An Overview of the Trust Administration Process and How It Differs from Probate
Wills and trusts are both legal documents that help transfer control and management of your assets. An experienced Arizona wills and trusts lawyer can explain which document is right for your goals and the needs of your loved ones. In general, wills become active only when you die. After death, the will has to be approved by a court through a process called probate administration. Trusts, on the other hand, can become active upon your death, thereby allowing you to entirely avoid the probate process.
Trusts can be created for many reasons:
- Pass assets outside of the probate process
- Distribute assets based upon religious preferences
- A child, spouse, or loved one has special health needs
- A child is a minor
- A child is an adult but the person creating the trust doesn’t want him/her to get the funds until the child is older -21, 25, 30, any age over 18
- To help provide for the management of a business or investments
- To help reduce taxes
- To help prevent creditors from obtaining the trust funds
- Many other reasons.
The person who creates the trust designates:
- The property that will be placed in trust – such as cash, investments, and other assets.
- The beneficiaries. The people who will be paid from the trust
- The trustee. The person, organization, or company designated to manage the trust
- A termination date. Some date or event that will end the need to maintain the trust
People use wills for the following:
- To designate beneficiaries. The people who will be given your assets.
- To designate an executor. The person who will manage the trust
- To designate what property will go to which beneficiaries. Generally, all property that doesn’t go to someone directly (such as being named a life insurance beneficiary) or through a trust is collected and then distributed to the beneficiaries/heirs.
- To designate a guardian. Anyone with minor children should appoint someone to raise their children if both parents are deceased.
Generally, wills require probate and trusts require private administration. Both probate and trust administration are the processes that validate the legal document and determine how the document’s terms should be fulfilled. Wills can be changed until the person who created it dies. Trusts are usually revocable until death – though some trusts can be made irrevocable.
Advantages of trusts versus wills
Some of the reasons Arizona trust lawyers recommend the creation of trusts during a person’s lifetime are:
- To avoid probate. Probate is public while trust administration is private. Probate involves expensive court costs to make sure everyone gets proper notice and for other reasons.
- To avoid the expense of managing the estate. Most wills require that the executor and the lawyer be paid for collecting the estates, paying the bills that are due, and then distributing the assets to the beneficiaries.
- To minimize taxes. Arizona, currently, does not have an estate, inheritance, or gift tax. People with very large estates may use a trust to reduce or eliminate the need to pay a Federal Estate Tax.
- To avoid the need to appoint a conservator or guardian. If you become ill and can’t manage your personal affairs, then a guardian may have to be appointed to help you. If your incapacity prevents you from handling your financial affairs, a conservator may be needed. If there are no documents such as a living trust or healthcare power of attorney, the person who wants to help you (a relative or organization) needs to get court approval
- To control who benefits from your assets, when, and how. Some trusts, for example, are created to provide income to a trust beneficiary for their lifetime. After the lifetime, the assets may be sold and distributed. There are many variations you can choose with the help of an Arizona trust lawyer.
- Less time is needed. The probate process and the time to manage the estate can take months and months. Trust administration requires a much shorter time frame.
- Less likely to be contested. Because most trusts become active during the creator’s lifetime, the trust creator is able to resolve any issues that may arise.
- More private. Anyone can read the probate records including creditors. The records usually include the identities and addresses of the heirs. Trusts are usually not open to public examination.
Speak with a skilled trust and estate lawyer
Our Tempe Arizona lawyers begin by reviewing your goals. We then explain the various options. There are many legal strategies that can help you meet your estate planning goals. Sometimes trusts and wills are tied together – the will creates a trust. A power of attorney may be an option. There are different types of trusts for different goals. At Yaser Ali Law, we understand how much you want to protect yourself and your family. To speak with a respected estate planning lawyer, please call us at (480)-442-4175 or complete our contact form to schedule an appointment.