Estate Planning: 10 Things You Should Know in Arizona

The reality of life is that you will die.  An estate plan lays out how you want your assets handled at your death or when you’re physically or mentally incapacitated. Hopefully you have a long and fulfilling life, but that is not guaranteed.  Just read the obituaries and you will quickly realize that people of all ages pass away.

Everyone needs an estate plan and without one, you leave a mess for your loved ones.  While an estate plan cannot prevent death or illness, it can protect your family from unnecessary stress, grief and family drama. An estate plan gives your loved ones exact direction on what to do and frees them to grieve without having to make difficult decisions.

1. An estate plan covers decisions in life AND death

While living, an estate plan can explain your wishes when you have a serious medical condition and can’t make decisions yourself. You name an agent, typically a family member or trusted friend to decide for you. You can create specific instructions, like whether you want to be an organ donor or want to refuse treatment when on life support with no chance of recovery in an advance directive.  By you making these decisions ahead of time, your agent can simply carry out your instructions.

In death, your estate plan lays out what you want to happen to your property at death. Who gets what and when? Do you want to leave anything to charity? Who will be the personal representative or successor trustee in charge of paying your last debts and distributing your remaining assets?

2. An estate plan is much more than a will

A proper estate plan is typically not just a testamentary will.  Typically, at a minimum, you will want the following documents:

1. Revocable Living Trust.
2. Pourover will.
3. Healthcare Power of Attorney.
4. Mental Healthcare Power of Attorney.
5. Living Will.
6. Durable Financial Power of Attorney.

3. Have a plan, or the government decides for you

Arizona has laws for what to do when someone dies or becomes incapacitated without an estate plan.  If you have no plan, the government in its infinite wisdom will decide for you.  Sometimes this is fine, sometimes not so much.  Why risk the government’s plan when you can easily decide?

4. Beneficiary designations can be your friend

Beneficiary designations can be your friend and will override your estate plan.  Some bank accounts, retirement accounts and life insurance policies ask you to name a beneficiary to inherit the money after your death. These instructions override whatever you may have written in your trust or will and other estate plan documents.  Always keep your beneficiary designations up to date!

5. A living revocable trust provide control after death

A living revocable trust is a legal entity that holds property for the benefit of someone else. You can set up a living revocable trust to control how your money and property are distributed after your death. For example, if you’re worried about your 18-year-old, pot smoking, financially irresponsible son being able to manage a large inheritance, you could put the money in a living revocable trust with a delayed distribution, dictating that your child gets the money only after turning 30 or whatever age you believe appropriate.

6. Avoid the probate process and speed up inheritance

If you die without a will or even with a will, your family will have to go to court.  It’s called the probate process.  Even with a smooth probate process, this can typically take 1-2 years.  If the probate process become contentious and the family is fighting over property, it can take longer.  Often times, there is always that one family member who has to make things difficult.  If you don’t have an estate plan and your family members fight over the inheritance, they could spend everything on legal fees.

This is unnecessary.  Create a living revocable trust, fund the living revocable trust and avoid the probate process entirely.  Your property will be distributed pursuant to the trust terms and bypass the probate process.

7. Estate planning may save taxes for your heirs

Taxes should always be considered in your estate plan.  The good news is that Arizona has no state estate tax.  The bad news is that there are federal estate taxes if over the federal exemption.  The federal exemption varies from year to year.  You could minimize these taxes by planning in your lifetime, for instance by making more gifts.  After you pass away, it’s too late.

8. Remember your pets

Let’s face it, pets are a member of the family.  They must be taken care of when you pass away.  If you have a cat, dog, or other animal, include what you want to happen to them in your estate plan. Who will take over the pet, a friend or a local humane society?

9. Have a mental healthcare POA

Mental health issues are becoming more and more prevalent as we age.  Dementia and Alzheimer’s for example. When you lose your cognitive ability, it’s too late to create an estate plan.   Will you need to go into an assisted living facility?  Many mental health providers will need a mental healthcare power of attorney.  A regular healthcare power of attorney may be insufficient for many mental healthcare facilities.

10. Review your estate plan every year

Life can throw you many curveballs.  Things change quickly.  If you have an existing estate plan, your situation may have changed over the years.  If any of the following events or circumstances have occurred since the creation of your estate plan, you will probably need to revise/amend your documents:

1. A death in the family;
2. If you want a new trustee for your trust or personal representative for your will;
3. A birth in the family;
4. A divorce;
5. A new marriage;
6. If you want to disinherit a child;
7. If you want to add or change beneficiaries, including a charity;
8. If one or more of your beneficiaries predeceased you;
9. If any of your beneficiaries have special, or changed, needs that you want your estate plan to address.
10. If you received an inheritance or additional assets;
11. If you want a new person to have power of attorney (healthcare or durable financial);
12. New tax laws may have been enacted since you created your estate plan.

It’s easy to forget, but don’t delay in amending your estate plan when life changes.

With over 50 years of combined experience, we can help. Our firm possesses the dedication, determination, and compassion necessary to help you successfully plan for the future. Call us at (928) 213-5916 to speak with one of our experienced Flagstaff estate planning attorneys.