Revocable Trust Colorado

Revocable Trust Colorado: Understanding The Key Details

A revocable trust is one of the most widely used estate planning tools. It allows Colorado residents to plan for the future while remaining in control of their assets. Using a revocable trust can reduce the burden on your family upon your death and help them avoid unnecessary legal hurdles and potential delays.

This post breaks down the essential aspects of revocable trusts. You’ll learn how this type of trust works, its benefits, and situations where it might be the ideal option, particularly within Colorado state laws. 

What Is a Revocable Trust?

A revocable trust is an estate planning tool that allows you to transfer assets into a legal structure while maintaining complete control throughout your life. This type of trust can be updated, adjusted, or dissolved as circumstances change, making it a versatile option for managing wealth and preparing for the future.

The trust document outlines how the trust should operate, detailing the management of assets during the trust maker’s life and after their passing. Many people use a revocable trust to streamline the transfer of wealth, reduce legal complications, and provide a clear plan for asset distribution.

Revocable Trust vs. A Revocable Living Trust: What’s The Difference?

A revocable trust and a revocable living trust are essentially the same thing. All revocable trusts allow a trust maker to manage, change, or revoke the trust during their lifetime. The term “living trust” simply refers to the fact that the trust has been created and will function throughout the trust maker’s life, unlike a testamentary trust, which takes effect after death.

That said, it is possible to create an irrevocable living trust. These trusts also function during the trust maker’s lifetime. However, by contrast, irrevocable living trusts are far more rigid and cannot be changed or undone once finalized.

Please Note: All revocable trusts, assuming they are not dissolved, eventually become irrevocable after the grantor (i.e., the person who created the trust) passes away.1 

Revocable (Living) Trust vs. A Will: What’s the Difference?

When considering estate planning options, comparing the differences between a revocable trust and a will is helpful. Both tools help you pass assets to your beneficiaries, but they work differently and serve distinct purposes. Here’s a closer look:

Relation to the Probate Process: A significant advantage of a revocable trust is that it avoids probate court, unlike a will, which generally requires it. Probate is the court-supervised process of validating a will and distributing assets. This process can be expensive and slow, but assets held in a trust are exempt, transferring directly to beneficiaries without court involvement. This can make things easier and faster for your loved ones.

Level of Privacy: One crucial distinction is privacy. During probate, a will becomes part of the public record, which means the details of your estate and its distribution are accessible to anyone. A revocable trust, on the other hand, remains private. A trust can offer peace of mind for those who value keeping their financial matters confidential.

Ability to Manage Assets: A revocable trust isn’t limited to planning after your death. It also serves as a tool for managing your finances during your life. If you cannot oversee your financial matters, a trustee you designate can step in to manage them on your behalf. A will, on the other hand, only applies after death and doesn’t offer this kind of ongoing flexibility.

Costs and Complexities: Setting up a trust often requires more upfront time and expense than drafting a will. Trusts involve transferring property and creating a more detailed plan. However, this initial effort may be worth it, as it eliminates the hassle of probate (which can be costly) and streamlines the asset transfer process for your heirs.

When to Choose One Over the Other: A will may be enough for more straightforward estates or when probate is unlikely to cause issues. However, a revocable trust is a better choice for larger or more complex estates, particularly when privacy, multi-state properties, or avoiding probate are priorities. For many, using a combination of a will and a trust offers the best of both worlds.

When Should You Use a Revocable (Living) Trust?

A revocable trust is a versatile tool, but there are certain situations where it is especially useful. Below are some examples of when creating one might make sense:

If you want to avoid delays in the probate court, placing assets in a revocable trust can eliminate the need for probate court. This allows heirs to receive their inheritance without unnecessary delays or legal barriers. This approach works particularly well for estates with multiple properties or substantial assets.

You Own Real Estate in Multiple States: Owning property in different states often requires separate court proceedings in each jurisdiction when settling an estate. However, a revocable trust can consolidate the management of these assets into a single plan.2 This enables bypassing multiple probate processes at once and passes along your multi-state properties as you fit with far fewer legal complications.

You Want to Address Unique Family Dynamics: Whether supporting minor children, caring for a loved one with special needs, or balancing interests in a blended family, a trust allows you to create customized terms. This flexibility helps ensure your loved ones are cared for according to their unique needs.

You Want to Ensure Privacy: Unlike a will, which becomes public during probate, a trust keeps details about your assets and beneficiaries private. This feature is handy for those who value confidentiality or wish to avoid unnecessary public exposure.

You Want to Prepare for Incapacity: A trust can also serve as a backup plan if you’re unable to manage your finances due to illness or aging. By naming a successor trustee, you establish a system where someone you trust can take over without the need for court intervention.

You Want to Remain Adaptable to Changing Needs: A revocable trust is designed to be adaptable. Whether you need to add assets, update beneficiaries, or modify instructions, you can revise the terms of the trust to reflect new priorities or life events.

Do Revocable Trusts Have Drawbacks?

Although revocable trusts offer plenty of flexibility and convenience, they also come with limitations that shouldn’t be overlooked. These are some of the biggest drawbacks of opting for a revocable trust:

Does Not Provide Tax Advantages: Assets held in a revocable trust are still part of your taxable estate, meaning they remain subject to income taxes and estate taxes. This lack of tax protection distinguishes it from irrevocable trusts, which are designed to minimize tax exposure.

Vulnerable to Creditors and Legal Claims: With a revocable trust, assets are held in a way that keeps them accessible to creditors. Since you maintain control of the trust, creditors can pursue those assets to settle unpaid debts. Moreover, assets within a revocable trust are also not protected from lawsuits. Since these assets are legally tied to the estate, they remain accessible for legal action against the trust maker.

Open to Other Legal Challenges: If family members disagree with the terms of the trust, they may choose to challenge it in court. This can lead to expensive legal battles and delays, especially in contentious family situations.

Please Note: Unlike a revocable trust, an irrevocable trust removes assets from your estate completely. This provides stronger protection from taxes, creditor claims, and lawsuits. To learn more about the benefits of an irrevocable trust in Colorado, check out our article for additional insights.

Setting Up a Revocable Trust in Colorado

Creating a revocable trust involves a series of important steps to help organize your estate and plan for the future distribution of your assets. By addressing each part individually, you can simplify the process and create a trust tailored to your goals. Here’s how to proceed:

Drafting the Trust Document: This legal document establishes the rules for managing your assets while you’re still alive and for transferring them to your heirs after you pass away. While templates are available, it’s often more effective to work with an estate planning attorney who can tailor the document to any relevant Colorado-based laws and your unique circumstances.

Funding the Trust: After creating the trust, it is important to transfer ownership of your assets into it. This process, known as funding, may include retitling real estate, updating account ownership, or assigning valuable personal property to the trust. The trust’s terms won’t cover assets not transferred, so this step is key to making the trust functional.

Choosing a Trustee: The trustee oversees the management of trust assets. It’s common for the creator of the trust to serve as the trustee over the course of their life. However, naming a successor trustee is helpful for continued management if you’re unable to do so or after your death. Select someone dependable and capable of handling financial responsibilities.

Keeping the Trust Updated: Revisit and adjust your trust as needed to reflect changes such as marriage, divorce, or shifts in your financial goals. These reviews will help make sure it remains aligned with your overall plans.

Other Considerations for Revocable Trusts in Colorado

Setting up a revocable trust requires a solid understanding of its legal and tax implications, particularly for Colorado residents. Below are the key considerations:

How Trust Income is Taxed in Colorado: If a trust or estate earns money in Colorado and meets federal tax filing rules or owes state taxes, it needs to file a Colorado Fiduciary Income Tax Return. For trusts or estates managed outside Colorado, taxes are based only on the portion of income tied to Colorado. The state uses a form called Schedule E to figure out what share of taxes applies to Colorado income.3

Trustee Responsibilities and Colorado-Specific Rules: During your lifetime, serving as your own trustee typically keeps administrative work simple. After your passing, the successor trustee must manage tasks like filing taxes, distributing property, and communicating with beneficiaries. Colorado law may also require certain notifications or reports to beneficiaries, making collaboration with an estate planning attorney helpful for ensuring compliance.4

What Happens if You Don’t Name a Successor Trustee: Failing to name a successor trustee can create unnecessary complications in managing your trust. Without a clear replacement identified, beneficiaries might need to involve the court to appoint someone, which can delay administration and increase costs. Including detailed instructions in your trust—such as naming alternates or designating someone with authority to choose a new trustee—helps avoid disputes and ensures a smoother transition.5 

Final Thoughts on Revocable Trusts in Colorado

A revocable trust can help you manage your estate with greater flexibility and privacy. It offers benefits like avoiding probate court and simplifying asset transfers. It’s a practical way to plan for the future while maintaining control during your lifetime.

At Colorado Capital Management, we specialize in helping clients incorporate trusts into their overall financial strategies. Our team collaborates with you to ensure the trust aligns with your long-term goals. Whether we’re reviewing tax considerations, advising on asset transfers, or tailoring the trust to Colorado-specific rules, we bring a personalized approach to every plan.

We can also work closely with your accountant or attorney during the process or recommend trusted professionals from our vetted network. Schedule a consultation with our team today and take the next step toward securing your family’s financial future.

Sources:

  1. https://www.metlife.com/stories/legal/revocable-vs-irrevocable-trust/
  2. https://www.legalzoom.com/articles/estate-planning-when-you-have-property-in-different-states
  3. https://tax.colorado.gov/estates-trusts
  4. https://www.omtrial.com/an-overview-of-a-trustees-duties-and-trustee-liability-in-colorado/#:~:text=Colorado%20law%20requires%20a%20trustee,at%20(3)(a)
  5. https://keystone-law.com/how-to-change-trustees-on-revocable-trusts-vs-irrevocable-trusts#:~:text=If%20an%20alternate%20successor%20trustee,an%20appointment%20to%20be%20formalized.

 

Financial Advisor, CFP®, CSRIC® |  + posts

Emily is an advisor at Colorado Capital Management, bringing eight-plus years of significant industry experience from both brokerage and investment advisory firms. As a Chartered SRI Counselor™, Emily has a strong background and keen interest in sustainable investing and enjoys helping clients understand the merits of this approach.

Editor’s Note: This blog post is for informational purposes only and does not constitute financial, legal, or tax advice. Readers are encouraged to consult with a qualified professional regarding their individual circumstances. Please refer to our firm’s website for full disclosures and important information: CCM Website Disclaimer

Scroll to Top
Jason Black, Financial Advisor (CFP)

Jason Black, CFP ®

With a drive to live purposefully and passionately, Jason focuses on helping clients to live in abundance.

Jason is a partner and senior advisor at Colorado Capital Management.  He brings more than 15 years of varied experience working in the financial services industry. He joined CCM after a long search to find the perfect firm that aligned well with his values and mission. Jason is passionate about helping individuals and families live abundant and intentional lives. He is proud to be part of a Certified B Corporation, doing meaningful financial and investment planning for clients, while also focusing on socially responsible business practices and making a positive impact. As a Chartered SRI CounselorSM, Jason has a strong background and keen interest in sustainable investing and enjoys helping clients understand the merits of this approach. Jason is also a Certified Financial Planner™ and has a bachelor’s degree in business administration from the University of Colorado. 

Before joining CCM, Jason worked with Jackson National as a consultant for financial advisors. He helped create meaningful connections with families, creative asset allocation strategies, and tax-advantaged retirement-income solutions. During his tenure there he worked with over four thousand financial advisors across the country, was recognized multiple times as consultant of the year, and also managed a team of twenty-five individuals. 

Jason is happily married to his wife, Bridget, of thirteen years, who he met while in college at CU. Together they have a son and daughter, and a Frenchie named Coco Disco. They live in the Whisper Creek neighborhood of Arvada. When Jason is not at work, he and his  family can often be found making turns in Summit County, wakesurfing in Glendo, WY, cooking, dancing and traveling.

Erica Loughrey, Associate Financial Advisor

Erica Loughrey

Erica is passionate about providing purposeful advice to help clients enjoy a meaningful life.

Erica is an advisor at CCM. She joined the firm in 2021, fulfilling her desire to work for a values-based company with a deep commitment to making an impact. She moved from her hometown of Anchorage, Alaska and quickly fell in love with the sunny and beautiful state of Colorado. She brought with her prior experience as a para-planner and is delighted to be engaged in a profession that empowers individuals to flourish financially. She believes strongly in exceptional client service and creating lifelong generational relationships.

In 2022, she accomplished two of her major career goals, finishing her master’s degree in financial planning (MSFP) and earning her Certified Financial Planner™ designation.

Erica enjoys spending time outdoors and traveling to exotic locales. In her free time, you can find her out skiing, hiking, scuba diving, practicing yoga or jetting off to new places to explore. She has a never-ending list of travel plans, having already visited over 20 countries, and feels lucky to have so many wonderful opportunities and adventures.

Lee Strongwater, Senior Financial Advisor

Lee Strongwater, WMS

An entrepreneur and world traveler, Colorado Capital Management vice president and co-owner Lee Strongwater brings a global perspective to investments and life planning.

For more than 15 years, Lee has passionately assisted clients with their financial planning and portfolio management needs. He especially enjoys helping them live more meaningful lives and invest in ways that are aligned with their values. Lee holds a bachelor’s degree in political science from the University of Colorado and a master’s degree in international affairs from Columbia University. He also holds the Wealth Management Specialist (WMS) certification.

Before joining Colorado Capital Management, Lee was a managing partner at Strongwater-Schott, a fee-only investment management and financial planning firm in Denver. Prior to that, he was an entrepreneur who helped start and manage several small firms, including a children’s product company that went public in 2007.

Lee is an active volunteer for several organizations. He is a past President and current member of the Board of Directors for the Boulder Jewish Community Center, an organization that is highly respected on both a local and national level. Lee is also on the Investment Committee of Girl Rising-Global Education, a venture philanthropy fund that invests in social entrepreneurs with culturally-relevant ideas. The fund’s investments promote gender equality and improve educational outcomes for girls and boys living in poverty in Kenya and India.

Lee is married and has two daughters. He enjoys hiking, skiing, traveling—mostly to Mediterranean countries—and trying out new recipes from his journeys. When he’s not on the go you can find him engrossed in a book.

Steve Ellis, Senior Financial Advisor

Steven Ellis, CFA

Steve Ellis has spent his career making an impact, so it’s not surprising that Colorado Capital Management’s founder and president launched the firm’s entry into impact investing.

He brings over 30 years of experience as a financial advisor to high net worth clients. His early work included teaching college courses in accounting and finance, consulting for a major accounting firm, and researching and acquiring investments as the chief due diligence officer of a leading national financial planning firm. Since 1989, he has advised individual and institutional investors on the management of their wealth. Steve is a Chartered Financial Analyst (CFA), holds a business degree from the University of Colorado, magna cum laude, and a master’s degree from Cornell University.

Steve launched the firm’s entry into impact investing in 2012 and is committed to helping build the field. Steve is a passionate speaker on the topic. He has taught about impact investing at various conferences and classes around the country, including as a past faculty member at Middlebury Institute of International Studies. He is listed in the Who’s Who in Impact Investing.

Steve is married, with two daughters, enjoys hiking, biking, skiing, tennis and bridge, and is actively involved in the community. He has served on numerous boards and committees for a wide array of nonprofit organizations, including the Boulder JCC, Rose Community Foundation, Jewish Family Service, and Friendship Bridge. His passion for impact and community service helped lead Colorado Capital Management to become a Certified B Corporation and to build a strong culture of volunteerism and philanthropy.