Do you have a living trust? Or are you considering getting one? Either way, you probably have a lot of questions. In this article, we try to answer some of the most frequently asked questions about having a living trust in Arizona.
What Is a Living Trust in Arizona?
A living trust is a trust that someone creates during their lifetime. Most living trusts are also revocable. That means the Grantor can cancel or change it at any time. The most popular trust for estate planning combines both characteristics. It is called a revocable living trust.
There are other types of trusts. For example, some trusts don’t take effect until after you die. That is called a testamentary trust. It gets created when your Will gets probated.
You manage the assets in your living trust during your lifetime. If you become incapacitated, someone else takes over managing your trust assets for you. Then when you pass away, the trust assets are transferred to your designated beneficiaries.
Here are some terms you should understand.
Grantor, trust-maker, or trustor
The person who creates the trust is the grantor. Sometimes this person is referred to as the trust-maker or trustor. The words grantor, trust-maker and trustor all mean the same thing.
Trustee
Typically, the grantor of a revocable living trust is also the trustee. The trustee is the person who handles the administration of the trust . For example, the trustee selects a financial advisor to invest money in the trust. The trustee then keeps track of income and files tax returns. The trust should name a successor trustee. This is the person who will manage the trust when you no longer can.
Beneficiaries
The final term to know is beneficiaries. These are the people or organizations that will receive assets from your trust after your death.
Is a Revocable Trust the Same as a Living Trust in Arizona?
Not exactly. ‘Revocable’ and ‘living’ refer to two different things. A revocable trust is one the Grantor can cancel or change at any time. The Grantor of the trust is both the trustee and beneficiary. This allows for easy and convenient control of the trust’s assets.
A successor trustee can take over if the Grantor becomes incapacitated. When the Grantor passes away, a successor Trustee can administer the trust. In both cases, a properly funded, properly drafted living trust can avoid probate.
Who Needs a Revocable Living Trust in Arizona?
You need a revocable living trust in Arizona if you want:
- To avoid probate if you become incapacitated or pass away;
- Privacy protection;
- Protection in case you become incapacitated;
- Flexibility;
- To save money and protect property; and/or
- Greater control of assets.
There is no “one-size-fits-all” approach when it comes to planning your legal affairs. Our experienced revocable living trust lawyers can help answer this question for you. We will offer advice tailored to your situation. We will also determine which type of trust is appropriate.
Some of the factors we will consider:
- Do you have personal property of considerable value?
- Do you have real estate or business investments?
- Do you have young children?
- How do you want your assets distributed after your death?
There is no simple answer to the question “do I need a revocable living trust?” Our Arizona living trust lawyers will guide you through the steps to create a revocable living trust if that is the right path for you.
Contact the us for legal help on revocable living trusts. Whether you already have a revocable living trust or you are considering developing one, call us at 602-443-4888. We’re here to help.
How Do You Create a Revocable Living Trust in Arizona?
A living trust is created (and governed) by a trust agreement, which is a legal document. A trust agreement can be written by a lawyer but it doesn’t have to be. It describes how assets put into the trust will be managed and controlled.
You will be the initial trustee and beneficiary of your living trust. But, you also need to make the following three key decisions:
Who will be trustee if you die or become incapacitated?
Who will get the money and property in the trust when you die?
What property should go into the trust?
We are an experienced Arizona living trust law firm near you. We understand that estate planning requires diligence and attention to detail. We also understand there is more to estate planning than financial and legal intricacy. You have a vision for your estate plan and we will take the time to understand that vision. We will tell you whether a revocable living trust will be advantageous or not. If there is a simpler solution, we will tell you. We will help you protect your assets through an estate plan that adheres to your vision. Protect your assets, your heirs, and your legacy with our legal team on your side.
What Are the Benefits of Having a Revocable Living Trust in Arizona?
There are six main benefits to having a revocable living trust in Arizona:
- Avoids probate if you become incapacitated or die;
- Privacy protection;
- Protection in case you become incapacitated;
- Changeable and flexible;
- Saves money and protects property; and
- Provides greater control of assets.
Revocable living trusts avoid probate.
If you have a will when you die, any assets in your name alone will go through probate. The same is true if you die without a will or a trust and have assets in your name. Probate is a court process. In probate, your assets are distributed per your stipulations (or according to law if you don’t have a will). Probate is a relatively slow process that takes at least four months in Arizona. If you own property in more than one state, your beneficiaries may have to go through multiple probates. The costs of going through probate can also cut down on what your beneficiaries inherit. With a revocable living trust, probate is not necessary. Your successor trustee will be able to pass your assets on to your beneficiaries without waiting for a court order. That usually means a quicker and more affordable process for your beneficiaries.
Revocable living trusts provide privacy.
If you die owning assets in your name alone, your will gets entered into the public records. Anyone can see what your will says. They can see who your beneficiaries are and what each beneficiary is inheriting.
And what if you get dementia or Alzheimers Disease and need someone to manage your money and assets for you? In that case, the court needs to appoint a conservator for you. Again, all your assets get disclosed in the public record. Plus, your finances are discussed in open court.
But money and property in a living trust get distributed in private. No one can search the public records to see where your assets went. This protects the privacy of your assets as well as your beneficiaries.
Protection in case you become incapacitated
Your living trust manages your assets during different phases of life. If you become incapacitated, your trustee can take over and manage your affairs. (This person has a fiduciary duty to act in your best interest. They are legally bound to protect you.) This happens automatically. No one needs to go through court proceedings or appointed conservators. A revocable living trust can also take care of your minor children if you no longer can.
Revocable living trusts are changeable and flexible.
Revocable living trusts allow you to make amendments at your own discretion. That can prove invaluable if your circumstances change. It can also be important if you change your mind about who you want to name as your beneficiaries. This flexibility is good if you are starting your estate planning young.
Revocable living trusts incur less cost and hassle down the line.
Drafting a living trust usually requires more funds and effort upfront. It is a more complex to put in place than a will. And of course it’s more complicated than simply doing nothing. So that means you will need to spend some time and money to properly set up and maintain your trust. Yet that work can save your family the headache and higher expenses of a probate. Living trusts also tend to hold up better if someone contests a provision. That can save more money and time for the people you want to benefit later.
Greater control of assets
A trust gives you greater control over how and when your assets get distributed to your beneficiaries. Here are some situations when that matters.
Minor beneficiaries.
Without a trust, minor beneficiaries get their inheritance when they turn 18 years old. That’s pretty young for someone to make responsible decisions about money.
Beneficiary with an addiction.
If your child has an addiction, you can stipulate that they must remain sober to get the money. You can include other conditions if you wish.
Future changes needed.
You can include ways for the trust document to be changed after you die. For example, maybe a trustee turns out to be irresponsible and needs to be removed. Or maybe there is a change in the law and the trust needs modification.
Beneficiary with creditors.
If the beneficiary is getting sued or getting a divorce, the trust can hold the money and property. The trust can distribute to the beneficiary when he or she is no longer under financial threat.
When to Amend a Living Trust in Arizona?
You should consider amending your living trust when you’ve had a significant change in your life. For example:
- Marriage
- Divorce
- Birth of a child
- Death of a beneficiary
- You want to change your beneficiaries or how property is distributed
- Name a new trustee
- You have moved to another state
This list is not exhaustive. There could be many other situations that will warrant changing your trust. If you are not sure whether to amend your trust, discuss it with a trusts and estates attorney.
When does a living trust in Arizona become irrevocable?
If there is only one grantor, a revocable trust turns into an irrevocable trust when he or she dies or becomes incapacitated. If there are two grantors, when the trust becomes irrevocable depends on the terms of the trust. If you are unsure, talk to an attorney.
There Is Only One Grantor and That Person Dies
A revocable trust turns into an irrevocable trust when the grantor of the trust dies. The grantor usually is also the trustee and the first beneficiary of the trust. Once the grantor dies, the terms written into a revocable trust cannot be modified in any way. Nor can anyone add or remove assets. After the grantor dies, the new irrevocable trust requires an Employer Identification Number. The trust becomes its own entity, which means it needs to get an EIN for filing tax returns.
There Is Only One Grantor and That Person Becomes Incapacitated
A revocable trust becomes irrevocable when the grantor becomes incapacitated. At that point, the person can no longer make decisions about the management of the trust. The trust may say when the grantor is considered incapacitated. Often, a licensed healthcare professional must confirm the incapacitation diagnosis. After the grantor becomes incapacitated, a successor trustee takes over management of the trust. The trust is considered irrevocable only during the grantor’s incapacity. If the grantor regains capacity, then the trust once again becomes revocable.
H3: Why Is It Common for a Married Couple to Create a Joint Living Trust in Arizona?
Two spouses have the right to set up a trust as co-grantors. In this case, the trust is a joint trust. Joint trusts are common in community property states like Arizona. When one spouse dies, the surviving spouse gets a step-up in basis on community property in the joint trust.
Sole and separate property can be designated as such in the trust. In that way, each spouse can be protected if they get divorced.
However, having a joint trust has the benefit of providing for both spouses during their lifetimes. Plus, a joint trust makes it possible to prevent the accidental disinheritance of children from a prior marriage. In short, there are many advantages to having a joint trust. Those advantages outweigh any disadvantages.
How Does a Revocable Trust Turn Irrevocable When There Are Two Grantors?
A legal issue can arise about when a joint revocable trust becomes irrevocable. In most cases involving joint trusts, the co-grantors do not die at the same time. When one spouse dies before the second spouse, the question is, does the revocable trust turn irrevocable?
The general rule is both grantors must die for a revocable trust to become irrevocable. But there are legal ways to change the general rule for co-grantors. This means the co-grantors have the legal power to set the rules for the trust. An estate planning lawyer can add language to change the rule.
Here are some variations to joint living trusts:
* Part of the trust becomes irrevocable when one spouse dies or becomes incapacitated. This partially prevents the surviving grantor from disinheriting later beneficiaries.
* All of the trust becomes irrevocable when one spouse dies or becomes incapacitated. This gives more protection from the surviving grantor disinheriting later beneficiaries.
* The trust could name a Trust Protector. That person could make changes to the trust based on the surviving grantor’s wishes.
* A successor trustee assumes the legal responsibility for making decisions involving the trust. That person could “decant” the trust and thereby amend it.
* Even an irrevocable trust could contain a power of appointment. A surviving grantor with a power of appointment can change the beneficiaries.
As you can see, there is no simple answer to when a joint revocable trust becomes irrevocable. Just because a trust is irrevocable does not mean it can’t be amended. This is a complex area of the law. If you have any questions, talk to an experienced trust attorney. (We would love to be that attorney for you.)
Let us help you create your living trust in Arizona
Estate planning and crafting a revocable living trust can be complex. We can reduce this complexity because we understand the law. Regardless of how complex or straightforward your revocable living trust needs may be, we would love to help.
Our Arizona living trust lawyers can help you create a revocable living trust. We can also help you change or dissolve your trust. We can help you manage all the legalities of a revocable living trust. We can also help you protect your assets and legacy. We can offer the legal guidance you need. It doesn’t matter whether your estate is large and complex or quite modest.
Since 2002, attorney Paul Deloughery focused on wills, trusts, and estate planning. Since 2007, he has been helping families with probate and trust administration. We can help you achieve the legal outcome and peace of mind that you want. Whatever questions you may have, our Arizona living trust lawyers have answers.
At Sudden Wealth Protection Law, we work tirelessly to help our clients plan for and enjoy their retirement years. Call us at 602-443-4888 or use our convenient Contact Form.
We offer services for clients throughout Arizona, including Chandler, Gilbert, Tempe, Phoenix, Mesa, Scottsdale, Anthem, and Paradise Valley.
