Trusts are an important estate planning tool for many individuals but may not be right for every estate plan. Trusts are complex legal documents and should only be prepared by a lawyer who practices in this specific area of law. There are many different kinds of trusts and they are established for a variety of reasons. This post provides a very brief overview of the different uses of trusts. Every individual has unique needs and goals and only a consultation with an experienced estate planning attorney can help you understand whether a trust, or a variety of trusts, is right for you.
Trusts for Parents
Trusts can be particularly useful for parents of young children because a trust allows parents to create a plan for the financial future of their minor children. A trust designates a trustee to manage money for the benefit of the children. This structure bypasses the need to have a court appoint a Conservator for each minor child, who must then make yearly reports to the court. It also allows the children to receive their money at any age the parent chooses, rather than either 18 or 21 under current state statutes.
Trusts to Avoid Probate
Trusts can be useful tools to avoid the probate process. Any assets held in trust are exempt from probate and can be managed outside of the court’s oversight. This is especially useful for people who own property in multiple states as it can avoid the need for probate in multiple jurisdictions. The cost of opening a probate through the court varies in each state and also depends on the size and type of assets within the decedent’s estate. In Arizona, the average probate roughly costs $2,000-$4,000 and typically takes 9-18 months.
Property drafted trusts can also bypass the need for “living probate.” This is the probate court process of appointing a Guardian or Conservator for someone if they become incapacitated. These legal actions range from $4,000-$6,000 each in Arizona. Living Probate is not needed when someone has a properly drafted trust, with a Successor Trustee who can manage someone’s assets if they are incapacitated.
Trusts for Medicaid Planning
Trusts can be created to protect assets of someone who may need state Medicaid assistance in the future. Assets held in these types of trusts for a period of five years or more are not counted as assets under Arizona’s Medicaid eligibility rules. This means a person can receive Medicaid benefits as well as keep their assets for their ongoing needs.
Whether a trust is appropriate for your own particular situation will depend on many different factors. An experienced estate planning attorney can help you decide whether a trust is appropriate.
