The best estate plans are created by focusing on people not just property. In its most basic terms estate planning is how your affairs will be managed in the event you are not around, either because of your death or incapacity. No one wants to think about their mortality but do you honestly want to leave your loved ones to sort out your affairs without your input? Worse yet, if you do not create your own estate plan the State will create one for you.
Advance health care directives are written instructions that tell others how you want your health care managed when you are not able to do so yourself. Advance health care directives generally include:
- Appointment of Health Care Representative – You appoint someone to make health care decisions for you in the event you are unable to do so yourself
- Living Will – You state how you want your end of life medical care handled
- Anatomical Donations – You give instruction should you decide to donate any of your body parts upon your death
A durable power of attorney allows you to appoint someone to manage your assets if you become incapacitated. The person you appoint can have broad powers to act but should at a minimum have the following powers:
- Manage and transfer your assets
- Create or amend trusts on your behalf
- Pay taxes and deal with the IRS
- Make gifts
A last will is a written document that states who you wish to be the guardians for your minor children and how you would like your assets distributed at your death. The last will names an executor to facilitate the management of your will during the probate process.
If you die without a valid will (known as dying intestate) in Arizona your assets will be divided up according to State statute.
Trusts are a legal construct that allows you to create a separate legal entity to hold your assets. A trustee is named who manages the assets for the benefit of you and your beneficiaries. Revocable living trusts are created and funded during your lifetime and you often name yourself as trustee to maintain control of the assets until your death or incapacity. A testamentary trust is created after your death by a provision in your will. Trusts are very flexible and there are many different types. The type of trust used is dependent on your specific goals and circumstances.
Probate is the public process of filing and validation a will in court. The probate process allows claimants to come forward and ask for payment of debts owed by the estate. The probate court will oversee the distribution of the assets in the estate either according to the terms of a valid will or under your state law if there is no will.
Some assets avoid probate including:
- Life insurance and annuity contracts with a valid beneficiary designation
- Valid gifts made prior to death
- Assets held in joint tenancy with rights of survivorship
- Retirement plans and IRA’s with valid beneficiaries
- Assets held in living trusts