Frequently asked questions on Trusts.
What is a Trust?
A Trust, like a will, is a written document that governs what happens to certain property when a person passes away. Unlike a will though, Trusts can also be used for providing for a person’s needs while they are still alive. There are many different types of Trusts, trusts can be simple or complex, they can be used to shield beneficiaries from creditors, they can be used for charitable purposes, trusts can even be set up to care for your pets. However, for the purposes of this article, we will be discussing a basic Revocable Living Trust. This type of trust allows a person to retain control over all of the assets in the trust and to make changes to the trust at any time. The requirements for creating a trust are governed by Arizona Revised Statute §14-10402. Generally, in order to create a trust, a person must have the capacity to create a trust, the intent to create a trust, the trust must have a beneficiary, the trustee must have duties and the same person cannot be the sole trustee and the sole beneficiary.
Does a Trust affect all my assets?
In order for a trust to be controlling, the trust must be “funded.” This means that assets that will be governed by the trust, must be titled in the name of the trust. In other words, a Trust will only affect the assets you chose to put into it. For example, if a person buys a house, they may title that house in their own name. However, if they want to the trust to control the disposition of that house, the house must be titled in the name of the trust. Similarly, financial accounts such as checking/savings accounts, IRA’s, Life Insurance Policies or other accounts that can have a designated beneficiary, must designate the trust as the beneficiary. Otherwise, the trust will not control the disposition of these accounts.
Do I have to have a trust?
Absolutely not. There is no requirement in Arizona that a person have a Trust, or even a will for that matter. However, there are some very valid reasons why someone would want to create a trust. Since we are dealing with a Revocable Living Trust, we will take a look at some of the most common reasons someone may want to create one. The First is cost. While it’s not always the case, if done properly, a trust administration can be a less costly and less cumbersome process then a probate. Directly related to this is the ease of administration. Again, this is not always the case, but trust administrations can be less formal than probate requirements and can be easier to administer in some cases. One of the better reasons to make a trust is for protection. Trusts can provide for protection of beneficiaries including beneficiaries who are minors or otherwise unsuitable to receive a lump sum inheritance at once.
Can a Trust be changed?
The answer to this question depends on the type of a Trust that has been established. Since we are talking about a Revocable Living Trust, the answer is yes. In fact, that is one of the attractions to this type of trust is that it allows a person to maintain control over their assets in addition to amending or entirely revoking the trust.
Why do I need a Trust?
There are many reasons why you may, or may not, need a trust. Everyone will have differing circumstances and there is no one size fits all approach to estate planning. However, estate planning should be an important step in everyone’s life. Even if that means the right estate plan for you is to not have one, it’s important to consult with a knowledgeable attorney to discuss. Moreover, circumstances change throughout our lives and what is right now, may need to be changed later. Whether it’s your first time discussing estate planning, or you would like us to take a look at your existing estate plan, Platt & Westby has attorneys that are ready to assist you. Platt & Westby has offices in Phoenix, Arrowhead, Litchfield Park, Scottsdale and Mesa Arizona. If you are interested in discussing a new or existing estate plan, contact our office by calling 602-277-4441 or visit www.plattwestby.com to schedule a free consultation with one of our experienced attorneys.