Revocable Living Trust Overview
What to know:
- A last will & testament is part of almost every estate plan
- When accompanying a living trust the will is called a "pour over will"
- Only a last will & testament can nominate guardians for dependent children
- A last will & testament becomes effective only after the will's creator passes
- Probate's purpose is to prove a will is valid and provide creditors a time to be repaid
- A last will & testament can create a testamentary trust to hold assets
- Neither a last will & testament nor a testamentary trust help assets avoid probate
Last Will and Testament
A last will and testament is part of almost every estate plan, even if a living trust is involved. The last will and testament is used for:
- Naming guardians for dependents
- Naming executors to handle distribution of assets not in a trust
- Distributing personal assets without designated beneficiaries nor in a trust
If you pass without a will, Arizona has a default will for you which will name family members, starting with those most closely related to you, as beneficiaries.
A will is valid in Arizona if it is in writing, is signed by the decedent and has two witnesses. A.R.S. § 14-2502.
A handwritten will is valid if it is completely handwritten regardless if it is witnessed. A.R.S. § 14-2503 .
Handwritten wills (also known as holographic wills) are typically subject to greater scrutiny by the probate court.
Probate is often confused as a tax. Many people incorrectly believe probate is Arizona's way of taxing the decedent's estate. Probate is a latin word meaning "to prove" and is simply a court process designed to:
- Validate a will
- Present an opportunity for creditors to be repaid
- Oversee the transition of your estate
In Arizona, regardless of the probate type, creditors are given a four-month window of probate to make a claim against the estate. If a creditor misses this opportunity then the creditor is out of luck - a big advantage over a living trust which leaves the window for creditors open if a detailed list of debts is not provided with estate planning documents.
If you do not have family, friends or want to pay a professional service such as a corporate trustee to handle your estate's transition, the court can provide needed oversight to ensure your will's instructions are fulfilled.
Estates with less than $75,000 of real property (less any leans/encumbrances) and $50,000 of personal property (less any leans/encumbrances) can avoid probate in Arizona with the small estate exemption.
A.R.S. § 14-3971
Some assets are not included in the calculation of probate assets. These include assets with named beneficiaries such as but limited to life insurance, IRAs, 401(k)'s, bank accounts with POD's (payable on death) and real estate using beneficiary deeds.
Probate costs include:
- Court filing fees which in Arizona are usually a few hundred dollars
- Newspaper publishing of Notice to Creditors which costs about fifty dollars
- If required, the cost of a obtaining a bond
- Attorney fees if legal help is needed which can be several hundred to several thousand dollars.
A last will and testament is used to name guardians for dependents. Without a last will and testament, dependent children will have a guardian appointed by a court without the input of the deceased parent. Read more on dependent's guardians.
A last will and testament can create a trust to hold assets for beneficiaries similar to a living trust. The testamentary trust is not created until after the will's creator has passed. Assets are transferred into the trust after the creator passes (which is why testamentary trusts do not help avoid probate).
Testamentary trusts can hold payouts from life insurance or the proceeds from the sale of other estate assets until certain requirements are met by a beneficiary, such as age, education, drug testing, etc. A trustee is named by the will's creator to manage the trust for the beneficiary until the trust is empty.
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Important: Please consult with Four Peaks Planning, Inc. or a legal professional before undertaking any actions. The information in this web site is provided with the understanding that the publisher is not engaged in rendering legal, tax or investment advice. While every attempt has been made to provide current and accurate information, neither the author nor the publisher can be held accountable for any errors or omissions. You agree not to hold any employee of LivingTrustArizona.com or Four Peaks Planning, Inc. liable for action you take from the information on this website. Copyright: Four Peaks Planning, Inc. © 2019