Trusts

Trusts are powerful tools in strategic estate planning, offering flexibility, protection, and peace of mind for individuals looking to manage and protect their assets in Colorado. However, they can be confusing unless you are used to working with them regularly.

At Jones Law Firm, PC, we take the time to explain the complexities of estate planning, particularly when setting up and managing trusts. We want you to understand trust operation so that you can make informed choices and enjoy the full benefits offered by your trust.

What is a Trust?

A trust is a legal arrangement where one party, called the grantor or trustor, entrusts property to a second person, known as the trustee, who holds property as its nominal owner for the good of a third person known as the beneficiary. A trust can have more than one beneficiary, and it should have successors nominated in case a trustee passes away or is unable to fulfill duties.

Trusts can be customized to meet various estate planning goals, including asset protection, probate avoidance, tax planning, and providing for loved ones.

Types of Trusts

Trusts can be broadly categorized into three main types, each serving distinct purposes:

• Revocable Trusts: A type of living trust, revocable trusts can be altered or dissolved by the grantor at any time during their lifetime. They are popular as tools for avoiding probate and protection in case of incapacity.
• Irrevocable Trusts: Once established, these trusts cannot be easily modified. They offer benefits like protection from creditors and reduced estate taxes. For instance, special needs trusts enable individuals with disabilities to receive resources while retaining eligibility for government aid programs such as Medicaid or SSI. And charitable trusts allow you to leave a charitable legacy while potentially providing tax benefits and income during your lifetime.
• Testamentary Trusts: Created within a will, these trusts do not take effect until the grantor’s death. These trusts are often established to provide for the management of assets left to minors or others who might not manage a direct inheritance effectively.

Benefits of Trusts in Estate Planning

Trusts are valuable tools in estate planning, offering numerous benefits to enhance the management and protection of your assets. Different types of trusts are used to achieve different goals, but here is an overview of some typical benefits: 

• Control Over Assets: Trusts allow you to control how your assets are managed and distributed during your life and after your death.
• Probate Avoidance: Assets held in a trust bypass the probate process, facilitating a smoother and faster transfer of assets to beneficiaries.
• Tax Advantages: Certain trusts can minimize estate taxes, reducing the financial burden on your beneficiaries.
• Protection from Creditors: Properly structured irrevocable trusts can shield your assets from future claims by creditors and legal judgments.

Setting Up a Trust in Colorado

Establishing a trust involves several critical steps that should be undertaken with the assistance of an experienced attorney. First, you need to understand what you want to achieve with your trust, such as asset protection, caring for a family member, or charitable giving. Then your attorney can consider your goals as well as your specific financial and family situation, explain your options, and help you decide on the type of trust that best meets your needs. 

You will need to choose a reliable and trustworthy individual or institution to manage the trust. This decision is crucial as the trustee will need to manage the trust assets according to your terms. For a revocable trust, the trust creator typically serves as the primary trustee and nominates a successor to take over after their death. However, it often makes sense to choose a professional to serve as trustee of an irrevocable trust, because these trusts generally require compliance with complex regulatory requirements. 

Your attorney will prepare the trust document outlining the trust’s terms. This includes naming beneficiaries, defining the trustee’s powers, and setting forth any specific instructions for asset management. 

The final step is to fund the trust by transferring assets into the trust. This might involve changing titles, obtaining a new deed for real estate, or filing paperwork with a bank or other institution. 

Ongoing Management of Your Trust

Once established, trusts require ongoing management to ensure they continue to operate as intended and comply with legal requirements. This management might include annual reviews, adjustments due to changes in the law or your circumstances, and ongoing communications with beneficiaries. Proper management also involves reconciling trust accounts and investments to ensure financial accuracy and compliance. Additionally, it may be necessary to consult with estate planning professionals periodically to align the trust’s operation with current tax laws and estate planning strategies.

Partner with Jones Law Firm, PC

Trusts are powerful instruments, and they require careful planning and maintenance. At Jones Law Firm, PC, our experienced team is committed to helping you face the nuances of trust creation and management. We provide the experience needed to protect your estate planning goals and assets.

If you’re considering establishing a trust or need assistance with any aspect of estate planning, we encourage you to reach out. Contact Jones Law Firm, PC, at 720-513-5983 or online to schedule a consultation. Let us help you secure your legacy and provide for your loved ones in the most effective way possible.