For many, the word “Trust” evokes thoughts of wealth and the privileged, however in Arizona, funding a Living Trust is a sound way of making things simpler for your family after you have passed—and you don’t have to wealthy to benefit. The fast, least expensive way to pass your assets on to your family lies in the use of a living trust.
What Is a Trust?
A trust is a legal document where one person legally holds title to another’s property. The person creating the trust is called the “trustor” or “grantor” or “settlor”. The person holding legal title to the property and responsible for administering the property is called the “trustee”. A “self-settled” living trust is a trust you create for yourself while you are living in which you are both the creator of the trust, the trustee of the trust and the “beneficiary” (you receive all the benefits of the trust during your lifetime). You retain full control over everything owned by the trust. The trust typically remains revocable (can be amended or revoked) while you are living. When you die, your living trust usually becomes irrevocable. The trust document includes directions about how the assets will be administered after your death, who will receive the assets and who will carry out directions on administration and distribution of the assets.
Arizonans often choose a living trust so their families will not endure the expense and long timeline of probate proceedings. Probate is a court proceeding to validate the deceased person’s will. The will is submitted to the court, the court appoints a personal representative to oversee distribution of the deceased person’s assets after debts, taxes and administrative costs are paid. A living trust can avoid the probate process making the estate administration simpler and quicker when a living trust is created and implemented correctly. An important part of implementing a living trust is transfer of ownership of assets to the trust. A trust cannot administer assets not properly titled in the trust! An experienced estate planning attorney can help create a well-structured living trust and help transfer title of assets to the trust.
Does a Living Trust Reduce Estate Taxes?
If you have a simple living trust, there is no effect on federal estate tax. However, there are more sophisticated living trusts such as an AB trust (bypass trusts) that can help by reducing the federal estate tax bill for families who have very large estates. With the recent changes to taxes, the exemption amount has been raised to $5.6 million for individuals, $11.18 million for married couples, increasing annually based on an inflation index. Most people will be covered with the recent increases in estate tax exemptions, with few exceptions. Living trusts are still beneficial for avoiding probate and will make estate transfers easier upon death. Currently, Arizona does not have an estate or inheritance tax although some other states do have such taxes.
Create Your Own Arizona Living Trust?
Those who choose a non-attorney or an online service to prepare a trust and related documents are often surprised to learn mistakes have been made which are costly to correct. Or your beneficiaries (after your death) may learn of the mistakes which cost the estate and the beneficiaries when the trust plan does not work as expected.
However, when you meet with an estate planning attorney, you will share your family situation, your assets and your wishes on distribution of assets when you die so the attorney can design your trust according to what you want to happen when you pass. You will be the trustee, you will determine what will be distributed, to whom and when. After the documents are created and signed, assets will be transferred to the trust; assets such as your home, other investment property, cash accounts, etc.
And that’s it! Because you are the trustee, you can make changes to your trust as needed while you are still living. Learn more about how we can help you create your living trust and a full estate plan by calling us today.
Tucson Estate Planning Attorneys
At West, Longenbaugh and Zickerman, our estate planning lawyers are here to help individuals and families throughout southern Arizona achieve their long-term financial, legal, and estate planning goals. We will work with you and provide you with everything you need to prepare a trust that will take care of your needs, as well as your family, friends, and loved ones. Our team of attorneys are committed to addressing the individual needs of each of our clients and can assist you with all aspects of estate planning.