As part of putting together an estate plan, many estate planning attorneys suggest forming a trust. But what exactly is the purpose of a trust, and what property should you avoid putting in it? Today, we're here to answer those questions for you and make figuring out your estate plan a little easier.
To schedule a free consultation with one of our estate planning attorneys for your case, contact us online or via phone at (303) 647-4245.
Types of Trusts
To understand what you can and can't use a trust for in Colorado, you must first understand the different types of trusts. Generally, trusts can be divided into two types: Revocable and irrevocable.
Revocable Trusts
A revocable trust can be changed or amended by the individual who sets the trust up (the grantor) at any time. There are two common types of revocable trusts:
- Living trust. A living trust often contains property, such as heirlooms, valuable objects such as clothes and jewelry, or any other such items the grantor wants to pass on to a beneficiary.
- Land trust. As the name implies, land trusts are often created to award land to a trustee.
Generally, grantors name a trust company or another individual such as an attorney as their successor trustee. This person or entity is responsible for ensuring the trust is carried out after the grantor dies or in the event they become incapacitated.
Revocable trusts are more common than irrevocable trusts because they're more flexible. A grantor may realize they would like a different beneficiary to receive certain assets than they first thought, and a revocable trust offers the flexibility to change how items in the trust are awarded so the grantor can achieve that goal.
Irrevocable Trusts
In contrast, irrevocable trusts cannot be amended or changed by the grantor. There are three common types of irrevocable trust:
- Asset protection trusts. These trusts are used to shelter assets from creditors, and are often utilized to protect valuable assets in the event the grantor falls on bad times, needs to file for bankruptcy, or experiences another such event that could lead them to lose certain property if it weren't in a trust.
- Special needs trusts. Special needs trusts are created for individuals with certain conditions, enabling them to receive the benefits of the trust without being disqualified for government aid.
- Family trusts. Family trusts can be irrevocable or revocable. They can enable a grantor to award assets to beneficiaries without said assets needing to go through probate.
Speak with your estate planning attorney to determine what kind of trust is best for you and your needs, but most grantors settle on a living revocable trust.
What Shouldn't I Put in My Trust?
So, what shouldn't you put in your trust? Generally, you want to avoid the following types of assets unless you're awarding them to your own children, who are currently minors:
- Motor vehicles;
- Life insurance;
- Uniform gifts and transfers to minors;
- Health and medical saving accounts; and
- Qualified retirement accounts.
These assets can be difficult to distribute through a trust, and leaving them out can help make matters simpler.
At the Law Office of Alexandra White, P.C., our team can help you draft the perfect trust for your needs. Contact us online or via phone at (303) 647-4245 to schedule a free consultation with our team!