Trusts are an essential component of most Colorado estate plans. However, despite their importance, many individuals do not understand the basics of a trust, including their key concepts and terms. While trusts can sometimes be complicated, the following post breaks down the essential aspects and terms associated with a Colorado trust.
What is a Trust and Who is Involved in the Process?
A trust is a legal agreement involving at least three parties, where one party holds and distributes assets on behalf of another. The terms of the trust – which all parties must abide by – are included in a legal document called the trust agreement.
As mentioned previously, there are three parties involved in a trust agreement. The first party is called a trustor, who creates the trust and is giving away, or transferring, the assets. The second party is called the trustee, who manages the trust and its assets. The trustee is legally obligated to manage the trust in the best interest of those receiving the assets and also consistent with the terms of the trust agreement. The third party is called the beneficiary, who will receive the assets in the trust. They are called the beneficiary because they benefit from the trust. It is important to note that the same person can be in more than one of these roles, even at the same time. For example, often, the same individual will be the trustor and the trustee.
Are There Different Types of Beneficiaries?
Colorado law provides trustors with a lot of flexibility in drafting their trust and adding the necessary provisions to ensure the trust assets are managed and distributed as they intend. Because of this, a trust need not have a sole beneficiary; rather, there can be multiple beneficiaries at a time. Many people wonder what to do if a trust’s beneficiaries die before the assets run out; however, individuals drafting a trust can plan for this possibility. A trustor can create primary or current beneficiaries to receive benefits now, and also add into the trust contingent or successor beneficiaries, if the current beneficiaries pass away. Additionally, the trustor has the ability to change the current beneficiary – or beneficiaries – at any time.
Besides a traditional beneficiary, other types of beneficiaries can be named within a trust, such as income and remainder beneficiaries. An income beneficiary only receives income earned by the trust, like interest and dividends. On the other hand, a remainder beneficiary is designated to receive any assets left in the trust after a previous beneficiary passes away.
Because drafting a trust can often be complicated – and must comply with Colorado and federal law – individuals interested in creating a trust should contact an experienced estate planning attorney.
Are You Interested in Contacting a Colorado Estate Planning Attorney?
If you or a loved one is interested in creating a trust or Colorado estate plan, contact the dedicated attorneys at Braverman Law Group. We have extensive experience handling various estate planning and elder law matters for a diverse set of clients. Our attorneys take the time to explain the estate planning process, as they understand how critical it is to create the correct estate plan for you and your loved ones. To learn more, and to schedule a free consultation, call us at 303-800-1588 today.