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Trust formation basics: Part I

Some of the misperceptions about trusts are that they are too burdensome or expensive. In many situations they provide a cost-effective vehicle to plan for the needs of a surviving spouse and smoothly transfer assets to the next generation.

How do you determine whether a trust would be beneficial? In this series of posts, we will look at the role a trust can play in a comprehensive Colorado estate plan. Additionally, we will cover important basics of trust formation and administration.


Initial questions to ask

Many of our posts follow this formation; what to ask, a Q & A or things to consider. But knowing what issues are important prior to meeting with an experienced estate planning attorney is really the best way to get the most out of the meeting.

So here goes another list of things to think about on the path to setting up a trust:

  • Who do you want to receive the property or assets? If one of these people has special needs (mild down syndrome or autism) or struggles with mental illness or substance abuse a trust could be essential to avoid cutting off benefits or letting a loved one immediately squander a gift.
  • What will you use to fund the trust? Many types of investments could be source s including a stock portfolio, mutual funds or even an investment property.
  • How will management of the assets be handled? Is a relative a financial planner who might agree to serve as trustee? The choice of a trustee must be done carefully – in a February blog post we described trustee duties in more detail.
  • Is it important to be able to make changes to the trust?

Deciding how long you hope the trust lasts and setting conditions for when to wrap up the trust are also important.

Each circumstance is unique, so boilerplate and templates must be avoided. Making a mistake in the formation can set up loved ones for crisis down the road and sometimes relationships never recover when conflicts flair over inheritances.


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