AZ Estate Planning News

AZ Estate Planning News

Knollmiller and Arenofsky Trust and Estate Planning

Posts filed under Probate

Advantages vs. Disadvantages of a Revocable Trust

New Grandchild

Advantages of a Revocable Living Trust

  • Avoidance of probate. In particular, a revocable living trust can avoid expensive multiple probate proceedings when you own real estate in several different states, as well as the publication of the otherwise private financial details of your estate.
  • Avoidance of conservatorship. A revocable trust can avoid the additional cost of a conservatorship in the event of your incapacity.
  • Efficient distribution. A revocable trust can reduce delays in t istributing your property after you die, although delays caused by filing an estate tax return cannot be avoided.
  • Confidentiality. Generally the terms of your living trust are confidential, with only your named beneficiaries and trustee having access to that information.
  • Continuity. A trust can provide continuity of management of your property after your death or incapacity.

Disadvantages of a Revocable Living Trust

  • Expenses of planning. A revocable living trust can be a little more complicated than a will to draft, and asset transfers can take time and can result in additional costs.
  • Expenses of administration. If you appoint a bank or trust company as trustee, you will have fees to pay (though these may take the place of investment advisory fees and other fees you are already paying).  Of course if you do not use these services, this additional expense will not apply.  Setting up a revocable living trust will not eliminate the need for professional services of attorneys and accountants in the future.
  • Inconvenience. Once the trust is established, you must be sure that trust books are maintained and that all assets continue to be registered to the trustee.   Again, this is not a large issue but certainly is something to consider.
  • Unforeseen problems. Revocable living trusts can raise a variety of new problems regarding the ability to borrow against property, title insurance coverage, real estate in other countries, Subchapter-S stock, certain pension distributions, and many other issues. Only a skilled attorney familiar with estate planning can tell you whether, on the whole, a revocable living trust is right for you, your family and your assets.

In this author’s opinion, the advantages far out weight the disadvantages

This is based on an posting by the Oregon State Bar

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How Much Does the Government Take When you Die?

Arizona State Capitol Museum

This question gets asked a lot.  Sometimes it is asked if the Feds or Arizona tax you when you die?  Sometimes it is asked if the State gets part of your estate when you die?  Mostly it is thought of in terms of probate whether you have a Last Will & Testament or not.

The short and simple answer for almost everyone is zero, the Feds and Arizona gets absolutely nothing when you die. Of course there are exceptions, but they are very limited.

One exception is if your total estate is over $5,250,000 at least for year 2013.  If a married couple have done proper estate planning they can pass $10,500,000 this year estate tax free.  And no, the State of Arizona does not have an inheritance or death tax.  Some states do but Arizona does not.

Another exception is if you do not have a Will or Trust and you have no heirs.  This means no parents, children, spouse, nieces and nephews, cousins, etc. Very rare, but possible.  If this is the case, the State of Arizona takes the entire estate.

Another exception, but I don’t really think this should be thought of as an exception but basic taxation, is that if you have any assets that are pre-tax, for example an IRA, then when the funds are distributed, they are subject to income tax as they would have been if the person was still alive.

So in answer to the question, no, the Feds and the State of Arizona will very unlikely get a piece of your Estate.  Of course this doesn’t mean your Estate will go where you want it to without careful estate planning. That is a subject of another post.

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