What is a Living Trust?

Author

Danborn, Thiessen & Dunham P.C.

For more information about the author, click to view their website: Frie, Arndt, Danborn & Thiessen P.C.

Posted on

Apr 09, 2024

Book/Edition

Colorado - Denver Metro

A living, or intervivos, trust may be revocable or irrevocable, and it may be funded or unfunded. A funded living trust is an alternative to a will and to probate. In a funded living trust, a person (the settlor) puts property and money into his/her trust during his/her lifetime for the benefit of him/her and possibly other family members. An unfunded living trust typically receives assets through a simple pour-over will following the settlor’s death.

Most people who are able to handle their own financial affairs usually name themselves as trustee of revocable trusts they set up. The trustee invests the trust assets and makes the assets and income available to the settlor/beneficiary during his or her life. Such a trust is almost always revocable, meaning that the settlor can revoke or amend the trust so long as he or she is able.

If the settlor/beneficiary becomes disabled, alternate trustees are usually named in the trust to assume trustee responsibilities, the most important of which is providing for the financial needs of the disabled settlor/beneficiary. A settlor will usually name a spouse, adult child, relative, friend or a bank as alternate trustees. When the settlor/beneficiary dies, the trust often terminates, and the successor trustee will distribute the trust property to the beneficiaries, as under a will. In many situations, however, living trusts will continue for the benefit of the settlor’s spouse and children.

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A living trust has several advantages if it is set up properly and fully-funded, meaning all the settlor’s assets are placed in trust. First, a fully-funded trust can reduce or eliminate the need for probate upon the death of the settlor. Second, a Colorado resident who owns real property in another state can put that real estate into a living trust and thereby reduce or eliminate the need for probate in the other state. Third, a living trust may avoid the need for a conservatorship for the settlor if he or she becomes legally disabled. However, a living trust cannot avoid a guardianship, because the trustee of a living trust cannot make medical or care decisions for the settlor unless the trustee is the named agent for the settlor under a separate Medical Power of Attorney. (See Chapter 6 for more information on guardianships and Health Care Powers of Attorney.)

Many people think they need a fully-funded living trust so that probate is not necessary when they die. In some states, the probate process is cumbersome and costly, and it is thus desirable to avoid that process. In Colorado, however, probate is relatively simple and avoiding probate is not, by itself, a good reason to have a fully-funded, living trust.

Trusts are complex legal documents that require the use of competent and experienced estate planning attorneys. Preparing and managing the trust can be more expensive in Colorado than a will and probate. If the trust is not drafted correctly, significant harmful tax results may occur. You should not try to create your own trust or purchase a preprinted living trust. Initially, living trusts and wills with testamentary trusts are more expensive to prepare than wills without trusts. However, they may save you many thousands of dollars if you have a complex estate.

 

Bob Frie and Paul Danborn in our office would be more than happy to discuss with you if you would benefit from a Living Trust.  Please call our office to discuss this with them.

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Elder Law 7400 Wadsworth Boulevard, Arvada, Colorado, 80003

Our firm was founded in 1985, and there are good reasons for our continued success. Simply put, we offer devoted service to our clients. We work hard, and try to help clients think clearly about their legal problems and to explore alternative ways to resolve them. We are tenacious, not only in our conduct of litigation, but also in the attention we bring to our clients concerns.We try to set ourselves apart from other practitioners by communicating with clients in a way that recognizes the challenges each case presents, yet offers understandable choices. We are curious. Every client presents a unique opportunity to apply our knowledge of substantive law to his or her particular circumstances.We also have a proud tradition of community involvement and service. For example, in 2005 we received the Law Firm of the Year award from the Denver bar foundation for its extraordinary efforts and dedication to providing pro bono legal services to those who cannot pay fees. It is an exceptional honor for which we are grateful.We would welcome the opportunity to consult with you about your legal concerns.Please contact us to see how we can assist you with your legal situation.