An Overview of Revocable Living Trusts in Colorado

Dan McKenzie • July 19, 2023

Few people want to think about what will happen to their property after they die. However, individuals may inadvertently place undue hardships on their families and other beneficiaries without thorough and effective planning.

Complicated laws, excess tax burdens, and uncertainty over which properties should pass to whom can create challenges and costs. A revocable living trust can ease these burdens and help property owners and their families focus on more important matters.

WHAT IS A REVOCABLE LIVING TRUST?

A Revocable Living Trust is an estate planning solution that helps property owners transfer their property and assets at death without going through a court-administered process. The trust is a written document that should provide clear instructions for property management, distribution, and ownership. Should the trust maker, also called the grantor, become mentally incapacitated or pass away, another appointed person, a successor trustee, should administer the trust. It is considered “revocable” because the grantor can amend the trust to reflect changing circumstances or decisions during their lifetime.

The stakeholders can include:

Grantor / Trust Maker.: The property owner who creates the trust.

Trustee: The individual who is responsible for managing the trust property. The grantor typically acts as the trustee until they die or become incapacitated.

Successor Trustee: When the original trustee dies or can no longer serve in this role, the successor manages the trust.

Beneficiary: The trust establishes this person as the one who will receive the property after the death or incapacitation of the grantor.

WHAT HAPPENS TO MY PROPERTY IF I DON’T ESTABLISH A REVOCABLE LIVING TRUST?

Revocable living trusts provide significant protection for individuals and their families in the case of their death or incapacitation. Under Colorado estate laws, properties typically go into probate after the deaths of their owners, potentially leading to complicated legal issues and considerable expenses for the beneficiaries.

A carefully crafted revocable living trust can help circumnavigate the probate process. Wills are subject to court involvement, and they become part of the public record; revocable living trusts, however, allow grantors to distribute their property privately.

HOW DO I SET UP A REVOCABLE LIVING TRUST IN COLORADO?

Setting up your Colorado Revocable Living Trust is probably much easier than you think. Property owners generally enlist the help of an experienced and qualified estate planning attorney. A lawyer can carefully examine your circumstances and ensure your trust is effectively written, funded, and executed. That being said, here is a list of things to remember when thinking about drafting and funding your trust.

What are your assets?

The steps for setting up a trust include the following:

Obtain the necessary paperwork for your assets.
Decide who should inherit the trust property.
Decide on a successor trustee.
Draft the trust documents.
List the trust’s beneficiaries.

DO I NEED A REVOCABLE LIVING TRUST?

As you may have heard before, in most cases, a Trust is not something you get for yourself; instead, it should help make the lives of your family and other beneficiaries safer and more accessible. One of the advantages of a Revocable Living Trust is a more precise, more streamlined succession plan that will not necessarily require the supervision of a probate court. Additionally, once the trust becomes irrevocable, the beneficiaries can enjoy a degree of protection if the assets remain in the trust and are managed by a third-party trustee.

WHAT DOES A REVOCABLE LIVING TRUST DO FOR ME?

A revocable living trust does two things. First, a revocable living trust allows your assets to avoid probate. Second, a revocable living trust protects your property from lawsuits brought against a beneficiary other than yourself. A revocable living trust does not reduce your taxes, it does not protect property from your creditors or lawsuits, and it will not help you become eligible for government benefits. (Other trusts are available that serve these purposes, but a revocable living trust does not do any of these.)

WHAT DOES IT MEAN TO FUND A TRUST?

Funding a trust means transferring the ownership of property to the trust. For an asset to avoid probate, it should be transferred to your trust. For example, by signing a deed, you can transfer your real estate ownership to your revocable living trust, keeping your real estate out of probate. A trust can also be named a beneficiary on bank accounts, retirement accounts, insurance policies, and other assets. Funding the trust is a crucial part of your estate plan since only the assets in the trust generally can avoid probate and receive third-party management and protection.

WHAT DOES IT MEAN TO BE A TRUSTEE OR A BENEFICIARY?

The trustee is the trust administrator but is not permitted to have beneficial use of the property unless also named as a beneficiary. Generally, the person who sets up the trust wants to be the trustee for the rest of their life. The grantor should select a successor trustee who would take over the management of the trust once the grantor becomes incapacitated or passes away.

The trust's beneficiaries are those who benefit by receiving distributions from the trust. Generally, this means the grantor’s children, grandchildren, or other family members, but it can also include charitable organizations and other loved ones.

ARE REVOCABLE LIVING TRUSTS NECESSARY?

The answer to that question will depend on various factors, such as your level or assets, your family situation, and your plans for the future. Only you can determine whether you need a trust, but with effective counsel, you can get answers to all your trust-related and other estate planning questions.

At The McKenzie Law Firm, we take pride in helping our clients create strong trusts to set their minds at ease and facilitate transitions for their beneficiaries. Contact us today to schedule a personalized Attorney Evaluation Session.

What next?

If you think it might be time to think through your estate plan, you can:

Call us at 720-821-7604 to schedule an "Attorney Evaluation Session," to determine whether our firm would be a good fit for your needs. Or fill out our contact form to have us call you.
Visit our estate planning page to learn how proactively thinking through your estate plan can protect you and your family, minimize hassle, lower the chance of family discord, and minimize or eliminate taxes.
Learn more by reading our blog or watching our videos.

< Older Post Newer Post >

Differences Between a Trust and a Will in Colorado

April 14, 2025

Differences Between a Trust and a Will in Colorado

Who Can I Name as an Heir in Colorado?

March 13, 2025

Who Can I Name as an Heir in Colorado?

Consequences of Dying Without a Will in Colorado

February 12, 2025

Consequences of Dying Without a Will in Colorado

What Types of Assets Can Be Included in a Colorado Trust?

January 30, 2025

What Types of Assets Can Be Included in a Colorado Trust?

What is a Guardianship and When Do I Need One?

December 2, 2024

What is a Guardianship and When Do I Need One?

What Are the Required Documents to Create a Will in Colorado?

October 28, 2024

What Are the Required Documents to Create a Will in Colorado?

Probate in Colorado: A Guide for Families and Executors

October 1, 2024

Dealing with the death of a loved one is never easy, and navigating the legal process that follows can add stress during an already difficult time. In Colorado, probate is the legal process by which a deceased person’s estate is administered, their debts are paid, and their assets are distributed to beneficiaries. Whether you’re an executor, beneficiary, or family member, understanding how probate works in Colorado can help you anticipate the steps involved and your potential responsibilities. This blog post will provide an overview of the probate process in Colorado, outline when probate is necessary, and offer guidance on how to navigate the system effectively. What is Probate? Probate is the legal process that occurs after someone dies to ensure their assets are distributed according to their will or, if there is no will, according to state law. The probate process includes validating the will, inventorying the deceased’s assets, paying off debts and taxes, and distributing the remaining assets to the rightful heirs. While probate is often associated with lengthy court proceedings, not all estates require formal probate. Colorado offers several options depending on the size and complexity of the estate, which can help simplify the process in many cases. When is Probate Necessary in Colorado? Probate is not always required in Colorado. Whether an estate must go through probate depends on the types and value of the deceased’s assets. Generally, probate is necessary if: The deceased owned real estate solely in their name. The deceased’s assets, such as bank accounts or investments, were not held in joint tenancy or designated to transfer on death. The deceased had personal property valued at over $74,000 (as of 2023). If an estate falls below this threshold and does not include real estate, the beneficiaries can often use a Small Estate Affidavit to claim the assets without going through probate. Types of Probate in Colorado Colorado has three main types of probate procedures: small estate procedures, informal probate, and formal probate. The type of probate required depends on the estate’s value and whether there are disputes among heirs or creditors. Small Estate Procedure (Collection by Affidavit) The small estate procedure can be used if the value of the deceased’s assets is less than $74,000 and does not include real estate. This process involves filling out a Small Estate Affidavit, which allows the heirs to collect and distribute the assets without opening a probate case in court. It is the simplest and fastest way to handle a small estate. Informal Probate Informal probate is used when there is a valid will and no disputes among heirs or creditors. The process is overseen by a court-appointed Personal Representative (executor), but there is minimal court supervision. Most of the process, such as distributing assets and paying debts, is handled by the Personal Representative, with only basic filings required with the court. Informal probate is less time-consuming and costly than formal probate. Formal Probate Formal probate is required when there are disputes regarding the will’s validity, disagreements among heirs, or if the estate is complex and needs court intervention. The process is supervised by the court, and all major decisions, such as approving the distribution of assets, must be approved by a judge. Formal probate can take much longer and involve more legal fees than informal probate. Steps in the Colorado Probate Process While the specific steps in probate can vary depending on the type of probate and the complexity of the estate, the general process in Colorado typically includes the following: Filing the Probate Petition The process begins with filing a Petition for Probate with the appropriate Colorado probate court. The petition is usually filed by the executor named in the will or an interested party if no will exists. Appointment of the Personal Representative The court will appoint a Personal Representative (executor) to manage the estate. If there is a valid will, the person named as executor is typically appointed. If no will exists, the court will appoint someone, usually a family member, to serve as the Personal Representative. Notice to Heirs and Creditors The Personal Representative must notify all potential heirs and creditors of the probate proceeding. This step is essential for providing an opportunity for interested parties to come forward and make claims against the estate. Inventory and Appraisal of Assets The Personal Representative must create an inventory of all the deceased’s assets and have them appraised if necessary. This inventory will include real estate, personal property, financial accounts, investments, and any other assets owned by the deceased. Paying Debts and Taxes Before distributing assets, the Personal Representative must pay off the deceased’s debts and any taxes owed. If the estate does not have enough assets to cover all debts, Colorado law dictates the order in which creditors are paid. Distribution of Assets Once all debts and taxes have been paid, the Personal Representative can distribute the remaining assets to the beneficiaries according to the will or, if no will exists, according to Colorado’s intestacy laws. Closing the Estate After all assets have been distributed and all required filings have been made with the court, the Personal Representative can file a Petition for Final Settlement to close the estate. Once approved, the Personal Representative’s responsibilities are complete. Challenges and Disputes in Colorado Probate Unfortunately, probate can sometimes become contentious, especially in cases involving high-value estates or when family members disagree on how assets should be distributed. Some common challenges in Colorado probate include: Will Contests Heirs or beneficiaries may challenge the validity of a will, claiming it was signed under duress, there was undue influence, or the deceased lacked the capacity to create the will. Will contests can significantly delay the probate process and require formal probate to resolve. Executor Misconduct If an executor is not fulfilling their duties or is mishandling estate assets, beneficiaries can file a complaint with the court and request the executor’s removal. Disputes Among Beneficiaries Disputes can arise over specific bequests, how assets are divided, or even the valuation of estate property. Mediation or formal court intervention may be necessary to resolve these disputes. How a Colorado Probate Attorney Can Help Navigating the probate process can be overwhelming, particularly when dealing with the emotional aftermath of losing a loved one. An experienced probate attorney can help in several ways: Guiding You Through the Process An attorney can explain the probate process, help you understand your rights and responsibilities, and ensure all legal requirements are met. Managing Court Filings and Deadlines Probate involves numerous legal documents and deadlines. An attorney can handle these tasks, ensuring that everything is filed correctly and on time. Resolving Disputes If disputes arise, an attorney can provide representation in negotiations, mediation, or court hearings to protect your interests and work toward a fair resolution. Minimizing Costs and Delays With the guidance of a skilled attorney, you can often minimize the time and expense associated with probate, helping ensure the process goes as smoothly as possible. How The McKenzie Law Firm, LLC Can Help At The McKenzie Law Firm, LLC, we understand the complexities of the probate process and are committed to helping families navigate it with compassion and expertise. Whether you’re an executor needing assistance with your duties or a family member looking to understand your rights, our experienced probate attorneys can provide the support you need. If you have questions about probate in Colorado or need legal assistance, contact us today to schedule a consultation. We are here to guide you through the process and ensure your loved one’s wishes are honored.