Under the appropriate circumstances, a revocable living trust is the perfect estate planning document. Sometimes, however they can be overkill or underused. Whether a trust is the right document for you depends much upon your assets and family circumstances. Also much depends on whether you as the maker and trustee are willing and able to do so. Here’s some things to consider before using one in your estate plan.
A Trust Is Not A Will Replacement
If you have a trust, you’re still going to need a will. Colorado law states, those who die without a will, die intestate. C.R.S. 15-11-101 Therefore, the laws of intestacy will apply to your estate, which may be contrary to what’s in your trust. Signing a pour over will along with the trust, ensures at the very least, the nomination of a personal representative, and the appointment of guardian for minor children. The law requires the personal representative (or executor) to notify creditors and close the estate.
Your Estate Stills Need To Go Through The Probate Process
Contrary to popular belief, a trust does not avoid probate. The document allows assets placed in the trust to pass outside of probate. Assets placed in a trust are non-probate assets; those remaining outside of it need to go through probate. Often trusts are underfunded or not funded at all. To make your trust work for you, you’ll need to fund it. This means you’ll have to change titles on property or assets, among other things. If you don’t have many assets to place in the trust, there’s a good chance it might not be worth it.
Time And Energy Commitment Managing A Trust
Not only must a trust be funded it must be maintained. There’s work involved in managing as well as the ongoing maintenance of the legal agreement. Besides making distributions to beneficiaries, some of the other duties of a trustee are:
- pay the trust’s bills.
- insure property.
- develop investment strategies for asset growth with minimal risk.
- oversee investments.
- maintain detailed records.
- report to beneficiaries.
- make timely distributions to beneficiaries.
Moreover, separate trust accounts should be maintained for operating expenses as well as distributions. And, a trustee must never commingle funds with personal funds.
In light of the above, there are professional options for trust management. So if you do decide a trust is right for you, don’t feel you have to go it alone. You can always get help from professionals willing to do the heavy lifting for you.
Chances Are Your Estate Isn’t Taxable
Since, Colorado has no estate taxes. And the federal threshold for taxable estates is $11.5 million for an individual and $23 million for a couple. Therefore using a trust to avoid paying taxes is likely a low or non-existent priority. Only a small percentage of families pay estate taxes. Of the 2.8 million Americans who died in 2019 only 0.07 percent paid estate taxes.
Is There A Better Solution?
Carefully think about what you’re obligations will be, before including a trust into your estate plan. Bear in mind, you’re still going to need a will; your estate will have to go through probate; the trust has to be funded and managed, and your estate isn’t going to pay estate taxes whether you have one or not. Before leaping into a trust as a solution, look at other options first.
This article is for educational purposes only, and does not constitute legal advice about your case or situation. There may be exceptions to the information outlined above. Please consult an attorney if you have specific questions about your business or estate plan.