As you are making plans to protect your estate in Colorado after you die, you may find yourself wondering what types of trusts you can use. According to CNN Money, the advantages to using trusts are many, including the ability to choose who manages your estate once you pass away, reduce how much of your assets creditors can touch and avoiding the costly probate process.
Irrevocable life insurance trust
Irrevocable life trusts prevent you from being able to change beneficiaries and borrow against any life insurance policies that are in it. By creating this type of trust, you have agreed to give up ownership to those policies, which removes them from your estate. The beneficiaries of the trust can use the proceeds to provide for themselves with tax-free money and pay off any remaining estate expenses after you die.
You are not required to pass on some or all of your estate and assets to your children if you do not want to. You do have the option of skipping two or more generations for your beneficiaries and passing things down to your grandkids. There are stipulations on how much money can be placed into this type of generation-skipping trust. However, there are no restrictions on how the funds can be used as long as your grandchildren are the one who benefits from them. If you go over that limit, your beneficiaries could be responsible for paying a transfer tax on the proceeds.
There are many ways you can use trusts to protect and distribute your assets the way you want. However, their rules and stipulations vary greatly and can be confusing. You should have a professional go over your estate plans and trusts to make sure you are not making any costly mistakes.