The Colorado Revocable Living Trust...What is it? Do You Need One?

A trust is a written agreement whereby money or property is managed by one person for the benefit of another, but is owned by the trust.

A Colorado revocable living trust (also called a "living trust" or "revocable trust") is one type of trust.  It's called a “living" trust because you create it while you're alive.  It's "revocable" because you can change or end the trust at any time, for any reason. Usually a living trust becomes irrevocable, not open to changes, when you die.

A trust involves three parties:

• The settlor or grantor is you, the person who creates the trust.
• The trustee is the person (usually you or you and your spouse) who agrees to accept your property and manage it as the trust agreement directs. You can name more than one trustee, thus creating co-trustees who must act together.
• The beneficiaries are those who will receive the income from the property in the trust and, with your direction, the property itself.  If you were to die or become disabled, you'd want your dependents to be financially secure and you'd want someone to manage or distribute your assets just as you would yourself, if you could.

How and when do I fund a revocable living trust?

You need not put anything into the trust when you set it up. This is known as an "unfunded" trust.

Some people decide to put all or most of their property into the trust in the beginning. A fully-funded trust avoids probate. Others put in some property at first and add more from time to time. Still others set up a trust so that much of their property gets transferred only after they die.

To accomplish this, you'd use a simple will called a pour-over will.  It funds the trust with any property you didn't put into the trust during your lifetime.  However, this arrangement will not avoid Colorado Probate.

How does a revocable living trust differ from a will?

Both a will and a living trust enable you to provide for your beneficiaries and direct how your property will be distributed after you die. With a living trust and a will, you keep control of your property and manage it yourself while you're alive. A living trust also lets you do something a will can't do: spell out how you want your property managed if you become disabled during your lifetime. This avoids a “living” probate.

What else can a revocable living trust do?

• Provide financial management of your property
• Provide property management if you can't manage your affairs
• Provide for minor or irresponsible children when you die
• Avoid probate
• Shorten or eliminate delays in distributing your property to beneficiaries

Should a revocable living trust be part of your estate plan? No simple guidelines exist to answer that question. People with various levels of wealth and in different circumstances may, or may not, find a revocable living trust useful. To learn much more in simple, easy-to-understand language, request your FREE copy of The Colorado Guide to Living Trusts.