Articles Posted in Estate Planning

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No one wants to think about the aging process, let alone all the dangers associated with advanced age and living in today’s world. Education and planning are the two most important steps to preventing any type of issues in the future.

Senior financial abuse scams are a multi-billion dollar industry. This type of abuse not only effects the senior individual but also their families, their financial institutions, taxpayers and all the services that provide relief to the victims. A study was done in 2011 by Metlife Mature Market Institute and they estimated that the annual financial loss from senior financial abuse was 2.9 billion dollars! That number was based solely on the cases that made it to the media.

Seniors are especially susceptible to fraud. This is because we tend to be more trusting as we age, we have more wealth accumulated by that time in our lives, and our worlds become smaller. Generally, Seniors do not have contact with a wide variety of people and become secluded from the outside world. While this is a natural process that comes with age, it also provides opportunity for those who mean to cause us harm. All seniors are at risk for being targeted, but women account for the majority of these types of crimes. I am not convinced this will always be the trend but for now it is. That is due to the fact that women live longer than men, leaving them alone when their spouse passes, and elderly women in 2017 are from a generation where they are used to relying upon others in their lives to help them make important decisions.

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Arizona is a community property state. “Community property” is a term that  refers to how the property, during a marriage, is viewed in the eyes of the courts. In community property states all property accumulated by a husband and wife during their marriage becomes joint property. In plain terms, this means that all property belongs to both husband and wife equally if it was acquired during the marriage. Even if it was originally acquired in the name of only one partner.

Conversely, all property acquired before marriage, or through a gift or inheritance during marriage, is presumed to be the sole and separate property of the spouse who has acquired the property.  As with anything in law, there are exceptions, but this is the general rule.

The character of property as community or sole & separate can be important.  For example, if spouses divorce, each will retain his or her sole and separate property just as if they had never been married.  Any community property will be divided equitably. Equitably does not always mean equally. However, an “equitable” division of assets means a fair division.

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Reverse mortgages can be a great financial tool for retirees or others living on a fixed income. A reverse mortgage can be used to pay off an existing home loan, gain freedom from a house payment and/or provide a retirement income source. The homeowner must still pay real estate taxes and homeowner’s insurance but otherwise no payments are due on a reverse mortgage until the borrower spouses both die. Then the loan comes all due and must be paid in full by refinancing, the use of other estate assets or by a sale of the home.

But what happens when the reverse mortgage is taken out by only one spouse?   If the surviving spouse is not also a borrower, he or she may need to sell or refinance the house when the borrower spouse dies. Refinancing is not usually an option for a surviving spouse so the family home would need to be sold at, perhaps, the worst possible time.   At least that was the situation until the advent of an FHA program called Mortgagee Optional Election (MOE).

The MOE program can enable a surviving spouse who was not a reverse mortgage borrower to remain in the family home after the borrowing spouse dies.   But inclusion in this program is not automatic. The surviving spouse needs to contact the mortgage servicer to request an MOE assignment. Certain conditions also apply:

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The baby boomer generation is aging. Over the next decade or two there will be an enormous transfer of wealth to the next generation. This should be a good thing. The intention is good—to provide for the next generation—but actual results are often disappointing. Everyone is familiar with the statistics on lottery winners. Many lottery winners will have lost most or all of their winnings within just a few years. It is the same with inheritances. A large percentage of inheritances is quickly squandered and lost. This is tragic. Not only is the work, thrift and discipline of the previous generation discarded, but the education, retirement and dreams of their children are lost or impaired.

So what can be done to prevent the next generation from acting rashly and spending inherited funds unwisely? Unfortunately, there is nothing that can guarantee that the next generation will act responsibly. But there are some things that will certainly help. Here are a few that we have found to be helpful:

  1. All family members need to develop the discipline of saving and know the basics of investing. This is a process that ideally starts when children are small but can commence at any time.
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A Living Will is different from a normal Will.   A Will is a common estate planning document that controls the distribution of a person’s property after he or she dies. It is not effective until death. A living will, however, is effective during a person’s lifetime and serves a wholly different purpose.   Also known as an “advance directive” a living will allows a person, in advance, to give written instructions for medical treatment should he or she become terminally ill and be unable to communicate with a physician or family member. Most states have laws authorizing living wills/advance directives. Arizona’s statutes are found at A.R.S. §36-3201, et.seq. A sample Living Will can be found in A.R.S. §36-3262.

Medical care has become so good that life can be extended artificially for long periods. Physicians often opt to extend life where possible, but this may not be what a patient wants. Few of us want our lives to be artificially extended where we are terminally ill with no chance of recovery. Most want to be allowed to die with some dignity.   This is where a living will comes in.

A Living Will provides a means to control the medical procedures provided to you at a time when you cannot speak for yourself.   In most cases, this amounts to a description of what services are not wanted in the event of a terminal illness. Often, people opt for “comfort care” with instructions that they are to be medicated to be free from pain but other life extending procedures such as feeding tubes, blood transfusions, cardio-pulmonary resuscitation and similar services are rejected. In other cases, patients may wish to preserve life as long as possible using current technology. A Living Will can also be drafted with this goal in mind.

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Clients give a great amount of thought to the transfer of wealth when drafting a revocable living trust. Of course, this is one of the most important reasons to create a trust—to transfer wealth as efficiently as possible without probate and with the minimum estate tax possible.

But there are other issues that often do not get the attention they deserve. Here are a few of them:

  1. Appointment of a Guardian.   Parents will usually appoint a guardian for their minor children in the event that both become disabled or deceased. However, thought might also be given to appointing a guardian for themselves in the event a guardian is needed later in life. A guardian, if needed, will control all aspects of your life. Your instructions as to who this person will be are important.
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Revocable living trusts have long been an important tool to minimize estate taxes and avoid probate. But these benefits are realized after a death. Growing in importance as the baby boomer generation ages are the benefits a Living Trust can provide long before death. A fully funded Revocable Living Trust can help prepare for the aging process and the cognitive disorders that many elderly experience.

In the normal case a husband and wife creating a Living Trust (the Trustors) name each other as co-trustees and choose a child or a relative to be their successor trustee—the person who takes over management of the Trust when the original Trustors die or become disabled.   This works fine until the Trustors can no longer manage their finances.   Then the nominated successor trustee takes over. Results will vary widely depending upon the skill and honesty of the person chosen for the job. Most successor trustees will do their best.   But many have been chosen because of a relationship—e.g. a firstborn child—and not for his or her competence. Such a trustee may have no concept of what it means to be a fiduciary and might have no experience in managing significant assets. Or, worse, a successor trustee may find it impossible to withstand the temptation of “borrowing” money from the estate or using estate assets for their personal needs. These successor trustees can commit substantial financial abuse and can ruin a lifetime of prudent financial planning. In our practice we have often seen that a child is responsible for the financial abuse of a parent.

In planning for older age, there are some steps that can be taken to minimize this risk. Creating a Revocable Living Trust is a good first step.   Then it should be funded it as fully as possible to place all possible assets under the protection of your nominated successor trustee.

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Congratulations! Being appointed as a Personal Representative or Executor under a Will is an honor. The Testator considered you capable and honest and has entrusted his or her estate to you. Your job is to assemble assets, pay debts and make sure the Testator’s wishes as expressed in the Will are followed. Along with the honor comes a lot of work and some risk. If you make mistakes, or even if you do the right things but do not do them quickly enough, you run the risk of being sued and surcharged for any loss that the estate may have incurred.

Here are some things you need to know to minimize your risk.

  1. The primary duty you owe, as an estate’s Personal Representative, is loyalty to the estate and its beneficiaries.   Every action taken must be for the benefit of these individuals. As Personal Representative you are entitled to reasonable compensation for the work that you do on behalf of the estate. However, you are not allowed to profit personally in any dealings with the estate. You must avoid even the appearance of such a conflict of interest.
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So, you made it your New Year’s resolution to get your ESTATE PLANNING needs addressed. You’ve got a young family, you are healthy, and you and your spouse are starting to accrue some assets. Here are some important things to consider to protect those assets and plan for your family’s future:

WILL or TRUST – You should consider putting together a WILL or a TRUST to indicate what you want to happen with your property at your death. Nobody likes to talk about death, but it is a reality that unexpected things happen. With a family, you need to consider this possibility and plan for it. Beyond how your assets would be distributed, your WILL can name a person to take over as the GUARDIAN or CONSERVATOR for your children if both you and your spouse die. A TRUST will avoid the necessity of appointing a CONSERVATOR for your minor children because the successor TRUSTEE would take over management of the TRUST assets for the benefit of the children, and do this without court intervention.

POWER OF ATTORNEY – Usually people need to have two different powers of attorney. The first is a MEDICAL/MENTAL HEALTHCARE POWER OF ATTORNEY to permit someone to make medical decisions for you if you are unable to make those decisions for yourself. Absent such medical power of attorney, it may be necessary to obtain a GUARDIANSHIP for you, especially if you are incapacitated for a longer period of time. The second kind is a FINANCIAL POWER OF ATTORNEY. This permits another person to make financial decisions for you, and assist paying your bills while you are incapacitated.

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Effective since 2011, A.R.S. § 28-2055(B) gives you another ESTATE PLANNING tool where it permits the use of a beneficiary designation on your vehicle to avoid the necessity of probate to transfer the title. In pertinent part, it says:

“At the request of the owner and on payment of a fee prescribed by the department by rule, the certificate of title may contain, by attachment, a transfer on death provision where the owner may designate a beneficiary of the title.”

Arizona’s Motor Vehicle Division (MVD) provides a simple, one-page form to complete. You can either go to a local MVD office, or download Form 96-0561 by going to then under the Motor Vehicles category clicking on Forms and Publications, then clicking on the MVD Forms Library, and then selecting Form 96-0561 titled “Beneficiary Designation”