What is the Difference between a Will & a Revocable Living Trust?
Is a Will or a Revocable Living Trust a better Fit For You? What is the Difference between a Will and a Revocable or Living Trust?
Both of these documents provide for a distribution of your assets upon your death. A Will allows you to name a guardian for any children under the age of eighteen (18) and provide for testamentary trusts (created after your death) to hold assets for a surviving spouse, children or any other beneficiaries. Probate in Colorado is relatively straightforward and inexpensive, therefore creating a revocable trust (also referred to as a living trust), may not be necessary as it is in some other states with higher probate costs. A revocable trust offers several advantages to a Will and will be better estate planning tool for you if you own real property in another state, have children under eighteen (18) years old, want your designations to remain private or wish for a seamless transition in managing your assets if there is concern about illness, frequent travel, diminishing capacity, or any other reason you wish for a co-trustee to take over the management of your assets.
The Advantages to Creating a Revocable trust
1. You Own Real Property In More than One State. If you own real property in a state other than Colorado (this includes timeshare ownership and oil and gas interests, but excludes stocks or interests in an LLC or family partnership), you will need to probate your Will in each state where you own real property. Probating a Will in more than one state is problematic because you must find a good attorney in a state where you may have few contacts to assist you, that state may have an expensive or difficult probate process, it can add to the expense of administering your estate for your personal representative or executor. These problems can be avoided by transferring any out of state real property to your revocable trust or an LLC during your lifetime.
2. Avoiding the Delays of Probate. Property placed in trust can be transferred quickly to beneficiaries following death without going through the probate process. Unlike New York, California and Florida, which have the most challenging and expensive probate proceedings in the county, Colorado has one of the most efficient probate processes in the county, so avoiding probate is not as big a concern in Colorado.
3. You Have Children Under Eighteen (18). By avoiding the delays probate can cause on the transfer of assets, your trustee will have immediate access to pay for any expenses required for the care of your children. Additionally, if you are injured and alive, but do not have the capacity to handle your affairs, a Trustee can follow the guidelines of your revocable trust to administer your assets and care for your dependents with clear legal guidance and fiduciary duties. Compare this to having a Will and Power of Attorney, where there is minimal fiduciary guidance on how to care for your dependents until your death (because the trust set up for your children in your Will is not effective until your death), and an agent under a power of attorney is given very broad powers that do not have the same fiduciary obligations as a Trustee. A fiduciary is someone who has the legal obligation to care for another and hold that person’s best interest above the fiduciary’s own interests. Fiduciary obligations include the duty of care, duty of loyally and avoidance of self-dealing.
4. Keeping Personal Property Separate from Martial Property. Martial assets are subject to division upon divorce. Often times for a second marriage, or if there is family property you want to preserve to your children that was acquired before marriage, or is expected as a gift or inheritance, setting up a Revocable Trust offers a useful tool in isolating what property is separate property and not marital property. Keep in mind, in Colorado, the appreciation on separate property may still be subject to division at the end of a marriage.
5. You are Concerned About the Effective Management of Your Assets. One of the best reasons to create a revocable trust is to provide for an easy transition in the management of assets from one trustee to another. This is similar to #3 above. Initially, the trust creator may act as sole trustee, or may elect to name a spouse, child or other fiduciary as co-trustee. Having a co-trustee or successor trustee, one who would only step in the shoes of the trustee if the serving trustee could not act, allows for a seamless transition in the management and administration of the trust upon absence, temporary illness, or incapacity and eventually death of the serving trustee. A co-trustee’s role can be limited to only making certain decisions, only acting if there is unanimous or majority agreement among all co-trustees, or may be unfettered so that the co-trustee may act with the same authority as the grantor.
5. You Want to Keep Your Designations Private. If a Will is lodged with the probate court, it becomes part of the public court record and can be seen by anyone who requests to see it. All estate plans should have a Will, however, if you wish for your designations to remain private by creating a revocable trust, the Will simply states that all assets are transferred to trust and the trust provides for the specific designations to each beneficiary. This can be important if you are disinheriting a relative or are concerned about a Will contest due to conflict within the family, which may arise if your family has a conflict with your partner or lifestyle.