What is Estate Planning?
Estate Planning involves documents that affect your property, your loved ones, and your future needs should you become incapacitated and when you pass away. With proper planning, you can determine how your assets will be managed or distributed. You can also determine how health care decisions will be made if you become unable to care for yourself.
Who needs Estate Planning
YOU do—whether your estate is large or small. Either way, you should designate someone to manage or distribute your assets and make health care decisions for you in the event of incapacity. Estate Planning is especially important for parents or guardians of minor children or dependents with special needs.
I already have a Will. Isn't that sufficient?
A Will provides a set of instructions on how to settle your estate when you die. However, it does not allow for any disability planning while you are alive, and it also requires your beneficiaries to go through the public probate process at your death.
What is a Revocable Living Trust?
A Living Trust is a legal document that actually changes the ownership of your assets into the name of the Trust itself. Your titled assets are placed into the Trust, and a Trustee is put in charge of managing the Trust’s assets. Most people name themselves as the initial Trustee. With a Revocable Living Trust, you are able to revoke or change any terms of the Trust as long as you are still competent. As the Trustee, you control your assets during your lifetime. You can also arrange for a successor Trustee to manage your assets should you or your spouse become incapacitated. After your death, the remaining assets can be transferred to the beneficiaries you designate. When the Trust is properly created, there is no need for Court involvement at any time.
Who will direct my affairs if I become incapacitated?
A complete estate plan includes documents that not only function while you are capable of making sound decisions, but also direct trusted persons to make decisions on your behalf if you become incapacitated. A comprehensive package includes a Revocable Living Trust, a Pour-Over Will, a Durable Power of Attorney, a Health Care Power of Attorney, and a Living Will.
THE TOOLSWills
What CAN A Will accomplish: A Will allows an individual to set forth who is to get each or all of their assets at the time of their death. Without a Will, the statutes (laws) of the State of Arizona determine who gets the assets. This is called “intestate succession.” With a Will, you can nominate a personal representative (executor) who will distribute your assets per your instructions. A Will can also designate the person(s) to be the guardians of your children.What a Will CANNOT accomplish:
A Will does NOT include or affect assets that are in joint tenancy, or have a P.O.D. (Payable on Death), T.O.D. (Transfer on Death), or beneficiary designation.A Will does nothing to assist you in the event of incapacity. If a person becomes incapacitated, often a guardianship and/or conservatorship is required. These are Court actions, which can be expensive.Every once in awhile a person will name a minor child as a beneficiary in their Will. In the state of Arizona, a minor child is not permitted to inherit large sums of money or assets outright, and when this happens a conservator of the estate will be appointed until the child turns 18.Most importantly, a Will does NOT avoid probate. Upon death, any assets which do not have a P.O.D., T.O.D., beneficiary designation, or joint tenancy must go through some level of probate. Probate is the legal process by which the estate of the deceased is administered. It involves collecting assets, liquidating liabilities and then distributing assets to heirs or beneficiaries.
Trusts
A Trust is a document that actually changes ownership of assets to the Trust itself. The most common is a Living and/or Revocable Trust. The Trust owns the assets and they are controlled by the Trustee. The original owner of the assets is called the Trustor or Settlor. Normally, the initial Trustee of the Trust is the Trustor. This Trustor can be an individual or a married couple.The advantages to a Trust over a Will are many. For example:
A Trust does not die. For a married couple, when one of the Trustees passes away, usually the other spouse just takes over. When both of the Trustees pass away, a Successor Trustee (as designated in the Trust) assumes the role of Trustee.
There is no need for a probate.
Provision can be made in the event one or more of the Trustees becomes incapacitated.
A Trust is private. Assets and/or the distribution of the assets are never filed with the Court, as is the case with a Will.
A Trust stays in effect even if one or both of the Trustors become incapacitated. The Successor Trustee takes over, and there is no need for a guardianship or conservatorship.
A Trust, like a Will, can be changed if you change your mind or your life circumstances change.
A Trust can also have tax advantages not available with a Will.
A Trust can be used to distribute money to a minor child without having to go to Court. The Trustee manages the child’s money until the child reaches age 18 or reaches a certain age you specify in the Trust.
Power of Attorney
A Power of Attorney is a document that gives a person the authority to act on behalf of and make decisions for another person. The person signing the document must have legal capacity (not have dementia, mental disability, etc.) to sign a Power of Attorney. Some institutions (for example, banks and Motor Vehicle Departments) are very picky about Powers of Attorney, and will only use their own forms.Powers of Attorney are NOT effective after death. When a person dies, the Power of Attorney dies with them.There are two general types of Powers of Attorney. One type covers financial matters; the other covers health care matters. When you create your Powers of Attorney, you can choose one trusted individual to be your Agent for both types of documents, or you can choose two different people to serve the two different functions.
Living Wills
A Living Will is often confused with a Last Will and Testament. A Living Will has nothing to do with your assets. Rather, it is the document that directs your doctor and your Healthcare Power of Attorney how to handle the end-of-life care. You can decide ahead of time when, and to what extent, you want life-saving measures provided to you, such as a feeding tube or ventilator.
HIPPA Documents
HIPAA stands for the Health Insurance Portability and Accountability Act. Basically, it is the law that assures privacy of your medical records. You can designate the person(s) you want ability to access your medical condition and records. Usually, a close family member or members are named.
