Is a trust something that I would set up instead of a will or in addition to a will?
If you just have a will, the will is basically the document that tells where you want your estate to go. If you have a trust, the trust agreement says where you want your estate to go, but we still prepare a will. In legal parlance, it’s called a pour‑over will. The purpose of that document is to make sure that if you fail to put any assets in the trust or if ‑‑ say your death is caused by somebody else’s negligence. You’re killed in a car crash. The other party ran a red light and smashed your car and killed you. Your estate makes a claim for your wrongful death, as do your children.
But that would put some money in your estate, so thereby the necessity of having that pour‑over will, the only function of which is basically to transfer assets into the trust that weren’t there already. While there are other purposes to the will, you can nominate a guardian for your children in the will. You can have a personal property list where you want to distribute items that might be family heirlooms or collectibles or things like that.
To most people a trust sounds like something that only rich people need.
There are, as you said, a lot of people who feel like, “Well, I don’t have sufficient assets to need a trust.” And there are some people who probably don’t have any significant use for a trust. Those are people who have assets, if they don’t have real estate total $50,000 or less or if they have real estate, the total assets ‑‑ they give you up to $75,000. Those assets can be handled by what’s called a small estate affidavit in lieu of doing a probate. You can transfer up to $50,000 ‑‑ again, if there’s no real estate. If there’s real estate, then you get up to $75,000. But the concept for most people is, “You know, I don’t have a lot of money.”
Sometimes we have somebody who’s only real asset is their home. If they have children or one child and they want to leave it to, they can avoid the probate process by preparing what’s known as a beneficiary deed. That type of a deed says, “When I die, my home is to go to this person.” Their son or daughter, whatever. Until that time, it’s mine alone. I can sell it. I can encumber it with a mortgage or a second mortgage or a homeowner’s equity line or things like that.
It’s still mine to do what I want with it, but when I die, it goes where I say on the deed. It goes to whatever person I name.
If that’s the only real asset somebody has, and they have somebody they want to name in a beneficiary deed, they can avoid the need to do a trust, and still not have to worry about a probate.
But for the average person, they’re going to have ‑‑ if you add bank accounts, equity in home, equity in vehicles, home furnishings, jewelry, artwork, various and sundry things like that along with any retirement benefits, bank accounts, 401(k)’s, IRAs, that kind of stuff, it’s real easy to go above the $50,000 mark and necessitate a probate.
A probate, even on a simple estate, is going to require at least four to six months, and sometimes an awful lot longer than that in this court system. It’s going to usually cost a minimum of $2,000 to $2,500 when you pay the filing fee, some attorney fees because most people don’t know enough about probate to be able to do it on their own. And then, notice to creditors. It has to be published in the newspaper, things like that.
If we come in and want to set up a trust, what is the process like? How many meetings? How many weeks?
There’s an initial meeting. If you understand enough and you’re ready to move forward, I go through ‑‑ I’m the sole person that meets with the client ‑‑ I gather information on an information sheet that we have prepared. We get the names of all the parties and how they want trust assets to be distributed. Most parents distribute in equal shares to their children, but not all. Sometimes there are very good reasons. Either a child has proven that they really don’t have any use for the parents, and the parents don’t feel an obligation to leave them something to that child. Or the child does not have a good sense of money management or the child has borrowed from their parents over the years, and they feel like they’ve already got their inheritance. Or things like this.
Even though most couples leave their estates to their children in equal shares, it doesn’t always happen that way. There are certain situations where parents specifically exclude a child, because a child has treated them badly or has kept the grandkids away from them or things of that nature. There are lots of things that these documents can be set up to do. They can basically be customized to do whatever the customer or client wants.
That’s the first meeting, then. What’s the rest of the process like?
Sometimes what happens is I have one of the spouses who comes in. The other does not. Either they’re not available or they just want the one to go in and kind of find out if it’s something they’re going to be interested in doing. If that’s the case and the spouse that didn’t attend the first meeting wants to come in and have their questions answered, we would usually provide at least half an hour of consultation on that. Once we get the information ‑‑ and sometimes, to be candid with you ‑‑ I will, they’re not in a position where they really want to name who the people are. There are going to be alternate trustees or guardians for their children or things like that. If that’s the case, then I’ll photocopy my information sheet and send it home with them so that they can discuss it and figure out who they want and so forth. Then they either bring it back, email it or fax it to us.
Once we get all the information, we prepare the documents and usually within two weeks of that, we have the documents prepared for them. We will then email them to them, which a lot of law firms won’t do out of fear that they’ll take the documents, go sign them themselves and not come in and pay the bill. There’s a risk of that we recognize.
We generally email the documents to them so they have the opportunity to go over them at home. We tell them to make notes on the pages if you need to, so that when you come back we can answer questions you might have. And go on from there.
If that’s the case, then when we send them the documents, they do go over them, come in and we’ll answer questions they have. We can make corrections or changes at that time. It’s not ‑‑ I didn’t say it’s a high percentage, but probably 20% to 25% of clients get in and say, “Well, after talking with you again, we want to change this person for that person” or things like that. We do try to make changes for them when necessary.
Then they sign the documents. It usually takes about an hour to go over all of the documents and sign them. The initial meeting is, again, half an hour to an hour. The follow‑up meeting might be another half an hour. Then we draft the documents. Go through and proofread them. Make sure they’re the way they should be. Email them out. Make changes if required and then explain to the clients how the documents work and distribute them back to.
That’s kind of the way that works. We send clients out the door with the originals on documents. We do offer a service to the client, if they want ‑‑ if they are putting real estate from Arizona, because we can’t do out of state real estate. Arizona real estate ‑‑ if they’re putting it into their trust, we charge $100 to prepare and record the deed to the property so that it will transfer into the trust. That’s kind of the way it works.
Let’s say I already have a trust set up. It’s two or three years later. Are there things that I need to be doing to maximize my benefit there?
We try to explain all of these things to the client. Here’s one of the things that I do, that I know a lot of attorneys won’t do. Anytime I have prepared a trust for clients and they have questions about the documents of “how do I do this?” or “what should I do here?” or “I forgot what you said about this” and so forth, I will take calls from the client on my documents and I don’t charge them for the call. I give them the opportunity to have some additional consultation at no cost. Now, I always advise clients pull the documents out every two or three years and look at them. Make sure everything’s still the way you want because over time, things change.
It may be somebody they’ve named as a second alternate trustee or something who died or moved out of state or they had a falling out with, and they really don’t want to have them in that position anymore. So they may not have thought about it at the time, but if they pull the documents out and see that name, they’re going to say, “Wait. Time to change.”
These documents can be changed. It’s called a “trust amendment,” and we can make changes as they see fit.
People, once they’ve established a trust with you, should periodically check in just to see that everything is still kept current and up to date.
Sure. We will also do trust reviews for people. In particular, people who’ve moved in from out of state. I need to emphasize that if a trust was created in another state and is valid in that state, it is valid in Arizona in the same any Arizona trusts that are created that are valid here are valid in any other state. Because that can be important to somebody who knows that in a year or two they’re going to move to another state. Does this mean if I do a trust now, I have to turn around a year or two later and redo it? And they don’t.