Wills, Trusts, and Powers
A Last Will and Testament (more simply a “Will”) is an ancient device for declaring one’s intentions upon death. It can be simple or complex depending on the needs and objectives of each individual. A Will typically includes:
- Directions concerning the disposition of a decedent’s probate estate;
- Designation of the person or persons who will act on behalf of the decedent (known in Arizona as a personal representative); and,
- Designations of the person or persons who will serve as the guardians of minor children.
Many mistakenly assume that executing a Will avoids probate. This is not the case. In fact, a Will is meant to guide and inform the probate process. Failing to execute a Will can, however, have negative consequences. If an Arizona resident passes away without a Will, he or she is deemed to have died intestate. This means that the Arizona laws of intestacy will apply to that person’s estate. In effect, by failing to execute a Will, the person decides to let the State of Arizona decide how his or her property will be distributed and to whom.
Trusts, like wills, are of ancient origin and are in extensive use today. Much of the wealth in the United States is transferred from one generation to the next via trusts. While there are several types of trusts, every trust has the following elements:
- A Trustor (the person who creates the trust);
- Some form of Trust Property;
- A Trustee (the person who manages the trust property on behalf of the Trustor); and
- A Beneficiary (the person for whom the trust is created).
In many trusts, the Trustor, Trustee and Beneficiary are all different persons. However, some trusts allow the same person to fill all 3 roles. These trusts are called Revocable Living Trusts and they serve as valuable Estate Planning tools. In a Revocable Living Trust, the Trustor, Trustee and Beneficiary can be one and the same person and the Trustor retains the right to amend or revoke the Trust. Some of the advantages of using a Revocable Living Trust are as follows:
Avoids probate (when properly funded).
Allows greater flexibility in the distribution of trust assets to beneficiaries. (This may be particularly beneficial where the beneficiaries are minors or where there is a desire to delay the ultimate distribution of trust assets to the beneficiaries over a period of time.)
Privacy and ease of administration. (Unlike a Will, which is filed with the court and becomes a matter of public record, a trust transfers powers from a decedent to a trustee in private and without the need of a court’s oversight.)
Creditor protection for beneficiaries may be available.
Estate tax avoidance may be available in certain cases
Many trusts are or become irrevocable. This means the Trustor does not have the right to amend or revoke the Trust once it is created. Irrevocable Trusts are typically more advanced and address specific needs. Some of the more common Irrevocable Trusts include: a Decedent’s or Credit Trust, an Irrevocable Life Insurance Trust, a Qualified Personal Residence Trust, a Qualified Domestic Trust or a Charitable Remainder Trust. Each trust serves a specific purpose and can form a valuable part of an Estate Plan.
In addition to a Will and/or Trust, a complete estate plan will also include a Durable Power of Attorney, Health Care Power of Attorney and a Living Will. These powers are designed to operate during your lifetime. Specifically, they authorize someone to act for you if you become incapacitated. A validly executed Durable Power of Attorney names a person to make critical decisions for you in personal and financial matters and helps avoid the costly and unnecessary burdens of conservatorship and guardianship. A Health Care Power of Attorney designates a person to communicate health care decisions for you. A Living Will sets forth your last wishes concerning end-of-life decisions.
We Can Help!
There are many factors to be considered and many questions to be answered when preparing Wills, Trusts and Powers. Expensive and prolonged disputes can and often do arise when documents are either ambiguous or do not comply with statutory requirements. Our estate planning professionals are prepared to help you properly document your estate plan.