed. That being said, here is a list of things to remember when thinking about drafting and funding your trust.

What are your assets?

The steps for setting up a trust include the following:

1. Obtain the necessary paperwork for your assets.
2. Decide who should inherit the trust property.
3. Decide on a successor trustee.
4. Draft the trust documents.
5. List the trust’s beneficiaries.

DO I NEED A REVOCABLE LIVING TRUST?

As you may have heard before, in most cases, a Trust is not something you get for yourself; instead, it should help make the lives of your family and other beneficiaries safer and more accessible. One of the advantages of a Revocable Living Trust is a more precise, more streamlined succession plan that will not necessarily require the supervision of a probate court. Additionally, once the trust becomes irrevocable, the beneficiaries can enjoy a degree of protection if the assets remain in the trust and are managed by a third-party trustee.

WHAT DOES A REVOCABLE LIVING TRUST DO FOR ME?

A revocable living trust does two things. First, a revocable living trust allows your assets to avoid probate. Second, a revocable living trust protects your property from lawsuits brought against a beneficiary other than yourself. A revocable living trust does not reduce your taxes, it does not protect property from your creditors or lawsuits, and it will not help you become eligible for government benefits. (Other trusts are available that serve these purposes, but a revocable living trust does not do any of these.)

WHAT DOES IT MEAN TO FUND A TRUST?

Funding a trust means transferring the ownership of property to the trust. For an asset to avoid probate, it should be transferred to your trust. For example, by signing a deed, you can transfer your real estate ownership to your revocable living trust, keeping your real estate out of probate. A trust can also be named a beneficiary on bank accounts, retirement accounts, insurance policies, and other assets. Funding the trust is a crucial part of your estate plan since only the assets in the trust generally can avoid probate and receive third-party management and protection.

WHAT DOES IT MEAN TO BE A TRUSTEE OR A BENEFICIARY?

The trustee is the trust administrator but is not permitted to have beneficial use of the property unless also named as a beneficiary. Generally, the person who sets up the trust wants to be the trustee for the rest of their life. The grantor should select a successor trustee who would take over the management of the trust once the grantor becomes incapacitated or passes away.

The trust's beneficiaries are those who benefit by receiving distributions from the trust. Generally, this means the grantor’s children, grandchildren, or other family members, but it can also include charitable organizations and other loved ones.

ARE REVOCABLE LIVING TRUSTS NECESSARY?

The answer to that question will depend on various factors, such as your level or assets, your family situation, and your plans for the future. Only you can determine whether you need a trust, but with effective counsel, you can get answers to all your trust-related and other estate planning questions.

At The McKenzie Law Firm, we take pride in helping our clients create strong trusts to set their minds at ease and facilitate transitions for their beneficiaries. Contact us today to schedule a personalized Attorney Evaluation Session.