If you would like to set up a trust as part of your estate plan, you may be curious about where to start. Do you know what is available in Colorado, or applicable to your unique situation? Having a formidable trust can help your assets and estate avoid probate, but not all trusts are created equal.
Which trust is right for you?
Before you open any trust, it is important to remember why you want to open that trust and when it should go into effect. This can help you determine which trust is right for you.
The following are two general types of trusts and a brief description of what they do or how they might benefit you:
- Revocable (living) trust: Allows you to adjust the terms and details during your lifetime. However, does not protect all assets from creditors.
- Irrevocable trust: You cannot alter this trust after its creation. A living trust can turn into an irrevocable trust after your death.
The following are trusts that fit into these categories:
- Insurance trust: This trust only consists of your life insurance policy. May avoid certain taxes.
- Generation-skipping trust: This trust benefits your grandchildren.
- Spendthrift trust: This limits your beneficiary’s spending or selling of your assets.
- Special needs trust: This can help a family member with a disability for decades to come.
- Charitable lead trust: This trust will donate to a designated charity first, up to a certain amount, and your beneficiaries after.
- Charitable remainder trust: This trust allows beneficiaries a certain amount and donates the rest to a designated charity.
It is important to keep in mind not every trust is available in every situation. A legal team is always the best resource for finding and understanding the best estate options for you.