Answers to Common Estate Planning Questions

Answers to Common Estate Planning Questions

Estate & Business Planning Attorney

Answers to Common Estate Planning Questions

We draft customized plans for each individual client rather than generic template plans, so the prices of each estate plan varies. The typical price range for a complete plan for a married couple ranges between $2500-4000, while the cost for an unmarried individual can range between $2000-3500. Pricing can vary depending on your specific situation but typically falls within those ranges. Pricing may exceed those ranges based upon circumstances, such as special needs planning, complex distribution plans, charitable giving, business interests, or real estate holdings. It is impossible to quote an exact price without first meeting with you to discuss your situation and needs. We are happy to offer a no-pressure, free consultation for estate planning clients at which time we can offer more specific pricing.

Every adult over the age of 18 should have an estate plan. However, not everyone needs the same kind of estate plan. A basic plan may be sufficient for a young adult with no children and no large, valuable assets, whereas a couple with a home and children will need a different plan that takes care of their children. Retirees with a lifetime of assets are best served with yet a different plan to address their unique situations. The best plan for you depends upon the complexity of your specific situation and desires. Here at Woods Law Group, we do not believe in using one size fits all template plans. In fact, we usually foresee problems that result from them and it’s disheartening to learn how many law firms and other businesses take money from people and, possibly inadvertently, provide plans that will inevitably lead to problems. We take the time to find out what is important to you so that your plan is appropriate for your needs.

Absolutely. Estate planning has two components. The first component is disposing of your assets after you pass away. The second component is taking care of you while you are still alive, also known as incapacity planning. Many people tend to focus on assets and less on incapacity planning. As much as we like to help our clients with their assets, taking care clients while they are alive is far more important to us at Woods Law Group. Establishing ahead is time who will make medical decisions for you and what kind of medical care you want it is the crux of an estate plan. The attorneys at Woods Law Group will not only customize a plan to dispose of your assets but will also make sure you are taken care of while you are alive too.

Through estate planning, there are two primary ways to dispose of assets post-death: 1) a will or 2) a trust. A trust-based plan is more comprehensive than a plan that includes but is not based on a will alone. However, not everyone’s situation or goals necessitate having a trust. We’ve had clients worth millions of dollars whose needs were met with a will and we’ve had clients with minimal assets whose goals could only be met through a trust. Understanding the nuances of which type of plan is appropriate for each situation is the job of an experienced estate planning attorney. The attorneys at Woods Law Group are versed in these nuances and are here to match your needs and goals with the appropriate type of estate plan for you.

Who to choose as your decision makers, such as trustees or agents under a power of attorney, is the most important—and for some the hardest—part of creating an estate plan. The various documents in an estate plan could designate just a few people as your decision makers, or you could choose different people for each job. Often, people tend to designate their oldest child first, and then second oldest next, and so on. Each job, however, requires a different skillset and it is important to fit the right person to the right job.

The healthcare power of attorney agent is appointed to speak for you regarding healthcare options. We recommend designating someone who is level-headed during a crisis and who will follow through with your end of life wishes. The financial power of attorney agent and trustee makes financial decisions. For this role, we recommend choosing someone who is responsible, understands investing, can work well with financial professionals, attorneys, CPAs, or investment advisors, and can keep detailed records of income and expenses.

For your court representative, the personal representative (executor) of your will, we recommend designating someone who can meet court mandated deadlines, follow through with instructions, work with attorneys and tax professionals, and is organized. The attorneys at Woods Law Group will walk you through these decisions and help guide you through making these tough choices.

The short answer is yes, there are websites that offer simple plans. As long as a document is legally executed, it doesn’t matter if it was created online or not. Keep in mind, though, that legal validity does not mean the document is any good or that it is going to work the way you think it should. Any plan you may receive online probably won’t be the ideal fit for your situation and wishes. Estate planning documents are complex legal documents. Good estate planning attorneys have years of experience planning for thousands of families and situations, and they continue to learn as new situations arise. It takes years of experience and practice—even for attorneys—to really understand all of the complicated concepts and strategies involved in estate planning. The problem with do-it-yourself online documents is that no legal advice can be given, nor do you have any idea if the document will work for you and your specific circumstances. You simply don’t know if the program is asking you the right questions or giving you the right answers. Unfortunately, your family will be left with the burden of sorting out the results.

A big risk of using computer software or online document generation sources is that you and your family won’t know if the online documents are any good until you need to use the documents—when something has gone wrong. Unfortunately, once the emergency has begun, it is too late to go back and change or update the documents. We’ve had far too many families in our office who thought they were protected because of their estate planning documents, where we’ve had to explain why the documents are not going to work the way they thought they would. Poor quality documents often costs families more money, stress, and complicated problems than had there been no plan at all. A judge in a recent case involving online estate planning forms out of Florida stated, “this case does remind me of the old adage ‘penny-wise and pound-foolish.’” Visit: http://www.aaepa.com/2014/04/penny-wise-pound-foolish/

Although it is great when your financial professionals suggest you get an estate plan and then introduce you to an experienced estate planning attorney, many times these professionals are introducing you to a Certified Legal Document Preparer (CLDP) rather than an actual attorney. Why do they do this? Often it is because they are getting a financial kick-back. Only a handful of states recognize and sanction this type of legal service, and Arizona is one of them. Some financial institutions, including many of the credit unions around the valley, employ their own CLDPs to create estate plans for their clients. To our dismay, the worst estate plans we have ever seen have come from CLDPs. The problem is that, similar to do-it-yourself online programs, you don’t know what you don’t know. We’ve had too many families in our office going through costly court proceedings because their loved ones used a CLDP to prepare their estate planning documents. It is important to find an experienced estate planning attorney to prepare your estate plan. Merely having documents is not the goal—having documents that work for you is the goal.

Comparing legal services can be confusing. First and foremost, people often see advertised low prices from certified legal document preparers and confuse them with attorneys or believe they are getting the same documents attorneys offer but at a lower price. Legal document preparers are NOT attorneys. They simply cannot provide legal advice as to which options will best suit you and your situation. Many do not even carry legal malpractice insurance to protect you if something goes wrong.

When comparing attorneys, it is important to know whether they are experienced and knowledgeable in the practice area of estate planning. When comparing experienced estate planning attorneys, it is important to make sure they take the time to get to know your situation and goals and will customize a comprehensive estate plan for you. This means that not only are the major planning documents included in your plan—such as a revocable living trust, will, health care power of attorney, and financial power of attorney—but that the other supporting documents are also created as well. Some examples of additional documents included in our comprehensive estate plans are:

  • Living Will
  • HIPAA Release Form
  • Certification of Trust
  • Personal Property Assignment
  • Personal Property Memorandum

If the attorney that you are considering is not providing all of these documents, you probably are getting an inferior service.

It is also important for your documents to be robust. Each legal document is its own “book of answers.” If a situation arises and the legal document does not have an answer to your question, the only person who can craft an answer is a judge at a probate court. No one wants to go through the hassle or expense of going to court. Proper planning is meant to keep you and your loved ones out of probate court. For example, our revocable living trusts for a married couple are on average around 90 pages in length. This isn’t for the entire estate plan—just for the trust itself! We can almost guarantee that if your existing trust is only a mere 20 pages, that there is a high likelihood that a situation may arise that is not addressed in the document. If this happens, you or your loved ones will be forced to spend substantial sums of money and time in court. In short, if estate planning services are priced very low, there is usually good reason for that—the provider is not an attorney, is simply not an expert in the field, or is providing an inferior service.

Yes, you can avoid death probate with the proper use of beneficiary forms. One of the main reasons people do estate planning is to avoid death probate, which is the court process of distributing your assets after death. By using the proper beneficiary forms, one can avoid court involvement post-death. However, there are other reasons for estate planning other than simply avoiding death probate—and beneficiary forms alone cannot address them.

Most people want to avoid not only death probate, but also living probate. Living probate is the process in which the probate court appoints agents to make your medical decisions (guardianship) for you and/or your financial decisions (conservatorship) for you if you are unable. Living probate avoidance cannot be accomplished with beneficiary forms.

Only a comprehensive estate plan that includes the proper health care documents and revocable living trust can consistently avoid both living and death probate. Beneficiary forms also have another problem— everyone listed on the form gets written a check upon death—there is no asset protection. Not every beneficiary should inherit monies outright in the form of a check. Through a beneficiary form you have no control over when the beneficiary gets the money or how the beneficiary spends the money. You can have this control, however, through a comprehensive trust-based estate plan.

We regularly have clients in our office that are confident that their assets aren’t going to go through death probate because they own the asset jointly. This may or may not be true. Let’s start with the most common form of joint ownership—husband and wife. While it is true with joint ownership that if one spouse passes away, the other spouse gets the asset without going through death probate, but what happens if both spouses pass away at the same time? Now there is a death probate. What happens if the healthy spouse that takes care of the finances passes away and now the unhealthy spouse needs help with the bank account? Now there is a living probate to appoint a conservator to help the surviving, unhealthy spouse.

Clients also tell us that their assets aren’t going to go through death probate because they own the asset jointly with their adult child or children. This can be extraordinarily problematic. First, if the adult child is being sued, going through a divorce, or filing bankruptcy, this asset, that you consider to be yours, is now at risk from your child’s creditors. Second, the child can rightfully spend or dispose of the entire asset without your knowledge or authorization. Third, when you do pass away, the asset belongs solely to the child who is listed as the co-owner on the asset. Your surviving child has no legal obligation to share the asset with your other beneficiaries. If there are other children or beneficiaries, this asset might not be divided up the way that you had hoped that it would be. If your child does decide to share the proceeds of the asset with your other beneficiaries, he or she may become responsible for gift taxes. With proper comprehensive estate planning, these types of issues can be avoided.

This question gets the stereotypical attorney answer: It depends. A validly executed trust and/or will from another state should work here in Arizona. The other documents in an estate plan, however, such as health care and financial powers of attorney, are state specific and are less likely to work. If you’ve moved to Arizona and have these documents from another state, it is important to consult with an experienced estate planning attorney. The attorneys at Woods Law Group review many plans from out-of-state and are experienced at giving the proper recommendations on what does and does not need to be updated due to relocation.

There is no set amount of time that should pass before you should update your plan. It could remain up to date for a year or for a decade. Your estate plan does need to be updated, however, when one of two things occur.

  • Certain life changes necessitate changes in your estate plan. For example, this could be moving to another state, a birth, death, marriage, divorce, or serious illness for you or those people named in your plan (beneficiaries, trustees, personal representatives, power or attorney agents). If you’ve had life changes that affect your plan, you need to update your plan.
  • Changes in estate planning or tax laws can affect how estate plans are written. Changes to laws that may impact estate planning can happen at the local or federal level.

In Arizona, for example, on January 1, 2009, we had a major overhaul of our estate planning laws. If your planning documents pre-date 2009, we would recommend having them reviewed by an experienced estate planning attorney to see if they include the new, 2009 requirements. In our experience, almost all documents prepared prior to 2009 should be updated. We do not expect any other major estate planning law changes soon in Arizona; however, there are never guarantees as to what our legislature will do.

At the federal level estate planning laws were changed recently by way of the SECURE Act which was signed into law on December 20, 2019. This law, among other things, changed the rules for how IRA’s and some other retirement accounts can be distributed. This potentially will require that some estate plans be updated.

Additionally, other laws, which may not be directly related to estate planning, may change in ways which could have an indirect impact upon existing estate planning documents. For example, changes to tax law, real estate law, or family law could all have the possibility of impacting your estate plan.

Probate is the legal process whereby a court oversees the disposition of a person’s assets after death. If someone dies having left a will, the court will attempt to validate the deceased person’s will and carry out its provisions. Regardless of the existence of a will, the court may be required to determine who the deceased person’s heirs are (the people who will inherit) and who will serve as personal representative (PR) of the estate.

The PR is the person who is then responsible to identify and inventory the deceased person’s assets, have them appraised, sell property, pay debts and taxes, and distribute the remaining property in accordance with the will or the laws of intestacy if the decedent did not have a will. The probate court will generally have oversight over that entire process and may even require direct supervision and approval of each action.

Part of the probate process includes publishing notice to creditors that the individual has died. Anyone who feels they are owed money by the deceased or their estate must come forward within four-months (providing the opportunity for all valid debts to be paid). A similar notice is sent to all of the devisees (people who inherit under a will), heirs (people who inherit under the laws of intestacy), and other interested parties (such as people who would be heirs under the laws of intestacy but are not devisees under the terms of the will) giving them notice of the court proceedings and inviting them to contest the will or the appointment of the PR within four months.

Such notices tend to have the effect of opening the door to disputes. On the bright side, contests are generally barred if it not brought within the four-month time period. A typical uncontested probate will take at least 5-6 months and will cost at least $2500-5000 in legal fees. Any contested actions, or proceedings with irregularities, may cost significantly more and take much longer to complete. Worst of all, probate proceedings are almost always mentally and emotionally draining on all participants.

Simply creating a revocable trust document by itself is not enough to ensure that your assets do not end up in probate when you pass away. You must still go through the process of “funding” your trust. Funding your trust is the process by which you re-title your financial accounts into the name of your trust. A properly funded trust avoids probate, while an unfunded trust does not help avoid probate. This means you go into your bank to convert your checking, savings and money market accounts out of your own personal name and into the name of your new revocable living trust. You must also contact your brokerage firm to get any forms they may have so that you can convert your fully taxable investment accounts into the name of your trust as well. For life insurance, non-qualified annuities, and retirement accounts and plans, you contact your carrier and update the designated beneficiaries to include the name of your trust. If any of your assets or financial accounts are not updated to reflect your revocable trust, you are at risk of your assets being subject to probate.

Many have heard from others that they want to avoid probate, but do not have an understanding as to why they would want to avoid it. Here are several reasons to avoid probate:

1. Emotional Toll

There is a tremendous emotional toll to nearly all court proceedings, especially with probate proceedings. When a family member or loved one passes away, the last thing you want to have to be involved with are attorneys and courts when your energy is drained while grieving the loss.

2. Financial Cost

Here in Arizona a typical uncontested probate (where interested persons are in agreement and issues are relatively straightforward) can easily cost between $2500 to $5000. If there are any irregularities, disputes, or other challenges, a more costly and complex form of probate could be required.

Some of the problems that can commonly cause probate to be much more costly is when the decedent owned property in multiple states. For example, if there is any property in California, a small simple probate can easily cost upwards of $10,000. The reason is because attorneys in California and many other states are allowed to base their fees on a percentage of the value of the asset going through probate.

Probate will have to be opened up in each state where the decedent owned property. So if your loved one lived in Arizona, but had a vacation home in California, and some mineral rights in Oklahoma, and a timeshare in Missouri, you are looking at 4 probates in 4 different states! Although they will all be linked together, the time for all of this to be completed and the costs associated can be very high.

3. Time

A simple uncontested probate can take at least 5-6 months. If families are not getting along and result in legal disputes in the probate process, the time for completion can grow significantly, easily stretching the 5 to 6-month time period into two years or more.

4. Privacy

Probate proceedings are public record. A trust, on the other hand, can be kept private. In many cases, the decedent would have probably preferred to have had the estate distributed privately. This can help to reduce hurt feelings between family members who might feel that allocations of property or other decisions made by the decedent are not fair. In addition, there are predators who look through court records to prey upon those who will be inheriting money in the near future.

With some planning and proper advice, probate can be avoided in most situations. This is why is it is important to seek advice from an experienced estate planning attorney.

While the purpose of a financial power of attorney is to appoint a person to help you with your finances if you become incapacitated, that doesn’t mean it will be all-inclusive. Unfortunately, there is no legal requirement that banks or other financial institutions accept a properly executed power of attorney. If you are relying on a financial power of attorney to gain access to a financial account, it is very likely that the institution will tell you to go to probate court, be appointed the conservator for your loved one, and come back with a court appointment. This type of living probate is very costly, time consuming, and adds additional stress to an already stressful situation.

Rather than relying solely on a financial power of attorney for incapacity planning, a revocable living trust is a much better tool for the job. The great thing about a revocable living trust is that there are legal requirements that banks and other financial institutions must accept the document. This makes the revocable living trust the preferred legal document to keep your family and loved ones out of living probate for financial situations.