Understanding Trusts in Denver, CO
Trusts come in many different types. Some Common Trusts are:
- Revocable Living Trust
- Testamentary Trust
- Irrevocable Trust
The most popular type of trust for Estate Planning is the Revocable Living Trust.
Revocable Living Trust:
A revocable living trust prepared by an Attorney, is an instrument used instead of a Will. The Revocable Living Trust can provide the following five advantages over a Will:
- Avoids Probate
- Control Distribution Times to Beneficiaries: ex. (1/3 at 24 1/3 at 28 and the balance at 32)
- Private Instrument: wills are open to the public and can be accessed in either the appropriate District or Probate Court after one's death.
- Built-in Conservator: If you become incapacitated the persons you have named as successor trustees can come in and manage your trust funds on your behalf. You picked the persons you wanted and there is no need for a conservatorship hearing for the assets properly placed in the trust.
- Asset Protection: The trust will protect assets of the named beneficiaries after your death and before outright distribution to the beneficiary.
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Who Will Manage Your Trust?
The most important part of your trust is your trustee. This is the person who will manage your trust upon your death or incapacity. You need to choose someone who has similar values to you. The other major component in your trust is your beneficiaries. These are the persons who will inherit under your trust. As mentioned you can pick different ages for them to receive at or they can receive upon your demise. The trust should not have any effect on your income taxes since all assets will remain under your social security number and your tax returns will continue to look the same.
The most important item in having an effective revocable living trust is that the trust must be funded. If assets are not properly placed into the trust, then that particular asset will have to go through the probate process; thus eliminating some of the major advantages of the trust.
Finally, it should be noted that the trust is revocable. As such you can make changes to the trust as long as you are competent. You can even revoke the trust in its entirety.
Will with Testamentary Trust
A Will with a testamentary trust is very similar to your standard Will, however the document has a trust built into it. These documents are commonly used when we are doing an estate with minor children or if one of the beneficiaries is mentally incapacitated. Upon the demise of the maker of the Will, the Will goes through the probate process but instead of the assets going directly to the beneficiary they go into a trust for the benefit of the beneficiary. The trust will name a trustee. The money in the trust can be distributed to the beneficiary for health, education, maintenance and support of the beneficiary. When the beneficiary attains the age of distribution then the trust shall distribute the balance of its proceeds directly to the beneficiary. We do two types of Wills with testamentary trusts: 1. Simple Minor’s trust and 2. Complex Minor’s trust.
Trustee is the person who manages the funds for the beneficiary.
Guardian is the person whom the minors will live with until they reach the age of majority.
A Will with Simple Minor’s Trust is built on the uniform gift to minors act and as such the money is held by the custodian (trustee) until the child attains the age of 21. The funds are then distributed to the minor outright.
A Will with Complex Minor’s Trust is a will that distributes the assets to a full-fledged testamentary trust. With this trust you can choose any ages for distribution that you like, such as 1/3 at 24, 1/3 at 28, and the final 1/3 at 30.
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