A living trust is one way to be proactive about planning your estate. If you’re in Arizona and think that establishing a living trust might be the best way for you to protect your assets and make life as easy as possible for your family after you’ve died, this guide will give you the information you need to set up the trust.
Whether you’re creating a trust or a financial plan, a financial advisor can help you create an estate plan to protect your family’s wealth.
How to Create a Living Trust in Arizona
Think you want to set up a living trust in Arizona? Below, we break down the process of creating a living trust in the Grand Canyon State into six steps:
- Choose the type of trust you want to set up: If you’re single, you’ll want to opt for a single trust. If you’re married, you and your spouse can each make single trusts or both make a joint trust. A joint trust allows you and your partner to put joint property like cars and real estate into the trust.
- Take inventory of your property and decide what to place in the living trust: You can put everything from stocks and mutual funds to family heirlooms and your boat into a living trust. Also gather any corresponding paperwork, like records of home ownership, stock certificates and car titles.
- Select a trustee: If you choose to make yourself the trustee, you’ll also want to name a successor trustee who can take control of the trust when you’ve died. This is also a good time to figure out who you want to inherit your property. Your trustee, or successor trustee, will be responsible for distributing the property to your beneficiaries after your death.
- Make the trust document: You can create a living trust using an online service, or you can find an attorney to guide you through the process.
- Get the document notarized: You’ll need to sign the document in front of a notary public.
- Fund the trust: Transfer the property you’ve determined you want included into the trust. This requires some paperwork. Again, hiring an attorney may be the best option for getting this done, as there are some risks with DIY estate planning.
What Is a Living Trust?
A living trust is a legal document that allows a person to grant ownership of his or her assets to beneficiaries. It takes effect when you’re alive and remains in effect after your death. Each trust has a designated trustee who is responsible for dispersing the assets as the trust creator, or grantor, wants. You can name yourself as the trustee or give that power to someone else.
There are two basic types of living trusts. An irrevocable living trust is permanent. This means the grantor cannot remove any asset placed in the trust without first getting permission from every person named in the trust. Property placed inside the trust is no longer under the grantor’s ownership. Thus, taxes are paid by the trust not the grantor.
A revocable living trust, by contrast, offers more flexibility than an irrevocable living trust. With a revocable living trust, the grantor can alter the trust whenever he or she wants. The grantor maintains ownership of the assets placed in the trust and pays taxes as usual.
How Much Does It Cost to Create a Living Trust in Arizona?
The cost of creating a living trust in the state of Arizona will depend entirely on how you go about setting it up. If you do it yourself, your costs will depend on which service you use. Your total costs could be less than $100, or it could be a $300, depending on the online program you select.
If you choose to hire an attorney to help you create the trust, the attorney’s fees will determine your total costs. You could end up paying more than $1,000. Before agreeing to work with an attorney, make sure you discuss their fee rates so you know what to expect.
If you do go with a lawyer, you should also look for someone who specializes in creating trusts. Just because a lawyer works with estates does not necessarily mean they are a trust specialist, so look specifically for an attorney who has expertise in this particular area. You can find qualified lawyers on the State Bar of Arizona website.
Why Get a Living Trust in Arizona?
Generally speaking, people typically opt to create a living trust so that their heirs won’t have to go through the probate process when they die. Probate is a time-consuming legal process that your assets go through after your death in order to ensure that they’re distributed according to your wishes. With a living trust, however, your estate will avoid probate.
While avoiding the probate process might be huge time saver in some states, probate might not be as much of a headache in Arizona. That’s because Arizona uses the Uniform Probate Code, which makes the probate process significantly easier. According to the State Bar of Arizona, most estates in Arizona “use informal probate procedures that do no require formal court approval” and “in many cases, personal appearance in court is not required.” Unless you have another reason to create a living trust, it may be more trouble than it’s worth. This is especially true for estates valued at less than $50,000, as Arizona offers a simplified probate process for these smaller estates.
Other reasons for setting up a living trust include the ease of leaving property to a minor. With a living trust, a trustee can hold onto the property until the child comes of age. Another benefit of creating a living trust is avoiding conservatorship in the event you become incapacitated, as you’ll already have designated a trustee to manage your affairs.
Who Should Get a Living Trust in Arizona?
While a living trust isn’t only for the wealthy, the size and complexity of your estate is certainly a factor in deciding whether or not you should get one. Especially in Arizona, where the Uniform Probate Code simplifies the probate process, it might make sense to skip a living trust and just use a will if your estate is fairly simple. Additionally, Arizona offers a simplified probate process for estates that are worth less than $50,000. If your estate falls below this threshold, a living trust likely won’t be necessary for probate purposes as the process will already be more straightforward and less costly for you.
Living trusts are also more expensive and more difficult to set up than a will. Additionally, they have the potential to cause drama after you’ve died, as the time period to contest a living trust is longer than it is for a will. If you decide to forgo a living trust, just remember you’ll still need an estate plan.
Living Trusts vs. Wills
Even if you get a living trust, you’ll still need a will. If some piece of property doesn’t end up in the living trust, the will can make it clear who that property should be passed to. Just as a trust has capabilities that a will does not, a will can do things that a trust cannot. These include:
- Naming an executor
- Providing instructions for paying taxes and debts
- Selecting managers for children’s property
- Establishing guardianship for children
The following table provides an overview of the capabilities of living trusts versus wills.
|Living Trusts vs. Wills|
|Names a property beneficiary||Yes||Yes|
|Allows revisions to be made||Depends on type||Yes|
|Avoids probate court||Yes||No|
|Requires a notary||Yes||No|
|Names guardians for children||No||Yes|
|Names an executor||No||Yes|
Living Trusts and Taxes in Arizona
A living trust won’t have a big impact on your taxes in Arizona. Still, it’s smart to have a working knowledge of the Arizona estate tax and the Arizona inheritance tax for your estate planning.
There is no estate tax or inheritance tax in Arizona. The federal estate tax only applies to estates worth more than $12.06 million ($24.12 million for a couple) in 2022. This tax applies regardless of whether you have a living trust.
Creating a living trust in Arizona is not hard, but it does take some planning and a monetary investment. You can set up a living trust by yourself. However, if you’re not experienced, it might make more sense to get professional advice.
If your estate is worth a lot, you may benefit from a living trust. The Uniform Probate Code, however, does simplify the probate process for estates without a trust in Arizona. So if your estate is straightforward, it may not be worth the trouble to create a living trust.
Estate Planning Tips
- If you’re creating a trust or simply want help with financial planning, consider hiring a financial advisor. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- After you’ve create an estate plan, don’t forget to update your estate plan through the years. If you buy a new house, have another child or go through any other major life change, make sure to update your estate plan.
- If you’re saving using a 401(k) or other retirement plan, that’s great! When you’re planning your estate, it’s important to know how much you’ll have saved by retirement. Find out how much your account will be worth by your golden years using SmartAsset’s free 401(k) calculator.
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