(gjsentinel) -- Almost everyone we meet in our practice, or in our private lives for that matter, is familiar with the word "trust" when talking about wills or other aspects of estate planning.
And most people have a vague idea of what a trust is or what it can do, but usually, that information comes from a neighbor or extended family member and is rarely reliable.
If you go online and ask the question "What is a trust?" you will likely get something like this answer: "A legal entity created by a party through which a second party holds the right to manage the trustor's assets or property for the benefit of a third party.
That excerpt comes from Business Dictionary and is a pretty standard explanation. Some sites will go on to explain the different types of trusts that one can create, but even with all of that information, most people don't understand the value of a trust any more than when they started their search.
In reality, there are many situations in which a trust offers a lot of value and can be very effective in helping a person, a couple or an entire family create a solid estate plan and manage their assets before and after death.
For example, assets in a trust need not go through the cost and process of probate when a person passes. Probate is the court process which permits an asset owned by a deceased person to be passed on to a beneficiary; in Colorado, probate is not necessarily expensive or particular problematic, but a probate action here can't facilitate the transfer of a condo or cabin located in California or any other state. In the situation of a person who owns a home here, and a second home elsewhere, two probate actions will be necessary, one in each state.
That problem can be avoided if the person puts both properties into a trust because the trust will own both properties from the date of the initial transfer to the trust and the later death of the person that created the trust is no longer relevant. By creating the trust to hold the property, the person avoided paying two attorneys in two different states for probate.
Other advantages of a trust include things like increased privacy, asset protection from creditors of beneficiaries, control over the use of assets after incapacitation or death, reduction of estate taxes and the ability to appoint a trustee to manage affairs of the deceased person beyond the implementation of his or her last will and testament.
We will address these additional benefits of trust in our next column and will also discuss them in no-cost seminars to be held twice each month so that anyone who wishes can come to find out more about trusts and how they can be used to help in specific situations.