What is an Estate Plan?

An estate plan is a group of documents that detail what you want to happen if something happens to you. A comprehensive estate plan:

Names a guardian to care for minor children if something happens to their parents.

Names a conservator and/or successor trustee to manage any assets left to minor children.

Creates a distribution plan for assets and property after death.

Name a personal representative to administer a deceased person’s estate.

Name a successor trustee to manage assets owned in trust.

Names an agent to make health care decisions if you are unable to do so yourself.

Name an agent to handle a person’s finances if they are unable to do so on their own because they are ill or incapacitated.

States your wishes about medical treatment that would only serve to artificially prolong life if you are in a persistent vegetative state or suffering from a terminal condition.

Who Needs an Estate Plan?

Everyone over the age of 18 can create an estate plan and should do so. If you don’t create your own estate plan, the court will create one for you.

Do Only Wealthy People Need to Do Estate Planning?

No. Don’t be confused by the word “estate”. You don’t need a large house on many acres to have an estate. Your estate consists of everything you own at death. An estate could consist of $10 and a pair of shoes or $100,000,000 and multiple properties and airplanes. The word estate can also apply to you. Part of your estate plan are documents planning ahead for your incapacity. In that regard, your person is also considered your estate.

Should I Create a Will or a Trust?

Choosing between a Will and a Trust depends on your goals. If your main objectives are to name a guardian for minor children, create a distribution plan for your assets and plan ahead for incapacity and you aren’t looking to avoid probate, a Will-based estate plan is probably right for you. If your objectives are to do all those things and avoid probate, delay distribution of assets to young beneficiaries and leave assets to beneficiaries asset and creditor protected, a Trust-based estate plan is likely right for you.

What Is Included in an Estate Plan?

A basic Will-based estate plan should contain the following documents:

Last Will and Testament: names a guardian to care for minor children, a conservator to manage any assets left to minor children, a personal representative to administer the deceased person’s estate and handle a probate if necessary and states a distribution plan for the person’s assets.

Health Care Power of Attorney: names an agent to make health care decisions for another person (the “principal”) if the principal becomes ill or incapacitated and unable to make those decisions on their own. A Health Care Power of Attorney may also include a Mental Health Care Power of attorney allowing the agent to make decisions pertaining to the principal’s mental health. A Health Care Power of Attorney should also include language allowing the agent to access the principal’s federally protected health care information (HIPAA). This language can also be included a separate HIPAA Waiver.

Durable Power of Attorney: names an agent to manage the principal’s finances and other aspects of the principal’s life if the principal is unable to do so on their own due to illness or incapacity. This means that the agent can pay the principal’s mortgage and medical bills, manage the principal’s business and do tasks on behalf of the principal.

Living Will: states end-of-life medical wishes about aggressive treatment in situations where the person is suffering from a terminal condition or a persistent vegetative state. This document is sometimes referred to as a do-not-resuscitate document.

Additional documents should be included with an estate plan with a Trust:

Revocable Living Trust: a document is created during a person’s lifetime (the “trustmaker”), is fully amendable and revocable during the trustmaker’s, and creates an entity called a trust to hold the trustmaker’s assets. The trustmaker names one or more successor trustees to manage the assets in trust if the trustmaker becomes incapacitated and after the trustmaker’s death. A Trust also contains the trustmaker’s distribution plan which can delay or stage the distribution of assets to young beneficiaries (example: 1/2 at 25, 1/2 at 30) or leave assets in trust to be used for the benefit of the beneficiary yet remain asset and creditor protected. A properly funded trust may also avoid probate.

Certificate of Trust: a condensed version of a Revocable Living Trust that contains all of the pertinent information about a Trust a bank or other institution may need. This allows the trustmaker to keep the contents of their Trust private while providing institutions with the information they may need.

Assignment of Personal Property: executed with a Trust and immediately transfers all items of tangible personal property (jewelry, china, clothing, furniture, etc.) into the Trust.

Other important documents may include:

Personal Property Memorandum: in this document a person carves out specific items of tangible personal property, and states who should inherit which property items. People often use Personal Property Memorandums to dispose of sentimental items like jewelry, artwork, china and photo albums. A nice thing about using a Personal Property Memorandum is that if a person changes his or her mind, they can just destroy the old one and make a new one without having to amend their Will or Trust.

Funding Instructions: funding a Trust is essential if the trustmakers want to use the Trust to avoid probate. Funding instructions will include give detailed instructions on how to transfer common types of assets into Trust.

Beneficiary Deed: an easy way to transfer title of the trustmaker’s real property into Trust after death and effectively funds the trustmaker’s real property into the Trust.

Who Gets My Property if I Don’t Have an Estate Plan?

Every state has different laws that determine where a person’s property goes if they don’t have an estate plan. These laws are called the laws of intestate succession. They may or may not work like you think they would, depending on your family situation. These laws are especially unfriendly to blended families. Learn more about this at Who Gets My Property If I Die Without a Will?

What Is Probate?

Probate is a court proceeding in which a deceased person’s assets are legally transferred to the person’s heirs or devisees (unless those assets were held in Trust). During probate, a personal representative is appointed to administer the deceased person’s estate which includes gathering the person’s assets, paying creditors, paying taxes and filing a final tax return and distributing the deceased person’s assets. Read more about Arizona Probate Frequently Asked Questions.

Why Do People Try to Avoid Probate?

Many people want to avoid probate because it is a time consuming and costly process that can get ugly during an emotionally difficult time. Even the easiest of probate cases will take at least six months and cost a few thousand dollars at a minimum if you hire an attorney.  In addition, documents filed during probate cases become public record available to anyone to see.

How Can I Avoid Probate?

There are a number of assets that will transfer outside of probate via a beneficiary designation, with life insurance being the most obvious example. For assets that do not transfer outside of probate, this requires using a Revocable Living Trust. During a person’s lifetime they transfer their assets into their Trust (a process called trust “funding”). With a properly funded Trust, when the person dies there are no assets remaining in their name, and therefore no probate action is required to transfer their assets.

“Small estates” may also avoid probate. An Affidavit can be used instead of opening a probate if the value of the person’s personal property is $75,000 or less and the value of their real property is $100,000 or less.

Who Should I Hire to Create My Estate Plan?

The only way you can be sure that your estate plan works the way you want it to is to hire an experienced estate planning attorney. An estate planning attorney can apply the law to your particular set of facts and create a plan custom tailored to your individual needs. We offer a variety of options designed to give you the peace of mind that your estate plan will be there and function correctly when you need it. Call the Neal Law Firm today at 480-699-7992.

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