Estate planning can take a lot of energy, and there are many options to consider when coming up with your directions for what will happen to your money and possessions after you’ve died. One option you have for making sure your assets are protected and your family cared for is to use a living trust. This article has information for anyone thinking of forming a living trust in Colorado, including a step-by-step guide to the process and a look at whether or not a living trust is a good choice for your situation. If you are just starting to go through your estate planning process, consider getting a financial advisor to help. SmartAsset has a free financial advisor matching service that can help you find the right financial advisor. We also have a list of the best financial advisors in Colorado.
How to Create a Living Trust in Colorado
This is how you’ll make a living trust in Colorado:
A living trust is a legal framework, established via a document, into which property and assets can be transferred. Each living trust has a trustee who is in charge of managing the trust and distributes the assets inside the trusts to beneficiaries according to instructions the trust founder leaves. You can be the trustee of your own trust or you can pick someone to do it for you, oftentimes a child or another trusted relative.
There are two types of living trusts: revocable and irrevocable. An irrevocable living trust is permanent. Once it is formed, the person who made the trust cannot remove the property or otherwise modify the trust. The trust takes ownership of the property and all taxes are paid via the trust. A revocable living trust, on the other hand, is more flexible. Property can be placed inside and removed as wanted. The grantor also maintains ownership of all property and pays the relevant taxes directly.How Much Does it Cost to Create a Living Trust in Colorado?
It is difficult to estimate how much it will cost you to set up a living trust in Colorado, as a lot of it comes down to the method you use. You can create a living trust document by yourself with the help of an online program. This option will likely run you a few hundred dollars. You can also use an attorney, which will cost, possibly more than $1,000. The exact amount you spend, though, will be determined by the rate your attorney charges and how complex your estate is.
It is certainly cheaper to make a living trust alone, but there are some serious risks to DIY estate planning. This work is detail-oriented and requires a lot of research and precision to get right. If you aren’t up to that, getting a lawyer is the right decision. Make sure you hire a lawyer who is a trust specialist, not just an estate planner. Also, make sure you know the fees and discuss them upfront so there are no surprises.Why Get a Living Trust in Colorado?
The reason people use living trusts is to make it easier for their families after they die. A living trusts makes it possible for a family dealing with the estate of a deceased relative to avoid the probate process. Colorado, though, uses the Uniform Probate Code, which makes the probate process fairly easy. Unless you have an especially complex estate, getting a living trust may not be worth it in Colorado.
Another benefit of living trusts is that it makes it easier to control how property is given to minors. A living trust allows you to leave the property in the trust under the supervision of the trustee until the child reaches a certain age. One more benefit of living trusts? If you become incapacitated you can avoid conservatorship. You already have a trustee controlling the property in the trust, so you won’t need to go through that process.Who Should Get a Living Trust in Colorado?
Living trusts are not just for the wealthy, but Colorado has some rules in place that make them less useful for smaller estates. As noted above, the Uniform Probate Code makes probate a simpler process than in some other states. Moreover, the state has a simplified probate process for any estate worth less than $50,000, so if your estate will be less than that, it is unlikely that a living trust is the right choice for you.
A living trust may be more trouble than it is worth. It also leaves open a longer period for legal challenges after you die, so make sure you consider all potential downsides when you are proceeding. Even if you don’t make a living trust, you still need an estate plan.Living Trusts vs. Wills
Even if you make a living trust, you still need to make a will. With your will, you can instruct your family what do with property that isn’t in the trust, plus a will can do the following”
Colorado has no estate tax or inheritance tax. There is a federal estate tax that applies to estate worth more than $11.4 million ($22.8 million for couples.)The Bottom Line
A living trust is a handy arrow in the estate planner’s quiver. The state uses the Uniform Probate Code, though, so unless your estate is particularly large or complex, it may not be needed in Colorado. You can make a living trust by yourself, but if you want to use one it may make sense to find an attorney to help you do it right.Estate Planning Tips
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