WHAT IS A LIVING TRUST OR WHAT IS A REVOCABLE LIVING TRUST?
A revocable trust is also referred to as a living trust or an "inter vivos" trust. It is a written legal document typically drafted by an estate planning attorney or a wills and trusts lawyer that you can use to avoid probate court. You put your home and other real estate you own in your living trust. You can also include money market accounts, stocks and bonds. This is not an exhaustive list, but there are some things that you would typically not put in a revocable trust such as an IRA or other assets that have a designated beneficiary.
While you're alive, you control the trust as both the trustor and the "trustee." Once you pass away or become incapacitated, your estate planning attorney includes within your trust a successor trustee of your choosing and the trust becomes an irrevocable trust upon your death. If you have a will, typically the language of the will indicates that all property and possessions not included in the trust will be included in the trust upon the death of the trustee. This is referred to as a pour-over will and is meant to avoid probate as much as possible. This is the most simple explanation of a living trust. Estate planning attorneys have proper legal training and can guide you in the decisions you make with the management of your wealth and its eventual transfer, as well as who will take care of things when you are incapacitated or passed on. Michael Koberlein is an estate planning attorney in the Gilbert and Mesa area. Please contact him today at (480) 776-6912 and schedule an appointment.
WHAT IS A LIVING TRUST?
WHY DO I NEED A LIVING TRUST?
WHY DO I NEED A LIVING TRUST OR A REVOCABLE TRUST?
There are a few different reasons people like to set up living trusts. The main reason a lot of people set up living trusts is to avoid the probate process. If a person doesn't have a trust and the value of their real property exceeds $100,000 after liens and encumbrances or the value of their personal property exceeds $75,000 after liens and encumbrances, then their estate (essentially everything they own) must go through the Arizona probate process. This is the State of Arizona's way of making sure that the decedent's wishes are carried out to the furthest extent possible.
This is difficult if a person dies without a will. In that instance, the state intestate laws govern what happens to the decedent's estate. If there is a will, then it is typically what is used to distribute the decedent's estate. There's a process of appointment of a personal representative that must take place in Arizona Probate Court. Once a personal representative is appointed, there are a lot of other requirements and paperwork that must be met and completed before the estate can be closed. It's a lot of work within the probate court that most people want to avoid. Another reason people do not want to go through the probate process is because they want to maintain their privacy as much as they can. The probate process is a public process; therefore, if your neighbor wanted to see the documents related to your estate in the probate court, they could do that. So, avoid the probate process because it's time consuming, you have to get the court involved and it's not a private process.
Another benefit of setting up a living trust or an irrevocable trust is that if you own property in several different states, such property can be handled with only one trust. If you only have a will, then you must file with probate court in every state where you have property in order to properly probate your estate. If you have several properties in several different states, that would get very expensive and troublesome very quick.
You can also change a living trust (aka revocable trust). This means that if you want to buy and sell property several different times, you can do so. You don't need to change your trust documents in order to put the property in the trust. You only need to make sure that you fund the trust with the property or assets you want in the trust. This is done by ensuring that you put the property or assets in the name of the trust. For example, on the deed of a property you would have the name of the trust. If it were Bill Jones and his trust name was THE BILL JONES LIVING TRUST, then on the deed of the property on the owner or grantee line of the deed would be written THE BILL JONES LIVING TRUST. A lot of people appreciate the ability to put assets in and take assets out of the trust while they are still living.