Do I Need a Trust to Avoid Probate in Arizona?

One common question estate lawyers hear is, “Do I need a trust to avoid probate?” Reach out to an experienced trust attorney in Arizona if you’re curious about estate planning and want to make the probate process as seamless as possible for your loved ones. Discover ways to bypass the probate process in this comprehensive guide.

How Probate Court Works

Losing a loved one is hard enough, but additional stress and costs come in the form of probate after someone passes. A person’s assets within their estate will go through the arduous process of probate court. Certain parties like creditors can contest the estate and try to claim some of the assets before a judge settles the estate and leaves it in the hands of the deceased’s loved ones.

Even if you have a will, it won’t prevent your assets from going through probate. Some of the largest components in any estate that must endure probate court include:

• Real estate
• Retirement investments
• Banking and brokerage accounts

The estate becomes subject to tax laws and can leave your loved ones with less once the process is over. This begs the question: Do I need a trust to avoid probate? Establishing a living trust can help you evade the time-consuming probate process.

What Is a Living Trust?

When you have a lawyer draw up a will, it will map out how you want to divide your assets upon your death and won’t go into effect until your passing. At that time, all of the assets in your will must go through probate. If you’re looking to avoid this, establishing a living trust proves effective.

This legal arrangement goes into effect immediately after you create it and allows you to allocate and protect your assets while you’re still alive. You have the power to divide and transfer some of your assets to beneficiaries before your death so the legal components of inheritance don’t become a hassle.

Pros and Cons of Creating a Trust

If you’re wondering, “Do I need a trust to avoid probate and estate taxes?” it’s worth considering the pros and cons of opening a living trust. You might find that the advantages are too good to pass up and decide that a trust will define your estate planning process. On the other hand, a few drawbacks might deter you from moving forward.

Discover the biggest pros and cons that come with establishing a trust.

Pros

Compared to a will that becomes public upon your death, a trust remains a private document after you pass. The privacy it grants your loved ones handling your estate can be extremely favorable. In addition, a trust bypasses the probate process so your family won’t have to spend months waiting for the court to settle your estate.

In the event that you become incapacitated, having a trust protects your assets. A will only goes into effect upon your death and serves little purpose if you’re incapacitated.

Cons

The many advantages of having a living will come with a few drawbacks as well. Cost plays a significant role since establishing a trust often leads to more legal fees because of the amount of paperwork it requires compared to a will.

One of the biggest differences between a trust and a will comes down to funding. All of your assets must be transferred to the trust and you as the grantor, will name a trustee to distribute those assets to the appropriate beneficiaries. This process can be complex, but many people find it worthwhile if their main concern involves avoiding probate.

A revocable living trust does not receive the same tax benefits as an irrevocable trust. Be mindful of the two entities and the amount of protection you want from creditors when creating a trust.

Tips for Avoiding Probate in Arizona

Do I need a trust to avoid probate if I use other estate planning tactics? You can successfully evade probate court without a trust depending on a few different scenarios. An estate planning attorney can explain all of your options to you and help you take the right course of action so you leave little to no burden on your loved ones.

Below is a breakdown of the instances that allow you to avoid probate court without a trust.

The Estate Value Falls Below the State’s Requirement

Arizona law dictates that personal property totaling more than $75,000 and real estate worth more than $100,000 must go through probate. If you anticipate having an estate that doesn’t meet this criteria, you can evade probate altogether. Work with a professional attorney who can explain if your executor needs to file a small estate affidavit.

You Make Charitable and Personal Gifts

If you already have beneficiaries in mind and want to slowly distribute assets from your estate, you can make financial gifts of up to $17,000 each year. This tax-free gift allows you to reduce the value of your estate so loved ones don’t face hefty tax implications upon your death.

You can give the maximum amount per year either to an individual or a charity. If you choose to donate to an organization, you’ll likely have to establish a charitable trust that names that organization the beneficiary of a certain percentage of your estate.

You Plan for Real Estate Transfers

Why do I need a trust to avoid probate if another tactic has the same outcome? The main purpose of a trust is to protect your assets while you’re still alive and make a plan to distribute them as you see fit. Distributing any real estate in your name doesn’t necessarily need a trust thanks to the following components:

• Rights of survivorship: Say you own a house with your spouse. Arizona law recognizes rights of survivorship, meaning that one’s ownership will automatically transfer to the surviving spouse at the time of their death.
• Community property: Community property laws also extend to spouses and dictate that any property one spouse takes ownership of during their marriage will automatically transfer to their spouse upon their death. The surviving spouse does not need to have their name on a property’s deed for this to occur and bypass probate.
• Beneficiary deeds: Create a beneficiary deed for anyone over the age of 18, and you’ll maintain full ownership of a property until your death. Your beneficiary will then assume ownership.
• Joint tenancy: The legal arrangements above pertain to spouses only, whereas joint tenancy applies to property owners who aren’t married. For example, if you want to leave your house to your child, you can add their name to the title and they will automatically assume full ownership if they outlive you.

Establish Transfer on Death Deeds

One simple way to go about estate planning involves setting up transfer on death deeds. If you’re looking to keep your assets out of probate court and distribute them to your loved ones, ask a lawyer, “Do I need a trust to avoid probate, or will transfer on death deeds do the trick?”

Attorneys can help you set up these deeds, which function similarly to beneficiary deeds. The main difference boils down to beneficiary deeds pertaining to real estate, whereas transfer on death deeds can apply to various assets, including:

• Vehicles
• Bank accounts
• Stock investments

You’ll have to name a beneficiary whenever you open a life insurance policy or retirement account such as a 401(k). Transfer on death deeds work similarly since the beneficiary you name will receive the funds or piece of property shortly after your death.

When to Start Estate Planning

You never know when something will happen to you so it’s wise to plan for your future early. You can establish a will when you purchase a home or other piece of property, marry, or have children. As your assets grow, consider protecting them with a trust.

Creating the trust offers more privacy and control over your assets than a will and keeps your estate from going through probate. However, the complex paperwork and asset transfers that must take place might not make a trust the right option. Meet with an estate planning lawyer who can review all of your options and guide you through the process.

You might find that a trust offers benefits you can’t refuse or decide to take other steps to avoid probate, such as creating transfer on death deeds for all of your assets.

Schedule a Consultation with Trust Attorneys at Lincoln & Wenk, PLLC

Do I need a trust to avoid probate? I’m having trouble understanding how family trusts work and want to know more about them. How do I start the estate planning process?

The experienced legal team at Lincoln & Wenk, PLLC, can answer all of your questions and put you at ease while planning your estate. Our helpful attorneys understand family and estate law and will guide you in the right direction when you wish to avoid probate. To schedule a consultation, contact our law firm at (623) 294-2464.