Life insurance is often the first outside investment the head of the family makes, and it’s the only way to create an instant estate. In fact, of all the estate-planning tools, life insurance is the most flexible. However, you may be shocked to learn that life insurance will be included in your taxable estate, regardless of the beneficiary.
According to experts, when it comes to something like estate planning tucson az families should consider creating a trust. It’s a common estate planning technique to exclude life insurance benefits from a taxable estate. But it must be properly designed and managed to achieve its goals.
Advantages of Having a Trust
The establishment of an Arizona trust saves your heirs from the delay and the cost of having to put your estate through probate. A probate process can take up to a year, but your assets can pass to your heirs without delay if you have a trust. Arizona has two types of trusts: revocable and irrevocable. The type of trust that is best for you and your family depends on your succession planning goals. While still alive, in Arizona, a revocable trust allows you to keep control of your assets, allowing you to modify the terms of the trust, change the beneficiaries or completely revoke the trust.
An irrevocable trust is one that you do not control and cannot be changed or revoked. However, there are tax benefits to an irrevocable trust that are not available with a revocable trust. Some of the advantages include:
- It enables both your estate and spouse’s estate to avoid estate taxes on insurance proceeds
- Liquidity for estate needs can be provided if the trustee is authorized to purchase assets from your estate
- Death benefit proceeds will not be included in your probate estate
- A substantial sum of money after your death may be available for the benefit of your survivors
Irrevocable trusts also protect heirs’ assets for special need cases, and protect against wasteful use of assets.
The Probate Process Can Overrule a Will
A properly drawn will should state your wishes as to the disposition of your property. The will is presented to the court where they will determine if the document is acceptable for probate. The court will also hear any claims or disputes to contest your will and will interpret any ambiguous provisions. So, is there a chance, although small, that your wishes may not be carried out as you thought? It’s possible. Historically, people have used a trust as an effective means of avoiding the inheritance process. However, a trust can provide several more important benefits for you and your loved ones.
Having a trust allows you to appoint an administrator and provide specific instructions on how any inheritance should be distributed, and it helps you avoid potential legal disputes since challenging a trust entails a considerable burden plus time and expenses on the part of the party that challenges it. You can see the advantages, and having a trust truly gives you the last say.