When it comes to estate planning, trusts are a powerful tool that can help protect your assets, minimize taxes, and ensure your wishes are carried out. However, when setting up a trust, many individuals want to know: is it smart to put everything in a trust? As an Arizona wills and trust attorney, I’ve helped countless clients navigate this complex issue. While every situation is unique, there are some benefits and limitations of trusts that can help you determine what assets to place in your trust. 

Benefits of Trusts

A trust is a legal arrangement in which a trustee holds and manages assets for the benefit of designated beneficiaries. The person creating the trust, known as the grantor or settlor, determines the terms of the trust, including how assets are to be distributed and when.

Trusts offer several advantages over other estate planning tools, such as wills. Some key benefits include avoiding probate, maintaining privacy, and minimizing estate taxes. Certain types of trusts, such as irrevocable life insurance trusts (ILITs), can help reduce your estate tax liability by removing assets from your taxable estate. 

What is Best to Put in a Trust?

When considering which assets to place in a trust, you must focus on those that will benefit most from the advantages trusts offer, such as avoiding probate, maintaining privacy, and controlling distribution. Here are some assets that are commonly placed in trusts:

  • Real Estate: Placing real estate in a trust can help avoid probate and ensure a smooth property transfer to your beneficiaries. This is especially useful if you own property in multiple states, as it can prevent the need for probate proceedings in each state.
  • Business Interests: If you own a business or have an interest in a partnership, placing these assets in a trust can help ensure continuity and protect your beneficiaries. It can also provide a clear succession plan and help avoid disputes among family members or business partners.
  • High-Value Assets: Valuable assets such as art collections, antiques, or jewelry can be placed in a trust to ensure they are distributed according to your wishes.
  • Life Insurance Policies: Placing life insurance policies in an irrevocable life insurance trust (ILIT) can help remove the policy’s death benefit from your taxable estate, potentially reducing estate taxes.
  • Bank Accounts and Non-Retirement Investment Accounts: Transferring these assets to a trust can help avoid probate and maintain privacy. However, it’s important to consider the tax implications and potential ongoing management requirements.
  • Intellectual Property: If you own patents, copyrights, or trademarks, placing these assets in a trust can help ensure they are managed and distributed according to your wishes.
  • Personal Effects with Sentimental Value: While not necessarily high in monetary value, items with sentimental value, such as family heirlooms, can be placed in a trust to ensure they are passed down according to your wishes and to avoid potential disputes among beneficiaries.

Should You Put Everything in a Trust?

When you’re setting up your estate plan, should you put everything in a trust? The answer depends on your unique circumstances and goals.

In some cases, placing all your assets in a trust can be a smart move. For example, a trust can provide the necessary control and flexibility if you have complex family dynamics or want to ensure your assets are distributed according to your wishes.

However, there are also situations where placing everything in a trust may not be necessary or practical. For instance, if you have a small estate and your primary goal is to avoid probate, you may achieve this through other means, such as beneficiary designations on bank accounts and retirement plans or transfer-on-death deeds for real estate.

Additionally, some assets may not be suitable for trust ownership. For example, retirement accounts like 401(k)s and IRAs have specific tax rules that can be disrupted by trust ownership. In these cases, it’s better to use beneficiary designations to control the distribution of these assets. Also, it doesn’t often make sense to put vehicles in trust. In many cases, the value of a vehicle doesn’t justify the added complexity and costs associated with trust ownership.

Working with an Arizona Wills and Trusts Lawyer

Ultimately, the decision to place assets in a trust is personal and should be made in consultation with an experienced wills and trust attorney in Arizona. At our firm, we work closely with clients to understand their unique needs, goals, and family dynamics. We then craft personalized estate plans that may include a combination of wills, trusts, and other tools to ensure your wishes are carried out and your loved ones are protected.

If you’re considering creating a trust or have questions about whether trusts are right for you, we invite you to contact our office to schedule a consultation. Our team of dedicated Arizona wills and trusts lawyers is here to guide you through the process and provide the peace of mind that comes with knowing your assets and loved ones are secure.

Remember, what works for one person may not be the best solution for another. By working with a skilled wills and trust attorney who understands the intricacies of Arizona estate planning law, you can create a plan tailored to your specific needs and goals.

Contact Blake & Pulsifer today at 480-838-3000 or fill out our confidential contact form.