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You know by now that trusts are a great way to transfer your estate to loved ones while reducing taxes and the need for probate. Along with your will, powers of attorney, and advanced health care directives, you can use wills to create a strategic and efficient estate plan. But mistakes in your will could be costly and tie up your assets for a considerable amount of time after your death. Don’t leave it up to chance- hire an experienced professional to create your estate plan. To discuss our estate planning services and receive an affordable quote, call 480-833-8000 to schedule your free consultation with our estate planning team today!
Do I need a will or a trust? How do I know what I need?
Once you start to become established in life, acquire some possessions, and possibly even start a family, you should begin thinking about creating your estate plan. This can give you peace of mind knowing there is a nest egg to help provide for your loved ones after you pass away. But transferring assets to your family members after you pass away through your last will and testament may not be the most efficient way. Depending on your circumstances and needs, it may serve you well to transfer some or all of your estate through carefully planned trusts. An Arizona estate planning attorney can help you determine the most efficient way to use trusts in your estate plan.
What are Trusts?
A trust is an instrument used to transfer assets from the person who creates the trust, or the trustor, to one or more beneficiaries. The trustor is also commonly referred to as a grantor or settlor. Once the trustor has deposited assets into the trust, it will go under the control of the trustee. The trustee will manage the trust, keeping it maintained and profitable, until the time comes for the trust to transfer to the beneficiary. The trustor can be the trustee of the trust, or someone else can fulfill those responsibilities. The trust can transfer upon the trustor’s death, or when a different condition is met.
There are several types of assets that you can consider contributing to a trust. The simplest way to fund a trust is with the funds from your bank account, but you aren’t limited to just cash. Real property, or real estate, such as houses and land can be used to fund a trust. Business interests and assets can also be contributed to a trust. You can contribute your valuable possessions, antiques, collectibles, and other keepsakes to your trust. Investments like stocks and bonds can also be used to contribute to a trust. You can also use certain life insurance policies to fund a trust.
REVOCABLE TRUSTS vs. IRREVOCABLE TRUSTS
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If you’ve been considering using trusts in your estate plan, you have probably heard them referred to as either revocable or irrevocable. These terms refer to whether or not the trust can be revoked, or canceled. Each type comes with its own benefits and disadvantages, which you should fully understand before creating a trust. If you need more help deciding, call our office or use our online form to schedule your free consultation.
Many people who choose revocable trusts in their estate plans do so because they prefer to have control over the contributed assets while they are still alive. Revocable trusts can be changed or canceled as the trustor sees fit. Whether it’s a marriage or divorce, the birth or disowning of a child, revocable trusts offer more flexibility than irrevocable trusts. Another benefit of using a revocable trust is that you, the trustor, can also serve as the trustee. You can still use someone else, or list someone to serve as your successor for when you pass away or if you become legally incapacitated. That is why so many people use revocable trusts to bypass the probate process. Because revocable trusts don’t go through probate, it speeds up the transfer process and protects the privacy of everyone involved.
As you may have guessed, irrevocable trusts differ from revocable trusts in that they can’t be changed or modified. Any funds, real estate, or possessions added to an irrevocable trust are there to stay, until the time comes for the trust to transfer to the beneficiary. You may be wondering why someone would want to establish an irrevocable trust rather than enjoy the flexibility of a revocable trust. Just like revocable trusts, irrevocable trusts help your loved ones avoid probate and taxes after you pass away. Similarly, they also help protect privacy. The assets in them are protected from your creditors.
Pros and Cons of Using Trusts in Your Estate Plan
Every estate planning instrument has its advantages and disadvantages, and trusts aren’t excluded. You will need to weigh them carefully before creating a trust, in addition to deciding whether you would like the trust to be revocable or irrevocable. For guidance with the process, call our firm to speak with one of our experienced Arizona estate planning lawyers.