Four Mistakes to Avoid with Trusts in Colorado Estate Planning

When it comes to estate planning in Colorado, trusts are a powerful tool to protect your assets, avoid probate, and ensure a smooth transfer of property to your loved ones. However, mistakes in creating or managing a trust can cause costly problems. If you’re considering a revocable trust in Colorado, here are four mistakes to avoid along with practical examples.

1. Not Funding the Trust

Mistake: Creating a trust but failing to transfer your assets into it.

Example: Sarah set up a revocable living trust in Colorado but kept her home titled in her own name. When she passed away, her children had to go through probate in Colorado to transfer the house from her estate, which delayed inheritance and added unnecessary costs.

Tip: Always retitle assets like real estate and update beneficiary designations on bank accounts and investments in the name of your trust to avoid probate and ensure your Colorado revocable trust functions as intended.

2. Forgetting to Update Your Trust

Mistake: Letting your trust become outdated after life changes.

Example: John created a trust before his divorce and listed his children from that marriage as beneficiaries. Years later, he remarried and had more children, but never updated the trust. When he passed away, the trust still directed a significant portion of his estate to the children he no longer had a relationship with, creating tension and conflict for his current family.

Tip: Review your estate plan regularly, especially after marriages, divorces, births, or significant asset changes. Keeping your trust current ensures your wishes are honored.

3. Choosing the Wrong Trustee

Mistake: Picking a trustee without considering experience, impartiality, or legal knowledge.

Example: Emily appointed her oldest daughter as the trustee of her Colorado trust, assuming that family loyalty would prevent disputes. Unfortunately, the daughter had no prior experience managing finances or legal documents. She struggled to keep accurate records, missed tax filings for the trust, and showed favoritism toward one sibling over the others. This led to arguments, formal complaints, and ultimately costly court involvement to resolve distribution disputes. What was meant to be a smooth transition of assets became a stressful and expensive ordeal for the entire family.

Tip: You need not appoint family to be your successor trustee. Consider a neutral third-party or professional fiduciary when choosing a trustee for your Colorado trust to reduce the risk of family conflicts and errors in administration.

4. Attempting a DIY trust

Mistake: Assuming a do-it-yourself trust will avoid legal issues.

Example: Linda drafted her own trust using an online template and assumed everything would go smoothly. After her passing, a creditor challenged the trust, claiming it was invalid because it didn’t meet Colorado legal requirements. On top of that, one of her children contested the distribution, arguing that the terms were unclear. What was intended to be a seamless transfer of assets turned into a lengthy, stressful court battle, costing the family time, money, and peace of mind.

Tip: Have your trust professionally drafted by a Colorado Springs estate planning lawyer to ensure compliance with state laws and reduce the risk of challenges.

Trusts are one of the most effective tools in estate planning, but they must be properly created, funded, and maintained. Avoiding these common mistakes helps ensure your family’s assets are protected and your wishes are honored.

For personalized guidance, contact Evergreen Law, your trusted Colorado Springs estate planning attorney, to create or review a trust that fits your family’s needs.