Can You Change a Living Trust After a First Spouse's Death in Arizona?

What is a surviving spouse allowed to do if their spouse dies? That is a common question we have frequently in our estate planning consultations. The short answer is: it depends.

Our blog will explain how a trust works and what a surviving spouse can and can not do. We will try to explain why working with an experienced estate planning attorney in Arizona may be the difference between accomplishing your goals and having your wishes respected, or having your children lose their inheritance to a dishonest spouse, that is specially important for blended families.

Here's What Happens to a Living Trust When One Spouse Dies.

Under Arizona Revised Statutes § 14-10602, a trust is revocable by the settlor during their lifetime, unless the terms of the trust expressly make it irrevocable. This means that when one spouse passes away, the surviving spouse has the ability to amend or revoke the existing joint living trust if they wish. However, the process must follow the method specified in the trust agreement itself.

There are several potential reasons why a surviving spouse in Arizona may want to modify their living trust after their partner’s death. Their financial situation and estate planning needs could change substantially as a single person. They may want to update beneficiaries, asset distributions, or trustees named in the original trust. Tax implications and eligibility for potential credits or deductions could be impacted. Or they may simply wish to restructure the trust based on new personal circumstances.

A joint revocable trust remains revocable while both spouses are alive and provides for a smooth transition of control and distribution of assets upon the death of one or both spouses.

While amending a revocable living trust is permissible, it’s crucial for the surviving spouse to follow proper procedures and understand the potential ramifications. Consulting an experienced estate planning attorney can provide valuable guidance to ensure the trust is properly revised in accordance with the law and the individual’s specific objectives. An attorney can analyze the original trust, advise on ideal modifications, and implement any complex changes required.

Can you prevent a Trust from being changed after you pass away? Certainly. A Revocable Living Trust, properly created and funded, can have some safeguards added to it to prevent the unexpected. Keep reading to understand more. Lets go over a few things about revocable trust and irrevocable trust, as well as successor trustee, to learn more.

What is a Living Trust or Revocable Living Trust?

A living trust (or revocable trust) is a legal arrangement where a person (the grantor) transfers ownership of their assets into a trust during their life. This allows their property to bypass probate upon death and directly transfer to their named beneficiaries. In Arizona, it is common for married couples to create joint revocable living trusts that include provisions for the surviving spouse. Separate trusts provide more protection from creditors and offer more flexibility in leaving assets to non-spousal beneficiaries.

Benefits of a Revocable Living Trust in Arizona

A revocable living trust can provide several key advantages for Arizona residents. One of the primary benefits is avoiding probate upon the death of the trustmaker. Probate is the court-supervised process of transferring a deceased person’s assets to their heirs, which can be lengthy, public, and expensive. With a properly funded revocable living trust, the trustmaker’s assets are already re-titled into the name of the trust during their lifetime. This allows the assets to transfer to the named beneficiaries according to the trust terms, circumventing probate altogether. This saves time, money, and preserves privacy compared to having a Will go through probate.

Another significant benefit of a revocable living trust in Arizona is that it can allow for incapacity planning. The trust agreement can name a disability trustee to manage the trust assets if the trustmaker becomes incapacitated and unable to handle their own affairs. This avoids the need for a court-supervised conservatorship or guardianship, which can be cumbersome. The disability trustee has the legal authority to step in, pay bills, make decisions, and provide for the trustmaker’s care according to previously established wishes laid out in the trust document. This can be a major advantage over a Will, which only governs asset distribution after death.

What to do with a Living Trust after a Spouse dies in Arizona?

When a spouse dies in Arizona and the couple had a joint revocable living trust, there are several important steps the surviving spouse should take regarding the trust:

Review the trust documents thoroughly. The trust agreement will spell out the specific provisions that take effect after the death of the first spouse. It may include instructions for distributing certain assets or creating sub-trusts for tax or creditor protection purposes. A 'survivor's trust' is created where the assets remain accessible and controllable by the surviving spouse.
Obtain multiple original death certificates. The surviving spouse will need to provide official death certificates as proof when re-titling assets formerly owned by the deceased spouse into the name of the trust.
Transfer ownership of applicable assets. Any assets owned solely by the deceased spouse should be transferred to the surviving spouse’s name or the name of the trust, depending on the terms. This includes real estate, bank accounts, investments, etc.
Hire a professional trustee or assume full control. Either a named successor trustee will step in to administer the trust, or the surviving spouse can choose to be the sole successor trustee managing assets going forward.
Amend the trust if desired. Arizona law allows a revocable living trust to be amended by the surviving spouse after their partner’s death. They may wish

Does a Revocable Living Trust a Become Irrevocable Trust when one Spouse Dies in AZ?

No, a revocable living trust does not automatically become an irrevocable trust when one spouse dies in Arizona. Here are some key points about what happens to a revocable living trust after a spouse’s death in Arizona:

The trust itself remains revocable after the first spouse’s death, unless the trust document specifically states that it becomes irrevocable upon that event.
The surviving spouse typically has the power to revoke or amend the revocable trust, since they are usually named as the successor trustee and beneficiary.
If the trust was jointly created and funded by both spouses, the deceased spouse’s share of the trust assets will get reallocated to the surviving spouse’s share after their death.
The surviving spouse can choose to continue operating the revocable trust during their lifetime for their own assets and management purposes.
Or the surviving spouse can revoke the original trust entirely and create a new revocable trust tailored to their individual needs as a single person.
In some cases, provisions in the trust may split it into revocable and irrevocable shares or sub-trusts after the first death for tax or asset protection purposes. We usually advise blended families specially to have the trust split after the first death.

But by default, a revocable living trust does not lose its revocable status and become irrevocable simply because one spouse passes away in Arizona. Careful trust drafting can specify if and when irrevocability should occur. One of the key benefits of a revocable living trust is that it helps avoid the legal process of probate.

What is a Successor trustee?

A successor trustee is a person or institution named in a trust document who has the responsibility and authority to administer the trust if the current trustee is unable or unwilling to do so. A personal representative handles the deceased's assets, makes inventory, pays expenses and taxes, and distributes remaining assets to heirs.

Specifically:

The successor trustee steps in and takes over trust management duties after the death, resignation, or incapacity of the initial trustee.
In a revocable living trust, the trust creators (grantors/settlors) typically name themselves as the initial trustees during their lifetimes.
They also name successor trustees to take over when they are no longer able to manage the trust themselves due to death or incapacity.
Common choices for successor trustees include adult children, other relatives, trusted friends, professionals (attorneys, accountants), or corporate trustees like a bank’s trust department.
The successor trustee has a fiduciary duty to the trust and to administer the trust according to its terms and always act in the best interests of the trust’s beneficiaries.
Their responsibilities include managing trust assets, investing prudently, making distributions to beneficiaries, filing taxes, and ensuring the trust’s provisions are properly carried out.

Having a capable successor trustee named provides a smooth transition of trust management if the original trustee can no longer act in that role. It helps avoid potential court intervention.

What is a Co-trustee and how we use it in Blended families?

A co-trustee is when two or more people share the role and responsibilities of being the trustee of a trust simultaneously.

Co-trustees can be useful in blended family situations involving trusts for a few key reasons:

1. Shared Decision-Making

With children from previous marriages, naming co-trustees (e.g. a spouse and an adult child) can help ensure input from different family members when making trust decisions that impact all beneficiaries.

2. Checks and Balances

Having co-trustees can provide checks and balances so no single person has full control over the trust assets. This can help mitigate potential conflicts between step-parents and step-children.

3. Representing Different Interests

Co-trustees can represent the interests of their respective family branches. For example, one co-trustee represents the interests of the settlor's children, while the other looks out for the surviving spouse.

4. Building Trust

In blended families where there may be tensions or trust issues, naming co-trustees that all parties respect can help build confidence in the trust administration.

However, co-trustees need to be able to work cooperatively, as they must act together on trust matters unless the trust states their powers are exercisable individually. Clearly defining their respective roles and decision-making powers in the trust document is important.

Overall, utilizing co-trustees in blended family trusts can help protect everyone's interests and facilitate productive trust management when there are complex family dynamics involved.

What is the Difference between a Family Trust and a Marital Trust?

A family trust and a marital trust are different types of trusts that serve distinct purposes:

Family Trust: A revocable living trust used to hold and manage assets for the benefit of the entire family, including children from previous marriages. All family members can be beneficiaries.

Marital Trust: An irrevocable trust specifically created to allow assets to pass to a surviving spouse free of estate taxes at the first spouse's death, taking advantage of the unlimited marital deduction. It benefits just the spouse.

Can a Spouse Change a Trust after Death if appointed as the Successor Trustee?

Yes, a spouse appointed as the successor trustee can typically change a revocable trust after the other spouse's death, within certain limitations:

If the trust is a jointly-created revocable living trust, the surviving spouse will usually have the authority to amend the trust document itself after their spouse's passing. As the new trustee, they can update beneficiaries, adjust distributions, change trustees, and potentially even revoke the entire trust if they wish. However, the spouse must follow the amendment procedures outlined in the original trust agreement.

For trusts with certain irrevocable provisions or sub-trusts created after the first spouse's death (such as a credit shelter trust), the surviving spouse's ability to modify that portion of the trust would be limited based on the restrictive terms. The trustee powers only extend so far as the trust allows. But for the revocable portions, the surviving spouse-trustee retains amendment powers unless the trust's instructions specify otherwise upon the original settlor's death.

Talk to a Wills and Trust attorney in Arizona today!

Creating a revocable living trust that suits your individual needs and the needs of your family is not an "one size fits one" kind of process. At our law firm we create what is right for you, your family, and your stage in life.

Citadel Law Firm PLLC will be pleased to help. Our Will and Trust attorney in Chandler, AZ will be pleased to help. Call (480)565-8020 or click here to schedule your free estate planning consultation with an estate planning attorney today.

Frequently asked questions about Living Trusts after a spouse dies

1) How to amend a living trust in Arizona?

The process for amending a revocable living trust in Arizona starts with carefully reviewing the original trust document itself. The amendment procedure is outlined in the trust's terms and must be followed precisely. Typically, the trustmaker(s) must complete a formal written amendment with language clearly stating what sections are being modified or removed and what new provisions are being added. This amendment is then signed following the same witness/notary formalities as the original trust.

For assistance amending, it's advisable to work with an experienced Arizona estate planning attorney. They can ensure the amendment is properly drafted, executed, and does not conflict with state laws or unintentionally impact other areas of the trust. The attorney can also coordinate required steps like notifying beneficiaries or trustees, re-titling assets if needed, and providing relatives with updated documents. Amending a trust incorrectly can create legal issues, so seeking legal guidance helps protect the trustmaker's wishes.

2) How long can a trust remain open after death in Arizona?

There is no definitive time limit for how long a trust can remain open after death in Arizona. The duration depends on the specific terms laid out in the trust document itself. However, here are some general guidelines:

1) Revocable living trusts: These typically become irrevocable upon the death of the trustmaker(s). The successor trustee then administers and distributes the remaining assets according to the trust provisions, which can take months or potentially years if assets need to be sold, debts paid, etc. Once all assets have been distributed, the trust can then be closed.

2) Irrevocable trusts: These are structured to remain open for a set period, such as the trustmaker's lifetime, a term of years, or spanning multiple generations. The duration is defined in the original trust terms.

3) Testamentary trusts: Created by a will upon death, these trusts remain open until the trust purpose is achieved, such as providing for a beneficiary until they reach a certain age.

Arizona law does not impose a strict time limit, as trusts are designed to carry out the trustmaker's intent which can vary case-by-case. However, trustees have a duty to administer and close trusts in a reasonably timely manner once objectives are met. Working with an estate attorney can ensure compliance.

3) What are the rules for a living trust in Arizona?

Here are some key rules and requirements for creating and maintaining a valid living trust in Arizona:

Trust Formation:

- The trust must be created by a written document signed by the settlor(s) or their authorized agent.

- The settlor must have capacity (be of sound mind) to create the trust.

- The trust must identify the settlor(s), trustee(s), beneficiaries, and the trust's purpose.

- The trust document must comply with all legal formalities, such as having a notary or witness signatures if required.

Trust Funding:

- To be effective, the settlor's appropriate assets must be legally re-titled and assigned to the trust.

- Real estate needs a new deed naming the trust as owner of the property.

- Accounts and investments must list the trust as owner as well.

Trustees:

- The settlor often names themselves as the initial trustee during their lifetime.

- At least one qualified trustee must be named to manage the trust if the settlor becomes incapacitated or dies.

- Trustees owe fiduciary duties to administer the trust according to its terms and act in the beneficiaries' best interests.

Trust Revocation/Amendment:

- For a revocable living trust, the settlor retains the ability to amend, revoke, or terminate the trust while alive and mentally competent.

- The method for modification must follow the process outlined in the original trust document.

Arizona also has laws governing trustee powers, prudent investing standards, asset distribution requirements and more that a valid living trust must comply with. Working with an experienced estate lawyer in Arizona is highly recommended when creating or modifying a living trust.

Can You Change a Living Trust After a First Spouse’s Death in Arizona?

A Living Trust is a great instrument to avoid probate, but what happens after the first spouse dies?

Read our blog to understand what happens to a living trust after a spouses passes away and how that can affect your family and planning.