Introduction
Setting up a trust is an essential part of estate planning. This useful document can help ensure your assets go to your chosen beneficiaries.
Contrary to popular belief, estate planning isn’t only for wealthy people. Taking care of your loved ones with a trust will avoid hassles and headache for them after you pass. But do you need a trust in addition to a will, or is having one or the other enough?
What’s the Difference between a Will and a Trust?
What are the advantages of having a trust versus a will? Let’s look a bit closer at each of these estate planning tools:
A Will
Your will states what you want to happen to your assets after you die. In Arizona, if you don’t create a will, the people who you wish to inherit your estate may not have access to it. This simple document is your chance to set your desires in stone. Your will can include instructions for caring for pets, disposal of debts, property beneficiaries, distribution of business assets, and much more.
A Trust
What is the point of a trust? A trust is another estate transfer method that enables you to give someone else authority over your assets once you pass on. The person you appoint will distribute these assets to the advantage of your beneficiaries. Trusts are inexpensive to make. With this document, your estate goes directly to your heir(s), stays private, and you can likely avoid probate altogether.
Which is Best for You?
Is it better to have a will or a trust? These estate planning devices aren’t mutually exclusive, and in many cases, it’s prudent to have both. If you plan on having a trust, creating a will is a helpful step for ensuring your assets go to the correct heirs.
Most trusts don’t include instructions for handling all of your estate, so this leaves assets open for the expensive, stressful probate process. Without your specific designations for distributing your estate, the legal system will disperse it according to Arizona law. And most of the time, state law won’t align with your personal preferences.
There are different options for trusts, so working with an experienced estate planning attorney is the best way to choose what’s optimal for you.
What are the Advantages of a Trust?
If you rely on just a will for estate planning, it will go through probate when you pass on. Court proceedings are public, so that means your will terms will be available to curious researchers. Trusts, on the other hand, are private without a public record or court process. Here are some other benefits to setting up a trust:
Avoiding Probate
Probate is an expensive, often time-consuming process that leaves your estate responsible for legal costs. If you make a will, this process is necessary to verify the document and distribute your estate according to your wishes. If you have a large or complicated estate, probate can take years. A trust will avoid this completely, bypassing legal fees and getting your assets to your established heirs sooner.
Taxes
As soon as you’ve established a trust, you can place the assets in your estate in the trust to avoid estate taxes. Keep in mind that if you do this, the trust owns the assets instead of you. But depending on the circumstance, you may still benefit from them (by receiving income, for example).
Emergency Planning
If you’re unexpectedly incapacitated or become ill, a trust allows your established trustee to manage your assets immediately. With just a will (and no established power of attorney), this process can take much longer and negatively affect your assets.
Should You Put Your House in a Trust?
Putting your home in a trust is one way to avoid the probate process once you pass on. Leaving your real estate property to your heirs through a will leaves them open to probate just like your other assets. Keep in mind that your trust may not protect your house from creditors.
Irrevocable vs. Revocable Living Trusts
A living trust is a document that you create while you’re still alive to hold title your assets. It will define what happens to your assets once you pass and, unlike a will, goes into effect as soon as you sign it. This document may be irrevocable or revocable.
Irrevocable Living Trusts
If you make an irrevocable trust, you can’t make changes once you (and other relevant parties) have funded, formed, and signed it. As soon as you’ve placed property and other assets into the trust, it’s out of your hands for good.
Revocable Living Trusts
You can amend your revocable living trust whenever you want. If you think you may wish to amend the terms of the document, you can do so using a trust amendment. You can even undo the entire trust, if need be.
How does a Trust Work after Someone Dies?
When someone leaves a will behind after death, they name an executer to disperse their assets according to their desires. Leaving a trust accomplishes the same thing via a trustee.
As long as you have a trustee appointed, a revocable living trust doesn’t necessarily end when you pass on. You can request that your trustee continues distributing your assets and maintaining the trust as necessary. For example, you may wish to give an heir a certain asset for their birthday or for your other belongings to go to a beneficiary on a specific date.
Many people distribute their estate in percentages to their chosen heirs. In this case, once the trust owner has passed on, his or her beneficiaries should meet to establish the value of their estate.
Have Questions about Creating a Trust?
Estate planning can be complicated and stressful. If you’re wondering about creating a trust in Arizona, or whether you need a will, trust, or both, contact an estate planning attorney. They can help you decide between a revocable or irrevocable trust and answer any other questions you may have.
Call our Arizona Estate Planning team at (480)467-4325 to discuss your case today.