If you are a new homeowner in Colorado, you may have already started thinking about creating a will to ensure your home is passed on in accordance with your wishes. Another option to consider is a living trust. With a living trust, you retain control over your assets during your life, and the assets are transferred to your beneficiaries after you pass away. One difference between a will and a living trust is that living trusts avoid probate.
What is probate?
Probate is the court process by which a will is proven to be valid. Probate is also the process that assets go through if you die without a will. If you have a will, an executor that you appoint will act on your behalf as your representative. When assets are in probate, a third party can contest the contents of the will. The probate process can, sometimes, take years to complete, and administrative fees for probate are taken out of the estate.
Assets that do not pass through probate
Assets that are held in payable on death or transfer on death accounts with assigned beneficiaries such as a checking, savings, or retirement account do not pass through probate as long as the named beneficiaries are alive. Life insurance benefits also avoid probate. If you co-own a home with someone else, the home will pass to the other person upon your death without going through probate. Otherwise, you will need to put your home into a living trust in order to escape probate.
Benefits of a living trust
Living trusts can be revocable, which means they can be added to or amended during your lifetime, or irrevocable. With any living trust, you will assign a trustee to oversee the funds after you pass away. If you die before your children become adults, you could instruct a trustee to use his or her discretion to give the children some money for college and some money at a later date, per your instructions.
Trusts may also offer tax benefits for you or your heirs. A Colorado licensed estate planning attorney can discuss your options with you further.