Estate planning is a critical process that allows individuals to manage their assets and provide for their loved ones after they pass away. It’s not just for the wealthy; everyone can benefit from a well-thought-out estate plan. In this article, we’ll discuss the essential components of an estate plan, including revocable living trusts, powers of attorney, pourover wills, and warranty deeds, and explain how each element plays a vital role in protecting your interests and ensuring your wishes are honored.
Every situation is different, and we highly recommend scheduling a consultation with one of our estate planning attorneys to determine what the best course of action would be for your situation. That being said, our full estate plan package includes the following:
1. Revocable Living Trust Agreement
A majority of the trusts we form are revocable living trusts. Revocable means that the trust can be changed by you (and your spouse) while you are alive, and living means that the trust was created while you are alive. Your Revocable Living Trust may be adjusted as your circumstances change over the course of your lifetime. If you are married, typically only one trust is prepared to cover the couple’s individual and community property.
IMPORTANT: The only way to avoid probate in Arizona is if you have a trust, and all of your assets have been transferred into the trust (some exceptions may apply). If you have a valid original will, your heirs will still have to go through probate with the courts, which can add time, expense, and unnecessary stress for them.
The revocable living trust agreement eliminates probates for all assets transferred into the trust, identifies guardians for any minor children (or for any adult child who needs a guardian due to mental disability), outlines your plan for distributing trust assets, and plans out the order of priority for your successor trustees.
We often recommend creating a testamentary trust for minor children to delay distributions until they reach a certain age. Testamentary means that the trust is created by a will or living trust agreement. A common example would be the child will get 1/3 of the their portion at 18, 1/3 at 25, and the remaining 1/3 at 30. This helps protect the assets of the trust so that the minor child isn’t receiving all the assets at once when they turn 18. Testamentary trusts may be used for other reasons as well (i.e., adult child who is bad at money and you don’t want them to spend it all at once).
2. Healthcare Power of Attorney (Including Living Will) and HIPAA Release
The Healthcare Power of Attorney (“HPOA”) identifies your healthcare agent(s) and alternates, grants your agent(s) power to make healthcare decisions on your behalf if you are deemed incompetent or are unable to make your own healthcare decisions, gives directions to your agent(s) and physicians regarding continuation of life support systems, and outlines your wishes for funeral arrangements, organ donation, and autopsy requirements.
This is probably the heaviest document in our estate plan, as it covers a wide range of possibilities and you have a lot of decisions to make. If you are married, you will have a separate one from your spouse.
One of the biggest benefits to having a HPOA is that your loved ones won’t have to guess about what you would want if you are in a coma or vegetative state, as well as what you want done after you have passed. Without this, your loved ones will have to guess as to what you want, which may cause some fighting between your loved ones, and can add stress to an already emotional and stressful time.
We also include a HIPAA release so that your agent(s) can speak with your doctors to obtain a full picture of what is going on to make an informed decision.
3. Durable/Financial Power of Attorney
The Durable Power of Attorney (“DPOA”) will identify your agent(s) and alternate(s) and grants your agent(s) specific powers to make important financial decisions on your behalf if you are incapable of doing so on your own. If you are married, you will have a separate DPOA from your spouse.
This document will only be used by your agent(s) if you are unconscious, in a coma, have dementia, or something similar. The DPOA will allow your agent(s) to pay your living expenses (such as your mortgage payment or rent), manage your investments, and communicate with your financial advisor(s) and CPA(s) to ensure your finances are taken care of.
4. Pourover Will
The Last Will and Testament we include is commonly called a “Pourover Will” (see article). The Pourover Will basically serves as a backup to ensure that all your property is transferred to the designated trust beneficiaries, even if an asset is not transferred to the trust during your lifetime.
This document will only be used by your agent(s) if you are unconscious, in a coma, have dementia, or something similar. The DPOA will allow your agent(s) to pay your living expenses (such as your mortgage payment or rent), manage your investments, and communicate with your financial advisor(s) and CPA(s) to ensure your finances are taken care of.
5. Warranty Deed(s)
For any real property that you own at the time of the Estate Plan signing, we can prepare the warranty deed to convey the property from you (and your spouse) to the Trust. Once the Warranty Deed is recorded in the county the property is located in, that property becomes part of the Trust.
Once a Trust has been set up, if you purchase any new real property, you can let the title company know that you have a Trust and they will title new real property in the name of the Trust.
Currently, we can prepare warranty deeds for the following states: Arizona, Wisconsin, Georgia, and Indiana (where we are licensed). If you have real property in another state, we can help find a referral for that state to assist with the transferring of the real property.
Conclusion
An effective estate plan is tailored to your unique circumstances and goals. By including a revocable living trust, powers of attorney, a will, and appropriate deeds, you can ensure that your wishes are respected, your assets are managed wisely, and your loved ones are protected.
While creating an estate plan may seem daunting, working with an experienced estate planning attorney can provide valuable guidance and peace of mind. Remember, estate planning is not just about what happens when you’re gone; it’s also about ensuring that your wishes are carried out during your lifetime and safeguarding your legacy for generations to come.
If you have questions or need assistance in developing your estate plan, don’t hesitate to reach out to our law firm. We’re here to help you navigate the complexities of estate planning and create a plan that meets your needs.