Family Trust vs. Living Trust in Arizona

A recent study asked participants how they'd define "a life well lived." 94% of them responded by saying having family and friends that love them. Over 66% hope to be remembered by the time they spent with their loved ones.

This feeling continues after death. During estate planning, many choose to create a trust that gives their assets to those they love most, whether that is a surviving spouse or a family member or even non family members.

The process can get confusing because there are several types of trusts to choose from. Read our guide to the differences between two of the most common, a family trust vs living trust.

Pros and Cons of Trusts

There are certain disadvantages and advantages that apply to all trusts. Knowing these can help you decide if you should take the time to choose any of them.

Creating trusts is an easier and more effective method of handling assets than probate. They can be given to care for your loved one's medical needs or during certain stages of their lives.

They protect against creditors and lawsuits as well as sudden disability if properly structured to achieve that. Your trust's assets remain available until your death to access whenever you or your beneficiaries need them.

Trusts are more private than a Last Will and Testament because they won't ever enter the public record. No one has to know how your assets are distributed except you and your beneficiaries.

Without a revocable trust, you may have to go to probate court. The process can be expensive and take months or years to complete. Your trust assets get put on display and they will be public record.

There are disadvantages to consider before you choose a trust. It requires proper funding, can make you ineligible for government benefits like Medicaid, and opens you up to negligence if you choose the wrong trustees.

They say you shouldn't put all of your eggs in one basket, and you can't place all of your assets into a trust as well, especially to try and avoid the probate process. Find another method to distribute:

• Retirement accounts
• HSAs or Health Savings Accounts
• Active financial accounts
• UGMA/UTMA accounts
• Vehicles

An experienced estate planning lawyer will be able to advise you on the best way to structure living trusts or family trusts, or even irrevocable trust. Irrevocable trust assets will be protected from creditors after a look back period, or if the assets held in trust are inherited.

What Is a Living Trust?

A living trust, as its name suggests, is a type of estate planning document that you can set up while you're still alive. This is one characteristic it shares with another common estate planning document, the living will. They have other similarities and differences, but mainly differences.

A living will is a legal document that outlines your last wishes related to healthcare. It specifies your preferences for the end of your life. These include whether you want life-sustaining treatment and who should take care of your loved ones in a medical emergency. It's important to have if you believe you may ever become unable to communicate your preferences.

A living trust is also different from a testamentary trust. These are set up through a last will and testament. They don't come into full force until the grantor dies and the will goes to probate. A testamentary trust is created during the probate process.

What is a living trust, then? It's a document that determines how your assets will be distributed. It puts them into an account managed by a trustee that you, as the grantor, appoint. They'll receive power of attorney if you become incapacitated. However, do not get this confused by an irrevocable trust. Living trusts and irrevocable trusts are very different.

What's a Family Trust?

A family trust is a specific type of living trust. This trust created is to manage your assets after you're gone. The difference is that the beneficiaries are always family members.

The grantor gets to decide which family members are part of the trust, how much of the estate they receive, and when they receive it. Perhaps they'll receive a certain amount when they meet life milestones such as having a baby or getting married. Perhaps a certain amount is set aside to provide for family members with special needs.

Usually family trusts are set up when a first spouse passes away. The surviving spouse may received income from the family trust but they may not have access to trust property.

Family members can even be trustees and manage the distribution of your assets. This does present the potential for conflicts of interest when handling assets, and they won't have the legal knowledge that a professional would. Consider a professional trustee as a co-trustee if you go down this road.

Family Trust vs. Living Trust

Both options are common types of revocable trusts. This means that they can be altered at any time before or after the grantor has died. It makes them more flexible and adaptable.

The primary difference between a family trust vs. living trust is who they benefit. The latter can include almost anyone as a beneficiary, including pets and charities. The latter almost always includes family members and only family members.

A living trust is made during the grantor's life and details how they want their assets distributed after they die. When they die, the distribution of their assets may be a quick process. It's all laid out in the document, and all the trustees and other other relevant personnel have to do is follow it.

Family trusts are meant to have a longer lifespan and have more long-term goals in mind. They can cover how the grantor's assets are distributed throughout the entire lifespan of their family members. A dynasty trust covers generations and generations of the family, but these are rare in low-income households.

35% of Americans were exposed to conflict from their friends or other family members during estate planning. 53% chose to create a trust to ease the tension.

A revocable family trust is not the best option if this is your goal because it's open for debate. Go for irrevocable trusts that cannot be changed instead. They'll have to accept your terms, whether they like it or not.

Some states use testamentary trust more than Arizona.

Where to Get Estate Planning Help

Trusts are an effective way to distribute your assets and avoid probate after your death, but even they present a large menu of choices. Even ones with names that seem interchangeable aren't. Knowing the difference between terms such as family trust vs living trust helps you choose the right option for you.

A living trust is made to hold your assets while you're alive and determine where they go after your death. A family trust is similar but only lists family members as beneficiaries. Talk to an estate planning attorney today to figure out you estate plan.

Contact us at Citadel Law Firm today to begin your estate planning journey. Our estate planning attorneys in Chandler will be pleased to help. Call (480) 565-8020 or click here to schedule your free estate planning consultation.

We can help you with family trusts, living trusts, an irrevocable trust, a revocable trust or a testamentary trust. We can make sure the surviving spouse will get the right assets according to your wishes. When that spouse dies we can make sure assets are than assigned correctly.

We can advise you on the best successor trustee to use to make sure your family and family trust are managed correctly. Please call today, we will be pleased to help.