WANT A TRUST? YOU WILL ALSO NEED A WILL.

I often get this question: Do I need a trust or a will? The answer is that if you have a trust, you also need a will.

I saw this article from the blog Fatherly and realized that even those holding themselves out as experts have no idea about the interplay between a trust and will. The headline reads: Estate Planning? Consider a Trust Instead of a Will. The article makes the reader think that it is an either-or proposition. Nothing can be further from the truth. It is almost always legal malpractice to create a trust and not also create a will.

The issue is trust "funding." Funding a trust means that you put assets into the name of the trust (e.g. your home is title in the name of "The John and Jane Doe Revocable Living Trust"). It is true that if all your assets are in trust, when you die your trust beneficiaries will likely never use your will. However, unless you have a full time attorney on staff, something ALWAYS gets left out of the trust (frequently everything gets left out). In other words, you have a trust, but it's empty of assets.

When assets are left out of your trust, you need a will to "pour over" assets into your trust. If you don't have a will, and something is left out of the trust, the asset pass to your intestate heirs, as directed by the state of Arizona. Why does this matter? You could end up giving your money to someone you do not wish to receive the money.

In other words, if you want a trust, get a will too.

TAX REFORM IS COMING—SHOULD I DELAY MY ESTATE PLAN?

I recently heard this question: “given that Congress is going to enact tax reform, should I delay establishing my estate plan?”  The questioner reasoned that once Congress acts he would need to change his estate plan anyways.  The short answer to this question is “no.”  Get your estate plan now. 

Firstly, the tax most individuals worry about—so called “death taxes”—are not likely to change to cause more tax. Congress is considering making the tax less onerous rather than more onerous.  https://www.huffingtonpost.com/entry/tax-reform-estate-tax_us_59f0b291e4b0d094a5b68c4c.   

Secondly, death taxes affect virtually no one.  Roughly .2% of deaths in 2017 will result in a federal estate tax.  It is estimated that of the 2.7 million people who will die in the United States in 2017, only 5,500 will pay any sort of death tax.  The reason is that your estate must be roughly $5.5 million before any federal estate tax kicks in.  http://www.taxpolicycenter.org/briefing-book/how-many-people-pay-estate-tax.  Moreover, even if you currently have over 5.5 million in assets, at the time of your death, after 20 years of retirement, you will not have those assets.  The money will be spent on your living expenses. 

Lastly, and most importantly, tax planning is only a small portion of your estate plan.  The most important part of the average estate plan involves the following:

1.     Determining who will care for your minor children.

2.     Avoiding confusion created when a person is a spouse in a blended family and/or has kids from a prior relationship.

3.     Avoiding the delay and costs associated with a probate.

4.     Determining who will represent your estate at your death.

5.     Determining how you will divide your assets at death.

6.     Determining who will care for your finances when you are incapacitated. 

7.     Avoiding confusion that can be created when you fail to create an estate plan.

8.     Determining how to pay your debts at death.

9.     Keeping the “family peace” by having a well ordered estate that clearly communicates how you want your estate divided and who you want to provide for at death. 

10. Creating that peace of mind that comes with good planning. 

Of course, I am writing about Arizona law, this general information may not be right for your specific matter, and is not legal advice. I’d be happy to talk to you, so give me a call at Davis Miles McGuire Gardner, 480-733-6800, or reach me at rsewell@davismiles.com.

CAN MY TEXT MESSAGES BE A WILL?

A recent case in Australia answered the question of whether a text message can create a will.  The Court ruled that a decedent’s text messages, some of which were unsent, could constitute a will.  http://www.telegraph.co.uk/news/2017/10/11/dead-mans-unsent-text-message-accepted-will/.   Think about how much confusion (not to mention fraud) this could create if this was the law in Arizona. 

Courts would be called upon to discern between fake text messages and real ones.  Experts would be called on to decipher whether the text messages were created before the death or after.   Courts would need to decide whether the text messages were supposed to revoke existing estate plans or just amend an existing estate plan.  Courts would need to decide whether the text was just a note for a possible future will or an actual will.  The list can go on and on.  Thankfully, this is not the law in Arizona.

To create a will in Arizona is simple.  It requires doing one of the two options below:  

Holographic Will:  A testator, over the age of 18, can create a holographic will so long as he/she writes the will, in his/her own hand, and it is signed by the testator.  There is no need for the will to be witnessed or notarized. 

Standard Will: A standard will is a bit more complicated.  These types of wills must have the following:

A.    It must be in writing;

B.    Signed by the testator or signed by someone else in his/her conscious presence for the testator; and

C.    Witnessed by two witnesses who witnessed the testator’s signature on the will.

If you have not complied with each requirement, you have not created a will in Arizona. You will die “intestate,” meaning without a will.  Please note that under the Standard Will, I recommend that a testator have his/her signature notarized. 

Despite the simplicity of creating a will in Arizona, I recommend that you hire an attorney to create your will or estate plan.  It is one thing to create a will that the courts will review and attempt to decipher.  It is yet another, and much harder, to create a will that actually conveys your property without confusion and without unnecessary litigation.  

PROTECT YOURSELF FROM THEFT: CHOOSE THE RIGHT PERSON AS POWER OF ATTORNEY

Bad estate planning decisions happen all the time, even when you have a great attorney. One common mistake: Choosing the wrong person to be your power of attorney. A recent case in the news was a great reminder. http://www.channel3000.com/news/crime/power-of-attorney-charged-with-taking-using-mans-money-for-personal-use/607446161. 

In that case, a Wisconsin woman became an elderly man’s power of attorney. After time, she began to spend his money on herself. Using his power of attorney and his money, she paid her mortgage and other bills. After she done, there was nothing to pay his bills. What she did is a crime in Wisconsin and in Arizona. She is now facing six felony counts.

What this woman did is not unique. It happens every day all over Arizona. However, it is preventable in many cases. My advice is the following: Choose a power of attorney when you don't need one—when you have a clear head—and when you are still competent to make good decisions.  Once you need a power of attorney you may not be in a position to make well-reasoned decisions. 

When choosing a power of attorney, be honest with yourself.  Does the person have good judgement? Is there anything in his/her character that would suggest he/she is not trustworthy? If you cannot answer these questions positively, choose a different power of attorney.  A person who has a history of dishonest acts or bad financial decisions should not be your power of attorney.

If you cannot find someone to trust, get a professional fiduciary to be a power of attorney for you. The professional will pay your household bills, manage your finances, and take care of any other issue in your life.  Most of all, a licensed and insured professional will keep you from being victimized.