There is a story about a miserly old man who is nearing death.  He calls his three closest friends to come visit him on his deathbed.  He tells them that he has heard he cannot take his wealth with him, but he wants to give it a try.  He hands each of his friends a bag of gold coins and requests that each person place the bag of gold coins in his coffin.  A week or so later, the man passes on.  At his funeral, each of his friends goes up the casket and leans over the coffin to pay his respect to the deceased man.

After the services are over and the burial complete, as the three friends leave the funeral, they begin to talk.. One breaks down, saying, “I just can’t take the guilt.  I only put half the gold in the coffin.”  Another says, “You are fine.  I only put the bag in, not the gold.”  The final friend says, “I am disappointed in both of you.  I wrote him a check for the full amount!”  It seems, after all, that the deceased man couldn’t take it with him!

When death comes for all of us, our possessions, money, and other assets will need to be passed on to someone else – our beneficiaries or heirs.  The process of passing things on is exactly what estate planning is all about.  You can use a will to pass on your assets, and the will does so by going through the probate process.  Probate is the legal process for getting assets from the deceased individual to the named beneficiaries or heirs.  Probate is really not that bad in Colorado, but you do need to meet the deadlines and timeframes set by the courts.

If you want to avoid the probate process, you can use a trust to do so.  A trust is an alternative to a will.  You can set up a trust now, and the trust will dictate what happens to your assets.  The trust doesn’t die with you, but rather continues to exist after you pass away.  This means you can dictate what happens with your assets after you die, keep the process away from the courts, and make it easier on your children after you are gone.  Trusts allow you to do a lot of the work on the front end of things, instead of pushing everything off on your children, beneficiaries, or heirs on the back end – after you die.

 

A Trust Does Not Die With You

If you have a trust set up, and you pass away, the trust continues to exist.  The trust does not end just because you pass away, so the trust can dictate who will act as the successor trustee.  The successor trustee is tasked with carrying out the distributions described in the trust and doing so in the manner the trust dictates.  Since the trust does not cease to exist when you pass away, the assets owned by the trust are still controlled by the trust.  The written trust agreement describes what should happen with the assets in the trust and who should receive the assets.  Because the trust did not die, just the person who made the trust, the assets inside of the trust are not subject to the probate process.  Instead, the trust is the proper way to distribute assets, so the courts do not need to be involved in the distribution of assets from a trust.

Let’s face it, nobody really wants to go to court, and that includes most of the attorneys I know!  By using a trust, you can avoid the need to have your children or other heirs go through the court process.  Of course, this is not for everyone.  Trusts do tend to be more costly to set up, and many, or possibly even most, estates are simple enough, or small enough, that a will is completely sufficient to transfer assets to the children with a minimum of inconvenience going through the probate process. However, many times trust is worth the extra cost to set up now, as it can save children time and effort once you are gone.

 

Trusts Dictate What Happens After You Are Gone

No matter what you have set up – a will or a trust, there is still work to be done once someone passes away.  A trust can streamline the process and reduce the work.  If a trust dictates that assets should be distributed outright, then the successor trustee just distributes the assets upon death of the person who created the trust.  If a trust says that assets are to be kept in trust and used for the benefit of a child, that could be much easier than trying to set up a trust for children who are not able to handle outright distributions at the time of the trust creator’s death.  The trust could then dictate that assets are only to be released at the correct ages or time when children are ready to handle the distributions.

Oftentimes this happens if the person who passed away had minor children.  A will could say that a trust should be set up for minor children through the probate process, but that is often a cumbersome or time consuming process.  If a trust already exists, then the survivors do not have to go through the effort of setting up a trust through the courts or the probate process.  Everything is already in place and set up, so the children or other named individuals can simply come in and take over the trust and start doing what needs to be done with trust assets.  This can make the process much simpler and streamlined for the survivors.

 

Trusts Allow You to Do the Work Now, Not Push the Work Off On Your Kids

If you set up a trust as part of your estate plan now, you can do the work of moving assets into the trust, deciding who will be in charge, and setting up the terms and conditions of distributions from the trust.  Moving assets into the trust might involve preparing a deed to transfer real estate into a trust, or changing ownership on an investment account.  Or, for assets that have reasons not to move them into a trust right now, like unfavorable tax treatment, you can set up the trust as a beneficiary, so that all of your assets flow into one spot – the trust.  This is true for IRAs, 401(k)s, or other retirement accounts.  You can set up your assets so that the assets are either owned by the trust now, or will transfer into the trust at the time of your death.  Such transfers, if set up prior to your death, will happen according to the policies and procedures of the companies that hold the assets, but those procedures are usually far less cumbersome and complicated than dealing with the companies in the probate process.

Setting up a trust means you can do most of this work on the front end of the process, and not push everything off on your children on the back end through the probate process.  You are able to set things up to transfer more seamlessly and in a more streamlined manner.  I have had many people tell me it feels like their last gift to their children – having things set up to transfer and not leaving the children to clean up the mess or deal with the courts.  A trust means you can do the work now, saving your children time and effort, and possibly money, on the back end.

 

Trusts Help Assets Transfer Faster and Easier, But Aren’t for Everyone

To be perfectly clear, not everyone needs a trust.  Some people don’t want to spend the time or money setting up a trust and moving assets into the trust.  Some people have assets in financial accounts that have designated beneficiaries on them, so a trust wouldn’t necessarily save them time.  And some people have a beneficiary deed on their real estate, so even that type of property wouldn’t need a trust.  Each individual, or family, has a unique set of circumstances.  If you think you might want to use a trust to make things easier, you should consult with an experienced estate planning attorney.  To make an appointment to talk with an experienced estate planning attorney and see if a trust is right for you, click the link below.