Legacy and estate planning is a difficult and sometimes uncomfortable process. One possible way to make it easier is to form a living trust. If you live in Arkansas and you’re thinking about creating a living trust as part of your estate plan, this article will take you through all of the steps and provide an overview of the pros and cons of making a living trust in the state. If you’re thinking about creating a living trust or you just have some general financial planning concerns, a financial advisor can help.
How to Create a Living Trust in Arkansas
This is how you’ll make a living trust in The Natural State:
- Decide what type of trust you want to form: If you’re single, a single trust will be right for you. If you’re married, though, you can form a single trust for just your property, or you can make a joint trust with your spouse. Joint trusts are sometimes preferable because they allow you and your spouse to store jointly owned property, like homes, vehicles or joint bank accounts.
- Take inventory of your property: You should know exactly what you own and what you want to put inside the trust. Bonds, stocks, vehicles and family heirlooms can all be placed inside a living trust. You should also gather relevant documents, like car titles, at this time.
- Choose your trustee: You can name yourself as trustee, or pick someone else. People commonly choose a child or another family member as trustee. If you name yourself, you will also need to name a successor trustee to take over the trust when you die. This person will also make sure your property is given to the heirs you want it given to, another decision you need to make now.
- Create the trust document: You can do this either with the help of a lawyer or using an online program.
- Sign the document: This must occur in front of a notary public.
- Move your property into the trust: This is a process called funding the trust. You can do this on your own. However, the paperwork can get a bit complicated, so you might consider hiring a lawyer to help out.
What Is a Living Trust?
Living trusts are legal frameworks established by a document in which you can store assets and property. A trustee is responsible for managing the trust and distributing the property to the trust’s beneficiaries in accordance with its instructions. You can name yourself trustee or pick someone else, such as a family member.
There are two basic types of living trusts: irrevocable living trusts and revocable living trusts. An irrevocable living trust is permanent. You cannot remove any property placed in an irrevocable living trust unless you first get permission from every person named in the trust. With this type of trust, the property is wholly owned by the trust and taxes are paid via the trust.
A revocable living trust, by comparison, is more flexible, as the grantor (the person who created the trust) can remove property or modify the trust as he or she desires. The grantor retains ownership of the property and pays taxes on it as normal.
How Much Does It Cost to Create a Living Trust in Arkansas?
A living trust can range in cost, mostly depending on how you go about setting it up. You can use an online program to set up the trust, which will likely cost a few hundred dollars or less. You can also choose to hire an attorney. The cost of this option will depend on the fees the attorney charges. You could end up paying more than $1,000 if you hire a lawyer to help you create your trust.
Setting a living trust up yourself has some appeal, but there are certainly risks to DIY trusts. Attention to detail is key, so if you choose to go it alone you’ll need to spend a good amount of time researching and making sure you get everything right. If you choose to hire an attorney, make sure you know what their fees are upfront, and make sure they’re a trust specialist, not just an estate planner.
Why Get a Living Trust in Arkansas?
Generally, an Arkansas resident would consider getting a living trust to make matters easier for their family when they die. Any property stored inside the trust is not subject to probate court, a time-consuming and sometimes privacy-invading process that most trusts have to go through. This may be especially important in Arkansas, which does not use the Uniform Probate Code, which simplifies the probate process in some other states.
A living trust can also help if you’re leaving assets to a minor child. In this instance, the trustee can take ownership of the child’s assets until the child reaches legal age. It can also be useful if you become incapacitated. If something were to happen to you, a conservatorship won’t be needed because you’d have already designated a trustee.
Who Should Get a Living Trust in Arkansas?
Sometimes people think living trusts are just for the very wealthy. That isn’t true, though. Arkansas has not adopted the Uniform Probate Code, which simplifies the probate process. That means that a living trust can be helpful even for smaller estates in Arkansas. It should be noted, though, that if the estate is worth less than $100,000, excluding the homestead, probate is not necessary in Arkansas. In this situation, a living trust might not be worth setting up.
There are some downsides to living trusts. They’re more complicated and expensive to set up than simply writing a will. They also provide more time for a legal contest after you’ve died, potentially making things more difficult for your family.
Living Trusts vs. Wills
You’ll still need a will even if you get a living trust. A will can direct any property that you don’t place in the trust. Plus, wills have certain capabilities that living trusts do not, such as:
- Establishing guardianship for children who are minors
- Selecting managers for children’s property
- Providing instructions on how to pay taxes and debts
- Naming an executor
This chart shows just what living trusts and wills can actually do:
Living Trusts vs. Wills
|Names a property beneficiary
|Allows revisions to be made
|Depends on type
|Avoids probate court
|Requires a notary
|Names guardians for children
|Names an executor
Living Trusts and Taxes in Arkansas
A living trust won’t have much of an impact on your taxes. Still, it’s worth knowing about the Arkansas estate tax and the Arkansas inheritance tax.
There is no estate tax or inheritance tax in Arkansas. The federal estate tax might apply, but only to estates that are worth more than $12.06 million in 2022 or $12.92 million in 2023. For married couples, each of these exemption amounts are exactly doubled.
Making a living trust in Arkansas is not hugely difficult, but it does require a bit of planning and some time. It might be especially useful to make a living trust in Arkansas though, because the state does not use the Uniform Probate Code. This means that a living trust could save your family a lot of time and hassle after you die.
You can make a living trust by yourself, but it can be tricky. For this reason, finding a lawyer may be your best bet.
Estate Planning Tips
- Working with a financial advisor can be helpful when getting together your estate plan. Finding a financial advisor doesn’t have to be hard. 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.
- Knowing how much you’ll have saved for retirement by the time you reach your golden years is an important part of estate planning. Though you can’t put your 401(k) directly in a living trust, you can name the trust as the beneficiary.
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