Estate planning is the process of making decisions and preparing legal documents to avoid probate court, save taxes, minimize professional fees and keep control in your hands as long as possible. Who needs an estate plan? Do only the wealthiest 1%? Everyone in Arizona already has one (the laws provide default rules if you don’t create a legal plan), and anyone 18 and over should at least prepare the basic documents to make their own choices. If you don’t set up your own plan, you go through probate. So really, everyone should do estate planning, regardless of age, wealth, or status.
When you need a Will…
There is a common misconception that preparing a Will means your assets and property will not pass through probate. A will guarantees your estate will go through probate. Also known as a “Last Will & Testament”, this document allows you to choose a personal representative, a guardian for any minor children, and to direct who will inherit your property.
If you have less than $100,000 of equity in all real estate combined, and less than $75,000 worth of all other property, you can use a Will and still effectively avoid any probate problems after death. Arizona has “small estate” procedures that can make a full blown probate unnecessary if your assets are below these limits.
When you need a Trust…
If your property and assets exceed the small estate limits, you should consider setting up some type of revocable living trust or trust-substitute. This can only be done while you are alive and still have all of your mental capacity.
Unlike a will, a revocable living trust avoids probate. This is important for your family and heirs after your death,
but the most important benefit of using a living trust is to avoid a “living probate”, a conservatorship proceeding.
A revocable living trust is basically a contract between three people: the Trustmaker, the Trustee, and the Beneficiary. In most cases the client sits in all 3 seats at the beginning. This gives you complete control over the trust assets, just as you always have had. A very simple trust might read “I, Francisco P. Sirvent, give $5.00 to the Trustee, Francisco P. Sirvent, to hold for the benefit of the Beneficiary, Francisco P. Sirvent.” But most clients want something that provides more instruction.
The trust will own your assets during your life. The Trustees manage the property for the benefit of the beneficiaries.
When a death of a Trustmaker occurs, the trust is already the owner of the property. So, upon the death of the client, the duties and responsibility to manage the trust property automatically shifts to the successor Trustee who was hand-chosen for this job by the client.
Of course, any competent estate planning attorney will also prepare a health care power of attorney and a financial durable power of attorney when creating your trust. (We create about a dozen other documents, too!) Both the trust and the power of attorneys are very powerful documents and must be drafted carefully.