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Creating a financial plan for the future is always a wise decision. Your estate planning portfolio will comprise several documents, including a living trust and will. However, you might wonder about the difference between a living trust and a will in Arizona and how that affects you. Let this guide help you understand the differences between an Arizona living trust and versus will.
What Is the Difference between a Will and a Living Trust in Arizona?
Generally, if you have a will, you would also have a living trust. These are factors you need to consider when comparing a living will vs a will in Arizona:
Purpose
A living trust vs a will in Arizona will serve different purposes in your estate planning portfolio. A living trust or revocable living trust is a legal entity where you (the grantor) transfer ownership of your assets.
A trustee is appointed to manage the trust for specific beneficiaries. As the grantor, you can also be the trustee and primary beneficiary during your lifetime. This will allow you to maintain control and ownership of the assets.
On the other hand, a will ensures your assets are distributed according to your wishes after you pass away. This is when it becomes effective. It provides clarity and peace of mind, allowing you to specify who will receive what and how. Additionally, a will allows you to appoint a guardian for your minor children, ensuring their well-being is safeguarded.
By naming an executor, you ensure that the terms of your will are carried out efficiently and effectively. Don't underestimate the importance of creating a will – it's a proactive step towards protecting your loved ones and preserving your legacy.
Probate
Probate is a widely discussed topic in estate planning. How a probate is handled by a living trust vs a will in Arizona is something to consider. One of the main benefits of a living trust vs a will in Arizona is that it avoids probate.
Probate is the court-supervised process for distributing your estate after your death. Assets held in a trust are owned by the trust, not the individual. As a result, they avoid the probate process entirely.
A living trust will allow you to have more control over your assets even while you are still alive. This document empowers you to have a say in who manages your assets when you pass by, avoiding probate.
Assets that are passed through a will usually need to go through probate. Keep in mind that this process can be time-consuming and sometimes expensive.
When distributing assets through a will, going through the probate process is unavoidable. Ensuring the proper transfer of assets according to the deceased's wishes might take some time and money.
Privacy
Living trusts offer a level of privacy that wills simply can’t match. Unlike wills, which become public documents upon the grantor's death, trusts remain confidential. Only the beneficiaries and trustees have the legal right to access the trust document. Thus, ensuring sensitive information stays private and protected.
After a will is probated, it becomes a public record. This means that your neighbors, friends, and anyone can access the details of your estate and who receives your assets. Suppose you want your affairs to remain private. In that case, this is something to consider when comparing a living trust vs a will in Arizona.
Date of Effectiveness
A will only take effect when you pass away. Unlike a will, which only takes effect upon death, a living trust becomes effective as soon as it is created and assets are transferred. This means you can rest assured knowing that your assets are safeguarded and managed according to your wishes, even while you're alive.
Asset Management
To ensure your assets are managed efficiently if you become incapacitated, setting up a living trust in Arizona is a wise decision. By including provisions for asset management, you can avoid the hassle of having a court-appointed conservator.
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The focus of a will is primarily on post-death matters, such as distribution of assets and handling of affairs. It does not address asset management in case of incapacity. Incapacity and management are factors to consider when comparing a living trust vs a will in Arizona.
Amendment and Revocation
Living trusts can be amended or revoked by you during your lifetime. Similarly, a will can be revised or revoked by the person as long as they are alive and mentally capable. The ability to make changes ensures that these legal documents accurately reflect one's wishes and provide peace of mind for the future.
Do I Need a Will and a Living Trust in Arizona?
Having a living and a will in Arizona is generally good practice. Since they have different purposes, they cover different parts of your estate plan. Having both will help ensure you have a comprehensive plan.
Do I Need an Attorney to Set up Trust in Arizona?
You should work with attorneys and financial planners with a background in estate planning to set up a trust in Arizona. What you fund a living trust with is important. Funding mistakes for your living trust in Arizona can actually cost you. You might think it's a good idea to place all or most of your assets in a living trust, but this could forfeit certain benefits.
For example, suppose you have an IRA, and you designate your living trust as the beneficiary. In that case, your spouse will lose the benefit of spousal continuance. Spousal continuance allows your spouse to treat the IRA as their own.
Someone without experience in estate planning might assign assets in a living trust that you shouldn’t be there. Also, experts would be able to navigate other factors such as:
Probate Threshold
In Arizona, the probate process has a threshold where assets valued at $75,000 or less won’t undergo a formal probate. This simplifies the court process because it is rapid and reduces the burden on the courts. Even with a small estate, you should still consider a living trust. A rapid, informal probate is still public record, so your affairs will be public.
No-Contest Clauses
Inserting a no-contest clause, also called an "in terrorem" clause, into a will or trust is an option available to provide additional protection and discourage potential challenges or disputes. If a beneficiary decides to challenge or contest the document, including specific provisions, forfeit any inheritance.
This will deter frivolous challenges to your estate plan and preserve your intent. A clause like this can make it easier for your family to accept the terms and maintain harmony among them.
Work with Us to Protect Your Assets in Arizona
Regarding estate planning, it's vital to cover all your bases. While there are distinct differences in Arizona for living trusts vs wills, many opt for both for a comprehensive estate plan. Working with the experts at Asset Preservation Wealth and Tax will help you develop a financial plan for your unique needs.
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Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Stewart Willis, providing such comments, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment, legal or tax advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations for services, execution of required documentation, including receipt of required disclosures. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Any statistical data or information obtained from or prepared by third party sources that Foundations deems reliable but in no way does Foundations guarantee the accuracy or completeness. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD # 175083.
