UNDERSTANDING WILLS AND TRUSTS

What is a will?
A will is a written document that directs the disposition of a person's property after his or her death. Disposition under a will can be outright or in a continuing trust. A will nominates one or more personal representatives, sometimes referred to as “executors,” to manage and distribute the estate. A will can also nominate a person to be guardian and conservator for a minor or incapacitated child.

What happens if there is no will?
When a person dies without leaving a will, any assets in his or her estate will be distributed according to Arizona laws that designate which family members, or “heirs,” will receive assets and who will be appointed personal representative.

Does a will affect all assets?

Assets for which you have set up a different method of transfer are not affected by a will. These include trusts, joint tenancy with right of survivorship, and life insurance or IRAs that name beneficiaries directly. Assets with these kinds of transfer mechanisms automatically pass to the surviving owners or named beneficiaries.

May a will be changed?
A will can be changed or revoked anytime before death. Often simple changes are made by an amendment called a "Codicil."

What is probate?
Probate is the process of submitting a deceased individual’s will to the court, appointing a personal representative and following through with the legal requirements to dispose of the person’s assets.

Probate proceedings are governed by the law of the state where the deceased person maintained his or her legal residence at the time of death, and by the probate laws of any other state where there was real property located at the time of death.

Does a person need a large estate to have a will?
No. Any person wishing to designate who will receive their assets at death should have a will. Individuals with minor children will want a will for purposes of nominating a guardian.

Who should draft a will?
Only a lawyer should draft a will. It is best to have an expert professional who can advise the best alternatives with respect to an individual's estate plan.

Understanding Trusts

What is a living trust?
A living trust, or revocable trust, is an estate planning arrangement where a trustee (which can be one or more individuals and/or bank) takes title to the assets of the original owner (“settlor”). In most cases, the settlor is also the initial trustee. The terms of the document designate who will take over as trustee when the initial trustee is no longer willing and able to act.

What are the advantages of trusts?

  • Cost savings. Avoiding probate can save substantial fees and costs.
  • Incapacity management. Named trustees can manage assets for a settlor’s benefit if he or she is incapacitated, avoiding the need for a court-appointed conservator.
  • Tax savings. A trust arrangement can reduce estate taxes for a married couple in certain situations. Ask your attorney for more information.
  • Beneficiary protection . Setting up a continuing trust arrangement in either a will or living will can protect beneficiaries who are too young or otherwise unsuitable to receive all of their inheritance outright in a lump sum, and can help protect against loss of assets or use on antisocial purposes such as drug addiction.

How do I obtain a will or trust?

It is important to consult with a licensed attorney or accountant experienced in estate planning to determine what estate planning devices are best for you. Using the services of someone not trained in estate planning can end up costing more money to fix the problems they create.

In discussing an estate plan with an attorney, make sure to fully disclose all of your assets. The person preparing your trust cannot determine your needs without knowing your circumstances. By disclosing your assets to an attorney, you protect the information through attorney/client confidentiality.

To check the status of an attorney and their disciplinary history, call the State Bar of Arizona at 602-340-7239. If you think you have been misinformed about living trusts, contact the Office of the Arizona Attorney General Fraud Line at 602-542-5763, or the Better Business Bureau at 602-264-1721.

Myths and Facts About Wills and Probate

Myth: Probate costs and attorney fees are usually as high as 10% of your estate.

Fact: Arizona attorneys may charge only reasonable fees for necessary services, not percentage fees. Fees may increase in the event of tax issues, disputed creditor claims, or other litigation, but these same issues can arise with a trust.

Myth: With probate there is a 1-3-year waiting period for distribution of assets.

Fact: An informal probate procedure can start as early as five days after death, and distribution can occur as soon as it is clear there are sufficient assets to pay expenses, creditors and taxes. Creditors have up to four months to submit claims and the personal representative may, but need not, delay distribution until the end of the creditors' claim period.   A trustee may also have to delay distribution in order to pay taxes or liquidate assets in order to divide property. An improperly prepared or funded trust may require money and time to correct before distribution can be carried out.

Myth: Probate forces the liquidation of your assets.

Fact: Liquidation of assets is required only if necessary to pay expenses, creditors, taxes, or to make distributions to beneficiaries. A trust is no guarantee against such liquidation for the same purposes.

Myth: Probate litigation is more expensive than trust litigation.

Fact: Unhappy family members or beneficiaries can challenge both wills and trusts. A trust is not a guarantee against litigation. Expenses will depend on the nature of the litigation.

Myth: A trust will avoid Federal estate taxes.

Fact: A will or trust that provides for a “credit shelter trust” arrangement can reduce estate taxes for married couples who have combined assets over the federal estate tax exemption. A trust in and of itself does not reduce estate taxes at an individual’s death, nor does a will.

Myth: Probate proceedings are complex and require special court approval.

Fact: In Arizona, most estates use the informal probate procedures that do not require formal court approval and in many cases do not even require a single personal appearance in court.

 

The information published here is a public service by the State Bar of Arizona. It is meant only to inform, and not to advise anyone on a specific legal problem. Laws and regulations change regularly. Consult an attorney if you need specific legal advice.

Back to Consumer Brochure Homepage