Arizona Wills and Trusts: Living Trusts

Living Trusts

Living Trusts do everything a Will does.... and in addition, they also avoid the time and expense of probate and may save you thousands of dollars in federal estate taxes.

Who needs a Living Trust?

Anyone with an estate that would be subject to probate should have a Living Trust. (Assets that have beneficiaries, such as life insurance, retirement plans, POD and TOD accounts are not subject to probate.) In Arizona, an estate with probatable assets that exceed $50,000 would be subject to probate.

People with minor children who have life insurance or retirement plans are better served with a Trust. For a information regarding minors and insurance refer to a recent case, Metropolitan Life Insurance Company vs. Kevin D. Hunt, a minor.

The common misconception is that you don't need a Trust unless your estate is over $600,000. This is NOT correct. Estates that exceed $50,000 may be subject to the expense and delays of probate. Probate expenses usually average 7% of the value of the estate ($7,000 with a $100,000 estate). The time involved in probate can range from 6 months to 2 years.

In addition, an estate may be subject to Federal Estate Taxes when it exceeds $1.5M.

NOTE: The exemption for Federal Estate Tax is scheduled to increase over the next few years with the amount to be $3.5M in 2009 with a flat rate of 45%, unless changed by congress in the interim.

What is involved in having a Living Trust prepared?

To determine the type of Trust needed, you should know the value of your estate, including the retirement accounts and life insurance death benefits. You do NOT need to have an itemized list for the Trust preparer, however. You will want an itemized list as you fund (i.e. re-title assets) you Trust.

You should decide the following:

	Who would manage your estate if you (and your spouse, if married) should become incapacitated?
	Who would manage and distribute your estate when you (and your spouse, if married) die?
	Who would you want to inherit your estate and in what proportion. If you are a young family and you were all in a common fatal accident, who would you want to inherit your estate?
	If you have minor children, who would you want to be their guardian if something happened to you and their other natural parent? At what age would you want your children to receive their inheritance?

You will also need a copy of the Deed to any real estate that you own. (If you cannot find the Deed , a copy can be obtained from the County Recorder's office.)

Living Trust documents can be prepared with one to two appointments.

What should a Living Trust consist of?

The Trust, at a minimum, should consist of the following documents: Trust Declaration, Trust Exhibit Property, Certificate of Trust, Memorandum Disposition of Personal Property, Assignment of Personal Property. A Community Property Agreement is optional. In addition, you should also have a Pourover Will, General Durable Power of Attorney, Healthcare Power of Attorney, and Living Will.

What happens if I need to change something in my Trust?

A Trust can be easily changed. It is done with an Amendment to the Trust. The most common changes are: adding, or deleting beneficiaries, changing the amount of distribution to the beneficiaries, changing the age of distribution to minors, or changing the Successor Trustees.

An Amendment does not have to be done by the original firm/company that prepared your Trust. An Amendment must be signed and notarized. It should not be a handwritten change on the original Trust document itself.

Do I have to change the Trust every time I open new investment or bank accounts?

No. You simply title the accounts in the name of the Trust.

Do I lose any control of flexibility with my assets if I have a Trust?

No. You continue to have the same control and flexibility with the assets that you had prior to the Trust.

NOTE: If you refinance your house, you will need to Deed the house out of the Trust, complete the refinance, and then Deed it back into the Trust. The title company or the firm who prepared your Trust can do this for you.

What other benefits would I have with a Trust instead of a Will?

A Trust avoids the cost and delays of probate. Upon your death (and your spouse, if married), your Successor Trustee can distribute the assets almost immediately and with little or no additional expense (other than typical costs such as real estate commissions, etc.) Court supervision is not required.

A Living Trust also avoids guardianship and conservatorship if you become incapacitated.

A Living Trust keeps your estate affairs private. A Will that goes through probate makes all aspects of your estate a matter of public record.

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