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What are some of the most common trusts people need?

On Behalf of | Jun 24, 2024 | Estate Planning

Trusts are valuable legal tools that offer various benefits, including privacy, asset protection, and control over distribution. Understanding the common types of trusts helps individuals and families in Colorado plan for their future and protect their assets effectively.

Revocable living trust

A revocable living trust allows individuals to retain control over their assets during their lifetime while designating the distribution of assets upon death. It avoids probate, ensuring a smoother and private transfer of assets to beneficiaries.

Irrevocable life insurance trust (ILIT)

An ILIT is a trust that owns life insurance policies, keeping the policy proceeds outside the insured’s estate. This setup helps beneficiaries receive life insurance benefits without the burden of estate taxes.

Special needs trust

A special needs trust is for individuals with disabilities. It preserves the beneficiary’s eligibility for government benefits while supplementing their needs with additional funds from the trust.

Charitable trust

Individuals looking to support charitable causes can establish a charitable trust in Colorado. This trust allows donors to contribute to their favorite charities while potentially receiving tax benefits.

Pet trust

Pet trusts are quite popular. Pet owners can establish a trust to ensure that their loved ones care for their pets in the event of their death or incapacity. The deceased designates funds for the pet’s welfare and maintenance as the trust creator specifies.

Testamentary trust

A testamentary trust is established through a will and comes into effect after the individual’s death. It allows for the distribution of assets to beneficiaries according to specific instructions outlined in the will.

Understanding these common types of trusts empowers individuals to make informed decisions about their estate planning needs.