Arizona Living Trust Rules and Law: What Are They?
Living trusts are a great way to help protect and transfer assets. Here are the basic living trust rules and laws in Arizona.
According to one survey, 67% of adults in the U.S. have no estate plan. This means the court will divide their assets when they die following Arizona law if they live in the sun state.
A will is part of any basic estate plan and a good starting point. You can't beat the protection of a living trust in Arizona. The best way to ensure your beneficiaries receive your assets is to take advantage of the revocable living trusts law in our state.
An estate planning attorney can help you create a revocable living trust to avoid probate. The probate process is not only time consuming, it is stressful and costs more money than creating a living trust. A revocable living trust is an important estate planning tool, specially if you become incapacitated.
Living Trust Rules
The word trust makes people think of a legal document rich people need. In reality, it is a contract to direct the distribution of assets to beneficiaries.
The threshold for probate in Arizona is pretty low. Depending of your age, if you own property in Arizona (like a house or land), if you have bank accounts or investments a living trust in Arizona may be your best option to avoid the probate process. Estate planning lawyers will know how to give you the correct advice.
Beneficiaries are who receive assets from the trust. A trustee is who the settlor (trust creator) designates to manage the trust after their death. Trustees must follow Arizona trust rules, laws, and instructions within the trust.
Arizona trusts require:
- The settlor creates a trust
- Settlor indicates their intention to create a trust
- A trustee is a person or professional fiduciary administering the trust
- The trust must have at least one beneficiary receiving trust assets
- Duties the trustee must perform
- A sole trustee may not be a sole beneficiary
Arizona law allows a grantor to be a trustee and beneficiary, but they cannot be the only beneficiary if they are the trustee. This is because Arizona law ARS §14-10402(a)1-5 requires a split in the legal and equitable title. This means the legal title vests in the trustee and the equitable title vests in the beneficiaries.
The trust's purpose is to preserve your assets for future generations by avoiding probate and providing protection against creditors, divorce, or other unexpected events. When meeting with a trust attorney in Chandler, AZ, they will discuss trust types:
- Irrevocable Trust - no changes can be made following the creation
- Revocable Trust - the creator may change or revoke the trust at any time
- Living Trust - goes into effect immediately upon creation, when you are alive
- Testamentary Trusts - go into effect when the person named in the trust passes away and it is created by your will
A revocable living trust is the most flexible option and the most common type of trust we create for clients. You can maintain control over your assets and make changes during your lifetime. You can also make the trust irrevocable after you pass away to make sure your wishes are fulfilled.
You family and your loved ones will appreciate clear guidelines in how to handle your estate. It is also important to find a lawyer that you like as the lawyer and the law firm will be the ones taking care of your family and loved ones in one of the most difficult moments of their lives.
Arizona Trust Code
The Arizona Trust Code, ARS §§14-10101-14-11102, establishes default and mandatory rules for creating and managing a trust. This includes the trustee's duties and powers, the power of the court to modify or terminate a trust, and more.
The trustee is bound by law to act in good faith. They must adhere to the trust's purpose unless it does not comport with Arizona law.
The court's role in the administration of a trust is outlined in §14-10201. Under normal conditions, a trust is not subject to supervision under the probate court. Courts may intervene if an interested person files judicial proceedings regarding trust administration.
A trustee is entitled to reasonable compensation, even if not shown in the trust. Under specific circumstances, the court may adjust payment to a higher or lower amount per ARS §14-10708.
Living Trust Benefits
When your estate planning in Chandler, AZ, includes a living trust, you benefit by bypassing probate. Your assets transfer directly to your beneficiaries. You need to make sure your living trust in Arizona is properly funded. Part of funding you revocable living trust is the transfer of assets to the trusts in Arizona. Real estate, personal property, any financial assets (like ban accounts and retirement accounts), need to be put in trust for it to avoid probate. Trusts in Arizona are very common as the trusts law in Arizona are some of the best in the country.
Your trust designates how and when beneficiaries receive their inheritance. You may include stipulations for distribution, such as after college graduation or after reaching a specific age. You can also have specific designations in how to treat a minor children and who should care for them and their assets. You can even set up a different trust for your children.
Another benefit of a living trust is that probate is public, but trusts remain confidential. The details of your last will and testament are publicly available during the probate process, including details of your assets and their distribution. If a portion of your estate goes through probate, items in the trust remain confidential.
You unfortunately it is too late to create a trust and you already have to go through probate you can hire a probate lawyer from Chandler to help you with the process. Lawyers know what they are doing and they will guide you to minimize the financial liability when you at as a fiduciary during the probate process.
Estate Tax Considerations
Most people in Arizona do not need to worry about paying federal estate taxes. Those only apply if the estate is worth $12 million or more. For 2022, the estate tax rate is 18% to 40%, depending on how much your assets exceed $12 million. Arizona does not have an estate tax.
The assets in a revocable trust count toward the overall value of your estate. Consider an irrevocable trust if you have a high net worth under federal tax law.
Assets you have in a revocable living trust are at risk of being taken by creditors, and the government considers them when calculating eligibility for Medicaid assistance. If you need to enter a nursing home, you must deplete your funds before receiving government assistance. This can rapidly decrease the assets you leave your heirs.
Assets in an irrevocable trust are separate from your estate. They cannot be taken by creditors or affect your eligibility for Medicaid and other government assistance. Contact an estate planning attorney to determine whether a revocable or irrevocable trust is in your best interests.
How to Create an Arizona Living Trust
When creating a living trust in Arizona, your attorney will assist you in determining the type of trust that fits your needs.
You must decide who your successor trustee will be. This is the person who administers the trust after your death. Select a second successor trustee in case your first choice cannot serve.
List your beneficiaries. These are who receive your assets upon your death.
You need to determine what assets will fund the trust. This is a step you complete after the attorney creates the trust.
Some people use do-it-yourself online trusts and wills, but these do not provide the unique details or legal advice you get from an estate planning law firm. Usually the trusts will not be properly set up and funded, and a probate will still be needed. In some really bad cases litigation will be needed.
Once your trust is complete, you must sign it before a notary public. You will then need to change the title of any homes, vehicles, bank accounts, or other assets you transfer ownership of to the trust.
Do I Still Need a Will?
Yes, you need a will, even if you have a living trust. Pour-over wills cover assets you do not have in your trust. You can designate assets in your will for transfer to your trust, but they must still go through court before the transfer of assets to the trust.
Your trust attorney will ask you about creating a will as part of your estate plan. If you are meeting with a will lawyer in Chandler, they may recommend you include a living trust in your estate planning.
Feeding Your Trust
The purpose of the trust is to protect your assets from probate. Items to consider feeding to your trust include:
- Real estate, even if mortgaged (property);
- Security accounts, including stocks, bonds, mutual funds, and bank accounts;
- Small business interests and LLC shares;
- Copyrights and patents;
- Valuable works of art, antiques, furniture;
- Precious metals and jewelry;
- Collectible items such as stamps, coins, figurines, antique vehicles.
You may transfer items into and from the revocable living trust at any time. Your personal property should be assigned to the trust as well. Some personal property may not have financial value but it may have personal value. You can also create a generation skipping trust that allows the assets in your trust to go to your grandchildren and on.
Protect Your Life Assets
When you meet with an estate planning lawyer in Chandler, they will explain the best way to protect your assets. They will ensure your estate documents comply with Arizona living trust rules and laws. They will help you decide between an irrevocable living or revocable living trust. They will ensure that your assets are distributed according to your wishes.
Citadel Law Firm attorneys deal in probate, estate planning, wills, and trusts. Call (480) 565-8020 today to schedule a free consultation. Or click on the link below to schedule. We will love to help you.
To learn more about the different types of trust in Gilbert, AZ, click here.