Can you have both a will and a living trust in Arizona? What are the differences between each?
In order to create an optimal plan for your estate, you must understand the difference between a revocable (living) trust and a will. Without understanding this, your estate plan may not reflect your true wishes.
Wills and living trusts are both useful estate planning devices with their own purposes, and you don’t have to choose one or the other. You may use them in conjunction in order to meet your needs better. We’ll look closer at the benefits of each and how to use both for your estate planning process.
Wills vs. Living Trusts
Estate planning isn’t only for the rich; it’s for protecting your loved ones from additional difficulty once you pass. Both wills and revocable living trusts are useful estate planning tools. They each allow you to designate beneficiaries to receive your assets, but living trusts are more complicated to make. If you want to name a guardian for your child or an executor for your estate, you’ll need a will.
A will is a written, witnessed, and signed document that details who your property must go to (and how to give it out) once you pass on. It enables you to officially determine how you want your property distributed once you pass on. This document will let you keep property from going to the wrong people. Without a will, the state distributes your property and the results most often won’t reflect what you would’ve chosen yourself.
In your will, you can designate the amount you want your spouse to receive to meet their needs. You can also use the document to protect any beneficiaries who aren’t capable of handling finances yet. In addition to designating a guardian for your children, you may also designate a will executor who is to distribute the estate after you pass. A will is a revocable document that you may change any time you want during your life.
Who Should Create a Will?
Everyone. Contrary to what many believe, wills aren’t only important for wealthy people. Despite how much you own, writing a will ensures that your assets go to the people you want them to go to. This is even more important if you own a business or have minor children. A will is also your chance to designate someone who will cancel your credit cards, pay off bills, and more.
Without a will, Arizona law will determine how to distribute your estate through probate. Since probate is long and can be quite expensive, a will is a good way to prevent adding extra stress to your family’s burden once you pass on. It’s also a good way to be specific about your estate rather than allowing the court to distribute it the way they see fit.
A living trust is a way to manage your property both during life and after death without court intervention. If you’re incapacitated from an illness or accident, a successor trustee will manage the property in the trust based on your request. This enables you to avoid the publicity, expenses, and hassle of going through the courts for estate distribution.
With a properly funded and written living trust, you may avoid probate for your assets, keep your financial affairs off the public record, and plan for unexpected incapacitation. Keep in mind that a trust comes with drawbacks, too. They cost more to set up because you must actively manage the trust after you create it. Remember that the terms of your living trust only apply to the assets you’ve placed in it and that the trust only works once you’ve funded it.
Who Should Create a Trust?
While most people should have a will, a living trust isn’t necessary for everyone. Your financial situation, whether or not you’re married, and your age will all determine whether or not you should create one. Keep in mind that even if you choose to make a living trust, a will is also a good thing to have. There are a few unique benefits that a trust gives you that a will cannot, including protection from creditors on the inheritance you leave behind.
Many people are concerned about the inheritance they’ll leave behind as it can be vulnerable to the beneficiary’s unpaid bills, a lawsuit, bankruptcy, and other factors. A trust gives you a way to protect the assets from creditors by not placing them in the beneficiary’s name. It also allows for minor beneficiaries to access assets in the trust without court intervention.
Limits of Wills and Living Trusts
In learning what a will and living trust can do for you, it’s important to know their limitations, too. You can’t use either tool to reduce estate tax (if applicable), and you shouldn’t use them for transferring sensitive information such as bank account logins or email passwords. Keep this information in a separate (and very secure) location. You can leave instructions for your funeral in a will, but don’t leave them in a living trust.
What If the Documents Don’t Agree?
What will happen when your living trust and will provide conflicting information? You may change a revocable (living) trust while you’re still alive and it becomes operative, while your will doesn’t go into effect until your death. So, the living trust will take precedence if there’s conflicting information in each.
Keep in mind that the trust can only determine what happens with assets in the trust. If you form the trust without moving the assets into it, it won’t protect your estate.
How to Create a Living Trust in Arizona
A living will only goes into effect during your life if you’re incapacitated. If you believe you may need one, it’s important to take action soon as life can be unpredictable. If you have a particularly complex family or financial situation and need answers to some questions about your will or creating a living trust, speak with one of our estate planning attorneys today for guidance.
Call Arizona Estate Attorney Dave Weed at (480)467-4325 to discuss your case today.