Are you interested in providing for your loved ones after you’re gone? Do you want to help heirs receive assets without the hassle and publicity of the probate process? Would you like to protect your family from lawsuits or creditors? The right trust or trusts can accomplish all these goals and much more.
You’ve worked hard to acquire wealth and build a legacy for yourself and your family. Now it’s time to protect it. Contact Peakstone Law Group today for a consultation with a trusts lawyer in Colorado Springs. We’re ready to discuss how you can use these powerful estate planning tools to meet your goals.
What Are Trusts and Why Are They Useful in Estate Planning?
A trust is a legal instrument where one party, known as the trustor or settlor, transfers assets to a trustee, who manages the assets for the benefit of a third party, called the beneficiary. The trust creates a fiduciary relationship, meaning the trustee is legally obligated to act in the beneficiary’s best interests and manage the assets according to the terms set by the trustor at the time they created the trust.
Trusts can hold a wide range of assets, including:
- Businesses and corporate shares
- Cash and deposit accounts
- Collectibles like art or antiques
- Investments like stocks, bonds, and money market accounts
- Life insurance policies
- Real property, such as homes or land
The exact purpose of a trust depends on its specific type and why it was established. However, as a general rule, trusts protect assets (often from taxation or creditor claims) and ensure they are managed and distributed according to the trustor’s wishes. They accomplish these goals by separating legal ownership, which is held by the trustee, from beneficial ownership, which is enjoyed by the beneficiary.
Common Types of Trusts in Colorado Springs
There are many types of trusts, each of which can help a trustor accomplish specific goals. Here are some of the most common types of trusts in Colorado Springs:
- Testamentary trusts are created through a will and come into effect only upon the trustor’s death. They are commonly used to manage assets for beneficiaries, particularly minors, over time.
- Charitable trusts benefit a charitable organization or purpose. These trusts can provide tax benefits to the trustor while supporting a good cause that is important to them.
- Special needs trusts provide for a beneficiary with disabilities without jeopardizing their eligibility for means-tested government assistance programs.
- Medicaid planning trusts similarly help individuals qualify for Medicaid benefits while preserving their assets, which would otherwise count against them for eligibility purposes.
- Spendthrift trusts protect the trust assets from the beneficiary’s creditors and limit the beneficiary’s ability to access and misuse the funds. They are an ideal way to provide for a loved one who cannot be trusted with large sums of money.
- Generation-skipping trusts allow assets to be passed down to grandchildren or future generations, bypassing the trustor’s children and potentially avoiding estate taxes.
- Life insurance trusts hold a life insurance policy in the trust. When the person insured by the policy dies, the irrevocable life insurance trust receives the proceeds. The arrangement can help reduce estate taxes and provide liquidity to the estate upon the trustor’s death.
Differences Between Revocable and Irrevocable Trusts
Trusts can be arranged as either revocable or irrevocable. The key difference is how much control the trustor retains over the terms of the trust, which has downstream effects on how securely those assets are protected.
As the name suggests, revocable trusts can be revoked by the trustor, allowing for greater flexibility. As such, the rules of the trust are not permanent and binding until the trustor passes away. Revocable trusts are useful primarily for their ability to bypass probate, which means assets transfer to beneficiaries faster than they would be distributed by a will – and, crucially, in secret, as probate is a public process.
The terms of an irrevocable trust, on the other hand, are more or less permanent as soon as the trustor transfers assets into the trust. Once the assets are in the trust, it becomes hard for the trustor to get them back out again. Why would this be beneficial? Because when the trustor no longer controls those assets, they are no longer the trustor’s possessions, and cannot be claimed by creditors, taken through lawsuits, or counted against them for tax purposes in most cases. As such, irrevocable trusts offer more powerful tax-planning and asset-protecting benefits than revocable trusts.
Factors to Consider When Choosing a Trust
As you consider the right trust to meet your goals, ask yourself whether you want to maintain control over the assets during your lifetime (as with a revocable trust) or if you want long-term asset protection and potential tax benefits (as with an irrevocable trust).
Consider the age, financial stability, and needs of your beneficiaries. Are you concerned about passing assets through probate and having their details become a matter of public record? Our experienced estate planning attorneys can explain what various types of trusts can accomplish, learn your goals, and advise you on how to meet them.
Benefits of Establishing a Trust in Colorado Springs
Establishing a trust in Colorado Springs can provide you with a wide range of benefits depending on the type of trust you set up. A trust can help you:
- Minimize taxes
- Avoid probate
- Maintain eligibility for government benefits
- Safeguard wealth for the future
- Enjoy the peace of mind that comes from knowing your assets are protected and your loved ones are cared for after your death
How Our Colorado Springs Estate Planning Lawyers Can Help You
At Peakstone Law Group, we want to help you and your family prepare for the future. If you’re interested in establishing a trust in Colorado Springs, we’d be happy to get to know you and your goals, advise you on the trusts that can help you meet them, and draft the necessary documents for you. We offer additional services to help you get the most out of your estate plan.
Contact us today for a free consultation about your estate planning options with a trusts lawyer in Colorado Springs.