Real estate in Steamboat Springs often is sold and purchased by trusts rather than individuals.
Such trusts are important estate planning tools that can offer tax, management and probate advantages, attorneys said.
A trust is like a will, a document stating that when someone dies, his or her property will go to the beneficiaries named. But while wills become public at the time of death, a trust remains private and is not subject to probate proceedings. A trust also avoids the cost of a second-state probate proceeding if there is out-of-state property.
Trusts are set up for such privacy and, in the case of multi-million dollar estates, to avoid estate taxes. The federal government only imposes an estate tax on estates worth more than $1.5 million, according to the Internal Revenue Service. If one dies, all property left to a spouse is exempt from taxes if the spouse is a U.S. citizen. All property left to a tax-exempt charity also is tax exempt.
Typically, trusts are popular for wealthy people, said Steamboat Springs real estate attorney Jill Brabec.
"That's why we see more (trusts) here, because more wealthy people are coming here buying homes," Brabec said.
Instead of signing a person's name as the single owner of a home worth millions, many opt to put the home, along with the rest of their net worth, in the name of a trust. That way if a trust-holder dies and his or her spouse is living, everything in his or her trust can transfer to the spouse tax-free.
People use trusts for more than home purchases, said Laurie Cluster, a personal banker at Wells Fargo Bank in Steamboat Springs. A trust can be established for something as simple as a checking account, she said.
"A lot of people are doing that to protect their beneficiaries from having to go to probate," Cluster said.
Vance Halvorson, a Steamboat attorney who specializes in trusts and wills, agreed.
"They are right for people who want to avoid probate," Halvorson said. "There are many different kinds, but they often are set up as trusts to take care of children, disabled relatives or other family members.
"Customarily, what I find as one of the best benefits is that trusts provide continuity management. When older or disabled people can't manage their money, a trustee can help manage the funds, pay bills and sign checks. That's one of the real significant benefits. It's a tremendous fund management vehicle. It provides a smooth transitioning."
Trusts are more expensive than wills, Halvorson said. Costs will depend on the specifics of the trust but they often are particularized to the point where one doesn't know how much they will cost until one gets into them," Halvorson said.
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