Experienced Arizona Ancillary Probate and Trust Attorney Arizona Ancillary Probate Lawyer Matthew L. Howell Attorney at Law
Arizona Real Estate Trust Attorney
Arizona Ancillary Probate Specialist

Frequently Asked Questions And Answers for:

Living Trusts and the Estate Plan
(See Trusts in general)

  1. WHAT IS THE FUNCTION OF A REVOCABLE LIVING TRUST IN MY ESTATE PLAN? -- Many clients prefer to establish an estate management mechanism that governs the handling of their property during life as well as providing for its management and distribution upon death. Upon establishing the trust the clients immediately transfer legal title to all (or most) of their assets to themselves as trustees to manage it for their sole benefit during life and to name successor trustee(s) to manage and distribute it at death. When the client dies all trust property is managed as a "trust estate", not a probate estate, thus avoiding probate court administration. The trust also allows continuous property management for the benefit of any incapacitated trust beneficiaries.

  2. WHEN SHOULD I CONSIDER MAKING A REVOCABLE LIVING TRUST PART OF MY ESTATE PLAN? -- A client should consider establishing a living trust under any or most of the following circumstances:

    a. Any time the clients' estate is sufficiently large (or complicated) enough to justify the additional cost of establishing a trust estate as opposed to a probate estate or where the use of other (non-trust) probate avoiding estate planning procedures are not safe or practical.

    b. Any time married clients' combined estates are subject to significant state tax liability. This has become less of a problem for most clients since effective 2015 each decedent may exempt $5,430,000 from federal state taxes. Also Arizona does not impose an estate, inheritance or gift tax.

    c. Any time the client seeks to simplify the current estate management by combining the management of the overall estate property into one governing (trust) mechanism instead of having assets spread out under different title designations.

    d. Any time the client seeks to simplify the after death (or after incapacity) estate management by allowing successor trustees to merely succeed to all trust assets for faster, simpler and more efficient estate administration.

    e. Any time the client wants to avoid delays, costs, and difficulties caused by at death probate court administration, and other convenient, safe, probate avoiding mechanisms are not practical.

    f. Any time the client wishes to ensure confidentiality in the administration of a trust estate rather than a probate estate because a client's probated will (unlike a trust) becomes a matter of public record.

    g. Any time a client, due to complexity of assets or special administrative requirements, would like a professional trustee to provide, unique, expert estate management services.

    h. Any time a client has minor, or adult handicapped beneficiaries, or those with other special circumstances, who need to have their trust beneficial portion maintained, protected and managed by a successor trustee.

    Will Alternatives, Real Estate Trust Plans

  3. WHAT IS THE ALTERNATIVE TO THE TRUST AS PART OF MY ESTATE PLAN? -- The basic alternatives are as follows:

    a. The Will alternative--The client can die with all assets titled in his or her sole name and according to the court probate process have that property distributed to the beneficiaries named in the will. If the estate qualifies as a small estate and the will does not have to be probated, the beneficiaries named under the will are still entitled to the estate.

    b. The non-Will alternative (dying intestate)--The client can die with all assets titled in his or her sole name and according to the court probate process have the property pass to the client's closest next to the kin under Arizona intestacy statue.

    c. The non-trust (or real estate trust) probate avoiding strategy--In some cases the client can effectively structure his or her estate so that some or all of the property is held in assets in which an automatic beneficiary designation goes into effect at death. Examples of these assets include, joint tenancies, pay on death designations, trust bank accounts, transfer on death brokerage accounts, designated (contractual) beneficiaries of insurance products and individual retirement accounts, etc. However, for many reasons, the client's house should not be titled in joint tenancy with right of survivorship, with anyone other than the client's spouse. Although a simple real estate trust or beneficiary deed may solve this problem usually, it is advisable for the client to sign a last will and testament as part of this plan.

  4. WHAT IS INCLUDED IN THE TRUST VS. REAL ESTATE TRUST PLAN? AND WHAT ARE THE RELATIVE COSTS? --

    a. The Living Trust plan consists of the following documents (including attorney conferences necessary to discuss and implement the plan and recording of deeds/assignments): (a) Revocable Living Trust, (b) deed(s)/assignments to (Arizona) real estate, (c) last will(s) and testament, (d) personal, financial and medical powers of attorney, (e) living will(s) declaration, (f) community property agreement (husband and wife trust only), (g) funding affidavits and trust explanatory letter; which starts at about $1,200.00;

    b. The last will and testament plan consists of the following documents (including attorney conferences necessary to discuss and implement the plan: (a) last will(s) and testament, (b) personal, financial, medical powers of attorney(s), (c) living will(s) declaration; which starts at about $400.00;

    c. The real estate trust plan consists of the following documents (including attorney conferences necessary to discuss and implement the plan and recording of deeds\assignments): (a) Revocable Living (Real Estate) Trust, (b) deed(s) /assignments to (Arizona) real estate, (c) last will(s) and testament, (d) personal, financial, medical powers of attorney(s), (e) living will(s) declaration; and starts at about $500.00.

    ANY DOCUMENT WITHIN THE ABOVE PLAN(S) THE CLIENT DOES NOT NEED OR WANT (E.G. DEED, POWER OF ATTORNEY) CAN BE DELETED AND THE PRICE REDUCED ACCORDINGLY.

  5. HOW MUCH ADMINISTRATION IS INVOLVED AFTER THE TRUST IS SET UP? -- Once the trust is set up the first thing the client needs to do is to ensure (subject to certain exceptions discussed with the attorney) that all assets are titled in the trust. The attorney will have the client sign deeds and assignments transferring all Arizona real estate assets into the trust, but the client needs to take other steps to ensure that title to the other assets are transferred in the name of the trustee. Thereafter, the client(s) can usually manage the trust without any further difficulty; they merely sign documents pertaining to their finances as trustee(s) rather than individuals. Similarly, the client files income tax returns the same as before the trust was set up; and all trust income is taxed in the trust the same way it would be if out of the trust. Until major changes in estate circumstances occur, namely, those requiring a trust amendment, the attorney does not need to be consulted, but is available (often without charge) for routine questions about trust administration and the overall estate plan.

  6. WHAT HAPPENS WHEN THE TRUST CLIENT DIES? -- This depends on the type of trust the client(s) has. In the case of a single settlor client, or on the death of a spouse settlor in an A/B type trust, or on the death of the surviving (spouse) settlor client, the client's named successor trustee(s) needs to consult the attorney to properly administer the trust estate. (See #7 directly below.) However, upon the death of a spouse settlor, in a non-A/B type trust, one only has to prepare and record a successor trustee affidavit to show that the surviving spouse settlor is now the sole trustee.

  7. WHAT DOES AT DEATH TRUST ADMINISTRATION REQUIRE?

    DEATH OF SINGLE SETTLOR OR A SURVIVING SPOUSE SETTLOR -- Administration generally requires (a) notification of beneficiaries of trust administration, (b) compiling and sending a copy of the at death inventory of trust assets to beneficiaries, (c) payment of all trust final debts and administration expenses (appraisal costs, expenses to maintain trust assets until final distribution, including trustee, attorney, accountant, etc. fees), (d) filing the deceased settlor's final personal income tax returns, (e) filing the trust's income tax return, (f) selling assets, including any real estate, if necessary, (g) making accounting and final distribution of trust assets to beneficiaries.

    DEATH OF FIRST (SPOUSE) SETTLOR IN A/B TRUST - Aside from expenses described above, married spouses with a marital estate significantly exceeding the current individual estate tax exemption amount ($5,430,000 for a decedent dying in 2015 and afterwards) may maximize federal estate tax savings through A/B Trust Planning. This option is now enhanced under estate tax “portability” which allows the estate of the first spouse to die to elect to apply any unused exemption amount, to the surviving spouse’s taxable estate. Also Arizona has no estate, inheritance or gift tax.


FAQs Local Probate

Estate Planning

Wills

Durable Powers of Attorney

Probate Estate Administration

Guardianship-Conservator ship

Living Will Declaration

Living Trusts and Estate Plan

Marital Property Agreements


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