If you’re reading this, you are likely considering whether to create a Trust. Creating a Trust starts with creating a Trust Agreement, which usually involves other documents in an estate plan. Contemplating whether you should create a Trust is a very important first step.
What is a Trust?
Without getting into too much detail, Trusts are legal entities. They are things because the law says they are things. They are established by agreement from the settlor, who is the person creating the Trust. Settlors start by creating an agreement, which serves as the rules of the Trust. Creating a Trust Agreement is one of the main reasons why any settlor should consider having a lawyer. Our flat fee plan is excellent because you can speak to our attorney as much as you need to get the words exactly how you like, and you don’t need to worry about the fees adding up. Furthermore, settlors usually serve as trustees during life in a revocable living trust. However, settlors designate successor trustees for when settlors pass away or become incapacitated. We can get into more of that if you have questions.
What are the benefits to creating a Trust?
As you probably know, but it deserves repeating, Trusts have several benefits. This is not an exhaustive list, but only some of things that often come into our initial consultation. In general, Trusts are the most adaptable, most cost-effective estate plans for parties that have acquired or plan on acquiring more than a few assets. Trusts aren’t necessarily for the rich, but they don’t make sense for everyone.
First, Trusts are great tools for reducing or eliminating probate costs. When assets are put into the Trust, they become non-probate assets. NOTE: this does not happen automatically once you create the trust. Trustees must put the assets into the Trust.
Second, this brings us to another great benefit, which is ease of managing your assets. Once you, as trustee of your Trust, figure out how to put assets into Trust, then you can repeat the process as you buy and sell assets. This makes Trusts the best testamentary device for those who want to grow their estate over a life-time. Again, you don’t need a lot of assets to start the Trust. For many people, it is a good decision when purchasing a piece of real estate earlier in life. People who purchase real estate in their twenties or early thirties are likely to acquire more assets, and putting items into the Trust helps build a portfolio of assets.
Third, when managing the estate, and as the settlor(s) transition(s) into elderly years that require a special level of care, this plan thinks through that care. This plan thinks through so much more than simply creating a Will that must go through Probate. In short, it involves more parties (i.e. other loved ones) in the estate plan. It is an ideal way to think through more details that make things easier for the loved ones that likely inherit the responsibility of taking care of mom and dad. Plus, it can be a great tool to unify the family in the estate plan, rather than a surprise or point of contention.
Last, Trusts have several tax benefits that are not available if you simply hold property outside the trust, but I will defer to a tax attorney for all the specifics. Just note there are tax benefits.
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How do I know whether I should create a Trust or not?
Again, Trusts are not for everyone. Their creation and administration costs slightly more than creating a Will. When you see the document comparison, you understand why. However, they also save a lot more, when used well.
There is no real definitive dividing line whether a party should create a Trust or simple Will. If there is any determining factor, it might be just a matter of simplicity and particular needs. Wills take care of the general and specific terms that parties want a probate judge to decide on — like where do you want property to go and who do you want serving as personal representative — and there are ways to set-up the estate to minimize the probate costs even with Will plans. Lawyers help you analyze the distinctions between probate and non-probate property, which saves you costs and hassle of going through probate on everything.
Whether you should use a Trust or not depends on what you want to do with your estate.
Good news is we offer free consultations to listen to your special circumstances and help you decide. We are also upfront with our rates. Please take time to briefly fill out the form below and schedule today.
If you haven’t done your estate plan, you can handwrite your Will as a placeholder because handwritten Wills (holographic) are valid in Arizona, and you don’t need witnesses or notary because the handwriting verifies validity.