Big changes coming to Colorado trust law
In 2018 the Colorado General Assembly enacted legislation that significantly changes trust law in Colorado. Colorado is not generally a “destination jurisdiction” for trusts, and the new Colorado Uniform Trust Code (CUTC) contains important provisions that must be considered for all estate plans created in Colorado. The new law goes into effect January 1, 2019 and will negatively impact most estate plans.
There are key philosophical differences among states regarding trust laws. States like Nevada, South Dakota, Wyoming, Alaska, and a few others place a high priority on privacy and on the trust creator’s ability to control how their property is managed – and ultimately, how it’s inherited. Those states also place a high priority on protecting inheritances from future creditor claims, allowing a family’s wealth to remain intact for generations.
Other states like Florida, Massachusetts, California and others place significant restrictions on the way a trust creator can structure their plans, and dramatically dilute the protections heirs can receive through inherited trusts. Unfortunately Colorado has chosen to follow this second path by diminishing the level of control a trust creator has, and making inherited trusts more vulnerable to creditor claims against inheriting heirs.
The new Colorado Uniform Trust Code is primarily a “default” statute, which means that all but a few key provisions of the law can be avoided with intentional planning. But if a trust creator does not explicitly opt out of the default rules, the CUTC will apply to the interpretation and administration of the trust. All estate plans implemented before the CUTC should be reviewed (and probably revised) to make sure the plan provides the privacy and protection the trust creator wants. Trust creators will want to draft around the most onerous provisions of the Colorado Uniform Trust Code whenever possible.
It’s also worth pointing out that nothing prevents a Coloradan from designing trusts under more favorable laws of other jurisdictions. There are additional planning steps involved, but when an individual places a high priority on privacy and protection – for themselves and for their loved ones – we design and implement their planning in more favorable jurisdictions. (This is part of the “strategic” part of planning.)
This is just another example of the fact that strategic legal planning isn’t a one-time chore to be checked off a “honey-do” list. Just as an individual’s priorities and goals change over time, the law and the world of available legal strategies is dynamic. State and federal laws change in ways that present new challenges or open up new opportunities. Proactive, consistent strategic legal thinking is essential to make sure that legal strategies are updated regularly as circumstances change.
We’re happy to work with individuals and families who either have no strategic legal planning in place, or who want a fresh set of eyes on their existing planning to make sure their plan does what they want it to do, and to make sure it takes advantage of the best legal options available.