An Overview Of Wills & Trusts

The most well known documents for transferring estates are wills and trusts. A will is a legal declaration that assigns a person or people to manage your estate, transferring its property to your heirs when you die. A trust is a legal arrangement where one or more trustees for the benefit of your heirs manage your estate.

Unlike a will, a trust is usually effective immediately, and carries on in the event of your incapacity (i.e. inability to give informed consent) or death. Trusts and wills fall into two basic categories: simple and complex.

1. Simple and Complex Wills

Simple wills usually apply to estates whose value is low enough to avoid estate taxes, while complex wills usually apply to estates whose value makes them taxable.

2. Simple and Complex Trusts

Simple trusts, also known as bare trusts, must distribute all of their income and none of their principle until a certain condition set forth within the trust is met. Complex trusts are not bound to distribute their income and can distribute their principal.

Trusts can be further categorized as revocable and irrevocable. A revocable trust can be modified and even terminated by its creator, while an irrevocable trust is often impossible to modify or terminate. Irrevocable trusts are often chosen for their tax benefits.

3. Family Limited Partnership

A family limited partnership allows family members with aligned financial interests to combine their resources to achieve lower accounting, legal, and investing expense. Family limited partnerships have two types of members: general partners, who are qualified to manage the partnership and its assets, and limited partners, who have financial interest in the partnership but not managerial capacity. Family limited partnerships are often used to mitigate estate tax on large estates.

To discuss whether a will, trust, limited family partnership, or any combination there of is right for you, contact an experienced Colorado estate planning attorney at Ellmann P.C. today.

Other Types of Wills and Trusts

There are several types of wills and trusts that serve estates in different ways, such as joint wills, living trusts, and testamentary trusts, to name a few.

1. Joint Will

As its name implies, a joint will is one that two people make together, with each often leaving the other all of his or her estate. A joint will may also specify how an estate should be transferred when both persons are dead.

2. Living Trust

A living trust ensures the management of an estate upon its creator’s incapacitation or death. Living trusts are used to avoid probate costs, to reduce estate taxes, and to keep the details of an estate from probate records.

3. Testamentary Trust

Also known as a will trust, a testamentary trust is included as part of a will. Ideal for future estate distribution, testamentary trusts are often used to distribute an estate to minor heirs when they reach adulthood or attain another condition set forth in the trust.

Wills and trusts can enhance each other to ensure that your estate is distributed equitably, punctually, economically, and in the best interest of your heirs. Wills trusts and estates is a broad area that requires an attorney to identify best estate options.

For more information on which Colorado wills trusts and estates options are right for you, contact our experienced wills trusts and estates attorneys today.

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