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 trusts? 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 expenses. trust. 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 court. 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.