It can be confusing to figure out if you need a will or a trust if you live in Arizona. To start, what is the difference between a will and a trust? Wills and trusts are both useful legal documents that come together to create a solid estate plan. This post gives an overview of the differences between these two documents, but it is not intended to be legal advice. You should always talk to an attorney before drafting any life planning documents.
What is the major difference between a will and a trust?
Wills and trusts are dynamic legal documents that can be customized to fit many different situations. However, the major legal difference between the two of them is when they go into effect.
A last will and testament only becomes active upon your death. A trust, on the other hand, can go into effect as soon as it’s created.
Because of this difference, a trust allows you to pass ownership and active responsibility for your assets to your beneficiaries before you pass away or become unable to manage them yourself. A last will and testament is typically a simpler document that is used to name recipients of property and guardians of minor children when larger assets aren’t involved.
Which one you choose to create will depend on your circumstances. Working with an attorney can help you decide which one is best for you.
Why should I set up a will in Arizona?
As many as 64% of people in the U.S. don’t have a last will and testament. Most of these people believe it’s not an urgent need. Up to 15% of people don’t think they need one at all.
Unfortunately, it’s never too early to start thinking about how you want to provide for your dependents after you pass away. A last will and testament’s greatest benefit is its ability to name beneficiaries of your property, and guardians for your minor children or incapacitated adults who are dependent upon you. If you don’t define this ahead of time, the state may do it for you.
What’s the difference between a will and a living will?
Some people are confused between a last will and testament and a living will. Although they sound similar, they are actually quite different.
A last will and testament is the one most people know about; it lays out your wishes about the distribution of your assets and your dependents’ care.
A living will is different from a last will and testament, but it’s an equally important document. It outlines your decisions about how you want to handle your end-of-life healthcare. This can include your choices about life support, organ donation, and autopsy. You can find out more about creating a living will in Arizona here.
Living wills and last wills and testaments provide important legal protections. Since they can be relatively simple documents to create, it behooves you to create both of them so you can effectively communicate all of your wishes about end-of-life care and distribution of your property upon death.
How to create an Arizona last will and testament
A last will and testament is easy to create and can be readily changed.
If you’re over 18 and of sound mind, you can draft a will yourself and finalize it by signing it in front of two witnesses. The state of Arizona also recognizes handwritten, or holographic, wills as long as they are signed by you and in your handwriting.
Of course, consulting an attorney familiar with this area of law before you prepare your last will and testament is important. Distributing your assets and making provisions for your loved ones can be impacted by the manner and method of drafting these final documents.
Why should I set up a trust?
For many, having a last will and testament in place along with a trust is a good option. Trusts can be more detailed documents that define the management and distribution of your assets. At a minimum, they provide you with the opportunity to outline:
- How your assets will be held and managed during your lifetime and after your death
- Who manages your assets prior to distribution
- Who receives your property
- When they receive it
- How they can use it
- Specific contingencies of distribution, if any
As noted, trusts go into effect immediately, allowing you to pass management of your assets onto a trustee if you become unable or unwilling to manage them yourself.
Creating a trust can also help your dependents avoid the Arizona court’s probation process, which can delay distribution of property and creates a public record of your assets. And, it may protect larger estates from some taxes.
What are the different types of trusts?
There are various types of trusts that are used depending upon your unique situation.
For example, most people will create a trust that can be changed or added to as their situation changes. This is called a revocable trust, though there are also irrevocable trusts. There are also trusts that are made specifically for families with special needs dependents, blended families, or unmarried couples. We’ll cover all of these types of trusts in more detail in an upcoming post.
Finding the right trust can provide the most protection for you and your unique family. Since there are multiple options, working with an attorney can help you choose the trust that’s best for you.
What should I have?
So, which one is right for you? It depends, but in most cases having both provides the greatest legal protection for you and your dependents. It also provides the most flexibility while avoiding probate, which is a primary goal of many who seek to create estate documents. Individuals with limited assets who intend to distribute all of their assets at death, however, may have all their needs met with a simple will.
If you’re still not sure if you need a trust, ask yourself the following questions:
- Do I have minor children?
- Is my estate large enough that it will be subject to estate taxes?
- Do I have any children, grandchildren, or other dependents with special needs?
- Do I want to avoid public declaration of my assets?
- Would the disbursement of my assets be contentious in any way?
- Are there any specific limitations I would place on the distribution of my property?
If you answer yes to any these questions, or aren’t sure, it’s wise to talk to an attorney. An attorney can explain the different types of trusts and wills and help you decide which ones would work best for you. They can also discuss current estate tax laws, as these change frequently.
If you need help creating your Arizona last will or trust, or have legal questions about the difference between a will and a trust, contact Victoria Ames at ARTEMiS Law Firm today to discuss your options.