Having an estate plan in place is the first and most important thing you can do to secure your legacy and your assets for the future. However, an often-overlooked aspect of estate planning is updating your existing estate plan. Circumstances change, and your estate plan should be updated accordingly.
1. Moving to a New State
When you move to a new state, it is important to update your estate plans. Most of the hard work will be done already as you have already made choices as to who will be your beneficiaries and otherwise. However, there are some state-specific rules that you must comply with when moving states.
2. Changes in Family Members
When new children are born or a new marriage happens or otherwise, you need to update your estate plan. You may want to change your beneficiaries.
3. Major Changes in Assets or Business
When accepting a new job or acquiring a business, estate plans must also change. When new large assets are acquired, you should be sure to update your will to include these new possessions.
Many people consider estate planning only in the context of death. The truth is more complex, however. A good estate plan also provides protection in the event of incapacitation.
Legal incapacity is generally defined as an individual being unable to effectively manage their property or financial affairs. This incapacity could be through illness, injury, or any other cause.
If no plan is in place upon your incapacitation, your family members will have to navigate a complex legal process to appoint a guardian to manage your financial affairs, which can be very expensive.
An estate plan that includes a Durable Power of Attorney, a Living Trust and Health Care Directives can help you avoid this situation. These instruments give a chosen trusted individual or several individuals the ability to access and properly manage your finances and your health care decisions in the event of your incapacitation.
Your children are precious, and their upbringing is of the utmost importance. Having proper estate planning in place will allow you to determine a suitable legal guardian for children in the event of your passing.
In the event of adults passing and leaving behind minor children with no estate plan, the courts decide their futures. Unfortunately, this means that a judge is given the responsibility of deciding who will take care of the children. You, the parent, and not a judge, are the person best suited to provide for your children's care.
To avoid this situation, you can set up an estate plan to name legal guardians for your children. This puts the power in your hands, and you can decide who you would like to raise your minor children in the unlikely, yet possible event of your passing. You can also include a letter of instruction which gives directives to your chosen guardian on how you wish your child to be raised and your educational goals for them.
Depending on your situation, a will could be the most important document in your life. If an individual dies without a will, Arizona law dictates how an individual's wealth must be distributed. Call Hilltop Law Firm today so you can decide how your finances are distributed to your beneficiaries.
To create a valid will, the individual creating the will must be at least 18 years old and of sound mind. The individual who has created the will and signed off on the final draft must be able to comprehend the extent of their property and be aware of who his or her heirs are. The individual creating the will must also comprehend that by executing a will, he or she is giving clear and direct instructions on who inherits what upon his or her death.
Arizona law requires that the will be in writing, signed by the individual creating it (the Testator) and two witnesses. If the testator is unable to physically sign for some reason, then he or she may direct someone else to do so, while in the testator's presence.
Arizona law requires that each witness physically observe the testator signing the will or have the signature on the will verbally verified by the testator. The testator and another witness must be present when the witnesses sign their signatures.
A witness to a will must also be mentally competent. Generally, lawyers recommend that witnesses not be named as a beneficiary in the will. This demonstrates that the witness is a disinterested person not seeking personal gain as a beneficiary of the will. However, if the witness is a beneficiary of the will, that does not invalidate the will.
Arizona law allows holographic wills, or handwritten wills. A holographic will is valid in Arizona, witnessed or not, if the signature and the material provisions are in the handwriting of the testator.
A will may be simultaneously executed, attested, and made self-proved by its acknowledgment by the testator and by affidavits of the witnesses. If the acknowledgment and affidavits are made before an officer authorized to administer oaths under the laws of the state in which execution occurs and are evidenced by the officer's certificate, under official seal, using special language.
Although a trust requires administration, a trust will streamline the process of transferring an estate after you pass while avoiding a lengthy and potentially costly period of probate. Call Hilltop Law Firm to see if a will or a trust would be better for you.
Trustees interested in seeking the counsel of an experienced Arizona Trust Attorney should take the following steps to ensure speedy assistance.
- Have Your Trust Assets Inventoried and Appraised
- Check to see if any required estate taxes need to be paid
- Notify all potential beneficiaries
- Complete all trustee obligations per Arizona Trust laws
- Exercise the Full Powers Available to Preserve the Trust
Unfortunately, it is quite common for representatives or trustees to jeopardize the trust by failing to properly administer the estate. Sometimes this is not an oversight by the representative or trustee; it may be done intentionally if they benefit from leaving estate assets unsold for extended periods after the decedent's death.
Most Arizonans look to establish revocable living trusts in the interest of avoiding probate in the future. While a will indicates how an individual's assets should be divided through probate court, beneficiaries receive direct transfers from the trust without ever going through probate.
Creating a revocable living trust provides beneficiaries with their portion of your assets much faster than going through probate, while substantially reducing the associated legal costs over the life of the trust.
In the interest of expanding control over how or when beneficiaries claim their portion of assets. A revocable living trust allows for stipulations to be applied giving these directions.
The author of the trust can direct the trustee to wait until specific time frames or benchmarks have been met before distributing the assets to beneficiaries. Often, holders of trusts direct that their beneficiaries only receive income made from investments, maintaining the principal value of the trust for future family members.
Utilizing an IRA Trust as part of an estate, individuals can be confident that the trust will coordinate the distribution and administration of their IRA assets after their death. An IRA trust typically benefits individuals with tax-deferred retirement accounts more than $100k. IRA Trusts are very useful for preserving an estate for future family members due to extensive post-death contingency planning with asset protection as well as saving through income-tax rules.
Some of the benefits to establishing an IRA Trust are
- Larger Inheritances for Beneficiaries Through Income Tax Deferral
- National Asset Protection on inheritance from judgements, creditors, bankruptcy, and ex-spouses
- The holder of the account can establish a contingency plan for all IRA assets if the beneficiary dies prematurely, faces divorce, or has mental incapacity for an extended period.
In an IRA Trust, the account holder maintains control over all IRA investments, choice in beneficiaries, and distributions during their lifetime.
A Special Needs Trust (often referred to as a supplemental trust) is critical for providing funds to a beneficiary that suffers from a disability, in a way that also preserves their ability to receive critical government benefits. Parents with a child that has special needs will set up a Special Needs Trust to ensure their child receives a distribution of their assets at the time of their death.
Because the child does not own or control these assets, the Trust does not put the child's eligibility for Medicaid or Supplemental Security Income (SSI) at risk. Individuals with a disability are likely in need of lifelong assistance, especially regarding their health care needs.
As most people with disabilities may never be employed, receiving continued health insurance under Medicaid ensures their consistent care. If a disabled individual inherits assets directly from his or her parents, this will likely disqualify the individual from receiving any further Medicaid benefits. This ensures continued coverage of SSI and Medicaid, regardless of the dollar value of the trust, as the government does not count these funds as belonging to the beneficiary.
To maximize savings and prevent assets from being used for health care or nursing home costs, a Medicaid Trust works as a cost saving option. Medicaid Trusts hold the assets of an individual who may ultimately be in a nursing home at some point in the future. In most cases, a properly constructed Medicaid Trust names a child as trustee, though it may also be a friend, relative or independent party.
A Medicaid Trust is the only trust that has exemptions from rules on trusts that jeopardize Medicaid eligibility. To ensure Medicaid does not disqualify any assets included in a Medicaid Trust, the assets must be transferred into the trust at a minimum of five years prior to going into the care of a nursing home or seeking long-term care.
Medicaid Trusts are irrevocable. A future Medicaid recipient can use the assets within the trust, such as a home. Because these assets are being held within the Medicaid Trust rather than by the recipient, they are free to use them without fear that the government will consider the assets when qualifying the citizen for Medicaid.
A Medicaid Trust also provides that in the event of a recipient's death, the assets can be passed on to beneficiaries named in the trust. Establishing a Medicaid Trust is an excellent way to avoid spending one's assets to qualify for Medicaid.
This allows a donor to set aside assets for one or more charities. Charitable Trusts come in two types, Charitable Remainder Trusts and Charitable Lead Trusts. They are considered split-interest trusts because assets are divided between a charitable beneficiary and a non-charitable beneficiary. The maker of a Charitable Trust has the power to choose either depending on their respective goals regarding estate planning or asset preservation. Both types are similar because the assets are divided between a charity and non-charitable party in either distinction.
The main distinction between a CRT and CLT appears in how the income interest gets distributed. In a CRT, individuals receive the income interest, while charities are provided the remainder.
With CLTs, the income interest goes directly to the charity during an individual's lifetime or for a set duration of years, and individuals receive the remainder of the assets at the end of the trust term.
Legally referred to as a Trust Deed, an Asset Protection Trust allows the value of an item to be held by one or more trustees. Duty-bound to fulfill the intentions of the Trust's settlor, trustees act in a fiduciary role for the beneficiaries of the trust.
An Asset Protection Trust ensures that creditors do not assume possession of any assets held within the trust. Asset Protection Trusts can be established for both domestic and offshore holdings.
Gaining popularity with estate planning attorneys, Domestic Asset Protection Trusts are fairly new in regard to estate planning. Many clients are more interested in Domestic Asset Protection Trusts because their name sounds more appealing to some, but their efficacy leaves many estate planning experts with doubts.
Offshore Asset Protection Trusts have a long history in estate planning, with many case law examples building their credibility. In addition to their strength in having a long case law history, Offshore Asset Protection Trusts are proven effective and beyond the reach of local courts, none of which can be said of Domestic Asset Protection Trusts.
In the interest of creating flexibility in planning for asset protection for a surviving spouse and ensuring that the assets of the deceased spouse get passed on to the original beneficiaries as intended, Disclaimer (Marriage) Trusts achieve these goals.
A Disclaimer Trust provides the surviving spouse up to 9 months to execute a valid disclaimer, typically prepared by an attorney for the surviving spouse to sign. Despite the grief that naturally occurs during the death of a spouse, this should be done sooner rather than later after their passing. The urgency of getting the disclaimer done comes through the many ways a surviving spouse might make this disclaimer invalid if too much time exists between preparing a valid document. A surviving spouse waives the rights to change any disclaimed benefit or asset in any way until they have been moved into a Disclaimer Bypass Trust. The surviving spouse may also opt to have the assets come to them outright rather than establishing a Disclaimer Bypass Trust.
Disclaimer Trusts have become more popular as a level of uncertainty has risen as to how the Federal Estate Tax Exemption may change in the future.
Several situations in life can prevent an individual from making his or her own decisions regarding their healthcare and best interests. Arizonans must prepare for being unexpectedly incapacitated by designating an individual they trust to act on their behalf as their healthcare power of attorney.
As a Healthcare Power of Attorney, the designated party acts as an agent in the event of an emergency to make critical health decisions on his or her behalf. The Powers of Attorney for Healthcare are authored prior to the actual necessity of an emergency and only become effective if the principal becomes incapacitated and unable to make their own healthcare decisions.
While Healthcare Powers of Attorney cover major medical crises, agents are not empowered to admit the principal into a mental health care facility as an inpatient. To admit the principal into an inpatient mental health care facility, a Mental Health Care Power of Attorney would be required.
Often created at the same time as Healthcare Power of Attorney, Mental Health Care Power of Attorney can also be established later under Arizona State Law. A Valid Healthcare Power of Attorney must clearly outline the principal's intentions to pass authority over health care decisions to a specific person.
This declaration must be signed by the principal while free of duress and of sound mind. An adult that has no relationship to the principal and is not involved in the principal's healthcare must bear witness to the signing of these documents.