Estate Planning and Probate Law
Estate Planning: Trusts, Wills and Probate
An estate is the total property, real and personal, owned by an individual prior to distribution through a trust or will. Real property is real estate and personal property includes everything else, for example cars, household items, and bank accounts. Estate planning distributes the real and personal property to an individual's heirs.
Estate planning is the process by which an individual or family arranges the transfer of assets in anticipation of death. An estate plan aims to preserve the maximum amount of wealth possible for the intended beneficiaries and flexibility for the individual prior to death. A major concern for drafters of estate plans is Federal and State tax law.
Wills and trusts are common ways in which individuals dispose of their wealth. Trusts, unlike wills, have the benefit of avoiding probate, a lengthy and costly legal process that oversees the transfer of assets. Sometimes, though, it will be useful to make inter vivo's gifts (gifts made while the donor is alive) in order to minimize taxes. The Federal Gift Tax exempts certain levels of lifetime gifts.
What are the Purposes of an Estate Plan?
The purposes of an estate plan are to: (i) plan for the management and disposition of your property while you are alive and after your death; and (ii) plan your health care if you become unable to take care of yourself.
Estate Plan considerations
Before you can implement your estate plan, you must consider and answer the following important questions:
• Personal Representative. Who do you want to name as your first, second and third choices to be the personal representative of your estate? Your personal representative is responsible for collecting your assets after death, administering your estate, opening a probate if necessary, distributing property to your beneficiaries, completing your last tax return and paying any taxes and other debts of your estate from your probate assets.
• Guardian. If you have minor children, who do you want to name as your first and second choices to be the guardian(s) of your children? A guardian is responsible for raising and caring for the minor children.
• Conservator. If you have minor children, who do you want to name as your first and second choices to be the conservator(s) of your children? A conservator is responsible for administering and accounting for any property owned by the minor children.
• Title to Property. How should you and your spouse hold title to your assets? Should it be as community property, community property with right of survivorship, joint tenancy or another form?
• Healthcare. If you cannot care for yourself, who do you want to make decisions about your healthcare?
• Property Management. If you cannot manage your financial affairs, who do you want to give the power to manage your financial affairs and spend your money?
• Beneficiary Designations. Who should receive the proceeds of your life insurance policies and your retirement benefits? Make sure you have properly designated your primary and alternate beneficiaries for all insurance policies and retirement plans.
• Living Trust. Should you create a revocable trust to provide for a spouse or children, federal estate tax savings, asset management or to control property distributions until children are mature and able to manage your property?
• Federal Estate Taxes. Is your estate large enough to be subject to federal estate taxes? If so, what can you do to eliminate or reduce your potential estate tax liability? If your estate may owe federal estate taxes, how will the taxes be paid?
Who Needs an Estate Plan?
Most adults should have an estate plan, regardless of the value of their estates. An estate plan is necessary to name the beneficiaries who will receive your property after your death. If your estate has substantial value, a good estate plan can assist in preserving your property for your heirs and reducing or eliminating federal estate taxes on your death. Everyone should designate the person or persons who are to manage their financial affairs, care for them and make health care decisions in the event they become incapacitated.
Factors That Require Estate Planning
If any of the following situations apply to you, you should consider adopting an estate plan to accomplish your objectives:
1. Do you own real property or personal items that you want to give to one or more beneficiaries who would not inherit the property if you were to die without a will?
2. You have children under age 18 for whom you need to designate a guardian or a conservator.
3. You have children from another marriage and you want them to receive a portion of your property.
4. You want to give property to friends and/or charities or schools rather than family members.
5. Your estate may be subject to federal estate taxes, i.e., the value of your estate assets less your liabilities and deductions is more than the exclusion amount.
6. You want to eliminate or reduce your federal estate tax liability.
7. You want to pick the person or persons who will be responsible for your financial affairs if you were to become incapacitated.
8. You want to pick the person or persons who will be responsible for making health care decisions for you if you are incapacitated.
9. You want to state your medical treatment desires, donate your organs, provide for burial or cremation, or do not want to be kept alive by life support if you are in a terminal condition.
What Documents Are Included in an Estate Plan?
• Arizona Last Will & Testament. A Last Will & Testament is the legal document in which you identify the beneficiaries (people and/or companies or charities) who will receive your property after your death. The will also names a person or company to be your personal representative to administer your estate. Your personal representative manages your affairs and is responsible to see that your property is distributed as provided in the will. The will may also name the guardian(s) of your minor children, the conservator(s) of property that belongs to minor children, make specific gifts of property and include burial instructions. In Arizona, a child is a minor until becoming age eighteen.
• Living Will and Healthcare Power of Attorney. A Living Will is a document in which you may declare that if you are in a terminal condition, you do not want your life to be prolonged and do not want life-sustaining treatment, beyond comfort care, if that treatment would serve only to artificially delay the moment of your death. Your Living Will may also state that if you are in a terminal condition, you do not want cardiopulmonary resuscitation, drugs, electric shock, artificial breathing, artificially administered food and fluids, or to be taken to a hospital if at all avoidable. This document also names a person or persons to hold the power to make healthcare decisions (including mental health care decisions) for you if you are unable to make those decisions for yourself.
• Power of Attorney for Financial Matters. This is a document that grants one or more people the power to manage your financial affairs if you become unable to do so or if you want a person to handle these things for you. The holder(s) of your power of attorney have the legal power to make binding decisions that affect your money, property, and other assets, including, paying your bills and spending your money. Without a power of attorney, your family may be required to obtain a court-supervised conservator to manage your financial affairs. A power of attorney terminates on your death.
• Revocable Living Trust. A revocable living trust is an arrangement you make for management and distribution of your property. Like a will, the trust is "revocable", meaning that you can modify or eliminate it at any time. Living trusts are established by written agreement or declaration which appoints a "trustee" to administer the property, and which gives detailed instructions on how the property is to be managed and eventually distributed.
What is Probate?
Probate is a Superior Court procedure by which probate assets belonging to a decedent are collected and administered by the decedent's personal representative and transferred by the personal representative to the beneficiaries named in the decedent's will. The personal representative is also responsible to pay the liabilities of the decedent from the probate assets.
At the Rosacci Law Firm, PC, we sit down with our clients to determine which estate planning tools are correct for them. We encourage our clients to ask as many questions as needed to ensure that they feel confident in the plan that has been offered.
Call 602-954-1300 to schedule an appointment with Ms. Bellomo, an experienced estate and probate attorney.