If you die without an estate plan, state law determines who receives your property that doesn’t otherwise pass automatically to someone upon your death. This is known as dying “intestate.”

Colorado law establishes a default order of inheritance based primarily on your surviving spouse, children, parents, and other relatives. Those rules apply regardless of what you might have wanted. Your estate may also need to go through probate and someone may need to be appointed to administer it.

An estate plan allows you to make these decisions yourself rather than relying on the default rules provided by law.

The biggest advantage of a living trust is that property held in the trust doesn’t have to go through probate when you die. A will doesn’t avoid probate. Instead, it provides instructions for how your property should be distributed through the probate process.

A living trust can also provide greater flexibility in how and when your property is distributed. For example, you can provide for an inheritance to be held and managed for a beneficiary rather than distributed all at once.

A living trust isn’t necessarily for everyone, but it can make the transfer and management of your property significantly easier and more efficient.

The length and cost of probate depend on the size and complexity of your estate. In Colorado, even a relatively straightforward probate typically takes six to nine months to complete. This is due in part to statutory waiting periods, including the time that must be allowed for creditors to present claims against your estate. When disputes arise, probate can easily take a year or longer.

Probate also involves expenses that may include court filing fees, publication and other administrative costs, attorney fees, and compensation for your personal representative. The total cost depends largely on the complexity of your estate and the amount of work required to administer it.

Property held in a living trust avoids probate, allowing your successor trustee to administer and distribute the trust property without first opening a probate case.

A revocable trust is a trust that you can change or revoke during your lifetime. You remain in control of the trust property and can add or remove property, change beneficiaries, or modify the terms of the trust as your circumstances change.

An irrevocable trust generally cannot be changed or revoked as easily. Creating one usually requires giving up some degree of control over the property placed in the trust. In exchange, the trust can provide benefits that a revocable trust cannot, such as protection from creditors or planning for Medicaid eligibility.

For most people whose primary goals are avoiding probate and controlling how their property will be distributed after death, a revocable living trust is the more common estate-planning tool.

Yes, in some circumstances. Creating an irrevocable trust doesn’t necessarily prevent you from serving as its trustee. However, the powers you retain over the trust property may affect whether the trust accomplishes its intended purpose.

For example, an irrevocable trust designed for asset protection or Medicaid planning may limit your ability to distribute trust property to yourself or otherwise use it for your own benefit. In some cases, appointing someone else as trustee may be necessary or preferable.

Whether you should serve as trustee therefore depends on the type of irrevocable trust, the reason you’re creating it, and the powers you would retain as trustee.

The tax consequences depend largely on the type of trust. A living trust is generally disregarded for income tax purposes, meaning you continue to report any income generated by the trust property on your individual income tax return.

Irrevocable trusts are different. Depending on how the trust is structured, the trust may be taxed as a separate entity. Income retained by the trust can be subject to significantly compressed tax brackets, meaning that the trust may reach higher income tax rates much more quickly than an individual taxpayer.

Transferring appreciated property into an irrevocable trust can also have important capital gains tax consequences. Property you transfer during your lifetime into an irrevocable trust generally retains your existing tax basis and may not receive a new basis equal to its fair market value when you die. As a result, your beneficiaries could ultimately owe more capital gains tax if they later sell the property.

These issues generally don’t apply to property held in a living trust. Because you retain control over the property, it remains part of your estate for tax purposes and generally receives a new tax basis equal to its fair market value when you die.

A living trust only controls property that has been transferred into it. This process is commonly referred to as “funding” the trust.

Real estate, bank accounts, non-retirement investment accounts, and tangible personal property are commonly transferred into a living trust. Other assets may require different treatment. Retirement accounts, for example, cannot be transferred into a living trust during your lifetime and instead pass according to beneficiary designations. Life insurance policies also typically remain in your individual name, although you may choose to name your trust as a beneficiary of the policy.

Exactly what you should transfer into your trust depends on the types of property you own and how you want that property to pass after your death. You may ultimately decide that some assets should be transferred into the trust, while others may be better left in your individual name with an appropriate beneficiary designation.

A comprehensive estate plan does more than determine what happens to your property after your death. It also allows you to decide who will make financial and medical decisions for you if you become unable to make those decisions yourself.

A financial power of attorney, for example, allows you to appoint an agent to manage your financial and legal matters, while a medical power of attorney allows you to appoint an agent to make healthcare decisions for you. A living will allows you to provide instructions regarding medical treatment if you have a terminal condition or are in a persistent vegetative state and cannot communicate your wishes.

If you have a living trust, the trust can provide another layer of incapacity planning. Your successor trustee can take over management of the property held in the trust if you become incapacitated, without requiring that property to be transferred to someone else.

Yes. As long as you have the required legal capacity, you can change or revoke your will or living trust during your lifetime.

A will can be amended through a codicil or replaced with a new will. A living trust can likewise be amended or revoked. This allows you to update your estate plan as your circumstances change, whether because of a marriage or divorce, the birth or death of a family member, changes in your property, or simply a change in your wishes.

Different rules apply to irrevocable trusts, which are generally much more difficult to modify or terminate.