Trusts are valuable estate planning tools that many people should consider adding to their Phoenix estate plans. There are many different types of trusts that may offer unique benefits to you and your family. In the Phoenix area, if you are interested in adding a trust to your estate plan, contact Nicole Pavlik, an experienced estate planning attorney, to learn more.
What is a Trust?
A trust is a legal contract in which a trustee holds assets on behalf of a beneficiary or beneficiaries. Trusts can specify exactly how and when the trust assets should be distributed to the beneficiaries.
What are the Types of Trusts in Arizona?
There are many different types of trusts that you could add to your Phoenix estate plan. Each trust has unique legal requirements and serves a specific purpose. A qualified estate planning attorney can guide you as you decide what trust best fits your needs and goals. A few common trusts in Phoenix are listed below.
- Revocable Living Trust. A revocable living trust is a trust that is in existence during your lifetime and can be modified at any time. This is often the most common type of trust.
- Marital Trust. A marital trust is an irrevocable trust that allows you to transfer a deceased spouse’s assets to the surviving spouse without incurring any taxes. It can also shield the trust property from creditors.
- Bypass Trust. A bypass trust allows the surviving spouse to avoid estate taxes by placing the deceased spouse’s assets in two separate trust funds below the estate tax limit.
- Testamentary trust. A testamentary trust is created as a part of a person’s last will and testament. It only comes into existence after the settlor dies.
- Irrevocable Life Insurance Trust. An irrevocable life insurance trust is funded with one or more life insurance policies. It has tax benefits and protects the life insurance proceeds from creditors.
- Generation-Skipping Trust. A generation-skipping trust is used to pass assets to a grandchild or other individual at least 37 ½ years younger than the settlor. Its purpose is to minimize the tax liability of the transfer.
- Special Needs Trust. A special needs trust is created for individuals with disabilities. It allows the individual to receive property while maintaining their eligibility for public benefits, like Medicaid.
- Charitable Remainder Trust. A charitable remainder trust is an irrevocable trust that generates an income stream for beneficiaries for a term of years, with the remainder going to a charitable organization.
What are the Benefits of Adding a Trust to Your Phoenix Estate Plan?
There are various benefits of adding a trust to your estate plan. The effect of the trust will depend on the type of trust and your unique circumstances. Below are five potential benefits of adding a trust to your Phoenix estate plan.
- Trusts avoid probate. Probate is the court process of administering an estate. The process is lengthy, expensive, and public. Trusts are not subject to probate. The trust assets pass directly to the beneficiaries without court involvement.
- Trusts protect you during incapacity. Your successor trustee can control and manage your trust assets if you become incapacitated. They can access the property to manage your financial affairs when you cannot do so yourself. Without a revocable living trust and durable power of attorney, your loved ones may be forced to petition the court for a conservatorship.
- Trusts may provide tax benefits. If the trust is irrevocable, it can lower your tax liability. The trust property is not included in your estate and, therefore, not counted when government assesses federal estate tax.
- Trusts may provide protection from creditors. Certain trusts protect the property from the reach of creditors.
- Trusts give you control over the distribution of your property. In the trust, you can specify exactly how you want the property to be managed and distributed after your death. You can put restrictions on when the assets are distributed and what the distribution must be used for.
How Do You Add a Trust to Your Phoenix Estate Plan?
Trusts are complex legal documents. If all the legal rules are not met, the trust will not be valid. It is critical to work with an estate planning attorney well-versed in trust creation. Your attorney will help you decide which type of trust or trusts you may want, help you select a trustee, encourage you to review and update your trust on a regular basis.
Your Phoenix Estate Planning Attorney
Nicole Pavlik is a top Phoenix area estate planning attorney who can help you create a comprehensive estate plan. If you have questions about adding trust to your estate plan, call Nicole Pavlik Law Firm today at (602) 635-6176 for a free consultation.