Setting up an estate plan in Colorado helps the decedent divide their assets according to their wishes. Many people think wills are the only way to handle assets, but it’s also possible to include a trust in an estate plan. Trusts have many benefits that wills don’t, and there are several types.
A grantor, the trust creator, can alter the contents of a revocable trust at any time during their life. For example, if they divorce or the beneficiary passes, they can remove the assets from the trust or sell them. The person may serve as the temporary trustee and appoint a successor trustee to oversee the trust upon their death or incapacitation.
One benefit of a trust is that it helps the beneficiaries avoid probate, which can take months. However, revocable trusts do not offer protection from creditors or from taxes since the assets remain in the grantor’s name.
An irrevocable trust cannot be modified after the grantor moves assets into it without permission from the beneficiaries. Unlike a revocable trust, the grantor no longer owns the assets and will not get subjected to taxes or creditor liens. The modern irrevocable trust has a provision that allows older trusts to merge with it, which is called decanting.
A type of irrevocable trust is a testamentary trust, which gets created after the grantor’s death. The trust is created according to the will of the deceased, and assets cannot be distributed until the validation of the will.
A generation-skipping trust passes the assets to the grandchildren of the grantor or a person at least 37 and 1/2 years younger. This helps avoid paying estate tax twice, but it still comes with a transfer tax, which often changes.
It isn’t just a wealthy person who can benefit from estate planning. Anyone with income can include trusts as part of their estate plan. However, it is advised to hire an attorney since each person’s situation differs, and estate laws are complex.