AZ Estate Planning News

AZ Estate Planning News

Knollmiller and Arenofsky Trust and Estate Planning

Posts filed under trusts

Will My Heirs Have Hurt Feelings Over My Personal Items? Short Answer: Probably

English: Antiques being sold on Colaba Causeway

“The biggest estate-planning mistake is that people think it’s only about the money,” said Marlene Stum, a professor at the University of Minnesota and author of the “Who Gets Grandma’s Yellow Pie Plate?” workbook and website. “When it comes to their personal possessions, they say, ‘It’s just stuff.’ ”

In my opinion, the personal items in a home is often the biggest source of unhappiness among families when a loved one dies.   Without taking the time on how to resolve the distribution of personal possessions, you can unwittingly leave a legacy of rancor and resentment.

Baby boomers surveyed by Allianz Life Insurance Company selected personal possessions six times more often than financial inheritance as important in legacy planning.

Okay, where do we start?  How about asking your heirs what items mean something to them?   Then keep a list and resolve any overlapping interests.

Next, on a sheet of paper, titled Personal Property Distributions, and upon completion attached to the back of your Will, list who gets what and sign, date and number the sheet(s) 0f paper.  While writing the names on the pieces themselves seems like a great idea, it is unlikely supported in the law if there is  a dispute on who gets which items.

If you have a lot of sentimental items, and you do not want to list who receives them, perhaps a third party executor or successor trustee that will distribute the personal items will work better since their decisions will not be treated as biased or personal.
Starting the process early leaves time to work out ground rules and deal with different assumptions and opinions.  And it can be a chance to see the pleasure your treasures can bring to their new owners if you choose to give them the items you do not need now.
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“Only Older People Need Estate Plans”

Français : Enterrement à

Français : Enterrement à (Photo credit: Wikipedia)

It isn’t a surprise to anyone that those typically motivated to do estate planning are those that have their mortality staring back at them.  Examples include clients preparing for travel, life challenging illnesses or individuals in advancing years.

I don’t need to remind anyone that life can be cut short since all of us have been affected by a passing that came too soon and too fast.   In my practice, I’ve had parents pass without making their choice be known for a guardian of their children and recently an individual passed and because she didn’t have a will, it passed to an individual that the rest of the family kept shaking their heads saying “she must be turning in her grave that so-and-so inherited her estate.”

Sure, very few of us like planning for our passing.  But often, it is the things we least want to face that end up giving us the greatest peace once faced, tackled and then resolved.

Give us a call and we will be happy to assist you with the process, make the planning and implementation of your estate plan as simple as possible and will guarantee that the burden that gets lifted off your shoulders will give you great satisfaction.

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“I don’t need an estate plan since I’m unaffected by the estate tax”

Tax

coffin

While this is a common misconception, I believe it mixes up two ideas, estate planning and estate tax planning. Estate tax planing is actually a small, but important, part of the overall estate planning process.

Estate planning is about making sure your estate is in order and passes as you wish.  Estate tax planning is making sure the government gets as little of your estate as you can.

Estate planning uses a trust, or a will, to organize your affairs and distribute it to who you care about when you die.   Estate planning is for tax and non-tax reasons.   Of course no one is required to have an estate plan. Many would be unhappy to know that our legislature in Arizona has written an estate plan for everyone that hasn’t written an estate plan themselves.

Kevin P. McFadden, Knollmiller & Arenofsky, LLP

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Estate Planning Mistaken Belief #2

IF I HAVE A WILL, MY FAMILY WILL AVOID PROBATE

historic deeds and probate court

I am unsure how this mistaken belief ever came about since a Will is almost synonymous with probate.

By way of background, using a Will as your primary estate planning document, your estate may be probated. Without a Will, your estate will still go through the probate process, but the state laws of intestacy,  discussed before in this blog, are applied to your estate and possibly overcome your wishes.

Probate is a court supervised proceeding, where your Will is “proven” in court. If the Will is proven to be valid, then title on your assets, after payment of your debts and expenses, can be legally transferred to your heirs according to your wishes.  Since this is a court supervised process, it is also a public process, meaning the full details of your Will are public and available to anyone wishing to view the court records. This includes the information about who your heirs are, where they live, and often the assets of the estate.

Sandusky County Courthouse

As if the public airing of your final wishes and disposition of your assets is not bad enough, notices must be sent out to all parties with an interest in your Will, usually to all family members, to your creditors, and public notices of your death must be posted. This is to notify and allow anyone who may have a claim against your estate the time to file that claim and have it included in the probate process.

Further, for those individuals with property in more than one state, upon death there will not only be a probate process in the state of residence, but also the need for what is known as an “ancillary probate” in each of the other states where property is owned.

Because of this, most people would choose to avoid probate if they could. Why would anyone voluntarily choose to allow their estate to be probated? There are other methods to use, such as using a living trust as your primary estate planning document instead of a Will, which can avoid most of the time, expense and publicity associated with the probating of a Will.

In short, using a Will as your primary estate planning tool will not keep you, or rather your heirs, out of probate. It does mean however, that your probate will likely be more organized than it otherwise would have been had you died without a Will.

Kevin P. McFadden, Knollmiller & Arenofsky, LLP

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Estate Planning Can Be Intimidating

David F. Houston  (LOC)

We avoid what we don’t know.  For many financial, insurance and accounting professionals, they feel they ought to know estate planning better than they think they do.  They also feel they should be assisting their clients in getting their estate’s in order but due to the professional’s discomfort with estate planning, put off discussing this need with their clients.  This is completely understandable but also leaves the client with an unmet need.

To be frank, most attorneys that do not practice in this area of law are intimidated by estate planning and these are men and women that learn this area of law in law school!  I am not surprised that non-lawyers often feel the same way.

I don’t want to go into a big estate  planning lesson here even though I hope through time this blog provides some education to these professionals. Instead, may I suggest various way to connect the client with an estate planning attorney.

Our office has three was of meeting the estate planning needs for the clients of the professional.  All depending on the involvement the professional wants to be in the process.

The first way is direct involvement. Our office for example has an online procedure for creating an estate plan. The process walks the client through the questions, with simple explanations, followed by a recommendation from the law firm of the appropriate estate plan.  The client will speak to an attorney, either on the phone or in person. The professional is facilitating the discussion but is protected from any suggestions that he or she is practicing law. This may be a good approach to some but most prefer the next option.

The second approach is a legal assistant that facilitates the entire process. The legal assistant meets with the client.  The client can be at the professional’s office or at their home. The client will speak to an attorney during the process and a signing appointment for recommended estate planning documents is either handled at the professional’s office or at our office. With this approach the professional and client are assisted during the entire process.

The third approach is the traditional referral to a law firm.

As you can see, at no point in time is the professional put on the spot to fully explain estate planning.   He or she merely facilitates the process and gets to choose his or her level of involvement.  Most importantly, the client’s estate planning needs are met as a result of the professional’s service to their entire financial, estate and tax needs.

Kevin P. McFadden, Knollmiller & Arenofsky, LLP    480-345-0444

 

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Question: Does Having a Will Mean You Avoid Probate?

Essex County Probate Courthouse

Question:  Does Having a Will Mean You Avoid Probate?  Answer:  No, almost by definition, a Last Will & Testament implies that a probate will be needed to administer the estate.  The best way to avoid probate is using a revocable trust.

Another way to avoid probate, but sometimes causing more problems than the probate itself, is to have all your assets in joint tenancy with right of survivorship or pass by beneficiary designation.  The issues this cause is that the beneficiaries tend to get unequal distributions from the decedent, die before expected or assets don’t pass upon death as expected and probate ends up being required in spite of efforts to avoid it.  Therefore, revocable trusts are still your best tools to avoid probate if this is your goal.

Kevin P. McFadden, Knollmiller & Arenofsky, LLP

 

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“I thought a trust avoided probate!”

Judge Michael Evans

This question usually gets asked by the family after a loved one has died and they are told they have to go through probate.  How did this happen?

Yes, one of the benefits of a revocable trust is avoiding probate. The explanation everyone has heard is because the assets are held in trust there isn’t an estate to be probated.  Instead, the successor trustee can access, get under control, liquidate and ultimately distribute the estate to the trust beneficiaries.  So, if this is what is suppose to work, what went wrong? These are the most common cases of probates in spite of a revocable trust being in place:

  1. Refinance.  Very often when a client has a house in a trust decides to refinance the mortgage, the house gets transferred out of trust in order to make the financing go through. Too often the title company will transfer the property out but never takes any steps to transfer the house back in or even remind the owner that the house needs transferred back.
  2. IRA or Insurance Beneficiary dies.  If you have named a beneficiary of your IRA or life insurance and they die, often the contract states it will be paid to your “Estate.”  This often means probate.
  3. Leaving checking  or investment accounts and vehicles out of trust.  While you can have up to $75,000 outside of trust and not go through probate, sometimes accounts do not get titled in the name of the trust.  If the total non-trust assets exceed $75,000, you may be in probate.
  4. Mortgages.  While a house may be in the trust, and therefore avoid probate, if you have to work with a lender, you will need to have an executor appointed to represent the decedent in all dealings with the lender. The same may apply to other debts or the IRS.

Of course most of these can be avoided with just being mindful that most assets need to be titled in the name of the trust.

Call me with any questions, 480-345-0444

Kevin P. McFadden, Knollmiller & Arenofsky, LLP

 

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Avoiding Conservatorships

An Official in the Atchison County Courthouse ...

Conservatorships

Conservatorship is a court proceeding where an individual is considered by a judge to be unable to manage their own financial affairs so another person or entity is named to handle it for them.  There are many reasons why a conservatorship may be needed; disability, dementia, youth, incapacity, and more.

The process can be costly, requires an annual accounting, court hearings, and in some unfortunate instances completely uses up the entire estate of the person it was intending to protect.

Two methods typically used to avoid conservatorships are Powers of Attorney and Trusts.

Powers of Attorney

Powers of attorney work in some instances but have proven to not be a guaranteed solution.  For example, title companies will not accept a power of attorney to sell real estate unless the document specifically mentions the power to sell the very property in question.  Another example are IRAs. Normally the brokerage firm will not permit an agent under a power of attorney to exercise some powers unless the power of attorney specifically states retirement accounts AND lists that the agent can do the very thing it is trying to accomplish.  The final example of a power of attorney problem is the age of the document.  Sometimes a company will not accept an older power of attorney even though the statutes say the documents do not expire.

Trusts

The other tool to deal with conservatorship is a trust.  By placing assets in the name of the trust, the person has more assurance that if down the road they become unable to manage their own financial affairs, the next successor trustee can act on behalf of the assets.  For example, let’s say I I own a piece of black acre and place it in my trust.  Years down the road I develop dementia.  My successor trustee that I named in my trust can sell my share of black acre, rent it, or handle it as if I were able to act on my own behalf.  No power of attorney is needed.

Grandma. The Matriarch.

If you have any questions about conservatorships, please give us a call at 480-345-0444.

Kevin P. McFadden, Attorney at Knollmiller & Arenofsky, LLP

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Advantages vs. Disadvantages of a Revocable Trust

New Grandchild

Advantages of a Revocable Living Trust

  • Avoidance of probate. In particular, a revocable living trust can avoid expensive multiple probate proceedings when you own real estate in several different states, as well as the publication of the otherwise private financial details of your estate.
  • Avoidance of conservatorship. A revocable trust can avoid the additional cost of a conservatorship in the event of your incapacity.
  • Efficient distribution. A revocable trust can reduce delays in t istributing your property after you die, although delays caused by filing an estate tax return cannot be avoided.
  • Confidentiality. Generally the terms of your living trust are confidential, with only your named beneficiaries and trustee having access to that information.
  • Continuity. A trust can provide continuity of management of your property after your death or incapacity.

Disadvantages of a Revocable Living Trust

  • Expenses of planning. A revocable living trust can be a little more complicated than a will to draft, and asset transfers can take time and can result in additional costs.
  • Expenses of administration. If you appoint a bank or trust company as trustee, you will have fees to pay (though these may take the place of investment advisory fees and other fees you are already paying).  Of course if you do not use these services, this additional expense will not apply.  Setting up a revocable living trust will not eliminate the need for professional services of attorneys and accountants in the future.
  • Inconvenience. Once the trust is established, you must be sure that trust books are maintained and that all assets continue to be registered to the trustee.   Again, this is not a large issue but certainly is something to consider.
  • Unforeseen problems. Revocable living trusts can raise a variety of new problems regarding the ability to borrow against property, title insurance coverage, real estate in other countries, Subchapter-S stock, certain pension distributions, and many other issues. Only a skilled attorney familiar with estate planning can tell you whether, on the whole, a revocable living trust is right for you, your family and your assets.

In this author’s opinion, the advantages far out weight the disadvantages

This is based on an posting by the Oregon State Bar

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