Revocable Living Trust

Can you Have More Than One Trust in Arizona?

Can you Have More Than One Trust in Arizona

A living trust is a great instrument to avoid probate in Arizona. Are you allowed to have multiple trusts in Arizona?

Sometimes clients want to understand if they are allowed to have multiple trusts, either a revocable living trust or an irrevocable trust, in Arizona. Read our blog article to understand more about the subject.

Estate planning with trusts is a valuable tool for those looking to protect their assets and carry out their wishes after passing away. In Arizona, trusts are particularly useful for avoiding the often costly and public probate process. But what if your estate planning needs are more complex? What if you have multiple goals for different portions of your estate?

If you are reading this article we assume you are familiar with the purpose of trusts. We will not spend time explaining what is a revocable living trust and what is an irrevocable trust. We will go directly to the subject. Are you allowed to have more than one trust in Arizona? Lets not sugarcoat it, the answer is YES.

Why you as an individual would do that though? Keep reading our article to understand when having more than one trust is important. You should also be able to understand how can an experienced estate planning lawyer help you have the best estate planning strategy for your life situation, your family and your assets. Enjoy!

Why use multiple trusts in Arizona for asset protection?

There are several compelling reasons why you may want to establish more than one trust as part of your comprehensive estate plan in Arizona. Some of the key advantages of using multiple trusts include:

  • Asset Protection for yourself and beneficiaries

One key reason to establish multiple trusts is for asset protection purposes. Certain types of trusts, such as domestic asset protection trusts or spendthrift trusts, can shield your assets from potential creditors, lawsuits, or even a beneficiary’s poor financial decisions. By segregating high-risk assets like a business or investment property into a separate trust, you can limit your liability and safeguard the rest of your estate. This provides significant creditor protection.

  • Estate Tax Planning

Utilizing multiple trusts can also provide significant estate tax benefits, especially for married couples. An AB trust, also known as a credit shelter trust, allows a couple to effectively double the amount of assets that can pass to their beneficiaries free of federal estate taxes. Additionally, establishing various irrevocable trusts such as the 'ILIT' can be beneficial for estate tax purposes.

  • Blended Family Estate Planning

In blended family situations, it’s common to create separate trusts for each spouse’s assets to ensure their respective family members inherit as intended. Most of the time we create a separate trust for the surviving spouse, after the first spouse passes away, and a trust for the children of the deceased. This ensures that intended beneficiaries are provided for according to the estate plan.

  • Special Needs Planning

For parents with disabled children, establishing a special needs trust is crucial to provide for the child without jeopardizing eligibility for government benefits. Irrevocable trusts are often used in this context to ensure long-term care and financial stability.

  • Charitable Giving

Those with philanthropic goals may choose to create a charitable trust to support their chosen causes while potentially generating an income stream and tax benefits.

  • Asset Management

Segregating different types of assets into separate trusts can simplify management and investment strategies tailored to each asset class. Setting up multiple living trusts may be beneficial depending on the individual's circumstances.

  • Privacy and Control

Trusts offer greater privacy than a will, which becomes public record during probate. Trusts also allow you to maintain control over how assets are managed and distributed.

  • Personal Residence Trust

A personal residence trust can be useful for individuals who want their beneficiary to use and enjoy their home for their lifetime, and then pass the property to someone else upon their death. This is particularly beneficial in the case of a second marriage where the trust permits the surviving spouse to remain in the home during their lifetime, after which the property passes to the homeowner's children.

Can you have more than one type of trust in AZ?

Yes, you can absolutely have more than one type of trust, including a revocable trust, in Arizona as part of your comprehensive estate plan. In fact, utilizing multiple different types of trusts is quite common for those with complex financial situations or specific goals they want to achieve. The introduction rightly points out that some individuals choose to establish multiple trusts as an added layer of security and protection for their investments and assets.

Having multiple trusts allows you to segregate assets based on their intended purpose and implement customized provisions for how those assets will be managed, invested, and ultimately distributed to beneficiaries. An experienced estate planning attorney can guide you in strategically using trusts to maximize benefits while ensuring compliance with Arizona laws.

For example, you may have a revocable living trust acting as the main vessel to avoid probate and provide for your spouse and children after you’re gone. But within that, you could have separate sub-trusts established, such as:

An irrevocable life insurance trust to remove the death benefit from your taxable estate.

A qualified terminable interest property (QTIP) trust for your current spouse while preserving assets for children from a previous marriage. (Great for blended families).

A special needs trust dedicating funds for a disabled child or dependent without impacting their eligibility for government benefits.

A charitable remainder trust that pays income to beneficiaries with the remainder going to a chosen charity or foundation after a set term.

The combinations are flexible based on your individual needs and goals related to taxes, asset protection, beneficiary situations, and charitable intentions. Multiple trusts provide enhanced flexibility, control, and strategic value when structured properly as part of a holistic estate plan.

What Are The Different Types Of Available Trusts? What Is Their Purpose?

There are indeed many different types of trusts available in Arizona, each with its own purpose and functions. You provided a good overview of the main trust categories - revocable vs. irrevocable and living vs. testamentary. Let me expand on the various trust types and their typical uses:

Revocable Living Trusts

  • Usually can be amended or fully revoked by the grantor during lifetime.
  • Avoid probate and provide for unified management of assets.
  • Common for basic estate planning to transfer assets upon death.
  • Great for young families that just started having children.

Irrevocable Living Trusts

  • Cannot be modified or revoked by grantor once established.
  • Used for asset protection, tax planning, charitable giving and elder law planning.
  • Examples: life insurance trusts, qualified personal residence trusts

Testamentary Trusts

  • Created by will provisions and funded at grantor's death.
  • Can accomplish similar goals as living trusts, but no probate avoidance.
  • Common for minors, special needs beneficiaries, spendthrift protection.

Asset Protection Trusts

  • Domestic or offshore to insulate assets from creditors, lawsuits.
  • Arizona allows domestic asset protection trusts but there is usually a 5 year look back period.

Special Needs Trusts

  • Supplement care without disrupting beneficiary's eligibility for public benefits.
  • First-party or third-party depending on source of funds.

There are also more specialized trusts like qualified terminable interest property (QTIP) trusts for spouses, generation-skipping trusts to leverage estate tax exemptions, gun trusts to comply with NFA regulations, and more.

The key is that trusts are incredibly versatile and customizable. Multiple trusts with different structures and provisions can be combined to accomplish an integrated set of estate planning goals related to taxes, asset management, beneficiary protection, and wealth transfer.

Trust and Estate attorneys in Chandler, AZ that you can trust.

Are you interested in working with an trust and estate attorney that can create a tailor made solution for you and your family. We can help you with legal answers. Citadel Law Firm PLLC will be pleased to help.

Call (480) 565-8020 if you wish to schedule a free estate planning consultation today. If you prefer click here to schedule your free estate planning consultation. We will be pleased to help.