Estate planning, for one reason or another, is often a subject people tend to avoid. However, having a good estate plan is crucial for just about anyone over the age of 18. Wills and Trusts are governed by Title 14 of the Arizona Revised Statutes. Our previous articles have discussed the requirements for a valid will or trust, whereas this article will discuss which one is better, and why.
People do estate planning for various reasons, most commonly it is to (1) Avoid Probate (2) Direct how their assets should be used after death (3) Minimize Tax Liability and (4) To simplify the administration of their estate. If these are the main reasons to make an estate plan, what method, a will or a living trust, works best? Overwhelmingly, a trust will handle all of these areas better than a will.
Avoiding Probate. Having a trust doesn’t automatically avoid probate. However, if no trust exists, it is a certainty that administering an estate via a will requires a probate. (Note: For purposes of this article we are assuming the estate needs to be probated). There is nothing wrong with probate, however administering a trust is usually quicker and cheaper than a probate. This becomes increasingly important the more complex an estate is. For instance, if a decedent owns real property in 4 states, 4 probates would need to be opened to transfer all of the property. Whereas if the property was placed in the trust, it can be easily administered without a probate in each state where there is property.
Directing how assets are used after death. There are several instances where a person may want to direct how their assets are used by the beneficiary. For this purpose, a trust is better than a will. A will may leave assets to a beneficiary, but with no real direction as to how they are used. A trust is good to set up support for a spouse from a second marriage, while passing the rest to your heirs after the spouses death. A trust can protect assets from creditors of the beneficiary to preserve them. A trust can provide for the care of a disabled child while allowing them to retain benefits. Or a trust can fund retirement or education for your heirs. These goals can be accomplished with a will, however, a Living Trust is a more practical solution to addressing these issues.
Tax Liability. Although tax liability is often cited as a reason why a trust is better than a will, the truth is that for most estates this won’t be a factor. The Federal Estate Tax is currently over $5 million. Most estates do not fall into this category, and the estates that do are complicated enough to be another article on their own.
Simplifying administration of your estate. The last category really ties in with avoiding probate as well. Generally speaking, it is simpler to do a trust administration than to probate a will. This becomes increasingly true the more complex an estate is.
In general, a living trust is better than a will if a person is older, has real estate in different states, has beneficiaries with special needs, has a complex estate or has children from a previous marriage. While the list is by no means exhaustive, it is a good blueprint for framing the question of a living trust or a will. Platt & Westby, P.C., has offices in Phoenix, Arrowhead, Litchfield Park, Scottsdale and Gilbert Arizona.
If you are interested in creating an estate plan, contact our office by calling 602-277-4441 or www.plattwestby.com for a free consultation with one of our experienced attorney’s to find if a Living Trust or a Will is better for you.