When Colorado residents set out to make an estate plan, they often assume that the plan will be built around a will, often referred to as a last will and testament. It’s likely that a last will and testament is what their parents and grandparents had, so it stands to reason that they will have one, too. In recent years, however, many people have found that an estate plan centered on a living trust better meets their needs than a last will and testament. What is the difference?
A trust avoids probate; a will does not.
A major reason that so many Colorado residents find living trusts appealing is that having their assets pass via trust allows their estates to bypass the probate process. If you have only a will, likely most of your assets are titled in your name (assets like joint bank accounts, titled in the name of two or more people, pass to the surviving account holders). If this is the case, they will most likely go through probate
There are a number of reasons you may wish to avoid probate. Privacy is one. Many people are unaware, when they make a will, that its contents will ultimately become a matter of public record. Colorado state law requires that your will be filed within ten days of your death in the Colorado County in which you resided. No such requirement exists for trusts. If you prefer to prevent friends, neighbors, family members and strangers from knowing what property you had, and to whom it was left, you might be better served by a living trust.
Other reasons for avoiding probate include the expense of the probate process, and the fact that it almost always takes longer for assets to be distributed through the probate process than via a living trust.
A will takes effect on death; a trust takes effect when you need it to.
Most people think of estate planning as something you do to plan for death. This is true as far as it goes, but the reality is that many people need help managing their assets before death due to disability or incapacity. A living trust can often manage assets more effectively using a successor trustee. While a power of attorney has utility in the event of incapacity, your agent under a power of attorney has only the limited authority of an agent. In contrast, a successor trustee is a replacement principal with greater authority to act.
A will has absolutely no effect during your lifetime, but after your death, it gets filed with the court and your personal representative distributes your property according to its terms. If you are disabled or incapacitated before death, by injury, dementia, or some other cause, your loved ones would have to go to court, have you declared incapacitated, and have someone appointed to manage your financial affairs. That person may or may not be who you would have chosen, and there will be a delay before he or she can act on your behalf, due to the nature of court proceedings.
However, with a trust, your assets are contained in the trust, and you manage them as trustee. Your living trust will also name a successor trustee so that, in the event of your incapacity, that person, whom you selected, can step into your shoes with little to no effort and manage your affairs almost immediately.
A trust offers more control than a will.
If you have concerns about how your heirs or beneficiaries will handle the assets you’re leaving them, a trust offers you significantly more control than a will does. A will dictates what assets will be distributed, and to whom, but has very limited ability to set conditions on how and when distributions will be made. A living trust allows you to place a variety of conditions on disbursements, structure them so that a beneficiary will not have more money than he or she needs or is able to handle, and protect assets from being seized by your beneficiaries’ creditors.
If you’d like to learn more about the differences between a will and a living trust, contact the experienced estate planning and probate attorneys at Davis Schilken at 303-670-9855 to arrange a consultation at one of our two locations in The Denver Tech Center and Golden, Colorado. Our attorneys can help you evaluate your estate planning goals and decide whether a will or a living trust is best suited to your needs.