Can I Have A Living Trust from Out of State in AZ?
Talk to a Wills and Trusts Attorney to see if your out of state trust complies with Arizona laws.
For those looking to create an estate plan, establishing a living trust is a common strategy to manage assets and avoid probate. But if you move to Arizona after creating a trust out of state, will it still be valid? Can you use an out-of-state living trust in AZ?
The short answer is yes, you can have a living trust created in another state work in Arizona. However, there are some important considerations to ensure the trust properly functions under Arizona laws.
Only an estate planning attorney licensed in the state of Arizona will be able to tell you if you revocable living trust or irrevocable living trust complies with Arizona law.
In this article, we’ll examine using out-of-state trusts in AZ and steps to take to update them.
What is a Living Trust?
Before looking at out-of-state trust usage in Arizona, let’s review what a living trust is. A living trust, also called a revocable living trust, is a legal entity you create to hold assets and property during life, then transfer them to beneficiaries upon death outside of probate process and court.
With a living trust:
- You name yourself trustee to maintain control over the assets while alive.
- A successor trustee is named after the current trustee passes away.
- You designate beneficiaries to inherit the trust assets when you pass away.
- You can change or revoke the trust terms at any time since it is “revocable.”
- Upon death, successors trustees you picked distribute assets directly to beneficiaries, avoiding the probate process. Make sure to add your personal property to the trust legal document.
Living trusts are popular estate planning tools because they provide control during life and streamline asset transfers at death. The main benefit is avoiding assets going through probate, which can be costly and time consuming.
Arizona has some of the best laws for a revocable living trust in the US.
Can an Out-of-State Living Trust Work in Arizona?
In general, a living trust created in another U.S. state or jurisdiction can also function legally in Arizona. This is because most states follow the same basic guidelines and laws for trusts under the Uniform Probate Code. As long as the out-of-state trust meets Arizona requirements, it can be valid.
Specifically, for an out-of-state living trust to work in Arizona, it should:
- Be executed properly under that state’s laws, such as being signed and notarized.
- Name an initial trustee and beneficiaries.
- Give instructions for distributing assets upon death.
- Allow you to freely revoke or amend the trust.
Provided these conditions are met, the trust should be recognized in Arizona. You take over as trustee for the Arizona property.
Additionally, Arizona allows non-residents who spend more than 30 days in AZ annually to have their out-of-state trust hold real estate here. This includes homes, rental properties, timeshares, and land.
Steps to Update an Out-of-State Trust for Arizona
While an out-of-state living trust may technically be valid in Arizona, it is smart to update it to align with AZ laws and account for your new residency. This ensures the trust works smoothly. Recommended steps include:
Review Arizona Trust Laws – Read up on current AZ statutes for trusts to see if any provisions need revising to comply with state laws. An Arizona estate planning attorney can advise you on this.
Change Governing Law – Update the trust documents to specify Arizona as the governing law that controls the trust administration and interpretation. Make sure to work with a lawyer that knows Arizona law.
Adjust Trustee Provisions – You may want to designate a new backup or successor trustee who resides in Arizona rather than out of state. This makes sense practically if they need to take over as trustee later.
Retitle Arizona Assets – To avoid any issues, you should retitle assets located in AZ into the name of the trust. This includes bank accounts, vehicles, real estate deeds, investments, etc. Make sure to not change the name of your trust, as well as the date, to avoid extra funding work.
Review Beneficiaries – Look over named trust beneficiaries to see if any changes are needed for Arizona estate planning purposes, like minimizing state estate taxes Most people have their surviving spouse as first beneficiary.
By taking these steps, you can ensure your out-of-state living trust conforms to Arizona laws and accounts for your new residency status. This allows it to effectively operate in AZ. Consult an experienced estate planning lawyer for personalized guidance for your trust document.
Benefits of Using an Arizona Living Trust
In addition to validating an existing trust, there are many good reasons for Arizona residents to create and use a living trust as part of their estate plan. Benefits include:
- Avoiding Probate – Assets in a living trust can bypass probate proceeding after death, saving time and expenses compared to wills.
- Privacy – Trusts are not public record unlike probate proceedings for wills. Trust details remain private.
- Control – As trustee, you maintain control over assets in the trust during your lifetime.
- Incapacity Planning – Successor trustees you choose can take over managing trust assets if you become incapacitated.
- Out-of-State Real Estate – AZ trusts provide an extra layer of protection for owning real property in other states.
- Tax Planning – While not tax entities themselves, certain trusts can be used to minimize estate taxes.
- Protection from Creditors – Trust assets may be shielded from creditors compared to property and accounts owned individually. A regular living trust will not provide creditor's protection.
- Divorce Protection – Keeping assets in a trust helps ensure an new spouse cannot make claims to the property in a divorce.
- Simple Passing – Living trusts allow easy transfer of assets to heirs, avoiding or minimizing fights between family members.
For these reasons, living trusts are highly useful estate planning vehicles for AZ residents looking to reduce taxes, avoid probate, preserve assets, and implement legacy plans.
Alternatives to Living Trusts in Arizona
Living trusts have benefits, but they are not the only option. Here are some other estate planning tools people use in Arizona:
- Wills – More affordable and simple to create than trusts. But assets transfer via probate court.
- Joint Tenancy – Co-owning real estate or accounts with automatic right of survivorship avoids probate. But no control over ultimate asset distribution.
- Beneficiary Deeds – Upon death, transfers Arizona real estate directly to named beneficiaries without probate. Limited uses.
- Payable on Death Accounts – Bank accounts naming a beneficiary to inherit the funds directly upon the owner’s death. For liquid assets only.
- Life Insurance – Proceeds from policies bypass probate and go to named beneficiaries. Requires paying premiums.
Each option has pros and cons for estate planning and probate avoidance in Arizona. Weigh them carefully when creating your plan.
Key Takeaways When Using an Out-of-State Living Trust in Arizona
To summarize the main points on utilizing an out-of-state living trust in Arizona:
- Out-of-state revocable living trusts are generally valid in AZ provided they meet state execution guidelines and allow you as trustee to amend or revoke. Only a licensed attorney will be able to confirm that.
- To function smoothly in Arizona, have an estate planning attorney review and update the trust accordingly, such as retitling assets and designating AZ successor trustees.
- Arizona residents gain multiple benefits from having a living trust, like avoiding probate and maintaining control over assets while alive. Generally speaking our state has some of the best trust laws in the country, take advantage of that.
- Alternatives like wills, joint accounts, beneficiary deeds, and life insurance can also accomplish some estate planning goals.
- Work with a knowledgeable attorney to ensure your trust or estate plan works best for your situation as an Arizona resident.
Proactively verifying an existing trust meets Arizona requirements or creating a new AZ-based living trust enables you to maximize the benefits of trusts and customize your plan.
With proper trust planning and execution, you can avoid probate, minimize taxes, and adequately provide for loved ones after your lifetime.
Call our Wills and Trust Attorneys in Chandler, AZ today!
Citadel Law Firm offers free out-of-state trust reviews. By our experience around 50% of the trusts we review will comply with Arizona law. The other 50% usually need to create a new Arizona living trust.
Call (480) 565-8020 or click here to schedule your free estate planning consultation today. We will be pleased to help.