A living will\u2014also known as an advance healthcare directive<\/a>\u2014is an estate planning document intended to inform physicians and family members of your end-of-life healthcare preferences. If you ever become incapacitated and are unable to communicate important decisions regarding your care and treatment, your doctor will operate based on the instructions in your living will. The doctor is legally bound to the parameters in your living will, even if your family and friends object.<\/p>\n Topics typically covered in a living will include artificial life support, tube feeding, resuscitation, and treatments to alleviate pain and suffering. You can broadly authorize any and all treatments to save and extend your life, or you can address the various topics individually. A living will is only valid during your lifetime, and is not to be confused with your last will and testament<\/a>, which performs a completely different function and only takes effect after your death.<\/p>\n A last will and testament is a legal document that indicates how your estate should be handled after your death. While no two wills are alike, there are a few common elements that most wills should include:<\/p>\n The executor that you nominate to handle your estate will be bound by the directions in your will, and they will execute your wishes under the supervision of the probate court. If there are no objections to your will, informal probate<\/a> proceedings can wrap up in as little as 4 \u2013 6 months with minimal court supervision. If any interested parties contest your will, formal probate proceedings could take several years with heavy court supervision and mediation.<\/p>\n A trust is a legal entity<\/a> that can actually take ownership of your assets. Think of a trust as a vehicle, and inside the vehicle are your assets (bank accounts, securities, property, etc.). Trusts can serve a wide range of purposes and their structure will vary based on their purpose, but all trusts have three common components:<\/p>\n The individual creating and funding the trust is called the trustor. Trusts can be revocable<\/a>, meaning the trustor has the right to amend or dissolve the trust during their lifetime, or they can be irrevocable, meaning the trustor cannot reclaim assets transferred to the trust. Because of this distinction, assets transferred to an irrevocable trust are removed from the trustor\u2019s estate, and the trust\u2019s investment income will be taxed independently. Alternatively, assets inside a revocable trust will still count towards the value of the trustor\u2019s estate (impacting the exposure to estate taxes), and income from the trust will be reported on the trustor\u2019s individual tax returns. Regardless of the distinction, assets transferred to a trust are retitled under the trust\u2019s name, and therefore are not subject to probate when the trustor dies.<\/p>\n A living trust is a special type of trust designed to serve as an alternative to a last will and testament. In a revocable living trust, the trustor serves as the trustee and the primary beneficiary. This allows the trustor to maintain complete control over the assets, with full access to the principal and income. The trustor will name a successor trustee<\/a> to take control of the trust when the trustor dies, and the trustor will designate a secondary beneficiary to whom the successor trustee is to transfer the assets.<\/p>\n For example, say John and Jane want to pass their assets to their children without the hassle of going through probate. With the help of an estate attorney, they can establish a revocable living trust to accomplish this. John and Jane will serve as both the trustees and the primary beneficiaries. They then select their financial advisor to serve as the successor trustee, list their four children as secondary beneficiaries, and transfer ownership of their assets to the newly created trust. When John dies, Jane will continue to retain control over the assets in the trust, which she will use for retirement income. When Jane dies, the successor trustee will temporarily take control of the assets until the trust is liquidated and the remaining assets are split equally between the four children.<\/p>\n The state of Arizona has a small-estate exception that allows individual estates with less than $75,000 in personal property and less than $100,000 in real property to bypass probate. If you have a small estate that fits within these parameters, utilizing a simple will is probably your best option. To do this, submit a Non-Probate Affidavit<\/a>. To the Superior Court of Arizona. The individual filling out the affidavit will need to affirm their relationship with the decedent, list the value of the property, provide some general information about the decedent, and itemize the decedent\u2019s assets and liabilities.<\/p>\n If your estate is too large to qualify for the small-estate exception but is still relatively small, or if most of your assets are positioned to automatically bypass probate, then a will may still be the easiest and most cost-effective solution. As a caveat, if your beneficiaries will need access to your assets soon after your death, then probate is not an ideal solution since it will probably take at least 4 months to conclude probate. In that case, a living trust is worth considering.<\/p>\n If you have a large or otherwise complicated estate with significant holdings that are subject to probate, a living trust may be advisable. A living trust will be more expensive up-front than drafting a simple will, but it has the potential to save your beneficiaries a significant amount of time and money in the long run.<\/p>\nWhat is a Last Will and Testament?<\/h2>\n
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What is a Trust?<\/h2>\n
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What is a Living Trust?<\/h2>\n
Which is Best: a Last Will and Testament or a Living Trust?<\/h2>\n