Q: I was asked to write about mistakes I see in estate planning. Since the previous column was about Wills, this column is about the pressure to have a living trust done to replace a Will.

A: For the record, I am not against living trusts, since I do a number of them for clients. In California, Hawaii, Texas, New York, and about thirty-five other states, I would strongly urge that a living trust be done. But in Colorado we have a choice and let's review why that is true.

The only reason to do a living trust is to avoid probate. Estate planning and estate tax avoidance can easily be done with a Will. A living trust is not a substitute for a Durable Power of Attorney. And here in Colorado, a living trust will not protect assets from creditors, alimony, and similar claims, as is the case in a community property jurisdiction. But even in community property states, the degree of protection varies. Finally, having real estate in more than one state is normally no longer a problem with the adoption of ancillary proceedings in sister states.

Living trusts are published so much because in most states, a lawyer is required in a probate, a lawyer charges a percentage of the estate inventory, assets can be tied up for months or years, inventories and reports that are filed with the Court tell the whole world what the deceased owned, hearings are held whenever the executor needs to do something, and it is very expensive and time consuming when an estate is closed.

Here in Colorado lawyers cannot charge a percentage and, in fact, are not needed if the personal representative (executor) wants to handle things himself of herself.

In an emergency, the estate proceedings can be started immediately, but usually the personal representative must wait five days. Once started, assets are not frozen. Bills can immediately be paid and assets distributed. Using unsupervised administration, no inventory or reports are filed, so the public does not know what is involved in the estate. The estate must remain open for six months but that is to permit creditors time to file a claim. And to close the estate, a Verified Statement is filed with the Court, which in essence says we are done and goodbye. And that is what a probate is in Colorado.

Now, to do a living trust, the assets have to be handled twice--once to place them into the trust and then again to transfer them out of the trust after death. And if all the assets were not in the trust, then a probate is necessary to handle the non-trust assets (except those held in joint tenancy or with a beneficiary designation) even with a "pour-over" Will.

Finally, what about the costs? If the family handles the probate, then the cost to go to Court is a few hundred dollars. There are some attorneys that will do the work for around $1000. The average seems to be around $2000. (My average is a few hundred dollars above that.)

Setting up a trust gets expensive. I understand that several attorneys will charge $1200 (and then extra to fund the trust, that is, transfer assets). The average seems to be $2500. Some, however, charge $4000 or more. Most people forget that while a living trust avoids probate, it costs to take the trust apart (a rule of thumb is that what it costs to create the trust is what it costs to later take it apart). And often, because all assets were not in the trust, or to give someone authority to handle "non-trust" problems, a probate is needed anyway, triggering the cash register to ring up the third cost for a living trust (setting up the trust, taking the trust apart, and handling assets not in the trust at death). Thus, the expense can be exorbitant.

Finally, many people look at all those living trust documents with glazed eyes, not understanding what they did. Can it be said that things are now "easier" for the family? Maybe or maybe not.

If you have a living trust and are happy, that is great. But for others, consider some of the downsides and know that you have a choice in Colorado.