| NEWS &
The Newsletter of DiGiacomo, Jaggers, & Perko, LLP, Attorneys
Volume 1, Number 1
A Look at Living Trusts
trusts have become increasingly popular in recent years. For the vast
majority of our clients, living trusts are not appropriate for estate
planning purposes. Here's a summary of what a living trust will not do.
Won't help you avoid taxes. A revocable living trust
doesn't save any income or estate taxes that couldn't also be saved by
a properly prepared will. Trust property is still counted as part of
your estate for the purposes of the federal and state income and estate
taxes. Filing tax returns and other duties can make the cost of
administering an estate distributed by a revocable living trust as high
as traditional estate administration.
Won't make a will unnecessary. You still need a will to
take care of assets that are not included in the trust. If you have
minor children, you need a will to appoint a guardian for them. Won't
affect nonprobate assets. Like a will, a revocable living trust won't
control the disposition of jointly owned property, life insurance,
pension benefits, or retirement plans payable to a beneficiary, and
other nonprobate property.
Won't protect your assets from creditors.
Creditors can attach the assets of a revocable living trust. In fact,
since the assets you put in a living trust don't have to be probated,
they could lose the protection of the statute of limitations, which
means that your creditors have longer to get at them.
Won't necessarily protect your assets from challenge.
Someone not named a beneficiary of the trust can still bring suit to
challenge the trust on grounds of fraud, undue influence, or duress.
Won't eliminate delays. A living trust might lessen slightly the time
it takes to distribute some of your assets after you die, but it won't
eliminate delays. The trustee still has to collect evidence of any
debts owed to your estate after you die, prepare tax returns, pay
bills, and distribute assets, just as would the executor of a will. All
this takes time.
Consumer Alert. Unfortunately, a number of dubious
companies, playing on fears of probate and suspicions about lawyers,
have taken to selling living-trust kits door to door, through seminars,
over the internet, by mail or through unsolicited phone calls. By
exaggerating the problems of probate, they often sell to people who
really don't need a living trust.
Most financial advisers urge you to avoid such pitches.
The products seldom live up to their claims and almost always cost more
than a good personalized trust prepared by us. Because revocable living
trusts should be crafted to fit your particular situation, it's next to
impossible to find a prepackaged one that will suit your needs as well
as one prepared by your lawyer.
May Need a Living Trust if...
1. You have property in another State. For such property, we recommend
deeding it to an entity you form such as a limited liability company, a
partnership, or a revocable living trust. This helps you avoid
time-consuming, complicated, "ancillary probate" procedures.
2. You don't want the task of managing your property. Again, an entity
such as a limited liability company, a partnership, or a revocable
living trust allows you to give those duties to someone else to manage
while you receive the income, minus the manager's fees, if any. But
there is a cost.
May Not Need a Living Trust because...
1. Colorado has simple procedures for administering estates the size of
2. You're young and healthy and don't have a lot of money. A will can
usually take care of the immediate needs of a young family. You can
think about a trust when your assets have grown.
3. You are not rich but you have enough assets that re-registering them
all may not be worth the trouble. For example, you might own a number
of parcels of real property, none particularly valuable, but all of the
property would require retitling if placed into a trust.
Setting Up the Entity. If you decide to go ahead with an
entity such as a limited liability company, a partnership, or a
revocable living trust, be sure to consult us - it's definitely not a
do-it-yourself job. Requirements for setting up these entities vary by
State. In general, you execute a document saying that you're creating a
trust or other entity to hold property for your benefit and that of any
other designated beneficiary. Some declarations list the major assets
(home, investments) that you're putting into the entity; others refer
to another document (a "schedule") in which you list the exact property
that will be conveyed to the entity.
DiGiacomo, Jaggers, & Perko, LLP | 5400 Ward Road
You will have to change the ownership registration on all property put
into the entity - deeds, brokerage accounts, stocks or bond, bank
accounts, etc. - from your own name to the name of the entity. Take a
copy of the entity agreement to your bank, stockbroker, mortgage
company, and anyone else who controls title to your assets and request
a transfer of ownership from your name to that of the entity. Make sure
to keep a record of these transfers; it will make your successor
manager's job much easier.
If you make yourself the manager, you will have to remember to sign
your name on entity transactions using your title such as Manager,
Partner, or Trustee, instead of using only your name.
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Phone 303.420.4220 | FAX 303.423.4840