Estate Planning Lawyers Review Wills, Trusts and Probate in Colorado
When a person passes away in the state of Colorado without a valid will or trust, their assets are transferred to the closest relatives under the state “intestate succession” laws. There are some assets that aren’t affected by these laws and do not need court proceedings for distribution. These assets include: 401(k), life insurance proceeds, real estate held by transfer-on-death or beneficiary deeds or property you’ve kept in a living trust. All other assets, whether included in a will or not, can be subject to probate proceedings.
Though the laws are clearly designed to help ensure all property goes to spouses, children, parents and relatives, the best way to control how an inheritance is managed is to develop a living trust ahead of time with a qualified estate planning attorney.
Do I need a will or a trust? What is the difference?
Whether or not a will or a trust is better for you depends greatly your personal situation, your total asset value and how much control you want over the process.
Here are some of the key differences between a will and a living trust:
A will does not avoid probate for valuable assets.
A will goes into effect after a person passes away. If property is owned by a single person, valued at over $60k in the state of CO, and is passed under the terms of a will, it will still require probate to legally be transferred to beneficiaries. The probate court determines if your will is valid, orders payments of outstanding debts and distributes the remaining property in accordance with the will.
A living trust transfers your existing assets to a trust immediately, that is no longer owned by you, but managed by your designated trustee. If property is placed in a trust, it will remain in the trust until designated beneficiaries can legally take ownership of it based on the terms you set when you created the trust.
A trust can protect the inheritance from creditors
If the beneficiaries have outstanding debt, family legal issues or lawsuits, the inheritance gained from a will would be considered an asset and could be lost to pay off existing creditors and legal obligations.
When an inheritance is placed in a trust, the trustee has access to the assets but they are not in the name of the beneficiary. The ownership remains in the Trust. When appropriate, you may also name the beneficiary the Trustee on the account, allowing them to manage their own assets.
Beneficiaries with Disabilities
It is important when leaving assets to a person with disabilities, that you consider their need to continually qualify for Supplemental Security Income and Medicaid Benefits. Housing, vehicles and family assets do not affect SSI or Medicaid, but cash gifts can cause beneficiaries to lose their ongoing state benefits. Setting up a special needs trust allows your loved ones to receive help from the designated Trustee in the form of home furnishings, vacations, physical therapy, recreation, personal care, services or products, without the support from the Trust qualifying as income. Because the trust is not owned by the beneficiary, it does not impact their eligibility for state programs and services.
A trust offers more control over distribution
When assets are transferred in a will, they are transferred in their entirety, with no control or rules. The distribution of assets in a Trust are all specifically mandated by you. Unlike a will, you can set up disbursements at various age increments or designate specific amounts for education, healthcare or other expenses.
Do you own taxable estate?
Most Americans do not have to pay estate tax. This is because the very high exemption level of $5.49 million per person that is considered non-taxable. In 2017 roughly two out of every 1,000 people who passed away were required to pay any estate tax. Estate taxes were developed to limit the tax breaks that wealthier households receive on their wealth as it grows; however, for the handful of households that fall in this category, protecting property and assets from government taxes is of primary importance.
Some options include the use grantor retained annuity trusts to pass along assets tax-free, charitable gift-giving, life insurance Trusts, personal residence Trusts or family limited partnerships.
Do you own property out of state?
Transferring out-of-state property into a living trust is the most effective way to avoid multiple probate processes. Real estate is governed by the law of the state in which it is situated, so each property would require its own probate hearing. Combining property within a Trust, simplifies the process and avoids costly legal and travel fees.
Summary
If you only have a bank account and a retirement account to transfer, these items can easily be managed with Transfer on Death paperwork to your intended beneficiaries. A simple will to dictate the distribution of items and care for minor children might be sufficient to meet your needs.
Typically, setting up a living trust is more costly than a will and requires ongoing management. If you have reviewed the choices and are still not sure what is best for you, consult with an experienced estate planning lawyer to review what options fit your lifestyle and goals.
If you would like to set up a consultation to discuss your estate planning needs, contact LaCroix & Hand P.C. Our dedicated team will help you make the right decision and help guide you through the best options available.
