What are the Different Kinds of Trusts for Arizona Estate Planning?
If you are handling your estate planning needs, you need to familiarize yourself with the different kinds of trusts. There are two different kinds of trusts used to help with estate planning. These are living trusts and testamentary trusts. Your attorney will review your assets and determine the best way to proceed with planning your estate. A living trust is set up to handle financial matters during the individual’s lifetime. A testamentary trust is a trust that is arisen on the death of the testator and is specified in the decedent’s will.
What are the Differences in Revocable or Irrevocable Trusts?
When you set up a living trust, you will either decide for it to be revocable or irrevocable. When you set up a revocable trust, you will retain control of all your assets that are included in your trust. When you set up a revocable trust, you are free to change the trust’s terms whenever you wish. When an irrevocable trust is established, you no longer own your assets. Any changes must have the consent of the beneficiary. However, appreciated assets in an irrevocable trust are not subjected to estate taxes. There are some other kinds of trusts that are only applicable in specific situations. Here are some of those other different kinds of trusts:
- Generation-skipping trusts – This trust allows for the transfer of a significant amount of money to your grandchildren tax-free. This is also called a dynasty trust.
- Credit shelter trusts – This kind of trust allows you to leave a specified amount to the trust that is up to the amount of, but not exceeding, the estate-tax exemption. The remainder of your estate would be transferred on to your spouse without tax obligations. Once you have put your money in this kind of trust, it is tax-free, even after it has grown.
- Irrevocable life insurance trusts – This kind of trust allows for life insurance to be removed from a taxable estate. It can then help pay for the costs related to your estate and provide cash to your heirs for use. To get the policy removed from your estate, you must surrender the rights of ownership. When you do this, you cannot borrow on the policy or change beneficiaries.
- Qualified personal residence trust – This trust allows you to remove the value of your vacation home or primary residence from your estate. If your home’s value will increase, this can be very beneficial.
Regardless of your assets, age, and financial situation, you should address your Arizona estate planning. You don’t want your family to be left in a stressful situation. Instead, you can handle all the matters ahead of time and make sure your assets are distributed as you wish for them to be. Estate planning can save time and money, reduce estate taxes, and help your loved ones follow through with your final wishes. Regardless of the trust you decide to establish, you will still need a Last Will and Testament. A Will takes care of any property you acquire after the trust was set up and that might be added to your assets before your death and before you make changes or additions to your trust.
You should make a list of your assets and any questions you have, when you go have a consultation with an Arizona estate planning attorney. A lawyer will know the best way for you to handle your estate and how to properly plan the distribution of your assets. An attorney understands estate taxes and the probate process, so he or she will work to save your family stress, time and money.