Estate Planning
Revocable Living Trust
A trust is a legal document that takes care of your assets while you are alive and disposes of your assets after your death. It is the centerpiece of most estate plans. A revocable trust is a trust that can be changed, amended, or revoked during the creator’s lifetime. The creator of a trust is typically called the “grantor,” “settlor,” “trustor,” or “trustmaker.” A revocable trust generally becomes irrevocable after the grantor’s death.
For most people the purpose of the Living Trust is two-fold:
Avoid Probate:
Probate can be a long and expensive process. By establishing a Living Trust and properly “funding” or transferring ownership of your assets into the Trust, you can avoid probate. This can save your estate significant money, as well as ensure that your assets are transferred to your chosen beneficiaries in a timely manner.
Sophisticated Asset Transfers:
Most of us dread the thought of giving large sums of money to young or irresponsible adults. A Living Trust allows you to do more sophisticated asset transfers to your heirs. Whether it’s giving your heirs specific amounts at specific ages, or requiring them to complete educational requirements, A Living Trust gives you the flexibility to decide how and when your assets will be distributed to your heirs.
Anytime you draft a trust it also essential that you have a Will. This Will is typically called a “Pourover” Will.
It accomplishes two main purposes:
1. A Pourover Will will direct that any assets that have not been properly funded into your Trust while you are still alive aExit Visual Builderre put into your trust after your death. It is a safety net in case you have any assets not in your trust.
2. A Pourover Will is also your opportunity to name a Guardian of your children in the event something happens to you while they are still minors.
Wills
The biggest myth surrounding estate planning involves Wills. We regularly hear this statement (or some variation of it): “I have a Will, so my family won’t have to go through probate.” Sadly, nothing could be farther from the truth. A Will FORCES probate.
A Will is merely instructions to the court of what you want after you pass away. If the only planning you’ve done is via a Will, you are almost guaranteeing your loved ones will have to go through probate court, or at least some kind of informal probate process.
A Will typically does four things:
-
- Distributes assets to chosen heirs.
- Names guardians for minor children. In Arizona, the only legal document where you can name a guardian is your will. For many parents, this is the most important decision of their entire estate plan.
- Names a Personal Representative (also known as an executor in many states) to handle the administration of your probate estate (paying taxes, paying creditors, and distributions to heirs).
- Forces probate proceedings.
Power of Attorney
Financial Power of Attorney
A Durable Financial Power Attorney allows your chosen agent to deal with assets during your incapacity (think stroke, heart attack, or serious car accident) or unavailability (such as being stranded in a foreign country). The person you appoint as your financial power of attorney is typically your “Agent” and has a couple of jobs.
First, when you have a revocable living trust, your Agent manages any assets that are not titled in the name of your trust, such as your retirement accounts, life insurance policies, vehicles, and perhaps real estate that was not deeded into the trust. Second, your Agent is also in charge of other daily life chores that you may not be able to complete yourself due to incapacity. For example, they may have to dispute a bill, call one of your utility companies, or even open your mail.
Due to the nature of duties required of your Agent, and the power they have, it is crucial that you choose a person or professional entity that is money-savvy and that you can trust completely. If you have a trust, the trustee of your revocable living trust is in charge of the day-to-day management of all your other assets should you become incapacitated.
Healthcare Power of Attorney
Property Deeds
For most people, their home is one of their largest assets; therefore, it is so important to make sure that your real property is correctly transferred into the name of your revocable living trust. By transferring the real property into the trust, your real property will avoid probate and get to the people you want it to go to efficiently.
In Arizona there are a couple of different deeds that we use to effectuate this transfer. One is a special warranty deed and the other is a beneficiary deed. Depending on your circumstances, one may be better than the other. It is the job of your experienced estate planning attorney to understand the pros and cons of these deeds and be able to recommend the appropriate deed for you.
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