Forming a Trust
Colorado Attorney R. Brian Daniel
A trust is a legal entity used to hold property for the benefit of someone else. While trusts come in many forms, each one serves a specific purpose. Trusts can be used for a variety of reasons including estate planning, managing assets for a minor, and avoiding probate. Due to the complex nature of trusts and the numerous different types available, you should consult a knowledgeable Parker, Colorado Estate Planning Attorney to find out whether you might benefit from a trust and, if so, which type would best suit your unique needs.
How trusts work
To set up a trust, a legal trust agreement is drafted by an attorney. There are three basic parties involved with a trust. The first party is the maker or creator of the trust - also known as the “Grantor”. This is the person who forms the trust and places assets into the trust. The second party, the “Trustee”, is the person or entity that manages the assets in the trust. Depending upon the type of trust, the Grantor may also be the Trustee. The third party involved with a trust is the person or entity benefiting from the assets in the trust – also known as the “Beneficiary”. In any given situation, there may be multiple Grantors, Trustees, and Beneficiaries to the trust. In addition, a specific provision in a Grantor’s Last Will and Testament may be used in conjunction with an existing trust in order to direct that all remaining assets of a Grantor’s estate become part of the trust upon the death of the Grantor.
Common trust forms
One distinguishing feature of a trust is whether it is created during, or after, someone’s lifetime. A trust created during the lifetime of the Grantor is called a “Living Trust”. A trust that is created after the death of a Grantor is referred to as a “Testamentary Trust” and they are usually created via a specific provision in a Grantor’s Last Will and Testament. There are two basic types of Living Trusts - revocable and irrevocable. A Revocable Trust is one in which the Grantor retains control of the trust assets by maintaining the right to revoke, make changes, or terminate the trust at any time. If the Grantor gives up these rights at the time of the creation of the trust (or at some point during the existence of a Revocable Trust), the trust is considered to be an Irrevocable Trust. Irrevocable Trusts are sometimes used to remove money from a Grantor’s estate in an effort to minimize estate taxes upon death.
Purposes of trusts
A trust’s benefits depend upon its purpose. Trusts can be used to provide for the needs of a Grantor in the event of incapacitation. They can also be used to pass assets onto the heirs of the Grantor. Individuals with a high net worth may use trusts as part of their estate planning in an effort to minimize the tax liability to their heirs. A trust can also provide the Grantor with more control than a Last Will and Testament over the distribution of assets after his or her death by, for example, allowing the Grantor to make stipulations that the beneficiary may not have access to the funds until they reach a certain age. Some individuals also establish trusts in an effort to avoid probate. A trust may provide more privacy than probate because probate records are public. Trusts can also be used to provide for special needs children upon the death of their parents.
How to determine if you need a trust
The best way to determine whether you need a trust is to talk to an experienced Parker, Colorado Estate Planning attorney. A trust can be a very complex estate planning vehicle and, if not set up properly, it may not serve its intended purpose and may actually confuse a situation the trust was intended to simplify.
If you are facing a complicated legal issue, reach out to The Daniel Law Firm. We take great pride in serving clients all over Colorado. Let us discuss with you the best strategy for moving your case forward in both a positive direction and timely manner. Call us today at (303) 951-0233.
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