Living trusts allow you to protect your loved ones both during your lifetime and after you pass away, while also affording additional protections that a last will and testament alone simply does not provide. You can learn more about wills here.
What is a living trust?
A living trust is a written legal document that you can create during your lifetime that spells out your desires with regards to your assets, dependents, and heirs. Unlike a will, a trust can be used for your benefit during your lifetime and then transferred to a designated beneficiary at the time of your death. New assets can be added at any time. The identities of who is to benefit from the trust can be changed anytime during your lifetime. A living trust is sometimes also called an “inter vivos” or “revocable” trust. A trust holds the “estate” of a person, and that estate is managed by the “trustee” of the estate.
There are a few key terms that can help you better understand how a living trust works.
An estate is the sum of a person’s assets – their legal rights, interests, and entitlements to property of any kind – together with all of their liabilities at that time. An estate may consist of:
– Real estate
– Insurance benefits
– Business interests
– Intellectual property interests
– Any other assets
A trustor is the individual who owns the assets to be put into the trust and then transfers them to the trust. During the trustor’s lifetime, the trustor is often also the trustee of his or her own estate and also the beneficiary of the trust.
A trustee is the individual person or entity who controls the estate or has the powers of administration of your trust. During a trustor’s lifetime, the trustor generally acts as his or her own trustee and uses the assets of the trust for his or her own benefit. The trust documents identify who will be the successor trustee to take over the management and administration of the trust should the trustor no longer be willing to manage their own trust or becomes unable to do so as a result of incapacity or death. The appointed successor trustee may be a family member, a close friend, a group of individuals, a professional fiduciary, or even a financial institution.
The trustee has a legal obligation to manage and administer the trust solely for the purposes specified in the document.
Why should I get a living trust?
You do not need to create a trust, however, there are multiple benefits to doing so. The most common one is to avoid probate. By avoiding the need to go through probate in the court system, your trust provides you privacy. A living trust is distributed privately by your trustee, whereas a will must be submitted to the court and administered as part of a public proceeding.
Another significant benefit of a trust is the flexibility to manage distributions to your beneficiaries. Living trusts can be set up in numerous ways to deal with nearly every imaginable situation, including:
– Multiple distributions over time
– Contingent distributions
– Establishing protections for minor children and the assets left for them
– Provisions for loved ones with special needs to protect their interests and access to benefits
And, a trust also allows you to set up protections for your assets in the case you become incapacitated.
Types of trusts
There are different types of trusts that you can create. Which one you choose will depend on your specific circumstances and needs. For more complicated cases, an attorney can help you decide on the option that works best for you.
Different types of trusts include:
– Revocable trusts
– Irrevocable trusts, also called irrevocable living trusts
– Testamentary trusts
– Family trusts
– Special needs trusts
A revocable trust is one in which its provisions can be altered or canceled depending on your wishes. During the life of a revocable trust, any income earned is distributed to the grantor, and only after death does the property transfer to the trust’s beneficiaries. The majority of living trusts are revocable.
On the other hand, an irrevocable trust cannot be modified or terminated without the permission of the beneficiary. Once assets have been transferred into the trust, the grantor effectively removes her or his rights of ownership to the estate. This is the case whether the trust becomes effective at the grantor’s death, known as a testamentary trust, or if it’s created during the lifetime of the trust’s grantor.
A testamentary trust is a trust that forms upon the death of the grantor. It is typically specified in the person’s will, though a will may contain more than one testamentary trust and it may address all or any portion of an estate. A testamentary trust is also sometimes referred to as a will trust or a trust under will.
A family trust is often intended to benefit the children and descendants of the trust’s grantor. A family trust may designate beneficiaries both within or outside of the family.
Special needs trusts
Finally, a special needs trust, or supplemental needs trust, is a specialized legal document that is designed to benefit an individual who has a disability. A special needs trust can be a stand-alone document, or it can be part of a larger estate. This trust allows a person with a qualifying disability or illness to have an unlimited amount of assets held in a trust for his or her benefit. Further, these assets are not considered countable assets when qualifying for government benefits like:
– Supplemental Security Income (SSI)
– Vocational rehabilitation
– Subsidized housing
– Other benefits based on need
While they’re not yet available in Arizona, ABLE accounts could allow for tax-exempt savings accounts for disability-related expenses. Find out more about these from the Arizona Developmental Disabilities Planning Council.
ARTEMiS Law Firm attorneys has advanced experience with special needs cases, based on their own experiences raising children with special needs. The standard, cookie-cutter approach to a trust often isn’t enough when it comes to special needs trusts. Because of this, we dedicate special attention and time with these cases.
Creating a trust in Arizona
There are multiple ways to create a living trust, and which one you choose will largely depend on your own circumstances and situation. For simpler cases, filling out living trust forms online may be a good choice. You can find many of these options for your state with a simple web search.
Those who have complicated or contentious estates, or those who want an additional layer of protection, may want to talk to a trust attorney for more help.
ARTEMiS Law Firm specializes in creating living trusts that work for you and your situation. With advanced experience in estate planning and family law, we can help you create a trust that provides the best protection to you and your loved one. Fill out our form to get started or give us a call at (480) 718-7545.