How Living Trusts Work in Arizona

Living trusts are a popular estate planning tool for many individuals and families. But you may wonder, “How does a living trust work for asset protection and distribution?” Understanding the process of setting up a living trust in Arizona can help you determine whether it’s a good fit for your estate plan. An experienced estate planning attorney from Pennington Law, PLLC can answer your questions and offer guidance as you make these crucial life decisions.

Pennington Law, PLLC is a top-rated Arizona law firm focused on estate planning, wealth management, and helping families prepare for life’s next chapter. Whether you need help creating a new estate plan or updating existing estate planning documents, our attorneys can provide trusted direction so you feel prepared for the future. Contact us today for a free consultation.

What Is the Purpose of a Living Trust?

A living trust is a legal instrument created while the creator (called the settlor or trust maker) is still alive. It can serve several purposes:

• Incapacity planning – The settlor can serve as trustee in a revocable living trust and appoint a successor trustee to take over asset management if they become incapacitated without the need for a financial power of attorney or conservatorship.
• Estate planning – Creating a trust allows trust makers to streamline the transfer of wealth during the estate planning process.
• Asset protection – Some types of living trusts, particularly irrevocable trusts, can protect assets and personal property from creditors and lawsuits.
• Flexibility – Since the settlor can serve as trustee, they maintain control over their assets and the power to make changes or revoke at any time.

What Are the Rules for a Living Trust in Arizona?

Executing a living trust in Arizona requires the settlor to meet several criteria:

• Legal adult – The trust maker must be 18 years of age or older.
• Mentally competent – They must have legal capacity and not be subject to undue influence.
• Written document – Trust laws in Arizona require a written legal document showing the person’s intention to create the trust.
• Beneficiary designation – The document must name at least one beneficiary or indicate it is providing for a charitable purpose, an animal’s care, or other non-charitable purpose. The creator cannot be the sole beneficiary.
• Named trustee – The trust must designate a trustee to manage the assets for the beneficiaries. The settlor can serve as trustee, but must name a successor trustee.
• Notarization – The trust document should be completed before a notary public to become valid.
• Asset transfer – You must turn over ownership of the funds to the trust.

What Are the Benefits of a Living Trust in Arizona?

Some of the benefits of executing a living trust in AZ include:

• Avoiding probate – Trust assets generally do not require probate in Arizona. This can make settling an estate simpler for surviving family members. Living trusts can also help people manage and distribute assets located in other states, avoiding the need for ancillary probate proceedings.
• Privacy – Since trusts stay out of the probate court, information about the settlor’s financial affairs and beneficiaries does not become public record.
• Continuity in asset management – By appointing a successor trustee, the creator can feel confident that their wealth will be managed in good faith if they can no longer do so themselves due to an accident or illness.
• Directed distributions – The trust maker can set terms for how and when loved ones may receive distributions of their inheritances or create conditions for how funds are used, such as for education.

What Are Common Considerations When Setting Up a Trust in Arizona?

Common considerations that people should evaluate when deciding whether to establish a trust in Arizona include:

How much does a living trust cost?

Setting up a trust in Arizona can have various upfront and long-term expenses. You will have legal fees to pay if you hire an experienced estate planning attorney to structure the trust to meet your specific needs and objectives. You may also incur filing fees to transfer certain kinds of assets into a living trust, such as real estate. Finally, a living trust may involve ongoing costs if you appoint a professional trustee to manage the trust or if your trustee requires professional counsel from an attorney or financial/investment advisor.

What is a living trust vs. a will?

Living trusts differ from wills in several ways. First, living trusts become effective once created by the settlor. A will goes into effect after the testator passes away.

In addition, living trusts can manage a settlor’s assets for the benefit of the settlor and other named beneficiaries. By contrast, a will provides instructions for how a personal representative should distribute a decedent’s estate assets. Finally, living trusts can pass assets and wealth privately, whereas a will requires a decedent’s estate to go through the costly probate process.

What voids a living trust?

A living trust in Arizona may become void if the trust document does not meet the legal requirements for a valid trust under state law. For example, a court may void a living trust if another party defrauded the settlor into creating the trust or establishing specific provisions for the trust. A settlor of a revocable living trust can void or revoke the trust by executing a written document that expressly states their intent to do so.

What Are the Implications of Choosing a Living Trust?

Other considerations to make when deciding whether to incorporate a living trust into an estate plan include:

• Trust structure – Different types of living trusts serve specific objectives, so creating a living trust will require you to choose a form tailored to your legal or financial needs.
• Cost – Living trusts can have ongoing expenses, especially if you choose to appoint a professional trustee who will charge fees for their services.
• Loss of asset ownership – Placing assets in a trust means giving up ownership of those assets. Although you can recover assets from a revocable trust, placing assets in an irrevocable trust means relinquishing them permanently.

A knowledgeable attorney can advise on the risks and benefits of choosing a living trust.

Talk to an Arizona Trust Lawyer Today

The legal professionals at Pennington Law, PLLC have years of experience providing trusted counsel to individuals and families from all backgrounds in Arizona. There’s no one-size-fits-all estate plan, and we’ll treat your situation with the individual respect it deserves.

Our clients’ feedback reflects our commitment to dedicated, family-first legal representation. Here’s what past client Anne M. shared:

“Having to deal with setting up a trust after losing my husband was difficult. It was a rough time but I was treated with dignity and respect and friendliness and little pieces of chocolate…they really did a wonderful job. Explained everything to me and got it set up …it’s all done now, and I would recommend Pennington Law to anybody who’s looking for estate planning. Thanks to all of you at Pennington Law for helping me.”

If you’re ready to discuss trusts and how they might work into your estate plan, we’re here to talk. Call or contact us today for a free consultation.