A trust is a legal document that allows a third party to manage property and assets on behalf of another person. Trusts are useful when it comes to protecting your assets, estate planning, charitable donations, and more. A trust allows you to decide exactly how and when you would like your assets to be distributed after death. There are also a number of additional benefits of a trust, like avoiding probate, maintaining control over your assets, and more.
Benefits of a Trust
Unlike a will, a living trust allows the probate process to be bypassed. Probate is the process of validating a will and properly distributing assets under court supervision. It is a costly and time-consuming process that can be avoided through the use of a trust. A trust will ensure that your beneficiaries are able to receive their assets and inheritances privately and quickly, without the need for probate and court.
A trust also gives you the opportunity to provide management for your assets if you become incapacitated and are unable to manage your affairs. It also allows you to provide a specific set of instructions about how you would like your assets and property to be managed, which the trustee will have a fiduciary duty to follow. One of the main benefits of having a trustee is that it allows for your personal and financial matters to be handled confidently in your best interest, without the need for a court-appointed conservator. It offers peace of mind and assurance that your estate will be properly handled if you are not able to do so yourself.
There are a number of different types of trusts available. A living trust ensures that you are able to maintain control over your assets in the trust during your lifetime. This means that you have the option to revoke or modify the trust at any time for any reason. You will still have the flexibility to manage, invest, or spend your assets however you please. Having continued control and access to your assets is a huge benefit of a living trust.
A trust offers privacy that a will cannot. A will becomes public record after death, whereas a trust remains private. This ensures that the details of your estate, including the value of your assets and the identity of your beneficiaries, remain entirely confidential. A trust offers significant advantages to those who wish to keep their estate and their financial matters private and out of the public eye.
In some instances, a trust may allow for immediate distribution of assets among beneficiaries either upon death or upon reaching certain milestones in their lives. For example, the grantor of the trust may set up their trust to include educational or medical expenses for beneficiaries. Other milestones may include graduating from school, marriage, purchasing a home, or more. Regardless of the reasoning, trusts can be particularly beneficial when it comes to providing financial support to family members and loved ones without the need for probate.
Finally, one of the greatest advantages that a trust provides is tax benefits. Certain types of trusts often go a long way in reducing estate and income taxes for your beneficiaries. This is a strategy that is typically favorable for those with a large net worth.
There are plenty of benefits that a trust offers. If you are interested in setting up a trust but don’t know which one is right for you, give us a call. The team of trust attorneys at Evans Case is prepared to help guide you through the process and make sure that your assets are protected. Our firm is here to provide you with outstanding legal representation that works for you. Come see why our team has been trusted by families in Denver for decades. For more information about our
estate planning services, schedule a consultation and speak with one of our attorneys today.
What Are the Different Kinds of Trusts?
As we touched on above, there are a number of different kinds of trusts available, each with their own unique set of advantages. Deciding which trust is best for you and your family can be a difficult decision, which is why we strongly encourage you to reach out to an experienced trust attorney for guidance. Some of the different types of trusts available include:
Irrevocable Trusts
An
irrevocable trust is one that cannot be modified or revoked once it has been established. Once the grantor has transferred all assets into the irrevocable trust, they have relinquished all control and ownership over those assets. Some of the benefits of an irrevocable trust include creditor protection, reduced estate taxes, and proper asset distribution.
One of the greatest advantages that an irrevocable trust offers is the ability to protect your assets from creditors. Once the grantor’s assets are transferred into an irrevocable trust, creditors are not permitted to lay claim to these assets in order to satisfy debts. These assets are no longer considered to be personal property and are owned by the trust rather than by the grantor. For professions that are more susceptible to litigation, like doctors, business owners, etc., an irrevocable trust is a promising way to protect your assets.
Another advantage of an irrevocable trust is reduced taxes on your estate. When assets are moved into a trust, they are essentially removed from the grantor’s taxable estate, meaning that these assets are not subject to estate taxes after the grantor’s death. Some contributions into an irrevocable trust may qualify for an annual gift tax exclusion, which could further reduce the taxable estate.
Finally, an irrevocable trust offers the option to dictate exactly how and when you would like your assets to be distributed among your beneficiaries. A trust ensures that your assets are used and distributed according to your best interest. An irrevocable trust can also include provisions that dictate how and when certain distributions are made. This can be extremely useful in situations where you may not trust a beneficiary to handle a large inheritance wisely. An irrevocable trust allows you to limit these distributions in order to protect beneficiaries from causing harm to themselves.
Some additional benefits of an irrevocable include being able to continually donate to a charitable organization of your choice and avoiding nasty family disputes. Setting up a charitable remainder trust will allow you to continually donate and contribute to a cause that you care about while simultaneously providing tax benefits that support your beneficiaries. Asset distribution, especially after the death of a loved one, can be an emotionally challenging process, and having clearly defined terms for how you would like your estate to be handled often helps eliminate any potential disputes and legal battles among family members.
Revocable Living Trusts
A
revocable living trust is the most flexible type of trust available. Unlike an irrevocable trust, this trust can be revoked or modified at any time. However, all assets within a revocable trust remain a part of the grantor’s estate. One of the biggest benefits of a revocable trust is that it can help avoid the probate process. It also offers tremendous flexibility and control over your assets.
As we mentioned before,
probate is a time-consuming legal process that involves validating a will, settling debts, paying taxes, and distributing assets on behalf of a deceased family member or loved one. Much like an irrevocable trust, placing your assets in a revocable trust allows for your assets to be distributed directly to the beneficiaries upon your death without the need for probate. This allows beneficiaries to receive their inheritances much quicker, which can be incredibly helpful for those relying on finances for medical bills, living expenses, or education. With a revocable trust, assets are made available to the beneficiaries almost immediately after the grantor’s death. A revocable trust also remains private, keeping the details of the trust and the identities of the beneficiaries confidential.
The greatest advantage of a revocable trust is the ability to modify or revoke the trust if needed. This is useful in situations where the grantor acquires new assets after creating the trust and wants them to be added. The trust is also able to be modified if the grantor’s relationship with any of the beneficiaries changes, whether due to marriage, divorce, death, or more. The flexibility of a revocable trust also allows you to make changes to your original plan to stay in accordance with or take advantage of new estate planning laws. As the name suggests, it also gives you the option to completely revoke the trust if needed. The ability to make changes that suit your best interests at any time is one of the reasons that revocable trusts are a popular choice.
Special Needs Trust
A
Special Needs Trust's primary purpose is to provide for the needs of beneficiaries with special needs while still allowing for government benefits like Supplemental Security Income (SSI) and Medicaid. Eligibility for these programs is dependent on the beneficiary’s income and assets, and without a Special Needs Trust (SNT) in place, the beneficiary may be disqualified from receiving these benefits.
A Special Needs Trust is structured so that the assets within do not count against the beneficiary’s asset limits for government benefits. An SNT is designed to be supplemental financial support rather than replacing services like SSI and Medicaid altogether. It also provides financial support for additional medical treatment that may not be covered by Medicaid, like in-home care or other specialized treatments. A Special Needs Trust can also be used to fund special education programs, recreational activities, social experiences, personal items and more that will help develop the beneficiary’s skills and improve their quality of life.
Special Needs Trusts require a third-party trustee who takes on a fiduciary responsibility to manage the assets appropriately and make distributions in accordance with the trust. It is the responsibility of the trustee to make informed decisions that prioritize the best interests and needs of the beneficiary. It is also greatly advised that the trustee does not provide cash or assets directly to the beneficiary, as that might jeopardize their eligibility for government programs. Instead, it is recommended that the trustee make payments directly to the beneficiary’s service providers and makes purchases on their behalf. It is beyond important to choose a trustworthy and reliable trustee who looks after the beneficiary’s needs while also still complying with their legal obligations. Being the trustee of an SNT can be a difficult task, which is why we strongly encourage you to reach out to our Denver team of trust attorneys for guidance .
Testamentary Trusts
A testamentary trust is one that takes effect upon the death of the grantor, and is most commonly used to manage and distribute assets for minors or dependents. Unlike both revocable and irrevocable trusts, a testamentary trust does not avoid probate. One of the most important functions of a testamentary will is to provide for minor children until they are old enough to do so on their own.
It is generally not in the best interest of a child to be handed a large sum of money all at once. A testamentary trust allows the grantor to design the plan to decide how and when the assets will be distributed onto the children, ensuring that the finances will be used for their intended purposes. A testamentary trust involves a trustee who is tasked with managing the assets of the trust on behalf of the minor children. This may include responsibilities such as paying for the children’s healthcare, education, living expenses, and more. It is the fiduciary duty of the trustee to act in the best interest of the child or children until they reach adulthood.
One of the biggest benefits of a testamentary trust is that it allows the grantor to directly appoint an individual (the trustee) to manage their assets according to their specific instructions. Without a trust in place, a court-appointed guardian may be assigned to manage a child’s inheritance, which can be a complicated process that may not align with the grantor’s wishes. A testamentary trust also ensures the children are receiving financial support steadily and continually throughout their childhood for things like education, camps, and any other program that helps improve the child’s development.
A testamentary trust gives the grantor control over the distribution of assets. They may choose to break up the inheritance or assets to be distributed once the children reach a certain age or milestone. For example, the trust may provide funds once the child turns 18, graduates college, buys a home, gets married, or more. Not only do these milestones allow for the assets to be distributed when they are most needed, but it also incentivizes the children to reach these milestones and live a positive, successful life.
Testamentary trusts are advantageous for young beneficiaries who lack any meaningful financial responsibility or experience. It can protect them from their own detrimental spending habits and set them up for continued success down the road. It is important to wisely choose a dependable trustee who will look after your child’s wishes and avoid any potential conflicts of interest. Testamentary trusts are a great way to protect your assets while concurrently providing for your children’s futures. For more information about what kind of trust is right for you and your family, call today and schedule a consultation with one of our trust attorneys.
Education Trusts
The goal of an education trust is to fund the educational expenses of the beneficiary. This type of trust ensures that the grantor’s assets are used to support their children’s education and are not used elsewhere.
The funds from an education trust are limited to purely educational expenses. This can include costs like tuition, text books, housing, laptops, extracurricular activities, and any other educational supplies necessary. These funds are meant to be spent on expenses that exclusively support the beneficiary’s academic success. An education trust can be designed to continually provide financial support for the beneficiary over the course of several years, including primary education all the way through college and even graduate school.
In some instances, the beneficiary may not end up using all of the funds that were allocated for their education. The grantor may specify in the trust how they would like the unused funds to be distributed. They may choose to split the remaining funds amongst other beneficiaries or roll them over to be used for future educational purposes. They may even choose to donate the remainder of the money to charity, opening the door for potential tax benefits.
Charitable Trusts
Finally, a
charitable trust is one that is established in order to benefit a charitable organization or cause. These trusts generally allow for substantial tax advantages while also supporting an important cause or mission.
There are two main kinds of charitable trusts: Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs). In a CRT, the grantor or other beneficiaries receive income for a certain amount of time, and then the remainder of the assets will be donated to the selected charity. In a CLT, the charity will continue to receive income from the trust for a set amount of time, after which the remaining assets will be distributed among the beneficiaries.
Whichever option you choose, charitable trusts are a great way to leave a lasting legacy while supporting important causes that align with your values. For assistance deciding what kind of trust is best for you and your family, Evans Case is here to help. Our Denver trust attorneys can help guide you through the process and make informed decisions about what kind of trust is right for you.
Medicaid Planning
Medicaid planning is an important part of a long-term financial and healthcare strategy, particularly for those who may require long-term care in the future. Medicaid is a government healthcare program for low-income individuals and families. Because Medicaid has strong income and asset limits, it requires thorough and careful planning to ensure your eligibility without depleting your estate.
A common strategy for Medicaid planning is the use of an irrevocable trust, such as a Medicaid Asset Protection Trust (MAPT). By moving your assets into an irrevocable trust, you can remove those assets from your ownership and ensure that they are not counted toward Medicaid’s asset limits. It is strongly advised that these trusts are set up in advance of applying for Medicaid, as they will impose a five-year look back period on the transfer of assets. Medicaid planning with trusts is a powerful option for protecting your financial legacy while making sure that you have access to the healthcare that you need. Consulting with an experienced trust attorney is highly recommended. The trust attorneys at Evans Case can provide invaluable legal assistance to individuals and families all over the Denver area. For more information about how we can help you plan for your future, contact us today.
How to Create a Trust
Before creating a trust, it is important to understand what goals and needs are important to you. Considering your current financial situation, your family, and your long-term goals will play a large part in deciding what kind of trust is best for you. It is ultimately up to you to decide how and when you would like to distribute your assets upon death.
It is strongly encouraged that you appoint a trustee that is dependable, financially literate, and willing to take on the responsibilities that come with the role. More often than not, a trustee is a family member or a loved one, though banks and trust companies may also serve as a trustee. By speaking with an experienced attorney, you can decide which option is best for you.
It is strongly recommended that you work alongside a trust attorney when you are drafting the document. It is highly important that your trust is legally sound and accurately reflects your wishes. There is plenty of information that must be included in every trust, and having a dedicated attorney by your side is a great way to ensure that your trust is in accordance with state law and is legally binding.
The final step in creating a trust is to fund the trust. This process involves transferring the ownership of your assets into the trust, including bank accounts, investments, property, and any other assets you may wish to include. Once the trust has been funded, it is important to make sure that it has been properly executed and is fully operational. This step includes notifying all relevant parties, including trustees, beneficiaries, and any financial institutions that may be involved.
It is also strongly advised that you regularly review your trust to make sure that it continually reflects your best interests. After significant events like birth, marriage, divorce, or death, it may be necessary to make some minor adjustments. We recommend consulting with a trust attorney who will be able to help ensure that your trust stays up-to-date and legally binding.
Call Evans Case Today to See How We Can Help
Whether you are ready to begin setting up a trust or you are seeking professional legal advice about which type of trust is best for you, Evans Case is the name that you can trust. Our Denver trust attorneys have years of experience helping Denver families prepare for their futures and protect their assets. Whatever your goals may be, Evans Case is here to help guide you through the process and make sure that your trust is legally binding and reflects your best interests. For more information about how we can help you,
reach out to us today to schedule a consultation. Come see why Evans Case has been continually trusted to provide exceptional estate planning services for families all over the Denver area.
