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Your Guide to the Colorado Trust Code

An Overview of the Colorado Uniform Trust Code

Before 2019, trust administration in Colorado was regulated by the Probate Code. Probate and trusts are two different ways of managing a deceased person’s estate. Having one law to regulate both areas created gaps in Colorado’s trust law, which may have led to confusion and further fueled the probate vs. trust administration debate.

To correct those gaps, the Colorado General Assembly passed a special law-the Colorado Uniform Trust Code, in 2018 to regulate the administration of trusts in the state and other related matters. The Code, which became operative in 2019, amended and repealed many of the trust-related provisions in the Probate Code and is now the primary statute for all things trust-related in the state.

As it is a relatively new law, many Colorado citizens may need to be made aware of the new developments and how they could affect them.

If you intend to establish a trust or you’ve been appointed as a trustee, this general guide offers some insight into critical provisions of the trust code to help you understand how trusts currently work in the state. But if you need personalized information, you may need to seek help from a good estate planning lawyer around you. In the meantime, please read on to learn more.

Significant Provisions of the Colorado Trust Code

Scope of the Code

The code applies to different types of trusts, including; express trusts, charitable/noncharitable trusts, and trusts created under a statute, judgment, or official decree, regardless of whether they were set up before the code was enacted or after.

However, it does not apply to a “business trust” or any other arrangement under which a person acts as a nominee or escrow holder for another.

How to Create a Trust

According to section 15-5-401 of the Code, a Colorado trust may be created in several ways, including the following:

  • By transfer of the trust property to an appointed trustee during the settlor’s (trust maker’s) lifetime
  • By creating a testamentary trust in a will that takes effect after the testator’s death
  • When a property owner declares themselves as trustee of their property for the benefit of others.

Your trust may be ineffective if you fail to follow the statutory trust creation methods. Get help creating your trust from experienced Colorado trust attorneys to ensure compliance.

Qualities of a Valid Trust

Every trust created under the code must have the following qualities:

  • The settlor must have the capacity to establish the trust. This means that trusts can only be made when the maker is in full possession of their senses and can make rational decisions.
  • The trust must demonstrate the settlor’s intention to create a trust.
  • The trust must have a definite beneficiary that can be ascertained at the moment or in the future; unless it is a charitable trust or trust for the care of an animal. If a non-charitable trust does not have a specific beneficiary, the trust is valid but becomes unenforceable after 21 years.
  • The trustee must be given specific duties to perform under the trust.
  • A sole trustee cannot be the sole beneficiary of a trust.
  • The trust’s purpose must be lawful and not contrary to public policy.

Registration of Trusts

Section 15-5-205 of the Code makes provision for the registration of trusts to be administered in the state. Under this section, the trust does not need to be created in the state. It can be registered in the state as long as the primary place of administration is within the state’s boundaries unless a foreign court already has jurisdiction over the trust.

The registration process involves filing a trust registration statement at the designated state court after acceptance of the trusteeship.

The duty to register a trust lies with the trustee and not the settlor. If the trust to be registered is a revocable living trust, the trustee is only allowed to proceed with the registration if the settlor can no longer have the power to revoke the trust (this is usually when the settlor dies).

If you’ve been appointed as a trustee, you must register the trust as soon as you accept the responsibility. If you fail, especially after a request by a beneficiary or settlor, you could be removed from your position by the court or made to pay a surcharge.

Compliance is important to avoid any form of liability. Get a skilled trust lawyer to help with the process if you’re unsure how to proceed.

A Beneficiary’s Right to Information

Under the old dispensation, many trust beneficiaries found out about their share at the time of asset distribution which could be a long time from when the trustee began administration.

At that point, any beneficiary aggrieved with the trust administration or distribution process would initiate legal proceedings that would delay further distribution of assets.

In order to avoid such issues, the code requires trustees to notify “qualified beneficiaries” of the following:

  • The trust’s existence
  • The identity of the settlor or settlors
  • Their right to request portions of the trust instrument that affect their interest
  • Their right to receive a trustee’s report

The deadline for this notification depends on whether the trust is revocable or irrevocable. For an irrevocable trust, the beneficiaries must be notified within 60 days after the trustee becomes aware of the existence of the trust. With a revocable trust, notification should be done within 60 days of knowing the trust has become irrevocable.

Fiduciary Duties of a Trustee

A trustee’s duties under the Colorado trust code include the following:

  • To administer the trust in good faith
  • To act in the best interests of the trust and its beneficiaries
  • To manage the trust according to the provisions of the trust instrument
  • To pay taxes due from the trust
  • To maintain trust assets separately from private property
  • To keep a proper account of the trust’s holdings/ assets.

A trustee who fails in these duties may be liable for breach of trust if any interested party files a civil action against them.

How to Terminate a Trust

There are several ways to terminate a trust under the code. They include the following;:

  • By revocation (for revocable trusts)
  • By expiration according to its terms
  • The trust has served its purpose fully
  • The purpose of the trust has become unlawful, contrary to public policy, or impossible to achieve
  • By order of a court.

How Estate Planning Lawyers Can Help 

Trusts are an estate planning tool. If you’d like to create one, an estate planning attorney can help. They can create a standalone trust that meets the statutory requirements or incorporate it into a comprehensive estate plan to secure your assets.

If your estate plan already features a trust made under the old law, an estate planning attorney may benefit you in light of the new developments under the code. They can help ensure that your trust complies with the provisions of the code and remains valid and enforceable.

Contact Duncan Legal, PC for Help With Your Colorado Trust

If you’ve been searching for skilled and diligent trusts attorneys in Colorado, do not hesitate to contact Duncan Legal, PC. At our law firm, we help our clients plan their estates according to their and their family’s needs. Together, we can devise a suitable strategy to manage your assets with your future in mind. 

Reach out to us or visit our office in Centennial, CO, for working solutions to your estate planning needs. 

Flat-fee options are available for wills, trusts and probate:

(303) 394-2358