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What Is a Living Trust?
In considering your estate planning options, you may have encountered the term “living trust” and wondered about its meaning. “Trust” refers to a legal arrangement used to manage and distribute assets. A “living trust” refers to a legal arrangement created to manage an individual’s assets while living and then distribute them according to their wishes at death or due to mental incapacitation.
How is a Living Trust Formed?
While it is possible to form a living trust yourself, it may be in your best interest to consult an experienced Arizona estate planning attorney to direct you through the process. This way, you can be reassured that your assets are appropriately protected at the time of your passing. The basic steps of forming a living trust are to:
- Decide what assets will be managed by the trust. This can include real estate, personal property, vehicles, and more.
- Decide who the trustee will be. The trustee will manage and distribute your assets after your passing.
- Decide who the beneficiaries will be. The beneficiaries will be the recipients of your assets.
- Fill out the paperwork to form the trust. The documents must be detailed enough to cover all your assets and specify your exact distribution wishes for each.
- Get the trust documents signed and notarized. This will legalize the trust.
- Legally place the assets into the trust. Once the trust is established, you must transfer the title for real estate, bank accounts, or other assets into the trust’s name so the trust can manage the assets.
- Maintain the trust until your passing. As life changes, through new births, marriages, or divorce, update the trust documents with your lawyer to ensure the asset distribution is still according to your wishes.
What Benefits Does a Comprehensive Living Trust Provide?
While a living trust does not preclude the need for a will, it gives several benefits. Some benefits of a living trust include:
- No probate courts. All wills must be validated in a public court of law during a process called probate before they are executed. A living trust bypasses this process entirely, making it possible for your assets to be passed on to your beneficiaries more rapidly and without the hassle of dealing with the courts.
- Greater privacy. A living trust makes it possible for your wishes, as regards the division of your estate and property, to be kept confidential. The details of your estate, assets, and debts will not become a matter of public record.
- Trustworthy management. When you form a living trust, you assign an individual of your choice to manage your affairs on the occurrence of your death or incapacitation, called a “trustee.” The trustee is usually someone you trust and is legally obligated to follow your wishes according to the written trust arrangement. While a will is executed in the event of your death, it does not provide for mental incapacitation and could be changed by a conservator while you are still alive but mentally incompetent.
- More rapid continuity. Because a trust allows for a more rapid transfer of assets to beneficiaries, it can be useful for important assets like family businesses to ensure they continue to operate under the family members designated in the trust.
- Control and flexibility. A revocable living trust allows you to change the distribution of your assets at almost any time. You can also be specific about when and how assets are distributed to whom, giving you greater control over your estate plan.
- Expedited asset distribution. This applies to small and large estates. Arizona law allows a “summary administrative procedure” for anyone with a small estate: $75,000 in personal property or $100,000 in real estate at the time of their passing. Yet even this process can be streamlined by establishing a living trust to bypass the court system.
Can I Make Changes to a Living Trust?
Depending on the type of living trust you establish with your estate planning lawyer, you may or may not be able to make changes. In a revocable trust, the person endowing the trust with its assets, the “grantor,” can change or update the trust as they wish. In an irrevocable trust, the notarized document is considered final. It cannot be changed without going through a special legal process and getting approval from the individuals named as beneficiaries. While an irrevocable trust is less flexible, it may provide additional tax benefits that a revocable trust does not.
Do I Still Need a Will If I Have a Living Trust?
A will and a living trust are not the same thing. Each has a specific function and does not entirely replace the other. Even if most of your assets have been placed in a trust, you will still need a will to govern anything else. A will can specify your last wishes, for example, regarding the care of any minor children or funeral arrangements, while a trust is solely responsible for financial/asset management matters.
What Happens If I Don’t Have a Will or Living Trust?
Without a will or living trust to express your last wishes, your estate will be subject to arbitrary distribution by the state following Arizona Revised Statutes § 14-2101 to § 14-2114. A person who dies without a will is called “intestate,” and the process by which their assets are distributed is called “intestate succession.” Your assets will be distributed to your heirs or extended family according to their blood or familial ties to you, regardless of your relationship with them before death.
Secure Your Future with The Turner Law Firm PLLC
The Turner Law Firm PLLC is here for all your estate planning needs. Let us help bring you peace of mind by making sure your assets are properly cared for today and into the future. We can assist you in finding a plan that’s right for you and your needs. Give us a call at (480) 618-1221.
