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Estate Planning FAQs

Why do I need an estate plan?

Many people assume that the laws of their state will appropriately distribute their property to family members. That is true to a certain extent, however, you give up a lot of rights if you fail to plan. For instance, an estate plan can help you ensure that your intentions for your assets are met, prevent disputes, reduce stress for your family at a difficult time and minimize or eliminate estate taxes.

What things do I need to consider in my estate plan?

The more important thing is to determine what matters most to you! Think about the arrangement you want for the distribution of your assets and for the care of your family, children and pets. Establish a relationship with the agents you appoint to handle your property and care for your family. Be sure to choose someone you KNOW will carry out your decisions and perhaps make the right decisions for you when you cannot. Finally, you'll need to prepare all the legal documents that will express your preferences in health care treatment, life-prolonging care decisions, etc.

Is Jointly Owned Property a good estate Plan?

Many people put their financial accounts in joint names thinking they are finding a way around estate planning or maybe just for easy access for their children to help them. With joint property, when you di the asset will go directly to the other joint tenant(s). These assets will not go through probate. This if often done, particularly with the elderly to add children or trusted friends to the account for convenience in paying bills or other reasons. What most people fail to realize is that this could lead to unintended or unexpected results. \. Disputes, including litigation, are common between the estate of the original owner and the surviving joint tenant as to whether the survivor's name was added as a matter of convenience or management or whether a gift was intended. Another common mistake is that the person has a will thinking that the asset will pass according to the will, but title is everything and if the account is joint, the will is meaningless. A common situation is when one child is on the account, but the parent wants to leave the account to all of their children. Guess what, that is not going to happen – the one child will get everything! If you want to see unhappiness and resentment this is the way to cause it. You really need to understand the consequences of each property title and its effect in order to have a good estate plan.

What is health care or medical power of attorney?

A medical power of attorney in Arizona is a legal document that provides another individual of your choosing with the legal right to make medically related decisions on your behalf. For example, if you are in an accident and become unable to communicate, your representative will communicate your wishes to medical professionals. A federal law protects the privacy of your medical information, but you can expressly permit disclosure to a named representative or family and friends (also known as an HIPAA representative). If you create a health care power of attorney, your named agent is automatically deemed a HIPAA representative. However, some states limit this power to a period of your incapacity, so you may want to appoint a HIPAA Representative, who will help you the rest of the time.

What is a living will?

A living will is a document which will express your feelings about life-sustaining treatments should be become incapable of expressing your wishes. For instance, it will let your family know if you do or do not want heroic measures to sustain your life. You can also indicate that you are willing to be an organ donor if you wish. You can name an agent or representative to make sure your wishes are carried out.

What is a durable power of attorney?

A durable power of attorney is a document in which you appoint an agent to act on your behalf and make decisions on financial matters. The document needs to clearly state what powers your agent has while you are incapacitated. For instance, writing checks, depositing funds, making financial decisions for your business, etc. Keep in mind that all powers of attorney expire upon your death, so you should make sure you have a trusted agent or representative in place when conservatorship or guardianship proceedings begin. Please note that many states do not allow your agent to make gifts of your property, change beneficiaries, or create, amend or revoke your will or trust.

What is a will?

A will is a document that details specific directions on who will receive your property after your death. It names a personal representatives or executors to oversee the implementation of your will. It names guardians or conservators who will care for your dependents and any property of your dependents. It can also name trustees, who will manage and property you direct to be held in trust. You can also detail your wishes for the care of your pets upon your death. After your death, your agent is required to file the will with the court for possible probate. Simply put, probate just means the need to prove the authenticity of your will. Your agent is also required to pay legally enforceable claims such as debts and taxes on your estate, as well as take care of the distribution of property.

What happens if you die without a will?

If you die intestate (without a will) the state laws in Arizona go into effect. The court will determine who receives your property by default — typically to your spouse or children, or if you have neither, to other family members. Of course, the courts will just be guessing on how your assets should be disposed of and the plan may not reflect your actual wishes. That's why creating a will is so important — you will have peace of mind knowing your heirs will be taken care of.

What does a will not do?

A will does not govern the transfer of certain types of assets (called non-probate property) which pass to someone other than your estate upon your death. For instance, real estate owned with rights of survivorship pass automatically to the surviving owner, and that person may or may not be a family member or child..

What is gifting?

You have several options for leaving your property and assets to different people. You can make an outright gift to the people you name. You can make a gift based on certain condition — for instance, the person must be alive at your death. Gifts can be made “in trust.” A trustee will manage the gift for the beneficiary and distribute it according to the terms you specify. In addition, can name alternate beneficiaries should the initial beneficiaries fail to meet the conditions you set.

What is a fiduciary?

A fiduciary is a term for a person you name to perform duties for you if you can't speak for yourself and upon your death. This person should be someone you trust, who will put your interests ahead of their own and perform their duties with care, attention and loyalty.

What questions should I ask myself before picking a fiduciary?

Are there state laws that might disqualify my chosen person? Does the person have the skills, time and commitment to perform the duties required? Will this person be discreet with my medical and financial information? Will this person truly follow my wishes? Is the person willing to take on the tasks? Are all my documents in order (powers of attorney, living will, will, trusts, etc)?

What is a Trust?

A trust is a document that functions like a will — you use it to leave your property to your heirs, friends and family. However, it has much greater flexibility than a will. For example, let's assume you'd like to leave your two children your money, but you don't entirely trust them to use it wisely. You can create a trust, and name a trustee (not one of your children) to administer the trust. You can set certain conditions on when and how the money may be distributed. For example, the money cannot be used for a trip to Las Vegas, but could be used for unexpected medical expenses.

What is a Revocable Living Trust?

A Revocable Living Trust, also called a Revocable Trust, Living Trust or Inter Vivos Trust, is simply a type of trust that can be changed at any time. In other words, if you have second thoughts about a provision in the trust or change your mind about who should be a trust beneficiary or trustee, then you can modify the terms of the trust through what is called a trust amendment. Or, if you decide that you do not like anything about the trust at all, then you can either revoke the entire agreement or change the entire contents through a trust amendment and restatement. A revocable living trust functions much like a will, although is far more flexible in what is allow you to do. It allows you to achieve significant personal goals with your assets that you would not otherwise be able to achieve. Perhaps most important, it allows your heirs to avoid probate on almost all property your own — real estate, jewelry, heirlooms, bank accounts and more.

Is a trust always better than a will?

Several years ago, one of my clients saw a highly recommended attorney for Estate Planning. He prepared and recorded a Beneficiary Deed for her home, instructed her to name beneficiaries on her life insurance and bank accounts and drafted a Will that allocated everything else to her two children. The Will was really a precaution–everything I own of value already has a named beneficiary. Then she had a friend tell her she should never have paid for a Will, but should have set up a trust. In addition to the points made by the other attorney that advised her, there are other reasons for utilizing a trust based estate plan. For example, using designated beneficiary on assets instead of using a will or trust to pass them has potential pitfalls that may cause her plan to fail. Another major issue to address is how her property will be managed and controlled in the event she becomes unable to makes decisions for herself. A designated beneficiary does not avoid that issue whereas a trust can facilitate those matters better in many cases.

What is Probate?

Probate is the formal legal process of proving a will and appointing an executor or personal representative who will administer the terms of the will — pay taxes, settle debts and distribute assets to the intended beneficiaries. Most states have streamlined the probate process, making it much easier that it once was.

Should you avoid probate?

Some property automatically passes outside the probate process — life insurance or retirement plan proceeds, for example. In states where fees are minimal, probate is not a bad thing. And a properly drafted will can help speed the process along the way. Even though a living trust may be able to avoid much of the probate process, a simple will is still needed to pass over any property that has not been transferred to the trust during your lifetime. Taxes and fees are still administered through probate. How can you find out if a trust fund exists /has been established with a trustee that you believe to be fraudulent? A few years ago, someone I know contacted me and was afraid that an individual in her family was taking advantage of her elders. She thought they had been manipulated into establishing a trust fund with a particular individual as the trustee — that person was apparently now receiving proceeds from this fund. Arizona law makes it illegal to abuse, neglect or exploit a “vulnerable” adult. In addition, the law imposes an affirmative duty on some individuals to report suspected abuse, neglect and exploitation to the authorities. “Exploitation” refers to one individual taking financial advantage of another. Financial exploitation must be reported to either of those agencies or the appropriate county's Public Fiduciary. If you believe that the elders are being financially exploited then you must consider notifying the Attorney General or Public Fiduciary. Without that, Trusts are private documents and people are free to do what they want with their property unless they are being exploited.

What is asset protection planning?

Asset protection planning is proactive legal action that protects your assets from future creditors, divorce, lawsuits or judgments. It involves a series of legal techniques that can deter a lawsuit, provide settlement negotiation power and help prevent the seizure of your assets in the event of a judgment.

Which United States jurisdictions allow for the creation of asset protection trusts?

Domestic asset protection trusts are permitted under the laws of Alaska, Delaware, Hawaii, Missouri, Nevada, New Hampshire, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Virginia and Wyoming.

What other areas of law should an estate planning attorney be familiar with before practicing asset protection planning?

An estate planning attorney should be familiar with taxation and business entities, bankruptcy law and creditor/debtor law. Specifically, the attorney must have knowledge of how applicable fraudulent transfers/conveyance laws apply to the proposed estate planning.

Who should consider establishing an asset protection trust?

Asset protection trusts are typically established by individuals in high risk occupations (i.e., doctors and real estate developers) and very wealthy individuals that realize they are targets for creditors due to their net worth. Asset protection trusts can also be used in lieu of a prenuptial agreement.

Are there any tax reasons to establish an asset protection trust?

In certain situations an asset protection trust can be used to eliminate or reduce the imposition of state income taxes. An asset protection trust may also be used to remove assets from a grantor's estate while still allowing the grantor to potentially benefit from the trust assets.

Disclaimer This site is provided as a public service by Poulos Law Firm. While the information on this site is about legal issues, it is not legal advice or legal representation. Because of the rapidly changing nature of the law and our reliance upon outside sources, we make no warranty or guarantee of the accuracy or reliability of information contained herein. If you have questions or concerns, please call us directly and schedule a time to talk.

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