Over the last few columns we have talked about various “shortcuts” that can help a person avoid probate and explained how some shortcuts may be very effective and others may not be. If avoiding probate is a priority for you, perhaps the most effective way to accomplish that goal is through the use of a trust; and that is because assets placed in a trust are no longer in your name and, therefore, need not go through probate to be transferred at your passing.
For example, if you own real property and decide to place the property in a trust, you will sign a deed of some sort that will transfer title to the trust. From there, that property is owned by the trust and can only be transferred when the trustee signs a deed. So, because the trust owns the property, there is no need to involve probate or a court when you pass away. Establishing a trust becomes even more useful if you own property in two or more states, because you then avoid going through probate multiple times in multiple locations.
Privacy is another advantage to placing your assets in a trust. The probate process may require the personal representative, also called the executor, to compile a list of your assets and that list may then be available to a broader circle of family members than if the assets were in a trust. In other words, family members who are not named to inherit anything in the will may still see the list of all of the assets. If you don’t want that result, you can avoid it by establishing a trust.
Another significant benefit of a trust is that it gives you control over when and how your heirs receive their inheritance. For instance, instead of giving your youngest child one third of your estate at age 28, you can dictate that he or she only receive a portion at that age, and then another portion at age 33 and another portion at age 38, and so on. That control is not always necessary, but sometimes it is vital to protecting your children from getting life-changing money at too early of an age.
Those types of benefits are available generally through any well-drafted trust. Sometimes, though, there are special circumstances, such as when there is a special needs person among your family. In cases where the family or that person receives outside aid, you do not want to provide that person with a substantial amount of money through an inheritance. Not only could they likely not handle that responsibility, but also, you do not want to disqualify them from receiving that outside aid; in those cases, a special needs trust can be prepared that protects against both of those concerns.
Another special type of trust, growing in popularity is a pet trust, which is exactly what the name implies. Colorado law allows for that type of “honorary trust,” and so long as the statutory requirements are met, a pet owner can ensure that his or her companions are properly cared for. Once that goal has been achieved, the proceeds of the trust can then be directed to another use, most often for the benefit of a charity that supports the care of animals.
Lastly, at least for our purposes here, most trusts are drafted to be revocable, but sometimes, an irrevocable trust will make more sense. An irrevocable trust is also just what it sounds like, namely, a trust with provisions that cannot be revoked once they are put in place. Because of that type of finality, the reasons and methods for creating an irrevocable trust require special care and attention, but if properly drafted, an irrevocable trust can protect assets from most creditors.
In our next column, we’ll delve into more details regarding the use of a trust to accomplish outcomes that would otherwise not be possible. And, in addition to these articles, we discuss trusts and other estate planning matters in our no-cost seminars. There is limited seating for each one (no more than 12 people), so that we can focus on the specific questions of a small group. If you are interested in attending the seminar, or if you have any questions about this article or topics you would like us to address in future columns, send an e-mail to Kkeim@GJlawyer.com or call (970) 270-1213. Ext.4
Brad Wright’s business and estate planning practice includes transactional and litigation matters with a special focus on business succession. His brother, Steve Wright, has a similar law practice in Idaho Falls, Idaho and, together, they assist businesses of all sizes and types with a wide variety of legal issues.
© 2020 Brad R Wright, Steven J Wright