Estate Planning and Significant Others

For anyone in an unmarried partnership, it is important to have an estate plan in order to avoid disinheriting your partner. If you do not have an appropriate plan in place, Arizona law will take over, your assets could be tied up in a potentially lengthy and expensive probate process, and ultimately distributed according to a state-run system which may not reflect your intent. The good news is that with our help, you can avoid probate. A living trust is a good way to avoid probate while still ensuring the transfer of your assets to your partner and/or friends after death. A living trust can provide you with a smooth, inexpensive transfer of assets after death, without the court-supervised probate process. It can make it easier for your partner and for your loved ones. In addition, a living trust is private. Even after you die, no one except the beneficiary has the right to know how you allocated your assets.

Another important reason to have an estate plan is to plan for Incapacity with a Durable Power of Attorney and an Advance Health Care Directive. Through a Durable Power of Attorney, you can appoint your partner or friend to act as your agent, with authority to make certain decisions for you if you become legally incapacitated, which must be certified in writing by your doctor. Then, your agent will step in and perform the actions which you have outlined. Examples of actions you may authorize your agent to perform are: making your mortgage payments, collecting money due to you and depositing it in your bank account, paying bills, and even keeping your business running. If you do not prepare and sign a Durable Power of Attorney, someone will have to petition in court to be appointed as your agent. This can be expensive, time-consuming, and distressing to all involved, especially if there is a conflict between your partner and a family member.

It is also prudent to execute a health care directive to complement and clarify your rights. For example, you can express whether you would like to be placed on life support if doctors have determined that there is no chance of recovery.

How Much Does a Trust Cost?

The short answer is: It depends. Be wary of anyone who is willing to quote you a price without knowing you or the nature of your estate. We will meet with you for free at an introductory meeting to determine what type of estate plan you want, then we will quote you a flat fee, so you know how much your estate plan is going to cost you.

To work properly, a trust should be specific to your needs, not a “fill in the blank” or “one trust fits all” that may be available for a cheap price. While it is possible that these cheap “fill in the blank” trusts might work, it is also possible that they are too general in nature and will not adequately protect you or your assets. The unguided use of such forms might, if you are lucky, result in avoiding probate with some of your property, but it will more likely result in added legal fees for court interpretation of vague legal terms, added taxes, and added costs in the estates of beneficiaries.

When you consider the tens of thousands of dollars in savings that can definitely – not maybe – be saved through the use of a professionally drafted and funded trust, properly coordinated with the rest of your estate plan, it is silly and reckless to try to do it yourself with the help of forms you know nothing about prepared by someone who is not a lawyer.

As part of your estate plan, in addition to a Trust, we will also prepare a Pour-Over Will, which works in conjunction with your Trust. Certain assets which were left out of your Trust can then be gathered up and “poured over” into your Trust after your death. Additionally, as part of your estate plan, we will also make sure you are protected with appropriate powers of attorney and medical directives which will protect you in the event of illness or disability.

Even though you may already have a Will, all of your property may not automatically pass under it.  Some of your property may pass outside your will by reasons of joint title, survivorship provisions, pay-on-death clauses, and beneficiary designations on deeds and contracts.

After creating a Trust, we will help you to fund your Trust by identifying assets that you desire to make a part of the Trust. Funding a Trust is critically important because a Trust only applies to those assets inside the Trust. Additionally, one of the important lifetime benefits is realized if you become disabled. If that happens, for jointly held securities or real estate, at least one-half of the value of the joint property would be “frozen,” and a sale would not be allowed until the probate court appointed a guardian or conservator for you. But, if you had this property placed in a living trust, no court action would be necessary, and your property would be immediately accessible by the trustee to provide for your care and treatment.

For a trust to be effective in avoiding probate and minimizing taxes, your assets must be placed inside the trust. Assets may include bank accounts, real estate, motor vehicles, stocks and bonds, life insurance, and retirement benefits. We will help you determine which assets should be placed inside your Trust as part of your estate plan.

How Could a Trust Help You and Your Loved Ones?

The following are several of the most common reasons why a properly drafted Trust may be beneficial to you and your loves ones:

1. Avoid Probate
The term “probate” refers to the legal process for the administration of a deceased person’s estate. Trusts are celebrated as the most comprehensive way to avoid a potentially expensive, public and time-consuming probate proceeding.

About ten thousand probate cases are filed each year in the state of Arizona, and the Arizona Probate Code provides for a “formal” proceeding where the court is directly involved in the probate procedure. The average cost of probate is 4% to 10% of the gross estate, and the average length of probate throughout Maricopa County is 13 months.

[Statistical data retrieved from Banks, Darrell R. (2000). What is Probate? Retrieved July 11, 2008, from]

2. Reduce estate taxes
In 2012, up to $5,000,000 per person is exempt from estate taxes. What may happen to this ceiling in 2013 and beyond is uncertain.  Accordingly, for larger estates, a properly drafted trust can literally save you hundreds of thousands of dollars.

3. Maintain control over your estate
Estate planning is about control. With a trust, you exercise control over your assets–even long after you have passed away.

4. Avoid guardianships
In the event that you are ever disabled or incompetent due to illness or accident, a trust can prevent a Court from intervening and appointing a guardian or conservator to act for you.

5. Protection of beneficiaries with special needs
Let’s assume that you leave $100,000 to your son, who is disabled and receives government assistance. When you die and your disabled son inherits the $100,000, the government may cut off his benefits and force him to spend the $100,000 to care for himself. A properly drafted trust could prevent this unfortunate situation from occurring.

6. Protection for your children or minors
One of the most common reasons for a trust is to care for your children or minors. Many people worry about giving inheritances outright at a young age because young people are sometimes not very good with money. You may feel that it is better to allow your children to use the property and assets you leave them only when they reach an age of greater maturity, when they better appreciate the value of money and are more responsible with it. A trust can be specially tailored to provide that your minor children or grandchildren only obtain the assets when they are older and more mature, or for their health or education.

7. Maximize Protection for your loved ones
A properly drafted Trust can protect your loved ones and ensure that your wealth is transferred to them in a safe and responsible manner. Some of the protections that Trusts can offer to you and your beneficiaries are:

A. Protection from creditors
Let’s assume that in your Will, you leave $25,000 to your daughter. If your daughter has $25,000 worth of credit card debt, her creditors can take her entire inheritance. This could be prevented with a properly drafted trust.

B. Protection from divorce
Let’s assume that you leave $100,000 in your Will to your son. You die, your son inherits the $100,000 and invests it together with his wife. A few months later, your son’s wife files for divorce and is awarded half of that $100,000 as part of the divorce settlement. Because you did not have a trust, you have essentially given $50,000 to your ex-daughter in law.

C. Protection from Substance abuse problems
Let’s assume that you leave $50,000 in your Will to your son, who has a problem with drinking and drugs. When you die, your son inherits $50,000, which fuels your son’s drug problem for a few brief months until the money runs out, leaving him worse off than before. This situation could be prevented with a properly drafted trust.