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Basic Planning

Estate planning is essential for everyone in Arizona – not just the rich or retirees. The basic components of an estate plan can help everybody, regardless of his or her position in life. While it is true, of course, that not everybody needs to establish a revocable living trust, and otherwise engage in complex strategies to minimize tax liability, there are certain preparations that everybody should make. Even people with very modest estates, for instance, should set up a plan to preserve their assets and prepare for incapacity issues.

If your estate is of a more modest size, it may be that a basic estate plan is all that you need. There may be strategies available to help you transfer most all of your assets by beneficiary deed or designation, and your remaining assets can transfer under a basic will. While preparing for incapacity is another issue, it is typically one that can also be handled rather simply by establishing powers of attorney and an Arizona living will. Ultimately, there is nobody for whom at least a basic estate plan would not be beneficial.

Click on the following links to learn more about some of the components within a basic estate plan:

Planning for Everyone
Planning for Incapacity
Planning for Special Needs
Essential Planning FAQ

Planning for Everyone

A will is a fundamental component of a basic estate plan.

In Arizona, wills tend to be the single most important estate planning tool available. If you do nothing else to get your affairs in order, you should at the very least prepare a basic will. While you do not need an attorney to draft your will for you, it is in your best interest to have legal counsel review your plan and help you determine what best suits your circumstances. You may use a basic will to:

  • Designate a personal representative to handle your estate after you are gone.
  • Designate a personal guardian for your minor children.
  • Designate a property guardian to manage property for your minor children.
  • Give assets to people and organizations of your choice.

A testamentary trust provides additional control.

Sometimes useful, though not as widely applicable as a basic will, is a testamentary trust. Simply put, a testamentary trust is a trust that arises upon your death, as specified by your will. So, rather than providing somebody with an outright inheritance, your will assigns all or a portion of your estate to the trust, to be used for the trust beneficiaries’ benefit. Testamentary trusts are relatively easy to create, and can be useful to keep assets in trust for minor children until they reach the age of maturity. There are certain disadvantages involved with this type of trust as well, however, so it is best to seek counsel from an Arizona estate planning attorney when determining whether this strategy is suitable for you.

Planning for incapacity

Health care powers of attorney

Everybody should appoint a person in whom they trust to act as their health care agent in case they lose the ability to make health care decisions personally. The best way of doing this is by creating two documents, a health care power of attorney and a mental health care power of attorney. You can use these documents to appoint the same person or two different people to make your health and mental health care decisions, and each of these documents can be written to only take effect if and when you lose capacity.

It should be obvious that you should select somebody you trust to act as your agent, as this person may one day make important decisions on your behalf. After selecting your agent, you should work with a Mesa, Arizona estate planning attorney to ensure that your powers of attorney comply with Arizona statute. Specifically, every health care power of attorney and mental health care power of attorney must:

  • Clearly declare the principal’s intent to delegate the power to make health care decisions to a specific person.
  • Be signed by a principal who is of sound mind and free from duress.
  • Be witnessed by at least one adult who is not an agent, relative or heir of the principal, or directly involved in providing health care to the principal.

Durable financial power of attorney

In addition to health care powers of attorney, you also want to create a financial power of attorney that designates somebody you trust to handle your financial decisions for you in the event you lose capacity. Like health care powers of attorney, a financial power of attorney can be written to only take effect if and when you lose capacity. And, also like health care powers of attorney, you should only appoint somebody in whom you have complete trust to act as your agent under a financial power of attorney.

Selecting an agent, of course, is only the beginning. To establish a valid durable financial power of attorney, you must comply with Arizona statute and adhere to the following guidelines, so it is always best to do so under the advisement of a competent Arizona estate planning attorney.

  • You must understand the nature and effect of signing a power of attorney.
  • You must sign the power of attorney willingly.
  • You must initial any paragraph in the power of attorney that benefits the agent.
  • A notary and witness other than the agent, the agent’s spouse, or the agent’s children must sign the power of attorney.

Living wills

An Arizona living will is another tool people use to make their health care decisions known to others, and it is one that most every basic estate plan should include. In Arizona, living wills generally provide instructions to health care providers and caregivers as to what type of treatment you wish to receive in the event that you become unable to communicate your health care wishes. The document can be very specific or general. For instance, you may simply state that you do not wish to receive any life sustaining measures once a physician has given you a terminal diagnosis; or, you may provide very specific instructions as to pain relief, antibiotics, hydration, feeding, and cardiopulmonary resuscitation.

Planning for Special Needs

While this type of planning is not applicable to everybody, it is certainly applicable to everybody who has a child with special needs. Most people with special needs depend upon public benefit programs, such as SSI or Medicaid, to provide for their care and comfort. These programs are needs based, so any sudden increase in a child’s income or resources could very well disqualify him or her from benefits. While children with special needs may not ordinarily be at risk of exceeding these income and resource limits, receiving an inheritance could well cause them to lose the benefits upon which they rely.

This creates an obstacle for parents of a child with special needs because it restricts their ability to leave their child an inheritance. This is particularly troubling because public benefits are typically only enough to cover basic necessities, but leaving a well-intentioned gift to supplement these basic provisions could jeopardize eligibility altogether. Fortunately, many parents have found a solution to this problem in special needs trusts. Special needs trusts are specifically designed to help individuals receive an inheritance without losing their public benefits. So long as special needs trusts comply with strict rules, and funds are used on approved expenses only, they will not interfere with an individual’s ability to receive benefits such as SSI or Medicaid. To learn more about the complexities of special needs trusts, please visit http://www.arizonaseniorlaw.com/special-needs-trusts/

Essential Planning FAQ

Why do I need to have both a health care power of attorney and a mental health care power of attorney?

It is important to have both a health care power of attorney and a mental health care power of attorney in an estate plan. They can be two separate documents, or incorporated into one document, but everybody should have both. Without a mental health care power of attorney, your agent will be unable to obtain inpatient mental health care for you, even if it would be in your best interest. Rather, the only way another person could help you receive inpatient mental health care would be by seeking a mental health care guardianship from the court, which tends to be both time consuming and costly.

What exactly is incapacity?

Incapacity is a legal term describing a person who does not have the legal authority to enter into a binding agreement. As it pertains to Arizona powers of attorney, incapacity generally stems from dementia and other debilitating effects of the aging process. As it pertains to Arizona living wills, incapacity generally stems from accident or disease that causes somebody to lose the ability to communicate their health care wishes. While incapacity seems simple enough, incapacity can fluctuate, so it is sometimes difficult to ascertain whether a person has truly lost capacity to handle his or her affairs.

What can happen if I become incapacitated without making any preparations?

If you lose capacity to make your medical and financial decisions before you have made any preparations, there will be nobody on the ready to handle these matters on your behalf. Further, you will have little control over who will handle these matters for you if and when somebody must step in. Rather, if somebody close to you notices that you are having difficulty handling your affairs, they will have to petition the court to appoint a guardian or conservator to act on your behalf. A guardian is appointed to handle your medical decisions, and a conservator is appointed to handle your financial and legal affairs. Having a guardian or conservator appointed tends to take about eight weeks, and there are always costs and legal fees involved. To spare your family from having to go through this ordeal, it is always easier to prepare powers of attorney up front. If you wish to learn more about AZ guardianships and conservatorships, please visit http://www.arizonaseniorlaw.com/guardianships-and-conservatorships/

What happens if I pass away without creating a will or otherwise making preparations?

Although everybody should have a valid will in place, the reality is that all too many people die without one. And, when this happens, all assets not controlled by other documents transfer according to Arizona statute, known as intestacy laws. The intestacy statute is based on presumptions about family relationships, so that it considers first whether the deceased person had a spouse, second whether the deceased person had any children, and so on. Of course, this Arizona statute only covers property that is not otherwise controlled by another document, such as a payable on death designation on a bank account or a deed naming another person as joint owner. When property is left to transfer according to intestacy laws, there is always the likelihood that it will not transfer according to the deceased’s wishes, and there is even a chance that it will escheat to the state, so preparing even a basic will is essential.

Can I revoke or change a power of attorney after it is executed?

Although an Arizona power of attorney is a legally binding document, it is not necessarily a permanent document. So long as you are competent, you retain the right to revoke or change your power of attorney. As such, if at any time you decide you want somebody else to act as your agent, appointing somebody new is as easy as executing a new power of attorney.

How long does a power of attorney remain valid?

Generally, powers of attorney will remain effective during your lifetime and can also ensure that your wishes are carried out after your death.  You can, however, revoke your powers of attorney at any time so long as you are of sound mind to do so.  Courts can also revoke healthcare powers of attorney, but it is extremely rare because judges are generally reluctant to get involved with healthcare issues.

When does a power of attorney take effect?

When creating a power of attorney, you have quite a bit of flexibility. One option is to grant your agent under the power of attorney with authority to act on your behalf immediately upon its execution, which means that you and your agent will have simultaneous authority to handle your financial affairs. A more common option, however, is executing what is known as a springing power of attorney; under which your agent’s authority to act does not spring into effect unless and until you lose capacity to handle your affairs personally. A springing power of attorney ensures that you retain sole authority to manage your affairs while you still can, and requires a physician’s certification before your agent assumes any responsibility.

How should my estate planning consider long-term health care?

Long-term health care should be a consideration in every Arizona estate plan. Even those who are healthy should think about long-term health care, as medical issues can arise suddenly and without warning. Moreover, because long-term health care is so expensive, paying for it can be quite difficult for those who have not made any preparations. Ultimately, people have three options when it comes to paying for long-term health care: Paying for it out-of-pocket; purchasing long-term health care insurance; and, qualifying for Arizona’s Medicaid program, ALTCS. Before determining which of these options is right for you, you should sit down with a qualified ALTCS planning attorney to discuss your situation. If you are interested in learning more about long-term health care planning, please visit http://www.arizonaseniorlaw.com/altcs-and-medicaid-planning/

What is the difference between a personal guardian and a property guardian or conservator?

When we speak of personal guardians and property guardians or conservators, we are referring to those appointed in an Arizona will to look after minor children in the event of both parents’ death. Personal guardians are appointed to assume a parental role to the minor child by taking the child into his or her home. Property guardians or conservators, on the other hand, assume responsibility to manage any inheritance left to a minor child until that child turns 18. The personal and property guardian can be the same person or somebody different, and it is best to discuss your situation with an Arizona estate planning attorney to determine which of these alternatives is best for your particular circumstances.

 

Call Arizona Estate Attorney Dave Weed at (480)467-4325 to discuss your case today.

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