living trust colorado

Document Sample
living trust colorado Powered By Docstoc
					Under current law, if the total assets at death are under $2 million in      such assets are counted as available resources (and the income of
the year 2008, and the death occurs in that year, then no federal estate     the trust as available income) even though the trustee may have full
tax or Colorado estate tax will be imposed. This asset value increases       discretion to pay or withdraw principal or income. This is a federal
to $3.5 million if the death occurs in 2009. However, the threshold is       rule. This is not the case where a trust is created under the deceased
scheduled to drop down to zero in 2010, so that all assets transferred       spouse’s will for the benefit of the surviving spouse.
at death would be subject to an estate tax. Please note that this law is
likely subject to change by the U.S. Congress.
                                                                             What are the comparative costs of wills and
Can creditors reach assets in a trust?                                       Although costs will vary depending on the attorney and the area in
Yes. Present and future creditors can legally get to the assets in a trust   which you live, having a will prepared by an attorney can cost $150
to pay outstanding bills while the trust is revocable.                       and up, depending on the complexity of your affairs. Probating a will
                                                                             through a Colorado probate court can cost as little as $200 to $3,000,
Under probate, claims of creditors can be eliminated when the required
                                                                             including attorney fees, court costs and the expenses of publishing
notice provisions are followed.
                                                                             notices to creditors. Generally speaking, most middle-sized estates
Under a living trust, the position of creditors can actually be improved.    can be probated for less than $2,000 to $3,000.
If assets pass under a will through the probate process, the family is
                                                                             The cost for preparing a living trust will generally run from $700 to
guaranteed an exempt property allowance and a family allowance.
                                                                             $5,000 depending on the complexity of the trust. In addition to the
These allowances must be paid prior to the claims of general creditors.
                                                                             cost of creating the trust, there are costs associated with transferring
This priority over creditors is not available to assets passing under a
                                                                             assets into and out of the trust, administrative expenses and tax filing
living trust. Also, there is no claims period limit for a funded living

Can heirs challenge a trust?                                                 Where do I get more information?
                                                                             If you are interested in a living trust, then make an appointment with
Yes. Both wills and living trusts are susceptible to challenge by
                                                                             an estate planning attorney to help determine what estate planning
disgruntled heirs.
                                                                             arrangement best suits you. Many attorneys will offer a free initial
                                                                             consultation. Remember that in estate planning, one size does not fit
What effect does divorce have upon a living                                  all. While your will or trust may be similar to your neighbor’s, each
                                                                             is different for special, personal reasons. Trusts are complex legal
trust?                                                                       documents that require the use of competent and experienced estate
Under Colorado law, any gift made in a will to a former spouse is            planning attorneys. For this reason, you should not try to create your
revoked. Under a living trust, the rule is the same for decedents dying
after July 1, 1995.
                                                                             own trust or purchase a pre-printed living trust. Beware of purchasing
                                                                             a living trust from a national marketing organization where your
                                                                             individual needs are not considered and where you have not met with
                                                                             the attorney who prepares the document.
                                                                                                                                                                                                Living Trusts
Can a person disinherit a spouse by signing a
revocable trust?                                                             What if I have been a victim of fraud?
No. The rights of a surviving spouse to a share of a deceased spouse’s
                                                                             If you think you have been the victim of fraud in the sale of a living
property are not avoided by having a living trust rather than a will.
                                                                             trust, please call the Colorado Attorney General’s Consumer Protection
                                                                             Division at (303) 866-5189 or (800) 332-2071 and ask for the
Can a living trust jeopardize qualification for                              pamphlet on “Living Trust Scams.”

government assistance programs?                                              (2008) This pamphlet is published as a public service by the Colorado Bar Association. Its purpose is to inform
                                                                             citizens of their legal rights and obligations and to provide information regarding the legal profession and how     Sponsored by the Colorado Bar Association
Yes. If assets are held in a living trust created by a deceased spouse       it may best serve the community. Changes may have occurred in the law since the time of publication. Before
and for the benefit of the surviving spouse who is a Medicaid recipient,     relying on this information, consult an attorney about your individual case.
Living Trusts                                                               After your death, your trustee will follow the terms of your living
                                                                            trust. Your living trust may direct that the assets held in the trust be
                                                                                                                                                         It is also the process that determines, in accordance with state law, who
                                                                                                                                                         will receive your property if you have not left a will or a trust.
There are good reasons to use a living trust in certain circumstances.      distributed to your named beneficiaries, or the living trust may direct      There are many types of property that pass outside of probate. For
However, there is a lot of false information about living trusts. Many of   that the assets continue to be held in the trust and managed for the         example, life insurance and retirement plan proceeds pass to the
the advertisements for living trusts are misleading. This pamphlet will     benefit of your beneficiaries.                                               named beneficiary. Property held in joint tenancy with a right of
explain a “living trust” (also known as a “revocable trust” or an “inter    Unlike a will, at your death your trust agreement is not filed with          survivorship passes directly to the surviving co-owner.
vivos trust”), how it is created, what it may or may not accomplish for     the court and does not become public. However, the trust must be
you, and under what circumstances it may be appropriate.                    registered with the court and the beneficiaries are entitled to copies of
                                                                            the trust. This allows you to keep your financial affairs private. If all
                                                                                                                                                         Should probate be avoided?
                                                                                                                                                         A living trust can make probate unnecessary. Advertisements for
What is a living trust?                                                     property was transferred to the trustee during your lifetime, probate
                                                                            of your estate will not be necessary.                                        some living trusts would have you believe that probate is extremely
A trust is a written agreement where you put legal title to certain                                                                                      burdensome and something to be avoided at all costs. Probate laws
property (called the trust property) in the name of a person or firm        A living trust has several advantages if it is set up properly and fully     differ from state to state. However, because of the Uniform Probate
(called the trustee) to be held for the benefit of yourself or a third      funded, meaning all of your assets are placed in the trust. First, a fully   Code, Colorado probate is a relatively simple, usually inexpensive and
party (called the beneficiary). A living trust is created during your       funded trust can reduce or eliminate the need for probate upon your          quick procedure for the distribution of a decedent’s estate.
lifetime and may be funded or unfunded. A funded living trust is an         death. Second, a Colorado resident who owns real property in another
                                                                            state can put that real estate into a living trust and thereby reduce or     Probate may be necessary with a living trust if even one asset has not
alternative to a will and to probate. In a funded living trust, you put
                                                                            eliminate the need for probate in the other state. (This is subject to the   been transferred to the living trust prior to death. Generally, a “pour-
property and money into a trust during your lifetime for the benefit
                                                                            laws of the state where the property is located.) Third, a living trust      over” will is drafted with a living trust to transfer any remaining assets
of yourself and possibly other family members. You can change or
                                                                            may avoid the need for a conservatorship for you if you become legally       into the trust at death.
revoke the living trust at any time. Generally, you are both the creator
of the trust and, while you are living, the beneficiary of the trust.       disabled. However, a living trust cannot avoid a guardianship, because       During probate, most estates do not require direct court involvement.
An unfunded living trust typically receives assets through a simple,        the trustee of a living trust cannot make medical or care decisions for      However, there are filing requirements with the court that must be
pour-over will following your death.                                        you unless the trustee is the named agent for you under a separate           met. Court supervision is available if disagreements or conflicts
                                                                            Medical Power of Attorney.                                                   arise. Delays in distributing assets should not be greater with the
During your lifetime, the trustee (who may be you) of a funded living
                                                                                                                                                         probate process than with a living trust. In both cases, a personal
trust handles your assets in accordance with your instructions for your
benefit. You (and other parties you may name) may receive monetary          Under what circumstances can a living trust                                  representative (formerly known as an executor) and trustee must
                                                                                                                                                         protect themselves from liability for premature distribution of assets
distributions from the trust. A funded living trust can manage the          prove beneficial?                                                            before creditors and taxes are paid.
everyday details of your personal finances.
                                                                                       • If you have assets in a state that has not adopted              There are instances when bypassing probate is a good idea financially.
If you should ever become incapacitated, alternate trustees are                          the streamlined procedure of the Uniform                        This is especially true if you own real property in more than one
usually named in the trust to assume trustee responsibilities, the                       Probate Code, a living trust may allow                          state.
most important of which is providing for your financial needs or the                     you to avoid a complicated and expensive probate
financial needs of your beneficiaries. You will usually name a spouse,                   administration.
adult child, relative, friend or a bank as your alternate trustee. Thus,               • If you are incapacitated, or if you are contemplating           Can a living trust save on taxes?
the trust, through the trustee, will continue managing your assets for                   your disability, your assets would be managed for               The living trust avoids no more estate tax than a will. (Avoiding probate
your benefit.                                                                            your benefit.                                                   never means avoiding estate tax.) Both a will and a living trust, when
Your trustee provides for your maintenance and support from the                        • You may want to see how an adult child will cope with           well written, can save substantial family assets that would otherwise be
assets in your trust. This usually occurs without having to involve the                  responsibility by giving him or her a supervised trial          used for payment of estate taxes.
court. This saves your family from having to have a court appoint a                      run as trustee.
                                                                                       • You may no longer wish to be involved in the                    Generally, you will be treated as the owner of the assets in the living
conservator to handle your affairs. The court procedure to have a
                                                                                         management of your financial affairs, and you want to           trust because you have the right to amend or revoke the trust and
conservator appointed can be expensive and requires that a detailed
                                                                                         place your assets under management.                             reclaim the property. Consequently, there are no advantages for
annual accounting of your assets and liabilities be filed with the
                                                                                                                                                         income tax purposes. Further, since you maintain some control over
                                                                                                                                                         the trust property, the trust property will be treated as part of your
Although you may have left detailed instructions on how to handle           What is probate?                                                             estate for estate and gift tax purposes, just as if you owned the trust
your estate upon your death in your will, your will has no effect until     Probate is the legal process that ensures your will is valid, your debts     property in your own name.
your death. If you become incapable of managing your own affairs,           are paid and your property goes to the people you name in your will.
then a living trust can be helpful.

Shared By: