Many people assume an estate plan is simply a will. In Arizona, a complete estate plan is a set of coordinated documents that does two things: it directs what happens to your property after you die, and it names the people with authority to act on your behalf either once you pass away or if you cannot make decisions for yourself.
Every family’s situation is different, and we recommend meeting with an estate planning attorney before deciding what is right for you. That said, the plan we most often prepare includes five core documents. Here is what each one does and why it matters.
1. Revocable Living Trust
A revocable living trust is the foundation of most of the plans we prepare. “Revocable” means you can change or cancel it at any time while you are alive, and “living” means it is created during your lifetime. You typically serve as your own trustee, so you keep full control of your property. Married couples often share one joint trust that holds both their separate and community property. While they are married, both spouses serve as Co-Trustees of the Trust and can manage the assets together.
A well-drafted trust accomplishes several things at once:
- Avoids probate for assets titled in the trust. Probate is the public court process for transferring a person’s property after death. Assets held in your trust pass to your beneficiaries privately under your instructions without court involvement. A trust is the most comprehensive way to avoid probate, but it is not the only way. Beneficiary deeds, beneficiary designations, and survivorship titling can also work for certain assets. You can read more in our article on understanding probate in Arizona.
- Plans for incapacity. If you become unable to manage your affairs, your successor trustee can step in without the cost and delay of a court-appointed conservator.
- Names your successor trustees. You choose who takes over, and in what order, so there is no confusion when the time comes. This person (or persons) will be in charge of gathering the assets, dealing with creditors, and making the distributions outlined in your trust.
- Protects inheritances. Rather than giving a young beneficiary everything at 18, the trust can distribute over time. A common example is one-third at 18, one-third at 25, and the balance at 30. These provisions are sometimes called testamentary trusts, and they are also useful for any adult beneficiary who may struggle to manage a large sum at once.
One caution: a revocable trust does not, by itself, protect your assets from your creditors.
2. Healthcare Power of Attorney, Living Will, and HIPAA Release
This is often the document that asks the most of you, because it asks you to think through difficult questions before they arise. Your healthcare power of attorney names a trusted person, called your agent, along with backups, to make medical decisions for you if you cannot make or communicate them yourself. It generally takes effect only when you are unable to decide for yourself.
The living will portion lets you give your agent and your doctors direction on life-sustaining treatment, such as what you would want if you were in a coma or persistent vegetative state. The document can also record your wishes about funeral and burial arrangements, organ donation, and autopsy.
Why it matters: without these instructions, your loved ones are left to guess what you would want, which can lead to painful disagreements at an already difficult time. We also include a HIPAA release so your agent can speak with your doctors and get the full picture before making a decision. If you are married, each spouse signs a separate document.
3. Durable Financial Power of Attorney
A durable power of attorney names an agent, and backups, to handle your financial affairs if you are unable to. “Durable” means the document stays in effect even if you become incapacitated. Your agent can pay your living expenses, such as your mortgage or rent, manage your investments, communicate with your financial advisor and CPA, and handle your tax filings.
Depending on how it is drafted, the document can take effect immediately or only when you become incapacitated. Without one, your family may have to ask a court to appoint a conservator to manage your finances. That process is public, slow, and expensive.
Because this document grants real authority over your money and property, the choice of agent matters, and the powers should be tailored to your situation. Certain powers, such as making gifts or changing a trust, should be addressed specifically in the document. If you are married, each spouse signs a separate power of attorney.
4. Pourover Will
The will in a trust-based plan is called a pour-over will. It works as a safety net: if you own something at your death that was never transferred into your trust, the will directs that property to “pour over” into the trust, so it is distributed under the terms you chose. The will also names your personal representative, sometimes called an executor, and can nominate guardians for minor children.
It is important to understand what a pour-over will does not do. Because it is a will, property that passes through it generally must go through probate first, unless it qualifies for a simplified procedure like the small estate affidavit. That is why moving your assets into the trust during your lifetime is so important, and why the pour-over will is a backup rather than the plan itself. To learn more, see our article on pour-over wills.
5. Deed to the Trust and Funding the Trust
A trust only controls the property that is actually titled in its name. For real estate, that means a warranty deed transferring the property from you to the trustee of your trust, recorded with the county recorder where the property is located. Once the deed is recorded, the property is part of the trust. If you buy real estate later, tell the title company you have a trust so the new property is titled correctly from the start. We also recommend notifying your homeowner’s insurance carrier of the change.
Other assets need attention too. Bank and brokerage accounts may need to be retitled. Retirement accounts and life insurance generally pass by beneficiary designation rather than by the trust, so those designations should be reviewed and coordinated with the rest of your plan. If you own real estate in another state, we can help you connect with local counsel there.
This step, called funding the trust, is the one most often overlooked, and it is where a plan most often falls short. An unfunded trust cannot do the job it was designed to do. Will vs. Trust in Arizona: A High-Level View of Estate Planning
Keeping Your Estate Plan Current
An estate plan is not a one-time project. Review it after major life events, such as a marriage or divorce, the birth of a child or grandchild, the death or incapacity of someone you named, a move, a significant change in your assets, or a change in the law. Even without a major event, a periodic review helps make sure your documents still reflect your wishes.
An effective estate plan is tailored to your family and your goals. By combining a revocable living trust, powers of attorney, a pour-over will, and a properly recorded deed, you can protect your loved ones, plan for incapacity, and keep your affairs private. For a broader overview, see our complete guide to estate planning in Arizona.
At Fowler St. Clair, we help Arizona families create estate plans that fit their needs, goals, and values. If you have questions or are ready to get started, we are here to help. Contact us to schedule a consultation.