When engaged in estate planning, individuals and couples often explore a very wide range of options. While typically they will work with professionals to do the planning, it can help to have some knowledge about the options before discussing them. One option is a trust.
Colorado residents who are new to the subject of estate planning may be interested to learn more about the various kinds of trusts that are available. Trusts fall into two general categories: testamentary and living trusts. A testamentary trust is set up only after the benefactor's death, when the person's will is put into effect. On the other hand, a living trust is established during the benefactor's lifetime.
Benefactors in Colorado have the option of using a living trust to provide a safe method of transferring assets to named beneficiaries. This instrument of estate planning differs from the traditional will in that a living trust includes directions for the management of property while the benefactor is alive. This can be especially useful if the benefactor serves as the trustee and loses the ability to manage the trust.
One of the most important estate planning issues for Colorado residents may be having enough money saved to address living expenses during retirement years. Without sufficient funds, there could be the need to get rid of some assets in order to handle the costs of living. Whether or not enough money has been saved, however, an estate plan is important for prescribing how one's remaining assets will be distributed after death. With a revocable trust, these directions can be changed as often as necessary to account for changes in holdings based on the liquidation of bad assets or the decrease in value of a good asset.
An irrevocable trust has long been known to be challenging to change, even if it is the trustee wanting to do the changing, but they are still used because of the tax advantage. Decanting a trust provides one solution by letting the trustee move the assets from the old trust to a new one and change some terms at the same time. It is called decanting because the person is "pouring" from one trust to another.