IMPORTANT FACTS ABOUT ESTATE PLANNING
Power of Attorney
Health Care Power of Attorney
Mental Health care Power of Attorney
What a Will Does:
A Will allows an individual to set forth who is to get each or all of their assets at the time of their death. Without a Will, the statutes (laws) of the State of Arizona determine who gets the assets. This is called “intestate succession.” With a Will, you can nominate a personal representative (executor) who will distribute your assets per your instructions. A Will can also designate the person(s) to be the guardians of your children.
What a Will Doesn’t Do:
- A Will does not include or affect assets which are in joint tenancy, or have a P.O.D.(Payable on Death) or T.O.D. (Transfer on Death), or beneficiary designation.
- A Will does nothing to assist you in the event of incapacity. If a person becomes incapacitated, often a guardianship and/or conservatorship Will be required. These are Court actions, which can be expensive.
- Most importantly, a Will does NOT avoid probate. Upon death, any assets which do not have a P.O.D., T.O.D., beneficiary designation, or living jointtenancy must go through some level of probate. Probate is the legal process by which the estate of the deceased is administered. It involves collecting assets, liquidating liabilities and then distributing assets to heirs or beneficiaries.
A Trust is a document that actually changes ownership of assets to the Trust itself. The most common is a Living and/or Revocable Trust. The Trust owns the assets and they are controlled by the Trustee. The original owner of the assets is called the Settlor or the Trustor. Normally, the initial Trustee of the Trust is the Settlor (Trustor.) This Trustor can be an individual or a married couple.
The advantages to a Trust over a Will are many. For example:
- A Trust does not die. For a married couple, when one of the Trustees passes away, usually the other spouse just takes over. When both of the Trustees pass away, the Successor Trustee as designated in the Trust assumes the role of Trustee.
- There is no need for a probate.
- Provision can be made in the event one or more of the Trustees becomes incapacitated.
- A Trust is private. Assets and/or the distribution of them are never filed with the Court, as is the case with a Will.
- A Trust stays in effect even if one or both of the Trustors become incapacitated. The Successor Trustee takes over, and there is no need for a guardianship or conservatorship.
- A Trust, like a Will, can be changed if you change your mind or your life circumstances change.
Probate is the court process that transfers assets from a person who has died to the heirs of that person. If there is a Will, the Will determines who gets the assets; otherwise, the assets of the estate will pass according to the statutory scheme established by the state, which may or may not be what is desired by the decedent. There are three types or levels of probate:
- The first level is Small Estates which is currently available if the assets in the estate are less than $50,000 for personal property (soon to change to $75,000) or $75,000 (soon to change to $100,000) for real estate only. This process is relatively inexpensive and can sometimes be done without an attorney.
- The second level is Informal Probate. If the assets exceed the levels above, with or without a Will, a court action must be filed to get the assets distributed. Usually a hearing is not required, but many documents need to be filed in a timely fashion to make the process effective. Legal Representation is recommended.
- The third level is a formal probate which is required whenever there are questions as to the Will or heirs. This a formal trial process which should not be attempted without legal representation.
Power of Attorney
A Power of Attorney is a document that gives a person the authority to act on behalf of and make decisions for another person. A Power of Attorney can be specific or general. Many institutions (for example, banks and Motor Vehicle Departments) have their own Power of Attorney forms. The person signing the document must have legal capacity (not have dementia, mental disability, etc.) to sign a Power of Attorney.
Powers of Attorney are NOT effective after death. When a person dies, the Power of Attorney dies with them.
A conservatorship is a court proceeding where one person is put in charge of the assets (money, home, car, etc.) of another person. This proceeding is usually required when someone has a mental defect and does not have a Trust or valid Power of Attorney. It requires at least two attorneys, sometimes a guardian ad litem (also an attorney) and at least one court hearing, and can be quite expensive. A Trust avoids the need for a conservatorship and may be the best estate planning tool.
If a conservator is appointed, the conservator(s) must provide the Court with an annual accounting as to what has been done with the assets. Many of the expenditures have to be approved by the court prior to spending money or selling assets. Each request may require a court hearing. Once a diagnosis of dementia or related incapacity is given, a conservatorship will often be necessary. At this point, it is too late to get a Power of Attorney or a Trust.
Guardianships are often combined with conservatorships. A guardianship gives a person control over the “person” of another. The guardian can make decisions as to living arrangements, medical attention and the like, while the conservator decides what to pay for. The same person can be both the guardian and conservator. Court approval for some actions is required.
Healthcare Power of Attorney
This document designates the person you want to make medical and end-of-life decisions for you if and when you are unable to make those decisions for yourself.
Mental Healthcare Power of Attorney
This document is very similar to the regular Healthcare Power of Attorney, except it allows for mental health treatment to be authorized which may be against the wishes of the person needing services. It allows for placement in a secure facility. Of course, if the person objects, there can always be a court hearing to determine the proper course of action.
A Living Will is often confused with a Will. A Living Will has nothing to do with your assets–it is the document that directs the doctor and your Healthcare Power of Attorney how to handle the end-of-life care. You can decide ahead of time when, and to what extent you want life-saving measures given, such as a feeding tube or ventilator.
HIPAA stands for the Health Insurance Portability and Accountability Act. Basically, it is the law that assures privacy of your medical records. You can designate the person or persons you want to be able to get access to your medical condition and records. Usually, this is a close family member or members.
THE BUTLER LAW OFFICE
The Butler Law Office can provide you with the information you need to make informed decisions about your estate planning needs. Call today for a Free Consultation at 480-921-0626.
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