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Wills and Trusts       

     Everyone should have a Will or Trust, period. To discuss Wills and Trusts you must start with this premise, however reality does not reflect this premise. People put off executing a Will/Trust for a myriad of very understandable and human rationales. Too morbid to think about your demise. Too busy. Too expensive.  The list goes on and on. Who among us wants to think about his or her mortality? 


     Another reality is that eventually we will all leave this life and if you do so without a Will or Trust the State of Arizona, not you, will decide what will happen to your assets.  If you have minor children, a judge will decide who will take care of them. This is a very sobering thought at best and should be enough to prompt some serious thought as to what kind of estate planning, if any, you have in place.  


     This is a good time for a brief discussion as to the differences between a Will and a Trust, and who should have what? Like most things it comes down to money. If you have less than $50,000.00 in personal property and/or less than $50,000.00 in real property, a Will is probably for you. In other words, if you realistically evaluate the value of your personal property, meaning everything you own except for your real property (home, time share, etc.), and that number is less than $50,000.00 you have passed the Will qualifying step No. 1. Qualifying step No. 2 requires another calculation of the equity you have in your real property. If both calculations taken separately (you do not add the value of personal property with the value of real property, they are valued separately) are less than $50,000.00 a Will generally will suffice.  If either of your calculations shows a value greater than $50,000.00 a Revocable Living Trust should be considered.


     The reason for the qualifying calculations above is directly related to the nuances of the Arizona probate process. When a person passes, with (testate) or without (intestate) a Will the probate process is used to wrap-up their affairs, distribute assets, and choose guardianship for any minor children. The Arizona probate process has differing levels of complexity and associated costs depending upon the value of the deceased’s estate. If you do not possess a significant amount of property, defined in Arizona as owning less than $50,000.00 in either personal or real property, the probate process is relatively inexpensive and short lived. Those left behind should expect to pay approximately $2,000.00 to probate a small, uncontested, testate (died with a valid Will) estate. The cost associated with the probate of an intestate estate will depend upon the specific case facts but expect to pay an additional amount equal to at least the original testate cost. Costs will skyrocket if the Will is contested irrespective of the estate’s value. As to the cost to create an appropriate Will Package (accompanying associated documents are described below), a simple estate Will package should cost approximately $500-1000 depending upon complexity. Obviously, if you have been fortunate to have accumulated significant assets the cost will increase accordingly.


     With a Revocable Living Trust Package the discussion above relative to the probate process is not applicable. If a person executes and properly funds a Revocable Living Trust, there is generally no probate process to endure. However, do you “need” a Revocable Living Trust? Although there are many factors to consider in developing any estate plan, as a general rule if your assets exceed the probate limits discussed above you should consider a Revocable Living Trust Package. A Revocable Living Trust accomplishes the same goals of disributing assets and settling affairs as a Will but does so quickly and without opening a probate case.


     Essentially, a person (or persons) create(s) a Revocable Living Trust in the same manner as you would a Will. Information is gathered, the Revocable Living Trust is created and executed (signed), and assets are funded to the Revocable Living Trust. The procedures required to “fund” a Revocable Living Trust differs as to each type of asset. However to be funded, and thus subject to Arizona Trust law, the Revocable Living Trust must “own” the asset and possess legal title. For example, a Quit Claim Deed is used to transfer title to Mr. & Mrs. Trust Client’s home naming the “Mr. & Mrs. Trust Client Revocable Living Trust” as the new owner of the home.


     There are several important Revocable Living Trust points to consider. Generally but not always, the Trustor(s), the person(s) who create the Revocable Living Trust, are also the Trustee(s) and retain control of all Revocable Living Trust assets. Another important point is that a Revocable Living Trust is private and is not recorded (although it may be) for public consumption while a Will is recorded and subject to public scrutiny. Assets not funded to the Revocable Living Trust will require probate negating the prime advantages of a Revocable Living Trust. Some assets should not be funded to the Trust. Your legal professional will be able to advise you of the pros and cons of each asset. Finally, a Revocable Living Trust is not a tax planning vehicle and should be thought of as a probate avoidance tool.


     Is there a downside to a Revocable Living Trust? The initial cost is greater than a simple Will. Expect to pay a minimum of $1,000 for a complete Revocable Living Trust Package. As with a Will Package costs will increase with complexity and the level of service necessary. Though initial costs are higher with a Revocable Living Trust, over the long run a Revocable Living Trust becomes very cost effective when the cost to probate is factored in. As with everything you get what you pay for and the services provided by an attorney will far outweigh the costs.


Ancillary Will- Revocable Living Trust Package Documents


Beside the actual Will or Revocable Living Trust document, the following documents should be part of any proper Will or Revocable Living Trust estate plan.


Durable Financial Power of Attorney: Exists when a person executes a power of attorney which will become effective in the event he/she should later become disabled.


Healthcare Power of Attorney: Allows a person to name a person (called an “attorney-in-fact”) to make healthcare decisions on their behalf if unable to do so themselves.


Living Will: Allows a person to memorialize their wishes as to their healthcare. Is used in conjunction with Healthcare Power of Attorney.


Mental Health Power of Attorney: Same as Healthcare Power of Attorney but relates to mental health issues.


Pre-hospital Medical Directive: “Do not resuscitate” document.


Separate List: Allows a person to make specific bequests. (There are specific Arizona statutory requirements that must be followed to make the bequest legally enforceable.)


A Revocable Living Trust Package includes the documents noted above and may include the following as needed;


Amendment to Trust: Generic form allowing a Trustor/Trustee to make changes to their Revocable Living Trust.


Comprehensive Transfer Document: Whereas a Declaration of Intent is a brief statement of Trustor/Trustee intent, the Comprehensive Transfer Document contains further detail and is used in conjunction with the Declaration of Intent.


Declaration of Intent: Notarized document stating the Trustor(s) intent that personal property, however titled, whenever obtained, is to be considered property of the Revocable Living Trust. Not a substitute for the actual funding of assets to the Revocable Living Trust and is used in conjunction with a Comprehensive Transfer Document.


Funding Instructions: General instructions as to the procedures required to transfer property into a Revocable Living Trust.


Glossary of Terms: Definitions of the legal terminology used in a Revocable Living Trust.


Pourover Will: Will used in conjunction with the Revocable Living Trust to state the person’s afterlife wishes.


Quit Claim Deed(s): Document used to transfer real property to a Revocable Living Trust.


Settling the Estate Instructions: General instructions on how to wrap up the affairs of a deceased person.


Summary of Trust: Notarized document declaring the creation of a Revocable Living Trust. Used as a means to inform interested 3rd parties of the Trust’s existence.


Summary of Trust Clauses: Explains the individual Clauses of a Revocable Living Trust.


Trustee Instructions: Provides guidance to the Trustee.


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