Southwest Wills & Trusts Services

Southwest Wills & Trusts - A Division of Southwest Legal Document Services, LLC

Privacy | Disclaimer

SERVICES > ESTATE PLANNING

INTRODUCTION

Estate Planning - Who Needs It?

Your Estate

Probate Assets vs. Non-Probate Assets

Community Property vs. Separate Property

Basic Estate Plan

Last Will and Testament

Advantages and Disadvantages to a Will

Durable Powers of Attorney (Financial and Medical)

Declaration (Living Will)

Burial/Cremation

Organ Donation

Trusts

DISPOSITION OF PROPERTY UPON DEATH

ESTATE PLANNING FACTS AND QUESTIONS (FAQ)

Introduction

When we talk about estate planning, most people think about Wills and making decisions about who gets what at our death. Although these are important, estate planning should address much more. What about our health and welfare during our lifetime, and what about the quality of life of our families during our lifetime?

Estate Planning – Who Needs It?

Incapacity and death do not discriminate on the basis of age, race, sex, religion or marital status. Therefore, estate planning is appropriate for any adult who wants to have a voice in matters such as:

who will make medical and financial decisions for you while you are living and unable to do so yourself
who will manage the assets of your estate and how
who will raise your children

Absent a valid estate plan, the State will make these decisions for you.

Estate planning is peace of mind for you and for your loved ones.

Your Estate

Your estate is comprised of probate and non-probate assets and consists of one-half of community property and all of your separate property.

Probate vs. Non-Probate Assets

"Probate" Assets are assets which you own and which will pass by a Will or intestacy when you die. Usual examples are real estate, stocks, cars and other so-called "hard" assets.

"Non-Probate" Assets are assets which pass by contract or beneficiary designation on death, and are not governed by your Will. Usual examples are life insurance, retirement plans and IRAs, and assets which are held in "joint tenancy with right of survivorship ", “community property with right of survivorship” or in a living trust.

For tax purposes, your estate consists of both probate and non-probate assets.

Community Property vs. Separate Property

Arizona is a community property state. This means that all property accumulated during a marriage is presumed to be community property, and must be proved to be separate property.

Separate property consists of assets owned before marriage, and assets acquired by gift or inheritance or with assets which were themselves separate property.

Your estate consists of one-half of community property and all of your separate property. It does not matter whether the community property was held in one spouse's name only. It is still divided one-half each on death.

Although community property is owned one-half by each spouse, during the marriage the spouse in whose name the property is held has the exclusive management rights over the property.

Basic Estate Plan

A basic estate plan has several elements, including the following:

Last Will and Testament

A Will is the only place you can nominate a personal representative (executor) to administer your estate, nominate guardians/conservators for minors/incapacitated adults, and specifically disinherit an heir to your estate.

A Will can also address unique circumstances such as blended families. Without a Will, children from a prior marriage are entitled to ½ of their deceased parents separate property and all of their deceased parents ½ of the community property. ARS §14-2102. This can result in serious unintended consequences for the surviving spouse - including homelessness.

Without a Will, Arizona intestate law will control these and other elections regarding your estate.

Some of the advantages to a will are that you can

designate how much and to whom property will be distributed

leave property in equal or varying amounts (based on need or affection)

nominate a guardian and/or conservator for minors/incapacitated adults

nominate a personal representative to administer your estate

Some of the disadvantages to a will are

equity in real property over $75,000 will require the Will to be probated

equity in all personal property with a combined value over $50,000 will require the Will to be probated

it does not eliminate the need for transfer of property

loss of confidentiality - majority of the documents are open to the public

Durable Powers of Attorney (Financial and Medical)

Durable Powers of Attorney are one of the least expensive elements of an estate plan, but can result in the expenditure of thousands of dollars if not done.

Spouses do not have automatic authority to handle all medical and financial decisions on behalf of an incapacitated spouse and often are required to seek court appointment as guardian of their spouse and, even more often, conservator of their spouses estate (spouses ½ of the community property and all of their separate property).

Absentee, incorrectly drafted and outdated medical and financial powers of attorney are creating an influx of guardianship and conservatorship proceedings to be initiated in our courts. These proceedings are very expensive (routinely in the thousands), time consuming and put an enormous financial and emotional burden on an already stretched family.

Declaration (Living Will)

If you are of estate planning age (18 or older), then you likely are familiar with some of the landmark cases and decisions involving the right to due such as Karen Quinlan, Nancy Cruzan, and, even more recently, Terry Schiavo. These cases bring sharp reality to the need for a Living Will (Declaration) stating whether you do or do not want to be kept alive by artificial means in the event you are in a terminal, non-recoverable condition as determined by one or more physicians (unlike Durable Medical Powers of Attorney which are intended to be used in the event you are in a non-terminal, recoverable condition). This document speaks for you when you can not and relieves family and other loved ones from the burden of making this very difficult decision for you.

As of September 1, 2008, no one, including a spouse or parent, may withdraw the artificial administration of food or fluid from a patient unless they are a duly appointed agent or by court order. HB 2823.

Burial/Cremation Instructions

Burial/Cremation
Under Arizona law, a legally competent adult may prepare a written statement directing the cremation or other lawful disposition of their own remains. Such a statement eliminates the necessity for the crematory, cemetery or funeral establishment to obtain the consent or concurrence of your family or other agent. In the absence of a written statement or concurrence to cremation, most crematory establishments will not perform a cremation without a court order.

Organ Donation

Under Arizona law, a legally competent adult may prepare a written statement directing or disallowing the gift of all or part of their body to a bank, storage facility, hospital, physician or medical or dental school for transplantation, therapy, medical or dental evaluation or research or for the advancement of medical or dental science. In the absence of a written statement to the contrary, a member of your family or your agent may make such gift.

Trusts

For some people, a Trust may also make sense. There are many types of trusts, but they all fall within two primary classifications - revocable and irrevocable. Revocable trusts can be changed, revoked or terminated while you are living, but they typically cannot be changed once you die. Revocable trusts give you the flexibility to make changes as tax and estate laws change. Irrevocable trusts cannot be revoked or terminated once they are set up, even while you are living. Irrevocable trusts have some tax advantages, but should be approached with caution because tax and estate laws change. Irrevocable trusts are also costly to form and administer and you lose all control over the property transferred into them. If you are considering establishing an irrevocable trust please seek the advice of a licensed attorney who specializes in estate planning and tax law to be certain that this is the trust for you.

There are two types of trusts commonly used in estate planning:

Testamentary Trust: this is simply a Trust created by a valid Last Will and Testament. This type of Trust begins when the Personal Representative (Executor) finishes administering the estate. At that point the Personal Representative ceases to be a Personal Representative and becomes a Trustee. Alternatively, the Will may appoint someone other than the Personal Representative to act as Trustee. Since a Will can be changed, revoked or terminated during the lifetime of a competent Testator/Testatrix, the provisions of a Testamentary Trust can also be changed, revoked or terminated during the lifetime of a competent Testator/Testatrix. Testamentary Trusts become irrevocable at the death of the Testator/Testatrix.

Some of the advantages to a Testamentary Trust are:

to delay the cost and complexity for transfer of assets, or other administration by a Trustee, until the death of the Testator/Testatrix;

to exercise control over to who, when and how estate assets will be distributed;

to protect assets from creditors of beneficiaries.

Some of the disadvantages to a Testamentary Trust are:

it does not avoid the necessity of conservatorship proceedings for the Testator/Testatrix.

it does not avoid the necessity of probate proceedings;

it does not remain private.

Revocable Living Trust: this is the most common type of Trust used in estate planning and is simply a Trust created by you during your lifetime to which you transfer virtually all of your probate assets. This Trust benefits you (and you stay in control as trustee) during your lifetime. It is a support vehicle for you in the event of incapacity and disposes of your property to your beneficiaries when you die. Since the most common use of this Trust is to avoid probate, please see Probate Avoidance for more information about this type of Trust.