Estate Planning During or After Divorce

In life, we try to prepare for everything as best we can but this isn't always possible. Sometimes, couples go from happily married to divorced in a short amount of time and this has sadly become natural. However, what does this mean for estate planning? Unfortunately, not many people are aware of exactly what happens after divorce so we are going to break it down for you today. 

The Will - Under Arizona law, the will of a divorced person remains valid but the ex-spouse will no longer qualify as a beneficiary to the estate. On the other hand, a decree of separation will not remove the spouse as a beneficiary as they will still qualify because they are still legally married. What does this mean? Right up until the point of divorce, the will remains in tact and each partner will remain as a beneficiary. However, divorce then changes this. For this reason, being ‘separated’ and ‘divorced’ is actually very different in terms of the will. 

With this being said, a final divorce decree will disqualify a spouse from a fiduciary position - such as guardian, trustee, or executor. If you want to keep an ex spouse in this position, a new will would need to be drafted. 

Powers of Attorney - Upon divorce, a financial or health care power of attorney will be automatically removed. However, they can be replaced if another willing agent can be found. 

Living Trust - In Arizona, joint marital property trusts are treated as if both partners have predeceased the other. In individual property trusts, the ex-spouse becomes automatically disqualified as a beneficiary. Furthermore, they will no longer become the successor trustee and will no longer have the potential to fulfil this role. 

Life Insurance - If you already have an insurance policy in place, any ex-spouse will be removed and disqualified as a beneficiary. However, some circumstances may require the ex-spouse to remain as a beneficiary which means that a new designation will have to be filed to the insurance company. If no action is taken, Arizona law suggests that the ex-spouse will be automatically disqualified as a beneficiary. 

These are the four main documents that will be affected by the divorce process and then will need to be changed thereafter. If you aren't sure or simply need advice, the best option is always to discuss your choices with a trained professional. Although divorce is becoming ever-more common, each situation is unique so professional advice for both you and your ex-spouse could be the way forward. Once you receive this, you can ensure that all your major documents are in order and your will, living trust, power of attorney, and life insurance are all valid and ready to be put into action in the future. 

Ultimately, your joint tenancy agreement, 401k, pension, profit sharing, and IRA will all also be affected by divorce so be sure to get advice to keep your finances in order.

Different Types of Trusts

When looking for ways to protect assets, one of the most popular methods can be found with trusts. Once assets are placed into a trust, it becomes the trust’s property and is subject to the rules laid out by the trust itself. Whilst the ‘trustee’ is the holder of the title, the ‘beneficiary’ will see the benefits of the trust. Although there are two main types of trust - revocable and irrevocable - there are a couple of others too so let’s take a look. 

Revocable - As the name suggests, this is a trust that can be altered, modified, or completely removed throughout its lifetime. Sometimes known as a living trust, the trustee can add and remove certain assets over the years and can be helpful towards avoiding probate. If the assets are placed into the trust and owned by the trust at the time of the trustee’s death, probate will not be necessary. 

Irrevocable - On the other hand, an irrevocable trust is one that cannot be altered in any way during a lifetime nor can be it be revoked. Once a property or asset is placed into the trust, it cannot be removed or taken out which means that this decision is a heavy one and should be considered deeply. Again, this will help to prevent probate if the trustee has placed an asset into the trust before death. 

Asset Protection - When creditors are on the attack and you need to protect certain assets from them, this trust is used as they will no longer have access. Normally, these will be irrevocable for a certain amount of time and then returned to the trustee once they are safe from creditors. Once the ‘attack’ is over, they can regain control of the assets. 

Special Needs - Ultimately, this trust is set up for people who are allowed government benefits so that the beneficiary isn't disqualified from the benefits. Thanks to Social Security rules, this is completely legal and permitted across the United States. Normally, an inheritance is subject to various taxes if government benefits have been received but a special needs trust prevents this. 

Constructive - As an Implied Trust, it is first established by a court and will then be determined from various circumstances and facts. When in court, they may decide that even though a property wasn't in a trust, there was intention and should therefore go to a particular person. 

Although these are the main five options, there are also a number of other types such as Tax By-Pass, Totten, and Spendthrift. All in all, trusts act to protect an asset to then be given to a beneficiary or back to the trustee at a later point in time. If you need advice or feel as though you would benefit from something like this, be sure to contact a local finance professional who will be able to advise you on your own unique circumstances. 

Estate Planning and Marriage

If you have never heard the term ‘estate planning’ before, you will want to carry on reading this because we are going to offer some fantastic advice. If you have recently gotten married or have been married for a while without estate planning, you need this information even more. Even if you happen to fall into the latter category, don’t worry because we have all the information you will need. 

What is Estate Planning? - At its core, estate planning describes the process we complete in order to create numerous documents that explain where our estate goes after death. By utilising three main documents - durable power of attorney, last will and testament, and a health care directive - you can ensure that your estate gets distributed exactly how you plan after passing away. 

Why Do I Need These Documents? - If you don’t do any of these plans and leave these documents untouched, you may be leaving your partner and potential children in the dark and they may not have access to your estate after your death. With these plans in tact, your estate will be left with your partner and your children and you will be ensuring their future. 

Furthermore, you will also be reducing the amount of tax they will have to pay after you pass away if you plan everything early and have it all in order. If you don’t have these documents, a significant portion of the estate will be taken in tax and various other costs. If you want your partner to have the most money possible, you will need to have the three documents in place. 

Estate Planning and Marriage - After you get married, your legal status changes in a number of ways and it affects how you earn, save, and are taxed with money. As a spouse, you can file joint taxes, share property, share income, get recognised as a married couple on a governmental level, and more. 

As you grow as a couple, you will start to involve one another with decisions and this should also be true for estate planning. Whether it is how you want to be cared for at the end of your life or simply the distribution of your assets, these are important decisions that you need to share with your spouse. In addition to this, you need to discuss who will the guardian of pets and children, whether you should jointly own property, and who will be bequeathed individual gifts. By doing this, you can remove the need for probate and ease the pressure on loved ones after you pass away. 

Summary - All in all, estate planning is vital in a marriage because it ensures that one of you will have a future should the other pass away. Rather than getting dragged into various financial issues and losing money to tax, you will both have everything planned for a stable future. No matter how hard it may seem to think about and how far off it seems, this is something that needs to be done! 

Common Mistakes to Avoid When Planning Your Estate

No matter who you are and what you do for a living, planning your estate is one of the most important things you can do in life. Although more and more people are starting to realise this, there are still some that are making key mistakes. For this reason, we have made a list of the most common mistakes for you to avoid. 

Not Planning At All - Before we dig any deeper, we should point out that the biggest mistake of all is not having any plans in place. No matter how much we like to avoid the topic, we are all going to die and having no plans means that your possessions and estate may not go to your desired recipients. Not only that, they could face losing a significant portion through tax and other costs. 

Leaving the Will Unattended - Drawing up a will is the first step and one that is often left too late, but it also has to be updated regularly. Throughout life, people will come and go and the value of your assets will change. With this in mind, you need to regularly review your will and ensure that everything is in place. 

Choosing a Poor Executor - When married, the immediate decision is to choose the partner as an executor but this doesn’t have to be the case. If you think that they wouldn't be suited to the role or are too emotionally involved, you don’t have to choose your partner to be the executor for your estate. In fact, it is a much wiser decision to choose someone who has less involvement in the process and can look at the situation with an objective view. 

Not Meeting a Professional - Nowadays, it is becoming easier to draw up all the relevant estate planning documents at home and online. However, this doesn’t mean that you shouldn't consult a professional. When creating our own documents, we are rolling the dice with our future because vital details can be missed out. By consulting a finance professional, you can ensure that all the documents are legal and drawn up correctly should the worst happen. 

Trusting People - In the past, many loved ones have been left disappointed because the deceased was simply too trusting with other beneficiaries. If you want to leave something for a loved one, make sure you include them as a beneficiary because the people you trust may not ‘do the right thing’. 

Adding a Child’s Name to the Deed - Although this seems like a good, safe idea, you could actually be setting your child up for a life of financial headaches and numerous tax costs. If you want to give your child the house, it might be safer to do so via an inheritance. 

There we have it, six common mistakes that people make when planning their estate. As long as you remember to avoid these, you should be in a good position moving forward! 

Keeping Track of Beneficiary Designation Forms

As you pass through life, you will have undoubtedly filled out some beneficiary designation forms. Whether you’re purchasing a new life insurance policy or simply opening a new bank account, this simple document states to whom the money should be passed if you happen to pass away. Over time, you may forget about certain accounts and who the beneficiaries are which is why it is important to review your beneficiary designation forms often. As long as you keep track of these forms, your money will end up with the desired beneficiary in the event of your passing. 

Life Insurance - Overall, this is one of the easiest to change and you can do so by simply updating your beneficiary designation form. After doing so, you should always phone your insurance company to ensure that it all passed through correctly. Remember, you may have smaller insurance policies through work or personal ventures so you will have to update them individually. 

Bank Accounts - With most bank accounts, you will be able to make the most of a ‘Transfer of Death’ designation form. With this set up, your desired beneficiary will simply have to take your death certificate into the bank and they will have access to your funds. Often, this is the preferred method because it doesn’t require a specific name and you won’t have to review it every few months. 

Health Insurance Savings - To prevent your estate from being billed the medical costs, ensure that your heirs have access to your health insurance savings. For up to a year after you pass away, your family and friends will be able to use these funds to pay for medical expenses. 

Retirement Funds - Over the years, we tend to accumulate a number of different retirement accounts and they each have a beneficiary designation form. If this is the case, you will need to maintain these accounts and ensure that you always have the right name on them. If you find it hard to keep up with them all, why not roll all your accounts into one Individual Retirement Account (IRA) to have just one beneficiary form and one name?

Trusts and Wills - Despite popular belief, the names on your individual accounts will actually override what is stated in your will so it is important to review these documents often. 

Too often, families are left with a mess of a financial situation and family members don’t get the money or possessions they feel they deserve. For this reason, keeping track of your beneficiary designation accounts is one of the most important things you can do. As long as you remember to keep on top of them and check them often, they will remain in order and the correct money will be left to the correct person. 

Problems with Deathbed Planning

In recent years, we have learned just how important it is to arrange a will and all our finances at an early age. In years gone by, we would not plan for death at all and this would lead to a number of problems which we will show to you now. If you haven't yet taken action towards planning your finances or what will happen when you pass away, keep reading because you might just pick up some valuable information. 

Power of Attorney - Firstly, leaving it so late can be dangerous because you might reach a stage where you can no longer make decisions. Due to a physical or mental illness, you might be in a position where your finances are taken out of your hands. If you don’t feel comfortable or are unable to make decisions because of an illness, it might be worth arranging a power of attorney so your finances are looked after. Once this has been set up, the power of attorney will arrange your finances and make decisions for you. 

Tax - Nowadays, money left to a loved one or relative is subject to all sorts of taxes and other costs. If you really want to leave money to a loved one, you will want to do so as soon as you can otherwise they face losing a large chunk to the tax man. Dealing with a terminal illness or the fact that life could come to an end soon is extremely tough; however, failing to deal with it will see a significant portion of your estate go to hands you don’t want it to go to. 

Inheritance - Many choose to gift money to their family before they die but, unfortunately, this isn't immune from taxation. In fact, gifts that are made within one year of a death are generally considered ‘inheritance’ and will be subject to tax. 

Power of Attorney’s Powers - Finally, it should also be noted that not all power of attorneys are allowed to make gifts to themselves which is something else you will have to look out for. If you set your only child as your power of attorney, they may be limited as to what they can do when it comes to rewarding themselves as this helps to prevent fraud and money-making schemes. When setting your POA, it is important to read the small print. 

As you can see, deathbed planning causes problems but it still happens far too often. If you want to avoid the stress and have everything in order early, why not look into financial planning as soon as you can? Whenever you get a spare bit of time, make the first step and contact a financial planning professional. As much as we don't like to think about it, life could strike us down at any moment so be sure to get your finances in order today!

Small Estate Affidavit and Probate

Losing a loved one can be extremely tough, however it’s made even harder when forms aren't in order and personal possessions and property have to be divided in a messy fashion. Normally, the probate process oversees this distribution and awards property to creditors and heirs. However, the court’s probate’s supervision can complicate things and the whole process can be complicated and stressful for loved ones. For this reason, the Small Estate Affidavit was created. 

In its essence, the Small Estate Affidavit is a much more simple process of transferring assets and estate to the beneficiaries without the need for formal probate. Normally, the following circumstances would see the Small Estate Affidavit drawn up;  

•    Firstly, you could be named as an executor for an estate. If this estate meets the requirements under state law, the Small Estate Affidavit could come into play. 
•    Secondly, a family member or spouse could pass away without having a will. In this scenario, the assets might meet the necessary requirements under state law. 

Of course, losing someone is already a hard time in life so a Small Estate Affidavit can reduce the stress of probate and simply reduce the paperwork and the delay in the court process. 

Requirements - With all this being said, one of the key questions is ‘what constitutes a ‘small estate’’? In truth, different states have different values and they can vary greatly. Whilst Vermont has a value of up to $275,000, Georgia limits it to just $10,000. In Arizona however, it is middle ground between those two examples at $75,000 for personal property. However, a value of $100,000 can be passed through the process if all taxes and debts have already been paid. For example, $100,000 with no mortgages or any other liens attached could pass through. 

How to Start - Firstly, you will need to get a valuation of the estate to assess whether or not you will be able to fill in the relevant Small Estate Affidavit form. If the estate falls within the requirements, you can fill in the form even if you live in a different state to the deceased. 

When filling in the form, you will need a whole host of information and personal details including your name, address, a list of assets and their values, information regarding the deceased, names and addresses of other surviving relations, unpaid debts or any other claims, confirmation that the funeral has been paid for already, and more. As the Small Estate Affidavit is independent, you will need to provide all the relevant information so they can then push the process forwards and assess the information. 

As soon as you have finished the form, you will need to file it in the court jurisdiction of the deceased and where the property is located. From here, you will soon hear back and the process will begin. As mentioned previously, this is often a much preferred solution as it is easier and less stressful than court proceedings. 

What are Living Wills?

When people hear the phrase ‘living will’, they assume that it is a different kind of normal will that divides property after death but this simply isn't the case. If you haven't yet looked into living wills, now could be the time because it could just be one of the most important documents you sign. 

As mentioned, livings wills don’t look post-death but instead the health care or treatment you receive when ill or not able to make decisions. By drawing up a living will, it lets everyone know your wishes in terms of treatment for end-of-life medical care. Otherwise known as an advanced directive or a directive to physicians, it allows you to communicate your decisions when you aren't physically able to do so. In terms of its use, this document is truly invaluable as it gives guidance to friends, family members, and medical professionals. Rather than having to guess which route you would choose to go down, they will have the guidance needed to make an informed decision. As a living will describes the actions taken for end-of-life care, it has no power after death. 

Creating a Living Will - When drawing up this important document, there are two main options - bringing in an attorney or making your own. However, each state is different as to where to go from here. In Arizona, you will have to sign the document in front of one witness or otherwise it must be notarised. If you choose to go for a witness, they must not be a relative, provide you with health care, or be a part of your division of estate in a regular will. If you choose to have the will notarised instead, the notary cannot be someone providing your health care nor can it be your health care agent. 

As soon as you follow this step, the document becomes valid and you will need to keep the originals. If you named a heath care agent, they will need copies of the document. To ensure that the living will is utilised in the appropriate circumstances, you may also want to give copies to your physician, insurance plan, trusted friends and family members, and even your hospital. 

Every so often, you will want to review your documents to see if they still apply and to see if you still agree with the wishes previously stated. If you move state, you will need to ensure that everything is still in place for your wishes to be put into place. Regardless of where you are, the document will be legal until you decide to withdraw them and remove all copies from the relevant bodies. Of course, the easiest way to draw up a living will would be to contact a professional in Arizona as this will ensure that all the requirements have been met and all the appropriate people receive a copy. 

The Probate Process - A General Overview

After losing a loved one, often the last thing we want to think about or discuss is the future. However, the items that are left behind by the deceased have to be dealt with and the process has to begin at some point. Whilst some people will think of the sentimental items, others will think of items with monetary value so how is this split? What happens to these key items? What happens to any debts that have been left unsettled? Over the years, the courts have developed a system of deciding who gets what and this is called ‘probate’. 

Probate Explained - As seen previously, probate is a legal process that decides what items go to which beneficiary and how everything is dispersed. Although probate isn't always required, often it is and the state will begin by validating the will. As soon as this happens, an executor is assigned either by the names in the will or by the court. Overall, the executor plays an important role because they will carry out the identification of assets, the payment of outstanding taxes and debts, asset appraisal, and then the distribution of the remaining section of the estate. 

Is it Necessary? - A common misconception that comes along with probate is that it isn't required if there is no will but this isn't true because if there isn't a will, the assets still need to be divided accordingly. In addition to this, courts will often step in anyway if the value of the estate is over $100,000. With this being said, the probation process can be avoided if the following is done before death; 

•    ‘Pay-on death’ accounts
•    Setting up a trust alongside a will
•    Having a beneficiary
•    Giving away all possessions before death
•    Changing assets into joint tenancy 

If all of these steps above are completed before passing away, probate will not be necessary because everything has been dealt with beforehand. For example, giving away possessions means that they will have reached their intended owners before death and changing assets into a joint tenancy will ensure that the joint owner takes over after death. By having these steps put into place, there will be no confusion as to what should happen after passing away. 

If you want to avoid probate for your family after passing, consider putting these actions into place now to ensure that it is avoided. If you have key possessions, be sure to give them to family members and friends before you pass away and even put your house into a joint tenancy so the intended future owner already has one hand on it. Although this sounds morbid to even think about, it may save your family a lot of stress in an already devastating time by going through the courts. In addition to this, families have been torn apart by the division of a relative’s possessions so completing these actions will prevent this from ever occurring. 

What Kind of Powers are Granted to my Health Care Power of Attorney?

Just like with your house or any other property you may have, at any point you are welcome to appoint a power of attorney (POA) who will make critical decisions regarding your health. Once you have set this up, you will be named as the ‘principal’ and the ‘agent’ will be whoever you appoint. When it comes to health, they are potentially the most important decisions that we have to make and so appointing a POA that we trust can be pivotal for when we are no longer able to make such decisions. If you happen to be in a poor state of health, your trusted ‘agent’ will be able to make decisions on your behalf judging by discussions you may have had previously. 

Determination of Powers - With this being said, what power does the agent hold if you’re unable to make an important decision and to what extent do you have a say over these powers? Nowadays, you will always have a say over your health and health care as long as you are of a sound state of mind. When you appoint a POA, this doesn’t change and you can grant the powers with which they will be given in any given circumstance. 

Furthermore, you can provide as much detail as you want, cancel your POA if you’re of a sound state of mind, and even appoint a backup agent just in case the primary agent cannot or will not make a decision. Generally, the following decisions will be in the hands of your health care POA agent; 

•    At what point life-sustaining treatment should end
•    What treatments should be refused due to personal or religious reasons
•    Life-sustaining treatments and any decisions that comes along with the process
•    What to do after you pass away
•    Whether your body will be given to medical research

As you can see, many of these topics are actually quite broad which is why you will be advised to give as much detail as possible. When you assign an agent, they should be aware of exactly what you want in each circumstance. In addition to being able to cancel or assign a backup, you can also set a time limit on the POA. If you wanted the agreement to last forever more, it can be signed until death. However, some choose to appoint an agent until a certain age so it all depends on your beliefs and what your main aim of the agent will be. 

So there we have it, a health care POA is essentially the same as any other power of attorney but looking after your health as opposed to anything else. As well as allowing them access to certain decisions, you can decide how long you want them to remain in this ‘agreement’ as well as assigning a backup and cancelling at any point in time. 

How To Avoid Will, Trust and Estate Litigation

From the outside, all things legal seem rather confusing and it seems as though wills and trusts are more effort than they’re worth. However, this isn't the case because one simple document could save you from having to go through any court proceedings. For example, a will is likely to prevent any arguments over possessions or land and a trust will help to keep any arrangements clear. 

In truth, you should be avoiding litigation in the key areas as much as possible because not only can the process be costly, it can also be time consuming and damaging to personal relationships. Although many people believe it is the best way to go to settle a dispute, you have to spend valuable time away from your job and the court case could actually cost more than the amount you’re fighting over. For this reason, you need to avoid litigation and here are some tips on how: 

Call a Professional - Firstly, the best way to avoid litigation is if you call in a professional and ensure that all your documents are legally binding and stand up should the worst happen. For example, some wills don’t hold up after the person passes away so calling a professional will ensure that the documents are drawn up officially. 

Mediation - If a family member has passed away, it doesn’t necessarily mean that you have to go to court over the will. Instead, you could attend a mediation meeting where both parties attempt to find a middle ground. Although this will still cost money, the cost will be insignificant to the bill that would come with a court case. 

Objective Opinion - In continuation of the previous point, always try and get an objective opinion of the scenario. If this isn't something you can do yourself, get a professional or a third-party who has no involvement in the will, trust, or estate. By doing this, they could find a middle ground that both parties had been blind to. 

‘In Terrorem’ Clause - If you want to avoid litigation with your will or trust, add an in terrorem clause which means that anybody who objects will immediately sacrifice their gift. Of course, this clause isn't worthwhile if the gift is small but will act as a deterrent if the gift is large enough. 

Capacity Test - After getting a major document drawn up, get a capacity test from your doctor as this will let everyone know that you were of sound mind when making the decisions. Then, it will be harder for anyone to contest it because there is no way anyone can use your state of mind as an excuse. 

Professional Mediated Meeting - With wills, trusts and estate plans, this can be a great way to go about things because it allows family and friends to stay in the loop in a professional forum. Rather than gathering everyone at your house, the recipients and beneficiaries will all be in the same room whilst in the presence of lawyers and other professionals. 

So there we have it, some simple tips to avoid litigation. As long as you keep these in mind, you and those around you can stay clear of this costly exercise.