Trusts

Sometimes, people want more control over the distribution of their assets than can be had from using a Will and simply listing beneficiaries on accounts and property. In such a case, a Revocable Trust can be useful.

Important Trust Terms

1. Settlor: The creator of the trust who provides the trust assets
2. Trustee: The owner of the trust assets
3. Benefciary(ies): The recipients of the trust’s income and/or principal

Typically, the Settlor is also the Trustee and the initial Beneficiary. Then, when the Settlor passes away, the Successor Trustee oversees the distribution of the assets to the individuals or charities the Settlor listed.

A couple, whether married or not, can have one Revocable Trust and both can be the Settlors, Co-Trustees, and initial Beneficiaries.

As the name indicates, a Revocable Trust can be revoked and amended. Thus, if you want to change the terms of the distribution of your assets, you can do so.

When determining whether a Revocable Trust is appropriate, consider the following factors:

1. If the Settlor owns more than one parcel of real property or owns real estate outside of Arizona or wants to leave Arizona real estate to more than three adults. In such cases, a Revocable Living Trust eases the administration of the property and avoids probate.
2. If the Settlor owns many stocks, bonds or other investments that are not held in accounts that have "transfer on death" designation. If there is no "transfer on death" designation, then a trust is necessary to avoid probate.
3. When the Settlor wants to leave assets to minors, the trust is necessary to avoid a court conservatorship. Court involvement is required if a minor receives more than $10,000 in a year unless the funds are held in a trust.
4. A married couple can utilize Revocable Living Trust to double the amount that can be passed free of estate taxes upon the death of both of them.
5. Couples who are not married but share property can have their access to the assets protected if one of them becomes incapacitated because the other one can act as sole trustee for the trust assets.

If the property is placed in trust, then it can be protected from the creditors of the beneficiaries. Such creditors can only obtain distributions from the trust but cannot invade or take the principal of the trust.

If the beneficiaries are minors, then the trust can limit how much income or principal the minor will receive. If the devisees have special needs or require government assistance, the trust can be worded so the beneficiary will not lose government assistance and the trust assets will provide the most financial help.

Even if a person has a revocable living trust, a Will is necessary to make sure that any property or assets not titled in the trust will be placed in the trust. In order to avoid probate with a revocable living trust, assets should be titled in the name of the trustees; for example, "Jane and John Doe as Trustees of the Doe Revocable Trust, dated January 1, 2002."