When it comes to passing on property and assets following your death, one of the most important resources to consider is proper estate planning.
Estate planning is the process of preparing and arranging for the management of a person’s estate before they pass away. Usually this is done as a way of organizing how property and assets will be dispersed following a death, however there are many other benefits such as reduction of taxes, prevention of probate and the easy transfer of titles or ownership.
One of the most common estate planning tools used by estate planning experts is a trust.
Trusts in Arizona
In its most basic form, a trust is an arrangement through which one person, the trustee, is granted the legal title to property of another person, called a beneficiary. Trusts can be arranged in many ways, with each way specifying exactly how and when assets will be passed to the beneficiaries.
Trusts also play a major role in preventing probate, which is the legal process that involves going to court. Preventing beneficiaries from having to go to probate court will save them hundreds, if not thousands, of dollars in court and legal fees. Through trusts, beneficiaries are able to gain access to their inherited assets much more quickly.
Types of Arizona Trusts
Due to their importance as an estate planning tool, there are varying forms of trusts. Each type of trust has their own specialty and criteria. Some of the most common trusts are as follows:
- Marital “A” Trust: Provides benefits to a surviving spouse, not tax exempt.
- Bypass “B” Trust: Credit Shelter Trust
- Testamentary: Outlined in a will and created following death
- Irrevocable Life Insurance: Excludes life insurance from taxable estate
- Generation-Skipping: Allows assets to be passed onto grandchildren
With varying types of trusts, each with their specific purpose, it can be hard to know which one best fits your needs. Working with an estate planning attorney is the best way to ensure that you choose the correct type of tryst to protect your estate.
Revocable vs Irrevocable Trusts
There are many types of trusts, but a major distinction between each of them is whether or not they are either revocable or irrevocable.
A revocable trust, also known as a living trust, helps transfer assets outside of probate. A revocable trust can be controlled and amended throughout the lifetime of the grantor of the trust. This flexibility allows for the trust to be added to, changed or even dissolved according to the will of the grantor so long as they are still alive.
Even though the flexibility of a revocable trust is nice, as it can be changed at any time, and it typically switches to irrevocable following the death of the grantor, it will not protect assets in the trust from taxation while the grantor is still alive.
Irrevocable trusts transfer assets out of a grantor’s estate while they are still alive and into a trust where they are often shielded from taxes, as well as probate after death.
Unlike a removable trust, irrevocable trusts are not flexible once they have been signed. This loss of flexibility stems from an inability to add to or remove items from an irrevocable trust as once it has been signed and filed the trust can’t be changed in any way.
Arizona Trust Misconceptions
Trusts are Only for the Wealthy
Most people have heard the phrase “trust fund baby” in their lifetime, and from it have incorrectly assumed trusts to be estate planning tools that can only be used by the wealthy to pass their fortunes to their children. This is far from the truth. Trusts are great estate planning tools for any economic status and their cost is mainly dependent on the type and complexity of the trust.
Trusts Give Up Control of Assets
Even though assets are placed in a trust, this is done according to the desire of the grantor, not any third party. As long as a revocable trust is being used, it can be amended at any time.
Getting Help with Your Arizona Estate Planning
One of the most frequent uses of estate planning is to prepare an estate before its owner has passed away, as once they have passed away the process of distributing an estate can be extremely time consuming and often expensive. This means that all components of a trust need to be properly, and professionally prepared to prevent an incomplete trust from being filed.
This is especially important for Arizona trusts, as certain requirements need to be met for a trust to be valid, and having an experienced estate planning attorney will ensure that your trust is valid.
If you are looking to legally protect your hard earned assets and property, acting now and having an estate planning professional assist you is the best decision to make. Hiring an estate planning professional to create your will protect your trust is valid and ensure that that which you worked hard to obtain is passed on to those of your choosing.
Call Arizona Estate Attorney Dave Weed at (480) 467-4325 to discuss your case today.
Schedule Your Consultation
Fill out the form below to get your consultation and discuss your best legal options.