Colorado Trust Funding Mistakes
When our clients plan with a Colorado living trust, they plan with the goals in mind of avoiding probate and, in some cases, death taxes. Unfortunately, good intentions seem to fade as time passes.
During the initial design and implementation of their Colorado living trust, clients are taught how to transfer assets into their trust now and how to transfer assets that they acquire later. To avoid Colorado probate, we need to transfer all real estate interests by deed to the name of their living trust. If they own real estate outside the state of Colorado, we seek the assistance of an attorney in each state to help with the deed work.
Mutual funds, CDs, savings accounts, money market accounts, brokerage accounts, savings bonds, promissory notes, business interests and other securities need to be transferred to the name of the trust during the planning process. This is done by changing the title ownership on the accounts or the stocks and bonds, naming the trust as the owner. With written instructions, most of our clients can make these changes on their own. We always handle the deed work.
Regardless of how well the initial funding is done, problems seem to develop later on when assets change. When refinancing real estate, title is usually transferred out of the trust so that the trust owners can secure new financing. Frequently, the trust owners fail to transfer the property back into the trust. If a death occurred, this property would go through a Colorado probate or a probate in whatever other state that property was located. We caution our clients to contact us whenever they refinance property so that we can help them flip the property back into the trust when the loan transaction is complete. Unfortunately, many do not heed this warning.
Our clients change brokers and investments as time goes along. Although our clients may have titled their securities properly at the time they created their trust, they may neglect designating their trust as the title owner of their new accounts when changes are made.
Similar oversights occur with CDs. The general rule is to name the trust as the title owner of all CDs, savings accounts and money market accounts. Because these accounts get changed frequently, clients often forget to stay on track.
In an effort to help our clients avoid making these mistakes, we have created a trust maintenance plan we call the “Inner Circle” which is designed to help our clients catch these errors before they become problems. Through the Inner Circle, our clients are invited back to our offices once every three years for a complete planning review to correct funding errors. Our monthly newsletter also keeps our clients informed of new laws and strategies and reminds them to continually be vigilant when it comes to titling their assets in their Colorado living trust. When real estate is purchased, sold or refinanced, we offer to do all of the deed work without charge as a benefit of Inner Circle membership.
In short, keeping trusts fully funded is an on going process that requires attention to detail. Funding is the secret to avoiding probate.