Chayet & Danzo, LLC

Call for a Free Initial Consultation

Direct 303-872-5980
Toll-Free 888-472-1088
Email Us

Compassion, talent and dedication:
guiding colorado families and Their Trusted Advisors During Times of Need

Estate Planning And Trusts Trust Basics And The Impact Of New Laws

Trusts can offer a wide array of financial protections. In addition to easing the transfer of assets and allowing a great level of control over which taxes are applied to transfers, using a trust as part of an estate plan can also protect assets from creditors.

In addition to these benefits, a trust can also offer the creator ease of mind by providing financial assistance to minor children or family members who may not be experienced with asset management. These advantages make the use of a trust beneficial for many individuals.

Setting up a trust

Before establishing a trust, it is important to determine which type is best for your expectations and financial situation. There are two main types of trusts: living trusts and testamentary trusts.

A living trust is set up during the creator’s lifetime and can be either revocable or irrevocable. A revocable trust allows changes to be made to the trust’s structure, while an irrevocable trust cannot be changed. Although revocable trusts allow for some flexibility, they often do not provide the same tax benefits as irrevocable trusts.

A testamentary trust is set up to begin at the time of the creator’s death. This type of trust is generally established in the creator’s will.

Trusts can be designed to carry out variety of goals. One popular use is the ability to provide money to loved ones while simultaneously protecting it from their potential future creditors. This provision is referred to as a spendthrift provision.

Other provisions can allow for the care of disabled children or grandchildren, can allocate money to be used specifically for education or even, in some circumstances, the care of a pet.

Once a trust type is chosen, the creator must appoint a person or entity, called a trustee, to manage the trust. The trustee could be a family member or a lawyer; the entity could be a trust department within a bank. The creator must also choose a beneficiary, or the person who will benefit from the trust. The beneficiary could be the creator or another person, depending on the type of trust used.

Once these basics are determined, it is also important to discuss how the trustee will manage the money within the trust and how the assets will be divided and used.

Potential future changes and how they may impact trusts

After a trust is established, it is important to review it from time to time. Estate laws are constantly changing, and these changes can impact the assets held within the trust.

For example, current law allows a taxpayer to provide another person with about $5 million in tax-free gifts. The estate and gift tax laws that allow for this generous transfer are set to expire in January 2013, however. At that time, the tax-free transfer amount may drop to $1 million per person.

If this change occurs, some individuals may want to adjust their estate plans. If one is already giving over the potential $1 million limit in gifts per person, it may be advantageous to give a smaller amount in gifts and establish a trust with the remaining assets.

Even if this dramatic drop does not take place, financial planners predict another one may be in the works. One example they point to is a plan favored by President Obama, which leans toward a reduction from the current $5 million exemption amount to $3.5 million per individual.

Regardless of which figure is enacted, one thing is certain: Estate and gift tax laws are always evolving. As a result, it is important to review the structure of the trust with an experienced estate planning lawyer to better ensure your wishes are met.

Contact Our Firm

Co-Counsel Services for
settling of Personal Injury and Divorce Cases

Read More

Important intake forms

Prepare for your Meeting

Our Elder Law & Estate Planning Blog

Read Weekly Updates

Join our mailing list

Sign up here

Recent Blog Posts

Is a deathbed will valid in Colorado?

Estate planning is one of those things that people tend to put off, even when they know they should do it and they honestly want to do it. It’s just easy to procrastinate and push it down the road as something you’ll do next month or next year or the year after that....

What does Medicare include?

Most people know that Medicare provides low-cost medical coverage for citizens that are over 65. However, what most people don’t know is precisely how Medicare coverage works. Medicare’s services are divided into four parts, each providing different benefits. They...

Be wary of trusts that are too specific and ironclad 

A trust, when drafted correctly, can be an incredibly effective way to leave assets to your heirs. Among other things, it provides you with an unprecedented level of control over the money you leave behind.  However, you have to be careful not to take this control too...

Turning 18? It’s time to set up a health care power of attorney

As soon as you turn 18, there is something that you have to consider. The fact is that your parents no longer have any control, legally, over your life. If you get hurt or end up in the hospital, they will have no access to your medical information. The same is true...

What fiduciary duties does an estate’s personal representative have?

As you've browsed our website, you've likely uncovered how personal representatives of estates have various responsibilities that they must fulfill in their role. These include inventorying and safeguarding testators' assets, paying off their creditors, filing their...