Most people think of trusts as a way to structure their estate plan or as a means of providing financial stability for heirs and beneficiaries who may squander their inheritance without proper guidance. While it is true that trusts are an excellent way for people to control their legacy and how people use their assets after they die, these are not the only roles that a trust can play in your life.

Creating a trust and funding it while you are alive with specific assets could be a great way to minimize your tax liability and protect the possessions you value the most.

A trust can be a great way to protect your assets from estate tax

Those who die with substantial assets in their name may have to worry about federal estate taxes taking a significant portion of their estate. By creating a trust, they can minimize or even eliminate the potential tax liability associated with their estate.

There are some exceptions to the tax benefits for a trust. For example, if you choose to place your primary residence in a trust, this may preclude you from claiming a full homestead exemption on the property, which could mean paying more in property taxes while you are still alive. However, there will be less tax risk after your death and transition to new ownership should also be easier thanks to the trustee having ownership of the house.

A trust can help you manage your finances intelligently

If you fund your trust with substantial assets, you may no longer have direct access to those assets. While this can be a headache in some circumstances, in others, it can prove beneficial.

You may choose to live off of only your current income or perhaps even the dividends or interest earned on your investments. By limiting your access to your liquid capital, a trust can make it easier for you to manage your money while you are alive.

Trusts are more difficult to challenge than a standard last will

Creating a trust now will also give you peace of mind about the future security of your loved ones. It is relatively easy for members of your family to challenge your last will, dragging your estate through probate and diminishing the overall value of your estate.

Creating a trust reduces the risk of a challenge in the future, which can give you more peace of mind now about the future stability of the people you love. If you find yourself wondering if creating a trust or maybe several trusts might be the best way to structure your estate plan, sitting down to talk with an experienced Colorado estate and probate attorney is often a critical first step.