When you create an estate plan to protect your family’s future, you might think a will and beneficiary deed are all you need to direct the distribution of assets. However, in many cases, you might do better to use a trust.
There are three big reasons to think about creating a trust.
Trusts Help Avoid Probate
Arizona is a probate-heavy state. This means families will need to probate any estate with over $75,000 of qualified assets unless they take steps to avoid probate. These assets don’t all need to be liquid, either. If you have more than $75,000 in your house, for example, your family may need to go to probate.
The probate process has two drawbacks. It can be expensive, and it can be time-consuming. This second point is important because the process can be emotionally draining, especially for family members who may still be grieving. In Arizona, the probate process lasts about a year on average. If you think about it, that’s a long time to keep poking at the open wound created by a loved one’s death.
Accordingly, a lot of people use trusts to bypass probate. They place their assets into the trust and then name the beneficiaries.
Reinforce Powers Of Attorney
When people create their estate plans, many will assign powers of attorney to family members or friends whom they trust. A power of attorney is designed to grant that person the authority to make financial decisions for you when you are unable to do so. However, banks will sometimes refuse to accept these powers of attorney. This can lead to another emotionally taxing process as the person with power of attorney goes to court to establish a guardianship or conservatorship.
You can avoid this concern by placing assets into a trust. When the assets are in the trust, the bank has to accept the power of attorney. As a result, trusts can provide a bridge in estate plans between incapacity and end-of-life situations. These are already stressful situations for most families, and it’s typically worth a little extra effort during the planning to spare family members from the work of pursuing a guardianship or conservatorship.
Trusts make it easier for your family to get through these difficult situations smoothly, and a lot of people appreciate that extra peace of mind.
Trusts Provide Greater Flexibility For Distribution
Trusts often do a better job of transferring assets than a will and beneficiary deed can do.
Consider this example: If you name two heirs in a will and leave a portion of your home to both of them, the home immediately becomes a divided property. This can affect those heirs in a lot of different ways. One heir’s debt could affect the other heir’s ability to live in the home. The home could become vulnerable to a lawsuit. Or, more importantly, you have two heirs who might have conflicting ideas about the home. They can’t agree whether to sell or keep the home. They can’t agree on a sales price. They can’t agree on a closing date. They have to work together, but they’re emotionally fried.
With a trust, you can provide guidelines for how your heirs should treat the home. You can appoint a trustee who can help them resolve their issues. You have a lot more flexibility and control to ensure that you’re not just directing the transfer of your assets, but that you’re setting up some guidelines throughout the process.
Trusts Allow You To Be More Thoughtful
There are lots of other reasons you might want to create a trust, but these three illustrate some of the main points. A lot of people think that a will and a beneficiary deed will cover everything. But they don’t always address the emotional realities. Estate plans without trusts don’t always cover all the gaps. A good trust can do a lot more to address your specific concerns.
The answer is intended to be for informational purposes only. It should not be relied on as legal advice, nor construed as a form of attorney-client relationship.
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